SINGAPORE: The new housing schemes announced by Prime Minister Lee Hsien Loong on Sunday (Aug 19) could see older flats retain their value for a longer period of time and become viable alternatives for prospective buyers, said analysts.
In his National Day Rally speech, Mr Lee said that the Home Improvement Programme (HIP) will be expanded to cover more Housing and Development Board (HDB) flats, to include those that were built up to 1997.
In addition, every HDB flat can expect to be upgraded twice during their 99-year lease, under the new HIP II scheme. The second round of upgrading will take place when the flats are about 60 to 70 years old.
This will create greater assurance for people who may want to buy older flats, said PropNex Realty's key executive officer Lim Yong Hock.
"It gives people a little bit more confidence to buy the older flats, especially those who intend to buy and live there till they die," said Mr Lim. "They know that even if they were to buy an older flat, five to 10 years down the road, HDB will still do the home improvements.”
“But there will still be other considerations - these could be location for example, the renovation (costs), and last but most importantly, the price,” he added.
However, for older flats to be attractive to buyers, there needs to be some changes to the Central Provision Fund (CPF) Withdrawal Limit, Mr Lim noted.
Currently, if the remaining lease of a property is less than 60 years, there are restrictions on how much CPF money can be used to buy it.
A home owner can use CPF money if his age plus the number of years left on the lease is at least 80 years – but subject to restrictions.
However, if the remaining lease is less than 30 years, CPF cannot be used at all.
"Younger buyers may not be able to use up to the full (amount of CPF)," said Mr Lim. "So this becomes a constraint, unless there are more changes and adjustments, then you may be able to see more younger buyers purchasing older flats."
ADDRESSING THE 99-YEAR LEASE WORRY UNDER VERS
Another housing scheme that was announced by Mr Lee is the Voluntary Early Redevelopment Scheme (VERS). The Government will buy back older flats before the 99-year leases run out and compensate residents whose flats are taken back early.
Residents, who have to vote for VERS, can then use the proceeds to buy a new flat.
The scheme could ease concerns about the value of older flats.
"A lot of owners were afraid that when the tail end of the lease comes, nobody will buy the flat from them and they would be forced to return the flats and end up with nothing," said Mr Chris Koh, director of property firm Chris Koh International.
"At least now, owners who have old flats know that there is some future ... You have options now instead of staying in your flat till the end."
There remains the question of how much home owners would get in return if they choose to go for VERS. PM Lee had already said that the terms will be less generous than that of the Selective En-Bloc Redevelopment Scheme (SERS), as there will be “less financial upside”.
"People are going to decline if they feel that the pricing isn't attractive enough or they feel that if they accepted the price, they don't have the financial ability to find another place," explained Singapore University of Social Sciences (SUSS) Associate Professor of Economics Walter Theseira.
"There's always this issue whether people feel they can find an appropriate replacement."
Still, Ms Karen Chan, who lives in a 48-year-old three-room flat at Stirling Road with her parents, hopes there will be rehousing benefits similar to SERS, when VERS kicks in.
"I am quite surprised because I thought there would be no chance for us to be part of these schemes," Ms Chan said. "I believe for the older generation - it would be good for them to have different options."
NO IMMEDIATE IMPACT ON RESALE MARKET
VERS will only start in about 20 years, when some flats reach 70 years old.
Similarly, HIP II will be implemented in about 10 years’ time, which is why property analysts said the schemes are unlikely to have any immediate impact on the HDB resale market for now.
“If VERS or HIP happened on Jan 1 next year - such a timeline can excite the people," said PropNex’s Mr Lim. "Too long a time to wait means that there are too many uncertainties in the market."
For Mdm Anbrijt Thakarsingh, who lives in a 43-year-old flat in Bukit Merah, she is already certain that she does not intend to sell her flat to the Government. She wants to pass it on to her children instead.
"What happens at the end of the 99-year lease is up to them," she said. "I'm happy to stay for as long as we are around ... no matter how much money is being offered."