Financing your real estate – Home loans (Part 1)

Purchasing a home is a costly affair. In fact, it can probably be one of the biggest financial decisions of your life. The idea of owning a comfortable place to occupy is bliss to many, yet when preparing to dive into the chaotic financial side, many are left lost and confused. This three-part article will help introduce to you on mortgage terminologies, basics of conventional home loans, and how best to choose the plan suited for you and some basics of Islamic home loans.

A simple home loan scenario :

 The bank evaluates and determines the type of loans eligible for the individual. As banks use different methods to calculate your worthiness, it depends on the bank itself and how they recognise the individual.

The bank evaluation of the individual is called
credit score
 review, which determines your eligibility (with respect to salary, debt servicing ratio, risk profile, property and etc).

After the approval, the bank lends a certain amount of money to the borrower to purchase the desired assets. The individual will then use the borrowed money to pay a certain amount of the house value after they pay the initial amount needed to onset the home.

When buying a home, the bank loan will only cover a certain amount of the house value. This is called
margin of finance
. Usually for first-time home buyers, they are able to get up to 90% loan of the total house value. The total amount the bank loans is termed
principal amount
. The remainder sum of 10% is called a
down payment
. A down payment is usually paid using the individual’s own savings. The duration of which the individual has to repay the bank is termed
tenure
.

For example, Ah Kaw has borrowed RM450,000 from HSBC Bank to finance his mortgage of RM500,000. His annual interest is 4.35% over the next 20 years, therefore his monthly payment estimation is RM2810.62. Make sense now?

On a side note,
lock-in period
 refers to the length of time where you’ll incur an exit penalty if you choose to fully pay off the loan at hand. For example, if you borrowed RM50,000 with a lock-in period of 3 years, you will pay a penalty of 3-5% for wanting to opt out early by paying the loan in full.

The agreement between the individual and the bank is to repay the money, compounded with interest structured by the bank.

Banks in Malaysia uses the
Base Rate (BR) system
, which determines their interest rates based on their own efficiency. This is different from the previous system called
Base Lending Rate (BLR)
, which the interest rates are predetermined by Bank Negara. As such, customers are unable to borrow below the value of the base rate.

For example, Public Bank has BR of 3.52%. However, the amount the individual must focus on would be the
Effective Lending Rate (ELR),
 which has the connotation of ‘+x%’. So if Public Bank has a BR of 3.52% and an interest of ‘1.1%’, the total ELR would be 4.35% per annum.

For more information on base rates and effective lending rates, read this article from
iMoney
. Also, calculating all these data and numbers can be quite confusing. Banks use the
reducing balance method
 for mortgage loans. This method is preferred due to the interest calculated being charged only on the outstanding amount of the loan. The interest compounded is minimal as compared to the simple flat interest rate.

All these terminologies are rather confusing at first, especially when doing your own research in regards to home loans. However, all these information are important as it will affect the types of conventional loans that will be explained in
Part 2
 of this article. The more you know, the better your financial judgement becomes!

This post is brought to you by Bumbung.

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Main Financing options – Home loans (Part 2)

The previous article on Home Loans help shed light on the glossaries and some mechanisms of conventional home loans.
However, there are a few different methods of repaying back loans. This article will guide you through the main conventional home loans in Malaysia, followed by the pros and cons.  Three main types of loans are normally considered when purchasing home in Malaysia.

Basic Term Loan

Basic Term Loan (BTL) is a traditional loan scheme that has a definite monthly repayment system based on either a fixed or floating interest rate, which the individual must pay within the stipulated time period. This was a common method back in the days. This benefits people with steady incomes and long-term jobs. It is even attractive for some people due to the low interest rates. However, the downside of this loan is that the individual is unable to pay more than the stipulated sum.

For example, Ah Beng has to pay back RM2,300 monthly for a RM300,000 loan. One day, he sues a man and gets paid hundreds of thousands. He finally has the financial capability to pay RM200,000 immediately. However, BTL will disregard such transactions and the money deposited will be used as a pre-payment for the upcoming payments as agreed by the bank and the individual. Due to the rigidity and strictness of the structure, Ah Beng has to keep on paying RM2,300 until the end of the term.

Semi-Flexi Loan

Semi-Flexi Loans (SFL) is a revised and more preferred loan as compared to the primitive BTL.  Individuals could deposit additional payments and reduce the overall loan amount. For example, Ah Beng loans RM450,000 and has to pay a monthly payment of RM2810 for the next 20 years with an interest rate of 4.35%. Suddenly, Ah Beng wins the Toto lottery and decides to pay back RM300,000 immediately by banking that amount into his account. Now, the bank only charges interest for the remaining loan of RM150,000!

This is considered a more desirable option because it provides more flexibility and freedom to pay back loans. Other than making advance payments to lower loan interests, banks have allowed borrowers to withdraw any additional money paid ahead of schedule for emergency purposes. However, do note that it requires processing fee (RM50-RM100) and some processing time. Also, not everyone can win Toto like Ah Beng, so please bear in mind that this is when you have readily available cash.

Flexi-Loan

Flexi Loan (FL), as the name suggest, provides a flexible and free range option for the borrower to withdraw and deposit into the loan account without incurring any additional charges or procedures. It operates with shorter tenures and savings on interest. This is possible by opening a Current Account and binding it towards the loan. The installment amount is scheduled monthly from the Current Account, while the additional money inside the current account reduces the principal amount owed. For example, Ah Beng takes a FL of RM500,000 and inherits a large sum of cash from his deceased relative. He parks RM450,000 inside the linked current account and saves interest rates on that RM450,000. Meaning to say, he has only needs to pay for the remaining RM50,000 interest!

Although it sounds beneficial and ideal, there are a few downsides. Firstly, the banks charge a monthly maintenance fee (RM5-RM10) for the current account. Assuming you are taking a 10-year period to return the money, you have fork out RM1200 extra for this. Besides that, interest rates for SFL and BTL have lower interest rates as compared to FL. Due to the nature of FL, many banks are unable to offer this option.

Loanstreet
 has listed out useful types loan calculators for more prediction and estimation on home payments.

Verdict?

As SFL and FL offers amazing flexibility, BTL might have lower interest rates and offer better renumerations. There are many banks offering amazing loans at low interest rates nationwide.
RinggitPlus
 and
iMoney
 has listed the desired options for you to research and compare. Yet, despite all the free and readily available tools, weigh your options and consider the future and your financial capabilities. Not everyone can be like Ah Beng, where he can sue, inherit and strike a Toto lottery, so be careful with your options and choose wisely!

This article is part of a 3 section guide.
Part 1
 explains the basic structure of home loans while. Read on for
Part 3
 comprising of the different Islamic home finances in Malaysia.

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Land ownership – Master Title, Strata Title and Individual Title

-Written by Carmen Tham-

A title is a legal document which records the ownership of a land/property. It will also contain other information such as mortgages, caveats, restriction-in-title, land use and etc.

Master Title

During the construction and development stage, developers usually hold that entire piece of land in the form of a Master Title. Under the master title, the developer is the land owner and holds all the rights to deal with or transact the land i.e. developing or selling it. As all properties built falls under the Master Title, the developer sells the properties to individuals by way of an assignment of rights to the specific property pending the issuance of the strata/individual title.

As the houses or apartment units which are built on the land are sold off individually and separately, typically the Master Title would be subdivided by the developer into multiple smaller titles known as strata title for high-rise buildings and individual title for landed properties.

Individual Title

All the landed properties like terrace houses, superlinks, bungalows, Semi-detacheds and etc will have separate land holders registered under individual titles. Alike the strata title, the individual title records the ownership, restriction-in-title, caveats and etc. The issuance of individual titles are generally speedier than strata titles.

However, do also note that there are some landed properties which shares common facilities (usually houses in gated and guarded community schemes) is considered as strata title. In order to ascertain whether the landed property will be issued an individual/strata title, the purchasers are advised to check with the developers or agents on this prior to purchasing the property.

Strata Title

Strata titles are issued to owners of high-rise buildings (e.g. condominiums, serviced apartments, offices, retail complexes and etc) which specifies the ownership details, area of the particular unit and accessory parcel (e.g. carpark bays assigned under the Sale and Purchase Agreement).

Previously, it takes up to several years for owners of high-rise properties to obtain their strata title as the developer would only apply for the separate strata titles after the building is completed. However, under the new Strata Title (Amendment) Act 2013 which came into force on the 1
st
 of June 2015, the landowner/developer is required to apply for the separate strata titles within 3 months upon the completion of “super structure”. The strata title is to be registered prior to the handover of vacant possession to the purchasers by the developer. The “super structure” stage is whereby the walls between the different parts of the buildings are completed, which renders it necessary for the measurements of the particular unit, the common property and etc.

Once the strata title has been issued, the purchasers will need to execute the transfer form (Form 14A) of the strata title within 30 days (previously 12 months) from the date of notice of transfer of strata title being served to the purchasers by the proprietor/developer or from the date of purchase of the property (whichever is later).

Additional fees

This is the stage where the purchasers would need to fork out a large sum to pay for the ad valorem stamp duty on the property transfer which is calculated as follows:-

First RM100,000.00 – 1%

Next RM400,000.00 – 2%

Thereafter – 3%

E.g. The stamp duty of transfer for a RM600,000.00 property would be calculated as follows:-

First RM100,000.00 x 1%                = RM1,000.00

Next RM400,000.00 x 2%              = RM8,000.00

Balance RM100,000.00 x 3%
= RM3,000.00

Total stamp duty
= RM12,000.00

Owners of strata properties will be subjected to the payment of maintenance and sinking fund charges imposed by the Joint Management Body or Management Corporation. The maintenance charges are calculated proportionate to the share units of the owner’s parcel, which is the main and accessory parcels.

Sinking funds payable by the owners of strata properties are usually 10% of the total amount of maintenance charges. This serves as reserve funds for future expenditures, which are less predictable and could cost more than the usual maintenance charges e.g. upgrading elevators, painting the building and etc.

Any defaulters of maintenance and sinking fund charges will be liable to face not only civil; but under the new amended law, may have to face criminal charges and if conviction will face imprisonment up to 3 years or fine up to RM5,000.00. Therefore, this is not something to be looked at lightly and it is strongly advisable to pay for your maintenance and sinking fund charges on time.

IMPORTANT NOTE: It is advisable to have a sub-divided strata title being transferred to your name as most banks will not finance a property if it is still on the Master Title 10 years after completion of the development. Apart from that, all transaction of the properties under Master Title must be approved by the developer and this will pose a problem/delay if the developer company is being wound-up.

“Carmen Tham is a lawyer and she is actively involved in real estate legal work. She is the managing partner of Messrs. KEAY & CO.
,
a boutique firm located in Publika @ Solaris Dutamas with one of their major specialisations in property development, sales and purchase of property, tenancies and real estate disputes
.

If you have questions that you would like to ask Carmen, please feel free to drop her an email at
enquiry@keayandco.com
.

Disclaimer: The information here does not constitute legal advice, please seek professional help for your specific needs.”

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Real Estate Agents 101

When researching on a certain product or delving into a topic, we usually will consult experts and people of rich experience. Likewise, having a realtor is a wise decision when purchasing your next real estate or property. In Malaysia, there is a prevailing problem of individuals that impersonate as professionals and scam people of their money. Bogus agents and fraudsters have been scamming people of their money. They are people of great communication skills, exaggerating their specialisation, and a flawless website to promote their services. The EdgeProperty has estimated 101 cases of
real estate frauds
 in 2016, scamming millions from people. This article will help identify legitimate real estate agents and how to deal with them.

When dealing with a third party to scout homes, ensure that the individual and company is registered. All individuals that are offering any property (land or building) for sale, rent or lease, or any individuals offering to purchase, rent or lease any property MUST be recognised by
The Board of Valuers, Appraisers and Estate Agents Malaysia
 (BOVAEA). BOVAEA is the body that regulates valuers, property managers and estate agents in Malaysia. They have the power to recognise, punish and even prescribe the fees for the real estate agents. Regardless of the many titles such as “Real Estate Negotiator”, “Real Estate Agent” and etc, ALL must be registered with BOVAEA. Those who are not can be fined, not exceeding RM300,000 or imprisonment for a term not exceeding 3 years or both. (Do report to your local authorities or BOVAEA if you happen to encounter one!)

Types of Real Estate Agents

There are typically two types of people you will meet, a real estate agent and a real estate negotiator.

Real Estate Agent (REA)

Real Estate Agent (REA)
 are the individuals responsible for providing a service in buying, selling, leasing properties for clients. They are fully certified and registered under BOVAEA, being recognised and even allowed to open up their own agency. Becoming a REA is no easy task as it may take up to several years.
EduAdvisor
 has given a simple guideline of what it takes to be one. These individuals have to undergo a stringent process, so hard in fact that there is even
a shortage of REA’s in the country
!
BOVAEA has set a list diplomas and degrees they recognised
, but even after studying, they must sit for 12 papers over a two-year period and undergo two years of post-practical training under the supervision of a registered REA firm.

To avoid being scammed, ensure these few things. Firstly, they have to complete the process of being a REA. Many are either in the process or have their licenses suspended, so it important to ensure this. Secondly, their REA tag. BOVAEA has issues a standard issued license ID in blue colour, with an E number with 4 digits (E 0000) followed by a hologram certification. Also, the service fee of the REA is maximum of 3% of the sale price of the property, thus nothing more than that should be charged (Agents may also charge additional costs for disbursements such as marketing materials and transport costs. However, customers are notified prior before this.)

Real Estate Negotiator (REN)

Real Estate Negotiator (REN)
 are salespeople who work for and under real estate agents. REN does not require the level academic qualifications as compared to a REA. They are instead, employed by REA’s to negotiate on behalf and set preceding to the property for the company. To be a REN,
BOVAEA
 has set out a clear criterion for all interested parties. An individual must be above 18 years old, attached FULL TIME to ONE REGISTERED REA and attend a course by the BOVAEA called Negotiator Certification Course (NCC). REN also have a standard issued tag, it is red in colour and has a 5-digit serial number (REN 00000) followed by a hologram certification.

Conclusions

Despite much awareness from government agencies, many are still falling scams to bogus realtors’ due to the lack of knowledge and experience they have. As real estate is a lucrative money generator, many dive in head first to get a quick buck. These people are taken advantage of their greed and end up being victims for not being careful. Vulcan Post has shared a list of
property scams
 that has occurred throughout the years. As a customer, IT IS YOUR RIGHT to question your REN or REA. Ask for their ID and scrutinise them. Know your rights and buy safely!

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Islamic Financing: Home Loans (Part 3)

Conventional home loans operate on a basic principle of gaining profit. Banks loan money, the money is paid back with interests. Like mentioned in the
previous article
, if there is a late payment or if payment is paid before the agreed time, a penalty is charged. As banks want to gain more money through interest, there is another way to leeway all these options. Islamic home financing is a fast growing option here in Malaysia. Unknowingly to many, Islamic home financing is for all regardless of faith and ethnicity. Sometimes, it can even provide a better deal than conventional home loans! This article will explain briefly what is Islamic home financing, its principals and how it operates.

ISLAMIC HOME FINANCING

As the name suggests, Islamic home financing is based on Shariah laws and its practical application. The main tenant of the sharia law in the financial aspect is that
riba
, or interest,
gharar
, or speculation,
haram
, or unlawful, is forbidden. These concepts are deemed dishonorable and illegal. This means that money has no intrinsic value, thus not allowed creating more money. Therefore, Islamic banks must provide services or products in order to earn profits. Islamic banks implement a simple concept of purchasing on the borrower’s behalf and selling it back to the borrower at profit. Instead of the interest rate being used,
profit rate
 is calculated.

(Note. This is why the term home financing is used here rather than loan because a loans generate interests. Profit rate just sounds better and more appropriate)

MURABAHAH

Some commonly used methods are
Murabahah
,
Musyarakah
or
Ijarah
.
Murabahah
 basically is a cost-plus profit markup, which means buy and sell. You and the bank will enter into a contract where the bank buys the property for you. The bank will then re-sell the property to you at a higher price from the profit rate estimated and then you will pay in the form of installments over a fixed period of time.

Malaysian real estate and properties commonly use the concept of
Al Bai Bithaman Ajil
. This subset concept of  Murabahah is based on the deferred payment sale through buying and selling. The bank buys the real estate at an agreed price, while the individual and the bank will determine the tenure and the manner of the installments.

This will include the actual cost of the home and also incorporate the bank’s profit margin.

The fixed monthly installments are determined by the selling price, repayment period and the percentage margin of financing.

MUSYARAKAH

On the other hand,
Musyarakah
 translates into a form joint enterprise with the financial institution and the party forms a partnership over the purchased property. All losses and gains are borne by both parties. In Malaysian real estate, the concept of
Musyarakah Mutanaqisah
 is used, having floating rates in the form of rental. Both parties agree to purchase for a mutually agreed percentage and the one with the bigger share (which is the bank) will rent out the property to the individual for a fee. At the same time, the individual will buy the bank’s share of the property at agreed installments until the full equity is reached. The floating rates are according to the current market rate such as the Base Lending rate and are popular especially in Malaysia.

IJARAH

Ijarah
 is the financial institution leasing the owned property to the lessee. Ownership still belongs to the bank and it is rented to you for a specified period of time with terms and conditions. For real estates and property, transferring property ownership at the end of leasing is possible. The bank will buy the property the individual will buy back the property by paying monthly installments. This concept allows you to buy out a property from the bank while paying for “rent”. There are
3 types listed
:

Al Ijarah Thumma Al Bai
 – Lease Agreement Incorporating Sale of Leased Asset at the end of the lease tenure.

Al Ijarah Muntahiya Bil Tamlik
 – Lease Agreement with option to Own Leased Asset at the end of the lease tenure

Al Ijarah Wal Iktina
 – Lease Agreement with option to Acquire Leased Asset at the end of the lease tenure

VERDICTS?

Malaysia has one of the most recognized Islamic financial and banking systems in the world. Despite the confusing Arabic terms,
Islamic banking
 has seen an increase in popularity over the years in Malaysia. The pros of Islamic home loans are great overall, with a 20% stamp duty discount for Islamic Loan Agreement documents for an indefinite amount of time, lower incurred charges on late payments as compared to conventional home loans, and lower rates that do not overburden the customers. Why not give Islamic home loans a try if the opportunity is right? Do check out these loan comparisons from
iMoney
 and
RinggitPlus
 for more information!

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Bored Do What: Walls (I)

Whether you staying at an expensive bungalow or condominium, or a low cost flat or single room apartment, there is always something to do to improve/spruce up the place. Of course, many Malaysians today love beautiful homes but many complain of being too busy or budget is tight. This series will be on how to invest your time in either improving yourself or the property you currently occupy. In this article, we will look at the fundamental things we all have in our homes, walls.

For starters, the walls can affect you indirectly. In fact, it can be used for a greater purpose. Just like a blank canvas painting, walls have the potential to either brighten your day or drown you deeper in the perpetual sorrow of your mechanical life. So what can be done with walls?

1. COLORS OF WALLS

Life doesn’t always have to be black and white. Likewise, the walls in your home do not necessarily need to be always white. In fact, wall colors can be used to reflect the temperament of the room, making it a joyous gathering place that is vivid and exciting, or a place of tranquility and calm where you can meditate or even sleep. It can suit according to your needs and how you perceive it.
NuProp Blog
 lists out some interesting behaviors or mood wall colors can evoke, with red being the color of excitement, yellow the color of joy and gray as sophistication.

Since Malaysia is a melting pot of different cultures and religion, the Western context might not fit snugly in our Asian perspective.
Asianpaints
 give a more familiar interpretation of what walls and colors bring to our lives. In fact, painting the ceiling can be a revitalizing thing since we tend to look upwards at times! Remember, this is a long-term investment and one should always repaint their homes every 7-10 years to keep the freshness alive.

2. WALLPAPER/TAPES

Painting might be costly and a cumbersome affair. So, a cheaper option would be wallpaper. Yes, wallpapers are something which is affordable and awesome at the same time. Also, one can choose from the different varieties as compared to paint which, can be limited in its choices. It last longer than paint, can cover up chips and cracks on the walls, and easily changed! Wallpapers can range from floral, nature, classical, minimalist, contemporary and much more. Malaysian stores such as

Korea Wallpaper
 and

LAMEX
 offer some good varieties and options to choose from. If you are interested in wallpapers, do read this article from

WallpaperSifu
. It gives a lot of insight on the pros and cons of wallpaper. Do read them up and have fun deciding wallpapers!

3. ARTISAN FRIEND/PRODUCTS

We often neglect local artists and overlook the struggles they face to make a living. Give these folks a chance and support their work! You can either support their products or ask them to paint! Artisan products are not limited to paintings and weird figurines. There are numerous of products you can buy and help improve the aesthetic value on your wall. Hang up some unique jewelry, crafts, masks, etc. All these can vastly improve the homely presence.

For painting, one can always consult their artist friends. Not paint as in 1-hour RM100 job, but rather draw something on these bare white walls. Artists have amazing and creative imaginations and giving them the opportunity to style and draw on your homes can be a bonus feature. It is unique, special and even empowering! Agree with them the design and let them draw something amazing. If you are an artist yourself, all the more awesome! Get your cans of paint and start styling your homes!

4. DIY BUDGET

If those options are still too expensive, then one can always execute creative DIY methods (or hacks). There are many different DIY tricks you can try. Be creative as possible and make it as unique and fun! Among some examples you can do are

Use beautiful photos from magazines/calendars and frame them up on the wall

If you can’t afford picture frames, use washi tape

Paint ceramic bowls and hang them on the wall to create a unique pattern

Use different tape colors and tape widths to paste them on the walls to make a cool design

Hang fairy lights and Polaroid pictures on the wall for rooms

Use unwanted toilet rolls (paint them of course) as a decorative piece to make outlines of shapes and designs

VERDICTS?

There are other creative and useful techniques to DIY and utilize your walls (such as having brick walls or making a secret lair behind it). It entirely depends on you, your budget and your creativity. Long gone are the days where inspirational quotes, posters of favorite bands, athletes, handsome Korean singers and unsightly wall blemishes. Do some research, get some items, and start decorating the inner walls of your home. This is the place where you will spend 40% of your lives in, so make the best out of it.

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Air Conditioner Buying Guide

Living in Malaysia, having air conditioner has become a necessity. In fact, this previous luxury has become a common item in almost all households that can afford it. Although there are many choices for air-conditioner, not many know how to buy one. Individuals end up buying the cheapest unit and this could result in higher energy consumption and frequent breakdowns. This article will give a guide on how to buy an air-conditioner for your home and the meaning of some phrases used in air-con shopping.

TYPES OF AIR CONDITIONER

There are many different types of air-con in the market today so this article will limit to those commonly found in domestic houses. There are commonly 3 types of air-con to choose from, window, portable and split.

WINDOW AIR CONDITIONERS

Window air conditioners
are the old air-con units that you can find in old buildings. It can be found at window sills and is a bulky equipment that can power a room. Although being most affordable, it can be difficult to remove them and reinstall again. Also, it can only cool down a small room and usually can be noisy.

PORTABLE AIR CONDITIONERS

Portable air conditioners
 are the air-con units that can be moved around and acts like a deluxe portable cooling fan. These units are intended for homes in which window configurations or building regulations prevent installation. Also, air-con units are great to be used for home events where there is a big garden space. However, these units are costly, consuming more energy and noisier.

SPLIT AIR CONDITIONERS

Split air conditioners
 are the most common in Malaysian households, being the sleek unit that is mounted at high wall level.  This one, although the costliest, has the most cooling power, is easy to install and use. The unit has low noise levels and needs a compressor outside the house. Much like regulating hot air and turning it into the cold air inside rooms.

INVERTED AND NON-INVERTED

Air conditioners have motors that drive the revolution of compressors. It helps to determine the level of cooling at either a constant speed or constant temperature. There are two types, which is inverted and non-inverted.

Inverted
type air-con enables different speeds that automatically adjusts to meet an ideal set temperature. When the room condition reaches the desired temperature, the motor speed reduces thus requiring lesser power and resulting in lesser energy. It is an eco-friendly option and it is advisable to have in the long term, despite its expensive buying price.

Likewise, a
Non-inverted
 air-con has motors that can either be switched off or on. Once the desired temperature is met, the motor shuts off. When the room temperature falls below the desired level, the motor functions again. This method lacks the energy efficiency, having to stop constantly and start again to maintain desired room temperature. Although a cheaper buy, the electric bill is more expensive in the long run.

Things to consider

There are also other aspects to consider when buying an air conditioner.

1. Horsepower (HP)

When buying an air-con, it is good to estimate the air-con suitability for the setting of the room. Air-cons have different compressor sizes and capacities. Being the heart of the cooling cycle, the compressor is measured in HP. Bigger HP equals to bigger cooling capabilities. 1HP would approximately equal to 746W(Watt) or 0.746KW(Kilo-watt). Home owners need to identify how many HP is necessary to avoid expensive costs in the long term. A compressor with 1HP capacity is able to remove approximately 9000 BTU/hr of heat.

2. British Thermal Unit (BTU)

BTU measures the amount of heat necessary to raise the temperature of 1 pound (0.45 kg) of water 1°F (0.56 °C). As compressors regulate temperatures through turning hot air into cold air, BTU is useful to know how quickly the room can cool down. 1 BTU equals to 1,055 joules. A normal window air conditioner rates approximately at 10,000 BTU. However, a higher BTU number does not equal to a long lasting and better functioning unit. This is because air-cons have cooling cycles, which a bigger BTU, might pose a problem as trying to lower the room temperature constantly can result in a shortened life span. Here’s a table below to help determine which BTU air-con to room size needed.

BTU CHART BASED ON ROOM SIZE

Room Size

BTU’s Needed

Room Size

BTU’s Needed

150 sq. ft.

5,000 BTU’s

700 sq. ft.

14,000 BTU’s

250 sq. ft.

6,000 BTU’s

1,000 sq. ft.

18,000 BTU’s

300 sq. ft.

7,000 BTU’s

1,200 sq. ft.

21,000 BTU’s

350 sq. ft.

8,000 BTU’s

1,400 sq. ft.

23,000 BTU’s

400 sq. ft.

9,000 BTU’s

1,600 sq. ft.

25,000 BTU’s

450 sq. ft.

10,000 BTU’s

1,900 sq. ft.

28,000 BTU’s

550 sq. ft.

12,000 BTU’s

2,700 sq. ft.

36,000 BTU’s

Source:
Compact Alliance

3. Room Size

When purchasing an air-con, research first the size of the room and the position of the room. The room position plays a role because rooms facing the west will have very strong sunlight in the afternoon and evening, which requires a more powerful air-con unit or more than 10%. If the house is fully shaded, it can even reduce the capacity by 10%. Also, the room size determines what HP and BTU are needed for the air-con. If the room is a small bedroom of 150 ft², a small 1HP air-con would work whereas the large 800 ft² room would require a 2.5HP air-con. It depends on certain situations as well, from the number of house occupants to whether the house is insulated or not. However, a general formula would be like one below

A + B = Btu / Hr

A = (Room Width (Feet) x Room Length (Feet) x 50)

B = (No of People x 500)

4. Energy Efficient Ratio (EER)

EER measures of how efficient a cooling system will operate when the outdoor temperature is at a specific level. It is measured in the ratio of cooling capacity of the unit per input power. The higher the EER, the more efficient the unit. Calculating EER is simple,

BTU/ Watts

For example, a 12,000 BTU air con consumes 1,500 watts, its EER is 8.

According to the
United Nations Development Programme
, the Sustainable Energy Development Authority of Malaysia (SEDA) emphasizes on EER units and those that are energy saving. SEDA informs that households could save RM277.42 annually for an air-con unit using a 5-star energy air-conditioners. It might cost you more at the beginning but you will save for the rest of the air-conditioner’s lifetime.

VERDICTS

Overall, air-cons are useful and becoming a necessity in this lifetime. Depending on the room size, its exposure to heat, and primary function of the room, the cooling capacity of the air conditioner needed varies. Check out websites like
Compact Alliance
 or other websites that enable one to calculate estimations.

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 comment

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Dave Miller

on 12 January, 2020 at 20:58

Reply

Hey, I’m a HVAC technician and I noticed that you link to a BTU calculator on
http://therooftalks.com/2017/08/31/air-conditioner-buying-guide/
 page, I have made a similar calculator based on more standardized and up to date calculations, meaning it’s essentially more accurate.

Would you consider trying it out and possibly adding it as a reference? Here it is:
https://heattalk.com/btu-calculator-for-heating/

I can also share the post to my following – via newsletter and Facebook, perhaps we can even collaborate in some other way, I often do guest posts and would love to work with you!

Thanks in advance,

Dave Miller

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How to read your electricity meter and bill?

Purchasing a new property is one thing. Knowing how to do the little things is another subject altogether. Understanding our homes can sometimes be a complicating task and one should take time to fully know the fundamentals of home settings. This article will guide you on how to better interpret your electricity meter and bill.

Electricity Meter

Tenaga Nasional Berhad
 (TNB) is the leading electrical company in Malaysia. Every month, they will issue a bill to your doorstep. To calculate the amount, every household will have an electricity meter. These meters measure the amount of electric energy consumed by a household. All electrical power supplied to homes are in the form of alternating current (AC), but measured in different voltages.  TNB measures according to kilowatt hour (kWh), which its amount will flash on the LCD of the electricity meter. According to
TNB
, there are 2 different type of Domestic Ordinary Power Consumers (electricity) meters, which is Single Phase and Three Phase.

SINGLE PHASE

Single phase
 consists of 3 wires which are Live, Neutral and Earthing/Grounding. This system is suitable if you do not have a high demand for electricity since its power is only 230V. If overloaded, there will be frequent fuse blows and power trips. It will flash the kWh once on the LCD screen on the meter.

THREE PHASE

The
Three phase
 consist of 3 Live wires, 1 Neutral wire and 1 Earthing/Grounding wire, a total of 5 wires that power 400V or more. The advantage of the three phase system is that it can provide more power and if there are any blows to one wire, other parts of the house will operate fine. Three phase electric meters will show and extra Kilo volt amperes reactive hours (kVARh), which are the units of reactive energy consumption. Hence, the LCD screen will show kWh reading, the kVARh reading and a blank screen at 10 seconds intervals. (Note. You are required to know the kWh amount and send it to TNB if requested)

CHARGES

TNB charges according to a Tariff A of the domestic category. According to
TNB
,
“Domestic Consumer”
 means a consumer occupying a private dwelling, which is not used as a hotel, boarding house or used for the purpose of carrying out any form of business, trade, professional activities or services.

Source from
TNB website
.

The reading of this LCD screen is 223 kWh.

Source from
TNB website

The electric meter is important and mandatory. The fuse and the meter are TNB’s property and tampering with them is a criminal offense.

ELECTRICITY BILL

After knowing how to measure your electricity meter, its time to know how to read your electricity bill.

The monthly electricity bill contains important information for the consumers to refer too. As an individual, the most important details needed to know are the following:

Station Number

Customer’s Account & Details

Last Date of previous bill settlement

Bill Codes (refer to back part of bill)

Reading (previous/current month)

Total Bill amount

Always cross check the bill with the electric meter to ensure the value is correct. In the circumstance where TNB is unable to read the electricity meter, an estimated bill (based on the customer’s 6 months average usage) will be issued. The estimated meter reading will be for the next 3 consecutive months. TNB will later send to the customer a notice for meter reading.

Conclusion

Knowing more about electricity meters and bills will enable home owners to identify certain problems, list out the usage and even budget better with their consumption. Be a smart home owner and ensure the little things for your home settings.

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Property Insurance I

Owning property is a dream come true, yet the process to achieve this dream is filled with challenges and tough obstacles. Borrowing from a bank can result in a debt cumulation of near 20-40 years. What if something occurs to the owner of the house? What would happen? Is there a preventive coverage to protect the owner’s loved ones? Mortgage insurance is an important aspect when dealing with an unprecedented turn of events. It helps to protect your home and your loved ones in the face of unfortunate circumstances. However, this is not to be confused with home insurance. As mortgage insurance protects the benefactor and family, home insurance deals with the protection of the home itself. These two are completely separate terms and meanings. This two-part article will explain the contents of mortgage insurance and home insurance.

In layman terms, mortgage insurance ensures that in the event the individual is unavailable to repay the debts, the insurance company will help the individual to repay the debts. Like conventional insurance, the individual must buy an insurance policy and pay a monthly premium. In the timely event the individual passes away while the policy is in effect, the insurance company pays the mortgage. Beneficiaries or closest to kin can live in debt-free without much worry. It can also occur in the event of a tragic accident that makes one disabled, or total permanent disability (TPD). In Malaysia, there are two types of common mortgage insurance available, which are the Mortgage Reducing Term Assurance (MRTA) and Mortgage Level Term Assurance (MLTA).

MORTGAGE REDUCING TERM ASSURANCE (MRTA)

Mortgage Reducing Term Assurance (MRTA)
is a life insurance plan that serves purely to pay off the outstanding mortgage balance to the financial institution in the event of death or TPD.  It functions also as a form of protection for the bank in cases where the individual is unable to further service the loan. Individuals have to pay a huge lump sum premium for an MRTA plan, which is usually offered by property agents. The sum insured decreases over time according to the loan tenure, meaning that coverage slowly reduces in line with the total loan until the end of your mortgage. The amount paid usually covers the home loan borrowed from the bank.

For example, Sami Valloh purchases a property of RM300,000 and the bank loans a total of RM270,000 over a tenure of 30 years. Sami takes an MRTA policy for 30 years, which is paid a one-off for RM12,000.  Sammi repays RM20,280 annually (monthly RM1,690) as agreed to pay off the loan with 6% of the bank’s interest rate. After 15 years, there is RM100,00 outstanding balance. Sammi suddenly dies/gets paralysed and is unable to pay. The MRTA covers whatever amount is outstanding on the mortgage balance at the point the insured is unable to pay the mortgage or part of it.

Hence, the bank is the beneficiary of the MRTA policies, whereas, family members do not get any amount. MRTA will also get affected by base rate (BR). Since banks can adjust their BR rates, MRTA coverage will be affected if below the loan amount. If the property purchase has full loan amount and coverage, MRTA is not likely to be affected. Another fun fact about MRTA is that it is actually transferable in some cases (with complicated time-consuming paperwork), but if the property bought is worth far more than the current property, it is more advisable to buy a new policy. MRTA is most suitable for individuals with sufficient standalone life and medical insurance, and also not financially dependent on anyone.

MORTGAGE LEVEL TERM ASSURANCE (MLTA)

Although similar concept to MRTA,
 Mortgage Level Term Assurance (MLTA)
functions differently, where not only does it pay off the outstanding mortgage balance, but also entitles the individual’s family get some financial payout in the event of the individual’s death or TPD. Anyone can be the beneficiary for the MLTA, making it transferable. This works as a life insurance as well, offering both protection and cash benefits. In fact, one can even pay more premium to expand it to cover Critical Illnesses (CI) as their insurance policy. This flexibility with protection allows adjustable value at anytime you desire. The premium can be spread throughout the mortgage term, allowing periodic payment instead of a one-off payment. Unlike the MRTA, the protection for MLTA does not diminish over time, as it ensures constant sum assured basis. MLTA is most suitable for individuals with families and those that are financially dependent on the individual as the source of income. The downside for an MLTA is that it is highly expensive, costing 10x more than an MRTA for basic coverages.

VERDICTS?

As both MRTA and MLTA have their own respective qualities, there have both their pros and cons. It is up to the individual on whether they are able to afford it, the necessity, and also the benefits that entail it. Many banks offer amazing policies, however, do more research and consult your financial planner for a better recommendation.

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Property Insurance II

When it comes to the home, we value our most expensive possession. Previously talking about mortgage insurance/assurance, the importance of having a backup plan in times of trouble comes in pretty handy. However, insuring in oneself to settle the financial obligation is one matter. As for how normal insurance works, mortgage insurance is protecting only the insurer when unable to pay the loans. What about the home and the properties within it? Being left unprotected and unsecured could lead to a loss of assets in any uncontrollable events. Home insurance plays an important role in ensuring coverage and giving you the peace of mind. This article will explain the role of home insurance and how it works.

WHAT IS HOME INSURANCE?

Home insurance protects the home and the contents of the home. Just like how normal insurance works, it gives coverage of a definitive sum for a premium that the insurer must pay. For those homeowners living in strata titled property (apartment, flats, condominiums), the management will buy typical fire insurance and the owners just have to pay a premium (can be exempted with certain conditions). Although home insurance is not compulsory, those taking a loan financed property are required to do so too.

A special formula is used when claiming insurance. For example, a fire burned down the house. The rebuilding cost is RM400,000, in the event of a claim, the insurance company will apply the principle of average. If the sum insured is RM300,000 and the loss amounts to RM200,000, the average principle will be calculated as follows:

This means the insurance company will only pay RM150,000 instead of RM200,000 for the loss.

There are 3 types of home insurance individuals can purchase, fire, house owner, and householder. All these policies have different coverages and different settings which can be applied to suit the owner’s needs.

FIRE INSURANCE

This insurance policy insures material damage towards properties such as buildings, and contents such as household equipment, fixtures, and fittings. The policy covers the loss or damage caused by fire, lightning or explosion of domestic boilers or gas used for domestic purposes. This is the most basic of all house insurance, with coverage of the basic items. This policy’s coverage can expand to even include more with the price of an extra premium being paid. Examples such as:

Aircraft

Vehicles

Animals

Faulty pipes and water tanks

Faulty electrical appliances

Natural disasters

Landslides

Rental loss

Riots

Note. Check with the insurance company on whether they offer these protections as different insurance companies have different coverage and different ways of defining their coverage.

HOUSEOWNER’S INSURANCE

This insurance policy protects the four walls and roof within which you keep your possessions, belongings, and items. It provides a more comprehensive and wider coverage for insurers and saves the owner the hassle of customizing the previous Fire Insurance plan. It covers almost everything mentioned in the fire policy, with the exception of landslides and riots, which can be bought at an extra premium. This policy is powerful, as it is based on replacement cost, meaning that in the event of a total loss, the policy will provide reimbursement, up to the policy limit. It can even be used to replace the structure where necessary or as stated in the agreement. However, this insurance is expensive and the value of buying this insurance can even cost as much as the value of the house itself. Hence, the popularity of fire insurance as compared to this.

HOUSEHOLDER’S INSURANCE

As the most deluxe insurance policy, householder’s insurance covers a multitude, like the Houseowner’s insurance. It also covers almost everything mentioned in the fire policy, with the exception of landslides and riots, which can be bought at an extra premium. The difference between houseowner and householder insurance is the owner will be insured. Besides covering household contents, the householder includes coverage for fatal injury to the individual as the insured. It works similarly as a MRTA. Due to its extensive coverage, it is the most expensive but most secured.

VERDICTS?

Despite the many coverages, policies have many loopholes and criteria to be met before the individual is able to claim all these things. Also, every insurance company protects different things and have different definitions, which is important to note as it needs to be scrutinized. Besides that, a good tip is that homeowners must declare all their belonging that is under the insurance to ensure claiming purposes, as insurance companies might refuse to pay. In the end, it depends on the individual’s choice and preference. These policies are to suit the people and it should be tailored according to the needs and necessity. Always make sure that the property is properly insured at all times to avoid any regrets or heartbreaking moments.

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How to read your water meter & bill

Understanding the system that supplies our homes with the necessary resources is a good general knowledge, as it is also part of the fundamentals of home settings. Common questions are bound to arise when noticing around the usual
taman
 settings. Where does one get their water from? How much water does one spend monthly? This article will be a guide on how to interpret your water meters and bills.

There are
several companies in Malaysia
 that supply water to our domestic homes. Every state has their own respective water companies, which functions to supply clean, fresh and consumable water for all Malaysians. The National Water Services Commissions has listed out that although we all live in the same nation; different states have
different charges
 for water supply. As water collected from reservoirs will be channeled into cities, a water meter will be installed at respective homes to measure the volume of water consumption. Below will be an example from Syarikat Air Bekalan Selangor Sdn. Bhd. (SYABAS) on how water rates work.

Bill Calculation for Domestic Tariff

Here’s an example from Syarikat Air Bekalan Selangor Sdn. Bhd. (SYABAS) on how water rates work.

Billing days: 33 days

Billing Period: 33 days/ 31 days (1 month) = 1.06 month

Consumption: 40 m³

20 m³ x 33 days / 31 days

=

21.20 m³ x RM 0.57

=

RM 12.08

15 m³ x 33 days / 31 days

=

15.90 m³ x RM 1.03

=

RM 16.38

Remainder

=

2.90 m³ x RM 2.00

=

RM 5.80

TOTAL

RM 34.26

Billing days : 31 days

Billing Period : 31 days / 31 days ( 1 month ) = 1.00 month

Consumption : 40 m³

20 m³ x 31 days / 31 days

=

20 m³ x RM 0.57

=

RM 11.40

15 m³ x 31 days / 31 days

=

15 m³ x RM 1.03

=

RM 15.45

Remainder

=

5 m³ x RM 2.00

=

RM 10.00

TOTAL

RM 36.85

Billing days : 27 days

Billing Period : 27 days / 31 days ( 1 month ) = 0.87 month

Consumption : 40 m³

20 m³ x 27 days / 31 days

=

17.40 m³ x RM 0.57

=

RM 9.92

15 m³ x 27 days / 31 days

=

13.05 m³ x RM 1.03

=

RM 13.44

Remainder

=

9.55 m³ x RM 2.00

=

RM 19.10

TOTAL

RM 42.46

Source from
SYABAS Malaysia

WATER METER

Source from
SYABAS Malaysia

Water meters are pipes with a scale measurement on them usually located on the premises. They have an account number allocation (as shown below) to properly identify the home owner.  The meter has 8 digits displayed, 4 white and 4 red. It shows the overall consumption of the water in the residential house. For example, in the picture below, the water reading shows 748.1910m ³. This means the water company will charge for only 748m ³ water consumed. If the meter is damaged, please contact your water company.

Source from
SYABAS Malaysia

WATER BILL

Water companies will bill the home owner every month based on the type (residential/ commercial) and the amount of water used. The unit used is m³. If your house’s water pipes are leaking, make sure that you fix it or call a plumber as it will also cause your water bill to be more expensive than usual. Failure to do any payment will result in water taps being turned off at the building lot.

CONCLUSION

As water is a precious and limited resource (despite its abundance in Malaysia), saving water is a wise act and often encouraged. Water companies have the authority to turn off water supplies when there is a need of repairs or in the event of a drought. As reservoirs run low, the city council together with the water company will start rationing water and distribute them through trucks. Residents using too much water will entail such disruption. Also, pipe bursts in public areas can also affect the water supply. So, if you are on the street and you see water wastage, do call your water company and help solve the problem!

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Getting a Home loan in Malaysia (ps: the answer is in your credit score)

Applying for a home loan in Malaysia can be quite daunting knowing that the prospect of your application being rejected is just around the corner. Want to know what our local banks CIMB, Maybank, OCBC, Public Bank, RHB, Citibank, HSBC considers before granting a home loan? They check your credit score. Not just BNM’s CCRIS, but do read on.

The process of getting your home loan approved by the bank can be a daunting experience. It is important to know the factors that banks look into about you when they are in the decision making process.
 Before submitting your request, it is best to have all these factors in check. One of these factors that banks look into is your credit score. In Malaysia, most banks uses both CCRIS and Credit Reporting Agencies (CRA). Essentially, your credit score points tells the bank how likely you are to pay them back. So the higher the score, the more likely you are to pay them back. It is our aim as consumers to have a good credit score to improve our financial attractiveness. This makes having a good credit score an important element to watch out for when you are looking for a home loan from a bank.

We recently had a chat with Dennis Martin, CEO of a credit reporting agency company called CTOS. Originating from New Zealand, Dennis has many years of experience with banks and credit bureaus in South East Asia before he began CTOS. CTOS was born in 1990 and is currently Malaysia’s Leading Credit Reporting Agency(CRA). Now, CTOS has over 9 branches across the country and is under the extent of the Credit Reporting Agencies Act 2010. Dennis describes CTOS as an organization that “uses data to create insight”. This means that CTOS aims to create trust, transparency, and provide detailed personal financial information in order to assist in decision making. They are a private company that informs its users about their credit health and attractiveness. CTOS also assist corporate companies make informed decisions about their employees and partners, encouraging transparency and encouraging confidence in one another.

So, when it comes to getting a home loan, your credit score could either make or break your home loan potential. The bank would look at your credit score to make a decision. Banks are interested in your credit score because it shows how reliable you are as a consumer. The CTOS report also helps banks identify frauds and to eliminate any potential bad borrowers because it contains information about a person’s credit history, legal cases and directorships.  As a consumer, knowing your credit score enables you to monitor your credit health and improve its score by making wise financial decisions.

You can check your credit score by signing up on CTOS by clicking
here
. You will be required to provide a copy of your NRIC and some personal details. Upon activation, one free copy of the report will be sent to you. However, in order to receive notifications and a more detailed report, you will be required to pay a small fee. As CTOS is under the CRA Act 2010, they will require your consent before sharing your information to a third party.

Stand a good chance at getting your home loan approved by having a good credit score. You can improve your credit score by knowing its current condition and making wise decisions that leaves a positive impact on your score. Credit Reporting Agencies such as CTOS aims to facilitate this process.

CTOS

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Author

Gadiy Lim

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A tech enthusiast seeking beautiful homes. Sometimes I write.

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How Does KL Rents Fares with Major Cites?

Ever wondered how rents in KL compares globally? We are here to shed light on KL’s rent performance in comparison with major cities worldwide.

Most Malaysians can agree that renting in Kuala Lumpur, the capital of Malaysia to be extremely expensive. Starproperty.com shed light with an interesting article about what its like to rent in big cities from around the world. The result came as a shock to us when researches showed that Kuala Lumpur is actually the most affordable city in the world, according to a
report
by RENTCafé.com. Researchers say that the living standards of various cities reveal that Kuala Lumpur is the most rent affordable city by looking at the ratio of average rental cost in comparison to the average household income. This suggests that only 20% of its dwellers’ income is spent on rental. While we take comfort with this finding, it is worth looking at other cities to determine the difference in rental standards in those regions or countries.

According to Trading Economics, Germany has a home ownership rate that ranks among the lowest in the developed world, with an average of 52.89% from 2005 until 2015. The unique situation in Germany is due to its historical circumstances that goes way back t0 the 1930s and 1940s. After World War II, post war Germany was in need of millions of housing units, which were supplied by the government. This robust housing regulations have extended to the rental market, and the state governments can cap rent increases to no more than 15% over a three-year period. Berlin’s rich history which involved the second world war has resulted in its rent control today. According to RentCafe.com, Berlin is ranked as the 12th most affordable city with a rent-to-income ratio of 30%. This makes Berlin as one of the western European cities that made it to the upper part of the affordable rent list.

Talks at Brexit have cast a dark cloud over the United Kingdom. It played a part in the recent drop of average annual rents in Central London and Greater London, 1% and 4.7% respectively. This has come after years and years of rises in rental rates. This places London as one of the most rent-burdened cities in the world and takes up 40% of its average citizen’s income. Despite the recent events affecting rent prices in Malaysia, rents in KL pales in comparison with London’s steep prices.

The Housing and Development Board (HDB) statistics shows that 82% of the Singaporean resident population live in lease accommodations. This is thanks to the provision of HDB flats sold on a 99-year lease agreement in Singapore. It’s a large accomplishment for a small city state with little land resources. Despite having the highest median household income among all 30 listed cities, Singaporeans fare poorly with 44% of their income being spent on rental fees, putting the city at the lower part of the list at number 25. This places KL in a higher affordability bracket, making KL an attractive place to live.

It is comforting to know that Kuala Lumpur is considered to be one of the most affordable cities to rent in the world. However, this does not remove the day-to-day challenges that Malaysians face in regards to rent. Lets hope that the numbers shown in paper reflects in real life.

Interested to know if you should rent or buy a property in KL?
Find out
 which works best for you.

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What to Expect in Malaysian Properties Through Budget 2018

Budget 2018 is an announcement every Malaysian has been waiting for. The announcement was made on the 27th October with a theme of  “Shaping The Future”. Budget 2018 will determine the country’s direction in tackling various socioeconomic issues that will lead and have a profound impact on us, the rakyat. Many Malaysians who are feeling the pinch hope to find relief through the new Budget coming next year. According to The Malay Mail Online, here are some highlights of what Malaysians are expecting in the Budget 2018 in regards to housing and properties.

There are major concerns over the issue of a homeless generation in Malaysia. As the name suggests, this generation consists of Malaysians are not able to afford their own home. Malaysians can agree that renting and purchasing properties now and in its current state is too expensive. For example, renting an apartment of 2 bedrooms with limited parking and zero security costs an average of RM1,200 per month. Living costs are off the roof and
affordability
 of housing is an issue.

In line with Budget 2018, The National House Buyers Association (HBA) came up with some methods in hopes to ease this crisis and it includes holding back property speculation through higher stamp duty rates and higher real property gains tax on buyers and sellers who own more than two properties. HBA also said the government should increase the amount of affordable homes by providing incentives to private developers by fast-tracking project approvals, cheaper land conversion or alienation costs, partial tax exemption on profits from such projects. The Real Estate and Housing Developers Association (Rehda) came up with measures to make it easier for first-time buyers of affordable homes.This includes a full stamp duty exemption on higher-value affordable properties instead of the RM300,000 limit announced in the last Budget, as well as exemption from higher conveyancing legal fee rates.

The Budget 2018 is the hot topic for all Malaysians this season. We hope to see houses become more affordable and available. However, regardless of our expectations, we hope that Budget 2018 helps ease our troubles instead of adding to it.

Learn more about Malaysian real estate from our comprehensive
guide
.

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Will Artificial Intelligence Replace Real Estate Agents?

Real Estate Agents and Artificial Intelligence

With the advent of technological expansion in our society, leaving more and more livelihoods risk of being replaced by AI, will the existence of real estate agents be nullified? Historically, the job title of a real estate agent comes with a subtle impression of rudeness, mistrust and caution, having countless cases of fraud affecting thousands throughout the world, from expat forums warning of potential scams to headline news detailing the latest schemes not to fall for. These cases appear in news sites internationally ranging from
protest
 and vandals on Foxton offices in Brixton to the
countless cases of conmen
 posing as property agents in Malaysia despite various measures taken.

Although, these events are quite uncommon, it only takes a few bad apples in the bunch to ruin the whole industry for the rest, giving honest agents a hard time and a bad reputation. Knowing of such cases while having the real estate agent being a gatekeeper to their dream home, it won’t be surprising that many people be skeptical and would opt in for a robot to do the work.

Disruption

A recent study by the accountancy firm Moore Stephens found that
one fifth
 of UK estate agents are potentially of out business with expansions of online property agents who operates on lower fixed cost. These agents have the added benefit of allowing home buyers to view offers online complemented with fast replies using instant messaging. On a larger scale, startups and artificial intelligence are constantly changing the playing field, revolutionizing industries, shifting the economy to another level. What used to be a simple way of buying food and goods at a grocery store has become much simpler thanks to AI.

The consumer goods sector perfectly depicts this trend. E-commerce giants like Amazon and Ali baba has cut down distributors and retailers, allowing goods to be ordered from the warehouse cheaply with fast deliveries while network marketing companies like Amway and Cosway completely creates a whole new purchasing channel that diverts from conventional means. Luxurious cruise trips and used to be expensive international trips are now available to the mass majority with the many travel portals offering the cheapest deals. With such changes to so many industries, will real estate soon experience its own disruption? And how will real estate agents be affected in the storm?

The nature of Real Estate

As a
disrupter
 in the real estate space that deals with agents, we at Bumbung.co believe agents have a key role and a future in the industry. Unlike the enormous supply and homogeneous nature of retail goods and services, real estate is heterogeneous in nature. No two homes are the same, a corner home with similar architecture designs located in different lots can fetch up to drastically different prices and a dilapidated home in a high profile neighborhood can be in high demand. This means that a home is bought as a lifetime good and is filled with sentimental value. This brings a the homeowner’s experience to a whole new level, one that cannot be truly experienced regardless of the endless variety of VR devices on the market or the many pictures and beautifully designed brochures.

Does the house have good ‘feng shui’? Is it suitable for disabled individuals or the elderly? Will the highway nearby distrupt your beauty sleep? Or it could be elements only experienced with a physical presence that would influence a buyers decision like the ambiance of the rooms, the size of the bathroom or the temperature of the rooms during the day. Other factors include sentimental values which is up to the real estate agent to help the buyer visualize and provide suggestions. Remember that a home purchase is permanent and long-term, requiring lots of contemplating before the ultimate decision.

The future

It was found that Real estate agents should always play a
key role
 in the home buying experience and that computer algorithms work better when working with real estate agents than those without. Bridget Frey, the chef technological officer at Redfin during Seattle Startup week regarding AI and agents. Moreover, AI instead has further enhanced the workflow of agents by automating some of the boring task while providing valuable data for them to utilize with their clients.

In the long run, increasing competitiveness delivered by technology and its growing accessibility to agents, there would undoubtedly be fewer but more highly skilled agents. Less people will be needed for mundane, easy task while more quality work will be done. The agents who will thrive will be those who can leverage their interpersonal skills and create positive emotional experiences for home buyers.

The takeaway

In a near future, AI may be able to fulfill tasks more efficiently than any human can however, our mortal traits still make us relatable to each other. Until artificial intelligence can accurately replicate and discern emotional cues, there will never be a substitute to being human.

Do you think that AI will replace real estate agents? Share your opinions in the comments below.

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Recipients of the recent Asia Property Awards 2017 (Singapore)

Here are the winners of the Asia Property Award ceremony of 2017

The PropertyGuru Asia Property Awards (Singapore) 2017, recognised the country’s best developers and real estate projects and design on Tuesday night (7 November) during an exclusive gala dinner held at the Sands Expo and Convention Centre at Marina Bay Sands.

DEVELOPER AWARDS

Best Developer

WINNER: GuocoLand with the construction of the astounding luxurious condominium,Wallich Residence

Wallich Residence at Tanjong Pagar

“One of the Singapore’s leading developers, GuocoLand believes that every project should possess ‘poetic ambience’ and offer a lifestyle that’s comfortable and usable. GuocoLand achieves its goal by incorporating well-designed public spaces, sustainable and green amenities, and choosing the most premium locations for the benefit of consumers.

For the full list of awards and winners, you may view it
here
.

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Kuala Lumpur’s Journey to Becoming a Bicycle Friendly City

A medium of travelling of the past?

Kuala Lumpur’s dream of working towards a world class
smart city
 might be a reality soon to be realised, but not one without bicycle friendly lanes and facilities. Kuala Lumpur is known to be a city built for cars and in some areas, there are no proper pedestrian walkways and paths for cycling. Malaysia stands third in the world for car ownership consisting of 93% of households. During the humble times of post world war 2, bicycles and trishaws were commonly seen, until the 80’s with the creation of the national car, Proton. Malaysia was determined to be a developed nation proudly filled with locally built motor vehicles. From then on, the number of bicycles diminished and were used in small towns and kampungs where most journeys were just a stone throw away.

What Changed?

Cycling started to become a trend, many Malaysians were picking up cycling as a new hobby and some as a cheap an efficient way to get to school and work nearby. Volunteers such as
Jeffrey Lim
 started to cut down a path utilizing crowdsharing by making it possible for cycling more adaptable to others on navigating Kuala Lumpur’s concrete jungle.

On social media, viral videos of stories such as The Malaysian who traveled from
KL to London by bike
 or the
Korean girl
 that cycled around the world for 60,000km in 5 years started to inspire others to do the same.

Major cycling events like the Car Free Morning in KL and the recent OCBC CYCLE 2017 increased the participation of cyclist bringing Malaysians from all cultures and backgrounds together on a journey towards unity and tolerance. These are just some of the few grass root movements that could potentially increase demand for cycling in Malaysia.

A healthier start

Professor Sugiyana did a study in North West Adelaide Australia in 2016 that the distance of residential areas is directly related with the circumference of its working adults. The main causes of this include the lack of active travel and excessive time spent sitting in cars. This is relatable for many KL lites who spend their days traveling to and from their workplaces and schools. The world bank data shows that
traffic congestion
 wastes between 270 and 500 million man-hours in KL jams in 2014. Imagine the amount of overall weight gained by Malaysians in that year.

A sustainable city

From the ever-rising fuel prices in Malaysia to a greater consciousness of our impact on the environment, Malaysians started to implement sustainable acts from using reusable bags to increased usage of public transportation and cycling.

DBKL project management executive director Datuk Mahadi Che Ngah said the city was moving towards sustainable living and steering its citizens to embrace a healthier way of life. This moves accompanied other policies ranging from reduced car parks and more park and ride facilities that encourages public transportation usage.

Furthermore, in conjunction of the world urban forum on February 2018, Kuala Lumpur will have its
first
ever dedicated bicycle lane that stretches for 3km through the heart of the city. This was announced by Kuala Lumpur city hall senior deputy director. Although its currently in its testing phase on its feasibility and benefits, it may be a catalyst to a greater change, one that will determine our choice and method of commuting around.

Other States

Penang is already on its way of becoming a bicycle friendly city as it has begun allocating bicycle lanes while cleaning up existing back lanes. This is especially prevalent in Georgetown making it a less congested city and aiming to boost tourism. The Penang Island City Council (MBPP) mayor Datuk Maimunah Mohd Shariff said that currently with 25 bicycle stations, Penang is working its way towards being more connective and residents are able to safely cycle from one island to another.

Meanwhile in Johor, Medini City’s
22 km bike lane
 kicks off as an attraction for residents to enjoy the scenery and public art displays. Additionally, RM1.5 million was allocated to the construction of bike lane and pedestrian pathways in
Iskandar
 Johor.

The rise of bicycle ride sharing

The rise of bike sharing start ups also contribute to the trend as they begin making a footprint here in Malaysia. The commonly seen obike bicycles are starting to be used more frequently but with recent penalties with the local government, there is a need for greater collaboration and understanding between all parties involved.

Cycling around KL used to be unsafe and impractical but with greater interest from Malaysians, we are sure to see a growth in greener transportation.

Do you cycle or plan to cycle around KL? Tell us what you think.

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5 Tips on How Real Estate Agents can Futureproof Themselves

With the world changing at such a rapid rate and much uncertainly awaits in the future, is there a way to stay and thrive in the real estate market? In our other
article
, we explain the impact of technology in relation to real estate agents. Here are some tips that will help you stay and improve your game at the property market. Not a property agent?, don’t worry you can still apply these tips to stay relevant in your particular field.

1) Focus down on a niche

The barrier to entry on becoming a real estate agent is lower in Malaysia compared to other countries. With so many other agents operating around, how do you stand out from the rest?

One way is to focus on a particular sector or niche. Don’t be the agent who is briefly known to have a some listings all over the country.

People are more likely to remember and consult someone who is focused on a particular area of expertise. Do you have a client with a fleet of condos ready to be rented out to students? Spread the word around that you are the go to person for student accommodations.

2) Network and Socialise

In our current age, the knowledge economy allows us to work productively based on our current expertise, however we are limited to our physical capacity to remember and apply our skills when we need it.

There is no longer a need to memorize facts with the sheer power and speed of our devices in our hands. When knowledge is easily accessible to everyone, everywhere at anytime, it is essential that we look back at our roots to see what differentiates us from our others.

Agents with better networking and social skills will gain an upper hand in the industry. Building an emotional connection with a client and helping them act in their own best interest will be an advantage.

Additionally, in an increasingly interconnected world, the increasing likelihood of people traveling abroad, sparks in foreign investment growth, and interaction of people from distinct cultures, it is imperative that agents prioritize building up their networks.

3)Build up your experience

Everyone knows that experience is important in every industry, and people look for these experts. Although the number of years worked in a portfolio does not equal to assured reliability, people tend to respect and trust those that had plenty of cases and projects in past portfolios. Agents with better experience will tend to have a larger pool of resources to work with.

Furthermore, the tendency to provide insightful analysis on a particular area or market is more likely. If possible brush up on any pending how to’s whether its a new legal clause or an amendment in the purchasing process.

4)Work with technology

The rise in popularity of Massive Open Online Courses (MOOC) is not accidental as people from different backgrounds learn new things that can be applied into industries while it couldnt be done in the past. New real estate
courses
 are being added frequently and some of them teach the application of technology in the real estate industry.

More and more technologies are being made ready for estate agent use and one cannot deny the potential and possibilities that they deliver. Lead generating sites such as Bumbung allows listings to work for them so that they will have more time to meet up with clients when needed.

Aiva, a virtual assistant CRM for real estate agents makes managing customers relationships easier and automate some of the tedious processes throughout the day. Software like these are packed with features that filter serious clients through the sales funnels or are able to re target cold leads.

Work with technology and do your best to automate your tasks to the machines, you have a key skill that comes into play on the next point.

5)Empathy

Have you ever had a conversation with a call-center operator? Does it sound like they are reading from a preset script making you feel like ‘just another client?’ For every spark of a business relationship, empathy plays a vital role role. Estate agents must begin by understanding the feelings of others and their problems.

By listening attentively, the agent will be know how to react and deliver his/her services appropriately and in essence the client will be satisfied. Always try to understand the underlying needs and feelings of the prospect to deliver well. Customers can feel whether you really care or not.

The Takeaway

This comes to conclude that change and innovation must be embraced to be applicable to the ever changing market demands. Do you have anything to add? Let us know in the comments below.

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How Foreigners can Buy and Rent Homes in Malaysia with Bumbung.co

Finding a property in a foreign country  as a foreigner can be nerve-wracking. Imagine this, as you roam around this foreign land looking like a lost puppy, looking for a place to live for the next few months or a few years. You start getting approached by a stranger offering you a deluxe apartment complemented with a bargained price. Should you trust him/her?

So many factors to come up when you look for a home, Is this a safe place to stay? Does it fit my personal requirements? Will I be able to afford it under my current budget? And most importantly, can I trust this person to deliver the promise or is there a flip side to it?

Our Co-founder Claire had the same difficulty finding a home in Malaysia. Back then in 2014, when she first moved to Malaysia. She faced an overwhelming process, the language barrier may have been a clear obstacle, but there were more, the process differed greatly from the French housing system, she met sly agents attempting to trick her while being offered low-quality pictures of the listings. Additionally, being up-sold alternative listings that didn’t match her requirements or budgets was not welcoming.

Bumbung.co aims to ease up the property search for everyone, including foreigners and expatriates. A search for a house should be as simple, and easily accessible and most importantly transparent. Fitting and adapting to a foreign country is not easy, From culture shock to homesickness, there is so much to learn. To ease down the way, we streamline the entire process to be simplified while refining our platform to be credible.

The process is simple and straightforward.

Key in your preferred property requirements and budget range. The more details you share, the more precise your results will be.

A new lead is then formed, when your request is matched. You will be notified and given a few choices for you to choose from.

Once you’ve decided on a particular home, we will provide you the details of the person responsible for the property.

When requesting to rent or buy a property with us, no payment is required. If you have any inquiries, don’t hesitate to email us at contact@bumbung.co.

We wish you all the best in your quest for a new home. Good Luck!

Find your dream home today!

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What will the Property Freeze mean for Malaysia’s Property market.

Bank Negara recently revealed that there is currently an oversupply of property in the market with 130,690 unsold units in Q1 of 2017 with majority of these units being high rise luxury apartments. This marks twice as many compared to the historical average of 72,729 units in a year between the year 2004 and 2016. These numbers recently prompted the government to ‘freeze’ certain property developments with unit prices above RM1 million in value. The recent property freeze means that there will be additional scrutiny before approving the development for certain types of properties.

One cause of the glut is the recent upsurge of property developers in the KL and Selangor area wanting to get a piece of the action. Many recent developments around KL were built to be luxurious condominiums despite a greater demand for affordable housing.

Many developers feel that building affordable homes is not financially sustainable and opt for higher end projects.Aside from that lenient granting of loans from banks in the recent years made borrowing easily both for developers and home buyers.

However,with the recent hike in cost of living such as GST and the constant rise of fuel prices as well as other factors such as the weak ringgit, Luxurious housing affordability is out of the question for many Malaysians.

The question arises if banks are willing to provided lower lending interest rates with possible risks of borrowers defaulting in the event of a market crash and if the government might have a solution to increase sales.

The property freeze is announced to be
temporary
 and done on a case by case basis, relieving some market sentiments that triggered a slight downfall on the property index by 1% and closing at 0.81%.

Kenanga Research
 said that they did not expect that the government will freeze luxurious properties given that while the property market had been stabilized with most developers now focusing on affordable homes, the demand for commercial spaces and luxurious condominiums had been weak recently.

They anticipate that lending rates next year will increase by 5-6% in monthly mortgage payments for people with a 90% margin of financing. As of now the freeze is a just away to bring awareness to developers to see if there is a market for their projects.

As of now, the types of properties limited to the freeze only shopping complexes, offices, serviced apartments and luxurious condominiums. At this time, the freeze only covers areas such as Kuala Lumpur and Selangor but there is no confirmation yet if it will cover other parts on Malaysia especially Johor having a large oversupply of luxurious homes.

The state government is already considering softening regulations on foreign ownership. If this initiative is implemented nationwide, developers in every state might be affected and forced to change their overall strategy and specifications.

The property market is a sensitive one, especially the housing sector, being an indicator of standard of living, spending power and employment, among others. If Kuala Lumpur aims to be an advance city by the year 2020, it must first solve its lopsided demand and supply equilibrium.

The property market situation risks affecting other sectors of the economy up to
120 different industries
 according to Bank Negara.

To solve this, the enactment of the residential tenancy act and the creation of the Tenancy Tribunal intent to protect the rights of landlords and tenants. More careful planning will be needed in the future between developers and local councils to make sure an area has adequate amenities and sufficient demand from people looking to stay. At this age, good public transportation connectivity is a must in new developing areas.

The question is what will happen in the upcoming year of 2018, will the property market crash with many home loans being defaulted, is there an alternative solution to solve this property glut? Share your opinions with us in the comments below.

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