Saturday, April 1, 2017

Don't Assume Old HDB Flats Are Eligible For SERS's #1 personal finance comparison platform by transaction volume, provides consumers with timely money insights and aggregates the latest credit card offers and up-to-date personal loan deals.

What is SERS, and why does it make some Singaporeans want to buy old HDB flats?
Minister for National Development Lawrence Wong has just warned resale flat buyers about their SERS assumptions. If you’re not too familiar with HDB’s practices, you may be wondering what this is, or why Singaporeans would be rushing to buy SERS flats (which are close to being demolished and replaced). Here’s what you need to know about it: 

What is SERS?
HDB flats have a lease of 99-years, after which they get returned to the government. So far, however, we haven’t had flats in which the lease expired, and the occupants got kicked out. One reason is the Selective En-Bloc Redevelopment Scheme (SERS). In theory, SERS is not about “restoring” the 99-year lease of flats that are nearing their end (although that’s one effect). SERS is actually about rejuvenating old housing estates. When HDB determines that a particular estate has become too old and run-down (thus driving up its maintenance costs), it may launch SERS. This allows them to take back the land and demolish the flats before the usual 99-year lease is up. However, SERS has benefits to the residents, to compensate for the loss of their flats. These are known as rehousing benefits.
What are SERS Rehousing Benefits?
The rehousing benefits come down to two main things. The first is compensation for your existing flat. The second is a price subsidy and priority when choosing a new flat, which will also come with a renewed 99-year lease. The compensation for your flat will be determined by a private valuer. In general, it’s based on price transactions in the given area. You can visit the Urban Redevelopment Authority (URA) website to check the flat prices in your neighbourhood. The valuer will also take into account:
    The size and type of your flat
    Storey height
    Any improvements you have made
    The length of the lease remaining
You will also be compensated for any stamp duties and conveyance fees that come from having to purchase a new flat. Lastly, you will get a “removal allowance” of S$10,000. This is to compensate for the price of moving or storing your belongings, or buying any furniture that you can’t or don’t want to move. Next, you can select a replacement home. You can either choose from one of the sites specifically put up for your SERS flat (called the replacement site), or you can choose to live somewhere else altogether. If you choose the replacement site, you can get a subsidy of up to S$30,000* for your new flat. You are guaranteed to get a flat at the replacement site, as SERS affected residents have priority over others who are balloting for homes there. If you choose to live somewhere else, you have one year from the announcement of SERS to pick another place. As long as the new home you pick is part of HDB’s public sales scheme (e.g. it is not a private condo), you can retain the rehousing benefits and subsidy. Around 5% of BTO flats in Singapore are reserved for SERS affected residents, and they have priority over others for these units. (*Subject to terms and conditions, and is affected by your citizenship status. See the HDB website for more details).
Why Would Singaporeans Want to Buy SERS Flats?
They buy it for the reasons given above: they want to get the rehousing benefits from SERS. If someone buys over your SERS flat, they take your rehousing benefits as you are no longer a resident there. Sometimes, a SERS flat buyer is interested in the replacement site. The new site may be closer to their children’s school, or be a rare flat in a mature estate (near malls, eateries, an MRT station, etc.) If they buy a SERS flat, they are guaranteed a spot at the replacement site in a few years. Some risk-takers also like to speculate on SERS. They go out of their way to buy homes in old estates, in the expectation of benefits once SERS comes around. It is less profitable to buy when SERS is already announced, as the residents will price the rehousing benefits into the sale. This is the group that’s being warned by our National Development Minister: it is dangerous to assume that SERS will always take place. So far SERS has always been around to rescue to ageing estates. But in the off chance that you buy an old flat and HDB really allows the lease to expire, you could end up losing a lot of money (the flat will become worthless). Our take on it is simple: if you can’t afford the potential S$350,000 to S$500,000 loss (the typical price of a resale flat), then you shouldn’t be gambling on SERS. No matter how “sure-fire” you think it is.

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