HDB-dwellers will have a new option to consider when they plan to offload their flat.

Prime Minister Lee Hsien Loong at the 2018 National Day Rally (NDR) introduced the new measure -- Voluntary En-Bloc Early Redevelopment Scheme (VERS) -- which allows HDB residents to vote for their estate to be bought back by the government for redevelopment.

This would only apply to estates which are at least 70 years-old and those that the government has deemed eligible to VERS.

And it would be another 20 years before any flat hits this age.

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Less uncertainty

Up until recently, it was still a misconception that the Selective Early Redevelopment Scheme (SERS) would serve as a "bailout" or even jackpot of sorts for all HDB owners -- never mind the word 'Selective' in its name.

Minister for National Development Lawrence Wong has already cautioned in 2017 that not all flats would be considered for SERS.

During this year's NDR, PM Lee shared that SERS usually picked on estates that had high redevelopment value. These are usually located nearer the city centre -- Tanglin, Havelock, Tiong Bahru, Tanjong Pagar, etc.

Some of that value is shared with residents in the form of a generous package, including full compensation for their existing flats and relocation expenses.

This may have been the reason fuelling some people's optimism that their flats will some day win the SERS lottery.

This unwarranted optimism should be put to bed now that PM Lee has said that HDB estimates that only around 5 percent of flats are suitable for SERS.

What is certain is that once an estate reaches 70 years of age, in the name of orderly development, the government will start identifying estates for VERS.

Residents may then collectively decide if they would like to let the government buy back their estate early for redevelopment.

Unlocking residual value of old properties

The caveat of VERS is that it will be less generous than SERS, because there will be less financial upside for the government when it does the buyback.

When a flat hits 69-years of age (or 30 years remaining on its lease), CPF funds cannot be used as down payment and HDB loan repayment when buying a flat this old.

This may reduce the number of potential buyers and correspondingly the flat's price.

And the amount of hidden repairs needed for an old flat may further discourage buyers.

So, while VERS is not exactly SERS, it presents a willing buyer for a 70-year-old flat.

Potential drawbacks

How will VERS work with HIP II?

The newly introduced Home Improvement Programme II targets flats which are 60 to 70 years-old and will help upgrade them to fix common maintenance issues that come with age.

How HIP II will work with VERS has not been announced. There will be several concerns.

How much will the government pay for the less-than-30-year-lease for VERS?

Will it be seen as wasteful if an estate that just received HIP II be then put up for VERS? Or will HDB disallow flats that went through HIP II from being put up for VERS to prevent wastage?

Will residents then decide against HIP II in hopes of cashing out via VERS?

Conflicts associated with en-bloc sales

Some HDB estates in the 1970s and 1980s were built within three to five years to meet urgent demand.

Should they be redeveloped in one go it would be difficult "to find new homes for a lot of people at once".

When PM Lee introduced VERS, he pointed out VERS will help the government redevelop estates progressively over several decades.

One such estate that was built in the 1970s and was highlighted by PM Lee during NDR is Marine Parade.

Interestingly, Marine Parade is also home to one of the most notorious en-bloc spats.

The Laguna Park en-bloc drama has been ongoing for more than 10 years now. It first made news in 2008 when some residents had their cars vandalised, and one resident even had his phone line cut.

Till date, Laguna Park has not been successful with its en-bloc sale, while it continued to make the news for drama related to the sale.

When VERS does come around, people living in 70-year-old HDB flats would probably be a mix of retirees, as well as younger Singaporeans who have inherited these old flats.

Their different needs in life may be a source of conflict when voting for VERS.

A balance must be struck between forcing senior citizens to relocate in their twilight years and the financial concerns of young Singaporeans holding on to an aging property they may find too expensive to repair and maintain.

Luckily, HDB has 20 years to figure this balance out.

At the end of the day, VERS is a step in the right direction offering more options to HDB residents.

Top image by Tedd Jong Wei