Connect with us

HDB

What’s The Difference Between Private En Bloc VS HDB SERS

With en bloc, you get more money; with SERS, you get priority for a new home


Real estate is one of Singaporeans’ favourite asset classes since it gives a roof over our heads while also being an investment, but without the high volatility associated with equity markets. Amongst the property types that are available in Singapore, HDB flats and private residential condominiums make up the two most popular forms of housing.

While these two types of flats can be bought and sold as individual units, they are, on some occasions, also sold collectively. The collective sale of private properties is known as an en bloc sale, and the same for HDB flats is known as the Selective En Bloc Redevelopment Scheme (SERS).

While they might be sold on a collective basis, the benefits accorded to both types of sellers differ. And true to the saying, “the grass is greener on the other side,” some private and HDB collective sales beneficiaries may feel that their outcome is worse off compared to the other party. At the same time, there are many other private and public homeowners who would wish to be in the shoes of either beneficiary.

In this article, we look at the key differences between a private en bloc sale and HDB SERS and what they mean for both types of beneficiaries.

Private Flat Owners Have Strata-Titled Ownership, Which Allows Them To Decide On An Enbloc Sale, Whereas HDB Flat Owners Only Own The Lease To Their Flat And Have No Say Over The SERS

(Private)

Owners of apartments and condominiums in Singapore have strata-titled ownership of their properties. This allows them to own, enjoy, and be responsible for the upkeep of common facilities like lifts, car parks, and recreational facilities like gyms, tennis courts, and swimming pools.

Whether a private development is selected for en bloc sale depends partly on developers seeking to replenish their land bank. These developers would normally look for potential residential sites from either the Government Land Sales (GLS) Programme or built-up private residential developments that have enhancement value.

Therefore, interest in an en bloc sale of a private development can be expressed either by a property developer through a private treaty or by the residents through a collective sales committee. The final sale, however, is voted on a voluntary basis by the private flat owners. If the development is 10 years old or older, it must have the collective consensus of at least 80% of the strata owners. And, if the development is less than 10 years old, then it must have at least 90% consensus from the strata owners.

(HDB)

Unlike private flat owners, HDB flat owners do not have strata-titled ownership of their flat and instead only own the rights to their flats for 99 years (or the balance of the lease). The land that the public housing development sits on belongs to the government.

As a result, the Housing Development Board (HDB) is the sole body responsible for identifying and acquiring precincts in older estates with high redevelopment potential or sites where the land has been underutilised. In 2022 alone, two sites, one at Ang Mo Kio Ave 3 and the other at Marsiling Crescent, were selected for SERS.

Nevertheless, HDB has previously stated that only 5% of all HDB flats are deemed suitable for redevelopment under SERS and most have been selected. In fact, more than 41,000 households in 83 sites have been chosen since 1995, when the scheme was first started. As the HDB housing site will be acquired by the government compulsorily under the Land Acquisition Act, it leaves HDB owners with no say over the collective sale of HDB flats under the SERS.

Read Also: HDB Ownership Debate: 4 Differences Between Owning A HDB And A Private Property

Private Flat Owners Receive A Full Cash Payment, Whereas HDB Flat Owners Can Receive Full Cash Payment And Purchase A New HDB Replacement Flat

(Private)

Private flat owners have a certain number of shares of the common area of their estate because apartments and condominiums are strata-titled properties. This would be in relation to the share value of their unit and the total share value of the development.

Therefore, in an en bloc sale, the owner’s portion of the sales proceeds is based on their individual share value in the development, which bumps up the total compensation received for each unit. Depending on the property market cycle and the number of bidders, an en bloc sale could fetch as much as two times higher premiums than selling as single-units.

Private flat owners will receive the sales proceeds in a lump sum payment upon the completion of the en bloc process and handover of their unit’s keys.

(HDB)

The compensation received by HDB flat owners is limited only to the value of their flats, given the lack of strata-titled ownership that private owners typically enjoy.

Moreover, unlike in the en bloc sale where the compensation is determined transparently through a bidding system, SERS flat owners have to rely on HDB, which would appraise the market value of the flat based on the point of the SERS announcement.

SERS flat owners will also be given other rehousing options aside from a full cash offer. This includes a choice between taking up a new 99-year lease flat at the designated replacement site or being able to apply for a flat elsewhere during the HDB sales launch. HDB flat owners could also choose to sell or transfer their flat with the rehousing benefits in the open market, or receive up to $60,000 in addition to the flat valuation (or SERS compensation) in lieu of the other rehousing benefits.

In most instances, SERS flat owners will receive a market valuation for their flat but may lose out on a possible Cash Over Valuation (COV) that they might have received if they had sold it as a single unit.

Read Also: What Happens When Your HDB Flat Is Selected For SERS?

Private Flat Owners Have A Short Time To Move Out And Source Their Next Accommodation, While HDB Flat Owners Can Stay In Their Current HDB Flat Till Their New Flat Is Ready To Move-In

(Private)

Upon the completion of the en bloc sales process, private property owners may choose to hand over the unit with vacant possession immediately for 100% of the sales proceeds, or stay on for up to 6 months. The terms can be negotiated between both parties.

Generally, private property sellers may only have a few months’ notice upon the sale of the property and would have to source their replacement accommodation. More often than not, they may find the replacement accommodation to be more costly than their current property due to either higher rents or property prices based on the price per square foot (psf) for a similarly sized private flat.

(HDB)

In comparison, HDB SERS flat owners may have less to worry about in terms of replacement accommodation.

Assuming SERS flat owners take up the replacement BTO option, they will be allowed to stay in their existing flat (for roughly 4 to 5 years) till the replacement housing project is completed. Moreover, they will also be allowed to stay for a further 4 months to renovate and move to their new flat.

Hence, HDB flat owners can stay in their existing flats without incurring additional charges till they either return the keys if they take up the full cash offer or move to their designated replacement BTO flat.

Read Also: En Bloc Deal: 3 Ways You Can Still Not Make Any Money

En Bloc Sales Give The Best Chance To Maximise The Gains On A Private Property, And Taking Up The Designated Replacement BTO Flat Could Maximise A SERS Flat Owner’s Potential Gain.

(Private)

An en bloc sale gives the best chance for a private property owner to maximise the gain on the property, as the owner receives a share of the total land area. On the other hand, if the property was sold as an individual unit, the value would only be determined based on the unit itself.

This does not take into account the return of the sinking funds to each individual owner, which could be a five-figure amount. Without the en bloc sale, the sinking fund would continue to be used only for the maintenance of the property. This leaves ex-owners to lose out on any excess sinking funds they may have contributed over the length of their stay.

(HDB)

Unlike en bloc sales for private properties, which are more prevalent during a property upcycle, SERS could happen in any market conditions. This could mean that the highest possible valuation may not always be accorded to the unit. This also applies to units that are well renovated and have unique characteristics that could command high Cash-Over-Valuation (COV) premiums on the resale market.

Nevertheless, SERS flat owners would not suffer much loss because HDB would value their flat based on current market value and sweeten the deal with generous rehousing benefits, which would more than compensate for any loss in market premium.

To maximise the potential gain, SERS flat owners could choose to take up the designated replacement BTO flat, which would have a better resale value due to the fresh 99-year lease. For example, a 5-room HDB unit at City Vue @ Henderson was sold recently for $1.4 million. It was a SERS replacement site for the 2011 announced SERS Redhill Close project. This is just one example of the value proposition for taking up the replacement BTO option.

Read Also: How Have Past SERS Beneficiaries Benefited From The En Bloc Of Their HDB Flats?

Private En Bloc Owners May Have Little To No Chance Of Staying Together With Their Old Neighbours, But The Option Is Available For SERS Flat Owners

(Private)

Some people may treasure their relationships with their neighbours as they bond with each other over time. Unfortunately, after an en bloc sale, it is unlikely that old neighbours will be able to stay close to one another.

The different financial circumstances between individuals and preferences may lead to the owners of private residential developments choosing different accommodation after the en bloc sales.

(HDB)

For HDB SERS flat owners, if they decide to move to the designated replacement BTO site, then they can choose to apply for the new flat registration with up to 6 of their neighbours under the joint selection scheme. This allows HDB owners to continue to live close to their old neighbours even in the new development.

Which Is Better, Private En Bloc Or HDB SERS?

Both the private en bloc and HDB SERS involve some form of emotional pain as we have to move out of a place where we may have grown accustomed to after living for decades. Moreover, it is also unlikely that we can get a similar-sized (older flats tend to be bigger) unit at that location anymore.

From a financial standpoint, whether it is an en bloc sale or a SERS, both could be financially rewarding to the homeowner compared to selling in the open market as an individual or a single unit.

Private property owners may likely have to deal with more hassle as they have to search for their next accommodation. However, for their trouble, they are compensated with much more than the unit’s market value. This gives them more options, including buying another private residential unit; buying back a new unit from the seller (developer); or even moving to an HDB resale unit.

As for the HDB SERS owners, they too are likely to benefit more from the SERS as their initial flat might have a short remaining lease. Instead of just selling their old flat on the open market, they have a guaranteed option to get another “highly coveted” BTO flat with a fresh 99-year lease as replacement. These owners also do not need to worry about rehousing after the SERS announcement as they can stay put in their existing flat until their new flat is completed.

Summary

En Bloc SERS
Property That Applies To Private Property HDB
Chosen By Private Developers/ Real Estate Consultants / Private Property Residents Government – HDB
Sold to Developers Government – HDB
Compensation Full cash payment based on highest bid or meeting reserve price – Market valuation based on SERS announcement
– Rehousing benefits, including option for new BTO flat
Accommodation after sales Need to search for another place to stay in Can stay in existing flat until new flat is ready to move in
Neighbours May need to go separate ways Can stay together with up to 6 neighbours

Read Also: What To Do And Consider If My Condominium Is Undergoing An En-Bloc (Collective Sale)?

Listen to our podcast, where we have in-depth discussions on finance topics that matter to you.