Prevent price bubble by restricting COV for resale flats

Source : Straits Times – 28 Sep 2009

I APPLAUD the Government’s recent efforts to curb private property speculation and I believe it is the right direction to take.

However, allowing cash over valuation (COV) for HDB resale flats to continue rising, based on the belief that market forces will eventually self-correct the currently high COV, is as good as believing in the efficient market theory.

There is a need for certain restrictions on COV before home buyers start using COV as a barometer of market sentiments, and an unsustainable price bubble builds up in the HDB market. This may ultimately spill over and affect the private property market as well, resulting in overrall asset price instability. This is the last thing we want on the path to economic recovery.

Ivan Phang