Commentary: Is it a curse or a blessing when your HDB flat is picked for SERS?
Home owners may not reap windfalls from the Selective En bloc Redevelopment Scheme, but they can replace their decaying HDB lease with a fresh 99-year one, say NUS’ Lee Nai Jia and Sing Tien Foo.
SINGAPORE: Four years after the last Selective En bloc Redevelopment Scheme (SERS) announcement, four Housing and Development Board (HDB) blocks – 562 to 565 in Ang Mo Kio Ave 3 – were picked on Apr 7 for redevelopment, affecting more than 600 home owners.
Since the scheme was first launched in 1995, 41,000 housing flats in 82 sites have been selected for SERS. As part of the Government's plan to redevelop mature estates where land use has not been optimised, older blocks are torn down to make way for newer, taller buildings at the same sites.
Resident reactions were unsurprisingly mixed: Some welcomed the move since their flats are already 43 years old. Others felt apprehensive about being forced to move away from friends and family.
Other onlookers seemed more cheery, even a little envious, as they saw getting picked for SERS as “winning the lottery”. After all, affected home owners will be entitled to compensation based on the open market value of the flat.
For example, an owner of a four-room flat in the latest Ang Mo Kio SERS project could expect to receive compensation ranging from S$380,000 to S$450,000, based on the recent resale market transactions in the area.
The Government will also cover reasonable expenses incurred in moving and buying a replacement flat, such as stamp duty and legal costs. For affected 3-room flat owners, these expenses could range between $16,300 and $18,500.
But is SERS more of a curse or a blessing for home owners?
IS THERE A LOTTERY EFFECT FOR SERS?
For one, home owners will be compensated around the price at which they would have likely sold their unit independently in the open market.
And the latest Ang Mo Kio SERS project comes at a time when resale flat prices are on the rise – HDB data shows that the resale price index has been rising for eight consecutive quarters. They could be cashing in on a robust resale market without the hassle of engaging a property agent or dealing with viewings and negotiations.
They could also receive additional benefits in waived stamp duties and removal allowance, which SERS grants up to SS$30,000, if eligible, when buying their replacement flat.
But this also means they would not have the chance of trying their luck at a higher premium if the resale market stay in their favour.
This is unlike private en bloc sales, where windfalls can happen. The sky-high sales prices tend to be higher than the open market value, as they reflect not the unit’s current value but the development potential of the land. In SERS, the increased value generated by enhancing land use is a public good that will be redistributed not to owners of SERS flats but back to society by selling the additional HDB flats to more residents.
But the real perk comes in the rehousing options. Home owners affected by SERS can choose to buy a new flat at the designated replacement site, apply for a flat elsewhere offered under HDB’s Build-To-Order (BTO) or Sale of Balance Flats (SBF) exercises with priority allocation, or sell the flat with rehousing benefits.
Affected Ang Mo Kio owners can essentially swap their decaying 56-year lease with a fresh 99-year one with better amenities. This gives them another chance to resell the replacement flat in the future with the attractiveness of a longer lease.
Furthermore, the replacement flats are usually located near the SERS site, which are mature estates that see rare and highly competitive BTO exercises. The most recent Ang Mo Kio BTO project in August 2020 drew nearly 20 applicants for each five-room flat. Getting a flat in the SERS precinct is probably the most attractive benefit.
If home owners choose not to take up the rehousing options, they will receive an ex-gratia payment of approximately S$30,000, plus the SERS grants like other owners taking the rehousing options.
TANGIBLE AND INTANGIBLE COSTS OF MOVING
But SERS is implemented via compulsory acquisition. Owners cannot opt-out of the programme if their blocks or precincts were chosen by the Government.
It may inadvertently place a higher social cost on older residents, which we see in earlier SERS exercises like in Tanglin Halt. Older residents who have stayed in their flats for decades and are so accustomed to the living environment will undoubtedly feel a greater pain of relocation.
It may not be easy to leave behind life’s memories and reorient themselves to living with new neighbours and places after moving. According to the HDB Sample Households Survey in 2018, about 89.3 per cent of respondents who were 65 years or older did not intend to move in the next five years, the highest among the various age groups.
Older residents are less mobile, making moving more difficult. They tend to bear the brunt of community disruption and social displacement through the move.
The new "Joint Selection Scheme" introduced in the latest Ang Mo Kio SERS, whereby up to six affected households could choose their new replacement flats together to allow them to live close to each other, could bring some relief.
There are also instances where some buyers who bought their flats at the peak of the housing cycle face losses due to differences in compensation prices and their historical purchase prices.
For example, a buyer who bought a 4-room flat on the upper floor (10th to 12th stories) at about $483,000 in December 2013 may find their flat to be given a lower compensation value based on the comparable resale evidence in 2021.
Home owners may also end up spending much of SERS compensation on a new flat anyway if they do not downsize to a smaller flat, take new loans, and incur moving costs.
DETAILS OF VOLUNTARY EN BLOC REDEVELOPMENT SCHEME?
When more HDB flats, especially those built in the 1970s and 1980s, age and uncertainties rise as quickly as leases decay, redevelopment will be on the minds of more home owners and prospective buyers.
During the National Day Rally speech in 2018, Prime Minister Lee Hsien Loong addressed the issue head-on with the proposed new Voluntary En bloc Redevelopment Scheme (VERS), which will apply to HDB blocks of more than 70 years.
It is expected that the compensation for VERS is likely to be less generous than that provided under SERS. A majority of older flat owners will need to vote to trigger the sell-back of their flats to the Government for redevelopment, so the process may end up taking a longer time.
But it remains to be seen what relocation options could be included under VERS – which will likely be the sticking point for most home owners.
With an ageing population, relocating households en masse may become more problematic, with potentially more resistance from older flat owners who prefer to age in place in their familiar surroundings. Elderly owners who lack family support may require support, not just in finding alternative housing, but also to minimise displacement anxiety.
Ultimately, it would be good for more details of VERS to be released well ahead of implementation, so that Singaporeans have time to weigh their options and decide what is best for them and their home.
Dr Lee Nai Jia is the Deputy Director of the Institute of Real Estate and Urban Studies (IREUS). Professor Sing Tien Foo is the Director of the same institute and Head of the Department of Real Estate at the National University of Singapore. The views and opinions expressed here are those of the authors and do not represent the views and opinions of the National University of Singapore, its subsidiaries or affiliates.