Sers rehousing option: Govt to ‘carefully study’ possible lease extension for 50-year lease replacement flats for resale
- The Government will “carefully study” if an extension can be provided in the future for shorter-leased Selective En bloc Redevelopment Scheme (Sers) replacement flats when they are resold subsequently
- Property analysts who spoke to TODAY shared mixed views about such possibilities
- While it may give assurance to such flat owners who might need to offload their flats due to exigencies, measures need to be implemented to prevent anyone from "gaming the system"
- Overall, the availability of various options would unlikely impact the wider housing market, given the limited number of Sers exercises
SINGAPORE — The Government will “carefully study” if a lease extension can be provided for Selective En bloc Redevelopment Scheme (Sers) replacement flats under the recently announced 50-year lease option when they enter the resale market.
The authorities are studying this possibility to be offered to both existing Sers flat owners who take up these shorter-lease replacement units from the Housing and Development Board (HDB), and any subsequent prospective buyers who might acquire the flat from them.
“The Government will carefully study if a lease extension can be provided for those who might wish to extend their lease in future,” said the Ministry of National Development (MND) on Wednesday (July 6) in response to TODAY’s queries.
Still, MND noted that the number of such 50-year lease flats would be "low, considering that the option is available only to Sers flat owners at designated Sers replacement sites".
The issue came to the fore after some Ang Mo Kio residents at blocks that are the subject of Sers said last month they were unhappy with having to fork out up to S$100,000 for a new replacement flat of a similar size.
Property analysts interviewed by TODAY expressed mixed views about the possible extensions of the 50-year leases. While it may give homeowners assurance should they have to offload their flats, safeguards should be put in place to ensure owners do not "game the system", they said.
On Monday, National Development Minister Desmond Lee’s told Parliament that new rehousing options offered to Ang Mo Kio and Marsiling residents affected by the Sers programme will apply to future Sers exercises.
One new option allows owners to buy a three-room or larger replacement flat on a 50-year lease, provided that the flat owners and their spouses are at least 45 years old at the point of the Sers announcement.
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 a letter to the residents last week.
MND said that ownership conditions of such flats are "no different" from that of 99-year lease flats.
"Flat owners can sell their flats with the balance of the 50-year lease after the Minimum Occupation Period (of five years) on the resale market," the ministry told TODAY.
The second new option allows flat owners aged at least 65 to sell some of the remaining lease on their existing Sers flat back to HDB and buy a replacement flat of the same remaining lease length.
The Ang Mo Kio Sers flats would be 49 years old when residents have to move out around end-2027. With 50 years of lease left, after selling a minimum of 20 years back to the Government, the remaining lease of their Sers flats as well as their replacement flats would be about 15 to 30 years.
In its letter last week, 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.
The possible extension of leases cited by MND does not apply to the lease buyback scheme for the Sers flats.
Analysts said providing a lease extension for such 50-year-lease flats would be viable but could take some time for the market to absorb.
Ms Christine Sun, senior vice president of research and analytics at OrangeTee & Tie said that it would make the shorter-lease Sers replacement flats “more attractive”.
“It gives buyers assurance,” said another analyst Lee Sze Teck, referring to owners who would prefer to take up the shorter-lease units, but still have worries about needing to cash out in the future due to exigencies.
The director of research at property agency Huttons Asia added that lease extensions would also be more sustainable as they would delay the tearing down of flats.
On the other hand, experts cautioned that some owners might try to place a premium on their shorter-lease flats if they resell them as any buyer would have the option of topping up the lease to live in the unit for a longer period.
Property expert Lee Nai Jia told TODAY the option to extend the lease should be granted only on a case-by-case basis.
“If need be, the Government can require a longer Minimum Occupancy Period (MOP) to prevent owners from gaming the system and inflating the price.Dr Lee Nai Jia, deputy director of the Institute of Real Estate and Urban Studies at the National University of Singapore”
“If need be, the Government can require a longer Minimum Occupancy Period (MOP) to prevent owners from gaming the system and inflating the price,” said Dr Lee, who is deputy director of the Institute of Real Estate and Urban Studies at the National University of Singapore.
The MOP is typically five years.
Mr Nicholas Mak, head of research and consultancy at ERA Realty Network, said that offering extension leases would involve more complex considerations, such as the quantum payable, and which flats would be eligible for such extensions.
“For example, owners (of other old flats) may go, ‘Because of major upgrading, the flat is still okay. Can we top up the lease?’ It opens up a lot of questions,” he said.
IMPACT OF MULTIPLE OPTIONS
The analysts outlined the possible impact of providing multiple options for eligible homeowners affected by all Sers exercises.
Ms Sun said this could, to some extent, distort the mean price of flats in the development later on, as prospective buyers would look at flat transaction prices in general and may not take into account the original lease period of each individual unit.
Mr Mak said that given this is a new scheme with no precedence, the market may take a few months before reaching an equilibrium on the resale prices of these flats.
"The differing lease periods will appeal to future buyers with different needs, and will be priced on a willing-buyer-willing-seller basis in the resale market," said MND in its reply.
The analysts also said given the novelty of the situation, it would be difficult to gauge which would be the more popular option among the few offered.
However, by and large, the impact on the wider housing market would be limited, said analysts.
Firstly, Dr Lee reiterated that the 50-year lease option was offered to specifically meet the needs of older home owners who could not or do not want to top up for their replacement flats, and intend to live out the remainder of their lives in the new units.
Analysts also pointed out there may not be many similar exercises where this issue arises.
“It was officially announced years ago by Mr Lawrence Wong — he was Minister for National Development back then — we are not going to en bloc every single old HDB block, and Sers exercises will be less frequent,” said Mr Nelson Lim, key executive officer at Altitude Real Estate.
Mr Lim, however, added that the current exercises can serve as a “benchmark or test bed” to determine how the decay of public flat leases can be managed in the future.
GREATER PRICE DATA TRANSPARENCY
As for why the possible extension of leases for replacement flats bought through the lease buyback scheme was not being studied, analysts said that this would not work because of how the lease buyback scheme was conceived.
Mr Mak said idea behind the lease buyback scheme when it was introduced was to help senior citizens who were asset rich but cash poor to monetise part of their flat without having to downgrade or move to a new home.
Under this scheme, the proceeds from selling part of the lease are used to top up their Central Provident Fund (CPF) retirement account. Flat owners are not able to sell their flat on the open market or rent out the whole flat afterwards.
Ms Sun said that generally, people who participate in the lease buyback scheme would not be in a position to extend the lease.
“To redeem what has already been sold cannot be considered a lease extension. The concepts (behind a lease extension and the lease buyback scheme) counter each other,” she said.
If the owners outlive the lease of the flat after the lease buyback scheme, HDB will work out an appropriate housing arrangement with them or their family members, its website states.
Mr Mak said that it would be difficult to come up with a straightforward solution that meets the needs of all homeowners.
“You cannot have your cake and eat it too — meeting diverse housing needs yet with a straightforward housing market situation,” he said.
Ms Sun suggested the Government consolidate Sers replacement flats into specific blocks instead of allowing residents to pick from all blocks in the new site.
“In this way the whole block of flats will have the same lease period. It may also be easier for the authorities to allocate the whole block of flat for another purpose, such as converting into rental flats, when the lease expires,” she said.
Experts also called for more transparency when publishing house transaction data in the future, by providing the original lease period on top of the remainder lease period, so that prospective buyers and sellers can have a more accurate picture when pricing the flats.
ADDITIONAL REPORTING BY DARYL CHOO