ACCURACY OF VALUATIONS OF HDB RESALE FLATS

Abstract

The property market is imperfect. This is due to the heterogeneity, indivisible and illiquid nature of real estate. Due to such imperfection of real estate, it implies that valuation is both a science and an art. Valuation is an estimate of property value. Valuations are carried out by qualified valuers and value is best reflected by the price established in the market. The estimate of value is to reflect the state of the market and circumstances as at the date of valuation. As valuations tend to influence decisions involving substantial sums of money, it is important that the value estimates should reflect prevailing market conditions. As about 86% of the Singaporeans live in HDB flats, valuations of HDB resale flats is of prime importance since the loan quantum and, thus, affordability of the flat is determined by valuations. The research seeks to find out if valuation is a good proxy for price in the case of HDB resale flats. The finding shows that average value ($ per square metre) is about 18% less than the average transacted price ($ per square metre). Also, there is no one to one relationship between valuation and price. Hence, in the case of HDB resale flats, valuation does not appear to be a good proxy for price.