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“Nearly all 540 Ang Mo Kio Sers residents need not top up for new flats if they take up 50-year lease” (ST, Jul 4)
“Nearly all of the 540 Ang Mo Kio residents aged 45 years and above will not have to top up any money to move into a similarly-sized replacement flat if they opt for a 50-year lease, said National Development Minister Desmond Lee.”
Comment:
“540 Ang Mo Kio residents aged 45 years and above will not have to top up any money” – will they be given adequate compensation to cover their removal and renovation costs?
“Both options will apply to all future Sers projects, and to flat owners of Blocks 212 to 218 Marsiling Crescent/Lane whose flats will be acquired for the expansion of Woodlands Checkpoint.”
Comment:
Since as I understand it, that most of the Marsiling residents do not have to top-up for the new 99-year lease – does it mean that they will be given a much higher compensation, if they opt for 50 years now that it has been made available to them, instead of 99 years?
“”Looking ahead, the flats involved in future Sers exercises are likely to be older with shorter remaining terms and such needs may arise too,” he noted.”
Comment:
As to “flats involved in future Sers exercises are likely to be older with shorter remaining terms” – does it mean that the required top-ups, may likely be even higher than Ang Mo Kio’s (up to $160,000), in the future, “with shorter remaining terms”, which may widen the gap between the shorter remaining lease and the replacement flats’ 99-year lease?
“HDB has said that only about 5 per cent of all HDB flats are suitable for redevelopment under Sers, and most of these projects with high redevelopment potential have already been selected.”
Comment:
Since “only about 5 per cent of all HDB flats are suitable for redevelopment under Sers” – what will happen to the balance 95%, which I understand may be about 1 million flats? Does it mean that the older flats may continue to decline in value until 0, at the end of the 99-year lease?
“Mr Lee noted that the short lease options are consistent with the key principle that the length of a flat’s remaining lease affects its market value.
In her speech, Ms Nadia, who is MP for the affected residents, said while they were appreciative of the 50-year lease option, some concerns remain.
Citing a leasehold table that computes how tenures affect land value – a table informally known in real estate circles as the Bala’s Curve – Ms Nadia said the financial value of leases decay in an accelerated fashion towards the end of the lease.
She then sought assurance that no residents will have to top up further funds should they choose the 50-year lease option. “And if it’s not the case, then what will HDB’s approach be to ensure that no resident is disadvantaged?”
In response, Mr Lee said a flat with a 50-year lease is not half the price of a flat with a 99-year lease, as a flat’s market value does not follow a straight line.
The value of assets, including leasehold properties, is calculated based on the time value or money, or the concept that $1 today is worth more than $1 in future, he added.
“Adopting this principle, the value of the first 50 years of the lease is expected to be worth more than the value of the last 50 years. But a shorter lease flat would be more affordable than a longer lease flat, all things equal,” he said.”
Comment:
Does the above mean that as HDB flats get older in S’pore, if they are selected for Sers – the required top-ups may generally keep getting higher and higher?
“HDB will consider offering affected residents who do not meet the criterion to apply for a 50-year lease or face extenuating circumstances on a case-by-case basis, he said.”
Comment:
So, for example – as to the about 66 residents who do not meet the criterion, because they are below 45 years old – what exactly are the solutions for them?
“Ms Nadia pointed out that approximately one in four residents will need to pay a resale levy using their sales proceeds or in cash, and asked if the payment could be waived or deferred given that Sers is involuntary.”
Comment:
So, will the resale levy be waived or not?
“She also asked about the implications of a 50-year lease, which would lead to a “curious mix of flats with varying leases, potentially creating price distortions in the market”.”
Comment:
Can you imagine in 4 neighbouring blocks – about 89% are on 50-year lease, and about 11% are on 99-year lease – what will the market prices be of the flats, especially the 99-year ones?
Its kind of like an unprecedented scenario- a buyer may be looking at 2 neighbouring flats of 50 & 99-year leases, with likely vastly different prices
What is the likely scenario? Will such 99-year lease flats be much lower in price with much reduced demand, compared to a block or neighbouring blocks that are all of the same 99-year lease?
What are the implications for the Ang Mo Kio residents who choose (or are not eligible for the lower-lease) the 99-year replacement flats? Is this fair to them? What does the future hold for them?
“Many residents have also expressed disappointment over the estimated valuation of their flats, she said, noting that the new site has fewer bus services and is less accessible to wet markets compared with the Sers site.
She also highlighted the Sers site’s proximity to the future Tavistock MRT station on the Cross Island Line. “Works for the MRT station started and residents will be putting up with the dust and noise but not able to reap the benefits,” she said.
In response, Mr Lee said the basis of determining the compensation for the Ang Mo Kio Sers flats remains the same as past exercises, where a private valuer takes reference from recent transactions of comparable resale flats, the remaining lease, flat attributes including condition and extent of renovation work, and information on existing and upcoming amenities and infrastructure in the area.”
Comment:
Using the same criteria for valuation in the past, may not be fair, equitable, logical or appropriate now, in the light of the rapidly declining value of older flats (due to the recent realisation of 0 value versus decades of the narrative of HDB as “asset enhancement) vis-a-vis the recent surging prices of resale flats
“The key difference, he said, is that the Ang Mo Kio flats are older – with a balance lease of about 57 years at the point of the announcement – compared to about 70 years in past Sers exercises.”
Comment:
I understand that there have been many past Sers of more than 35 and 40 years old flats – so, why is it that Sers Ang Mo Kio is now apparently the first one, that requires such huge top-ups, compared to other Sers historically? What has changed?
