When will the property market pick up?

Affordable living: The history of Stuyvesant Town, Manhattan New York dates back to 1943. In October 2015, Blackstone Group LP led a deal to buy New York’s Stuyvesant Town-Peter Cooper Village, a transaction that would put Manhattan’s biggest apartment complex in the hands of the world’s largest private equity firm and maintain some affordable housing at the property.

Experts predict between 2018 and 2019

AT a recent property seminar organised by Asian Strategy & Leadership Institute, several developers and property consultants had a debate predicting when the property market will pick up.

Real Estate and Housing Developers’ Association Malaysia (Rehda) patron Datuk Jeffrey Ng Tiong Lip reckoned the residential sector should recover next year or in 2018.

Ng was the moderator for the session on The Future Outlook and Challenges of the Housing and Property Sector.

Property consultants Savills Malaysia managing director Allan Soo, who specialises in the retail malls, expects a 2019 recovery.

Office market specialist Jones Lang Wootton executive director Malathi Thevendre declined to make any predictions. “It all depends ...,” she says.

Ng says the current slow housing market is actually good over the long term, although it is painful in the short term. It all depends on how we manage “the noise”, he says.

There are lots of noises at present, both on the national and international level.

“If next year is election year, the recovery – if there is one – will be after that because between now and then, there are so many uncertainties.

“There is a lack of clarity at the moment,” says Ng.

His reading of the property crystal ball of a 2017/2018 turnaround is by far the most positive and contrasts with Kenanga Investment Bank Bhd equity research head Sarah Lim Fern Chieh.

Lim expects house prices to be flattish or slightly weak depending on locations “over the next four to five years, if there are no major policy changes”.

Her rationale for a longer down-cycle is simple. If your destination is Genting Highlands, but you are driving in the opposite direction, you will need a longer time to arrive there when you finally realise you are driving in the wrong direction.

Although it is widely accepted that the property cycle is between eight to 10 years, within this cycle are “mini two-year cycles. There were two-year up-cycle in 1999-2000 after the Asian Financial Crisis, and another in 2003-2004 and 2007/2007.

But after the 2008 Global Financial Crisis, Malaysia had an extended five-year up-cycle between 2010 and 2014 with prices peaking in 2013, and this was largely due to quantitative easing (QE).

She is, therefore, expecting a longer consolidation period of between four and five years, starting from 2015, before the next up-cycle, barring any policy changes and the global economic climate.

She is also expecting the property market to experience structural changes due to affordability and liquidity factors, among others.

More realistic pricing

Notwithstanding the fuzzy horizon, there are nevertheless a few certainties which may well put the sector on a better footing.

First, home ownership has become a national issue.

Second, the government, at both federal and state levels being landowners, are stepping up on affordable housing.

Third, prices are expected to be more realistic going forward.

Rehda president Datuk Seri FD Iskandar Mohamed Mansor is seeking government cooperation to reduce or waive development charges and other charges, collectively known as compliance costs, in order to bring down prices as this is “too challenging” for private developers to go it alone, considering today’s high land prices.

“If the Government wants developers to build more affordable housing, give us cheaper premiums or don’t charge at all.

“We will then see more stability in prices, or even a reduction, if development charges and all sorts of other charges imposed on developers come down,” said FD Iskandar at a Rehda first half-year review recently.

He says property development and land matters have been the biggest revenue earner for every state. Both federal and state governments own large tracts of land. Although FD Iskandar had made this call before, he was very passionate and firm this time around. Other developers, previously silent, are also quite vocal about the various land and development charges they have to fork out.

This is probably the first time developers are coming together to make a collective public call to seek a waiver or reduction of development and other aspects of compliance cost. The effectiveness of that call depends on the Government’s will to act.

While developers can clamour for such waivers, what is facing the market today is weak sales and this in turn is forcing developers to tweak pricing and strategy a bit, hence the drop in the number of launches as they try push unsold stock.

Andaman group managing director Datuk Seri Vincent Tiew says developers will be offering “more realistic pricing” from now onwards with location being a paramount factor.

There will be more affordable housing and this can be seen from the various affordable housing projects being planned by both the federal and state government although the end-products are slow in coming.

This, says Tiew, can be seen in the various agencies under the federal and state governments, among them being PR1MA Corp mandated to build 500,000 units of affordable housing units by 2018, as outlined in Budget 2013.

A total of 240,000 houses were due by end-2015, with an annual mandate for 80,000 between 2013 and 2015. The number of completed units was 883 at the end of 2015, says Tiew. By the end of this year, 10,000 units are scheduled to be completed. The number of units approved to date are 232,807 against 1.24 million PR1MA registrants as of February 2016. All eyes will be on the affordable segment in the coming Budget 2017.

Healthy demand

The demand for housing has always been there. The issue is affordability, says Kenanga’s Sarah Lim.

“Of late, developers are beginning to price units at RM500,000 and below,” she says.

The current change in direction is attributed to societal and government pressure. Unsold stock and government pressure forced developers to relook their pricing strategy.If developers keep building RM1mil homes, when the threshold is RM500,000 and less, they will be left holding unsold stock. In order to move stocks, creative marketing/financing strategies are employed to move these stocks.

Lim says if developers were unable to meet at least 40% of their sales target by mid-year, they would be unable to meet this year’s targets.

More than two-thirds missed their sales targets last year.

“Prior to this, what was booked was considered sold. Now, this is no longer true,” Lim says.

Lim says there are two issues here, the pressure on the sector as the rate of aborted sales crept up and the people’s demand for realistic prices.

“What we are seeing today is the government’s influence. It is actually steering the market in the right direction,” she says.

Renting the way forward

The other certainty is observed in the rental market, which is expected to continue to be soft next year.

There will be “low occupancy rate” for projects completed last year (2015) and this year, with rental yield at less than 3% a year, says Andaman group’s Tiew.

It is cheaper to rent than to buy. There is so much supply going around and the purchasing power of the ringgit is shrinking.

Selangor State Development Corp (PKNS) senior manager (corporate planning and transformation) Norita Mohd Sidek advocates renting.

She says if there is a 50% loan rejection rate for affordable housing, and considering the limited supply by private developers, renting may be the only option.

She suggests building affordable housing cities the likes of Stuyvesant Town’s Peter Copper Village, Manhattan New York and counters the argument that there is no money to be made from affordable housing.

In October 2015, Blackstone led a deal that put Manhattan’s biggest apartment complex in the hands of the world’s largest private equity firm and maintain some affordable housing at the property.

Blackstone and Canada’s real estate company Ivanhoe Cambridge Inc acquired the 80-acre enclave for about US$5.3bil. Rent is kept below market rates for some 5,000 units. Public transport and other amenities must be part of the development for it to succeed. “Government grants and resources are needed to identify the right location to built more council homes,” she says in her paper.

In today’s low yield environment, pension funds around the world are looking at other ways to generate dividends besides equities and fixed income securities. They are buying into infrastructures and large township developments where there are economies of scale for maintenance.

Malaysia’s national housing dilemma cannot be solved by profit-oriented private developers alone. The golden property years between 2010 and 2014 have been intoxicating, having resulted in expectations of 20% to 30% rise in sales year-on-year, like the manufacturing sector. But the property sector is quite unlike manufacturing. The reflection point was seen in 2014 after the government introduced certain cooling measures and anti-speculation sales gimmick.

Going forward, the emphasis on housing priced RM500,000 and below means developers have to sell more units to make the same sales value as previous years.

“They have to sacrifice some of their margins. Higher profit margins can be had from the mid- to high-end segments,” says Lim. They will have to work harder to help buyers secure loans.

This search for some form of cohesion in the national housing arena has taken a bit of time. Hopefully, the coming Budget 2017 will pave the way for more positive action.

By Thean Lee Cheng The Star/Asia News Network

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Check your risk appetite and start investing as this is as good a time as any to invest in real estate be they physical assets, property stocks or real estate investment trusts (REITs).

Industry experts held this view during a panel discussion entitled “Where to put your money – real estate, stocks or REITs?” at The Edge Investment Forum on Real Estate 2016 (REIF 2016) on April 30.

For housebuyers especially, this is a good time to buy as the market correction which started last year will continue this year, said panellist Sunway Bhd managing director of the property development division for Malaysia and Singapore Sarena Cheah.

She said the banking sector is well-capitalised while non-performing loans are declining, which means borrowers still have the ability to service their loans.

Cheah noted that property prices have been on the uptrend for the past 10 years with an average capital appreciation of 8% to 9% from 2005 to 2015, buoyed by a healthy employment rate and low interest rate.

“Property price growth for 2015 had dipped 2% compared with 2014, but the compounded annual growth rate (CAGR) of capital appreciation had achieved 12%,” she shared.

“Property investment is a safe investment as it is one of the basic necessities. Strong demand will continue to support the capital appreciation of properties,” she added.

However, she advised investors to study the location, the developer and the future growth potential of a property or project before buying.

Also on the panel were Kenanga Investment Bank Bhd head of equity research Sarah Lim and Axis REIT Managers Bhd chief executive officer and finance director Leong Kit May. The Edge Communications Sdn Bhd and The Edge Property Sdn Bhd managing director Au Foong Yee was the moderator.

Lim expected property prices to plateau for the next few years before the next upcycle.

“The big rally in transaction volume and prices in 2010 to 2012 was supported by the baby boomers who were in their late 30s or early 40s. The next upcycle will depend on the next generation which would be the Millennials,” she explained.

In the near term, Kenanga Investment Bank has placed an “underweight” rating on the property sector as it expected property stocks to be volatile and eventually be range-bound due to the absence of catalysts, while earnings risks remain.

However, steady defensive big-cap players such as UOA Bhd and S P Setia Bhd have light balance sheets and high exposure to areas in the Klang Valley while Sunway Bhd and Eco World Development Group Bhd are worth looking at, she said.

Among the small to mid-capital players to look out for is Hua Yang Bhd – it is undervalued and has high yields.

Lim also noted that Malaysia’s residential supply is outpacing demand in the wrong segment as there is insufficient supply for residential properties priced between RM250,000 and RM500,000.

“Residential developments priced below RM500,000 constitute less than 35% of most developers’ upcoming projects,” she said.

Meanwhile, REITs could be the cornerstone of a portfolio of quality assets for investors who are looking for lower risk and stable income from rental properties.

“A REIT is a listed vehicle that invests in a portfolio of income-generating properties. Rents collected from tenants, less expenses, are distributed on a regular basis to provide stable yields to unit holders,” said Leong.

She noted that the current dividend yield for Malaysian REITs is at 6.69%, compared to fixed deposits which is at 3.31% and the Employees Provident Fund’s yield of 6.40%.

“The benefits of investing in REITs include the predictability in income stream in the form of distribution income, having a liquid proxy to physical property investment, transparent daily pricing, high level of disclosures and transparency, low entry cost and professional management,” she added.

On the future performance of MREITs, Leong said the company foresees no future interest hikes which augurs well for REITs as a higher interest may affect the trust companies’ ability to pay higher dividends. - The Edge Property

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Malaysia's property market seen next high in 2018

SK Brothers Realty Sdn Bhd general manager Chan Ai Cheng (filepic) believes the market would bounce back as soon as the Government decides to “boost the sector,” namely, measures promoting the industry. “We hope the market will return within the next two years,” she said.

‘Next market high’ for property seen in 2018

PETALING JAYA: A combination of pent-up demand, improved buyer sentiment and overall business environment is expected to spur the local property market to its “next market high” in 2018.

PPC International Sdn Bhd chief executive officer Siva Shanker said conditions have been improving albeit slowly, with the implementation of the goods and services tax (GST) not really having much of an impact as originally expected.

“GST came and went and everyone is still carrying on. But the general perception is that business is slow. When things are slow, the first thing that suffers will be property, because it is a big-ticket item.”

Siva said property transactions, not prices, have been spiralling since 2012.

“But we believe things (transactions) are improving already and we expect 2018 to be the next market high,” he said.

SK Brothers Realty Sdn Bhd general manager Chan Ai Cheng believes the market would bounce back as soon as the Government decides to “boost the sector,” namely, measures promoting the industry.

“We hope the market will return within the next two years,” she said.

Chan admitted that property transactions this year have been a little slower compared with the same period in 2014.

“From our marketing activities and road shows so far, it (transactions) has reduced compared with last year. There’s a bit of hesitation.

She added that the central bank’s tighter lending rules has had an impact on transactions.

“Year-to-date bookings have been about the same as last year, but conversions into sales are not the same.”

An AmResearch report last week reaffirmed an “overweight” outlook for the local property sector.

“While we expect residential prices to continue moving sideways in 2015, a return of pent-up demand towards end-2015 – barring external shocks – is possible as the market is still awash with liquidity.

“Besides that, property cooling measures and post GST impact appears to have already been priced-in, given the steep 52% discount that property stocks within our coverage currently trade at vis-à-vis their respective net asset value.”

In terms of property sub-segments, Siva feels that high-end condominiums are oversupplied within the Klang Valley.

“With that, owners will have problems selling. The landed (residential), industrial and commercial sectors, I believe, will be alright.”

He said the office subsector was also oversupplied - but added that it wasn’t a worrying situation.

“In the short-to-medium term, the oversupply will be absorbed. This is normal. Not every building will be fully taken up - it usually takes a while to get tenants anyway.”

In terms of pricing, Siva said secondary property prices were between 20% and 40% cheaper than new launches.

“It’s the secondary market that’s doing better now. But the focus should be on affordable homes, namely those below the RM500,000-range.

“Landed property within this price range is grossly undersupplied,” he said.

Source: By EUGENE MAHALINGAM The Star/Asia News Network

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Stupid fellow ! Dr Ling, former Malaysian Transport Minister slams Attorney-General

 

UTAR Council Chairman Tun Dr Ling Liong Sik speaking to the media regarding UTAR Initiatives and Developments at the Sg Long Campus, Kajang on Tuesday.

KAJANG: There was nothing wrong in the land purchase for the Port Klang Free Zone (PKFZ) project, said former transport minister Tun Dr Ling Liong Sik.

“The Cabinet was correct in deciding on that. It’s only the A-G (attorney-general who) thinks it’s a wrong decision. Stupid fellow,” he said at a press conference here yesterday to announce Universiti Tunku Abdul Rahman’s (Utar) latest initiatives and developments.

Dr Ling also said the land was sold to PKFZ at RM21 psf. He added that the land is now valued between RM70 to RM80psf, saying that it was already a profit.

Dr Ling and another former transport minister Tan Sri Chan Kong Choy was charged for cheating the Government over the PKFZ project. Both were later acquitted.

Dr Ling was acquitted on Oct 25 last year on three charges of cheating the Government over the PKFZ land deal. The trial began in August 2011.

Justice Ahmadi Asnawi, in delivering the judgment last year, held that the defence had managed to raise reasonable doubt into the prosecution’s case over the main and two alternative charges against Dr Ling.

Justice Ahmadi added that there was no evidence on who initiated the PKFZ project involving the procurement of the land.

The court found that Dr Ling’s evidence was corroborated by the testimony of former prime minister and then-finance minister Tun Dr Mahathir Mohamad.

Justice Ahmadi added that it was apparent Dr Ling merely signed off documents presented to him by his officers and later made the presentation to the Cabinet.

He said that when the Cabinet decided to approve the purchase of the land by Port Klang Authority (PKA) from Kuala Dimensi Sdn Bhd (KDSB), the Cabinet knew that the value of RM25psf did not include the total amount of interest payable and that interest of 7.5% would be payable over and above RM25psf.

Besides that, Justice Ahmadi said that the purchase of the land was not decided over a single Cabinet meeting but rather it was deliberated periodically between March 1999 and Nov 6, 2002.

Utar plans training hospital 

KAJANG: Universiti Tunku Abdul Rahman (Utar) plans to open a specialist training hospital in Perak that will be named the Sultan Azlan Shah Hospital.

Utar council chairman Tun Dr Ling Liong Sik (pic) said the specialist training hospital would be located near the university’s Kampar campus, though he stopped short of mentioning any time frame for construction.

“The hospital will offer treatment using traditional Chinese medicine (TCM) as well as Western or conventional medicine,” he told reporters yesterday to announce the university’s latest initiatives and developments.

Dr Ling said the hospital, which would serve the public, would be used to train medical students.

According to the Utar website, the university has been accepting students for its Bachelor of Medicine and Bachelor of Surgery (MBBS) programme since May 2010, while it was also the first institution approved to offer a bilingual TCM degree programme in Malaysia from May 2011.

Speaking at a press conference yesterday, Dr Ling said the land for the hospital had been donated to Utar by Perak ruler, Sultan Azlan Shah.

Utar president Prof Datuk Dr Chuah Hean Teik said the university would help to build and operate the hospital.

Separately, MCA president Datuk Seri Liow Tiong Lai announced that Dr Ling would helm the newly set up MCA Higher Education Institutions Coordination Committee.

The committee is tasked with streamlining the courses offered by the four educational initiatives of MCA: Tunku Abdul Rahman University College (TARUC), Tunku Abdul Rahman University (Utar), Kojadi Institute and the Institute Of Childhood Education Studies and Community Education.

Liow noted that they were “overlapping” courses offered by TARUC and Utar, especially after the former was upgraded from a college to university college last year.

Asked on why Dr Ling was picked for the post, Liow said: “He is a veteran who has shown his commitment and contribution to the development of the two institutions.

“Now we want to further develop the MCA higher learning section, and we need a lot of effort to synchronise and synergise to ensure that we can perform better in this area,” he added.

Sources:

The Star/Asia News Network

 

No asset bubble, said Malaysian Central Bank governor

Malaysia has addressed many issues, risks 

Zeti:‘There is confidence in the financialsystem.’- EPA  

KUALA LUMPUR: There is no reason to believe that Malaysia has seen the formation of an asset bubble that is about to burst, as the country has addressed many of the issues and risks related to it, says Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz.

She said three series of macro prudential measures had been introduced this year to avoid the very risk of the formation of such a bubble asset.

She was responding to a question on whether Malaysia was experiencing an asset bubble that would burst if China’s economy tumbled and as global interest rates rose, as reported recently by the foreign media.

“Conditions between now and in 1997/1998 are different. We are now on a growth path,” she told a press conference in conjunction with the South East Asian Central Banks (Seacen) 30th Anniversary Conference on Greater Financial Integration and Financial Stability and launch of the Seacen Financial Stability Journal.

Zeti said domestic demand was driving Malaysia’s economic growth and the country was not at the epicentre of the recent global financial crisis.

“Our financial intermediaries remain resilient and the supply of credit was never disrupted,” she added.

She said financial intermediation was continuing and financial markets continued to function.

“There is confidence in the financial system. This is the result of the focus over the last decade on financial reforms that have strengthened the foundation of our financial system.

“We believe that credit growth has moderated to a sustainable pace that supports the growth of the economy. In this regard, we continue to monitor conditions,” Zeti added.

Meanwhile, in her opening address at the conference, Zeti said the modernisation of the Asian financial system had been accompanied by a significant strengthening of the regulatory and supervisory frameworks.

She said it had also been accompanied by improved financial safety nets, a more effective surveillance of financial stability risks and stronger legal underpinnings.

“These reforms supported the transition towards more market-oriented financial systems that are anchored in stronger institutions, risk management capacity and governance,” she added.

“Our financial institutions are supported by stronger financial buffers to withstand adverse developments and shocks.

“Significant strides also continue to be made in strengthening consumer protection frameworks, promoting financial inclusion, and enhancing market discipline,” she said.

She also said these developments continued to support the region through the recent episodes of turbulence in the global financial markets.

“The region has also made important strides in enhancing monetary and financial cooperation arrangements to address regional financial stability issues and global policy spillovers.

“Much has been accomplished in the areas of surveillance arrangements, financial safety nets and crisis prevention, management and resolution,” she added.

On the Asian financial integration model for the ten Asean economies, Zeti said it was focused on strengthening pre-conditions through collective capacity building to promote more open market access.

“It also focuses on progressively reducing barriers to facilitate cross-border trade, developing the market infrastructure and an enabling environment to promote the efficient and effective intermediation of cross-border financial flows.

“It also focuses on establishing appropriate safeguards for the stability of the financial system,” she added.

Meanwhile, Bank Negara and the Bank of Korea jointly announced the establishment of a bilateral local currency swap arrangement. It is designed to promote the use of local currencies for bilateral trade and strengthen financial cooperation between Malaysia and South Korea, Bank Negara said in a statement.

This arrangement allows for the exchange of local currencies between the two central banks of up to five trillion Korean won or RM15bil.

The effective period of the arrangement is three years, and could be extended by mutual agreement between the central banks. - Bernama

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Malaysia's property market still growing strongly

Malaysia's property market still has much room to grow and will benefit from the high property prices in Singapore, said founder and principal trainer of Singapore-based School of Infinite Potential, Kenny Tan (pix).

"Malaysia('s property market) still has much growth. The market here is exciting and there is a lot of potential and resources. Malaysia can become a really solid country with its hardworking people," he told SunBiz in an interview.

Tan, who is also ERA Realty Network Pte Ltd group division director and a practising real estate agent, said property prices in Singapore have driven buyers to Malaysia due to its closeness in terms of proximity and culture.

"A lot of Singaporeans buy their second home or investment properties here. There is a lot of interest here, especially in Iskandar Malaysia (Johor). There is a lot of interest from Singaporeans, but we always advise them to do research prior to investing," he said.

Tan said while Singapore's property market has gone through a few rounds of corrections, property prices in Kuala Lumpur have been constantly rising since 2004.

Although the issues in Europe and the US have resulted in expatriates pulling out and weakening the rental market, there has been a good influx of foreign interest from South Korea and Japan.

"There is still a lot of opportunities for real estate agents in this segment," he added.

Meanwhile, the cooling measures introduced by the Singapore government has also helped attract interest to Malaysia, with Malaysian property developers taking the opportunity to ramp up their marketing efforts in Singapore.

However, there is still strong demand in Singapore's properties despite the cooling measures, especially from Chinese investors, said Tan.

"(It's just that Singaporean) investors are now taking their time to buy instead of rushing in and chasing prices. There are still transactions (in Singapore properties)," he added.

On property buying trends in Malaysia, Tan said it is moving towards online buying, selling and marketing.

"Technology provides convenience and productivity, one can search for properties online at any time and anywhere. This is already happening in Singapore and we foresee that happening in Kuala Lumpur over the next two to three years.

"There is an evident trend that Malaysia is moving towards that direction with the various online forums and property portals," he said.

Tan said going online means buyers can do research before viewing properties or meeting up with agents, saving time and money. At the same time, real estate agents know the calls they get are more likely to be hot leads rather than cold calls.

"However, there is still a segment of buyers who still use newspapers to search for properties. For example, the older generation and those who are less internet-savvy.

"In Singapore, buyers who want to buy landed properties do not search online. There is still a certain type of buyer who like traditional media thus it is important to have both (mediums)," he added.

 By Eva Yeong  sunbiz@thesundaily.com

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Kuala Lumpur property market gains stronger Momentum

SINGAPORE, July 18 (Bernama) -- The Malaysian property market has gained stronger momentum after the May general election, which saw a turn-around in the investment market in the second quarter of the year, says DTZ Research.

In a research note titled, "Property Times Kuala Lumpur Q2 2013 - Greater Market Certainties After The Election", it said the turn around in the second quarter was driven by corporate purchases for occupational requirement despite concerns about overall oversupply in the market.

It said the overall office market was stable.

Both vacancy and rental rates remained unchanged with continued substantial supply in the pipeline.

The research house also said the anticipated oversupply sentiment did not appear to affect the market as activities remained resilient and active, supported by stable rental and capital values.

Retail sales remained buoyant with continued local and international interest for investments in the sector.

It said the high-end residential market resumed activities with several new launches during the quarter despite Bank Negara contemplating measures to curb speculation and lending.

"Now that the GE13 is over, companies are starting to proceed with major investments, which may have been temporarily held back by political uncertainties.

"We can expect stronger momentum in government-linked mega projects such as the Tun Razak Exchange (TRX) where third-party investors and developers have been invited to participate, DTZ Research added.

The total value of 12 deals recorded in the second quarter amounted to RM988.6 million compared with RM490.8 million, comprising three deals in the first quarter, mostly in the office sector.

-- BERNAMA

Invest earlier, get real estate-tic

Income earners in their 20s are fast making their presence felt in the property market. But getting there takes discipline.

HE acquires one property a year. He has been doing this for the past five years. Today, at the age of 38, his one regret is that he didn’t start earlier, when he was in his 20s.

Entrepreneur JS dishes out advice that he himself takes seriously. He tells young people all the time that they should invest in property from a young age, or the money that could have gone into real estate would be frittered away.

He believes that investment in property delivers the best returns. Apart from property, where else can young investors leverage on a 10% investment for a stable future gain? Any other transaction, whether in silver or shares, requires payment in full.

As real estate is based on supply and demand, one has greater control over it compared to paper investments like unit trusts and shares.

JS believes that if a person is determined to own a piece of property, he can do so when he is in his 20s.

His formula is simple: the minute you start working, you should start saving for a property.

Put aside a sum of 20% of your salary every month for two years towards a property. But the challenge will be to live within the balance 80%, especially if it means giving up Starbucks, clubbing, smoking and shopping.

If your take-home income after several years of working is RM4,000 and you put aside RM800 a month, by the end of 24 months, you would have saved about RM20,000.

And that is good enough for a 10% down payment for your first foray into the property market, probably a small apartment in the fringe of the city.

While the cheapest high rise properties in inner Petaling Jaya and Kuala Lumpur are in the region of RM400,000 to RM500,000, it is still possible to buy properties close to RM200,000 in outer KL areas like Puchong, Sentul, Cheras, Seri Kembangan, Serdang, Cyberjaya, Bangi, and in Shah Alam.

With Klang Valley’s population at 7.2 million and expected to rise to 10 million in another seven years, there will be a constant demand for living quarters.

If you are renting out your property (the average yield is about 5%) you will probably have to top up the rental you collect on your property to cover your loan repayment.

As a simple ballpark, the loan repayment would be estimated at RM1,200 a month based on 20-year loan for a RM200,000 loan.

But after a year or two, you can increase the rental and eventually your property will be self-financing.

One father who is completely sold on getting his kids to start young is Ten. He got his daughter, 29, and son, 25, to fork out RM13,500 each to purchase their respective three-bedroom apartments in Puchong for RM135,000 more than a year ago.

His daughter sold her unit a year after the purchase for RM170,000. After the real property gains tax and other costs, she was able to make a net profit of RM25,000. The capital appreciation on her apartment was about 20%, not including her rental income that year.

With that, she now has close to RM40,000 (seed money plus profit) for her next – and higher value – property. In fact, the senior manager of a multi-national is now eyeing a RM600,000 condominium in Petaling Jaya and Ten is fully supportive of her next purchase (only a 10% downpayment is needed for the first two existing loans).

A great believer in property investment, Ten, a retiree, is all smiles these days as his total property investment which was valued at RM3mil in 2010 has since more than doubled. His own house, a double-storey corner lot in Section 17, which he bought for RM63,000 in 1978 after working for five years, is now worth about RM1.5mil.

The phenomenal increase in property prices in the past few years, shares the CEO of a realty firm, is unprecedented. He attributes it mainly to a prevailing low housing loan interest rate of about 4.1%, which is barely above the 4% government housing loan rate.

According to a report by Oriental Realty and Zeppelin Real Estate Analysis Ltd, the residential property market in Malaysia has seen an overall price appreciation of 78% from the first quarter of 2000 to the third quarter of 2011.

While the CEO thinks that buying a property or two for a young adult is a good form of forced savings, he cautions that one must buy within one’s means and be careful with one’s cash flow.

“What if you lose you job tomorrow? Don’t overstretch. As the Chinese saying goes, don’t try to cover 10 woks with nine covers,” says the real estate man who has been in the business for more than 30 years.

A tip he shares for “good deals” is to look out for “leftover” property – often balance or unsold units developers want to clear cheaply or bumiputra units – which are not advertised but handled by the bigger real estate agents. Usually, there will be innovative schemes to make the units affordable. New launches are a good place to start too.

Sometimes, it’s also a fine balance between patience and research and paralysis by analysis.

Leigh, 35, was on the lookout for a property to buy when he was in his 20s. But every time he found something in a new development that he liked, his real estate businessman father would pooh pooh it.

“The first property I looked at was a studio apartment going for RM90,000. My dad was not keen as it was a new area. Today, it’s worth RM250,000.”

On his fourth attempt in 2009, he managed to buy a condominium unit still under construction in Subang at a good price from someone who had an overseas posting. He sold it two years later at RM600,000 and pocketed more than RM200,000.

When Leigh bought his current home in Mont Kiara, he took his time and studied the area, went to the ground and spoke to owners instead of researching only via online portals.

“Most of the owners were asking for RM580,000 to RM620,000. So I told real estate agents that if there were any units going for below RM550,000, please alert me,” says Leigh who joined his father’s realty firm four years ago.

After three months, he got his break when a Singaporean owner wanted to sell his unit and Leigh paid RM530,000 for it!

His advice to young investors: do your homework. Study the master plan; look into the background of the developer, quality and design of the product. Be clear on what you want: are you looking for capital appreciation or rental income? If you need the rental income to cover the bulk of your monthly housing loan, you would choose the latter.

For an investment of RM20,000 plus a housing loan, your return after three years upon completion of the property could be more than two fold.

And the key to your first property – based completely on your own finances – is to save for it.

When it comes to saving, don’t worry about the amount, worry about the habit. Says a financial coach, if you’re an employee and you’re not earning the income you need to make that first property, look at how you can add value to your boss to get that increment. If there’s a will, there’s a property waiting….

Common Sen-se by LEANNE GOH

Note: A recent chat with a 29-year-old colleague was enlightening. She has already sold one property, bought the one she’s living in and has invested in another. Among 10 of her friends, four have already bought property. 

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Singapore Home Sales Rise 43% and stocks up

Singapore home sales rose 43 percent in January from the previous month as buyers rushed to purchase homes right after the government announced cooling measures to ease residential prices.

Home sales increased to 2,013 units in January from 1,410 units in December, according to data released by the Urban Redevelopment Authority today. Sales reached 22,699 units in 2012, according to calculation by Bloomberg News based on the government data, which dates back to 1996.

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People walk dogs past a house in Telok Kurau district in Singapore. Singapore has been attempting to rein in prices since 2009, when the government barred interest-only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments still being built. Photographer: Sam Kang Li/Bloomberg

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Traffic travels along the Benjamin Sheares Bridge past a condominium development in Singapore. Photographer: Munshi Ahmed/Bloomberg

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A jogger runs past people with dogs in Telok Kurau district in Singapore. Photographer: Sam Kang Li/Bloomberg

“This is a bit of an abnormality and the increase was a bit of a surprise,” said Nicholas Mak, the executive director at SLP International Property Consultants, who said developers extended the hours of their sales office on the eve of the curbs. “February will be lower than January because this is when the effects of the cooling measures will be felt.”

Singapore home prices reached a record high in the fourth quarter amid low interest rates, raising concerns of a housing bubble and prompting the government to introduce its seventh round of cooling measures on Jan. 11.

Singapore has been attempting to rein in prices since 2009, when the government barred interest-only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments still being built.

Mak said the curbs were also partly offset by price cuts by developers, some offered through rebates. He expects prices for so-called mass-market homes to increase between 1 percent and 5 percent this year. For high-end homes, or those in prime districts, prices may rise 2 percent or decline as much as 8 percent depending on buyers’ reactions to the measures, he said.

Shares Rebound

Singapore’s property index rose 0.3 percent at the close to the highest in almost five years. The measure has climbed 2 percent since the curbs were announced last month, recovering from a 1.6 percent decline on the first trading day after the measures.

Knight Frank Pte cut its estimates for new home sales for 2013 by 20 percent after the measures and expects sales to range between 12,000 and 14,000 units this year.

“Despite the strong sales volume in January, there could be a potential decline in demand for private homes for the next two months in first quarter this year by about 10 to 15 percent, as the private residential market fully absorbs the impact of the seventh round of property cooling measures,” property broker, Knight Frank, said in an e-mailed statement today.

The latest measures include an increase in the stamp duty for homebuyers by between 5 percentage points and 7 percentage points, with permanent residents paying taxes when they buy their first home. Singaporeans will also have the levy starting with their second purchase.

The government also tightened loan-to-value limits for buyers seeking a second mortgage, referring to the amount they are allowed to borrow relative to the value of their properties. The cash down payment will also rise to 25 percent from 10 percent starting from the second loan, it said. -- Bloomberg

Singapore property stocks up after Jan sales data



SINGAPORE - Singapore property stocks rose, bucking the decline in the broader stock market, after data showed private home sales soared in January.

According to the Urban Redevelopment Authority (URA), developers in Singapore sold 2,013 new private homes in January, up 43 per cent from December's 1,410 units. The jump came about despite new cooling measures announced by the government on Jan 11.

Around 0715 GMT, shares of Southeast Asia's biggest developer CapitaLand were up 0.8 per cent at S$3.93, while City Developments rose 0.3 per cent to S$11.45.

The benchmark Straits Times Index was 0.2 per cent lower.

"The number of transactions indicates clearly that demand for private properties is still there, especially when you take into consideration the advent of the January cooling measures,"said PropNex Realty CEO Mohamed Ismail.

Mohamed Ismail said many home buyers rushed to make purchases on the evening before the new measures kicked in, and most developers extended their opening hours to facilitate last-minute purchases.

By Kevin Lim  Reuters

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Chance to invest in distressed assets

Distressed property markets where deals are difficult to finance and yield spreads are at all-time highs provide attractive investment opportunities, according to Morgan Stanley’s real estate unit.

In the Asia-Pacific region, Morgan Stanley Real Estate Investing is most focused on China, India, Australia and Japan, said Olivier de Poulpiquet, who helps oversee $36 billion in real estate assets as the global co-head for the unit.

In India and China, demand is driven by strong demographic trends amid a dearth of financing, while in Australia and Japan, low borrowing costs are providing opportunities, he said.

Morgan Stanley, with a team of 280 globally in 11 countries dedicated to the property business, has about 45 percent of its investments in the U.S., 33 percent in Asia and about 22 percent in Europe.

In many developed markets, such as U.S., Japan and Australia, the yield spread between real estate and the risk free rate, typically the interest rate on U.S. Treasury bills, is as much as 400 basis points, de Poulpiquet said.

“Asia and the U.S. will continue to offer opportunities,” de Poulpiquet said in an interview in Singapore yesterday. “Investments in real estate have seen a flight to safety globally and in particular in the U.S. and Europe.”

Interest in property investments by institutional investors is improving as the asset class is viewed as an effective portfolio diversifier and an inflation hedge, de Poulpiquet said. Allocations to real estate by major institutions may climb from an average of 7 percent currently to 10 percent, he said, without providing a time frame for the increase.

India, China

In India and China, Morgan Stanley is finding opportunities by financing developers that are seeking money to complete projects amid a scarcity of capital, de Poulpiquet said.

In its almost three-year effort to tighten the property market, the Chinese government has raised down-payment and mortgage requirements, imposed a property tax for the first time in Shanghai and Chongqing, and enacted home-purchase restrictions in about 40 cities. India’s biggest developers have struggled to rein in record debt as they grapple with high borrowing costs, dwindling sales and banks’ reluctance to lend.

“The major trend in these markets is that this growth is combined with a capital constrained environment for real estate, mostly driven by government interventions and price cooling measures,” de Poulpiquet said.

“In India and China, there is less opportunity to buy existing assets but greater opportunity to pick the right developer and build to either lease or sell.”

Favorable Demographics

India will have 127 million more working age adults by 2020, while in China, the 470 million adults leaving rural areas for cities will reach a rate of 11 million per year, said de Poulpiquet.

Over the next 15 years, the total global urban space growth will reach about 82,000 square kilometers (31,660 square miles), 47 percent of which will be driven by India and China, he said.

In markets such as Shanghai, the supply of class A office spaces is relatively low while demand is forecasted to remain robust, de Poulpiquet said. In India, the trend is similar where the residential sector continues to offer interesting opportunities, he said.

In Australia, distressed assets sold by European banks which are undergoing deleveraging processes to clean up their balance sheets are attractive, said de Poulpiquet.

In Japan, Morgan Stanley is buying class B office assets in Tokyo and greater Tokyo, he said.

“In many markets globally, including Japan and Australia you can buy class B plus assets, at significant yield differential between your cost of borrowing and the real estate yield,” said de Poulpiquet. “It is a relatively safer investment with good quality yield and return profile.”

Europe will also increasingly offer attractive investments in real estate with all the level of distress in the market, he said. Still, Morgan Stanley remains “cautious” and focused on making “defensive investments” in the region as prices still have some room to fall, he said.

“Overall, we will see slower growth, more volatility but in Europe, it’s neither a doomsday scenario nor in a happy recovery and this will last for a while,” he said.- Bloomberg

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