Don't assume all old HDB flats will be picked for SERS, cautions Lawrence Wong

Lawrence Wong spells out conditions for scheme to be met, following recent sales of old flats for high prices
By Ng Jun Sen, The Straits Times, 25 Mar 2017

Early this month, a 30-year-old flat in Bishan sold for $1.09 million. Last month, a 33-year-old flat in Potong Pasir went for $925,000.

With some old Housing Board flats fetching such high prices, National Development Minister Lawrence Wong has issued a word of caution to home buyers: Do not assume your flat will be selected for the Selective En bloc Redevelopment Scheme (SERS) when the lease runs out.

In fact, just 4 per cent of HDB flats have been identified to undergo SERS since it was launched in 1995, he said in a blog post yesterday.

Under the scheme, the state buys back the flats at the market rate and offers residents discounted new units at another address.

Mr Wong spelt out the conditions that have to be met for SERS to take place.

It is granted only to HDB blocks on sites with the potential to be redeveloped. Typically, the land has not been well utilised.

Suitable replacement sites for residents must be available. The Government's financial resources also have to be considered.

Mr Wong said: "We will continue to maintain this strict selection criteria. So please do not assume that all old HDB flats will be automatically eligible for SERS."

In fact, he added, for the vast majority of flats, the leases will expire and the flats will be returned to the HDB, which will in turn have to surrender the land to the state.

OrangeTee head of research and consultancy Wong Xian Yang said: "When the lease goes to zero, the value of the home is also zero, so the owner gets nothing."

The minister was responding to a recent report in Chinese newspaper Lianhe Zaobao highlighting the high prices of several short-lease HDB flats in the resale market.

Checks by The Straits Times showed that old flats, generally in mature towns, are highly popular.

According to data from property portal SRX, 46 per cent of all resale transactions made in 2015 involved flats older than 30 years, with an average resale price of nearly $400,000.

Mr Lawrence Wong wrote: "While resale flats are transacted on a willing buyer-willing seller basis, I was concerned by the suggestion that some buyers are forking out high prices for older flats, in anticipation of the benefits of SERS."

But this will not pan out for most. "Buyers need to do their due diligence and be realistic when buying flats with short leases. This is especially important for young couples, who have to plan for a much longer future," he added.

Property experts said few buyers pay heed to the lease period when purchasing a resale home.

PropNex Realty chief executive Ismail Gafoor said: "Many buyers today prefer to upgrade and sell the property 10 to 15 years down the road. Hence, lease period is usually not a concern to many buyers."

So far, no 99-year leasehold HDB flat has reached the end of its lease. But as some flats were selected for SERS while they had around 60 years left on the lease, it could lead buyers to buy an old flat and expect to get a more valuable replacement unit under the scheme, said the analysts.

This is unwise, said R'ST research director Ong Kah Seng, adding: "SERS will remain a niche, exclusive windfall for those in strategic locations. Especially as there will be more flats with dwindling tenure appearing in the next decade or so, SERS cannot be a given for all flats."

By writing the blog post, the minister was pre-emptively "nipping the problem in the bud before it becomes unstoppable", said Orange-Tee's Mr Wong.

* 99-year lease HDB flats are still nest eggs for future retirement needs: Lawrence Wong

RESOLD FOR HIGH PRICES RECENTLY

Block 186, Bishan Street 13

Resale price: $1,088,000. Size: 146 sq m.
Age of unit: 30 years. Years left on lease: 69.


Block 132, Potong Pasir Avenue 1

Resale price: $925,000. Size: 161 sq m.
Age of unit: 33 years. Years left on lease: 66.


Block 129, Potong Pasir Avenue 1

Resale price: $905,000. Size: 161 sq m.
Age of unit: 33 years. Years left on lease: 66.

SOURCE: SRX PROPERTY









 

Buyers who pay high prices for old flats face reality check
Minister's cautionary note that not all old flats undergo SERS may force buyers to weigh not just location and size
By Ng Jun Sen, The Straits Times, 29 Mar 2017

Last year, Ms Siah Yuet Whey bought a Housing Board flat that is older than she is.

She is 28 years old. It is 44.

This means that she will most likely outlive its lease - which runs out in 55 years. She will be 83 then.

That did not stop her and her husband, 31, from paying more than $700,000 for the three-room unit in Jalan Ma'mor, in Whampoa.

At 861 sq ft, it works out to $854 per sq ft - the third-highest amount paid last year for flats with less than 60 years of lease left. "It is a rare terraced unit in an area with a lot of character, and it does not feel like it is very old at all. We think it is a fair price," said Ms Wong.

Last Friday, National Development Minister Lawrence Wong, alarmed by a news report on old HDB flats that fetched high prices, sounded a cautionary note about such buying behaviour. Some appeared to have bought those units on the assumption that their flats will benefit from the Selective En bloc Redevelopment Scheme (SERS), he said in a blog post.

This is not so, he said. Only a small minority qualify for SERS, which compensates home owners for their flats and gives them new ones with fresh leases. The rest of the flats will return to the state when their leases expire.

In particular, he advised younger couples to buy a home "that covers you and your spouse to age 95".

Mr Wong's comments have attracted a mix of bewilderment and concern, especially among those who live in old units.

"It wasn't cheap, but I thought the value will keep going up," said IT engineer Andy Zhang, 40, who also paid top dollar for an older home.

Last January, he paid $950,000 for his five-room Bukit Timah flat. It is 43 years old and has just 56 years of lease remaining. This was last year's record for an HDB unit with less than 60 years left on the lease.

To pay for it, Mr Zhang sold a newer three-room flat in Clementi.

Still, he said, he has no regrets. "The age of this flat was not an immediate consideration. I bought this place because my daughter's school is nearby and the location is good."

Flats of a certain vintage are more popular on the resale market due to factors such as location - they tend to be in mature estates - size and amenities in the neighbourhood.

Statistics show they account for a disproportionate share of transactions in the HDB resale market.

Almost half of all resales last year were of flats older than 30 years. This is even though such flats make up only around one-third of the HDB housing stock.

Even flats older than 40 sell well, despite loan restrictions on how much buyers can withdraw from their Central Provident Fund to finance such purchases. They form 11 per cent of transactions from 2014 to last year, even though just 7 per cent of all HDB flats are of that age.

Mr Zhang, for instance, said his resale flat - at 1,346 sq ft - is larger than today's five-room units, an important feature for his family of four.

Ms Siah, a property analyst, is confident she can find a buyer within the next five years or so, due to the rarity of HDB terraced units. There are only 285 left in Singapore.

But generally, she acknowledged, buyers will be more cautious about older flats following Mr Wong's warning. Said the chief executive of property portal Digital Real Estate Assistant: "Location is still the prime factor, not age. But his comments mean that people may be a lot more concerned about the age component now."

ERA Realty key executive officer Eugene Lim said: "It is going to be a lot more difficult to find buyers for older resale HDB flats. Prices for these flats may even take a big hit due to lack of demand. From now on, it is quite likely home buyers will view older 99-year flats differently."

Still, the problem looms far in the future for Mr Zhang, now more concerned about the living conditions for his family.

Asked what his plans are if his home cannot keep its value or if he is unable to find a buyer, he laughed. "That is something to worry about in 40 to 50 years' time. Who knows if I will still be around."

Just 40,000 flats picked for SERS since 1995
The Straits Times, 29 Mar 2017

Out of around a million Housing Board flats in Singapore, only 4 per cent have been selected for the Selective En bloc Redevelopment Scheme (SERS) since it began in 1995.

This translates into 40,000 units.

They are located on 80 sites. Of these, 73 have been completed - meaning that all residents have moved out, according to data from the HDB.

These are typically sites where the land has not been well utilised and has good redevelopment potential, National Development Minister Lawrence Wong said last Friday.

There must also be suitable replacement sites available for residents. The Government's financial resources will be considered as well.

Under the scheme, the HDB will acquire and demolish old flats. Affected residents are compensated based on market rates. They are also guaranteed a replacement flat in new blocks, with a fresh 99-year lease.

Depending on their eligibility, residents also get a fixed sum in the form of a SERS grant - $15,000 for singles and $30,000 for families.

SERS residents will be given priority if they are to opt for a new flat in a Build-to-Order or Sale of Balance Flats exercise.











Related
99-year lease HDB flats are still nest eggs for future retirement needs: Lawrence Wong
Do we truly own our flats if they will be returned to HDB after 99 years?
The 99-year time bomb some Singaporeans are sitting on