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28th September 2014

Singapore Real Estate

Use your right to BTO flats well

These subsidised homes are a sure way for the young to get into real estate without paying a lot of cash

Source: Straits Times / Invest

A close friend, who is an expatriate, once joked with me that he wanted to marry a Singaporean because he would then have a chance to buy a Housing Board flat.

"Where else in the world can you find an asset class that, for the past 20 years, has grown at a compounded annual growth rate of almost 10 per cent," he said cheekily.

His remarks were made in jest but they still left an impression on me: Too many of us seem to take the chance of buying subsidised housing for granted. Perhaps it does not seem like a big deal when more than 80 per cent of the population live in HDB flats.

Over the past few years, news of sell-out private property launches have hogged the headlines. A prolonged period of low interest rates seems to have made an investor out of anyone hoping to pay off his monthly mortgages with income from letting property. I have also subconsciously bought into that dream.

In the past few weeks, I visited some new show suites as research for my work. No matter how many I have been to, the shiny interiors, carefully curated furniture and designer kitchens - also known to me as the most important part of the house - have been very successful at fanning my desires for such a home.

When will I ever be able to own even a one-bedroom unit? I am surely not alone in feeling this way.

A young undergraduate recently asked me how she should diversify her portfolio to include real estate. It seems almost impossible for young graduates with regular jobs, she said. Property prices may have slipped, but they had still shot through the roof over the past five years.

For all my dreams of a kitchen outfitted with Miele appliances, I told her that as a Singaporean, she should buy a Build-To-Order (BTO) HDB flat first if she does not have much to start with.

From the many conversations I have had with seasoned investors, it is clear that the first roll of the property dice is the hardest.

But, unlike diving right into the private market, buying a BTO flat is a sure way to get into the game without stumping up a lot of cash.

Booking a BTO flat requires an option fee ranging from $250 to $2,000, depending on the unit type, according to the HDB website.

A subsequent down payment of 10 per cent of the flat's price is required, which can be paid in full from money in your Central Provident Fund, after which the option fee will even be refunded - meaning that booking a BTO flat can cost one almost no cash.

In contrast, buying a private condominium unit entails a cash booking fee of 5 per cent to 10 per cent. This means a young adult would have to cough up $50,000 to $100,000 at the outset for a home costing $1,000,000 - which would hardly buy anything comfortable enough for those setting up a family these days.

BTO flats are already heavily subsidised by the Government. Yet buyers are still entitled to more subsidies in the form of grants.

For instance, first-time buyers of units in non-mature estates like Sengkang can benefit from the Special CPF Housing Grant, which can go up to $20,000. An Additional CPF Housing Grant is also available for up to $35,000, depending on the household's average monthly income. These figures give young adults a buffer to get them off to a good start.

Although recent reports have noted the widening price gap between HDB flats and private condos, BTO flat buyers are in the money right from the start because the flats are priced at a discount.

It is arguable that HDB flats should be seen as a long-term home rather than an investment.

Still, many people interviewed in the Me & My Money columns in The Sunday Times have cited how their best investment bets were their HDB flats which, by their accounts, had trebled or even quadrupled in value by the time they sold them.

I know of many friends who come from well-to-do families and who can easily afford a luxurious private home, but who have chosen to take advantage of their right by joining the queue for a BTO flat.

Furthermore, a rule that kicked in on Aug 30, 2010, has made it so much harder for private property owners to get back into the public market as they have to sell their private homes within six months of buying an HDB flat.

Mr Donald Han, managing director of property consultancy Chestertons, estimated that BTO flats could gain 30 per cent in value by the time they are put up for resale, after the five-year minimum occupation period is up.

Prime Minister Lee Hsien Loong said in 2012 that our public housing model is just one of many types in the world. He said that, while others have focused on housing citizens by helping them to rent a home, he preferred to give young people a housing asset as an "endowment".

"This is for you for life and to help you have a stake in Singapore and to make sure that you start off with chips which can bring you to an equal starting point," he said.

So while my friend still has to stump up some cash to take a Singaporean out on a couple of dates first, those of us who have that birthright should not just give it up.

-By Cheryl Ong

Real Estate Companies' Brief

Shaw Centre's new delights

Revamped building's new tenants include a Spanish restaurant, noodles and whisky shops

Source: Straits Times / Lifestyle!

Diners hunting down new eats in the Orchard Road area can head to the newly revamped Shaw Centre, at the corner of Scotts Road and Claymore Hill.

It has undergone its first major revamp since it opened in 1975, and has a list of new food and beverage tenants.

These will add to the mall's existing Food Republic food court, Sanpoutei Ramen and Toastbox.

The first of the new restaurants to open is Terry's Singapore, a Spanish restaurant by the Les Amis Group. It opens on Wednesday.

The group also runs upscale French restaurant Les Amis and Italian restaurant La Strada, as well as two Japanese restaurants and a wine bar, all of which are in the building.

Other tenants that are slated to open in the coming weeks include The Ship Restaurant & Bar, an iconic Western restaurant which opened at Shaw Centre in 1979; and new restaurant Xi Yan Shaw, the casual offshoot of private dining restaurant Xi Yan in Craig Road. Both of them will open by the middle of next month.

In November, look out for I Want My Noodle, an eatery that will specialise in handmade, artisan noodles; together with retail shops selling mid-range and premium wines; rare whiskies; and Spanish gourmet products. (See other stories on this page.)

SundayLife! understands that more F&B tenants may be moving in, but details are not finalised yet.

Shaw Centre comprises a 27-storey office building and a five-storey retail and food and beverage mall. The 39-year-old building is linked to Shaw House, which was built in 1958, demolished in 1990 and reopened in 1993.

Shaw House refers to the 21-storey office building in Orchard Road and also comprises a retail mall - departmental store Isetan and Isetan Supermarket are its master tenants - and an entertainment complex that houses Shaw Theatres Lido.

Shaw House and Shaw Centre are linked by walkways and a new extended basement area where the three- month-old Food Republic is located.

On Food Republic's decision to move into Shaw House, its spokesman says: "Food courts are convenient, affordable and offer variety. We wanted to offer that to the office crowd in and around Shaw Centre, as well as moviegoers looking for substantial meals before and after screenings."

For the Les Amis Group and its sister wine distribution and retail company Vinum Fine Wines, which will run five new food and beverage outlets on the second floor, above its current row of restaurants facing Claymore Hill, opening more outlets there "makes sense".

A spokesman says: "Our group has a stronghold on restaurants here. So when we found out that Shaw Centre would be creating more space for food and beverage concepts, we decided to open our new concepts here as well, to consolidate our presence."

-By Rebecca Lynne Tan

Billionaire Mikitani’s Tokyo House Goes Up Amid Luxury Boom

Source: Bloomberg / Luxury

Billionaire Hiroshi Mikitani, Japan’s fourth-richest man, is building a house in central Tokyo that is estimated to cost at least 2.3 billion yen ($21 million), underscoring a shortage in the city’s luxury housing market.

The two-story house is on an 880-square-meter (9,472-square-foot) site in an exclusive neighborhood in Shibuya ward, according to a registration filing with the Legal Affairs Bureau. Land prices in the neighborhood have risen 20 percent this year, broker Century 21 Sky Realty estimated.

“There are few luxury homes for sale at the moment,” said Yukiko Takano, manager of international sales at List Sotheby’s International Realty, a real estate brokerage unit of the New York-based auction house. “Demand is rising at a time when supply remains unchanged.”

Luxury home prices in Tokyo have climbed as household wealth hit a record this year amid Prime Minister Shinzo Abe’s efforts to reflate the economy. Japan’s high-net-worth individual population growth rate surged to a record in 2013, according to Capgemini and RBC Wealth Management. Prices for luxury units in central Tokyo have increased 20 percent since October 2013 and are at the highest since 2007, according to an estimate by Sotheby’s.

Mikitani, 49, chairman and founder of Rakuten Inc. (4755), Japan’s biggest online retailer, has hired architect Hirotaka Kidosaki, known for his minimalistic designs that incorporate traditional Japanese elements and hidden details. Mikitani has a net worth of $6.8 billion, according to the Bloomberg Billionaires Index.

Dean Kirkness, a spokesman for Rakuten in Tokyo, declined to comment.

Estimated Cost

Mikitani acquired the land in February 2011 for an undisclosed price, according to the registration certificate. Around the same time, a site in the same neighborhood sold for 1.44 million yen per square meter, according to the land ministry. That is the equivalent of about $1,234 a square foot.

Prices in the area have gone up 67 percent since 2011 to as high as the equivalent of $2,057 per square foot, according to an estimate by Century 21.

Mikitani’s house is estimated to cost 2.3 billion yen when taking into consideration the cost of land, construction and design fee. The home is expected to be completed in February, Kidosaki, Mikitani’s architect, said.

The land is estimated to have been worth 1.27 billion yen, based on transactions in the neighborhood at the time of the purchase registered with the land ministry.

Status Symbol

Kidosaki said he charges 15 percent of the total construction fee for his design. Kidosaki declined to give details of Mikitani’s house because of client confidentiality.

The neighborhood, hidden behind the busy streets of Shibuya’s bustling shopping district, has art galleries and a Noh theater, which features a form of Japanese musical drama that started around the 14th century.

The area is home to Japanese Finance Minister Taro Aso and Hideyuki Busujima, chief executive officer of Sankyo Co., a pachinko slot machine maker.

It is one of the few areas where most houses have two-car garages in central Tokyo where land is scarce. Living in the neighborhood is “a symbol of status,” said Takano of Sotheby’s.

Fast Retailing Co. (9983) Chairman Tadashi Yanai, Japan’s richest person, also lives in Shibuya ward and his house is valued at about $74 million. Yanai has a net worth of $17.2 billion, according to the Bloomberg Billionaires Index.

Toranomon Hills

Rising share prices and a depreciating yen, as well as expectations of infrastructure being built ahead of the Olympic Games in Tokyo in 2020 and moves to legalize casinos, have attracted buyers in the luxury sector, Takano at Sotheby’s said.

Tokyo’s most expensive luxury properties are in Toranomon Hills, a 52-story office and residential building in central Tokyo, where apartments cost an equivalent of more than $2,571 per square foot, according to Sotheby’s. That compares with more than $5,000 a square foot at luxury condominium projects in Manhattan that are coming to the market, according to Olshan Realty Inc.

Mori Building Co., the developer of Toranomon Hills, has found buyers for all the 70 units in the building, Kosei Ajima, general manager of business promotion and residential sales, said.

“We had planned to sell all the units in two years, but it took just six months,” Ajima said.

French Wine

Housing Japan, a real estate broker, will offer two luxury houses in Akasaka for $6.8 million each in January.

“There aren’t any expensive houses for sale,” said Housing Japan President Mitsuo Hashimoto. “A lot of the time Japanese would have to buy land and build themselves. They have to do that because no house is available and there isn’t any inventory.”

Mikitani started his company in 1997 after seeing the devastation of the earthquake in his hometown of Kobe two years earlier, he said in a Bloomberg Television interview in July. That prompted him to start Rakuten, he said at the time. The company has now grown to a size with market capitalization of 1.71 trillion yen. The self-made billionaire owns 40 percent of the company.

Kidosaki’s designs emphasize the space between indoors and outdoors through the use of corridors. He uses windows as picture frames that offer picturesque views, he said. Though his works look simple, it’s the hidden details that distinguishes him from others, he said.

“A house with perfect design is like a French wine,” said Kidosaki. “Its beauty sustains even as time goes by.”

-By Kathleen Chu and Fukumi Yasuda