Changes to HDB valuation: Short term pain for long term gains

SINGAPORE - Buyers and sellers of HDB flats will now undergo a different process when settling on a price, after announcements made by Minister Khaw Boon Wan yesterday.

Instead of first getting an evaluation from HDB before negotiating how much should be paid over, or under, valuation, prices must now be agreed upon first and an Option-to-Purchase (OTP) - usually 1 per cent of the asking price - granted, before buyers can request a valuation. The valuation will no longer serve as a price negotiation factor, but rather, the basis of loan evaluations from financial institutions.

Such a move has the potential to moderate price growth or drops in the property market. The previous focus on cash-over or -under valuation meant that in an upmarket, prices would accelerate upwards rapidly, leading to flats being sold for north of a million dollars. Likewise, in a down market, such as after cooling measures were introduced and supply ramped up, prices fell rapidly and we went from talking about cash-over-valuation to cash-under-valuation in the space of about nine months.

With this new process, prices will be based even more closely on past transacted prices, instead of one-upping (or "downing") the previous prices. Buyers would also feel increased pressure to offer lower prices, because if the subsequent evaluation does not meet expectations, the buyer might not be able to get an expected loan amount from the bank and might end up not exercising their options and forfeiting deposits. As a precautionary measure, buyers should get in-principle approval for their loans before offering a price for the property they intend to buy.

Ultimately, while such a move might cause some short term pain to buyers, sellers and agents, a more stable HDB market is key to making homes more affordable for Singaporeans. This will also enforce the government's stance that HDB housing is not a source of investment, but rather, a means to put a roof over one's head.

To help buyers and sellers ascertain fair transaction values, users can go to STProperty's data analytics arm Singapore Property Watch ( to check the last transacted prices for the block or HDB estate they are buying or selling. With these insights on previous transaction prices in various HDB estates and neighbourhoods, buyers will reduce the chance of over-offering and sellers will also mitigate the risk of under-pricing their HDB apartments.