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SINGAPORE BUDGET 2019

Greater clarity expected for HIP and VERS

Analysts are expecting more details, along with more flexibility in using CPF for resale flats with shorter leases

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Analysts say that HIP II may involve more complex construction works such as structural improvements, replacing the electrical wiring and enhancement works.

Singapore

Cushman & Wakefield's senior director of research, Christine Li, reckons that the government may tweak policies to boost the liquidity of older flats so that owners who need to may unlock the asset more easily. "If the liquidity of older flats is boosted after the Budget announcement, you will see a mild recovery of HDB housing prices - and that is a boon for the private market," she said. "The private and HDB price gap has increased in recent years, and the stabilisation of the HDB market is generally welcomed by locals, who will find it easier to upgrade to private homes once the gap narrows."

In his National Day Rally speech last year, Prime Minister Lee Hsien Loong announced HIP II, which will be launched in some 10 years to upgrade flats that are 60 to 70 years old. This will see them being upgraded for a second time during their 99-year lease. The existing HIP, which upgrades flats for the first time at the 30-year mark, will also be expanded to include housing blocks built up to 1997. Prior to this, it was offered to flats built up to 1986.

Under VERS, residents in selected precincts will get to vote on whether to sell their ageing flats back to the government before the lease runs out. VERS would thus allow the government to redevelop these older towns if residents vote in favour of it.

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Market voices on:

Analysts whom BT spoke to said that Budget 2019 could bring greater clarity regarding HIP and VERS, which in turn may help the HDB resale market. Improved flats may garner higher prices when sold, some pointed out.

OrangeTee & Tie's head of research & consultancy Christine Sun expects that the government may reveal more information on these two programmes, such as the types of subsidies that could be doled out as well as the costs that owners might have to co-share. She said that the differences between HIP and HIP II could also be outlined, with HIP likely involving more cosmetic changes to the building.

She added: "HIP II could involve more complex construction works such as structural improvements, replacing the electrical wiring, enhancement works for the internal units such as upgrading the toilet system, waterproofing the unit or improving other safety features. The improvement works may include installing smart home technologies for the elderly such as smart monitoring systems, health sensors, portable ramps and grab bars."

Meanwhile, more information could be served up on the selection criteria to identify which HDB flats would be eligible for VERS. For VERS, key issues that need to be tackled include how the compensation would be calculated, where households should be relocated to and the minimum votes needed for the precinct to undergo VERS, Knight Frank's senior director and head of research, Lee Nai Jia, highlighted.

However, if the rules around HIP and VERS remain unclear, more HDB owners are likely to upgrade if they can afford it, pointed out Dr Lee. "This is especially so if they are risk adverse and more pessimistic of the outcome of both programmes," he added.

JLL's senior director of research and consultancy, Ong Teck Hui, said: "VERS, if well executed, will reassure owners or buyers of old flats of an exit value, and coupled with CPF usage for the purchase of flats with shorter remaining leases - when allowed - could result in a more active market for such flats. Currently, some owners of older flats with around 60 years of leasehold remaining may be facing difficulty in selling due to uncertainty over the future value of such flats. But if this uncertainty is dispelled by the proposed policies, transactions for these older flats and their values could improve." This may also help an owner of an older HDB flat upgrade to a private home but the effect on the private residential market may not be significant, he added.

Mr Ong also reckons that the rebate for service and conservancy charges (S&CC) for HDB flats under Budget 2018 could be extended to 2019 to deliver some relief amid the anticipated economic slowdown.

For FY2018, eligible HDB households received S&CC rebates to offset between 1.5 and 3.5 months of S&CC, depending on the type of flat.

Meanwhile, partner (tax services) at Ernst & Young Solutions, Lim Gek Khim, hopes that Budget 2019 brings some refinements to the Singapore real estate investment trust (Reit) taxation framework. She added: "These could include levelling the playing field on stamp duty relief for internal restructuring by Reits, extending the tax concessions for Reits ahead of their expiry in March 2020 to provide certainty, and expanding or refining the tax exemption in respect of foreign properties to make it more relevant in view of changing taxation landscape."