Hi to all agents here! I am a student doing a case study on COV. Would really appreciate some valuable inputs from you guys :) Thanks in advance!! If you are willing to share more, do leave me your contacts! THANKS!! :) 1.Based on your experience, what do you think cause COV? Mainly from buyers or sellers side? 2.Does COV affect your commission? 3.Under what circumstances are COV high? For instance, economic conditions, good location of the flat, urgent buyers, etc? 4.What are the implications of COV during a transaction? 5.Do you think COV is healthy and essential for the market to work? 6.Do you think government should intervene and ban COV? Would it help?
Hello Melo,
You have taken the effort to post a long question, and that effort deserves consideration and a well thought response.
Before jumping into the answers directly, it would help if you had stated the hypothesis, and then redefine the statistical parameters of your question. From the looks of the questions, you are probably still in the fact finding stage and are yet to clearly define your question set for statistics churning.
Let us start off the questions, and then develop them further if you have more queries.
1. "What causes COV, the buyers or the sellers?"
At its simplistic core, COV is a function of price, which ultimately is derived from the interaction of supply and demand, in this case, BOTH the buyers and sellers. However, within that economical "interaction" academics ALWAYS forget a fundamental assumption that is made within there, that states that:
A) There must be perfect information flow and
B) ALL parties are rational
I would suggest that you focus developing your survey into the 2 assumptions above, and you might come back with some interesting answers.
2. "Does COV affect your commission?"
It really depends. Commissions are usually paid by the seller, hence a smart seller would structure a well thought out remuneration strategy to provide the incentive for the brokers to fetch the highest price that both the seller and buyer can agree on.
Talented salespersons work the same way. A salesperson who can deliver a price that is out of the market is worth more than another that is of average standing.
3&4. "What factors affect the COV?"
As alluded to in point 1 above, all these considerations assume rationality in the buy/sell decision. As in all real estate transactions, the biggest portion of the deciding factor is emotional, and not on the logic of it. And clearly, emotive driven decisions are never totally rational.
All the points that you have pointed to in the above are factors that LOGICALLY would impact the COV, however, all these have already been taken into consideration in the valuation report which a 3rd party has already researched and provided. Which then leads to the present culture of "slapping" a "market rate" COV onto the purchase.
How the market rate is determined is largely a sentiment driven affair. Using our country's taxi service as an example, the market leader decides to raise fares, and with sufficient market clout, they shift the "sentiment" of the other service providers to also do the same.
If the market behaves as a "collective", this would be it. Over 2009 to present, the collective has been to set record after record of "asking COV", which has personally gotten out of hand.
5&6. This is a policy decision in the long run. COV has become an "entitlement" that sellers expect to keep, but the cost to us as a country is that COVs will be pushing overall prices up, and eventually price out subsequent generations from owning their own homes.
The official explanation of banning COV is that it will become an "under-the-table" transaction instead; however, the truth of it might simply be that the alternative would be almost logistically impossible to enforce.
The last straw to consider:
As market sentiment goes, a pure academic economics study of the "facts" and "sentiment" ignore the political element. After all, this is a situation unique to Singapore that affects public housing in our country, within which up to 85% of the voting population resides. Hence I leave you to draw the conclusions of this impact that would be hard to quantify at the end of your survey.
Do let me know if you would like to further develop our conversation on this.
Best Regards,
Mervin Tang
Marketing Manager
CEA Reg No. : R030951Z
Huttons Asia Pte Ltd
Mobile: (65) 9184 0208
Website: http://www.SGrealestate.sg
Sales Enquiry: mervintang@SGrealestate.sg
Discussions: http://sg-realestate-sg.blogspot.com/
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