Expert Series with Charles Tan – First Property Guide for all, especially couples.

Someone asked me these questions. Since I have drafted my reply, here is my sharing with all. It is a guide to buying that first property as a couple. Daunting isn’t it? Prices going higher it seems. It will wipe out nearly all our savings of many years almost immediately. I felt the same in 2002 too when I bought my first property, an apartment of 730 sq ft for RM123k. It was a starting point to a property investment journey as a working professional for me. Happy reading and learning.

1.  What is the first non-obvious thing you would say a couple should consider before they decide to purchase a property (besides property value, location, etc.)?

I think both should know the actual financial situation for one another. Let’s not have surprises when the wife thought she could rely on the husband or the other way around but in the end, both were actually already in a bad shape, financially. Credit card debts, existing car loan payments every month and even their total savings in the bank. All these matters and should be made transparent before any joint purchase is even considered and later decided. Both should only proceed when both know exactly what they would be getting themselves into. Remember, one major argument leading to breakups has always been about money.

2.   How can couples (married or not married, familial, friend/investment partners) maintain their personal financial securities when obtaining joint loans?

Personally, I would only recommend married couples to take up joint loans. However, if there is a very clear financial goal to be achieved from a joint purchase, then it is still okay to proceed. Spell out the commitment from the parties involved before hand. For example, a certain target price that would trigger a sale. It would be good to draft out an agreement to be agreed and signed by all parties. I do not recommend using a lawyer because if a lawyer is needed, perhaps the relationship was not that close to begin with or the ultimate goal for the investment is not a jointly agreed one. Either way, please do not proceed.

3.  What are recurring or indirect charges should new homebuyers consider before making an offer on a house?

Beyond the homeloan, there would be four other components that one should take note of. Three are quite certain.

#1 – LEGAL FEE – The first one is the legal fee. The first RM500,000 would incur a 1% fee and the next RM500,000 would be 0.8%. I assume first time home buyer would not buy anything above RM1,000,000. A minimum fee of RM500 will be applicable should the 1% fee is lower than RM500. If the house is RM500,000 then the legal fee applicable would be RM5,000.

# 2 – STAMP DUTY – The second one which is NOT based on purchase price but themarketvalue would be the stamp duty. My friend bought an undervalued condominium nearby KLCC for RM750,000. However, the stamp duty was based on marketvalueof the condominium which was RM850,000. This is to also to prevent any hanky-panky transactions. Following would be the applicable stamp duty schedule:

For the First RM100,000 – 1%

Subsequent up to RM500,000 – 2%

Again, I assume the buyer buys a RM500,000 property. In this case, the stamp duty calculation would be RM100,000 x 1% and RM400,000 x 2%. Total would be RM1,000 + RM8,000 which comes to RM9,000.

#3 LOAN STAMP DUTY – This is quite straightforward. It is total loan amount X 0.50%

Assuming it is a RM500,000 property, the total duty would be RM2,500

In conclusion, for a RM500,000 property, the homebuyer would need to have RM16,500 in his pocket too.

#4 Renovation and Furnishings. A general number would be 15-20% of the property price. The reason is because if we were to spend way too high and we should need to sell the property in the near future, chances are we would be selling it at a loss due to the substantial amount for renovation and furnishings. Note though that if one were to do further renovations after one has moved in would be a huge hassle. Get it done before moving in, its better.

4.  Which location/s would you say is an affordable choice for young couples in major Malaysian cities?

Seriously, stop looking at locations. The question is not WHERE but WHY. Assuming you love area A. Ask yourself what’s the three main reasons why you love Area A. If Area A is still affordable, by all means buy a home within Area A. However, if the three reasons stated could be fulfilled by Area B and it is 20% cheaper, I think it’s time we understand that the savings we have from buying area B could be invested into something else. Perhaps even a second property a few years down the road. Secondly, think duration and not distance. An area could be 10km away from the city centre but driving to work and back home may still take almost the same time as another area which is 20km away. Usually, the nearer the place to the citry centre, the more expensive. Again, thinking about duration instead of distance may save us a tidy sum which we can use for many other purposes.

5.   What should young couples know when choosing a real estate agent?

Go online, find their listings in the many property sites. See how they write about the property they are selling. It should be a good write-up, showing they put effort or know enough about the property they are selling. Talk to the real estate agent. If the real estate agent knows nothing about area they are selling, time to find another one. A really good real estate agent would be able to ask the right questions and provide the right answers. You would also be able to make a better choice because of the information provided by the real estate agent. In fact, the person may become your good friend and may just be the same agent you use when you are thinking of the second property.

6.   What type of screening procedures should young couples prepare for during the pre-application process?

Check out their credit scores. For example:
www.mycreditinfo.com.my
     or
www.ctoscredit.com.my
       or
http://creditbureau.bnm.gov.my/reportobtain.html

If the credit score is good, please proceed. If it is not, perhaps good to make it better first. Else, the application may just be rejected. Do note that rejection rate these days could be as high as 50% of all applications.

7.   What is your advice for young partners currently looking to obtain joint ownership of a property?

Be serious about it. This is most likely the single largest purchase in our life. View more units before deciding on one. Be transparent about it. Know the financial limitations of one another. There should not be sudden surprises 6 months later. By then, it’s too late. Be comfortable. Please do not stretch to the maximum limit that we could afford. Always buy below what we could afford. This helps to manage the risks. The next purchase can always be an upgrade while the current one can be turned into an investment. All the best

All the best to all taking this HUGE step.

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Cheap then, affordable today and property price in future?

This afternoon, I had lunch with a few colleagues. One of them asked about buying a new property as she wanted to move to a bigger home with her husband. Her new baby is due in January 2017. When she asked about property prices and the potential capital appreciation, I shared with her that
w
hen we buy today
,
the appreciation we can expect would have to be more realistic. If we were to look back, perhaps in 2007, the prices of condos of 1,000 sq ft may only be RM200,000 – RM250,000. At this price level, within a few years, the prices doubled. Today, there’s hardly any condo of 1,000 sq ft which is below RM500,000. (Unless we buy further away or in not so desirable areas.) Today however, when we buy the RM500,000 condo of say 850 sq ft – 900 sq ft, it is unrealistic to believe prices will increase to RM1,000,000 within the next few years. In fact, regardless of ringgit’s movement, it is highly unlikely too.

The reason is simple, the income level of Malaysians. At RM500,000, most couples with stable incomes in good company would be able to afford it, even if life would not be rosy after buying it. However, at RM1,000,000 I think only when the couples are both senior managers, then they may be able to afford. Even then, life wouldn’t be rosy too. Else, these 7 figure properties would depend on businessmen. Be reminded however that if I am super wealthy, I will not be looking to buy a below 1,000 sq ft condo where the density is very high. I prefer more exclusivity and thus these properties wouldn’t appeal to me. Will it increase to RM1,000,000 someday? Your guess is as good as mine but perhaps we should look at 10 years at least? If it goes up to RM1,000,000 within next few years, let’s get ready for property bubble bursting. Oh yeah, HDB flats in choice locations and sea-view in Singapore are already reaching SGD 1,000,000. Read here:
FLAT for SGD1.2 million (RM3.672 million)

My friend told me that she thinks
Semenyih is a bit far for her.
 She is thinking about Cheras, the part closer to the city centre and not the deep end. Desa Parkcity is meanwhile a bit too expensive for her. I told her that instead of
 identifying the area in advance
,
s
he should understand her reasons for buying first. If she likes a certain area for 3 major reasons, she can use these 3 major reasons and see if there are cheaper areas which fulfils the same 3 reasons too. She could not yet identify the most important three reasons but she laughed and understood. It’s always a question of want which involves more money or need which means more objectivity is needed. She asked for another lunch next week. Will update if there are any new discussions then. Cheers.

written on 9 Dec 2016

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Condo prices, bank valuations and neighbour’s parked cars.

You have just paid RM800k for a condo somewhere. Your banker tells you that the value that the bank assigned to the condo is slightly over RM800k and thus you are getting a good deal. It’s an awesome place. The facilities are top-notch and even the name of the condo sounds so special. In fact, where size is concerned, it’s bigger in built-up than some of those small landed double-storey homes for the same price.

However, when you drove into the car park, you suddenly noticed that most of the cars parked inside are ‘inferior’ compared to the car that you are currently driving. You may be thinking that these neighbours must have saved every ringgit and sen that they have for this home and thus they needed to drive cheaper cars, or perhaps older ones that they still could not afford to replace.

Actually, this need not be the case. The first batch of buyers (the bulk of all the buyers) might have bought the same condo unit for less than half of what you paid, today. At the time (many years back), most of them may be earning much lesser than what you earn today. At the time, they would have only been able to afford a cheaper car which they are still driving today. By the way, I read somewhere that the average lifespan of a car ownership in Malaysia is over 10 years. So, that explains a lot about those cars parked inside the car park of your RM800k condo. Oh yeah, in case you want to know, most Malaysians can afford only condos below RM800k. Take a look at the image.

The more recent buyers of your RM800k condo, usually just a couple of transactions or less every quarter for the past year or so would have paid almost the same price as you. The prices have gone up over the past many years and the bank’s valuation department has accepted the new price as the ‘right’ and current price.

The fact is, the value that the bank assigned to the condo does not mean every unit in the whole condo would fetch the same price. Imagine this. What if everyone in the condo wanted to sell, at the same time and many are desperate? When this happens, even if in the beginning the bank would not want to assign a lower value but what if a few units were sold at 10 percent lower than the market price? The next couple of transactions would follow the 10 percent lower prices as a benchmark.

Yes,
brickz.my
 would then start to show a dropping property prices trend. If banks still valued the condo at much higher prices, they would expose themselves to much higher risks. If some unforeseen circumstances required that property to be auctioned off and the price it could fetch is by far lower than the loan, then the bank’s bottomline is hit. There’s no need to be alarmed. This is just to tell you the usual reason why even for RM800k condos, the older ones I meant, the parked cars are usually the cheaper ones. Happy buying yeah.

written on 29 Jan 2018

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Cheap money, pessimism and banks’ profits – Let’s learn

General understanding when market is stable is when there are more money being printed, the interest rates would go down and it should push for more businesses to invest since cost of borrowing is lowered. The term is Quantitative Easing (QE). Google to read more. When interest rates are high, many businesses will face higher loan payments and when this happens, they should have less money to invest or feel that it’s not worth investing unless they are extremely sure. Well, what if there are MORE money but still there are LESS interest to borrow? The third equation comes in; sentiment. Pessimism means people spend less and when they spend less, the profits to businesses are lower. This would mean businesses would have less incentive to borrow from banks. In turn, banks would have LOTS of money but LESSER number of borrowers. Bad news. Do read here:
Telegraph.co.uk
 for an article about UK and Europe’s banks, interest rates and the request for a positive sentiment instead of an overly cautious one.  Enlightening really.

What’s up in Malaysia, as at recent previous quarter? Specifically, the top 2 banks as well as a smaller one? Maybank, CIMB and Affin Bank. Maybank’s Q1 ending 31st March saw it reporting a higher net profit of RM1.7 billion.This is up 19 percent when compared to the same quarter a year earlier. The two major reasons would be due to higher income and lower provisions for bad loans. Revenue was also marginally higher at RM11.3 billion compared to RM11.2 billion a year ago.  Full report in
TheStar here.
In brief, a positive result as well as the fact that signs for a higher default from borrowers due to whatever reasons are not showing yet.

CIMB? Full report in
TheEdgeMarkets here.
In brief, CIMB reported a 46 percent increase in its net profit for Q1 ending March 31 2017. In number, it’s RM1.18 billion versus RM813.8 million a year ago. Reasons for this increase include higher interest, non-interest and Islamic banking income. Besides that, CIMB has lower bad loan allowance and its quarterly revenue was higher at RM4.36 billion from RM3.73 billion previous year. In brief, CIMB is also anticipating that its borrowers are not not likely to default on their loan repayments. Definitely a positive sign.

Affin Holdings reported a 4 percent increase in net profit for quarter ended 31 March 2017. In number, it’s RM120.8 million versus RM115.57 million in the previous year. The reasons for the better performance include the increase in other operating income, Islamic banking income and net interest income totalling RM82.7mil. Revenue increased from RM509.60mil from RM426.92mil a year earlier. It has also allocated an allowance for loan impairment loss of RM5.8 million Full report in
TheStar here.
 In brief, it’s a positive result.

Results from banks are good indicators of the health of the economy. It’s by quarter basis too which meant that we will get an early warning about what lies ahead. Market is negative for some but for some exporters, they continue to do well which explains the trade surplus that we continue to have currently. Bank Negara Malaysia (BNM) has maintained the interest rates thus far so as to continue its accommodative stance to the economy. I believe this is sufficient and BNM should continue to focus on measures to strengthen and diversify the economy instead of lowering the rates. More money does not mean much if the businesses are pessimistic with the market. Happy working Mr. BNM governor.

written on 17 May 2017

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Cheapest and most expensive in Mont Kiara

Read an interesting list in theedgeproperty.com  It showed the cheapest projects and the most expensive projects in Mont Kiara. As usual, I have little interest in the most expensive. What about the cheapest? Since Mont Kiara is considered a very good area to stay in? Well, according to the charts, the cheapest condo in Mont Kiara is Lanai Kiara. It’s just RM433 per sf. Yes, I think those staying here may feel a little sad as they are staying in a condo which is at the bottom of the whole area. Take a look at what I found being listed.
(updated on 5th April 2016)

Referring to
propsocial.my
 (image beside) we wouldn’t that this project was completed 18 years ago. Perhaps this is why the prices are no longer crazily moving up. Well generally it looks ok and if Mont Kiara is must location for you and family, perhaps this is worth a few viewings. These days, owners are more willing to listen to your offer too.

According to the same report, the most expensive condo in Mont Kiara is Verve Suites, at RM1,086 per sf. Let’s look at some of the listings.
(Updated on 5th April 2016.)
It does look a little more modern, right? Okay, the size is also by far smaller too. A check at
propsocial.my
 revealed that the project was completed just 3 years ago. (Image beside.)

I hope it is now clear that the ‘most expensive’ or the cheapest’ may not actually be comparable! Haha. Please, take a look at the size. One is fit only for a single or at most, a couple while another one is fit for a nice family of 4 or 5. I have not been to both projects but my reasoning remain very clear. If you need just a
 roof over your head and
 does not want to pay too high and STILL want to stay in an area considered upscale, then Verve Suites suits you. Please do not think too much about the unit rising to RM600,000 in the near future. This would only happen if the whole area increases in prices too.

If however you need a landed property sufficient for a family with a budget of less than RM1 million, please skip Mont Kiara and
 think further away
. If you are like me, a condo of 1,600 sf or higher is sufficient and still have a budget of less than RM1 million, I think Mont Kiara is still a choice today. Note though that the Mont Kiara of yesterday is not the same as today. There are many more condo units there nowadays compared to the greener environment when it first started. Not that it matters since the address is Mont Kiara, right? Haha. I do not stay in Mont Kiara though I like to stroll Publika.

written on 9 May 2015, updated on 5 Apr with latest property listings and on 7 Aug 2016 with propsocial.my report.

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Cheapest home in most expensive city.

A good friend who earns HK$38,000 (RM20,287) in Hong Kong as a non managerial staff told me that it’s not possible to buy an apartment all by herself. In fact, it’s still not possible even after adding in her husband’s monthly salary. Their downpayment has to come with assistance from parents. Based on the salary, the cost of food is actually low. However, the ‘killer’ in many advanced property markets will still be the property price. Hong Kong is also the city where mosquito flats are sold at millions of ringgit.
Here’s an earlier article.
 Now, many of the ordinary people in Hong Kong may get a chance to buy a cheaper home, up to 38 percent below market levels.

Article in TheStar.com.my here.
  Hong Kong’s government will start to sell the first batch of cheap homes. These “starter homes” are in Kowloon and will be priced from about 38 percent below market levels. It will be around HK$13,000 (RM6,940) per square foot according to the Hong Kong Economic Journal. People can start applying from January 2019.  In another government program to provide cheap apartments in 2018, more than 260,000 applications were received for 4,431 flats. People eigible for the 450 starter homes include single permanent residents who earn no more than HK$37,000 a month and don’t already own homes. Buyers face restrictions on reselling, the Economic Journal reported. Hong Kong’s home prices are still 50 percent higher than 5 years ago despite dips in past four months.
Article in TheStar.com.my here.

Here in Malaysia, we face similar situation. Homes are said to be already at an unaffordable level for many.
Earlier article here.
Khazanah Research Institute said that in order for homes to be affordable, it has to be priced below RM300,000. According to some of my friends who needs an affordable home, the location of the home must be strategic; near to amenities which they like and it should preferably be landed too. Stop predicting the market, start understanding all these advanced property markets which are many years ahead of us, the emerging markets. Just remember to buy within our affordability and stop bubble from building.
Advice from our former Bank Negara governor (read here).
  Happy deciding.

written on 19 Dec 2018

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Potential to be cheated by illegal brokers are higher, definitely.

Personally, I have many good friends who are Real Estate Agents (REA) and Real Estate Negotiators (REN). I would engage them for all my real estate transactions. I would not want to take many calls and open the doors to show my unit to potential buyers 5 times a week. I would let the RENs do it and gladly pay them the necessary. By the way, I seriously do hope that majority of us Malaysians can be like the Singaporeans or the Hong Kongers. They would engage the licensed / legal real estate professionals instead of illegal or part-time brokers. Do read on a recent cheating case which happened recently. The below is a news release from the The Board of Valuers, Appraisers and Estate Agents Malaysia.

– start –

KUALA LUMPUR 8th June 2016:
 In the last two weeks, another two unscrupulous characters were caught posing as illegal agents and arrested for their misdeeds, an increasingly common occurrence that has the Board of Valuers, Appraisers and Estate Agents Malaysia (BOVAEA) worried.

A local news portal and dailies highlighted the most recent case on June 5 identifying the suspect as a ‘property agent’, however the man who cheated some 30 people is not a Registered Real Estate Agent (REA) nor a Certified Real Estate Negotiator (REN). The perpetrator, was one of the few caught for his acts and was sentenced to 16 years in jail as well as 30 strokes for his crimes involving RM382,117.

A Registered Real Estate Agent is a person who has passed the Board’s (BOVAEA) examinations and registered with the Board whereas a REN is certified by BOVAEA and employed by a REA who is directly responsible for their conduct and actions.

Sadly, there are a large number of cases with less amounts of money being cheated however it goes unreported. Official complaints are also on the rise and while BOVAEA has been keeping tab on the situation and educating the public about such illegal brokers, there seems to be a lackadaisical attitude on the part of the public to be self-vigilant in dealing with illegals. Such incidents can be avoided if buyers and property owners ask simple questions and check the registration of the said practitioners.

Illegal agents or brokers have been part of the real estate fabric for many years and now they are getting bolder and have less respect for the law.

BOVAEA’s President Datuk Haji Faizan Abdul Rahman said the board is very concerned about the welfare of the public as their life savings are at risk when dealing with illegal brokers in the property market. He said the current challenging market has made it a perfect opportunity for more illegal brokers to crop up, seeking many desperate home owners to list their property while buyers depart with money to own their dream property.

REAs are bound by strict laws and under the Valuers, Appraisers and Estate Agents Act 1981, all monies collected are to be deposited in a client’s account and protected by professional indemnity insurance. The Board can deregister, suspend or fine the REAs if they commit an offence and report to the police on cases of cheating. This is the mechanism to protect the public at large. It is also a law that no individual can sell property for a fee if they were not a Registered Estate Agent or working as a Real Estate Negotiator with a real estate firm.

A REA can easily be identified with their authority card and for a certified REN with their RED identity tags imbedded with a Quick Response (QR) code, so customers can scan the code with their smartphones to find out the background of his status as a REN.

Members of the public can also cross check the REN tag number with the BOVAEA website at
www.propertyagent.gov.my
 or
www.lppeh.gov.my

“I strongly urge everyone to apply this method to ensure you are being assisted by these practitioners to avoid any complication in the sale or purchase. Do not use brokers – you are asking for trouble,” he added.

Meanwhile he said BOVAEA and the police are collaborating to combat this problem and steps are being taken to identify and prosecute such illegal brokers. While we are doing this, we will continue to help educate the public on this matter and find a permanent long term solution to eradicate this menace.

Members of the public have also been advised to lodge police reports if they find themselves in a similar situation and keep the Board informed of such cases.

Ends

About BOVAEA

The Board of Valuers, Appraisers and Estate Agents Malaysia was set up in 1981 under the purview of the Ministry of Finance, Malaysia. The setup and operation of this Board is governed by the provision of Valuers, Appraisers and Estate Agents Act 1981. Its primary function is to regulate the Valuers, Appraisers and Estate Agents practising in Malaysia.

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Cheating you easily, when you are greedy

It was reported in PropertyGuru.com.sg recently about a company called Ecohouse with over 1,000 investors in Singapore. The company has gone ‘missing’ and all calls and emails to the company has gone unanswered. Some investors in Singapore have started legal actions against the company and the company was said to be still marketing their investment plans in other countries. It also quoted the President of the company as saying that the delay in paying the returns to its investors was due to its banks in Brazil. I sincerely hope that this delay is only due to administrative issue and that all the investors may get back their investments and the returns promised to them.

This brings me to the topic of the day. Most of the time, cheating you becomes very easy, when you are greedy. For example, how about the promise of 5% return every quarter. That’s 20% per year. The more friends you introduce, the higher your return would be. Have you ever come across such sales pitch before? It’s happening daily and I receive some of these super attractive offers once in a while. It’s true, my Fixed Deposit earns very little but I have never withdrawn it to earn such lucrative profits. The reason is because after over 16 years of working life, these are nothing more than just traps for the greedy.

If you have ever invested in unit trust, you would know that a return of close to 10% per year for a few years is considered very healthy. If you have invested in property you would know that a typical return of 10% or higher per annum over a few years is considered extremely good. If you have invested in stocks, you may have either win big, lost big or lost time buying a stagnant counter. If you have invested in GOLD many years ago, you may have luckily won huge amounts of money but if you did not sell it from it’s highest point till today, you would have lost 30% of the value of your investment. Once you know these, why do you think someone or some company can still offer you huge returns on a quarterly basis? What do they invest in? Smuggling drugs? That’s not a joke because other than illegal activities, I am not sure how a company can guarantee you returns of 20% per year. If there is such an investment, you would not even have a chance to invest.

It’s hard work to earn the money for you to invest. It’s a hard time getting it back if you invested in the wrong place. It’s even harder to work to get it back. My personal advice, if it’s too good to be true, it would not happen to you. Investment requires a little bit of luck, yes, but it requires lots of understanding and objectivity. Do not be greedy, they will cheat you easily. Happy investing.

written on 15 Oct 2014

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Check your empty units, everyone!

These days, things happen very fast. A rental advertisement could be posted within a few minutes and deposit for the unit could be collected within the next 1 hour. One easy scam which has happened and reported? Someone advertising a rental rate which is way below the market. Some people called the ‘owner’ and believe they are getting a great deal, quickly pays to get the deal only to learn later that the ‘owner’ was actually just someone who rented that unit via AirBnB for a few days… Well, apart from these, there’s another way people would profit from an empty property unit.

I think this is applicable to those who has empty units lying around. Just be aware that these empty units may be rented out without our knowledge. The reason? We were lazy to keep checking the units. We may have felt that the rental is too low versus the mortgage and thus not worth renting it out but others may not think the same. They have no mortgages to pay and whatever ‘rental’ money they get will be all the money they get.
One such case was highlighted in TheStar.com.my
 A businessman’s shop apartment was rented out to 14 people without his knowledge! He had not checked the unit for a few months. He said, “The locks I used earlier were changed. There were 14 people, comprising 12 Bangladeshi men, a Malaysian man and an Indonesian woman living in my unit. He was giving his side of the story to a press conference organised by MCA Public Services and Complaints Department head Datuk Seri Michael Chong. In 2018, 18 such cases were reported to Chong’s office. He said, “There could be syndicates that look for unoccupied units. They will cut the locks and rent these units to foreign or illegal workers.”
Please refer to the full article in TheStar.com.my here.

In some countries, homes which are left empty are taxed. In Malaysia, there was a rumour that vacancy tax could be introduced. Let’s understand that no fire has ever started without smoke yeah. The vacancy tax has NOT happened for Budget 2019 does not mean that it will never happen in the future.
Here’s that earlier article about the vacancy tax rumour.
 Personally, I think this tax is good because sometimes when too many wealthy individuals own too many units and just leave it empty while waiting for prices to rise, this is not going to be beneficial to those who really need a home. Of course, the vacancy tax MUST be used to help these people own a home and not for any other purpose yeah. Happy following.

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written on 19 Jan 2019

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Cheras’ RM11 billion GDV and nearly 4,000 residential units for DBKL.

Building homes for the public and awarded with a piece of land in Cheras. The developer is Retro Highland (50 percent owned by SP Setia) and the public housing project is for Dewan Bandaraya Kuala Lumpur (DBKL). The gross development value (GDV) for that piece of Cheras land is RM11.03bil. Retro Highland is a special purpose vehicle for SP Setia and Tradewinds Corporation Bhd. It has signed a privatisation agreement with DBKL. The agreement covers the construction of 3,971 residential units, 112 units of shops/stalls, a market and other public facilities. DBKL will then award Retro Highland with a piece of 52.25 acres of land which will be used for an estimated GDV of approximately RM11.03bil and adevelopment period of 11 years. SP Setia said that the development is a public-private strategic partnership undertaking. This is part of the urban renewal initiatives under the KL Structure Plan 2020.

The 52.25 acre land is located at the southeast of the Chan Sow Lin area in Kuala Lumpur and immediately east of the Cheras LRT Station. It is about  8km to Kuala Lumpur City Centre and 3km to Viva Mall and is located alongside Jalan Loke Yew. The overall development entails the renewal of 5,650 residential units. The renewal of the 3,971 units are for Taman Ikan Emas cluster houses, Sri Melaka low cost flats, Sri Pulau Pinang low cost flats and long houses, Sri Johor low cost flats as well as common facilities, shops, stalls and a market. The agreed value of exchange is RM1.19bil comprising the construction cost for phase one of up to RM344.79mil and construction cost for phase two of up to RM835.12mil. There is also a
cash consideration of RM14.99mil and should the construction cost of the development is lower than the cost estimated for phase one and phase two then DBKL will be paid an additional cash consideration for the difference.

I think this is a good ‘barter-trade’ where developers get prime pieces of land for the construction of good homes for the masses. Some would say that the number of units to be built is actually super-high but we must also bear in mind that as long as these units are nearby to
public transportation and majority takes the public transport instead of driving
, it will still be better than building in lower densities but in areas much further away. We can already see that many of the unsold units, even the affordable ones are due to them being in locations shunned by many. Urban redevelopment is certainly the right way to go. Just take the cue from many of the more advanced countries. It’s always a
balance between price, distance, size and demand.
 All the redevelopment units are within Kuala Lumpur. Happy redeveloping my dear KL.

written on 7 May 2018

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Cherating beach for holiday? RM380 million development in progress

Two weeks ago, a close friend, Ms. K was telling me that the next destination for a group of old friends would be Club Med in Sanya, China. I told her, yeah, maybe that could be one destination. 2 days ago, a good friend, Mr. M told me that he wants to bring his family to Club Med in Cherating. I told him that if the dates are okay, I would follow him as well. Anyway, driving to Cherating would just be a few hours from KL. Take a look at the google map below.

I think Cherating is a famous place and there are definitely that alluring beach facing the South China Sea too. There is another choice coming up in Cherating. It’s a hotel management group which runs the Impiana brand.

Article in themalaysianreserve.com
   IMPIANA Hotels Bhd will be commencing the development of Impiana Resort & Residences Cherating with a total gross development value RM380 million.  It is a new project on a 30-acre beach front land.

Impiana Cherating will be developed in 3 phases, targeted to be completed by 2023. Upon completion of the development, Impiana will be managing the development which will then provide the Group with stable recurring income.

Impiana’s Executive Chairman, Datuk Seri Ismail @Farouk Abdullah said that the group the en bloc sales of phase 1 sends a strong signal to the market that tourism is still evergreen.

“Phase 2 and 3 will be larger. We are optimistic that the take up rate will be promising as reflected in phase 1. Impiana Cherating is strategically located at the beach front with many existing and upcoming amenities in the area. Impiana will deliver the project within the stipulated time.” Read the full article with more details here:
Article in themalaysianreserve.com

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My little goals in life: Chill at hometowns, enjoy vacations more often

A few close colleagues were talking about potential to retire earlier. They were sharing what they wanted to do. Most of the plans include vacations at exotic or romantic places. Well, they are pretty expensive. For me, I do not have big dreams like sipping champagne in Paris followed by a vacation in Mauritius before returning to my penthouse in London. Fortunately for me, my wife is also not expecting these. She’s a simple women and I am the more complicated one. However, I do have a dream that I would stop having a full-time 5 day employment before 50. I would still want to continue working but I prefer to spend more time with my loved ones. So, hopefully just 3 days of working per week.

Saving money alone from my monthly salary is not likely to be enough. Let’s just say that I hope to have this through investments.
Property would be my main vehicle
 but
stocks can provide decent returns too.
 I can chill in the hometowns of my wife and mine. (Ipoh and Sandakan) more often. Seriously, nothing beats waking up to a delicious breakfast with family members followed by ‘anything goes’ for the rest of the day. Yes I know, I could only travel more during the school holidays since my kids would still need to attend schools.

My second dream is to enjoy vacations more often. It does not have to be overseas all the time. There are lots of places within Malaysia that I would love to visit more than once per year. I hate jams though which meant I hate to travel during the holiday season when everyone is travelling. Yes, my kids love the beach and the pools and my daughter always remind me that we need to go to beaches. I told her hotels are expensive and that we can only travel occasionally. She nodded her head in agreement. Anyone else with these simple goals in life like me? Cheers.

written on 6 Aug 2016

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China and India? More will visit Malaysia in 2020. They need accommodation yeah…

I personally agree with the visa-free idea for 2020 for China and India (alphabetical order…). The two most populous nations in the world. Counting just slightly over 1% of their (China and India) population is already equal to the total population in Malaysia. Lets be pragmatic yeah. Even better, both are firmly ASIAN too.

Both have contributed immensely as trade partners to Malaysia and surely ever higher trade numbers to come. Both have lots of people yearning to travel the world and yes, these people can always start with Malaysia as their first overseas destination and then continue with Malaysia or ASEAN nations again and again. It’s Visit Malaysia Year 2020 after all. Let’s take advantage of this and do our very best and see how many millions more of international tourists we could attract.

Article in thestar.com.my
  Beginning 2020, tourists from China and India will be able to visit Malaysia without a tourist visa. For the whole of 2020, they will be able to enter the country for up to 15 days by using the electronic travel registration and information system – either individually or through travel agencies in their respective countries.

The requirement is that the tourists must enter and exit Malaysia only through authorised airports or entry points. What happens after they arrive is that they must product proof of sufficient cash for expenses, credit card and produce their travel itinery here in Malaysia. They should also have with them a valid return ticket. For 2020, Malaysia aims to attract 30 million international tourists and this is estimated to bring in total tourist receipts of RM100 billion. Please read the
Article in thestar.com.my

What can I do as a Malaysian?  I could definitely continue to tell all my overseas friends to come visit me as 2020 is the year they should enjoy Malaysian hospitality and of course our teh tarik. I had the privilege to host one group of MBA students from Massachusetts Institute of Technology (MIT) and during that one day of moving, eating and drinking, this is their comment on teh tarik. ‘This is the best drink I have ever had in my life.’ Haha.

Stop all the unnecessary rhetorics. Focus on the good and make 2020 that year when Malaysia is mentioned the most and it’s on the beauty of the country and not something else yeah. When 30 million people come, they will need 15 million rooms, at least… So, get ready for these demands yeah. Buying a secondary property now is still in time. Haha. Enjoy your 2020 everyone. It will be our best year yet. Happy saving and investing.

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China property: “biggest bubble in history” says China’s richest man

China is already the world’s second largest economy. In fact China is a very important country to Malaysia for its huge and growing investments into Malaysia. It’s not just Iskandar but we can see Chinese investments everywhere. In fact they are in the running for the High Speed Rail project and I think they are serious contenders. The property market in China has been booming for many years but within the last few years, some smaller secondary cities are no longer booming. In fact google and you would lots of photos of abandoned malls and empty residential developments. If you go the bigger cities however, everything is normal and in fact prices are still moving upwards.

Interesting piece of news in thestar.com.my on 29th September 2016.
Full article here.
 In brief, the richest man in China, Wang Jianlin says that China’s property market is the ‘biggest bubble in history.’ (Note that bubble in history versus bubble bursting are two very different things.) He said that even as property prices continue to rise in China’s big cities but properties in smaller cities are falling in prices and also saddled with huge number of unsold homes. Wang also shared that he is not worried about a hard economic landing. The problem is however that the economy has yet to reach the bottom. With regards to the government’s intervention measures, he said,  ”If we remove leverage too fast, the economy may suffer further. So we’ll have to wait until the economy is back on the track of rebounding – that’s when we gradually reduce leverage and debts.”

Malaysia is much too small and the
potential investment cities
 remain far too few in comparison to China. As long as we read more, we would be well informed enough not to simply buy whatever is being pushed to us as great offer or ‘last few units.’ Reminder, the reason why people lost their money buying into certain developments was also because the market was too hot and everyone has no time to think. The current slowdown is a good time to think. Cheers.

written on 29 Sept 2016

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Chinese buyers? They are now focused on Asia-Pacific. (Yeah, that includes Malaysia too)

As at end 2017, China has a population of close to 1.4 billion. Mc Kinsey’s research showed that the Chinese middle class is now over 500 million and the range it uses to define this middle class would be US$11,500 (RM47,000) to US$43,000 (RM175,000) per year.
Full article on study by Mc Kinsey here.
 Assuming their T20 household size is also just 20 percent of the total population, that’s 280 million people. Many have bought properties overseas and latest news is that they are shifting their focus to Asia-Pacific instead of their usual destinations like America, Australia, New Zealand and Oceania. Please read the press release by Juwai IQI below.

Press Release by Juwai IQI

Here are some quick highlights:

– The centre of gravity for Chinese buyer activity has decisively shifted to the Asia-Pacific.

– The share of Chinese global real estate buying enquiries going to properties in the Americas fell from 35% in 2018 to 17% in 2019.

– Europe and the Middle East went from receiving 28% of Chinese global buyer enquiries in 2018 to just 13% in 2019.

– The region of Australia, New Zealand, and Oceania lost half its market share and dropped from receiving 25% of Chinese global buyer enquiries in 2018 to only 13% in 2019.

That Giant Sucking Sound? It’s Chinese Real Estate Demand Moving from the West to Asia
While Chinese demand for cross-border residential real estate grew modestly in 2019 in all global regions except Africa, the huge scale of growth in the Asia-Pacific dwarfed that of the other regions. The centre of gravity for Chinese buyer activity has decisively shifted to the Asia-Pacific.

While the Asia Pacific accounted for only about one out of every 10 Chinese global residential real estate buying inquiries made in 2018, it accounted for nearly 6 out of 10 in 2019. The Asia-Pacific gained market share at the expense of the rest of the world.
Meanwhile, the other regions all experienced a fall in Chinese market share. The share of Chinese global real estate buying enquiries going to properties in the Americas fell from 35% in 2018 to 17% in 2019.

Europe and the Middle East went from receiving 28% of Chinese global buyer enquiries in 2018 to just 13% in 2019. The region of Australia, New Zealand, and Oceania lost half its market share and dropped from receiving 25% of Chinese global buyer enquiries in 2018 to only 13% in 2019.

Key Factors

Juwai IQI Executive Chairman Georg Chmiel said:
“The Trump Presidency, Beijing’s capital controls, and the weaker yuen are the most important factors in shifting Chinese buyer interest.
“Chinese real estate buyers have reacted to uncertainty and risk by choosing markets that are closer, require less capital, and offer better yields. The Asia-Pacific region –and especially Southeast Asia– ticks all three boxes.”

2020 Forecast

“Given that the year started with a hot-war scare in the Middle East,” said Chmiel, “it’s a safe bet that 2020 will be no less unsettled and contentious than 2019. We expect Chinese investors to continue to seek to protect their wealth from a potential devaluation by investing overseas. We expect Chinese investors to continue to favour Asia-Pacific markets predominately because of the benefits of proximity, good yields, and low entry prices.”

Focus: The United States

Chmiel added that, “During the presidency of Donald Trump, Sino-American relations have become contentious enough to limit demand growth for US property. The uncertainty caused by the Trump effect and the Yuen’s weakness against the dollar have caused the US to lose Chinese market share.

“However, Chinese buyer demand, as measured by buyer enquiries made on real estate in the United States, has not fallen. Chinese buyer enquiries in the USA actually increased by 11.2% in 2019. The growth was due to strong second and third quarters, which more than compensated for a negative first quarter and flat fourth quarter.”

Focus: Malaysia

Kashif Ansari, Juwai IQI Group Executive Director, said: “During 2019, despite maintaining an independent stature towards Beijing, the Malaysian government has gone out of its way to woo foreign buyers. It seeks to relieve its beleaguered real estate market. Many Malaysian developers already hold an uncomfortable amount of unsold inventory and more new dwellings are being delivered each month.

“Government initiatives include changing the policy to permit offshore buyers to purchase less expensive homes than had been allowed.  “Malaysia had a stellar year when it comes to Chinese demand, with buyers making more than double the number of enquiries in the first quarter than in the same quarter of 2018. After nearly bottoming out in the third quarter, growth rebounded strongly in Q4. We think the Q4 jump was due to the government’s policy announcement.”

— end of press release —

Actually, it does not need any statistician to confirm the effects of Chinese buyers into property markets here in Asia Pacific. Even if just 1 million out of the assumed 280 million people actually have funds ready to buy property and out of these, 2% chose Malaysia, it will already be a potential of 20,000 buyers. This is why many developers are now enticing these  potential buyers and I think many more may think of Malaysia since the threshold is now lowered to RM600,000 for Kuala Lumpur for 2020. Happy following.

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China’s capital control and Chinese buyers for Forest City

We should not rely only on Chinese buyers for the property market. In fact if the percentage of foreign buyers ever reach
30 percent of the total transactions,
 we should be worried. At this moment fortunately their purchases are limited to the more luxury ones and not the affordable ones which are for Malaysians. Just look at how Singapore is limiting the foreigners who wish to buy properties and you would realise that all these limitations are necessary so that the locals are more protected.
Here’s a good article about foreigners buying Singapore properties.
Foreigners thinking of buying properties in Malaysia would actually be limited to the more expensive units too. Iskandar Malaysia is one place where the Chinese developers first started to come in on a huge scale and with them, the chinese buyers too.

One of the earliest and most famous of these developments from mega Chinese developers would be Forest City. It has recently handed over the keys for 132 apartments and completed a luxury hotel. Attached would be the image of the 5-Star new hotel called Hotel Phoenix. The ratings are pretty high actually, 8.4 and the pool really do look nice. There’s another article in
TheStar talking about the US$100 Billion Forest City hit by capital controls
 Briefly, it spoke about how Forest City used to be visited by droves of potential buyers from China. These have stopped. It quoted a few buyers who expressed doubts about their purchase and their worries. Chinese citizens could take out US$50,000 per year BUT they need to sign a pledge that they wouldn’t use it for property investment. It quoted Country Garden which said that the capital control has not had a material effect on sales and that construction is continuing. The article also quoted Samuel Tan, executive director at KGV International Property Consultants who said, “Given the oversupply, we don’t foresee any recovery until 2019 for high-rise projects.”
Full article by Bloomberg published in TheStar here.

While the title was “The US$100 billion Forest City hit by capital controls,” the content was not that bleak actually. It quoted some buyers who were worried but it also quoted Country Garden who said they sold 16,000 units in 2016. I think we would only be really certain when these units start to be delivered. By then, if the advertisements are mostly from real estate agents with lower price than the original, we would know that there are unsold units. However, if prices remain above the original price, I think Country Garden’s insistence about ForestCity’s prospects is still based on facts. Or perhaps those who bought earlier were still able to pay for the properties they booked, somehow. Oh yeah, for Iskandar,  there are quite a number of units to be completed by September 2017 as reported earlier. It is
Country Garden’s Danga Bay development.
It will be a test on the property market. I love Iskandar Johor but has not yet saved enough for a unit there. Nope, not looking at new ones, would only be interested in units that I could immediately rent out. Oh yeah, an earlier article about Country Garden’s Forest City here:
Forest City showrooms in Vietnam, Myanmar, Taiwan, Dubai and Japan

written on 23 June 2017

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China as a catalyst remains the same after GE, regardless of winner.

I have started to HIDE some people’s comments about politics. It’s a little tiring to read all of them. My personal thought is that most of everyone has made up their mind and nothing much would change from now until the voting day. However, this particular article I think would be of interest to the investors. Especially those who worry IF the current government wins or IF the current government loses and how it will affect the economy. Yea, that question of China’s investments here in Malaysia. Please do not hope that any advanced nation would be able to take over the current amount of investments lah. It has to be an ASIAN nation anyway because the biggest economy is about to start a trade war simply because it’s not competitive?
That article is here in freemalaysiatoday.com

In brief, the article quoted a political analyst by the name of Qianye Zhang who said that it was also in the interest of Chinese investors to establish rapport with Malaysia’s opposition leaders. She further shared that Malaysian opposition politicians were only playing up nationalist sentiments when they questioned Chinese investments, and they were likely to break their promise as there was too much at stake as far as China, Malaysia’s largest trade partner, is concerned. She also said that Tun Mahathir had praised China’s economic miracle many times and would definitely welcome Chinese investments that benefit Malaysia. She concluded that Chinese investors do not need to worry too much about the upcoming election. What Chinese investors and companies should do is to establish and maintain connection with the opposition in order to reduce their
own risks in the future. Here’s that full article for reference.

Okay, everyone can continue investing now. 🙂  By the way, before winning, anyone can claim anything but the government of the day, regardless of the party will definitely think twice when it comes to being unfriendly to the world’s second largest economy. Within the next 15 years, it may become the largest. Who knows if it’s faster? Remember, the only reason why Europe was so successful was also because they have an effective economic grouping with many advanced nations leading the lesser advanced ones. When they negotiate trade deals, they have power on their side. ASEAN + China will be more powerful actually. I found this quote by Abraham Lincoln, “Do I not destroy my enemies when I make them my friends?” Happy buying that property yeah.

written on 8 April 2018

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China growing at the slowest since 2009

Wondering why the property market in China is in trouble with huge number of empty completed units? Well, in Q4 2015, China’s economy grew just 6.8 percent. This should be a growth envied by many but based on statistics, this is the slowest growth since Q1 of 2009. Remember the 2008 mortgage crisis? Well, fortunately we are nowhere near that but this 6.8 percent meant that Beijing will now do even more to support and to manage fears of investors turning into panic. It did happen in the first trading week of 2016 and everything remain volatile currently.

As per reported in Reuters, China has been growing strongly in recent years but has now entered a slowdown, weighed down by weak exports, factory overcapacity, slowing investment, a soft property market and high debt levels. According to a poll of analysts by Reuters, the economy is expected to lose more momentum and will cool down to 6.5 percent even if Beijing increases fiscal spending and cuts interest rates. The silver lining is that this slower growth is expected to be sustainable and would not have any hard landing which all investors are fearing. There were further signs of improvement in the property market. Home prices continued to rise in December 2015 but a huge overhang of unsold homes means any full-blown recovery would not be seen in 2016.

Let’s also take note that China has by far the largest foreign reserves of the world. Due to its population, the investments into China is not likely to stop. To be honest, if I have a manufacturing concern and I want to target some of it on the local population, I will put my factory in China and not in the US. When we look at some of the recent news, I think China is looking to build up its investments overseas because this is the best time to do so. Not many countries in the world can still say this today, ‘I will increase my investments in your country.’ From some of the largest developers with the biggest projects to ports and trains, the flurry of new investments would be continuing. Happy growing my dear China, for the world’s sake, including Malaysia.

written on 21 Jan 2016

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China, Hong Kong and Malaysian properties? “Not connected”… for now?

If your Hong Kong friends asked if they should buy a Malaysian property, what would be your reply? Hopefully it’s a positive answer yeah. For me, I will tell them about the potential as well the fact that they could buy
and enjoy the same protection as local Malaysians.
Remember that earlier article saying that
HK buyers buying 50-100 Malaysian properties every week?
  Well, it seems that the interest has seen a dramatic stop. Major culprit? COVID-19 (a.k.a. Coronavirus).

Article in themalaysianreserve.com
   VPC Realtors (JB) Sdn Bhd Asia-Pacific property consultant Bruce Lee told
The Malaysian Reserve
, “For the time being, foreign demand for Malaysian properties, particularly from China and Hong Kong, are slowing down or almost stopped as they (tourists) have stopped coming (to Malaysia) due to the coronavirus outbreak.”

Lee added that it’s too early to tell what’s the actual situation though. He said, “When the coronavirus issue is over, perhaps in six months’ time, I anticipate demand from Chinese and Hong Kong buyers to improve tremendously due to bad experience for those who didn’t buy or own property overseas.” Recent reports from Chinese international property portal
Juwai.com
and Malaysian real estate agency network IQI Global showed mainland Chinese buyers bought RM8.4 billion (US$2 billion) worth of properties or 12.1% of the overall transaction value in 2018. But the amount sold only accounted for 0.4% from the total property transactions. Please refer to the
Article in themalaysianreserve.com

By the way, it’s not just property yeah. Car sales are down. Smartphone sales are down. In fact, even banks are scanning your temperature before allowing you to enter! Perhaps not all banks yeah. Fortunately for the popular malls, a slightly smaller number of visitors is still acceptable especially under current circumstances. So many people are choosing to work from home too. Anyway, the bosses are also very worried too.

Fortunately, stimulus is coming…
I seriously hope that the peak for COVID-19 is coming soon, especially with a hotter season of spring arriving soon. This should help to destroy the viruses easier and faster too. As for the property market, we should not be relying only on foreigners yeah.  Let’s not have a situation where the foreigners are buying double digits of our properties. That’s definitely not healthy for us. Happy buying.

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The China property market bubble will be ‘deflated’

On numbers, whatever happens in China should affect more ASEAN nations than the U.S. However, the recent currency fluctuations within ASEAN nations has been due to the U.S. and all their actions. (Yes, even SGD is not spared. Read here:
Weakest in Seven Years – CNBC.
The events unfolding in the U.S includes t
he new President’s intention
 to Federal Reserve’s comments for 2017, every single thing is advantageous to them. Well, let’s look closer to home today, China’s property market. This is one huge market which many have been saying as ‘dangerously close to bubble bursting.’ Based on their (China) international currency reserves, I think they have many more measures that they could do and will do. Politically wise, it’s also very stable and this allows any measures to be implemented successfully.

As per
reported in a Bloomberg article,
 its President Xi Jin Ping said, “The country should accurately understand the residential feature of housing and create a better system for purchases and rentals to better serve new urban populations. The market will play the leading role in catering to multi-layered demand, while the government will take care of basic housing demand. China will take a varied approach to regulating the property market and use an array of measures from financial and fiscal to land and taxes to better serve people’s needs. (Briefly, China will ensure its property market continue to function properly for the purposes it is supposed to serve. The property market is supposed to cool down instead of suddenly bursting due to it being way too unaffordable.
Signs for a property bubble?
)

If we do not know anything about China’s property market, we should. If we are worried about China’s property market, we should also understand it a little bit more. If we believe the property market may burst and bring about another crisis like the one in the U.S. in 2008, then I think we are comparing two different country fundamentals. Read more yeah.  Just google. Cheers.

written on 25 Dec 2016

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China Property Market Boost – All the measures

Developers in Malaysia are asking for some breathing space. Cooling measures have affected their sales quite a lot. On the other hand, is it really that bad? Well, in China it has gotten so bad that the Chinese government has had to relax some of the cooling measures that were put in place. In other words, instead of cooling measures, they are now trying to stop it from cooling or at least warm it up a bit. ‘Long winter’ is not welcomed. According to Moody’s Analytics, property sector is very important as once it slows, it affects the materials, home appliances and transport too. This is why it accounts for one-quarter of China’s economy, Some of the measures that they have taken are as follows:

30% discount on mortgage rates even for second-home buyers. It was only for first-time buyers previously.

Downpayment levels cut from 60-70% down to 30%.

40 of 46 regional Chinese governments have abolished housing investment limits.

Now, banks can continue to lend to those buying their third homes and have no outstanding unpaid mortgages. This is for cities without any housing investment limits.

Banks are asked to disburse faster for mortgages and also lend to healthy developers with commercially viable projects.

To enable them to lend more, the banks should sell mortgage-banked securities and bonds with longer maturities.

To pay for the mortgages, the regulators said banks should sell mortgage-backed securities and bonds with longer maturities.

Developers were also encouraged to sell bonds in the interbank market

A pilot for real estate investment trusts would also be started to broaden financing channels.

If these are not able to warm up the property market or at least stop it from cooling too fast, I seriously think more would be done. As for the crash landing, since this is China, I do not think it will happen. Unlike America which has to borrow from the whole world when the mortgage crisis hit them, this will not happen in China. As it is, China does have the world’s largest currency reserve today. Thus, there are many more options at its disposal compared to America. The only unfortunate thing is, with China’s slowdown, it will also slowdown all its trading partners too, I think. Oops, that’s Malaysia. Let’s see what happens next in China.

written on 4 Oct 2014

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Good news. China’s property market cooling.

Can a cooling property market be good news? I certainly think so. This is especially if the said market is China’s. It is very important for China’s property market to cool down slowly. According to an article in
TheStar: China’s housing market likely to continue to cool, says Fitch.
The two main reasons contributing to the housing market cooling according to Fitch Ratings would be stronger restrictions on home purchases across many cities and tighter credit conditions. It said, “Price gains have also moderated. Secondary home prices in Tier 1 cities rose by 28.7% in 2016, but increased by just 3.6% in the first five months of 2017, and fell for the first time since September 2014 in May.” It shared that the authorities have stepped in to prevent excessive froth in the market. With the current sentiment, first time home buyers may postpone their purchases. Fitch also said, “House prices are likely to decline slightly in 2H17, as demand weakens. We expect prices in Tier 1 cities to hold up better than in lower-tier cities. Prices in Tier 1 cities have risen by almost 90% in the last four years, compared with increases of 10%-25% in lower-tier cities.” Full article
in TheStar here.

It’s important to note that all these are based on average numbers. If the property is in a Tier 1 city and is within the city centre for example, the prices would definitely be well supported. For any significant falls to home prices, the economy itself has to be doing badly. At this moment, it’s clear to see that China will still be growing even if no longer as fast as many years ago. According to its PremierLi Keqiang, the targeted growth for 2017 should be achieved. Here’s the
article in Xinhua.
 He said, “The Chinese economy has become more stable and sustainable, and has made progress in restructuring and improving efficiency.” GDP target for 2017 is set at 6.5 percent. GDP growth for China in 2016 was 6.7 percent. Its recent quarter was good. It grew by 6.9 percent year on year and it was the quickest increase in 18 months. (I think I want to be confident with what Premier Li is saying, for the sake of many countries in the world which will benefit when China grows)

I think China will continue to restrict movement of funds out of China for property purchase. The reason is simple, if the funds could be invested within, why move them outside? However, when we look at a grander scheme of things, China is not moving backwards. It is pushing ahead with the One Belt One Road initiatives. Here’s one earlier article:
US$124 billion is now open to all nations, take or not

Would it affect Iskandar then? Let’s note that the investments by the Chinese into Iskandar can slow but as long as it does not stop, then there is a chance that investors from other nations can take up some of the slack. Singaporeans included, especially. Malaysia’s GDP growth also seems to be accelerating ahead because the world demand for our exports seems to be recovering OR we are becoming more competitive and is thus exporting more versus other nations. Here’s one latest
article in thedgemarkets.com
 So, should we still invest in property? I think as long as we do not buy the wrong one, definitely it’s a
great long term investment.

written on 4 July 2017

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Property Investment 101: Property Investment cannot be fast and furious please.

Slowing down, is this a bad thing really?

I hate it when property market transactions rise because people were thinking that the next rush is coming and they fear of missing out. As everyone is now buying with a specutive mindset, the price is no longer the focus. Everyone thought the price will be ever higher when they sell in the future. It’s as if there’s always a better price tomorrow! Haha. Stop believing this kind of fairytale yeah.

Depending on who you speak to, they will continue to tell you this fairytale. There may not be ‘happily ever after’ to this fairytale when someone buys an overpriced property yeah. If it has grown just too high, then the whole market would need to slow down before it could rise again. This is something that’s happening to once super hot property market.

Article in channelnewsasia.com
  The real estate industry grew at lightning speed after restrictions were eased in 1998 across China where buying a home is a common prerequisite for marriage as well as for investment. For two decades, developers have been able to build at breakneck speed thanks to easy bank loans, but their debts swelled so much that authorities put a stop to that access to cash from 2020.

The property market experienced its “worst-ever slump” last year, with sales down 24 per cent, said Rosealea Yao of Gavekal-Dragonomics, a Beijing-based economic consultancy firm. But after a dark year, “China’s property market has shown signs of stabilising” since the beginning of 2023, according to Fitch Ratings.

In March, a representative survey of major cities across China recorded a significant increase in property prices, according to figures released last Saturday by the National Bureau of Statistics (NBS).

Of the 70 cities that make up the official list, 64 recorded a price increase — up from 55 in February and 36 in January. Please do read the full article with a lot more details here:
Article in channelnewsasia.com

Stop believing that property prices would keep rising very fast (this is more like a gambling statement)

The rationale of “If a condo price in an area next to the prime area could rise from RM247,000 to RM640,000 in 12 years, surely that same property bought at RM640,000 could rise to RM1.2 million in the next 12 years?” Sorry, it does NOT happen this way. It could have risen because the prices were just too low (versus the world….) and it’s now expensive (by local country salary standard) and thus the increase moving forward would go back to a typical inflation pace. Or even slower until the salary starts to catch up.

Happy understanding that property investment is not supposed to be fast and furious. That’s for many other so-called investments but for property investments, it should be a sleep soundly and watch it rise steadily kind of investment. Unless of course we bought an overpriced investment in the first place yeah.

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China, the new ‘World Bank’?

Yes, you read it right. I think China is becoming the new ‘World Bank’. Is it a good sign? I think for many, this is not a good thing, especially for the IMF and World Bank supporters. For me personally, yes I would love to see China rivalling both of them or even exceeding these world lenders of last resort. What has happened recently? Well, China and India are backing a 21 country US$100 billion Asian Infrastructure Investment Bank (AIIB). Three notable absentees include Australia, Indonesia and South Korea. No guessing on why they were absent. 🙂  This AIIB would be headquartered in Beijing and initial capital itself would already be US$50 Billion and the later to be increased to US$100 Billion. In other words, within a short period of time, AIIB would be two-thirds the size of Asian Development Bank. As the name implies, its focus would be in Asia and for Asia. Japan is the largest shareholder of Asian Development Bank (ADB) and thus is not expected to join AIIB and play second fiddle to China.

Now there are two avenues for Asian countries to go to whenever needed instead of one and this is definitely a positive sign. US officials said that they could not support this initiative because AIIB is unlikely to be like the IMF, World Bank or ADB which not only lends money but also promote good environmental, procurement and human rights standards. I think you know which country he is referring to. Well, no comments on this statement. Believe what you want from the different sources that you read. 🙂  Oh yeah, according to

China’s Finance Minister, Lou Jiwei, AIIB will set high standards, safeguard policies and improve on the bureaucratic, unrealistic and irrelevant policies. Do you wonder whose policies are he referring to?

As the second largest economy in the world as well as a rising superpower, China has continuously played an important role in the world economy today. For example, Russia which is facing economic pressures with the sudden depreciation of Rouble has gotten assistance from China. Besides Russia, other countries which had asked and gotten help from China include Venezuela and Argentina. Besides that, China is increasingly promoting Yuan for bilateral trades and this would slowly put Yuan on the path towards full internatioanalisation. Backed by the world’s largest reserves by far, I think China would be a good ally to have. Many western reports have stated that if you do take money from China, you would have to do its bidding. I think, even if you take IMF’s money, you would also have to comply to its requirements which as usual is set by the country which is setting its direction. If you borrow money from the bank, you would also have to comply with its many requirements. Happy reading about these global financial dramas.

written on 28 Dec 2014

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China to Singapore through Malaysia with High Speed Rail. 12 hours?

Rail is amazing, especially the high speed ones. I loved it so much when I travelled from Tokyo to many other cities until I reached Fukuoka, all via bullet trains. It’s smooth and on time every time except when the earthquake and tsunami came. Yes, I was in Japan at the same time in 2011. I reached home safely few days after as Air Asia continued flying while all the rest of the airlines have stopped. Fortunately, earthquakes are not expected to happen in Malaysia. Rail does not just connect. It helps to generate economic activities along all the stops that it stops, something not possible by plane. Property prices, typically would be better along these stops too. Therefore, I think trains, especially bullet train from China to Singapore within 12 hours should happen! Why not? Well, unless the KL – Singapore High Speed Rail is built by other manufacturers and not from China. Then, this plan may be delayed.

Seriously, have you ever travelled by train before? Even Malaysia’s own ETS service? From Ipoh to KL. You should. It’s smooth and you know its much safer than the express bus or even if you are the one driving because sometimes, we are just too tired to concentrate enough. Reported in an online media, CCTV reported that the Chinese government has been quietly lobbying Thailand for an approval to link Kunming all the way to Singapore, via Thailand. With High Speed Rail, it will take just 12 hours to reach Singapore. The lobbying includes funding for the project too. Something like Penang’s Second Bridge which was built by the China Harbour Engineering and the funding was by China.

What if this really happen? Well, if this really happen, then the northern alignment would continue from Kuala Lumpur along Ipoh till Butterworth and onwards to Hattyai. Imagine KL – Haatyai in 2 hours. 🙂  You can go for a real Thai Tom Yam soup before coming back for Hainan Kopi O with your friends in Kuala Lumpur, within half a day. How to have this happening? Well, another China firm may be the missing link when the tender is called next year; China South Locomotive & Rolling Stock Corporation Ltd. It has developed the HSR system and is currently running on over 11,000km within China. Well, Hattyai till Singapore is ONLY less than 900km. Haha. Think about it.

Yes, I love international airports as it links Malaysia to the world and the world to Malaysia. I love high speed rail because this is where real travelling for the masses can begin to happen and for an even deeper and closer integration to start happening in this part of the world we call Asia. It is after all the new engine of the world and it will continue to be for a long time to come. Largest, Second largest, 3rd largest economies within the next 20 years? Anyone who’s still thinking of USA may have the wrong answer. Let’s see then. 🙂

written on 25 Oct 2014

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China will lead the U-shaped recovery in ASEAN+3 region

Press release by AMRO:
Sharp Slowdown Confronts ASEAN+3 Economies amid Challenges of Containing the COVID-19 Pandemic

The COVID-19 pandemic continues to cast a long, dark—and uncertain—shadow over the outlook for growth, having wreaked havoc on the global economy since February 2020. ASEAN+3 governments have taken unprecedented measures to contain the transmission of the virus and keep their economies afloat. This challenging situation is highlighted in the
August Update of the ASEAN+3 Regional Economic Outlook 2020
 released today by the ASEAN+3 Macroeconomic Research Office (AMRO).

In the ASEAN+3 region, strict containment measures to prevent the virus from spreading have caused economies to come to a standstill, leading to massive increases in unemployment, disruptions to businesses, and widespread collapse in domestic demand. Bans on international travel have decimated the region’s all-important tourism sector.

Encouragingly, the pandemic has been relatively well contained in the region and authorities have begun to gradually open up their economies. Recent indicators show significant improvements in production and trade for some, while high-frequency indicators of people movement suggest that activity within the region has been gradually recovering in recent weeks as containment measures are eased. However, the opening-up has also led to renewed outbreaks in several places and authorities have had to re-tighten restrictions.

“We expect a gradual U-shaped recovery in the ASEAN+3 region, led by China,”
 said Dr. Hoe Ee Khor, AMRO Chief Economist.
“Regional growth is expected to slow sharply this year, to 0.0 percent, from 4.8 percent in 2019, before rebounding strongly to 6.0 percent in 2021.”

He added that nine of the 14 ASEAN+3 members are expected to contract this year. Economies projected to record positive growth rates are China and the smaller ASEAN economies – Brunei Darussalam, Lao PDR, Myanmar, and Vietnam.

AMRO’s growth trajectory is predicated on the effective containment of the COVID-19 virus, both regionally and globally. The resurgence in infections in some parts of the region and elsewhere have heightened caution about another spate of lockdowns, which the ASEAN+3 economies can ill-afford, even though most still have some fiscal and monetary space to provide support if needed.

“The biggest challenge facing ASEAN+3 policymakers in the second half of 2020 will be balancing the trade-off between easing restrictions to revive their economies and risking another wave of infections,”
 said Dr. Li Lian Ong, Group Head and Lead Specialist for Financial Surveillance and Acting Group Head for Regional Surveillance at AMRO.
“Managing the exit from the raft of pandemic policies will be key to regional financial stability.”

— end of press release —

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Bad news? China’s credit rating cut because of ‘slowdown in economy.’

We must realise that China is a huge ‘help’ when it comes to GDP growth. As of not, it’s true even for the U.S economy. The U.S relies a lot on China’s willingness to lend when the U.S needs to borrow. Trade wise, it’s not an awesome thing when your biggest or top 3 trading partner slows down because it would mean that the country would need to work harder to find new trading partners just to replace the slowdown. China’s property market is in trouble, says some analysts. Here’s one:
Global property bubble about to pop? Pop means kaboom

Well, as long as its economy continues to grow, it should be just fine right? For many developing countries, growing less than 8 percent per year means it’s slowing down. Especially for China because of its potential; population. For now, there is a bad news for China where growth is concerned.

A big piece of news about the world’s second largest economy, China. Moody’s has cut China’s rating from Aa3 to A1. This is the first time it is cut since 1989. (Funny why it has never increased the rating despite all those progress over the years. Yet, one particular nation which has been increasing its debts is always rated higher….) Before everyone starts panicking because of the mumbo-jumbo, this cut means that China is “Rated as upper-medium grade and low credit risk.” It was previously rated Aa3 which stands for “Rated as high quality and very low credit risk.” Malaysia is rated by Moody’s at A3. Same level but two notches lower. This is what it says about Malaysia just a few months back
Moody’s on Malaysia:Balance budget 2020 unlikely

After the rating cut, this is the response from China’s finance ministry. It says that
Moody’s was exaggerating the mainland’s economic difficulties and underestimating reform efforts. The other two rating agencies have not changed China’s sovereign rating.Standard & Poor’s rating for China currently stands at AA- with a negative outlook, while Fitch’s rating is A+ with a stable outlook. Moody’s says the cut was because of rising
economy-wide debt and potential growth slows”.  China’s GDP grew by 6.7 percent in 2016 and this was the slowest since 1990. One article about this can be read here:
Nytimes.com: China can’t sustain its debt binge.

I think for now, no huge changes. China is trying to rebalance its growth from foreign investments into a more domestically driven one. I think this will take some time but is definitely the right way. Anyway, President Trump from the U.S is doing something similar. He has said it for a long time. At the same time, China is pushing for more integration between all ASIAN nations and I think this One Belt One Road policy will help to drive future growth. Happy following.

written on 24 May2017

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China’s economy, the main anchor to all

It would be foolish to look more to the US economy to predict what will happen like what is happening today in the context of ASEAN. While the US remains the largest economy of the world but it is not even among the top three largest trading partners to ASEAN anymore. Largest is China, followed by Japan and third is the European Union (EU). It’s time to switch to a more appropriate country, the new engine of the world. Our new anchor. The more important economy which I consider an anchor to majority of all ASIAN economies is China. In fact the three top partners continue to invest more in ASEAN and trade numbers are certainly growing a lot.

So, what happened recently to our anchor, China? Well, its stock market dropped 32 percent within one month. It wiped out a total of US$3.9 trillion (RM14.8 trillion) in value. It has since rebounded but the huge ‘correction’ has affected many countries who has hoped that China would bring more good news after Greece defaulted recently. With China’s weakening, its ability to import from many of the ASEAN countries would also fall. As the world’s biggest consumer of global commodities including oil, crude palm oil, iron ore and copper, it has shown that lower demands meant lower global commodity prices. Yes, this has affected Australia tremendously. Just look at its currency and you can see the ‘RM’ image as well. Nope, that’s not sentiment, that’s real numbers. AUD has fallen 9 percent in 2015 versus US$.

I seriously believe China has enough ‘weapons’ to tackle these weaknesses. First question is, did all the companies listed in China suddenly turn in a bad result? All of them? The answer is a simple, no. Did sentiment suddenly turn extremely negative due to many different reasons within and externally? Answer is a definite, Yes. Are all the companies doing exceptionally well before the sudden huge fall within past few weeks? Answer is no, the performance cannot suddenly change overnight. Please understand these few questions calmly and objectively. Of course, if all the quarterly reports from majority of the companies show a huge drop in profits / revenues etc, then yes, we are in for a much deeper roller-coaster ride than currently. Let’s wait.

Oh yeah, as usual during these sudden falls, the worst affected would be the uncle and aunties who did not have early warning. This is another problem that the Chinese authorities would have to also tackle as well or it could also spill into a social problem. Reason is simple, if everyone on the street does not have enough money to spend, it will turn up in the statistics of the country’s economic growth. There has been some predictions of a full blown economic crisis in China but I think if this happens, no country in the world would be safe, not even the largest economy in the world. Let’s hope this does not come true.

written on 10 July 2015

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China’s GDP will surpass the U.S. by when?

Without economic growth, let’s not talk about property. Perhaps stop talking about any investment because there’s nothing to talk about. in fact central banks including Bank Negara Malaysia may not need to do too many measures about the interest rate too. Just let it be perhaps? Haha.

China’s a very important trading partner to Malaysia and ASEAN too. In fact, ability to speak Mandarin is likely to be a great booster today because China is already the world’s second largest economy and in terms of actual comparison, China’s economy is bigger than the economy of Germany plus the UK plus India plus Japan and… more. That’s the size of China’s economy yeah. Do take a look at the chart below.

Anyway, despite the COVID-19’s effects, the world continues to grow yeah. It will be reaching US$104 trillion by the end of 2022. Where is Malaysia? Our GDP is at US$439 billion. We are projected to grow the economy by 5.7 percent for 2022 by OCBC and this is definitely a good number because the world’s growth is slowing down as per International Monetary Fund (IMF) Article
here: Malaysia’s GDP growth in 2022

I am personally quite optimistic that 2022 will be a good year if we compare to 2021, 2020. If Bank Negara Malaysia continues to increase the interest rate, it definitely is showing a good sign that the economy is getting strong enough for a higher interest yeah. Else, they definitely will do best to keep the rates low in order to be accommodative to growth. Oh yeah, happy buying your new car! (even if there’s no more exemption in sales tax yeah)

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China’s Hong Kong with a Hong Kong town in China. A rail based plan.

According to Bank Negara Malaysia, the average median property price versus household income ratio for Malaysia is at 5.2; severely unaffordable. In Hong Kong,

it’s quite close to 20. Here’s that earlier article.

There are no category for such a number. If there’s a ceiling, Hong Kong’s property price affordability is higher than the ceiling. The government of Hong Kong continues to try and make homes affordable to the citizens. Of course, one of the ways to make it affordable is to build smaller units but this is not really healthy in the long run. How small is small?
This is an earlier article.
Well, even a major owner of a developer in Hong Kong says that it’s not healthy to stay in these small units for long term.
Here’s that earlier article.
 The smallest units should only be between 300-400 sq ft and not half of this. There’s now a potential solution even if it requires a bit of travelling and perhaps earliest would be a few years later.

Hong Kong’s MTR Corporation runs the city’s railway network and acts as a property developer. (This is the most successful operator that I know which is PROFITABLE despite running a public transportation business. Reason? It’s also a very good developer and it owns many office buildings along the MTR lines. The rental more than covers the losses from just the usual ticket sales) the MRT Corporation has started talks with its state-run counterpart in China to explore some areas for it to build a commuter town. In brief, it’s looking at Nansha and Foshan to build a new town for Hong Kongers who could not afford homes in Hong Kong. Many may think this is a clever plan because it will help both Hong Kong and the areas which are developed for this purpose. This commuter town as the name suggests will be linked by railways.
Here’s the article in StraitsTimes.

The MTR Corporation says that the new community would have a “Hong Kong ambience.” It is aimed at retirees and young people and will be equipped with commercial and health care facilities and located near the high-speed rail station. Moving on, not everyone thinks of it as a positive thing. One pro-democracy lawmaker Claudia Mo told Agence France-Presse (AFP),  “It’s just yet another attempt to ‘integrate’ and mainlandise Hong Kong,” She also said that MTR Corporation is majority owned by the government. Some ridiculed the proposal online. “Is the government abandoning its people and pushing them out of Hong Kong?” wrote one SCMP commenter.  Many thinks this is going to segregate the poorer residents as well compromising the city’s autonomy.

Personally, politics aside, this does represent a solution to the current crazy property prices in Hong Kong. However, the segregation may be very real and this will not be healthy. No one wants to be known as the poorer community. Even today, whether it’s in Singapore or in Kuala Lumpur, people wants to stay in areas which everyone thinks is of a certain ‘level’ and would shun areas which are seen as ‘cheaper’ or less developed. Anyway, with the continuous rise in property prices, many of these further away areas would still rise in popularity. This is the same as asking someone if they prefer a smaller unit or a bigger unit. Majority would say they prefer a bigger unit but prices would bring everyone back to reality. By the way, if the property prices become totally unaffordable to everyone, get ready for the bubble to burst. I think no one wants that to happen. Happy following.

written on 25 April 2018

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China’s Property Market Rescue Package Deployed

I read from a Reuter’s report on China’s property market today. Why do you think some of the biggest developers in China are venturing into Malaysia? There is a huge oversupply condition in China’s property market today. Empty units and these days, some developers who just could not find buyers had to stop building and disappear. Some offer up to 25% discounts and this led to the confrontations between the earlier buyers and the developer. Shouting arguments happen in developers’ office and in some cases, clashes happen causing injuries to the home buyers. Fortunately this has yet to happen in Malaysia or would there be a chance for it? Personally, I think not. I think the developers here have already felt the slowdown since 2012 and many have restructured their offerings. Flipping is no longer a common word and perhaps speculation can be better carried out in the stock market versus the property market.

If China’s property market crashes as predicted by some foreign analysts, what would happen? Well, I am not any analyst but personally I think China has enough muscle to prevent this from happening. To me, a crash may not be likely. The government has started to take this seriously. It cut mortgages and downpayment levels for some home buyers for the first time since the 2008 global financial crisis. Main aim of this is to lend support to the sagging property market which may cause the economy to be pulled down too. Cash strapped developers were also given increased financing. This is to ensure the developers can pull through during this slowdown period.

Of course, if we now believe that the empty homes may soon find new owners, it may not be so. Prices spiralled too high previously. Something which we could also see in some parts of KL. Most importantly, the China property market should not have huge changes, either up or down. Prices which are way too high should come down slowly. Some buyers who wanted to flip previously may be willing to sell for a small loss. All these would continue to stabilise the market. This is very important for China and the world because property accounts for 15% of China’s economy and China is the largest trading partners for many countries, including MALAYSIA.

Thus, whatever is happening outside Malaysia would definitely have a bearing on what happens next for Malaysia. Overbuilding will bring with it lots of problems. Especially the non-stop spiralling of increasing prices. Bear this in mind when you buy. Buying is risky only when you knew next to nothing when you sign the agreement.

written on 4th Oct 2014

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