60 years leasehold condominium in Singapore.

When I was told many years ago that residential properties in Hong Kong generally come with a 50 years lease, I was amazed. 

So, if someone in his 30s were to buy a condo in Hong Kong and if he should live to be 90 years old, he could be kicked out of the property as there is no guarantee that the lease would be extended?

To someone from Hong Kong, a 99 years leasehold property in Singapore is probably a steal! The lease is twice as long as back home and the prices are probably lower too, like for like. However, what I have read in the papers today could change things in Singapore for the next generation.

A 1.02 ha residential site in Jurong Kechil comes with an unusual 60 years leasehold term.  This is believed to be the first time a private housing site is being sold on such short tenure under the GLS.

Developers have options for a 30, 45 or 60 year lease period for the plot, URA said. The development conditions for the site cap the maximum number of units at 203 units and can be built up to part 5 storeys and part 8 storeys. The tender will be launched in about two weeks.

Industry experts are expecting a top bid of between $200 to $250 psf ppr and a sale price of $550 to $600 psf. This compares with freehold developments in the area going for about $1,000 psf.

(Source: The Business Times, 6 September 2012)

The government did mention some time ago that it would explore offering residential sites with shorter leases to bring down the cost of home ownership in Singapore.

Possibly, I am out of touch with the reality on the ground. Foreigners, new citizens and younger Singaporeans are probably less concerned with shorter land leases. 

They might just want a home in their living years or to reap as much rental returns as possible in the same years. A project that is freehold or 999 years leasehold and selling at a premium might only be attractive to older Singaporeans over time.

Now, in my 40s, maybe, I would consider buying a new private residential property with a 60 years lease if I could save 40 to 50% compared to buying a similar property which is freehold or has a longer lease. This is for self stay only as the property could be hard to resell as its lease gets progressively shorter. 

Just pray I do not live to be a hundred.

However, for someone in his 20s or 30s, would he buy a new private residential property that comes with a 60 years lease? By the time the project gets its TOP, the property would only have 55 years left to the lease...

AK's simple strategy.

What is my simple strategy?

按兵不动

- Hold our troops; bide our time.

Collect regular dividends and wait for opportunities.

We want to be in a position which would allow us to benefit from market weakness as well as strength. The way to do this is to stay invested in the market and also have a war chest ready.

Opportunities to accumulate will always show themselves but without a war chest, it would be difficult to take advantage of them.

Sometimes, doing nothing is also doing something.

So, as I wait and do nothing, I might have mostly nothing to blog about. ;p

Related post:
To be richer, be comfortable with being invested.


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Singapore REITs yield world’s best returns: Southeast Asia
Wednesday, 05 September 2012

© 2012 - The Edge Singapore

Tea with AK71: Funny!

I was sent this and found it amusing:

I hope this has coaxed a chuckle or even a hearty laughter from you, no matter what your personal beliefs might be.

Life is short. Don't take it too seriously. ;)

This is funny! I really laughed very hard!

I don't know who are responsible for these works but kudos to them for bringing fun and laughter to our lives. :)

I know I need some cheering up as I will be sending my car to the workshop for major repairs early tomorrow and will be carless for a week or more. :(

See: Traffic accident with a Malaysian vehicle.

Wilmar: Should we be buying?

A reader asked me if I am buying more shares of Wilmar as I said before that the time to buy is when the selling has dried up. Has the selling dried up?

Well, the trend is still obviously down and my investment is in the red. My long position in Wilmar is my biggest money losing investment on paper this year.

However, I have bought more shares of Wilmar as the MACD is rising while share price declined. Momentum is still negative but with a rising MACD, the negative momentum is weakening.

There is no obvious sign of accumulation or distribution with the OBV flat as the share price languished more or less at the 61.8% Fibo line.

Volume has been relatively low as the Bollinger bands begin to squeeze, confirming the picture of low volatility. A big move in Wilmar's share price could be on the horizon. Which direction? That is anybody's guess.

If the move is to the upside, overcoming the 20d MA on high volume would signal a breakout. If the move is to the downside, the low of $3.04 touched on 15 Aug is the support to watch.

A sign that things might have bottomed is when there is massive pessimism and no one is interested in buying anymore. In fact, there would be more who would sell even at a big loss because they believe the share price could move much lower over time. Then, there are the increasing number of "sell" calls by the research houses all offering much lower 12 months target prices.

The relatively low volumes, the gently rising MACD and the flat OBV tell me that there is currently a stalemate between the bulls and the bears, pending a possible big move in price with the constriction seen in the Bollinger bands. The trend is, however, still in the bears' favour.

Now, no one should tell you what you should do. You have to decide for yourself.

Related post:
Wilmar: Touched a new low.

Tea with AK71: Quick, buy a new car cheaper now!

It is reported that last weekend saw 5 to 20% more new cars sold in the showrooms here as COE premiums declined for the first time in months.

We probably have friends and family members who are looking to buy a car for a host of reasons. Although some might think that cars are not necessary in Singapore, many would beg to differ.

Finance manager Lionel Ng, 58, and his wife, 53, a homemaker, own a MPV vehicle which will be 10 years old in October. Yesterday, they took advantage of the lower COEs to purchase a Toyota Altis which will replace their current car.

Mr. Ng said: "The COE is still very expensive but we cannot wait anymore - I feel a car is a necessity in Singapore but right now, it's priced like a luxury item."

Ms. Evelyn Tan, 36, self-employed, upgraded her vehicle from a 3 year old Toyota Vios to a Mercedes Benz C-Class. She said: "With the trade-in and lower COE, I'm getting a very good deal on my new car." (The Straits Times, August 27, 2012).

I bought my current car about two years ago and I have not really been looking at cars or tracking their prices. A quick check online revealed the following:

1. New Toyota Altis 1.6 Classic (A) @ S$ 123,988
2. New Mercedes Benz C180 (A) @ S$ 214,888

Wow! WOW! WOW!!!!!!

I am used to driving around and would find it hard to adapt to a carless lifestyle. However, to pay so much even for a new Toyota Altis is simply mind-boggling.

If I were to buy a car now, I would look at pre-owned cars.

A 2006 registered Mercedes Benz C180 would, for example, set us back by S$60,000. This means saving S$154,888 for losing 6 years of use. This is rather simplistic, of course, as we would be buying an older car with older technology which would probably cost more to maintain with the wear and tear accumulated over 6 years. However, we would be saving ourselves some hefty depreciation.

Although I would always argue it is not a matter of affordability but a matter of value for money, consumption is always more of an emotive activity for most. So, happy, buy lor! ;)

Related posts:
1. Tea with AK71: A new car for $75,000?
2. Tea with AK71: The price of my car now.

Saizen REIT: 2H FY2012.

Thanks to its recent acquisitive activities, paying down of its loans and a strong JPY, Saizen REIT is able to declare a higher DPU of 0.63c for 2H FY2012. This is payable on 18 Sep.

Therefore, the expected reduction in DPU of 10+% with the conversion of its warrants did not materialise and Mr. Market has shown his approval in the usual way as unit price of the REIT climbed higher today.

Net gearing: 24%
Interest cover ratio: 6x
NAV/unit: 30c

Annualising the DPU of 0.63c would give us 1.26c or a distribution yield of 7.875% at a unit price of 16c. Everything remaining constant, the DPU is likely to increase as the REIT's management continues to look out for apartment buildings to acquire and pay down its loans which are amortising in nature.

I have mentioned before that if the REIT's loans were not amortising in nature, its DPU could be some 50% higher than it is now.

The management has also indicated it could buy back units from the open market if unit price should be depressed. This would also improve DPU if it should happen.

All in all, I am very pleased with Saizen REIT's results.

With numbers very healthy and operations stable, Saizen REIT is very much undervalued. I believe a 30% discount to NAV/unit is closer to fair value. That would be 21c per unit.

Assuming that there is no new acquisitions from here on and everything else remains constant, at 21c a unit, we would be looking at a distribution yield of 6%. Bearing in mind that this would likely improve in time due to the amortising nature of the REIT's loans, everything else remaining constant, makes Saizen REIT a strong value proposition for anyone investing for income.

Results presentation slides: here.

Related posts:
1. Saizen REIT: Why did I buy and would I buy more?
2. Saizen REIT: Beefing up distributable income.