Singaporeans Buying Old, Trendy Hipster Flats, Are You Screwing Yourself?

SERS HDB Singapore

Peter Lin


Time can be a funny thing. It is tragic when a career is abruptly cut short at the age of 27 (think Jimi Hendrix, Janis Joplin, Kurt Cobain, Amy Winehouse) or when your career lasts so long that you go way past your heyday and people start calling for your retirement (think Arsène Wenger and one too many WWE Superstars).

Even here in Singapore, despite being a very young nation, time does gets to us. We were recently reminded of it when Minister Lawrence Wong pointed out that buying units in older HDB flats was a risk because not every flat will benefit from the Selective En bloc Redevelopment Scheme, better known as SERS.


Eh? Why not? I thought SERS was for all old HDB flats

The big hint is in the name. The S in SERS stands for “Selective”. And Minister Wong’s caution comes on the heels of news that buyers were paying high prices for “old” flats. Even though only 4% of HDB flats have been identified for SERS, since it was introduced in 1995! Flats are picked for SERS in groups called “sites”, and there have been 81 such sites identified to date. If your flat is not picked for SERS, it will be returned to the government when your lease expires.

But here’s the thing – the earliest HDB flats were only built in the late 1960s and early 1970s, which means that most have over 50 years left in their lease. So, the truth is, no one can really say what will happen to HDB flats once the lease expires, since that bridge hasn’t been crossed yet.


Let’s look at what may happen if you buy an HDB flat with less than 60 years left on the lease

Say you’re a newlywed couple looking to enjoy the idyllic life in one of Singapore’s gentrified neighbourhoods, which have attracted young people with a penchant for unique food options and coffee that costs much more than $2. Coincidentally, many such neighbourhoods also boast “old” flats from the 1970s, which adds to their rustic charm.

Here’s how much you’d need to cough up to live there:


1. A 3-room flat in everybody’s favourite hipster neighbourhood, Tiong Bahru

Tiong Bahru today is an interest mix of new and old. Walk along Kim Tian Road and you’ll see flats that aren’t as old as the original Power Rangers (they debuted in 1993), complete with a handful of modern multi-story carparks. But head down Yong Siak Street and you have Singapore’s literary stalwart BooksActually on one side, and 50-year-old flats on the other. These are some of the oldest apartments in Singapore.

The flats at nearby Moh Guan Terrace have about 54 years left on their lease. Recent transactions in this cluster of flats are slightly over $630,000 for a 3-room flat, which comes up to $710 per square foot. Rental rates for these same 3-room flats can range between $2,000 to $3,000 a month.

It’s a unique neighbourhood, to say the least – and it is the nostalgia-inducing charm that has attracted cafes, restaurants and bookstores to base themselves here.


2. A 3-room flat in Singapore’s newest nightlife hub, Keong Saik

What used to be a red-light district on the fringes of Chinatown is now a destination for tourists looking for a unique Singaporean experience. Keong Saik is home to multiple critically acclaimed eateries and several boutique hotels that try to squeeze you into the tiniest of spaces. Upon seeing my room, I was compelled to return to the reception to make sure they hadn’t given me the keys to a broom closet.

But if size matters, the 3-room units at nearby 4 Sago Lane are significantly bigger – and far enough from the bustle along Keong Saik Road to avoid insomnia. Recent transactions at this block range between $400,000 to $500,000, or $555 per square foot. Rental rates for these 3-room flats come up to $2,000 to $2,500 a month.

Even though there’s only 56 years left on the lease, it’s walking distance from SGH, Chinatown and even the Michelin Guide Bib Gourmand awardees at Maxwell Food Centre. That’s a convenience that cannot be underestimated.


The question is, is the convenience and charm of living in such neighbourhoods worth it?

The most recent statistics state that for the 4th quarter of 2016, the median price of 3-room flats in the Central area was $420,000, and the median price of 3-room flats in the Bukit Merah area was $390,000. So yes, these flats are definitely on the high-end.

But the fact is, if you’re looking to live in a neighbourhood like Tiong Bahru or Keong Saik, it’s really the convenience of the nearby amenities that you’re paying for. What’s more, because they were built in the 1970s, the area of the flat is larger than flats built today, and this might be a selling point for some buyers.

But those considerations aside, the fact remains that you will undoubtedly have problems recouping your property value as the years go by. That’s because you’re most likely going to be the last owner of your unit.

If your flat cost you $450,000, and there’s 55 years left on the lease, you are looking at an effective depreciation of $690 a month since the government is going to take back the flat once the lease expires. Yes, I know that’s an oversimplification, but just bear with me.

The good news is, there’s always rental income. As I mentioned above, these units are currently being rented for $2,000 to $3,000 a month. That comes up to at least $18,000 in net annual rent collected (after deducting various costs like maintenance and property tax). That’s 4% in rental yield – not bad at all.

And since the same factors that attracted you to the property will attract others, you should be more than able to find a steady stream of tenants, even in the final years of the lease, should SERS not kick in.


Who is Minister Wong’s warning really for?

It seems clear that the warning is really for property hunters who are looking to take advantage of SERS to benefit themselves in the short term. That is, they are not looking to stay in a hipster neighbourhood, but are gambling in the hopes that SERS will bring them short-term gains not just in the form of compensation but also in terms of priority in choosing units at the replacement flat.

But because the government keeps their SERS plans under wraps, the odds of you picking a location that will be eventually picked for SERS remains low for now. That said, it’s not a total mystery – the government is obviously choosing sites where the land could be put to much better use – even if that just means building 10 flats where once 3 stood. Look out for locations that have been slated for renewal and redevelopment, such as Woodlands, Pasir Ris and Toa Payoh as part of the ongoing Remaking Our Heartland programme, or the area around the Jurong Lake District, now that plans are underway to make it Singapore’s second CBD.


What do you think of the recent SERS discussion? We want to hear your thoughts.

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Peter Lin

I am the poster boy for reinventing one's self. I've been a broadcast journalist, technical writer, banking customer service officer and a Catholic friar. My life experiences have made me the most cynical idealist you'll ever meet, which is why I'm also the co-founder of a local pop culture website. I believe ignorance is not bliss, and that money is the root of all evil only if you allow it to be.