Government Solution to HDB 99 year leasehold expiry issue- Voluntary Early Redevelopment Scheme (VERS)

This is awesome! Our Prime Minister had announced during the National Day Rally that HDB will be launching (albeit in another 20 years time) the Voluntary Early Redevelopment Scheme ("VERS"). Under VERS, HDB owners of flats aged 70 years old will be able to vote (akin to enbloc for private properties) for the government to buy back their homes before the end of the lease. Considering that more than 80% of our fellow Singaporeans live in HDB flats, this is certainly a right step in resolving the depreciation and eventual zero value of HDB flats upon the end of the 99 years old lease period. VERS thus offer another solution for Singaporeans to preserve at least part of the value of their beloved homes and hard earned money.

The 99 years leasehold expiry nightmare suddenly surfaced last year (2017) when our Minister for National Development, Lawrence Wong, mentioned that HDB owners should not assume that their aged flats will definitely undergo Selective Enbloc Redevelopment Scheme ("SERS"). As a matter of fact, it was reported in the Straits Times that the flat identified for SERS was only a miserable 4% since 1995. There is actually an inextricably intertwined relationship between HDB and private property prices. If HDB prices crash eventually for aged HDB, then there will be less resources for HDB potential upgraders to get private properties. This leads to a vicious circle in terms of the future of Singapore Property market whereby the bulk of one's wealth is tied to the home where they are living in. 

While I am happy with the announcement of VERS which in a way will prevent a total erosion of the wealth of most Singaporeans, there are still some mind boggling aspects which I want to point out.

Firstly, new generation of Singaporeans are getting married later these days when compared to 10 to 15 years back. According to the Singapore statistics 2017, the median age is now around 30 years old for first time groom and 28 years old for first time bride- please see below screenshot.

From Statistics Singapore 2017-www.singstat.gov.sg

Now, let's assume that a young couple will always follow the traditional route of waiting for a BTO flat to be ready first before getting married. This means that a married Singaporean couple will be around 30 years old for the husband and 28 years old for the wife. VERS is only available when the flat is aged 70 years. So by that time, the first time buyers of the flat-if still alive- would have already reached 100 years old. I believed that both would have kicked the bucket and will not be able to enjoy VERS. More of would be for the future descendants to benefit from this legacy.

It seems to be catering more for the 2nd time, 3rd time and so on and so forth resales buyers to reassure them that the government will be giving them an exit option when they reached retirement age and to continue to pay high high prices for resales. So keep the record S$1Mil HDB resales purchases going and property crazy mindset going. We will probably need to wait for the government to tweak the details for this scheme such that it does not veer towards this route. 

Secondly, we all saw what happened to the recently collapsed bridge in Italy. Reinforced concrete cannot last forever. Most buildings in Singapore have steel  embedded in the concrete and in our hot and moist tropical weather, they will corrode eventually and weaken the building structure via spalling of the concrete. Will most HDB be able to survive till 70 years old in terms of structural integrity as well as the monthly maintenance cost?

Last but not least, what if residents who oppose the VERS at the 70th year later regret it (smacks of the Brexit which appeared to have no trade deal concluded in place yet)? So does it mean people who have disagreed on the one and only redvelopment vote at 70 years, later on regret it for the rest of their lives? This is different from private property where they can start new enbloc proceedings 2 years after the previous failed attempt. Perhaps the government can offer 2 VERS during the life time of the HDB home similar to the 2 upgradings during the life time of a flat that was announced during the National Day Rally. Maybe first VERS at 60 years old and another at 70 years old.

There will of course also be potential acrimony issues for the VERS which are already common for private enbloc. But in the context of the greater good, the exploration and fine tuning of VERS shall cushion the harsh landing expected for the diminution in value of leasehold HDB and thus of paramount importance.