SINGAPORE — The proportion of resale flat buyers who pay cash-over-valuation (COV) for their homes has halved since 2021, with the decline noticeably occurring after enhancements were made to the Central Provident Fund (CPF) Housing Grant in February 2023.

Since then, about 18 per cent of resale flat buyers have paid COV, Parliament heard on Wednesday (March 6).

Mr Tan Kiat How, Senior Minister of State for National Development, said that this was a "noticeable reduction" from about 29 per cent in 2022 and 36 per cent in 2021.

He was responding to a question from Mr Xie Yao Quan, Member of Parliament for Jurong Group Representation Constituency, who asked about the proportion of resale HDB flat buyers who have paid COV since the enhancements to the CPF Housing Grant were announced last February. 

COV is incurred when the resale price of a Housing and Development Board (HDB) flat is higher than the market valuation of the flat — the difference has to be paid in cash.

The CPF Housing Grant was increased in Budget 2023 to provide more support for first-timer Singaporean buyers in the following ways: 

• Eligible first-timer families buying a two-room to four-room resale flat can receive S$80,000 in CPF Housing Grant, up from S$50,000 previously
• Those buying a five-room or larger resale flat can receive $$50,000 in CPF Housing Grant, up from S$40,000 previously
• First-timer singles buying two-room to four-room resale flats can receive an increased CPF Housing Grant of S$40,000, up from S$25,000 previously
• Those buying five-room resale flats can receive $25,000, up from 20,000 previously

Mr Tan said that the median COV paid by buyers across all categories has remained at S$0. 

COV was in the spotlight in 2021, when rising property demand during the Covid-19 pandemic drove up resale prices. 

Anecdotally, property experts told TODAY at the time that COV typically ranged between S$10,000 and S$50,000, but it was not unheard of for buyers to fork out COV of between S$100,000 and S$200,000 for choice flats.

A response from the Ministry of National Development (MND) to a parliamentary question in 2021 stated that about 20 per cent of resale flat buyers paid COVs in 2020. 

Mr Xie also asked Mr Tan on Wednesday whether MND would consider a "tiered system", where the CPF grant is pegged to different amounts of COV to ensure "prudence in the determination of COV between buyer and seller". 

This would mean that a lower grant would be given when the COV is low, and buyers would get a higher grant if they had to pay a higher COV. 

Mr Tan replied that the COV is determined between a willing buyer and a willing seller, and if such a tiered system is implemented, this may give rise to abuses. 

"Because it's a willing-buyer-willing-seller agreement, there's a high chance of it being hard to enforce because buyers and sellers could collude to circumvent the restrictions," he said.

He added that in a willing-buyer-willing-seller situation, there could be many other considerations at play, such as the location of the flat, or that certain family members with caregiving needs are living nearby. 

"I think it's sensible to not over-complicate the scheme and overly intervene in such decisions."