THE IMPACT OF HDB VALUATION ON ITS TRANSACTED PRICE

Abstract

This study measures the deviation of Housing and Development Board (HDB) resale flats' valuations from their prices. It determines if valuation is a good proxy for the final transaction price and thus its impact on the transacted price as most sellers and buyers will do a valuation before deciding on the price to sell or purchase their flats. It was found that the valuation of the HDB flat is generally within + 20% of the transacted price which is the margin widely accepted by court (Neil Crosby, 1997). In addition, the premium/discount of the transacted price is analyzed with factors like transaction date, floor area and floor level of the flat over its valuation. The date of transactions is found to be one of the most significant determinants of the premium/discount of the resale flats. It was seen that valuers undervalue in bull and generally overvalue in bear markets. Floor level, room type, floor area, age and location of the property are also found to be significant determinants of the regression model. It was concluded that valuers are conservatively biased and undervalue properties in circumstances where factors that are generally accepted to be more popular such as flats with smaller room types, flats on the higher floors and newer flats etc.