Is the Selective En-Bloc Redevelopment Scheme a ticket to riches?

By Paul Ho

/ iCompareLoan |

April 25, 2016 10:00 AM SGT

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Besides Toto, 4-D and going to the casinos, which some people believe can make you rich, what other ways can you become rich? En-bloc sales are one way. For HDB flats, there is the Selective En-Bloc Redevelopment Scheme.

SERS was developed by the government to make Singaporeans rich, right? Actually, no. It is a scheme by the government to rejuvenate old estates and redevelop them. This usually happens in good locations where there is better economic value for moving HDB flats out and rezoning them for higher economic value.

Why it pays to buy mature HDB estates

• Food is cheaper. Many hawker stalls or food centres are leased to hawkers at a cheaper rate, thus the food is also cheaper;

• Food is tastier. Many of these stalls have been around for 20 to 30 years. Any food stalls that can survive that long must serve tasty food, otherwise they would have closed down long ago;

• You may strike the lottery. If your home is involved in SERS, you can move to a new flat;

• Proximity to the public transport system. You are most likely to be near major bus routes and MRT lines; and

• Proximity to family. You can be close to your parents, if they are already staying there.

Downside to selecting mature HDB estates

• Old building, old lifts, old design, old wiring and creaking pipes;

• Lack of vitality;

• It may not be easy to get a bank loan for the purchase; and

• You cannot spend too much on decoration and renovation in case of an en-bloc sale, which will render the renovation wasted.

Tanglin Halt

Tanglin Halt is one of the oldest HDB estates in Singapore. Whatever you choose to call them, the HDB flat owners or lessees (because, in reality, they rent it for only 99 years) in this area have struck the lottery.

The blocks selected for SERS are Blocks 24 to 32, 33 to 38, 40 to 45, 55, 56, 58 to 60, and 62 to 66 on Tanglin Halt Road and Commonwealth Drive. The owners of these HDB homes can look forward to moving into any of the five upcoming projects in Dawson estate, which will offer more than 3,700 new flats.

The replacement sites are on Margaret Drive, Dawson Road and Strathmore Avenue.

How much do I get for my Tanglin Halt flats?

Some people that I have spoken to say they are getting compensated at $300,000 to $405,000 (depending whether they have an extra corner corridor) for their three-room flat.

How much do I have to pay for my replacement HDB flat?

Based on HDB’s website, the price of a new flat for a 62 sq m, three-room flat in Block 30 ranges from $320,100 (unit #07-202) to $358,000 (unit #44-206). The higher the floor, the more expensive the unit.

How to select a good mature HDB unit with en-bloc potential?

• An estate that is at least 30 to 40 years old;

• Near the city or on the city fringe;

• Near or within URA’s Masterplan zoning for future development;

• Near major commercial buildings or business parks that are fully built-up; and

• A big price differential on a psf basis between HDB and nearby units.

The home owners of Tanglin Halt were compensated at $300,000 to $400,000 for their three-room HDB flats, moved into a new place nearby and paid about the same price for their new HDB flats. This is not a great price, but at least it is fair.

Some older folks are unhappy; they neither hanker for the compensation nor do they look forward to moving. They would much rather stay in Tanglin Halt.

Who, then, is the biggest winner? The residents, who have a new flat, or the government, which now has a new piece of land for which it can charge a higher price? If a 700 sq ft, three-room flat is going for $300,000 to $400,000, that would translate into a price of $500 to $600 psf. The government can buy this land cheap and rezone it into a private residential land or as an extension of JTC’s corridor of innovation, which means more business parks.

Let’s hope the rents for the new Dawson estate hawker stalls will not rise 200% to 300%, so that hawkers do not have to raise prices and serve tasteless food.

Paul Ho is chief mortgage consultant of iCompareLoan. He can be contacted at paul@icompareloan.com.

This article appeared in The Edge Property Pullout, Issue 725 (April 25, 2016) of The Edge Singapore.

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