How SERS Give Older HDBs A New Life

Many homeowners of older HDB flats are praying that their property would be able to go through the Selective En bloc Redevelopment Scheme (SERS) to renew their aged property. Since all HDB ownership has a 99-years lease, owners of aged properties hope that through SERS, they will be able to relocate to a new home with a fresh 99-years lease. This is because the value of the property will start to depreciate when the lease is nearing the end and the demand for such properties will drop significantly.

Some of you may ask what SERS is. It was launched in August 1995, and for HDB blocks that are fortunate enough to be selected for this scheme, owners will receive a notice from the government informing them as such. They will thereafter be awarded a generous compensation (usually at market value) and HDB will then assist these SERS participants to look for a replacement flat, which is usually located near to their previous HDB flat, where they will enjoy a subsidised price.

This entire process may take up to 4 years from the day the SERS participants receive the notice, to the day they actually move out of their flat. However, these participants do not have the luxury of voting, unlike those participants of en-bloc private sales, since it is a compulsory acquisition by the government.

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Benefits of SERS

Now, you may ask why is this scheme so popular? Why are some buyers willing to fork out such high prices just to purchase older flats in hope that it will be chosen for for this scheme? The biennial SERS survey that HDB conducts with residents who have benefited from this scheme has indicated the overall level of support for SERS,  ranging from 85% to 90%.  Below are some of the benefits that SERS participants and the neighbourhoods around SERS get to enjoy.

1. Uplifting effect

There are many factors that contribute to the rise in prices for properties, and the increase in price definitely is not solely correlated with the fact that the neighbourhood is undergoing SERS.  However, it is not a coincidence that there is a rise in price for the surrounding properties during SERS periods. For example, the SERS project in Ghim Moh has shown a rise in price for the surrounding flats. The nearby block of 3-room flats at 1 Ghim Moh Road saw an average price increase from $208,800 to $259,000. Notably, the price rise happened gradually over time, therefore SERS does help to bring about an uplifting effect to the surrounding properties.

2. Financial benefits

SERS participants will receive compensation for the acquisition of their old flats based on market rate valuation and also for related expenses such as legal fees, fire insurance and even moving fees. Other than these benefits, they would also be able to receive special grants, such as a $30,000 SERS grant to purchase their new flat. All these financial benefits provided for SERS participants have great attractiveness since they are not only able to discard their old HDB flats that are depreciating in value, but at the same time purchase a new HDB flat with a fresh 99-year lease at a subsidised price.

3. Using the flat as a prelude

SERS properties provides participants an opportunity to live in their desired location, since they may choose not to live near their old HDB flats and ballot for a new Built To Order (BTO) flat of their choice. Even though it will not guarantee them a flat, 5% of all BTO flats in Singapore are reserved for SERS-affected residents, and this gives them a competitive edge in obtaining a favourable queue number to select  a BTO flat of their choice.

4. Relief to SERS participants

The main reason why SERS is so popular amongst Singaporeans is because many owners of aged HDB properties often face difficulties when they intend to sell off their old flats, since the nearer the flat reaches the end of the lease period, the lower the valuation, which might lead to high cash over valuation (CoV). Hence, not many buyers will be interested in purchasing such HDB flats. However, with SERS, not only will participants enjoy newer amenities, but more importantly, they are able to own a new HDB flat with a fresh 99-year lease.

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Conclusion

Since the introduction of this scheme, some buyers are willing to pay high prices for older flats in anticipation of SERS happening in order to reap its benefits. However, it is a gamble for such buyers as it is important to note that only around 4% of HDB flats are able to benefit from this scheme and hence, it is not safe to assume that all old HDB flats are eligible for the scheme. Those that are eligible are often located at sites with high development potential, where the areas have not been utilised wisely. It is also subjected to the availability of suitable replacement sites for residents and the government’s financial resources.

With the newly implemented rules regarding the usage of CPF and HDB housing loans, interested buyers have to take note that the remaining property lease must cover the youngest buyer till the age of 95. This will therefore deter younger buyers from making a rash decision in purchasing older properties with short remaining leases. In conclusion, despite the numerous benefits that SERS may bring, one should not make the rash decision to buy an aged property just in hopes that it will be selected for SERS.

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