Cash over valuation, explained
If you agree a price above the flat's valuation, the difference has to be paid in cash. It cannot come from CPF or from your loan.
Cash over valuation (COV) is the amount by which the agreed price exceeds the flat's official valuation. If you agree $620,000 for a flat valued at $580,000, the COV is $40,000. What makes it important is the rule about how that $40,000 can be paid.
You only find out the valuation after agreeing a price
Before 2014 the valuation came first, and buyers negotiated a COV on top of it. That helped push COV very high: the island-wide median was close to $38,000 in 2011, and much more for popular flats. The process was then reversed. You now need an Option to Purchase, which means agreeing the price with the seller, before you can request a valuation.
So you commit to $620,000 first, and only later learn that the valuation is $580,000 and you need $40,000 in cash. This is why it pays to judge the price carefully before signing, using recent comparable sales rather than one optimistic example. The guide on how to tell if an asking price is fair explains how.
Your loan and CPF are based on the valuation
Both the housing loan and CPF use are capped at the lower of the price and the valuation. HDB or the bank lends up to 75% of the valuation, and CPF can be used up to the valuation. Anything above that is outside both, so the COV has to come from cash. Here is the same $620,000 purchase in full:
| Part of the price | Amount | Paid from |
|---|---|---|
| Housing loan (75% of valuation) | $435,000 | Loan, repaid monthly |
| Downpayment on the valuation (25%) | $145,000 | CPF / cash |
| Cash over valuation (the $40k gap) | $40,000 | Cash only |
| Agreed price | $620,000 |
COV therefore does more than raise the price. It increases the part of the purchase that must be cash rather than CPF, and for many buyers cash is the tighter limit. With an HDB loan, the whole 25% downpayment could come from CPF, but the $40,000 COV cannot. It is paid on top of the deposit, fees and stamp duty described in what a resale flat really costs to buy.
It also raises the stamp duty slightly. Buyer's Stamp Duty is charged on the higher of price and valuation, so in this example it is worked out on $620,000 rather than $580,000.
How big does COV get?
It depends heavily on the market. At the 2011 peak the median was close to $38,000, and popular flats reportedly went for six-figure COVs. After the 2014 change COV almost disappeared. By 2016 roughly four in five resale flats sold at or below valuation.
COV came back after 2020, as resale prices rose faster than valuations. In recent quarters, somewhere between one in six and one in three buyers have paid some COV, though amounts are well below 2011 levels. HDB stopped publishing COV figures in 2014, so there is no official median to check. You only learn your own COV once the valuation comes in.
COV is simply the price minus the valuation, paid in cash. What you control is the price you agree and how much cash you keep aside in case there is a gap.
Practical points
- Base your offer on comparable sales. The valuation will follow recent sales of similar flats in the block and area. If your offer is based on the same evidence, any gap is likely to be smaller.
- Keep some cash in reserve. While COV is common, budget for the possibility that you will pay some, and remember that CPF and the loan will not cover it.
- A seller's asking COV is negotiable. There has been no official COV figure since 2014, so a price above valuation is a matter for negotiation.
- Decide whether the flat is worth it. Paying above valuation can make sense for a genuinely scarce unit, such as a high floor or an unusual layout, but the cash you pay is not covered by the loan.
- Think about resale. If prices fall, the amount you paid above valuation is the part you are least likely to get back.
This Year shows recent prices by town and flat type, which is a quick way to check whether an asking price is likely to be supported by the valuation.