Redevelopment and extension of Woodlands Checkpoint, are also eligible for the new housing options

On July 2nd, HDB announced additional rehousing alternatives for those who own flats that are part of the Selective En bloc Redevelopment Scheme (SERS). The additional options include 1)) The Lease Buyback Scheme to seniors on the SERS site that allows them to purchase a replacement apartment on a short lease later; and 2.) provide larger or three-room flats with a lease of 50 years instead of 99 years and on designated replacement sites that will be able to cover residents until they reach the age of 95.

The Reserve Residences Jalan Anak Bukit price psf offer at $1,028,333. This is $10,650.23 per month.

“This may be the very first time HDB offers flats for 50-year leases,” says Nicholas Mak, ERA head of research and consulting department.

The two other alternatives will be available to those who qualify beginning with Blocks 562 through 565 Ang Mo Kio Ave 3 as well as those of Blocks 212-218 of Marsiliing Crescent/Lane (for the expansion and redevelopment for the extension and redevelopment Woodlands Checkpoint), whose flats were announced as available for purchase the 7th of April and May 26 respectively.

Both of these options can help lower the cost of replacement flats, which will make them less expensive, decreasing the worries of some senior citizens about having to increase their funds to buy another flat of comparable size at the new site,” says Wong Siew Ying, PropNex head of content and research.

Older homeowners don’t need to be concerned about mortgage concerns as they may not have to pay funds for their new home as per Christine Sun, OrangeTee & Tie senior vice president of research and analytics. Certain people may face difficulties when applying for a mortgage due to their age and job status (some may retire or work part-time) when they consider the option of swapping their home for a new apartment by renewing their 99-year lease, she says.

“The shorter lease with a shorter term of 50 years may also be a viable option for older singles with plans to pass on their properties as inheritance to anyone else,” Sun says. Sun. “Therefore it could be more financially beneficial to incur a lower or no upfront expense right now.”

Homeowners who are younger and middle-aged, and at least 45 who qualify for a mortgage to fund the purchase of their home, might also think about this option, according to Sun. “Since they purchased the apartments directly from HDB with subsidised, generous rates, they may be able to make an income in the near future as the value of resales will probably be greater than the cost of the purchase,” she says. “These homeowners are able to sell their unit and move to a new property in the future.”

The advantage of flats that are leasehold for a shorter period is that they may provide some financial benefits immediately for the owners, particularly when the flats with a 50-year lease are priced significantly lower than 99-year leasehold units, says the ERA’s Mak.

As there is no precedent for such flats in the event that owners of flats on lease for 50 years decide to sell them to the resale market following their Minimum Occupation period (MOP), “they will be subject to a price-finding process in which some flats could possibly be priced incorrectly in the short run,” adds Mak.

The cost of a 50 year lease flat is not even half the price of flats that have 99 years of lease according to Lee Sze Teck, Huttons senior director of research. “It isn’t an exact line to evaluate the remaining lease period,” he says. The decrease in the value of the flat’s resale will be much more steep as the lease’s remaining duration reaches 35 years, says he. The decrease is even more dramatic when the lease is shorter than thirty years remaining to run.

The flats will decrease in value faster than neighbouring flats with longer leases and longer leases, says Lee. Buyers of 50-year lease flats may find themselves in a position to be in the near future, particularly in the event that they choose to do an option to buy back their lease later: “There may not be enough time for them to return the property to HDB,” says Huttons’ Lee.

If the owner decides to sell the new flat after the five-year minimum occupancy duration (MOP) is completed, “the replacement flat – with an outstanding rent balance of around 45 years as at this date, but is only 5 years old may be attractive than some of the older resales of flats in the vicinity,” says PropNex’s Wong. “Its freshness could appeal to buyers who might prefer the lease being shorter.”

Capital appreciation can decrease dramatically in the event that the owner of the lease-to-own flat for 50 years decides to let it go after having lived in it for longer than 20 years, warns Wong. With a shorter lease term and a smaller pool of possible buyers could shrink, and it could be harder for the prospective buyer to secure financing for the property, she adds.

The number of buyers on the open market is restricted, particularly if the use of CPF (Central Provident Fund) money is severely restricted because of the lease being short Lee says Huttons’ Lee. This can affect the resale value of the property as well, he says. “If residents are planning to leave the property for their kids, they must select those with 99 years leases.”

PropNex’s Wong so expects the majority residents of SERS residents to opt for the 99-year lease option. “It offers a greater chance of capital appreciation because of the lease’s length when it comes to reselling in the near future, as compared to flats that have short leases,” she says.

Flats with a 50 year lease are a threat to 99-year lease flats that are in the same neighborhood, according to Huttons’ Lee. “The price for resales of the 50-year lease flats is lower , and could be used by buyers to gauge the worth of the 99-year lease flats” Lee adds.

However buyers who purchase their apartments on a 50 year lease for a lower price will likely enjoy an incredibly higher yield on rent, “possibly exceeding 10%” in comparison with their lease-hold 99 years neighbors according to ERA’s Mak. “Such apartments with leases that are shorter may draw potential investors” Mak adds. “If there is a rising number of these flats are rented out to international tenants, this can impact the demographics and social cohesion of the area.”

As the stock of flats age and lease decline begins the problem faced by residents of Ang Mo Kio residents will be more prevalent, says Huttons’ Lee. “The new policy on SERS could be seen as a first test to test the acceptance of the policy prior to being implemented for VERS [Voluntary Early Development Scheme”” Lee adds. “VERS residents could encounter similar situations, so it is crucial to ensure that the policy for VERS correct for it to get going with flying colors.”
If the two additional alternatives announced by HDB are received well, they could be a good model to use to be used in future exercises, and even for VERS, says the ERA’s Mak.