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National Day Rally 2018: A novel solution that keeps HDB flat as both home and asset

National Day Rally 2018: A novel solution that keeps HDB flat as both home and asset.

Many Singaporeans have been preoccupied with the issue of ageing HDB leases lately. This came to the fore in March last year when National Development Minister Lawrence Wong, concerned about the high prices some were paying for old flats, warned that not all will be eligible for the Selective En bloc Redevelopment Scheme or Sers.

Mr Wong said only 4 per cent of Singapore public housing stock had been selected for Sers since it began in 1995. Most of the remaining flats will return to the HDB when the leases run out and there will be no residual value.

Since then, there has been much speculation and concern over how this issue would be resolved.

The move to launch a new scheme - Voluntary Early Redevelopment Scheme (Vers) - can only be welcome news. It gives more households the option, when their flats turn 70, to sell to the Government what is left of the lease.

This mechanism goes a fair way in assuaging home owners' concerns about the value of their flats, offering another option other than taking their chances with market forces or letting their leases run down to zero.

This measure, coupled with the moves to expand the Home Improvement Scheme (HIP) to include flats built up to 1997 - and the new programme to ensure all flats go through a second round of upgrading when they hit the 60-, 70-year mark - will reassure HDB flat owners that the value of their homes will be maintained throughout the lifetime of the lease.

It will have a spillover effect on the HDB resale market, which has been dampened by Minister Wong's word of caution.

His comment cast a cloud of uncertainty over the fate of ageing flats, and this depressed HDB resale prices as well as the volume of transactions, as reflected in recent quarterly figures.

Now, with the newly announced Vers, the market can be expected to be more stable, as major upkeep is undertaken periodically and many are given an exit option at the 70-year mark.

It also effectively quashed hopes of other options, like allowing the top-up of leases, which could have resulted in even greater speculative activity.

The Government's decision to offer the exit option only at 70 years, when the lease has run down substantially, is also a prudent move that does not require it to shell out too large a payment.

These measures dovetail nicely into the bigger picture of Singapore's urban redevelopment.

As International Property Advisor chief executive Ku Swee Yong puts it, in 20 years, Singapore's urban landscape will need to be "resculpted, to be significantly modified for smart lamp posts, autonomous vehicles, drone taxis, solar energy".

If people can hold on to their homes for 99 years and beyond, such infrastructure development would be undertaken in piecemeal fashion or take too long to materialise.

Although Singapore is about 20 years away from its first Vers project, it is not too long a wait given the details, large and small, that need to be ironed out. Not least among them is the calculation of the amount the Government will pay to buy back the residual lease.

There is also the issue of how the Government will fund what is likely to be an exercise costing billions of dollars over decades.

Going by the experience of the private market, collective-sale processes have not always been smooth-sailing. Marketing agents have been sued by residents. Neighbours have fallen out with one another. Residents are sometimes most unhappy at having to leave their homes, the windfall notwithstanding.

Individual interest and the common good sometimes are in conflict.

Current collective-sale tenders in the private home market generally involve a few hundred home owners. With an HDB precinct, the numbers would have to be larger to make it viable.

A Vers project could well put neighbourliness and the kampung spirit of HDB folk to the test.

Adapted from The Straits Times, 20 August 2018.