Or dead men.
I bought my flat when I was 36. The flat then was already 30 years old. As it is a HDB flat, it was on a 99-year lease.
By the time the 99-year lease expires, I would be 105, if I were still alive. Likely, I would be dead. And it would not be my problem.
Or at least, not a problem for me to worry about.
When Z was born, the flat still had over 50 years of lease. If she stays here all her life and never moves, she will eventually have to when she’s over 50 years old, and the lease on the flat expires.
Unless, the flat is selected for the Selective Enbloc Redevelopment Scheme (SERS).
SERS is a government scheme to acquire flats for redevelopment of the land the flats are on. To have one’s flat acquired under SERS is considered to be the equivalent of being a minor lottery winner. The SERS process provides generous compensation for the acquisition of the home, an opportunity (with priority) for the affected owners to select a replacement home from HDB at a concessionary price, and with additional grants for renovating their new homes. And the new homes would have a fresh 99-year lease.
(Redevelopment is significant. They may acquire say 4 blocks of flats of 10 storeys each, tear them down, and rebuild 5 or 6 blocks of 25 storeys. That’s quite an increase in flats.)
My greatest worry when I bought my 30-year-old flat was that it would be SERS-ed. However, I was reasonably sure that it would not because at the time, it had been selected for the Major Upgrading Programme (MUP), which would add a storeroom (or small room) among other minor improvements to the flat and the whole block (including lifts that stop at every floor). With a MUP, it was unlikely that it would be SERS-ed so soon after (say within 10 years).
I did not want it SERS-ed because, well, I like the location. It was why I bought it. I did not want to move.
But, I thought that some time later – say a few decades later when the flat is nearing the end of the lease – the government would probably SERS my flat so that my “investment” would not be lost.
It was a reasonable belief or assumption.
Fast forward almost 20 years, and things are not quite as expected.
First, the Minister for National Development pointed out that paying too much for older flats may not be wise. And this kicked off a whole debate and discussion on the value and risk of buying flats with short leases.
The Minister’s main warning to Singaporeans was not to expect the Government to “rescue” flat owners when the lease expires, with SERS. The lease is a known factor when bought. There is no secret or hidden agenda and buyers transact in full knowledge of the terms and conditions.
SERS is not a given. SERS is not a promise. SERS is not a certainty.
And this is even more so today, when 1) the government is barely balancing the budget as opposed to the days (20 years ago) when budget surpluses were almost standard. The SG government has even had to define investment income from our reserves as “current income” in order to tap on those monies to balance the budget. So, if those “income” were not available, SG’s budget would actually be in deficit. And based on the current formulation, the current budget has maxed out the income from reserves.
2) The need for new flats will slow and redeveloping older estates will be less urgent, less necessary. Especially as more land are being opened up for development of new housing estates (Punggol, and Tengah).
The reason Singaporeans (including me) expected the government to “rescue” HDB flat owners is because the government had been touting the HDB flat (public housing) as a good investment and value. And it is true. Generally.
You buy a flat direct from the HDB for $200,000 (concessionary price). 5 years later you can sell it for$350,000 on the open market, maybe.
And the politicians have been harping on how the government had created wealth for all Singaporeans with their public housing programme. Which while true in a way, was probably political opportunism.
And probably based on an autistic conspiracy that was not sustainable.
But that is a long story, and one of my pet peeves, which will make this post unduly long.
So, keeping to the point of this post, which is about what am I to do with my flat? Now that any hope of having my “investment” rescued by SERS is a longshot. Do I need to do anything about my flat?
Well, the short answer is I would be dead long before the lease on my flat expires.
PL, being about 9 years younger than me, might be alive at 96 when the lease expires. She comes from a line of long-lived women. Well, her grandma is still hale at 85.
Well, if I were to sell the flat, it would have to be within the next 10 years. While there is still significant years left on the lease, that the flat is still marketable.
That would mean having to move.
And if things are status quo, it will mean moving into my 40 sq m “shoebox” condo apartment.
We lived there for a year after Z was born and it was liveable. But there were… compromises. Advantages too, but compromises.
If I want to sell my flat and buy another flat, I will need to sell my condo as owners of private property are barred from buying HDB flats. But it is fine if you own a HDB flat and then want to buy a private apartment. That’s called upgrading, and is encouraged.
And I will need to sell the apartment 30 months before I buy a HDB flat. I am barred from buying a HDB flat for 30 months after disposing of the private apartment.
The long and short of it, is I should have to sell my condo apartment first, before I can buy another HDB flat.
Anyway, a “test case” of the lease expiry in Geylang Lorong 3 had emerged. It is the worst case scenario as feared.
As always my planning and worry is for Z.
Where and how will she live.
Option A: She lives with us or in the flat until the lease runs out. In this scenario, I would have sold the condo at some point (age 55, 62, 65, or sometime thereafter). Then presumably I would die at about age 85, and then PL will follow about 20 – 25 years later, and then the lease will expire when Z is 55 or thereabouts.
At that time she will have to find a new place to stay. If she hadn’t gotten married, and did not buy a home at some point in time earlier. This is I think an extreme case. She might be without resources to buy a flat at that time or flats could be so expensive she couldn’t afford one all this time. But she would have been able (hopefully) to save over the last 30 years (from age 25 – 55) to be able to afford to buy or rent a flat. Maybe.
Option B: I manage to hang onto the condo (servicing the mortgage) which is freehold and does not have the same problem as the HDB flat. When Z is older (say 25), I transfer ownership of the HDB flat to her, and retain title to the Condo. And if I die within the next 5 years, the title transfers to PL. And after 5 years, if the rules today still applies, Z can take ownership of the condo and the flat. And when the lease on the HDB flat expires, she would still have a home in the Condo.
That is the reason for hanging onto the condo. The freehold condo will retain its value. Of course, by then it would be over 50 years old, and it might be subject to redevelopment. Which may not be a bad thing.
Or I could just be over-planning as usual.