PropNex Picks

August 31, 2022

Myth Or Fact: Do SERS Replacement Flats Really Command A Higher Resale Premium?

SERS, also known as the Selective En bloc Redevelopment Scheme was introduced as part of the Government’s efforts to renew older housing estates. Flats owners of the HDB blocks that have been identified for SERS will be offered new flats at a designated replacement site, usually within the same estate.

It appears that some of these designated SERS replacement flats have been resold for a tidy sum subsequently on the open market. But is that generally the case and how much of it is due to the “head-start” that they get due to a differentiated Minimum Occupation Period (MOP) condition?


But first, more about SERS…

The replacement flats generally come with a fresh 99-year lease, though the HDB has offered an option of shorter 50-year lease for some SERS flat owners. As part of the scheme, eligible flat owners may also receive SERS grant of up to $30,000, resale levy or premium concessions, and a housing loan from HDB when purchasing their replacement flat.

The first SERS exercise took place on August 1995, in Tiong Bahru. Having your flat selected for SERS was widely considered to be akin to “striking lottery” since affected owners could “trade in” their existing older flat at market value and purchase a brand-new from the HDB at a subsidised price, plus the rehousing benefits.

Needless to say, the desire to become a SERS beneficiary has encouraged some buyers to pay high prices for old resale flats perhaps assuming that estate would eventually be picked for SERS. This narrative persisted for some time until reality bit. In March 2017, then-Minister of National Development, Lawrence Wong dispelled the notion that the government will conduct SERS for all HDB flats – maintaining that only a select few flats will ever undergo SERS. Indeed, the number of SERS exercises have dwindled from nearly 40 between 1995 and 2000, to 7 exercises from 2010 to 2021.

SERS replacement flats on the resale market

For all past SERS projects, home owners could sell their new flat seven years from the date of selection of the replacement flat, or five years from the date of key collection – whichever is nearer. This allowed home owners to sell their replacements flat on the resale market before hitting the Minimum Occupation Period (MOP) of 5 years.

Many have opined that this policy enabled these flats to be sold earlier – with a longer lease balance - and at higher prices, in turn allowing owners to reap bigger windfalls compared to other flats which have completed their 5-year MOP. This issue was further cast into the limelight recently, following several record-setting million-dollar resale transactions in one of the recent SERS replacement projects, City Vue @ Henderson. [Editor’s note: The HDB has in June 2022 revised the MOP criteria for SERS replacement flat owners, who will be subjected to the same 5-year MOP.]



Table 1: Details of recent SERS projects

Source: PropNex Research, HDB, Data.gov.sg (data retrieved on 12 August 2022)
**Seven years from the date of selection of the replacement flat, or five years from the date of key collection – whichever is nearer

An analysis was done on resale transactions of seven new SERS replacement projects, namely: City Vue, Clementi Cascadia, Kampung Green, Jurong West Blossom, Ping Yi Greens, Tiong Bahru View and Commonwealth 10 which have been completed between 2015 and 2019. The key intention was to examine how much premium these SERS replacement flats fetched, compared to other flats in the estate, as well as an approximation of the profit which these the sellers stand to make.

Resale price premium of SERS flats

Looking resale transaction data of 4-room flats in 2022 at the seven projects, it was found that they generally commanded a higher price than other 4-room flats in their respective towns. For instance, the 4-room flats were resold at an average price of $916,000 in City Vue – 28.7% higher than the average price for a 4-room flat in Bukit Merah. To minimise the effect of older resale flats skewing the average price, PropNex analysed a smaller set of flats that were aged below 10 years old and within 2-km of the SERS replacement blocks. Even so, the average resale price of 4-room SERS replacement flats in City Vue still came in higher by 13.1% (see Table 2). This trend is apparent in most of the projects under study.

Table 2: Premium commanded by SERS project flats (4-room flats) against nearby flats in the estate

Source: PropNex Research, HDB, Data.gov.sg (data retrieved on 12 August 2022) ^Non-mature HDB town

All the 4-room flats resold in the seven projects had a higher average resale price relative to the overall average resale price for the corresponding flat type in their respective estate. When compared to newer flats of under 10 years old, five projects (City Vue, Clementi Cascadia, Kampung Green, Jurong West Blossom, and Tiong Bahru View) posted a premium, while Ping Yi Greens in Bedok and Commonwealth 10 in Queenstown had an average price discount of 8.7% and 2.6% respectively. Ping Yi Greens’ average price discount against nearby 4-room resales could be due to transactions at DBSS project Belvia and Bedok Central, which were resold at firm prices. Meanwhile, the average price discount for Commonwealth 10 is likely due to high resale prices of nearby newer flats in Dawson Road, Ghim Moh Link, and Holland Drive.|

Estimated capital gain of SERS flats

Table 3: The average estimated capital gain by project (4-room resale flats)

Source: PropNex Research, HDB, Data.gov.sg (data retrieved on 12 August 2022) ^in non-mature town

An analysis was also made to approximate the profit gain of these SERS flats, by taking the launch prices in the specific replacement project or a proxy BTO project during the year of the SERS announcement, against the resale price transactions.

Based on the analysis (see Table 3), SERS replacement flats owners in mature estate projects who purchased the replacement flats during launch date and sold them in 2022 made an estimated average capital gain of between $226,000 and $485,000. (Note that this figure is an estimation and the actual gains could be higher after accounting for grants; it would also vary depending on flat attributes.)

In this study, 4-room resale flats at Tiong Bahru View enjoyed the largest average capital gains this year at 105%, when compared against the median BTO launch prices at proxy projects SkyVille and SkyTerrace at Dawson. Meanwhile, Ping Yi Greens achieved the lowest average resale capital gain of the lot at 52% - which is still decent, by the way.


Let’s unpack the data and distil them into some key learnings:

  1. MYTH: SERS replacement flats will always command a higher resale price than other resale flats.
    Resale flats in attractive locations with strong attributes (e.g. DBSS flats on high floor) may fetch higher prices than these SERS flats.

  2. MYTH: SERS replacement flats in mature towns will enjoy higher capital gains.
    Non-mature estate projects, namely Kampung Green in Woodlands and Jurong West Blossom had estimated gains of about 99% and 95% respectively and was ranked second and third in this study, after Tiong Bahru View. It is also possible that the exciting transformation plans for Woodlands Regional Centre and the Jurong Lake District helped to support demand and resale prices in these two towns.

  3. FACT: SERS replacement flat or not, location is key.
    Of the seven projects evaluated, Ping Yi Greens had the lowest estimated average capital gain for 4-room flat resale transactions in 2022 at the time of writing. This perhaps has to do with its location, being slightly further from the MRT station (820m from Bedok MRT station) and fewer amenities in the immediate areas, compared to the other projects (see Table 4).

Table 4: Estimated distance to MRT station

Source: PropNex Research, One Map

First-mover advantage?
Another common point raised was that the “earlier MOP” for SERS replacement flat owners meant their flats hit the resale market slightly earlier than other HDB flats. For example, flats resold at City Vue this year have a lease balance of over 96 years, making them virtually brand-new – which in turn led to such units commanding higher resale prices. This too, is possibly a MYTH.
In Table 5, the average resale prices of 4-room flats from each project has been listed by year. It’s observed that all project had booked resale transactions within 1 to 4 years of completion. Typically, new HDB flats would not have been eligible for resale till 5-years after completion, but as mentioned previously SERS replacement flat owners have a differentiated MOP timeline before the conditions were revised in June 2022.

Based on the data, it is clear that the argument that the SERS replacement flats sold at an earlier date (and hence have a lengthier lease) command a price premium than those sold later. Take Commonwealth 10, for example, the 4-room flats had an average resale price of $775,000 in 2017, two years after completion, but the prices continued to climb as the clock ticked on and reached $838,000 this year. This trend was also evident at Clementi Cascadia, Kampung Green, and Jurong West Blossom.

Table 5: Average 4-room resale prices by project by year

Source: PropNex Research, HDB, Data.gov.sg (data retrieved on 12 August 2022, values noted in black are the average resale prices of flats which were sold 5 years after completion, which would have been the typical MOP, while values noted in green are the average resale prices of flats sold before the 5-year completion mark)

Obviously, prices will depend on the prevailing market conditions and the buoyant HDB resale market over the past two years – spurred by pent-up demand, low interest rates and pandemic recovery optimism – had no doubt helped to push HDB resale prices up.


More PropNex Picks