Ang Mo Kio Sers: New options of replacement flats with shorter leases of 50 years or less, says HDB letter to residents
- Two new options for replacement flats are now being offered to residents at Ang Mo Kio Ave 3 selected for the Selective En bloc Redevelopment Scheme (Sers)
- The first option will allow affected residents to purchase a three-room or larger replacement flat on a 50-year lease
- The second involves a lease buyback scheme which will allow residents to buy a new replacement flat on a short lease
- These details are according to aN HDB letter dated July 2 that was sent to affected residents
SINGAPORE — Residents of four Housing and Development Board (HDB) blocks at Ang Mo Kio Avenue 3 that have been selected to undergo the Selective En bloc Redevelopment Scheme (Sers) will be given two new options of replacement flats with leases less than half the usual 99 years, according to a letter by HDB to residents dated Saturday (July 2).
In the letter that is delivered by HDB officers to residents on Saturday, HDB said that affected residents can purchase a three-room or larger new replacement flat on a 50-year-lease.
The second option allows residents to take up a lease buyback scheme for their existing Sers flat, and buying a new replacement flat on a short lease similar to that left on their Sers flat after selling the lease to HDB.
These two new options, which are believed to be a first for Sers, are in addition to the existing option of buying a new replacement flat on a fresh 99-year-lease, said HDB to residents in the letter, which TODAY has seen and verified to be authentic.
HDB said in a news release on Saturday afternoon that these two options will also be extended to flat owners of Blocks 212 to 218 Marsiling Crescent and Marsiling Lane whose flats were announced for acquisition on May 26 for the redevelopment and extension of Woodlands Checkpoint.
HDB added that previously, Sers flat owners could not apply for the lease buyback scheme after their flat had been announced for Sers.
The affected Ang Mo Kio residents had previously expressed unhappiness at having to fork out up to S$100,000 for a new replacement flat.
HDB had stressed that it understands the concerns of the residents and will explore ways to help them. It also stressed that the new flats come with a fresh 99-year lease while the Sers flats completed in 1979 would already be 49 years old when residents have to move out around end-2027.
Some residents had in turn also suggested that HDB make the replacement flats more affordable for older residents by allowing them to buy flats with the same number of years left on the lease as their existing units.
In its letter on Saturday, HDB said that it recognised that “Sers can be an emotional journey for residents, especially for those who have lived in the estate for a long time and are attached to their neighbours as well as their familiar surroundings”.
HDB also noted that there were flat owners who had expressed concerns that the compensation amount for their existing flats would not be sufficient for them to a purchase a new replacement flat of an existing size on a fresh 99-year-lease.
“We hear you and understand your concerns,” said HDB.
"With these options, there is a suite of rehousing choices for residents who can decide which one meets their needs."
In a Facebook post on Saturday, National Development Minister Desmond Lee wrote: “These additional options are offered with our seniors in mind — to allow them to continue to have a home-for-life after Sers and live in new flats in a familiar environment, while addressing their concern of topping up for a replacement flat of comparable type or size.”
FLATS ON 50-YEAR LEASE AT REPLACEMENT SITE
HDB said that the 50-year lease offered in the latest option would be close to the balance lease of the residents’ existing flat by the time they move out around the year 2027 or 2028.
“With a shorter lease flat, you should be able to take up a new replacement flat of a similar size as your existing flat without having to pay a top-up amount,” HDB said.
In an example provided in the letter, it said the estimated market value of a 92 or 93 sqm four-room Sers flat on the sixth floor is valued at around S$415,000.
The estimated subsidised selling price of a 90 sqm replacement flat that is also on the sixth floor, after factoring in a S$30,000 Sers grant, is S$470,000 for one that is on a 99-year-lease lease, and S$359,000 for one on a 50-year-lease.
This means that instead of having to fork out S$55,000 for a replacement flat, residents will get to pocket S$56,000 instead either in cash or in their Central Provident Fund (CPF).
For a 68 sqm three-room Sers flat on the sixth floor, its estimated market value will be S$315,000 while a 65 sqm replacement flat will cost S$308,000 and S$233,000 with 99- and 50-year leases respectively.
This means residents can expect to pocket S$7,000 if they opt for 99-year lease or S$82,000 for 50-year lease.
To be eligible to exercise this option, HDB said applicants must be at least 45 years old at the point of the Sers announcement.
“This ensures that the lease of the new flat can cover you until at least the age of 95 and provide you with a home for life,” it said.
HDB said that this group of buyers will still have to meet the minimum occupation period of five years before they can sell the flat on the open market.
HDB added that these examples are estimated figures and the actual compensation amounts for Sers flats will be available in the fourth quarter of this year and the selling prices of the new replacement flats will be made known during the flat selection in late 2023.
LEASE BUYBACK SCHEME
As for those who are 65 years or older at present, HDB said they can opt to take up the lease buyback scheme for their existing Sers flat.
HDB explained that this scheme allows senior residents to “monetise any remaining lease of their flats that they may not need” to meet their retirement needs.
Under this scheme, HDB said such flat owners can retain 15 to 35 years of the lease — in five-year-increments — of their existing flat that will cover them till at least the age of 95, and sell the remaining tail-end lease to HDB.
They must sell back at least 20 years of lease to HDB.
The proceeds can then be used to top up their CPF Retirement Account and purchase a CPF Life Plan that will provide them with a monthly pay-out for life.
They will also enjoy a lease buyback cash bonus of S$30,000 if the Sers flat is a three-room unit, or a S$15,000 bonus for a four-room flat.
In any case, HDB said that in view of the Sers exercise, this group of flat owners will also receive market compensation for the balance lease of their flat they retain.
With this compensation, HDB said they can choose to buy a new replacement flat at Ang Mo Kio Drive of the same flat type, on a short lease that is equivalent to the remaining lease of their Sers flat after the lease buyback.
To illustrate how this works, HDB gave the example of a married Singaporean couple who are both aged 65 and are both joint owners of a fully-paid for three-room Sers flat.
Similar to the earlier example, the estimated market price for their Sers flat on the sixth floor is S$315,000.
If they opt to retain 30 years of lease valued at S$192,600 and sell the remainder to HDB, their lease buyback proceeds will be S$122,400.
The couple can then buy a new replacement flat with a similar 30-year lease. HDB said the estimated selling price of such a flat on the sixth floor, after factoring in a S$30,000 Sers grant, is S$139,000.
As the estimated market value of their Sers flat under the lease buyback scheme is valued at S$192,600, this means that the couple will also receive S$53,600 in total net proceeds.
GOOD MOVE BUT RESALE IMPLICATIONS UNCLEAR: ANALYSTS
Property analysts whom TODAY spoke to generally agreed that the latest move by HDB was a good way to address the complaints of the affected residents.
Dr Lee Nai Jia, deputy director of the Institute of Real Estate and Urban Studies at the National University of Singapore, said that most of the affected Ang Mo Kio residents are older Singaporeans who just want a replacement unit of the same size without having to fork out a large sum of money.
"I think HDB has understood their concerns and provided for them, which is good."
Altitude Real Estate's key executive officer Nelson Lim said the announcement is a "bold move by HDB" as there might be similar scenarios cropping up in future given Singapore's ageing population.
"It is a good time for HDB to start looking at issues like this now...They can refine the policy, and with refinement, the next iteration will be smoother and more acceptable (to the public)," he said.
Ms Christine Sun, senior vice president of research and analytics at OrangeTee & Tie, said that replacement flats with a 50-year lease will be helpful for owners who do not have the intention of selling their flats as well as senior singles who have no one to pass their units to as an inheritance.
With this option, Ms Sun said elderly owners would not need to worry about mortgage issues since they probably do not need to top up money for the new unit.
However, Ms Sun said that if the owners decide to sell these flats with shorter leases, there may not be many buyers who are willing to pay a high resale price, although the flat condition is still new.
The valuation process may also not be straightforward given the lack of precedents.
"Their lower resale values may cause some price distortion within the block or area. This may impact the resale values of other flats with longer leases within the same block," she said, citing how potential buyers may not know that the lower overall median price in that block or area was caused by the shorter-lease flats.
Agreeing, Mr Nicholas Mak, head of research and consultancy at ERA Realty, said that the value of the flats with shorter leases could depreciate faster than those on a 99-year lease in the same block.
Given that it will be the first time relatively new flats with short leases go on the resale market, both sellers and buyers could go through a period of "price discovery", which could lead to some flats potentially being mispriced in the short term, he said.
Ms Wong Siew Ying, head of research and content at Propnex Realty, said that the resale value of the flats with shorter leases depends on when the unit gets resold.
Should the owner decide to sell the replacement flat right after the five-year minimum occupation period is met, it could still be more attractive than some of the much older resale flats in the area.
"Its newness will be appealing to some buyers who may not mind the shorter lease. However, the capital appreciation upside could diminish substantially if the owner opts to sell it after living in it for more than 20 years."
Dr Lee said that he does not expect Saturday's announcement to cause any major shift for the overall property market because it only concerns Sers projects, which he said is not common.
That said, he believes the Ang Mo Kio Sers exercise would be a good case study to think about how to go about with the Voluntary Early Redevelopment Scheme (Vers), which generally involves a large proportion of elderly residents.
"If this (the Ang Mo Kio Sers exercise) goes well...the authorities consider offering similar options for Vers."
RESIDENTS REMAIN RELUCTANT DESPITE NEW OPTIONS AVAILABLE
TODAY spoke to 20 residents at the affected Ang Mo Kio blocks on Sunday (July 3), and almost all of them were unwilling to move despite the options available. However, many were still unclear on the details of these options and asked for greater clarity.
Mr Paul Goh, a 49-year-old facility manager who qualifies for the option to take up a new replacement flat of a similar size with a short lease, said: "But 50 years later, even if I can sell my place back to the open market or HDB, all these prices are not fixed."
Retiree Seah Kay Peng, 71, said in Mandarin: "I don't care that I'm getting a new flat with a lease of 50 years, I would rather continue living in this flat."
Others did not want to move as they enjoyed the amenities and accessibility of their flats.
Ms Kee Hwee Siang, 63, whose 92-year-old mother lives in Block 565, said: "She loves this place very much because there are three markets here. Every day she would go to these markets and shops in the area.
"I think all the neighbours here don't wish to move because they love this place."
Madam Jalikha Husin, a 71-year-old librarian who has lived in the estate for about four decades, said: "The options are quite reasonable but we have not thought about what to do yet... We have lived here for so long and I am very close to my neighbours. We are like family."
Ms Nadia Ahmad Samdin, the Member of the Parliament for the area, said that a number of residents she spoke to "were understanding, and glad that they could now own a new flat with similar lease length to their current home, while having cash on hand for their retirement".
"However, given the complexity of Sers and the unique circumstances of each of our 606 affected households, there remain other concerns and uncertainties which I will raise during my adjournment motion in Parliament tomorrow," she said.
ADDITIONAL REPORTING BY KIMBERLY LIM