Buyer must BE AWARE too, else no one can save them when things go wrong.

My views were featured in an
article in FreeMalaysiaToday.com
 recently.

These days, cashbacks are becoming a huge issue because this is one way to entice potential homebuyers. What has happened for some buyers is that they chose the one wish the most cashback as their top choice. Sigh… guess what happens if the whole development, everyone receives the same cashback. Do we believe prices will stay the same when everyone gets their keys? Happy reading:

— Start of article in
freemalaysiatoday.com
: —

Real estate players are calling on the government to take drastic steps to control the issue of house price inflation caused by those who offer cashback schemes to home buyers.

The Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) says those who inflate prices to make cashback offers aimed at enticing homebuyers must be closely monitored by the authorities.

This issue has long been a problem in the real estate industry, PEPS president Michael Kong told Property Advisor.

“It is not difficult to correct this practice but the authority lacks the will. For a start, make it mandatory for both buyers and sellers to declare the true price of a property. If proven otherwise, impose hefty penalties,” he said.

“If banks lend based on inflated values, that in itself is a problem. In the event the loan turns into a non-performing loan, the banks may not be able to recover the amount because they have lent over and above the fair market value,” he added.

He said the authorities must be serious about imposing regulations, guidelines and policies. “Nobody is doing anything about it. We can highlight it but if the current authority has no will to rectify this problem, it will persist.”

He said Bank Negara Malaysia could impose a condition on all banks mandating a market study, which would eliminate most of the problem.

Apart from that, Kong addressed the importance of valuation and data, as they are a guide for the public on the actual value of a property. “It is vital to highlight this matter so we are not misguided by so-called ‘property gurus’ and investment clubs.”

Even when a property is put up for auction, the banks get back only a fraction of the loan extended.

“This is a simple mathematical problem. As the issue is widely covered in the news, people know the banks are aware of it, yet developers are still doing it, said Kong.

“Individual banks can make both parties (buyer and developer) declare the actual price being charged for the property. And if it can be proved it is an inflated price, they will be in trouble. But are the banks ready to do it?

“Whether it is an actual cash rebate or on paper, it is equally bad. When actual cash in hand is returned in tens or even hundreds of thousands of ringgit, it creates a different problem.”

Kong said when a project is completed, the banks disburse the loan and the borrower gets the cash. For projects still under construction, the homebuyer will get a paper rebate (documentary transaction).

“This is a situation where one does not see the money, just a rebate or discount on a piece of paper and a lower amount is paid.”

Firdaus & Associates Property Professionals founder and managing director Firdaus Musa said in property matters, especially financing, the valuation of the property is of utmost importance as it determines its fair market value.

“Valuations depend on the transaction data available. The most reliable data would be from the Valuation and Property Services Department. Other data, such as asking prices and any other published transaction data may also be considered secondary data in determining the market value.”

He said, based on these, and for lending or financing purposes by the banks, over-lending does not come into the picture.

“However, on banks’ risk management of potential over-lending based on risk profiling of borrowers, movement in the property market and the property condition over time acts as full confirmation of market value when processing the loan,” he said.

Firdaus added that normally the banks would approach valuation firms to enquire about the value of a property, and if they were satisfied with similar indications, only then would the banks proceed with the loan and instruct a valuation report to be prepared.

“For new projects, the banks will ask the valuers about the current market value of similar projects in the vicinity, whether the prices are fair and require a marketability factor on the projects to ensure the bank’s position of not over-lending.”

Charles Tan, founder of independent blog kopiandproperty.com believes all stakeholders should take proactive action on the issue of cashback rather than allow the situation to continue as it is.

“Let’s be frank. If you are a buyer and the developer offers you a cash rebate, would you reject it or take it? This is why buyers themselves must understand that when a majority buyer of a project takes up that cash rebate, it results in the property price becoming higher than the original property price before the rebate.”

He said if the buyers are fortunate and market conditions are stable, then the property price could go higher. However, that is a risk many buyers may not be aware of when taking the cashback and spending it on other things.

Solution to overpricing and inflated loans

“We have come across cases where loan sharks will force people to take loan compression for completed projects to get RM100,000 in cash, and then the bank is left carrying the baby, so to speak.

“Criminal syndicates are cashing in on these schemes and taking advantage to scam the banks for tons of money. They are organised, they have all the credentials, they know how the system works and they are earning, scamming the banks out of billions of dollars,” warned Kong.

Loan compression is when an individual applies for several home loans simultaneously from various banks in order to purchase multiple properties at a time, so they do not count as second or third homes.

“The solution is simple but nobody wants to take action. If you are taking an inflated loan, it should be declared to the bank,” he said.

— end of
article in freemalaysiatoday.com
 —

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Buyer vs Owner. The winner gets a better deal.

As long as salaries are rising faster than home prices, the
affordability of a property stays put or goes lower.

This is the same for all countries, not just Malaysia. This is why everyone must keep transforming themselves so that they take higher responsibilities and thus higher pay. It’s very dangerous to keep repeating what we do every year and hoping next year’s increment will be better. On an average basis, property prices may rise
higher than the average salary increments.

However, someone who has a promotion may have a 20 percent raise in their pay and this usually meant that the person would be able to afford a more expensive property. However, the housing market is not controlled by robots but by humans. This is why there is no such thing as the most accurate prediction regardless of who that property expert is. Coming back to the property market for sellers and buyers.

Owners who could wait will usually accept only higher prices. In this case, if the transaction do happen at a higher price, it will push the average property price for that particular development up. When it happens often, then the average property price for the area goes up. Owners who could not wait would have to sell their properties at a lower price because this is the only way they could sell their units first before all the others who are waiting for higher prices. When this happens for many transactions, this would help to lower the average property prices for the said development. The valuers may look at this and value the next few similar properties lower. Banks would be much more stringent too because no bank manager would want to lend at a higher value than what the market seems to be heading towards. A good place to understand some of the happenings would
iProperty.com’s brickz.my

Many people tells me that the current market is a buyers’ market. Yet, my agent friends are telling me that some owners are just ‘crazy’ because of their asking prices which just not going anywhere! Well, in some new landed property launches, the scene is a busy one.

Selling all units within an hour for example.
If this is the case, why did the developer not start their selling price higher? Well, the mode is to finish selling, start building and get profits. It is not to sell, then continue to sell and well, continue to sell until the cow comes home just because the price was 5 percent higher. Today, there are still many of these launches even if the right place, right type and right price usually sells pretty fast. Yes, the Malaysian economy is definitely not going to collapse anytime soon, regardless of what happens after the general election. Happy buying.

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written on 3 April 2018

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The state of the property market in Malaysia (owners and tenants)

I saw this nice pictorial chart from MGAG. Look below. In my mind, I could think of three kinds of property buyers. First timer who’s really scared of buying because it involves a huge commitment (at the beginning, especially). Second time property buyers who is looking for an upgrade after staying in his 700 sq ft apartment for 4-5 years. (Yeah, this was me long time ago). Then, we have those who already have properties, already gained from it and is now looking to buy more below-market-value properties. (Just look at the secondary market for these attractive deals too, not just those from the new launches). Yeah, there’s also those who wants to buy but could not afford and not necessarily it’s due to the house price, it might be because they were expecting way too much; close to working place, huge in size and small in price. (Fat chance…). So, the government must set policies to help the genuine buyers and it cannot be left only to the market to sort it out themselves. Or, they can build more of these affordable homes. (HDB in Singapore builds all the flats for qualified Singaporeans).

As per MGAG’s FB page (forwarded to me by a good friend), this is the state of the Malaysian Property Market. In an ideal situation, everyone buys properties which are corresponding to their earnings. (Anyway, it has never worked this way even if more than half maybe doing this). In reality however, there are those who needs a home but could not get one and they will forever be renting from those seasoned and experienced buyers who would have purchased most of those affordable homes. Yes, there’s also that oversupply and unsold issue that is also plaguing the market currently. Earlier article about it here:
Unsold units are u further 16k units. Now at 146k
Anyway, this is made harder by having the 30 percent downpayment requirement from the 3rd home purchase onwards. So, a RM250,000 home would require a minimum of RM75,000. To buy two of these RM500,000 homes, one would need to have RM150,000 in cash first. Ever wondered why these seasoned owners are so engrossed in saving more down payments? Yes, they have tasted the ‘sweetness’ of having rental incomes.

For first time home buyers, it is extremely important that one has also started on this journey of at least owning one home and not starting the journey to continuous rental payments which will eventually make the owners richer and buying ever more units and leaving the tenants always poor because the rental they pay will not be going into the downpayment for the home. As for those without a down payment yet, there’s hope yet. Aim at the Rent-To-Own schemes that has been made available in the market. It is true that the monthly ‘payment’ carries a premium over rental but this will be part of the down payment for the home in the future. As for the need to rush, I would personally advise to look around the affordable homes as well as the secondary market as well as even those unsold units (negotiate for some extra rebates, renovation packages etc). The property market is not as bad as that depicted but one day in the distant future, it may be. Happy getting that first home sweet home.

written on 28 July 2018

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Good sales team / RENs increases the chance to close potential buyers. Equip them!

This article gives an idea to the sales and marketing heads of the potential of your people to close more sales or far fewer sales even if the sales team seems to be working hard or working long hours. This is even IF hundreds of people come to your show gallery every week because you have paid tens of thousands of ringgit to do mass exposure whether through offline or online media (social media for example).

Remember yeah, if we are selling a shampoo, a great social marketing campaign will do wonders. Potential buyers will just click, pay and get the product. The risk is technically extremely low or none. If it’s a property (regardless of your developer brand), any marketing ringgit you spend is just Building Awareness. The real deal is when these people who saw your campaigns drop by your gallery. Do they bring their cheque book along? Are you sure? So, the question is, are your people closing the sales or closing the door to potential sales.  Some questions you may love to ask your current teams and the typical answers are as follows:

#1: Customer:  This condo is on top and there is a mall and there are shops and also office units. Is this for residential or is this for commercial?                                                                                Sales person:  Wait, let me ask my senior. If I am not mistaken, it’s can be residential and commercial…

Do you still think the customer will have CONFIDENCE in whatever the sales person says after this?

#2 Customer: Wah, this project is very far away from the KL city centre.                              Sales Person:   It’s not far at all. it’s just 50km or 1 hour away from the city centre!

Okay, so 50km or 1 hour is NOT far from the city centre yeah. So, what is far from KL city centre? Tanjung Malim or Tapah? 😛

#3 Customer:  I come because of your price. Now you tell me the size which is smaller than 500 sq ft, how to stay for my whole family?                                                                             Sales person:  Uncle ah, with this price the size sure small lah… Some more this is a very good area, many people will buy one.

His points are good but his response is rude!  Come on, how do you know this uncle does not have a son / daughter who’s single and may just be interested?!

These days, within one area, there are many developments which are being launched. It need not be the same time but as long as everyone is still selling, then the potential buyers would be visiting more than just one sales gallery yeah. Even if they ask me, I will tell them NEVER to just visit one sales gallery and make their decision.

Many projects may even have similar configurations. Nearby the MRT… Nearby one popular mall… Nearby an international school…  Infinity swimming pool… Floating gym overlooking the pool…  900 vs 950 vs 1,000 sq ft… 3 rooms and 2 bathrooms… AWARD WINNING development… very well connected to the expressway… I think all these would sound very familiar to everyone right?  If this is the case, then what’s the real differentiating factor then? That final connection lah; a good sales person or a good Real Estate Negotiator.

Just remember yeah, IF reading the brochure alone can sell, then why need sales people and why pay them commissions? Why not just print very nice brochures so that the potential buyers can read by themselves then?  IF just advertising alone can sell all units, then why are so many projects still selling even after spending hundreds of thousands on advertisements on mass media both offline and online?

Happy understanding that equipping your sales team or your appointed RENs will be key to selling more units. With the current slow market, it may still take some time but imagine if we continue to attract more people to come to the gallery but our sales team continue to have super low conversion rates… That would be disastrous. Oh yeah, if you can read until this point, it means you are in the management of the sales and marketing team. Feel free to
write in to us and ask for an overview of ‘Effective Selling and Handling Objections workshop.’
 Form as below:

[contact-form-7 id=”35143″ title=”Sales Training Enquiry”]

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Buyers today, property fairs today and ignorant developers

There’s a property fair in Penang this weekend. (KWYP) There’s a property fair in Setia City Mall in Shah Alam. (The Star) Besides property fairs, there are so many new launching / previews in the market today. Just go into Facebook and go to Property Talk and Lifestyle Malaysia and you can see all the latest launches or upcoming ones. Are there advantages to go to property fairs then? Yes, the most obvious advantage is that you get to view many different projects under one roof. What’s the bad thing about property fairs? Truth is, not many developers launch their projects during such property fairs. Some even take property fairs as their final chance since they have been selling and selling and selling for the longest of times and there are still many units left.

My friend told me she saw one developer in the property fair in Penang. I laughed out loud. The reason I laughed was because over one year ago, this same developer told me that he does not need to do much advertisement because their properties are selling by themselves and there’s just 100 plus units, they do not need any online presence. I told them then that I wish them the best and gave them a smile. Of course if they managed to sell it all, they can continue to think that there’s no need for any online presence.

However, their presence in the property fair proved one very important point. While demand is there, if you take all the buyers as fools by selling it high, very few buyers would buy. These days, comparison can be done easily and quickly, online. These days, words travel fast, especially the time when you did your so called ‘launching’, it is already online. Thus, when I search online, I know almost exactly when you launch the project. Just go apartment-penang.com or penangpropertytalk.com  As a developer, your history can be found there easily.

Property fairs remain to be an important function for buyers and developers to connect. However, for developers who think of these property fairs as a place to dump their leftovers, then just beware because you will still not sell too many. If your project was promoted widely previously, there is no longer any need for you to dump your leftover. I remember one mainland developer who launched their property in a property fair, they sold so many units because their price was attractive and they got ready all the packages, all the bankers and hired many part-timer sales staffs. This is the mark of a developer who understands the market.

If any developers were to read this article, I hope you note that the market then and the market now is totally different. Many years ago, selling one project for over 1 year is considered okay. Today, try selling that same property over and over again is not a good sign. You may even lose earlier buyers too. The current online users started in 1990s. Today majority of them are already 40 years old. The rest of those below 40 are all already online savvy. Think carefully before you decide that a one or two times advertisement in newspaper is enough to sell. Buyers today wants VALUE, wants feel good BRAND and they want minimum Quality products.

written on 31 May 2014

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Buying a home? Here’s where you know all your COSTS.

A good friend was buying a home for the very first time, after many rounds of discussion with me. Well, at least 3 mamak sessions. His wife is a medical officer and I would think must be the one who’s also pressuring him. Haha. Speaking of loan applications, he applied for three banks and all three approved him. See, it’s not hard to get it approved. Just make sure our CCRIS is pretty clean. He drives a VW Passat by the way. Somehow, all my friends drive better cars than me. Perhaps that’s why I bought my first property when I was 26? I think after that first property, I was forever ‘poor’ and could no longer allocate much for a car. One day, I will buy that Audi… (ONE DAY…) He was asking me many questions about the loan, the legal fees, stamp duty and even the tenure. I told him that these days, the banks are pretty competitive and he should just take the one with the lowest Effective Rate.

As for all the other questions, well, I found
www.propertypricetag.com
‘s fee calculator.
Click here.
Basically, it’s simply entering the house price and well, everything is calculated automatically. We can choose whether we are a buyer or a seller. Take a look at what happens when we enter the house price as RM400,000 and a downpayment of 10 percent. The calculator tells us that we MUST get ready RM63,405 if we intend to buy a RM400,000 home. In other words, instead of just the RM40,000 downpayment, we need another RM23,405 for all the rest; stamp duty, legal fees, other fees and valuation fees. By the way, this does not yet include the
renovation fee which would usually be between 10-15 percent of the home price.
 Please try not to spend too high because when you sell your home, no one is going to pay in full for your renovation costs yeah.

So, what happens if we are not a buyer but we are the seller then? Hey, it’s as easy as a simple click to change from buyer to seller. If we are a seller and the price of the property is RM400,000, we need to pay as per the screen showed; RM6,245. Yeah, that’s one key reason why no one sells the home they bought at the same price. Usually they will sell higher. 😛  Can we save even more on the legal fee? Yes, if we did not appoint our own lawyer but uses the buyer’s lawyer instead. Be reminded that usually nothing bad may happen but the lawyer is on the buyer’s side yeah. So, they will work for the buyer while for your side, perhaps they are just an admin to you. I personally would still appoint my own lawyer even if I am the seller. Just kiasu mentality lah. Hope this will help all of us in our many questions about calculation of fees. Happy using it.
The link for reference again, here.
Thank you yeah
propertypricetag.com
 (They did not pay any fee for this review. Perhaps if I drop by their office, they may treat me a cup of coffee. Haha.)

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written on LABOURS DAY 2018

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Buying a new car may just be a better choice than property

A younger friend asked me recently, should he buy a car or a property. I said, ‘You think I will tell you to buy a property instead of a car?’ He smiled and nodded. I said actually for you, you should buy a new car first. Seriously ladies and gentlemen, if the car you are driving now is a very old car, without much safety features and on and off it breaks down, please buy a new car before a new property. I term old car as cars above 12 years old but well maintained or 8 years old and not well maintained. Let me tell you a few reasons why I say so.

Safety. Older cars typically have a lot of issues, especially with regards to safety. The brakes may no longer be at it’s best condition. If the engine has stalled before, it may stall again when you are driving. I would recommend you to buy a new car with at least one airbag for the driver, ABS, Disc brakes etc. My brother who’s an engineer said, ‘disk brakes will brake even after you have continuously been pressing brakes many times when you come down Genting Highlands. However, drum brakes may fail if it was too severely tested by your driving ability’.  Oh yeah, if you intend to be successful in future, staying alive till then is a pre-requisite.

Stable money management. If you bought a home and have just about enough for the mortgage every month, what if your car breaks down and needs a major overhaul? My friend’s Wira broke down, he overhauled the whole car and it broke down again 6 months later. My personal mechanic in Ipoh said, ‘if a car is old, there are a lot of things you cannot predict.’ Note, it does not mean a new car would not breakdown but it is comparatively much lower probability. With a new car, just make sure you service it on regular basis and you should be safe for at least first few years. This allows you to also serve your save money for your property or paying your mortgage payments without any hiccups.

Image. My friend is already a senior executive / assistant manager. Driving such an old car does not make sense. What if you need to send your client to the airport? What if you BIG BOSS from overseas needs you to fetch him from the airport? Seriously, I do not think anyone would complain the cheapest version of Saga SV because it is still spacious, cooling zircon and new. However, if the dashboard is torn here and there, the window does not really work, the air-con is not cooling enough and one of the doors can only be opened from the inside, what are you trying to do? Destroy your image?

Thus you see, there are still overwhelming reasons why you may just want to get a car first before property. However, majority of the time, I would definitely say property investment wins hands down versus buying car depreciation.

written on 16 march 2014

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Buying a new home? Ask Why, not just WHERE.

Someone reminded me this important point recently. When we first thought of buying our first home, how many of us would ask ourselves, ‘where?’ Many would argue that the most important question is always ‘where’ and there is nothing wrong with this. After all, all property gurus would always say,
‘location’, ‘location’ and ‘location’,
 right? After the ‘where,’ why not ask ‘Why’? The reason why prices in certain areas are already very high is because it’s attractive for some reasons. Many times, the question is just a question of ‘why.’ When we have the answer to this question, our choices suddenly increase.

For example, if we say Kelana Jaya, ask why Kelana Jaya? Is it because our office is within Kelana Jaya and we wanted to be able to get to work and home as early as possible? If the answer is YES and we can afford, of course it’s best to buy close to the office. However, if the answer is that it’s near to the Kelana Jaya LRT station, then you are in luck, there are many more of such developments, some are even
nearby MRT stations
, a new attraction.

If the reason is that it’s nearby a favourite mall, then please understand that the number of malls are increasing. Thus, choices next to malls are also increasing as well. If you do not want to drive too far, then converting this
distance into duration
 may reveal more choices. Understand the actual time needed. Further does not necessary mean longer driving time. Google Maps would be your best resource. With all the public transport availability you may also have a few more options too.

If the choice is due to preference for
low-density
, why not visit the high-rise developments with your agent during an afternoon at 5pm to look at the number of people using the swimming pool instead? Look at all the available facilities as well. Actually maintenance depends on the management. Some low density developments may be very badly managed and some so-called high density ones may have better maintenance. Visit and understand, not just look at the number of units and decide.

There are still many choices, both new launches and even secondary ones. According to some news I read, new launches would be continuing and the prices would continue to be attractive. This would be launched by the many state affordable homes such as RUMAWIP, Rumah SelangorKu as well as PRIMA and MyHome among others. Many of these choices would be at locations which would not be considered at all. However, think one step further, asking ‘WHY’ may reveal some good overlooked choices.

written on 10 Aug 2015

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Buying a Property, away from Analysis Paralysis

If you ask ten different friends on what are some of the criterias of a good home, you would get at least 5 different answers. Is this bad or good? Actually, this may not be bad. Imagine if you ask ten and everyone gave you the same set of criterias. I think you must be asking ten of your friends from your village who went to same school, same university and same education background and even similar jobs! If that’s the case, why bother to ask. Too many opinions, Too many property gurus, too many books meant Analysis Paralysis, who’s right?! Some tips on how to avoid this ‘analysis paralysis’

Be really clear. Do not ask your manager, your co-worker, your parents, your wife and your best friend, what do they consider the best property. This will get you nowhere. In fact you should be the one whom you should ask. Why am I buying this?
 Own Stay? Investment?
 If your answer is, own stay also can, investment also can, that’s called, ‘nonsense’. Sorry, if you are already a
multi-millionaire
, then yes, that’s ok.

Specialise in one, first. If you go to five different showcases of five different types of properties. Assuming you went to a
luxury condo

and you were convinced that expatriates are zooming into Kuala Lumpur. Then, you go to view bungalow lots and you were again convinced that your target in future are those businessman would prefer bungalow over condo. You then go to view the sub RM350,000 new launching in Kajang and after calculation you feel rental would give you continuous positive yield. Ok, now what. Personally, I feel that you should just concentrate on one type FIRST. Do not be Jack of all trades, master of none. That time will come. What’s the rush.

Make a short and clear checklist
. Do not create a long checklist of 20 things that you must have. Assuming, a few of the properties obtain almost the same rank, what do you choose? The lowest priced one? Personally I feel that you must have a checklist but it should be only limited to things which are really important, for example, location (10 minutes from town), or number of car parks (2 and must be covered). The points must be very clear. Either a yes or no answer. If it meets majority of
your strict requirements
, decide.

Be knowledgeable. There are many seminars by many property gurus in the market. Should you go to every one of them? Answer is, no. You should go to the one that you feel meets your expectations (synopsis, or friend’s recommendation) and continue to follow him/her. There are a lot of Facebook pages about properties, join the largest two. Don’t join five. It will just drown you. There are lots of books in the bookstore, read the synopsis and buy the one which attracts you the most. Of course, one thing’s for sure, follow kopiandproperty.com too.

Until today, I have only been buying condos and nothing else. My main reason continue to be long term rental returns and thus far condos which met all my checklists have been a good buy. In terms of books though I have read many and I think the resource rich books are preferred to assist you in your decision. For example, Ho Chin Soon’s books. I also read Property Insight and Property Hunter on a monthly basis. For online news, most of the time, I read The Edge and Starproperty.

Written on 3 April 2014, updated on 6 July 2016.

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Great question for property investment: Best Time, Worst Time and Some Time.

This article was written for
propsocial.my and was published 2 months ago.
  When is the
best time to buy
a property? I am sure everyone has his/her personal answers based on their experience.

Look for Opportunities

For people who have not bought a property, the best time may
yet to come—hopefully, it will be one day soon. For now, they are still
waiting. A senior management of a top developer in Malaysia once told me that
the best time was 20 years ago; the second best time may just be today.

For seasoned property investors, the best time is when they
find a distressed seller selling below market value. It may also be a property
they found in an auction where there are no other bidders and the property is
20 percent below the market price! These seasoned property investors almost
always keep their eyes and ears open for any potential opportunity.

The Worst Time?

When is the worst time to buy a property? For a first-time
home buyer, the worst time may be during some crisis right after they bought
their first property. During a crisis, the prevailing sentiment is negative and
they may find out that the property they paid for RM400,000 just a few months
ago is now in the market for only RM360,000.

Best advice? Ignore the market and just keep paying and
enjoying the stay. Recovery will come soon after. Past crises have shown that
recovery is a certainty here in Malaysia. From the 1980s to the 1997 US
subprime mortgage crisis, nothing has bothered our property market for more
than a few years.

For the seasoned investors, the worst time is when they could have bought but did not. I still remember the time I bought a condo in Kelana Jaya. The year was 2007. The units were over 1,000 sf and most were below RM200,000. I bought one for RM183,000 and wanted to buy another unit at RM192,000. After negotiating, I could not get the price I wanted and the transaction did not happen.  Fast-forward just a few years later and the same condo is now RM400,000. I sold my unit for RM460,000 after the RPGT period. If only I proceeded with the second unit…, right?

Maybe one day

I have friends who tell me that they will be buying a property “some time” in the future. When asked when, the answer will always be vague, and the “some time” never turns into the first time. If we look at advanced property markets in the world today, the fact remains that without a property to our name when we retire, it will be a tough time. Property may just be the ticket out of poverty in many countries.

In Silicon Valley, for example, the monthly salary of a
security officer is US$2,400 but he would struggle every month because of
property. The typical rental for a one-room place is US$2,400. He could share a
room with others, but I am worried for him when he gets old or when he has a
family.

Remember, when we retire, our income stops and it’s going to be a struggle paying for rental every month. However, if we turn that “some time” into “the first time”, the property would have been completely paid for at the end of 30 years.  By the way, a RM200,000 property at just 2% increase per year will still become RM500,000 at the end of 30 years. It’s very true that inflation would have eaten a lot of the RM300,000 increase in value, but I want to also remind everyone that not many Malaysians could save RM500,000 in their bank when they retire.

Be Ready

The best time to buy is when we are ready to buy. The worst time is when we have spent everything we have every month and then we find a property we’d love to buy but have to abandon the idea because we just could not afford it. Please discard the “some time” thought and focus on making that first-time property purchase a success.

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Happy deciding.

written for propsocial.my over 2 months ago

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Property Investment 101: Here are 5 reasons why buying a property is always very challenging (then, now and future)

#1 – Price is never at the level I want

As soon as someone said that property market is challenging, many potential buyers would tell all their friends that they are waiting for the property price to fall lower. The price has to be right. When asked what’s the price they were waiting for, the answer is usually they have no idea yet but they will make a decision as soon as the property price falls to a level they want. Decide lah, which level… is the level?

The unfortunate thing is this. Too many people arre looking to buy into areas where everyone is also thinking of buying. This caused the demand to be higher than the typical limited supply of properties in these areas. Most of the time, mature neighbourhoods where everything is already fully built and everything is available too.

#2 – Property market is never ready

When property market is booming, too many people who does not own a property said that the property market is likley to crash. When the property market is closed, for example during the Movement Control Order (MCO) periods, then people say that the property market is too quiet. When the property market is neither quiet nor booming, people say that they cannot see the direction which the market is going yet. Hahaha.

#3 – Renting is more comfortable

Not many people could save RM50,000 in order to pay for a downpayment for a RM400,000 property. RM50,000 savings in 5 years meant that this person may have to forego many, many, many things he / she loves to do. From vacations to nice restaurants and even to buying new gadgets. The more comfortable thing to do is just to rent a very nice place and enjoy that nice place and not thinking of saving like crazy, forego everything one loves and then buying a place which is inferior versus the place one is able to rent for the same amount every month. This is why renting is much more comfortable and easy to do too.

#4 Salary is just too low

This one is definitely the fault of the employers. They should pay me more money so that I could use the money to do everything I want including buying a property. If they pay me so little, how do they expect me to balance my expenses and savings and then still having funds to buy a property? Definitely the fault of the employers who are earning huge profits but paying me peanuts and thus cusing me unable to buy the property which I want.

Salary too low has always been a complaint. I have an ex-colleague who told me she bought her second property after listening to my sharing. She told me she was aiming for the third one. Her salary is nowhere near T20 catagoery yeah. She brings her own lunch… she drives a typical national car,… she has a handbag which I have no idea about the brand…I salute her for not complaining about the same thing as most people.

#5 Have zero idea that property is compulsory

Too many people continue to read too many investment ‘experts’ who does not think property is compulsory. Continue to share all those calculations showing their favourite investments could give returns which are double that of property. They also show that many people could retire without the need for property investment. They also show how much one could save if they did this and that. Frankly, majority would need a property because they cannot SAVE ENOUGH, they cannot EARN ENOUGH and they cannot AFFORD to pay rental forever.

Without a property, this is the needed amount in order to keep renting till we no longer need to rent.

20 years x 12 months x RM2,000 (rental and we assume price does not change) = close to half a million; RM480,000.

As long as everyone has this half a million when they stop working, OF COURSE you do not need to own a property.

Conclusion

All the best no matter what you chose to invest in. In fact if you could start a business and it could earn you much more money than needed to keep renting, please keep renting and make that business work. Property is NOT needed when one has by far more money than what is needed to rent a place to stay for probably 20 years. Most working professionals stop working between 55-60 and they usually live to 75-80 years old. Or perhaps just work far longer than the typical Malaysians lah. Then, one would continue to have salary to cover rental every month.

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Buying a property – Four questions to answer

Recently, a friend told me that she reads my blog quite frequently these days. Quite a lot of interesting articles and her goal is to buy a few properties within a short period of time. When I asked her, ‘when?’, she just laughed. She asked me to teach her. I told her honestly, if she wants to get up to speed fast, she needs to spend some money and go for those workshops by some property gurus. So many of them in the market. These property gurus would teach you how to maximise your property investment in using the little resource that you have; money. I told her though that instead of answers, I could give her four questions. Sort of a guide to how soon she should start her property investment.

1) Would our salary increment be negative? I mean for the majority of us. You can say whatever you like about inflation being higher than your increment but the fact remains that today, you are ever willing to spend RM10 for a cup of italian brewed coffee versus the usual RM1.20 Kopi-O that your parents said is expensive because it all started with a few cents. If your answer is, ‘my salary would continue to increase’, think what would happen to the stuffs that you would need to buy, including property.

2) Would urbanisation stop? Would graduates, after they left their hometown for their higher education be flocking home to their small hometowns and work as, well, as, well, I don’t know, perhaps a bank executive and retire 35 years later as a branch manager, if he/she is lucky? If your answer is, of course not. They would try their best to climb the corporate ladder here in the city, whether it is Klang Valley or Penang or Iskandar or even Singapore. What would happen to the property price when all these people flock to the city, all without a home?

3) Has property prices every stayed the same, ever? Even if you do not include the periods of 2010 onwards? My parents bought their Ipoh house at RM85,000 and it was considered very high then. Today, our neighbours house was sold for over RM350,000. Yes, it’s true, if you count the 25 years that they have owned the place, RM350,000 does not seem a lot but hey, that’s Ipoh! I repeat, ‘has property prices stayed the same, ever?’

4) Can more land be made available? Answer is YES. You can stay further and further away, right? Surely no one needs to stay at the same place that everyone wants to stay? Yeah, sure. If that’s the case, why are prices in popular areas jumping faster than those further ones? Do you know why new launchings in popular places are always condos? That’s because there are no available large pieces of land for landed properties already. Yet, everyone wants to stay there, so developers build condos to cater to the location demand. The answer is, LAND cannot be increased or made available once it’s used.

There are a lot more questions I can ask but if you can answer these four, you have already started on your journey. At least the mindset is now correctly tuned. Note, never ever be a speculator because you may lose everything and may even cause many others to lose everything. The advice is, buy if you can and buy early because buying a property has never been easy and as you get older, it gets even harder. Buying a property? Please answer the four questions.

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written on 9 April 2014.

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Buying a property? Comparisons, Viewing and Buying.

Please do not think that property prices are way too high. It will stop us from doing anything and in the end, we may have nothing and need to continue renting. FYI, when property prices are way too high, the transactions would stop, there may be panic selling and the property market may just crash. Yes, I am serious. Understanding what is a property bubble is important. Here’s an easy to understand three signs that anyone of us can pay attention to.
Spotting signs of a property bubble, 3 points (Updated)

There’s no need to look too far back. Property market may have bubble building and even bursting. It happened in 2008 in the country whose currency is rising versus virtually every country in the world today. Perhaps it’s because they are the ONLY country which is doing well even with close to 5 percent unemployment rate, huge trade deficits and huge national debts. Or perhaps every country in the world are just not doing well, somehow. Assuming you are now awake and after searching some property listings site realised that there are still properties that you could afford. What’s next? Three things should happen next before you decide. I assume you already have enough downpayment.

Comparisons. Firstly, what’s the type of property that you NEED. It may not be an expensive landed or even a luxury condo. Perhaps it may be just a 730 sq ft apartment like me when I first started. Yes, I love my first apartment and until today I still have sweet memories with it since I stayed in it for 4 years. Secondly, what’s your first choice area? Once you have decided on that area, start looking at other similar areas as well.
Answer the ‘WHY’ not the ‘Where.’
Lastly, once you have decided on the type and the area, compare different developments and decide which are the ones you would like to view. Set aside time for this because it is our future.

Viewings. Even within the same development, after viewing a few units, we may like only one unit. That’s why viewings are necessary. Decisions come only after we have viewed developments in a few areas, not just one development. In fact, we MUST write down all the positives and negatives from all the viewings because after over 10 viewings over a period of a few weekends, it will become impossible to remember all of them. Some tips on inspecting the secondary condos that we may be viewing?
12 tips on inspecting condos
.
Assuming you have done sufficient viewings, it is time to decide.

Buying. Once you have decided on that property that you like, buying is not just saying yes. Buying is the final dot. Before that final dot, it’s negotiating. Do you have your second and third choices? Of course, let’s be realistic. The market is not full of desperate sellers because it has never been easy for everyone to get a home loan.
Approvals are so hard!

Our offer should take into account the prices that other sellers are also offering. If it is too low, it’s time to move on. The seller will not call you back. One colleague is still trying after failing in three attempts. He asked for a 10 percent discount. Another colleague meanwhile bought a unit after the seller agreed to a RM10,000 discount which is around 3 percent lower than the initial price. Perhaps a good target is in-between these two numbers. This is a property, not a pasar malam yeah…

Wishing you success in your property investment journey.
Starting sooner is definitely more advantageous than starting later.
Happy comparing, viewing and buying.

written on 22 Dec 2016

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Buying a property over RM550K, relaxed and easy

When I bought my first property just before I got married, my wife and I calculated and recalculated and one final calculation before we decided to go ahead and buy our first apartment, jointly. When I bought my second property which is a condo, my wife and I calculated and decided not to buy and only changed our minds after both our parents said we should upgrade. Even then, at RM237,000 it seems like a huge amount.Why would people even pay such money for a property for which the land was shared by 500 plus other units?

Few years back, I got to know of a new launching called The Latitude by Ivory in Penang. It was even more expensive than The Peak Residences and just right next to it. I told my colleagues about it. They said, ‘sure or not’. I said, I hope so because if not sure, then we will all sink together because the two projects are side by side. They said, yeah, let’s go buy it. Two of them each got one unit each. FYI, the price then was around RM550K. This was way above what I would have ever thought.

Actually there are a few reasons why they bought it. First reason was acceptance. It was already an accepted fact that RM380psf is indeed an affordable price in Tanjung Tokong. Acceptance can come once the prices continue to rise continuously and the prices stayed despite the financial crisis. Second reason was maybe because risk was quite calculated. Both of them owned properties which has appreciated from the prices they paid earlier and thus, worst scenario meant they sell their current place and move to The Lattitude which was only ‘very far’ away from their current place. Third reason was due to the mortgage payment which was still acceptable and the downpayment needed which was just 10%. Yes, if something were to happen, they may not afford any other things except these two properties but I think both of them bought with their eyes wide open.

Oh yeah, why did I say buying a property, relaxed and easy? Well amongst the two of them, one took just 20 minutes from the time she stepped in till she paid the deposit and another took 40 minutes. Have you ever decided to buy something over half a million Ringgit in less than one hour? Buying a property, relaxed and easy.

Note:  I do not have any units in The Latitude. The project I bought which was beside them was The Peak Residences which was much cheaper, just slightly over RM300K.

written on 22 dec 2013

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Buying a property. Way too Far, too High and too Soon (updated)

Just last week, someone told me that no one should buy properties if they are not ready. I asked what does it mean by
not being ready?
 He said, lots of reasons, especially these days when the money is insufficient and the cost of goods are all so high. Furthermore properties are also so expensive. How to buy? I immediately showed him iproperty.com.my and browsed for secondary properties below RM300,000 and chose Selangor. I said, there are still MANY choices. He said, who wants all these old properties.
The young people nowadays prefer new properties.
 Haha. Ok, I said nothing further. Well, just to reiterate three points why people said they did not buy yet.

Too Far –
Unless you buy in a place without roads,
 it is very hard to find a ‘too far’ place for property. Even property developers would never build in places whereby it’s impossible to access. Think about it. Many years ago, Mon’t Kiara was nothing more than just……. nothing. Sunway was nothing but mines, mines and mines. You only go Sungai Buloh only when you really have nothing to do. Today, these places are still growing, especially in terms of price per sf. Even Rawang is now firmly into the picture especially with Rubber Research Institute of Malaysia having moved out and leaving a huge and prime piece of land for development.

Too expensive – I remembered when condo prices hit RM250,000 in Penang many years ago. Imagine this, in 2007, RM237,000 condominium, with FULL FACILITIES, I could wait for over 1 month before going back to buy back the exact same unit! At that time however, everyone was saying, how can a
property without a land of its own be so highly priced?
 Local Penangites especially was the most critical as they have never seen condo prices being close to RM300,000 for a high level unit. Today, even RM500,000 for a 1,000 sf condo is considered cheap if not very cheap. Availability is nearly none. I am talking about Penang island.

Too soon – This has no meaning, truthfully. Buy if you can afford. Not buy things which stretched you thin or
speculatively buy
. Thus, the question of too soon does not appear. It’s just a question of can you afford it at that point in time. What age should you buy? 30? 40? No one can answer because everyone is different. Some may be lucky to have support from ‘PAMA’ (father and mother) bank so you can buy slightly bigger but if you are ready to buy instead of rent, you should proceed. If you do not, the money saved will go to Iphones, Samsung Notes etc anyway.

Property may not be for everyone because it’s very sticky.
 It may be high risk if you bought wrongly and many other negative reasons. How about investing in REITs? It’s safe, it’s easy to buy and it’s affordable and low risk. Alternatively unit trusts or even PNB’s funds. Diversification is key to lowering your risk. Please do not speculate. Happy investing.

written on 24 Oct 2014

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Buying a property. Why the long…………… wait for the whole process?

When you have decided to buy, you would normally view the properties within the requirements you have decided. Typically if you are quite sure, it would take 5 – 10 viewings and you would have decided. For those who have more than a few properties, it may take you just 1 – 2 views to confirm. Oh yeah, more viewing does not necessarily mean you are more careful. The careful part should start before you start viewing, not after you started viewing. If you can never afford an area, do not waste your time with that area. If you somehow found one which you can afford easily within that area which you cannot afford, think very carefully, why is the property still waiting for you? Okay, perhaps you are lucky. If that’s the case, please proceed. I would not have such choices because for areas that I have decided not to buy, I would normally not view them. So, this may take few weeks, at most within one month.

Next would be bank loan applications. If your documents are all in order, it takes nothing more than just one week and another week for the letter to arrive at your mail box. Even the lawyer’s side would take nothing more than 2 weeks for you to sign. If buyer and seller are both using different lawyers, multiply that by two. Still within one month. Then, why it takes me more than 6 months to get into my home last time and my friend took 9 months?! Well, some delay would be due to different banks being used by both the buyer and the seller. Bank to bank, they do not normally like each other anyway because one would be losing business to the other as soon as the transaction is completed. So, of course they would take their time.

The one thing which delays everything tremendously is the approval from the land office. Typically, it’s 3 + 1 months. Thus, everything may be completed from viewing till moving in within 6 months. If it’s a leasehold, this becomes even longer. State consent alone may take many months. This meant the whole process from day one of viewing until moving in may be nine months to one year after. When you think of it closely, what’s the main reason for up to 6 months? After all, it is highly likely that the same leasehold unit has also been given consent before and thus it is highly unlikely that consent would not be given. Of course it’s very clear that for bumiputera units, it cannot be transferred to non-bumiputera but for the usual leasehold units, why does it have to take so long? Seriously hope that this would be something which all the state governments would look into, especially Selangor. The only time when I felt that it took ‘forever’ to complete the property transaction is my two purchases here in Selangor. Both are leaseholds and both are secondary properties. Let’s hope this improves soon.

written on 23 Oct 2014

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3 Advantages of buying a renovated unit

3 Advantages of buying a renovated unit.

My first property was a renovated unit
 (way back in 2002)

The first time I bought a property, it happened to be a renovated unit. The owner sold it because he was moving out to stay at the upper floor of his newly bought shop-house. It was walking distance to his shop-house too. He extended the bathroom in the master bedroom which meant that I saved many thousands of ringgit in advance.

Without this extension, I would have to do it because the toilet design from the developer was very poor.

My first property outside the state I work in was also a renovated unit

I was still working in Penang when I decided to invest into a property outside Penang. My first condo in the Klang Valley was in Kelana Jaya and it was also a renovated unit. The kitchen was fully renovated with kitchen cabinets and I think I saved many thousands of ringgit just for that cabinet alone. So, yes, when it comes to secondary units, I prefer to buy renovated units. Below are some reasons I love buying a renovated unit.

#1 Value for money.

If the property’s market price is RM500,000 and the total renovation is RM100,000 what is the price which we could buy the property? It’s definitely lower than RM600,000 because no buyer would pay for the renovations which was not his / her idea in the first place. So, instead of RM600,000 maybe the buyer is willing to pay slightly higher than market price for it. Thus renovated unit in the secondary market is value-for-money units too.

#2 We Save Money.

Typically, an extended bathroom so that it’s bigger and more comfortable would have been easily many thousands of ringgit. A kitchen cabinet with a length of 10 feet alone would have been a few thousands too. Some may have electrical cooker and hob built into them and these are again, thousands of ringgit depending on the brand.

Curtain railings done meant a savings of a few hundred ringgit and we just need to get the measurement to do new curtains.  I could go on but I think you get the idea. All these renovations meant that I could now focus my funds on other things such as a higher qualify sofa, a better bedframe and mattress, a twin-door fridge, branded air-conditioners etc.

Else, all these would have been extra costs for me, not to mention I needed to buy something cheaper since my funds would have been stretched thin because I had to also allocate it for renovations too.

#3 We Save Time.

A friend just said that all the renovation timelines given by the contractor is never accurate. It’s usually off by a couple of weeks. (I think it also depends very much on whether the owner decides to change this and that half way too…)  Anyway, typical renovations may take 1 – 2 months. Very extensive ones will take longer yeah.

However, it’s not just the duration of the renovation which is long. It will also mean we needed to occasionally drive over and check the work progress and this also takes away our precious time as well. Might as well use those extra time for a dinner with family instead? Or to bring the kids to the playground instead? Lots of things to do versus just driving over and checking progress…

Not everything is awesome with buying a renovated unit yeah

You may not like the renovations and the owner refused to sell it at market price as the market price is for bare units. Most owners would want a little premium if their unit is a renovated one.

What if you really and totally dislike the renovations? Move on to the next unit lah. Surely it’s better to buy an empty unit then. If you want to renovate the unit to your highest satisfaction, its best to get an empty unit and start everything from scratch.

Depending on how you do it, it’s really possible to reduce the overall expenses to a minimum. Time and effort must still be spent though unless we have a contractor who knows our wants and needs very well.  Happy buying a renovated unit or if you are getting an empty unit, then happy renovating.

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Buying auction properties – Part 1

Today, a Penangite friend asked me, what are my thoughts on auction properties. To be honest, I have never bought any auction properties before. However, I remember some points from a talk I attended before some time back. It was by Mr. Stephen Soon, the Chairman of Penang Auctioneers Association and MD of MNP Auction Team, also a good friend of mine. He said the fears of auction properties are based on a lot of hearsay and rumours. He gave a few pointers to all buyers, whether they are buying for own stay or even investment and said that everyone should understand about auction because it is not that different from buying a secondary property.

First reason is good opportunity to bid for properties at a bargain. For example, in a foreclosure (bank) auction, the bank will first fix the 1st auction reserve price based on the market value. There are times when the property was not sold and for the next auction, the price will be reduced by 10%. What if you happen to be the only one who bid for the said property in its second auction? You would have saved 10% which is very substantial indeed. Another investor friend of mine who is many times more active has bought properties at auctions before and he said as long as you go in with a clear mind, you should be fine. The truth is, even when you buy secondary properties, you also need a clear mind. Or else, you may end up with an overvalued property easily.

Second reason is pre-fixed terms and conditions. In fact, the two things you must always stress for property investments are ‘time’ and ‘money’. For bank auctions, the following are fixed and cannot be changed: date, time, conditions of sales and minimum reserve price. This meant there is NO NEED for any negotiation or uncertainty in price. When you buy from buyers, especially during good times, the prices may still change even after your 1st viewing! When it is a business entity like the bank, changing terms or price halfway is not going to happen. Of course, the bank may still choose to withdraw the property from the auction due to some unforeseen circumstances and you lose the opportunity for the withdrawn property. However, if you win the bid, it is also legally binding and you cannot do like what you when you buy secondary property, agreeing to the price and chose not to pay the deposit.

More reasons in the next article.

written on 7th Jan 2014

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Buying auction properties – Part 2

Two more reasons given by Mr Stephen Soon, the chairman of Penang Auctioneers association and MD of MNP Auction Team as below.

Property investment is about ROI. Return on Investment. Today, when you buy any property, you are faced with Real Property Gains Tax. This would severely deplete some of your gains or even make the investment not as worthwhile as previously. With auction, if you are able to bid for a property way below its market value, touch it up and sell at the right time, even with RPGT factored in, you may still be earning a decent ROI. Note that you may also achieve the same if you are able to buy any secondary property below market price though these days it is harder due to transparency of information. As a seller, you already know what the price in the neighbourhood is and there is little chance of you selling lower except if you happen to have some personal reasons.

Next reason is lack of transparency and not buyer friendly. The truth is totally opposite. Auction bidding provides an open platform for buyers to see the real demand for that particular property and everyone can compete fairly on the same terms as other buyers. In fact, the prices are determined by all the bidders and not influenced by the greedy owners or unprofessional buyers. Note, you must not overbid because if you bid way too high for the said property, you will end up with an overpriced property. Before you enter, know what is the maximum bid that you will bid and stick to it. In an auction, the auctioneer cannot let his friend win the bid unless his friend bid the highest. In fact once you win the bid, typically if you qualify, the bank loan application would be fast because the auction may be under a certain bank.

Some of the things you should take care when you buy from auctions are:

Check the said property. Even if you cannot go in, making sure the said property is empty is quite important.

Set aside some funds for potential makeover. For example, a new set of paint is normally necessary for older properties.

Always ensure you know what is the maximum that you would bid based on the market value. If you intend to bid beyond the market value, buy from the secondary market instead.

Know what is the reserve value that you must bring along when you register for an auction. Typically 5% or 10% of the property price is needed.

Time for property investment? Perhaps it’s time to consider dropping by property auctions. 🙂

written on 7th Jan 2014

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Buying condo and wait 15 years?

An Ipoh friend working in Singapore told me that she may want to buy a condo in Ipoh for her retirement. ‘You are retiring in a few years’ time?’ I asked. She said, nolar, buy now for future, since the price will continue to go up and S$ to RM is very advantageous to me.

I believe everyone should plan for retirement and Ipoh is of course a great place to retire. However, if we are buying a condo and will only stay there after we retire, which may be another 15 years, I think it is a little too far away. My reasoning stems from the fact that typically the maintenance of condo is harder compared to landed properties. Once leakages starts, it is so troublesome to rectify, especially if the leakage was due to pipes which are in the units above our unit. Of course, if the developer is a responsible one and uses the best materials and the contractors build it up to the specification specified, then this may not happen. However, assuming that we are only buying a RM400,000 condo, I cannot imagine the best of the best materials being used because the margins are likely to be low. I don’t know, maybe this is just my perception but why not buy landed instead?

If I am earning S$, I would choose to buy a landed property in a good location because comparatively, you get nothing in any other primary cities when you compare to Ipoh. Also, conservatively, the price would double easily within the next 15 years. The range acceptable is also much wider compared to a condo, not to mention that for condo, the designs would be very outdated by the time I needed to stay. As for the landed property, I only need to get a good architect and the house can be totally renewed. It is true, I may need to spend but for condo, even if I am willing to spend, I cannot change the outlook of the condo. I can only renovate the interior of the condo.

Cons: Rental for landed property is likely to be low compared to condo. If no one stays in the landed property, you may have a haunted house lookalike house after a few years. Haha. So, I think best to rent out.

So, I told her, I prefer a landed property instead. Let’s see what’s her decision. 🙂

written on 30 Jan 2014

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Buying condo – why low floors may just be better

Many of my friends asked me why all the condos I bought are on low floors. Lowest was first floor and highest was just tenth floor. I also own or have owned 3rd floor, 5th floor and 7th floor properties too. I have also stayed on 12th floor for a few years too. I normally reply that I love low floors and said perhaps I just could not afford higher floors, with a smile. Anyway there are a few reasons why low floor is not necessary worse off than higher floors.

First reason was because I just do not want to pay the premium associated with higher floors. It is true, comparing the views, you should be able to see a so called better view than me. However, you cannot deny that the savings I got from lower floors are enough for a holiday that would net me views you cannot see just by standing on higher floors. Also, honestly and truthfully, how many of you who bought high floors really do wake up early and watch the sun rises? You do? Great, high floors are for you. 😛

Second reason is because I just want to feel safer. Do you know that should any emergency happen, the probability of the occupants from lower floors surviving is higher than higher ones? If I am on the 3rd floor, there is a small probability that I may just twist my ankle if I jump down. Slightly higher, perhaps even break my legs plus I am also very sure that I can carry my wife down 7 floors but I dare not say so if I stay on the 15th floor.

Third reason is because when prices appreciate, it does not only happen to higher floors but also lower ones. Yes, some agents will tell you higher floors are easier to sell but when you go to any condo projects, tell me which are the floors are sold out first? Also, if indeed you want to sell, do not worry, there are a lot more people like me in the market. There’s also my brother too.

Oh yea, final reason which I am unable to confirm. An old uncle said that fire engines only have ladders which can reach up to 8th floor. This is not one of my main reasons but if this is true, then it is a plus point for lower floors. There are a lot of other reasons. You can also put forth a lot of arguments about benefits of staying on higher floors. I will only smile to you because the decision to buy whatever floor ultimately rests with you. Just make sure you like what you decide and not regret after you have decided.

written on 4 March 2014

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Buying few years earlier, yield should follow later. (should, not guarantee)

When the market is hot, property prices could rise with every transaction. Your neighbour on the left told everyone he sold his unit for RM500,000. Suddenly that next transaction 2 weeks later could have been RM520,000. Another 2 weeks later someone said that another unit has been sold for RM540,000. When the market is hot, these may just be the situation. However, what about the rental for these units? Even if the prices kept going upwards? Let’s look at this conversation:

Owner: Dear tenant, I am calling you to tell you that even though we signed a one-year tenancy agreement just 2 months ago, I have decided to increase your rental starting next month.

Tenant: Huh??!!

The situation above does not happen frequently. In fact, I have not heard of any awesome owners who kept increasing their rental every other month!  By the way, this is why rental yield can suddenly turn negative even if it was positive just a few months earlier. Rental could not change within months but property prices could.

So, what happens then when the whole property market slows down and there are a lot more owners willing to rent their units at rents which are even lower than their mortgages then? We have an even more negative rental yields. Are these owners crazy then? Actually, far from it. They are objective. Assuming their property was RM550,000 in value and their monthly mortgage payment plus maintenance fees (RM200) come to RM2,550.  If they could rent out their units at RM1,800 then they will lose RM750 per month. If they did not rent out their units for a very tempting monthly rental, then they would have to pay the whole RM2,500 by themselves! 🙂

What happens then if we are to enter the market today to buy a good property? Well, instead of selling their properties at RM550,000 some owners may be willing to sell their properties at RM450,000 instead. Some even lower if they are more desperate. For new owners who now own a RM450,000 unit, their mortgage plus maintenance fees may come to RM2,133 per month.  Assuming rental is still RM1,800 then the negative is down to RM333 per month.

Source: calculator.com.my

I remember long time ago, I used to rent out my whole unit for RM650. My condo in Kelana Jaya was RM1,200.  These days, RM1,800 is quite common. What happens in the future is that rental will just rise slowly over the years. When property price remains the same, rental yields will slowly turn to positive. It has happened to my condos in Penang, Sandakan and Kota Kinabalu. What happens if property prices inches up again then? Then we get capital appreciation but lower rental yield then… This is the world of property investment and rental yields.

REMEMBER THIS. If we bought an overpriced property, then nothing positive happens yeah. if it’s for own stay, still okay. Happy understanding.

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Buying for future of children. (literally!)

We are used to reading about articles on buying a property for children’s future. This is because when they grow up, they could only afford a very small sized home or very far away home. So, parents buy for them so that the kids could also afford to stay in a place not so far away from them. They buy so that when the kids grow up and needs money to further their studies, the home can be sold and turned into money. In one particular advanced country, it is reported that parents are buying even when they have yet to have children! Haha. Yes, buying for ‘future’ children. The reason? They want their child to have the best quality of education.

Article in news.com.au here. Childless buyers line up for sought-after school zone
Education is important and the young couples of Brisbane agrees. Parents are willing to dish out money for their children to get the best quality of education. Many buyers are weighing the costs of private school fees and the mortgage in a well performing schools. Here, public school fees are only $110 a year whereas it can go up to $30,000 for private schools. Thus, many parents are buying in school catchment areas to future proof their children’s education. Article quoted a parent, Paul Lynch. He shared that when he bought a home in 2007, the main concern was being within a $5 cab rise of Brisbane’s CBD. With that in mind, they were opting for a low-maintenance lifestyle in a four-bedroom apartment in West End so they are still within the school catchment area. He thinks this is the reason why people desperately want to live in the catchment area.
Article in news.com.au here.

Actually, this is already something which parents in Malaysia are doing, except that most are doing after they have kids. My friend moved to Sri Damansara so that her kids could go into a nursery within walking distance and a primary school of her choice less than 5 minutes away. The cost of that terrace home is just RM1 million (Plus a few hundred k of renovation). Kids are the future of all the investments we made today, whether it’s for them or due to them. Think about it. We want the kids to grow up healthy and strong but we do not live at a place where they could have space to run around everyday? Happy buying a place for the kids yeah.

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Article written and edited by Charles. News article summarised by Dina Batrisyia.

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Buying from a reputable developer

Many years ago,  my sister happily told me that she has placed deposit for a condo in Penang. I knew about the project.  I asked her to cancel it. She asked me why.  I said I prefer more reputable developers because it is a new property that you want to stay.  She cancelled it and bought Summer Place instead which is smaller. Two things vindicated my advice to her.  Summer Place was completed on time.  The other project,  despite being launched earlier was completed one and a half year later.  Secondly,  perhaps it is just plain bad luck but I got to know that a friend who bought that project suffered a leaking bathroom ceiling within less than one year.

It is true, buying from top developers may incur additional premiums but there is a reason why it would be safer. Assuming you bought a unit from IOI property in Penang. Do you think they would delay the completion or do such a shoddy work that its name is widely talked about online? Think how it would also affect its other projects elsewhere. I am not talking about a premium of 50%, ok. My acceptable premium threshold is max 15%. Anything higher, please rethink the pros and cons.

However if your sole purpose is just to earn profits and you do not mind waiting,  you may buy from any developer. I told another friend about a developer with a reputation to delay completion time, ‘this developer is always late but they never fail to complete.  Your money is safe’ I am using IOI as example because it is now one of the top property development listed company and I bought a very good property from them before.  Completed well on time and acceptable quality. However I do not know if they are launching any new projects currently.

This is not applicable for secondary properties though because by then you can view the actual build quality. There is also no delay possible because it is already completed. Buy with your eyes open. Complain when you need to but if you were to buy from a developer which are used to take a long time to complete, just stay happy and drink coffee. Very few developers run away with your money these days. Delays are however a common issue.

written on 18 Jan 2014

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5 reasons why buying further can still be okay.

Just a week ago, I wrote about property price when it comes to distance and size. I think it has above average clicks and I am sure many Malaysians are aware that they do not have unlimited funds and thus would have to choose between distance (further away) or size (much smaller sizes) Well, let’s also look into some advantages of buying a home in a neighbourhood further away from the city centre.

Here are 5 reasons why buying further is still a good choice and we are not going to suffer very badly.

#1 Further means less demand currently. This is why the prices that we buy will usually be lower priced (gross or price per sq ft) than if we were to buy somewhere already popular and wanted by everyone we know. True for both high-rise or landed. New townships will usually start with landed and high-rise will start to follow when the area’s popularity and population starts to rise. The reason is also because by then, the parcels of undeveloped land are smaller in sizes.

#2 Appreciation is still applicable yeah whether they are popular or not so popular areas. Just do not buy the totally-will-not-have-a-chance kind of area lah. People often tell me that the hotspot they bought into appreciated RM200,000 within the past 3 years. If we are talking about investment, it’s also the % as well. Example, RM800,000 increasing by RM200,000 (is 25% up) is slightly slightly behind RM300,000 increasing by RM80,000 (is 26.7% up). Which one has a higher potential for such an increase?

#3 Further means bigger (size wise).  Developers will usually have a much bigger piece of land and they can be more generous with the use of it. A smaller piece of land in the middle of a mature neighbourhood would have to be fully maximised and this is why the built-up for landed would usually be smaller while if it’s a high-rise, it’s either higher density to be cheaper or super expensive and lower density.  Land cost usually determines the gross development value.

#4 Affordability is the key for future demand. It’s true that prices for mature neighbourhoods are far higher than that of newer areas. The reason is not because of demand alone, it’s more of fixed supply. There’s just no new land to build new supply of homes in these mature neighbourhoods. Thus to buy into such areas, one has to be willing to fork out higher prices. Fewer supply versus higher demand means higher prices.

#5 Appreciation of the extras… I remember a Cheras friend once told me that Cheras is the best. It’s close enough to the city centre and it’s mature and there’s continuous development. It’s everything great about Cheras. Guess what, a few years back, she bought a landed property in Semenyih and is now staying there a few days every week. Why? It’s modern and it’s new. (emotion) It’s gated & guarded and the guards wear nice uniforms! (safety)

It has parks after parks after parks and all her friends love her new place. Yes, she has to drive 50km on a working day but truth is, it’s not like she could wake up at 7am in Cheras during a working day anyway…

There are a lot of cons in buying further too yeah but there’s already many of those articles written. Just google for them to read yeah. Oh yeah, if money is not an issue for me and I have too much of it, I will choose to stay in hotels instead and with full concierge service. I will not be choosing to stay in a luxury condo in city centre and having to walk down the street or through a covered walkway to the nearest LRT / MRT  station. Then again, I am just another working professional like most Malaysians. We watch what we buy and we try to maximise what we get from what we buy. Happy thinking.

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Buying HAUNTED properties?

I wrote about
buying properties near cemeteries
 before and I explained that I have made that decision before and have gained from it. How about buying haunted properties? This one, I have not tried before. Searching online, for Malaysia I could not find any of such advertisements in both property guru.com.my or iproperty.com.my. However, such advertisements can be said to be common in Hong Kong, a much more advanced real estate market when compared to Malaysia. Let’s imagine an advertisement stating, ‘the husband of the owner committed suicide in this property last year. Need to sell fast.’ Would you call? 🙂

Let’s look at squarefoot.com.hk  These advertisements are considered as just part of any real estate development. Note, even in Hong Kong there are no laws or regulations which said that the agents must tell you so much about the property. As long as the agent is not lying, then it is ok. In fact, these properties are typically sold lower than other normal properties. Or are they normal….? Haha.

To be honest, I do not think I would consider such a property if I happen to come across one. Then, I asked myself. What about 10% discount? No. What about 20% discount? No. What about 30% discount? Hmm…. I will take a look. I may still not buy but nothing wrong with taking a look.

What about you? Would you or would you not? Actually I think, it is possible to earn good money from this if the discount is good enough for us to get some professionals to help in ‘cleaning’ up the place, do some minor renovation including increasing the lighting and repainting before putting it back into the market. Alternatively, rent it out to people who’s not the same religion?

Real estate, full of possibilities. Who knows, in the near future when Malaysian real estate market reaches the level of Hong Kong real estate of today. Buying haunted properties may just be more common. Anyone?

written on 1 Feb 2014

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Alternatives are welcomed. Checks are important too.

Knight Frank Malaysia lauds the government’s effort to introduce a crowdfunding platform like
FundMyHome as another alternative
 for home financing solution. It has however advised the government to be vigilant in checking the profiles of first time home buyers and fund manages to ensure the mortgage crisis that hit the US over too-easy lending does not happen in Malaysia.
Here’s that article in FreeMalaysiaToday.com
  Knight Frank Malaysia managing director Sarkunan Subramaniam shares that, “However, there is concern that this may fuel overly lenient lending policies, potentially leading to future subprime situation, a lesson drawn from the United States where homebuyers with inadequate financial capacities were able to secure mortgages.”

He urged for the Securities Commission to be watchful, especially for some crowdfunding platform managers who may be tempted to build up their portfolios too quickly by lending to first-time home buyers with compromised financial credibility. This will disrupt the property crowdfunding platforms. He is hopeful that these funds’ portfolios be reviewed regularly to ensure that the investors’ investments are secured.
Here’s that article in FreeMalaysiaToday.com

I think it is important for the authorities to understand Sarkunan’s concerns. 6 months ago, I wrote something similar.
Lending to everyone is not helping the borrower, actually.
 Actually, our former Bank Negara Governor, Tan Sri Dr. Zeti Aziz said something similar too:
Stay Safe, Buy within affordability and stop bubble from building
 I believe everyone wants a vibrant property market. However, we also want a market which is going to be resilient and long-lasting too. This is especially for first-time home buyers who will have nothing to fall back on or lose a lot of their precious investment resource and time if their first one does not yield positive results. Happy understanding.

written on 12 Nov 2018

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7 advantages of buying in a slow market

Buying in a slow market is always good, not just for property yeah. Can be any goods and services. It’s usually the most expensive during the best times too.

I still remember this senior marketing manager in Penang who told me many years ago during the booming years. “Charles, people will laugh at me if I need to take 6 months to sell all these units.” He was selling over 500 units in a prime area in Penang. (some units with seaview…) Let’s just look at 7 advantages which buyers will get when they buy a property in a slow property market.

Photo by Anete Lusina on
Pexels.com

#1 – Negotiation is now possible. It’s now possible to tell the home owner sincerely that you love the unit but you also love another unit you viewed. The home owner will ask for a few days to think about it but hey, they no longer reject you immediately like what happened a few years ago when the market was hot….

#2 – Choices, real choices. From newly completed ones to new launches, sub-sale market and even property auctions, there are now more choices than ever. Gone are the days when developers assign you a number and 3 minutes to pick a property or they will call the next in queue. Gone were the days when people queue one week in advance prior to new launches.

#3 – Prices, good prices. Be realistic yeah. It’s good prices and NOT low prices. For some areas for which the demand is far higher than the available supply, prices will still be resilient. Ask ourselves. If we own a home in an area we love today or the home is right next to our parents, will we sell the home for a lower price? However, our asking price is definitely not as high as a few years ago.

#4 – Nothing lasts forever. There’s a cycle to everything. What’s up will come down and what’s down will go up again. The only thing about property investment is this; property prices on a longer term will always be rising.
Here’s the reason why it is so.
(We should look to the advanced property markets to understand why)

#5 – Banks need to survive.  Contrary to popular belief which is banks are no longer lending actually banks love to lend. This is how they earn profits… However they prefer to lend to borrowers who look like they could pay. Good customers are now harder to secure and some banks are definitely doing more to woo customers too.

#6 – Developers have to do more for less. It’s harder for developer these days. Instead of just one time newspaper and sell everything, they now needed to advertise more, build more interests and equipping their sales staffs or real estate agents with more ‘firepower’ so that the sales numbers are better. They are thus more accommodating. Let’s not wait for the turning point…

#7 – The main supporting foundation; economy is seen to be growing in 2021. This is very important. No property market could survive if the economy is in a crisis or when the unemployment numbers are high. Without a job, who could buy a property? Earlier article here:
Can negative GDP growth be positive news

Buying in a slow market definitely has more reasons but I will stop at 7, my favourite number. If the question is, should I still buy a property today? It’s a YES. If the question is, could I simply buy and expect prices to go up, the answer is a NO. It might have been because there was a period when everything went up. As for the best question of all time, ‘When’s the best time to buy a property?’ The answer is … buy when you could afford to buy (skip that barista coffee too). Happy investing.

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Buying Ipoh properties? Not much happening but price is increasing. Why?

If you were to travel to Ipoh today, you would see many billboards, especially for new properties as soon as you enter Ipoh. Ipoh is considered a sleepy hollow when compared to the tiny Penang island or the vibrant Klang Valley which is going to hit 10 million population within just a few more years. If you think Ipoh properties are cheap, better think again. In fact, the prices has appreciated tremendously despite the fact that there is NO international airport and job opportunities especially the higher management are few if any. Actually, that was the reason I moved to Penang upon my graduation. Okay, what are some of the reasons why Ipoh property prices has increased?

Scarcity of land. I know, you are looking at me now, ‘do I know what am I talking about?’ Scarcity of land? Yes, I meant it seriously, there’s scarcity of land in all the areas which people love. For example, Ipoh Garden, Ipoh Garden South and even Ipoh Garden East which was once considered the cheaper part of Ipoh Garden. This scarcity of land is the same in Penang, in Klang Valley. That’s the reason why the prices are increasing. Demand is there but the supply has ended, mostly secondary or even small parcels of land. If you are a son, would you buy nearby or far away? Answer is clear. This is the same answer even if you are a son who is working out of Ipoh and wishes to buy a place for retirement in the near future. Even if your wife dares to tell you she does not want to stay with your parents but she would not object to stay close to them.

Expectation. Many, if not majority of all the younger generation of Ipoh are working elsewhere. An engineering graduate may find a good paying job in Ipoh. There are actually world class manufacturing companies in Ipoh. Finisar is a company which pays as well if not better than even the Penang electronics companies. However, if you are talking about vast opportunity, Ipoh does not have it. These people who work in Penang or Klang Valley is already used to the typical RM500 psf price on the medium end and thus, when they look at Ipoh and the fact that RM400,000 can even still get you a terrace house in Ipoh Garden, even if you may need to spend on renovation, they would buy! To them, RM400,000 is a steal and if the whole nation prices rises, Ipoh prices would also rise.

Choices. There are now gated and guarded schemes. There are now luxury condos. There are now super low density luxury condominiums. There are now projects which are exclusive bungalows, gated and guarded and lots of greeneries. Can you sell these projects cheaply?With better choices, comes higher prices. The developers are much more adventurous too as they know many in Ipoh has huge savings and if they can make three generations stay together, they would be willing to pay. Or the older generation may not want to tend to their garden but prefer a smaller condo instead. It’s also safer too.

There are many other reasons but I think these three reasons are suffice to tell you that even though things do not happen in a fast pace like Klang Valley or too many people want to stay in a tiny island called Penang, prices of properties in Ipoh will continue to go up. One thing is sure though, if you are willing to buy slightly further away, RM400,000 can still buy you a semi-detached, even today.

written on 20 June 2014

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Buying Ipoh Property for retirement?

My colleague asked me just a few days ago, ‘Should I buy Ipoh property’ today? I was thinking Ipoh might be a good place to retire since KL properties are becoming so expensive. Penang is even higher priced since it is just an island.’  I told her if she really like to retire in Ipoh, she may want to buy today because prices would continue to increase. Despite the fact that Ipoh is a secondary property market when compared to KL / Penang, if the prices in KL / Penang continue to increase, do you expect Ipoh property prices to be exactly the same without any changes? Be reminded that Ipoh is only 148km from Penang and 189km from KL. Think objectively, this is not a city in the middle of nowhere. This is a city which is easily accessible by both places. It means if you stay in Ipoh, it is possible to do a day trip to KL / Penang; best of both worlds!

Secondly, while Ipoh city itself is already 643km2, majority of everyone wants to stay in areas where majority of the people love to stay. Thus, the prices in areas such as Tiger Lane, Canning Garden, Ipoh Garden South are rising a lot. Of course, if you intend to buy in places where Ipohans shun, then prices would be cheap, today. You can still buy a terrace double storey house in Bercham for less than RM300,000. Log on to
http://www.propertyguru.com.my
, search under Ipoh and see for yourself. My parent’s semi-detached single storey house which they bought for RM85,000 many years ago is now worth no less than RM350,000. Conservatively, price increase of just 5% per year meant that the price would double in less than 15 years. If it is for retirement planning, I think buying now is certainly better in order to hedge against the continuous increase.

Thirdly, Ipoh would always be in the middle of Penang and KL. This means even if it continues to increase in prices for both cost of living and property, it will always be cheaper than the two cities. This makes it always a great choice. When you add in the huge diversity of good food, tertiary institutions, availability of private hospitals, much lesser jams, much wider roads, lower crime rates and of course, friendly Ipohans, the choice is clear. Ipoh is a clear winner.

Think about it. Drive around, eat good food and stroll through all the heritage areas and take great pictures. I think Ipoh has the necessary ingredients for a good retirement.

written on 30 Jan 2014

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