My Exit Strategy on Singapore Real Estates: 99 years leasehold & 99 years lease

There are different types of real estate in Singapore, namely, freehold, 999 years leasehold, 99 years leasehold and 99 years lease.

Freehold is clear. You own it forever.

999 years leasehold, as the figure had indicated, it is yours for 999 years, that’s like 10 generations?

All right, let’s talk about the exit strategy on 99 years leasehold private property and the 99 years lease HDB. It is made clear by the government that once your 99 years lease is expired, we have to return our unit to the state and our property value will be ZERO value. We have to be mindful about this. So, what should we do?

Personally, this is what I will teach my children to do.
 

In the event the property reaches 50 years old, it is time to market to sell off the properties.

 

Unlike Malaysia, we were informed that we might be paying a small sum to extend the lease once the lease is expired. In my hometown at Sibu, Sarawak, almost all the properties are 60 years lease and we will see how all these leases are extended when time dues. It is near impossible that all houses will be returned back to the state while the 60 years lease is expired. I do not think so.

 

Anyway, back to Singapore. Singapore history is young too. There are no projects reaching the expiry of 99 years lease just yet but it will come one day for sure.

I like to give the example of Lakepoint condominium (99 years leasehold) at Lakeside. Even though it is a 35 years old condo, but it is still fetching a rocket high price today. The 4 bedrooms units at 12th floor (highest floor) are still transacted at S$1,600,000 level at today market while the price of the units in year 2006 was a mere S$530,000. I was the tenant by then in year 2006.

The interesting question is, what would be the market price when Lakepoint condominium reaches 50 years old, 70 years old, etc. I am pretty sure the price would still hold or increase by the time it reaches 50 years. But I would be concerned when it reaches 70 years old as the property value shall start to drop by then, not to mention, when the 99 years leasehold is up, it will become S$0 value. But , this condo is in good position for en-bloc. It has huge compounds and less units, I am pretty sure the condo will be demolished for a good buck before it really goes all the way to 99 years! That is my bet. Hence, the location plays an important role too.

So, a fact check myself, my HDB is 16 years old and the private property is 5 years old.

I would strategize to sell off my HDB unit 35 years later, by then I would be age 71.

I also will plan to sell off the private property 45 years later, by then, I would be age 81.

Both properties would still have 50 years on lease by then. Both units located at strategic locations at Jurong East and Clementi. I would seriously think there is still an upside of 150% to 200% at least by the time both units reached the 50% of the lease. Why? It is because it would be a mature second CBD area in Singapore and the bullet train station at Jurong East shall be a busy hub too after 40 years!

That does not mean you definitely MUST buy freehold or 999 years leasehold. Location still counts after all. So, that is my exit strategy on 99 years leasehold and 99 years lease. What is yours?

Below are the information taken from parliamentary debates official report dated on 20 January 2014.

Value of HDB Flats on 99-Year Leases and Flats Undergoing Redevelopment under the SERS Programme

Mr Gerald Giam Yean Song asked the Minister for National Development (a) how many HDB blocks are more than 40 years into their 99-year lease; (b) what will be the value of an HDB flat once it reaches the end of its 99-year lease; (c) what is the average number of flats undergoing redevelopment under the Selective En Bloc Redevelopment Scheme (SERS) each year for the past 10 years; and (d) whether the pace of SERS is fast enough to redevelop all HDB blocks before they reach the end of their lease.

Mr Khaw Boon Wan : The Selective En bloc Redevelopment Scheme (SERS) is part of the Government’s estate renewal strategy for older estates. It allows intensification of land use and revitalises such estates through new developments. At the same time, it offers an opportunity for flat owners to buy a new replacement flat with a fresh 99 year lease.

In the last 10 years, SERS has benefited the owners of about 18,000 flats. As the name suggests, the identification of suitable precincts for SERS is selective. The selection of sites and pace of SERS will depend on factors such as their redevelopment potential, and the availability of replacement sites for rehousing and other resources.

Currently, there are about 300 HDB blocks with 31,000 flats which are more than 40 years into their 99-year flat leases.

Like all leasehold properties, HDB flats will revert to HDB, the landowner, upon expiry of their leases. HDB will in turn surrender the land to the State. 

Pay Yourself First

I watched one short video clip by Ken Chee talking about this concept called, “Pay Yourself First”. Video is here: https://www.facebook.com/ken.chee/videos/10154042215248722/ I would like to take down notes on what he said first, then followed by my own comments (PLEASE read until the last paragraph).

Below is exactly what the trainer said, not me. Here it goes.

The school teaches us that the income we earned minus the expenses (paying off our bills) and if we manage expenses well, we should have good savings. And this is the wrong concept. Please do not teach that to your children.

+ INCOME

-  EXPENSES

+ SAVING

The key concept is very simple, it is called, “Pay Yourself First”.

We should change the sequence. Whenever we receive the income, we should pay ourselves first. Saving comes first. We should pay ourselves and put the money into an untouchable account (pay myself account). Whatever left over, I then to decide what to pay.

+ INCOME

+ SAVING

- EXPENSES

This is what we called the one degree tweak (one degree difference). You will discover two interesting points after you diligently exercise “pay yourself first”.

Point 1: You will have a sizeable saving in your so called asset account. The money here is able for you to start to deploy at assets. (Asset is anything that generates cash flow).

Point 2: You will form a long term habit in your spending. Once you pay yourself first, you will decide carefully how to spend your remaining, how to stretch your dollars and once you survive, it forms a habit.

Please teach this to your children.

We will use the money in the untouchable account on assets. Once the assets generates cash flow, we deploy the” pay yourself first” rules again and it will become a very powerful compounding machine.

Of course, if you do not know how to invest in the right assets, you also will loss money, that is why you must know how to manage the assets well, then the trainer goes on to invite you to attend his workshop on how to manage the assets, called Value Growth workshop.

 That’ is it.

All right, below are my comments.

As a trainer, you always need to come up with new ideology so that people are attracted at first glance. I am not against it but most of us are already doing it without our notice. It is a nice idea actually. I will teach that to my kid, simply because it sounds logic and it sounds cool too.

Take myself as an example, when I started to work in Singapore, my salary is as well close to S$3,000 per month and yet I have also exercised “pay myself first” concept. When the salary was banked into my saving account, immediately the incomes are automatically deducted (GIRO) to pay my “savings”, which is Investment Linked plan (ILP), Endowment plan (EP) and Whole Life plan (WLP). (For me, I treated these three instruments as my long term saving plan). I have been paying these 3 plans since year 2004. All right, of course, there is argument on how much returns are these plans are worth after 50 years, etc. But that’s not the discussion here. At least I am doing the savings part too!

I also started to pay myself even more 4 years ago by contributing additional S$7,000 into CPF SA account as well as S$15,300 into SRS account (to buy blue chip stocks that generates dividends and good growth). Both attract a sizeable amount of tax savings plus savings with good interest for SA account (4% to 5%).

So literally, my flow would be:

+ INCOME

+ SAVING (ILP, EP, WLP)

+ SAVING (CPF SA)

+ SAVING (SA)

- EXPENSES

+ SAVING (remaining)

Now here comes the interesting part.

1. How to manage the savings in the untouchable account that the trainer is talking about?
    
2. What assets are we choosing?

It can’t run away from stocks (that includes ETF, REITS, warrants etc.), real estate properties (be it Singapore, Malaysia, Australia, UK, etc.), bonds (fixed income assets), GOLD, oil commodities index, etc. And I am sure experts are digging into each asset and tell you how to select the best among the best.

But, life is not always about me, myself and I.

I would like to share one of the revelation I have in recent years. I know you are here for financial information but probably, this is the most important blog that you must read in your life. I started my tithing journey on November 30, 2014. If you do not have revelation, don’t tithe.


Tithing simply means take 10% of our income and give to our mighty God as 100% of ours are from God anyway, don’t you think so?


Offer our 10% to our God and He will sanctify the rest of our money (90%). Our God is faithful and He knows how to give us the best, not only in the heaven but on the earth as well. I am not here to preach you gospel but I am sharing my revelation to you. If you want to know more about it, you should visit our lovely church at the Star, Buana Vista.

 So, my sequence is actually looks like this. It is called, “Pay Jesus First”.

+ INCOME

- JESUS (10%)

+ SAVING (ILP, EP, WLP)

+ SAVING (CPF SA)

+ SAVING (SA)

- EXPENSES

+ SAVING (remaining)

I am more than happy to share more breakthroughs in my life (if any, ha ha..) in the many “revisions” to come and I am anticipating it too! May all the glories go to the mighty one, our lovely God !

“Bring all the tithes into the storehouse, that there may be food in My house, and try Me now in this, “ says the Lord of hosts, “If I will not open for you the windows of heaven and pour out for you such blessing that there will not be room enough to receive it.” Malachi 3:10.

 

Nusa Heights Service Apartment - My first Iskandar property investment (Revision 03)

Revision 03: Updated on November 28, 2021

Revision 02: Updated on December 6, 2020

I bought a FREEHOLD , 3 bedrooms service apartment unit at Nusa Heights, Block A, on 18 February 2012.

The size is 1,050 sq ft and it is a high floor unit, east sun facing, corner unit with 2 car parks.

The SPA price was RM 392,000

The developer gave 8% discount, hence the Net Selling Price was RM 360,640.

I paid 2% down payment RM 7,840 to secure the unit.

I took a 90% loan and capitalized MRTT Premium RM3,220 into the loan, the total loan amount was RM 356,020. I spread the loan tenure year to maximum at 38 years and monthly mortgage payment is RM 1,564.

How is the project doing so far?

Let's talk about the spending first.

(1) I started to pay loan interest only in November 2012 all the way until May 2015 while collecting the keys. So, the total loan interest I had paid was RM 21,485. That is rather a big sum of interest paid. If you buy the unit at the resale market, say in June 2015, you literally save this amount of RM 21,485! And guess what, the loan interest paid will continue to grow with years.

(2) I got 1 month rental + 1.5 month rental + 12 months rental. The total 10% agent fees I have paid was RM 2,325

(3) I spent RM 12,411 on furnishing (see the details below) as well as some miscl. furnishing cost up to RM 714 (to cater for short term stay of 1 month ).

(4) I also paid Assessment Tax to the Johor state, we call it Cukai Pintu or Cukai Harta. It is RM 714 per year.

With the above 4 items, I have spent RM 37,649.

The unit is tastefully renovated and furnished, don't you think so?

The entire unit comes with the false ceiling with down lights.



Now, let's talk about the receivables.

(1) The developer paid me the late delivery interest (they are late for few days only) of RM 751.78.

(2) I received FREE renovation, commission from renovation contractor and the real estate agent while I am doing the marketing, total amount of RM 25,625.

(3) I also received 1 month rental (RM 2,500) , 1.5 months rental (RM 3,750) & 12 months rental secured (RM 20,400), total rental : RM 26,650.

With the above 3 items receivable, total amount is RM 53,027.

So, total receivable of RM 53,027 - total spending of RM 37,649

= RM 15,378 ( a mere net profit).

The unit has a current bank valuation of RM 470,000 only. That is pretty sad. I am aiming for RM 650,000 at least one day.

The developer is giving 3 years FREE maintenance fees.

My monthly loan payment is RM 1,564 and the rental is RM 1,700 per month. So long your rental can cover the monthly loan payment, you shall be doing fine.

The rental yield is 5.66%, nothing too great to shout.

My second investment property in Iskandar will be completed by 4th quarter next year (2017). It is the first service apartment at Sunway Iskandar. I am targeting to market the Sunway Citrine service apartment unit at Airbnb platform when it is completed and fully furnished.

Revision 02: Updated on December 6, 2020

=================================

The new tenant will move in on December 30, 2020.

The new rental yield now is only 4.00%. 

Revision 03: Updated on November 28, 2021

==================================

On November 27, 2021, the tenant decided to renew the tenancy agreement with the same rate.

Rental yield stands the same as 4.00%.

Spent RM5,680 for the above unit toilet internal piping leak. 

(That's 50% of the repair cost, shared with the owner of the above unit).

Next year 2022 operating expenses estimated to be : RM 4,743.60.

Operating expenses such as: agent fees, service charge & sinking fund, quit rent, cukai harta and fire insurance.

Indah water bill paid by the tenant.

Net Gain (up to Dec 31, 2021): RM 91,354.26

Gain of RM 751.78 from the developer late delivery interest (2015)

Gain of RM25,625 from the renovation contractor (2016)

Rental received : RM 100,310 (from 2016 to 2021).

Travel Insurance: Tokio Marine (TM) Xplora Annual (Classic Family)

Let's talk about travel insurance. I never buy travel insurance until my son was born. Before I bought the travel insurance, I also do not have any baggage delay or travel delay during my personal holiday. Isn't that cool ? Typically, people tend to pay a small sum for travel insurance per trip per person. In view of frequent travel with the family within a year, I decided to buy a family travel insurance, covering worldwide.


I picked Tokio Marine (TM) Xplora Annual (Classic Family) Travel Insurance.


It is my 3rd time buying this same TM Xplora Annual (Classic Family). The latest one is dated from February 4, 2016 to February 3, 2017.

The usual price of such worldwide classic coverage for family per year is S$453.

I forgot how I got 15% discount. I paid S$385.05 by using credit card (to collect points of course).

It is actually a very good deal if you travel a lot in a year or you have a big family.

This is the emergency contact to keep.

The coverage of the classic plan is shown below.

And the comparison between the Premier and Classic coverage.

Do take note that some of the coverage amount are exactly the same for Premier and Classic, for example, the travel delay and baggage delay are cap at maximum S$1,000 for both Premier and Classic.

For this year, we have made two claims. The latest one was my wife Hokkaido trip, flying from Singapore to KL then KL to Hokkaido. The flight from Singapore to KL was delayed for 2 hours. Hence, once she reached KLIA 2, she had to rush towards the boarding gate and she managed to board the plane as the last passenger.

So obviously, the luggage in the SG-KL plane is not able to be transferred to the other plane on time. So, she was aware that the luggage will not reach the destination once she arrived at Hokkaido. She bought Uniqlo cloths at the airport in Japan and continued her journey.

At the end, the luggage reached the hotel 48 hours later. So, the baggage delay claimed was max at S$1,000, measuring S$200 per 6 hours block. Baggage delay is fine but not baggage loss! So, the S$1,000 claim can help to pay her entire SG to Hokkaido airfare as it was an AirAsia budget flight and plenty more to spend !

The other claim was Micah doctor visit at the specialist at KL, total claim S$337.10. That's the two claims so far in this year.

The claim process is easy. Just fill up the form online through the website below. Thereafter you submit all the relevant document in PDF format, such as the passport details, boarding pass and the baggage delay reports.

http://www.tokiomarine.com/sg/en/agents/tmis-online-claim-forms/tm-xplora-online-claim-form.html

While I was on the flight (March, year 2013) from Singapore to Washington D.C., transit at Dubai, my Emirates flight was delayed for 24 hours. All hotel stay and meals were provided by Emirates and that delay also entitled for travel insurance claim, travel delay. It was bad luck enough that even my return flight from Washington D.C. to Singapore, transit at Dubai, the flight was once again delayed for 24 hours (I was actually well prepared for this as the boarding time at Washington was delayed for 1.5 hours). So with both trips delayed, I was able to claim travel insurance max. of S$1,000 not with my personal travel insurance but with my company travel insurance as it was a business trip. You only can claim one travel insurance at a time.

Based on my record, we claimed S$417 doctor visit fees at KL for Micah in year 2014.

http://happysgpregnancy.blogspot.sg/2014/12/year-2014-micah-medical-bill_22.html


We also claimed S$552 doctor visit fees at KL for Micah in year 2013.


http://happysgpregnancy.blogspot.sg/2014/01/year-2013-baby-micah-medical-bill.html


That said if you have kid travel with you, you better buy family travel insurance. It is important to ensure that all the family members are well covered during the oversea trips as the cost is only S$385 per year per family , worldwide coverage.

Year 2016 Tuition Fees at Local Universities in Singapore (NUS , NTU & SMU) Revision 03

Revision 03: updated on August 28, 2019

Revision 02: updated on January 14, 2019

 

I have the latest figures (Year 2016) of the tuition fees at all 3x local universities in Singapore. Please take note that all fees are quoted in year 2016 annual subsidized fees. It means while you work for the first 3 years, you are slowly paying back the "subsidizes" to the government.

Somehow, the NUS and NTU fees are calibrated very close to each other, if not, exactly the same.

An engineering degree at NUS/NTU will cost you: S$31,800.

A business degree at NUS: S$37,400 while SMU: S$44,800.

Medicine at NUS: S$101,600.

Take engineering course as an example, S$31,800 for 4 years school fees, it is considered very affordable at today market.

For my curiosity, I just checked my U.S. university latest school fees in Michigan for the engineering course.

Undergraduate US$12,993 flat rate for one semester (1 year 2 semester, Fall & Winter), so US$12,993 x 2 semester x 2 years = US $51,972 ( lower level) + US$14,400 x 2 semester x 2 years) = US $57,600 . Total of 4 years school fees: US $109,572 = S$158,879.  And you are paying only S$31,800 in NUS. It is 80% cheaper.

Of course, the reason of the big differences are: you are studying in Singapore as a Singaporean versus studying in the United States as a non-resident (foreigner), that is why the cost has the big difference. Also, not everyone can enter the local university in Singapore, your A-Level grade must be good.

There are also some ways to reduce the cost of oversea studying by studying the first two years locally before doing the program exchange in the US, but the most you can save is about 50% of the total tuition fees quoted above in USD. After all, the price difference is still quite significant. Not to forget to add in the cost of residence, living expense, health insurance , etc.

So long the school fees increment is kept at low pace, I believe the tuition fees in Singapore is still within the reach.

To complete a Graduate program require 33 credit hours of course works. Hence, a Master degree in engineering will cost US $1,123 x 33 = US $37,059 = S$53,735. In other words, my certifications now has a market value of US $146,631 = S$ 212,614. That's crazy, how many years I have to work in order to breakeven that school fees ! :(

Good luck , kids, same goes to the parents. :)

 

Updated on January 14, 2019

=======================

 

All tuition fees increment are kept at a very reasonable pace.

 

From year 2019 onwards:

 

An engineering degree at NUS/NTU will cost you: S$32,800.

Tuition fees increment of 3.1% throughout 3 years.

 

A business degree at NUS: S$38,400 while SMU: S$45,800.

Tuition fees increment of 2.7% throughout 3 years for NUS and 2.2% for SMU.

 

Medicine at NUS: S$113,600 while NTU: S$136,800.

Tuition fees increment of 11.8% throughout 3 years for NUS and 4.6% for NTU.

 

 

 

 

Updated on August 28, 2019

=======================

 

Tuition fees for Singaporeans ! Still affordable, I shall say.