HDB value proposition improves as market awaits scheme details

No immediate impact yet; but owners now have further assurance they would be able to 'cash out' as lease runs down

Tue, Aug 21, 2018


FRESH measures to spruce up and to redevelop ageing HDB flats aren't expected to immediately impact the HDB resale market, say property analysts, who are seeking greater clarity on how the new voluntary early redevelopment scheme (VERS) will be implemented.

In his National Day Rally speech, Prime Minister Lee Hsien Loong announced a multi-billion dollar programme, Home Improvement Programme (HIP) II, which will be launched in 10 years' time to upgrade flats that are 60 to 70 years old; this will see them being upgraded for a second time during their 99-year lease. Meanwhile, the existing HIP, which upgrades flats for the first time at the 30-year mark, is being expanded to include housing blocks built up to 1997. Prior to this, it was offered to flats built up to 1986.

In addition, residents in selected precincts will get to vote on whether to sell their ageing flats back to the government before the lease runs out. Through VERS - which will kick off in around two decades - the government would be able to redevelop these older towns if residents vote in favour of it.

Noting that VERS will not start for another 20 years, national director (research & consultancy) at JLL Singapore, Ong Teck Hui, doesn't expect demand or prices for HDB resale units to shoot up. However, he added that the overall move is a positive one and should stabilise the market, especially where potential buyers of older flats are concerned.

While it may be too early to gauge if prices will rise because of the HIP and VERS schemes, the new policies may be a game changer for older HDB resale flats as HIP II will likely increase the attractiveness of such flats, highlighted Christine Sun, head of research & consultancy at OrangeTee & Tie. "Price depreciation of older flats may slow down and stabilise in the long term. Flats that are eligible for HIP I and II, especially bigger flats, could see more demand from HDB upgraders or downgraders from private homes," she said.

Meanwhile, PropNex key executive officer (KEO) Lim Yong Hock said that the measures were not about boosting or cooling the HDB resale market, but rather about providing reassurance and setting certain expectations for residents of older flats.

However, ERA KEO Eugene Lim offers a different perspective, reckoning that VERS should provide "a much needed boost" to the HDB resale market - especially for ageing flats - in terms of both prices and transactions.

Christine Li, senior director (research) at Cushman & Wakefield also said that prospective buyers could become less wary about an older flat's declining lease. "This could spur demand and prices for ageing HDB flats in mature estates, which tend to be centrally located and well-served by numerous amenities. Barring an economic crisis, existing flat owners who own an ageing flat are now in a stronger position to hold on to their asking price. This would support the current price levels."

She added: "Overall, the value proposition of HDB flats has improved. Owners now have further assurance that they would be able to 'cash out', which should drive market sentiment and have a positive effect on HDB resale prices and demand."

Where VERS is concerned, some property analysts noted that question marks remain around how the scheme would be structured. ERA's Mr Lim flagged that the government has yet to announce the minimum level of consent that would be required from voting residents in order for the flats to be redeveloped, and how compensation would be determined.

Compensation under VERS is expected to be less generous than the existing selective en-bloc redevelopment scheme (SERS), which aims to unlock high development value in older estates which may not have used space optimally.

Nonetheless, VERS is "good for the market because it will rejuvenate the whole precinct, since older flats may not appeal to younger buyers," said Lee Sze Teck, head of research for Huttons Asia.

He also pointed out that redeveloping older blocks would make it easier for the government to kit them out with smart systems or eco-friendly features, which are being rolled out at certain build-to-order flats.