What Shall We Do About VERS?

VERS (Voluntary Early Redevelopment Scheme) in Singapore is a buyback programme for HDB flats that are around 70 years old or more. Owners get to vote on whether to sell their homes back to the government or not, unlike in the case of SERS (Selective En Bloc Redevelopment Scheme), which is compulsory. The government buying back HDB flats before their 99-year lease expires will help address the issue of lease decay and facilitate the orderly, long-term renewal of HDB towns. 

VERS has had a long time in making. It was first announced in 2018, with scant details. And now, in August 2025, there are a few more details. Most pertinently, there will no longer be any SERS in the future. VERS will start in the 2030s with blocks built in the 1970s and then 1980s as they cross over the 70 year milestone. What is lacking so far, is of course, how exactly the pricing will be. And this is where we do a little speculation of our own!

How Do We Value 99-year Leasehold HDB flats in Singapore?

Singapore is one of the very few countries in the world with leasehold property (a gift from the British!). Hence, we are also one of the few places in the world to have any insights into what leasehold properties are worth relative to the more common (worldwide) freehold property. We cover this in our blogpost What’s the Value of my Leasehold Condominium (1)? Revisiting Mr Bala’s Table from several years ago.

The Singapore Land Authority (SLA), which owns around 90% of the land in Singapore, has a method for determining the value of leasehold land. This is encapsulated in what is commonly known as “Bala’s Table”, which has been in use since 1947. It was also made publicly available in 2000.

Bala’s Table From SLA

From Bala’s Table, suppose the SLA has a piece of freehold land which is worth $100. The SLA would in theory sell a 99-year lease on this land, perhaps to a developer for residential purposes, at a price of $96. What about for older properties? For example, from Bala’s Table, a property with 50 years left on its lease will be worth about 75% of the equivalent freehold property.

But what is the basis of Bala’s Table? How do we compute it? It appears to be based on the net present value (NPV) of the future rents which the land can earn. In the 99-year leasehold case, this will be for 99 years, in the freehold case, it will be forever. Suppose D is the annual rent for the property, and it grows at a rate of g every year. Discounting this at the rate r will give us the freehold value on the left.

Similarly, the expression on the right side is the value of the same property under a T-year leasehold. This looks similar to the freehold case, except that we subtract off the value of the rents after T years. Since our interest is the ratio of leasehold to freehold prices, we can use any value for D as long as we apply the same value for both freehold and leasehold. For the interest rate r, we can try using the long term yield on government bonds, which is around 2%. For the growth rate, we can assume 0% for a start.

When Mr Bala made his calculations in 1947, there were no calculators, much less computers. Hence many of the points on the table are probably approximations and interpolations. With computers and calculators, we can now reconstruct Bala’s Table more accurately now. With some trial and error, we find that a discount of rate of 2.94% matches Bala’s table best.

Bala’s Table compared to Leasehold Curve (2.94%)

How Does Bala’s Table Influence the Pricing of HDB Flats?

When we come across the ideas in Bala’s Table for the first time, the normal response is to dismiss them. Why? The values from Bala’s Table shows that leasehold property will inevitably suffer from lease decay over time, but what we see are 99-year leasehold flat prices appreciating over time instead!

This misunderstanding of what Bala’s Table represents, and what we see in real life stem from the assumption used in Bala’s Table that rental value does not grow over time. However, once we assume rental value grows over time, a very different picture emerges. We also explore this in What’s the Value of my Leasehold HDB (3)? Dealing with HDB Lease Decay.

In the chart below, we assume that the rental value of a freehold property grows by 3% a year. Not an outlandish assumption, given how rents have soared in recent years. Along with the rental growth, the value of a freehold property also grows by 3% a year, and compounding over, say, 50 years, this property value grows to some 5X the original value. At the same time, the rental value of the 99-year leasehold property grows as well. After 50 years, even though there are only 50 years left on the lease, we can expect the value of the leasehold property to grow to some 3.75X the original value too!

Value of Freehold and 99-Year Leasehold Property Over Time When Rental Value Grows

So what this shows is that lease decay implied by Bala’s Table doesn’t mean that leasehold properties will start losing value from day one. As long as rentals continue to go up, leasehold properties will also appreciate, albeit at a slightly slower rate than freehold properties. The effect of lease decay will only really be evident in the last 10-20 years of the lease, as the lease must terminate with zero value. But in the case above, with 3% growth in rental value per year, the value of a 99-year leasehold property will only peak after some 80 years! Given that the vast bulk of HDB flats in Singapore were built in the 1970s and 1980s, we will continue seeing new records and highs in HDB resale prices for many years more! Nothing will really slow the growth of the HDB prices until at least 2050, at the earliest!

Of course, we cannot expect rentals to always go up at 3% per year. After all, we are talking about rentals for an old property, and getting older and older too. Even if the broad market rental index is going up at a faster rate, the actual rental for an older property must go up only at a slower rate, to reflect the lower desirability of the property. In the chart below, we show how the value of a 99-year leasehold property might evolve under different assumptions for how rental values increase over time, from 1% per year, to 5% a year.

Value of 99-Year Leasehold Properties Under Different Rental Value Growth Scenarios

Note that in none of these scenarios do 99-year leasehold properties, like HDB flats, go down in value until sometime past the 60th year of the lease, and even then, sharp decrease in value (of more than 1% a year) will only occur after 70 years of the lease at the very earliest. The table below shows the year of lease of the 99-year leasehold property when its value peaks under these different scenarios:

Year of Lease when Value of 99-Year Leasehold Property Peaks

Rental Value Growth Per Year	Peak Value of Property
1%	59th year
2%	74th year
3%	79th year
4%	84th year
5%	86th year

What Does This Mean For VERS?

What does this long-winded journey through the dynamics of Bala’s Table tell us about VERS? Very simply, when VERS is offered to the residents, it is very likely that the HDB flats earmarked will already have reached their peak value. Thereafter, if the VERS offer is not taken up, the residents will only see the value of their property plunge sharply toward zero. So, while residents rejecting VERS will get to stay in their own homes for the future, they will also be holding on to an “asset” whose value will diminish continually over time.

In effect, VERS represents the last possible date to sell the flat if the owner is looking to do so. While under some assumptions, such as fast rental value growth of 3-5%, the HDB will still continue to grow in value for some time after the 70th year of the lease, these are fairly unlikely scenarios as it is difficult to envisage an old property commanding such rental increases.

VERS represents the last possible date to sell the ageing HDB flat if the owner is looking to do so.

Conclusions

It is no surprise that the 70th year of an HDB flat’s lease will be the date for when VERS will start. Based on the price dynamics of leasehold properties, that is the period when the value of the 99-year leasehold property will peak, and just a few short years before lease decay starts to set in with property values plunging towards the end of the lease.

But every HDB flat owner already knows this – the value of the HDB flat cannot go up indefinitely, and will become zero at the end of the lease. VERS merely crystallises the “head vs heart” choice that all owners of ageing HDB flats have to face – do I continue to live in somewhere which is familiar to me, or do I protect the value of what I have by selling it before the value falls?

This might not be an easy choice for some, but it is the choice everyone who purchases an HDB flat will have to face at some point.