You may not get good tenants all the time, but still proceed

With urbanisation, properties in the Klang Valley is always a good choice where rental is concerned. Many people are moving into the Klang Valley to work and would definitely need to rent. With escalating prices, some may believe renting is an easier and better option. Well, decision is yours.

My friend asked me if he should proceed with a purchase of a walk-up flat for RM150,000. The rental could be RM500 to RM550. He is looking for a few high-rise units to get positive yields as his current landed property is giving him negative return despite being rented out. I told him that if tenant are easy to get, then he should proceed. He said he is worried that the tenant that he got may be a bad one. Those refusing to pay or to move out. Honestly, there’s no guarantee that the tenant we have would always be those ‘pay on time’ type all the time. We could however take the following few steps to mitigate some of the potential risks.

1) Engage good agents to help get tenants. The tenancy agreement is a good precautionary step so that should anything happen, actions could be taken as the signed rental agreement. Get a good sample of tenancy agreement from your agent, else google for one. Read it thoroughly. Do note that when things go wrong, going to court is necessary but at least as a home owner, you have something which you could do legally when you have a binding agreement.

2) TALK to the tenants before renting it out to them. Of course, they may lie or hide certain things but never look down on our own ability to catch some of these little signs. When we are a little uncertain, better to err on the side of caution. To me, I would not welcome those staying with their pets.

3) Deposits should be 3+1. Assuming the rental is RM1,000, then a typical payment upon signing the rental agreement is RM4,000. 1 month for electricity and water deposit, 1 month advance and 2 months security deposit. There should be NO discount. Post-dated cheques for the future months would be desirable.

4) For Selangor, it may be better. According to the Selangor Water Management Group (Air Selangor) corporate communications head Amin Lin Abdullah, the landlord could submit an application to Syabas to terminate the water supply by paying the termination charges. This is as long as the registered account holder with Syabas is the landlord. Make sure YOU are the account holder.

Last but not least, I always think it’s best to rent out fully furnished for an extra premium. Most of the time, those willing to pay extra premium tend to be easier to deal with and less of the calculative type. One example, an empty unit for a condo in Kelana Jaya may be RM1,600 but a fully furnished one could be RM2,000. I told my friend that he should proceed as long as renting out is easy. On a longer term, capital appreciation helps tremendously too. Based on a RM150,000 price, it’s already going to be an uphill task for any developer to build such units in future without any assistance from the government. Happy buying and renting.

written on 19 Apr 2016

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Sorry but these are NOT investing. Call it with its original name.

This is the definition of
‘Investment’ as per Investopedia. (Read the full explanation here)

“An investment is an asset or item acquired with the goal of generating income or appreciation. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will later be sold at a higher price for a profit.”

How does a business earn a profit?
It sells goods and services. People buy those goods and services. The profit margin is their cost minus the price which the customer is willing to pay. This happens daily and monthly and quarterly and soon the business will report either a profit or a loss after every financial year. The INVESTORS into the company will now get dividends if there are or if the business is a listed entity, the share price will rise with the good performance.

How long would all these take?
 The business does NOT report daily profit numbers and investors do NOT get daily dividends…All these happen over a period of time and certainly not ONE day or ONE minute or even a FEW seconds.  This is why if we are investing into the stock market, it’s investing into a business which we should understand well. If we are BUYING a stock because we think it could suddenly rise tomorrow since there are rumours of a new project, then that’s BUYING a stock. If another word is needed, it’s called SPECULATIVE buy. This is why stock traders (whether full-time or part-time) are called TRADERS. They are not called investors.

What about property INVESTMENT then? Please look at the Malaysian House Price Index (MHPI) below. It shows the price changes every quarter. It also shows the average increase from 1990 – 2017 and that’s an average of 6.4%. (Please do not expect this average to go up, it’s too high already in my opinion.  It should continue to moderate. Reason is because our salary increment is not this high.)

Info and Image from:
https://www.housingwatch.my/02_market_01_mhpi.html

What the price increase tells us is NOT that if I buy a property, I should expect it to up by 6.4% every year. Sorry yeah. If you bought in the wrong year, say 1997, then by 1998, your property may have dropped by double digits. Yes, sleepless nights. However, the ones who bought in 1998 (if they dare to), then in 1999, their property price may have risen by double digits too. WOW. However, stretch this INVESTMENT longer, say over a period of 10 years and we get back that average price increase which is usually a natural hedge against inflation. This is property investment, it is a hedge against inflation and we will enjoy capital appreciation if we look at property investment as an investment.
“like watching grass grow…” (click here to read)

So, are we buying or are we investing. Are we speculating or are we investing? Are we trading or are we investing? There are reasons for all these different words. If we mix them up and we think everything is investment, then I wish you all the best. Luck however does not come every day even if sometimes we were lucky.  Happy understanding.

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Not just building but end-financing too.

Loan application approvals are hard to come by? It’s the bank’s fault OR? You are not qualified for PR1MA because your income is higher than the ceiling income set earlier? I think everyone knows that now there are even more households who qualify for PR1MA. Just weeks ago, it was announced that those with a household income of RM15,000 and below can now apply for the PR1MA scheme. This is up from RM10,000 previously. If you ask me why, I am not sure. RM15,000 is indeed lots of income. Perhaps both the husband and wife are driving Segment D cars. Then, that explains a lot why they could not afford to buy a property even with up to RM15,000 household income. Somehow, these households with up to RM15,000 income still finds it impossible to own anything out of the government schemes. Can some of kopiandproperty.com’s reader comment about this new requirement? Are we really this bad?

Now, this relaxation is further enhanced. PR1MA will now offer end-financing too, for those who qualify. Yes, it must be a PR1MA project to begin with. It’s called the Skim Pembiayaan Fleksibel (SPEF). You can read the full article in
NST here.
  The new scheme is established in collaboration with Bank Negara Malaysia, the Employees Provident Fund, and four local banks – Maybank, CIMB, RHB and AmBank. The PR1MA chief executive officer Datuk Abdul Mutalib Alias said that the scheme will increase homebuyers’ chances of getting a home loan.  How it works is that it will allow homebuyers to borrow a larger loan amount. In brief, SPEF is the step-up only or step-up with EPF Account 2 withdrawal options, where in the first five years, only interest is paid. The principal amounts kicks in from year six onwards until the loan is settled. With this, it meant that the homebuyers can borrow more.

I think it’s better that homebuyers with this kind of income step back and ask why they could not yet buy their own home and must rely on all these just so that they can buy one. No savings? Start saving la. No idea where to buy? Start viewing lah. Do not know the importance of property as an investment? Read more lah. My colleague who earns far lesser has just bought her SECOND property (Bandar Permaisuri). It’s only a RM380,000 apartment but she can now rent it out while continuing to stay at her current place. She earns much lesser than the RM15,000 maximum income ceiling stated. Is it also because the PR1MA homes are just not attractive? Too bland, too far, too expensive perhaps? If we can also look at the root-cause, perhaps we can then match these PR1MA homes to those who really need one. Cheers.

written on 14 Feb 2017

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Property market cannot grow or fall by itself

A good friend asked me the other day. I noticed you also shared about manufacturing numbers, the GDP growth numbers etc besides just property related articles. Why not just focus on property related articles? I laughed. Seriously, do we really buy property by focusing on property market alone? We do not need to know about all the big happenings that may affect the property market? When
economy is doing badly
, how can the property market be performing? If the biggest economy faces another uncertainty, it will certainly be contagious and the world will have to face it together, not just that one country.

Actually, we should also not look too far away. Domestically, there are so many things that could also affect the property market. Many still do not want to realise that MRT will change many areas. In my latest chat with some  colleagues just a day ago, there were still not open to any newer areas and would prefer to only buy those great locations of today. They were still fixated on affordability; anything below RM600,000 even if the size is only big enough for a single or at best a couple.

As for apartments below RM300,000 some prefer not to look at it at all, saying they are usually run-down or extremely far away and only suitable for those with no other choice. I think everyone has forgotten how places like Sunway, Damansara Mutiara or even Desa Parkcity started. In fact when Desa Parkcity was completed, there were still AVAILABLE UNSOLD units! Haha. Anyway, it’s ok.
Greater KL is

indeed by far a bigger place compared to many of the small cities around the region. Choices are still aplenty and growth will still continue. I have told many friends that it would not be within my time to see KLites having to stay in a room of 180 sq ft called home and having to pay millions for them.

Anyway, there are reasons why economists and top analysts are paid much higher than many people. They read, research and analyse more than us. If only property investment is only about reading property news and nothing else, many of us would have become
property speakers
. 🙂  By the way, if the property speaker that you happen to listen to does not even know anything about Non-Performing Loan, Unemployment Rate, GDP growth or even what’s happening to the world outside, I suggest to go for a cup of coffee instead. I am still trying my best to keep up;
reading more news beyond just property.
 What I share would also serve as a reminder to me and that’s why I share.

written on 9 Oct 2016

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It’s not one time yeah. It’s another 107 times to go.

This is an article for everyone who loves to buy something they could not afford yet but still want it because the marketing people of the product has done a great job. This is how the world works today yeah.

I love my readers’ comments on Facebook. Thank you. They tell the real situations happening on the ground and they tell it frankly. I wrote this article recently to highlight the capability of Malaysians to buy new cars in 2019. 600,000 new cars to be exact.
Article here: I wonder how, I wonder why. 600,000 Malaysians need new cars.
 Please do look at some of their comments after reading the article.

Selena Hooi did something I did. I drove my father’s Nissan Sunny until it exceeded 300,000km and by then, the maintenance (including wiring / engine( starts to show occasional issues.   Max Leong says it the best. “Wah, I am paying RM800 only leh” BUT they forget it is for 108 times. Haha… It’s the same as the advertisements for new smartphones yeah. It’s just RM199 per month. Well, that’s for the next 24 months.

More comments and they related to most Malaysians too. These are a few thoughts I have listened to over the years. My friend bought a new car. My friend has a better car. My car is getting old. My father’s car look so old-fashioned and more. For all these reasons, perhaps it’s best not to do anything. However, if the car starts to breakdown, then please get a new second-hand car if it’s more affordable currently. We should not lose our precious time to go workshops etc.

By the way, a good car is considered a MUST okay. Good car has got nothing to do with the brand or the prestige. That’s for the very successful people where any brand is just spending their pocket money. For them, it’s not even a want. It may just be a need yeah. Imagine someone telling you that the investment plan is worth investing and they drove you out to a cafe in a luxury car. You will believe them more than if they came with a 10-year old Persona… right? Happy buying!

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Not show profit and still a true business? For how long?

This article is aimed at huge names outside this region which is still losing money by focusing on market share, gaining them mostly through ‘spending.’ I think my tolerance level is pretty high for startups. I think they must be given time to grow and to start showing good promise which is a clear direction towards profitability. Perhaps 5-8 years, max? I mean, if I am starting a new restaurant, if it does not work, I will have to close it within 12 months.

This is the same for most other small businesses. Anything that does not work has better be stopped so that it does not keep absorbing more funds, spending them and then report a loss. I do not believe any start-up should still be getting ever more money and incurring ever continuous losses year after year. In Chinese, ‘where do you want to keep your face?’ This is especially those which has been around like forever.

One year in the internet world is equivalent to a minimum of 5 years in the traditional business world. Anyway, this is the actual statement that prompted me to write this article: “What a difference 17 years makes. In this day and age, companies can still not show a profit, but they have a true business,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.
Full article in TheStar here: (click to read)

I would not say I disagree with the statement but there are definitely way too many of these famous startups which continue to raise ever more fund and expand to ever more markets and all the while trying to kill all the local competition simply because they have more funds to spend. The local competitors? Well, most of the time, they are not really doing that well because of bad service for example.

However, competition should be based on providing really good service and NOT through subsidies where there is just no way for the local competition to fight back because they could not do so at a loss. The new startups with lots of cash in hand? Yeah, they could. By the way, please do not compare newer startups with a really good service versus those over 8 years and STILL getting more funds because they just could not return a profit yet. They are still selling a ‘story.’ Investors continue to believe them.

Please remember that all these so-called disruptors must be offering a superior service. It could not be exact same service abut offered at almost free (because they have lots of new funds from investors) With all these continuous subsidizing, of course becoming profitable is hard. Competitors are trying to kill one another and everything boils down to who has more money. I know this is how startups grow, right?
Here’s one nice article that sums up my view.
 Happy investing in one.

written on 23 July 2017    edited 12 Jan 2020.

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It’s not ‘sure profit’ with property investment

If someone tells us that he has profited from property investment, congratulate them. It’s just another investment which gave them good returns.  If we believe everyone profits from property investment, that’s untrue. I have come across many friends who told me horror stories about their property investment adventure. One good friend who has a cafe in Penang bought a flat which was never completed. So, he lost a lot of money and time. Another bought a ‘resort’ in Melaka which was never completed and burnt a lot of his savings. He says, ‘no more property investment for him forever. These circumstances do continue to happen today but it’s becoming more uncommon already. So, I think we should feel more fortunate today. Image is MHPI from
housingwatch.my

Source:
http://www.theglobaleconomy.com

Coming back to property price appreciation. For example, the average property price increase in Malaysia for the past 27 years (1990 – 2016) has been 6.5 percent per annum.(image above) It has however been dropping in recent quarters. As low as 5.5 percent in Q2 2017. The average inflation for the same period of 27 years (1990 – 2016)  is 2.76 percent. Do refer to
 the report in theglobaleconomy.com here.
 Image on the right. For the recent few quarters, inflation has been higher than the 27 year average. It meant that the average gain for property price minus inflation is around 3.74 percent per annum. Is this high? Not really but of course fortunately, for property, this increase is based on its total price. Inflation is meanwhile based on how much we spend, so it’s definitely lower. If we look at 2017 , it seems that the gain from property price increase minus inflation is only 2 percent per annum. Really does seem small. No wonder even investors are on the sidelines unless some very attractive ones comes along.

Source:
http://www.abc.net.au/news/2018-02-06/home-values-fall-by-one-quarter-in-perth-over-last-decade/9397444

When we look at some advanced property markets, it would tell us in numbers that it is not always a ‘profitable investment’ when it comes to property. For example, if we invested in Australian properties 10 years ago, it’s really fortunate if the investments were put into Sydney and Melbourne. However, if the money was invested into Perth or Darwin or Brisbane, then the actual property price after deducting the inflation rate is actually negative. For a
full article,do refer to abc.net.au here.
If we were to look at the country where the 2008 mortgage crisis happened, the U.S. it is also shown that some cities where the property prices dropped a lot during the housing crash has not yet recovered fully.
Here’s that report in globalpropertyguide.com in full.
 If we were to look into the UK housing market, the same thing is happening. For some cities, after the adjustments for inflation, house prices are actually not up.
Here’s that article in BBC UK.
I think for London,
 it’s definitely up but for the rest of the country, it may not.

Three things we should know from all these advanced property markets. Property investment is still a very good hedge versus inflation because the percentage up is based on home prices. So, it may be a low 3 percent but a 3 percent up on RM400,000 property is still RM12,000 up per year. Assuming inflation is up 6 percent but it’s based on our RM100,000 expenditure for the year, it’s still only RM6,000 up. In other words, we gained RM6,000 on paper.  Second thing is that property investment MAY NOT be profitable because it really depends on the timing when we bought as well as the timing when we sell. Plus, it is also pretty illiquid too which meant that if we want to sell fast, we may have to lower the asking price significantly.  Third, it pays to do a lot of homework because there are clear favourite cities that has risen and the reasons include economic growth and population growth. Just because we like a certain city in some advanced countries do not mean all other cities in that country are great for property investment. Let’s keep learning because Malaysian property market is nowhere near ‘advanced,’ yet. Cheers.

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written on 24 Feb 2018

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Not too far, Not too high, RM700,000 in 3 years

I have just moved into my new place, Armanee @ Damansara Damai. No, not the seven figure condo. This one is just slightly above half a million. The size is around 1,750sf. Yes, this is the area which everyone said, ‘wah so far’, ‘that area ah, not good ler’ or the best one for me, ‘you will pay RM1.60 everytime you go home.’ Yea, I know but do you think I would need to pay extra RM400,000 for toll in say 10 years? The reason being, for this size, in majority of whatever famous areas, it is at least RM1,000,000 or higher. There are many reasons why I bought it. Of course, first reason definitely is because my budget does not allow me to buy too high. There’s no need to smile. I am the only breadwinner today. My wife is a full time housewife and she said to everyone, ‘I will no longer return to the corporate world’. So, budget must be managed wisely. She likes the place a lot and my baby daughter who normally stays close to us whenever we are at a new place was walking here and there by herself when we brought her to the place for the first time just before we moved in. So, I think this they call, good fengshui. 🙂   Anyway, following are my three reasons which I think you may want to consider if this is going to be your home. Note: No speculation please, you will fail, I believe.

Not too far. From my old place, Kelana Puteri, in the morning, I needed between 16-18 minutes to arrive at the gym. Yes, I try to stay healthy. At my new place, it takes me 23-26 minutes. An increase of between 7-8 minutes. I can accept it. For the trip home, with the jams etc, it normally takes me 45 minutes to reach my home from office. Now, it takes me around 40 minutes. I save 5 minutes there. So, you can see, it really is not that far. 🙂 My office is in downtown, near SOGO / Tune Hotel / Maju Junction.

Not too high. I will be honest. Anything above half a million is definitely not considered low. However, yes, it is still affordable. Coupled with the size, it’s called great value. There are lots of places you can buy with RM540,000 but if size is important to you, then nothing even comes close to Armanee @ Damansara Damai. This gives it a price psf of RM308. I know, for bigger units, the price psf is supposed to be lower but RM308 psf, today? 🙂

RM700,000 in 3 years. Yes, this should be the price I will sell three years down the road. As long as everything happens as what it should. Maintenance continue to be good and new developments continue to come, especially the one they call ‘Damansara Sutera’ which is right next to Damansara Damai. I think it’s great that some developer is trying to rebrand Damansara Damai with a classier name. Oh yeah, what’s price per sf if it hits RM700,000? RM400 psf. A price which is not just impossible to get today but impossible to get three years down the road too.

If you have a family, just like me, wants a huge condo which the maintenance until today is still acceptable. The pools are cleaned on time. The rubbish bins are always cleared in the morning. There are guards in every block, around the condo, one full time stationed right next to the pool and everyone of them greet you, then you may want to just view it.

Nearly forgotten, the bad points? It’s too far. It’s too expensive for that area. It’s everything you cannot find if you buy in Kelana Jaya. Oh yeah, they say, there’s jam as well due to the one access road in and out. I am sure there are places in KL where there’s MANY access roads and there’s NO JAM. I am very sure. Happy searching for your dream home. As at now, I found mine.

written on 6 June 2014

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It is not the trust, it is the unknown elements which may be a risk.

Yesterday, I had lunch with a successful insurance agency branch manager who’s semi-retired and his ex-team lead. Of course the conversation could not run away from election and the stock market. It was a volatile Monday as it was the opening of a market after the change of government. I said that it will take a while for market to normalise and the foreign funds would most probably be the ones selling while the local funds would be going into the market. He said actually it may be possible that foreign funds are entering the market in a big way since this new government is a very positive sign that Malaysia will become stronger in the future. I told him that I do not doubt the positive sentiment brought about by the new government. However, when we are looking at all these foreign funds, they are not the investors themselves but they are merely the fund managers. Without a clear direction yet (even the cabinet ministers are not yet announced in full), the unknown elements are considered a risk.

Here’s an article today in TheStar speaking about the exit of foreign funds from Bursa.
Full article here.
 Within just 2 days, the foreign funds have been selling. The net selling surged to RM1.51bil and this is reflected in the prices of blue chips. All these selling has been absorbed by local institutions and retail investors. The analysts say that the selling could be due to them awaiting more details how the new Pakatan Harapan-led Federal Government would put the economy on a stronger footing. Some stats. On Monday, foreign funds were net sellers at RM682.6mil but local institutions were net buyers at RM238.2mil and retail investors at RM444.4mil. On Tuesday, the trend continued with foreign funds as net sellers at RM837.3mil but local institutions were net buyers at RM661.7miil and retailers at RM175.6mil.  Please do read more for some details on the stocks that went up or come down. In fact, some politically connected stocks dropped tremendously. As far as announcements are concerned, nothing much has happened to their busineses yet.
Here’s that article for reference.

I personally believe that many of these foreign funds would have to exit the market and re-enter once everything normalises. It should be okay because the local funds know the situation much better and they are closer to the ground too. When would the funds be back in force? Well, at the very least, all the ministers are already working and managing their ministries. Plus we get a full set of recommendations from the Team of Eminent Persons (TEP) and the government likes it, the analysts like it and even the international rating agencies like it too. I know, there are some funds which are much more bullish than the rest. However, this still do not mean they will invest without having the full picture yeah. Actually this is likely to be the same with the property market. Foreigners thinking of buying would most probably be holding back but when we look at the locals the buying of good properties would definitely continue. We will soon know what has happened in Q2 in terms of overall property transactions in 2-3 months time and then we can compare it to Q3 2018 to know if the positive sentiment has pushed the transactions up.
Fundamentally, we are okay but I look forward to an even stronger footing
.
 Happy following.

written on 16 May 2018

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Not verified, don’t forward. Stop showing your so-called SINCERITY. That’s just XXXXXX.

I saw an image which looked VERY FAKE in my Whatsapp group. I asked if the news is true. The person who forwarded said, ‘I am just being helpful, who knows if it’s true, then people should know.’  PLEASE STOP THIS.

Another forwarded a news which is said to be written by an unknown doctor with all his warnings. Another says a certain supermarket has Covid-19 infections. Another says that very soon there’s a lockdown. Another was some advice from a doctor who said he treated some Covid-19 patients and the story goes on.  HELLO, ENOUGH lah.

FAKE NEWS examples? Images below.  With people keep forwarding so many bad news, the people who wants to tell you the real news will fail.  Please go and verify all these so-called I am forwarding because I care messages before you forward.
This is the site: sebenarnya.my

how many got fooled by this?

how many thought this image was real?

Stay at home. Stay safe. Don’t go here and there. Try cooking something good for your loved ones. For the loved ones, even if it’s not that delicious, finish it… Last but not least, we have enough of fake news already.

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Not easy to allow developers to ‘lend money’

A close friend and I was talking about this issue just yesterday. My earlier article here:
No loan? No worry. I (developer) lend you.
 She is someone senior with an economics PHD from the banking fraternity. We agreed that the suggestion to allow developers to become money lenders is not a good one. Her point of view is simple. When one developer is approved, then other developers should also get approval. This will then be followed by ever more developers and the loans being ‘approved’ by these developers would be huge within a few years. Assuming we suffer another
external economic shock

and these developers have a hard time selling their properties and worse still, their buyers defaulted. May I know who will handle the mess? Really macro-economic view, yeah?

For me, my main worry would always be for the buyers. Assuming the bank would only approve 80 percent today, the buyers would need to either get the remaining amount somewhere or they would have to abort the purchase. However, if they can still get approval from the developers would they believe they can afford something more expensive? Would this then create more people with loans they couldn’t afford in the first place? Remember as a country we have this issue?
Households Malaysia and Debts
. It’s easy to get into debts but it’s very hard to get out. Let’s always be savvy about this.
Bankruptcy and Properties

Of course there are also others who said that this may create a property bubble. I think this would be a remote idea because the loans that the developers can give out would be extremely small in comparison to the whole  industry. There are comments that
property prices will be higher
 due to this, I also think this is developer specific. Without understanding objectively and buying rationally, those few hotspots would remain to be hotspots and prices would
 rise faster than the secondary ones.
 I think this would remain the major cause for property prices to keep increasing; demand vs limited supply. In conclusion, my friend and I are not supportive of the idea developers becoming money lenders. This is the same opinion, regardless of whether the rate is 6 percent or 18 percent.

written on 22 Sept 2016

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Not young anymore, thus don’t simply buy any property

I had a funny conversation with a younger friend a few evenings ago. This is one friend whom I believe is destined for great things to come. Passionate about her life and willingness to learn. She’s currently working in a public listed developer. Here’s the conversation.

Friend: I am in a dilemma. I have an offer for an
affordable apartment
 in a good area and nearby a college. Not sure if I should accept it as the monthly repayment is huge for my pay.

Charles:  What’s the KEY reason to buy?

Friend: I am no longer that young. I feel that I must quickly buy a unit before I get too old.

Charles: (Laugh for a few seconds). Please move on and wait for the next deal.

Reason 1:  Not Young anymore.  She’s nowhere near 35 yet. For property investment, too young is not necessary an advantage as your salary may be too low to buy something really attractive. When our salary is on the lower we may get stuck with a property which is
stretching us to the limit
 and is not yet considered a ‘premium’ property in a ‘primary’ area. After a few years, when we wanted to buy another property, it is harder to get another loan without selling the first one.

Reason 2: Must quickly buy before too old. Buy objectively, buy something affordable, buy something which has potential or even buy a property which will be built on the last piece of available land near to my mother’s home. Just never ever “buy quickly before getting too old”.

Reason 3: Good area. This is worth considering because
hotspots typically have more demand and less supply
 due to scarcity of land. However, always make sure the area is good because of certain tangible reasons like near to offices or manufacturing plants which meant the potential market is wider with working professionals. If it is simply because of historical perceptions, think again.

Reason 4: Next to a college. Look at the
mortgage versus potential rental.

Assuming the mortgage is RM1,800 (due to 90% loan) and the potential rental for 3 rooms is just RM1,200, should she proceed due to this reason no. 4?  Answer is No. RM1,800 has yet to include maintenance fees and all other miscellaneous which meant huge losses every month.

Reason 5: Potential for
prices to appreciate a lot
. For this particular potential, it also meant that newer launches next year can still be considered because in terms of new launches, majority of every developer is focusing on affordable launches instead of the luxury ones just a few years ago. Sizes are getting smaller to ensure affordability too. Choices are increasing and not reducing.

Well, she has yet to decide but I think she will make a
decision which is to her best advantage.
 Indeed, she is still very young and truth is, opportunities are everywhere and not even necessarily be within Penang. Last but not least, her reason to buy is extremely weak and should not be the main reason for anyone to buy a property at all. Aim for a roof over our heads but not a price which crippled our ability to buy the second property in the future. Happy deciding my young friend.

written on 11 July 2016

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Nothing clever about just ‘reading titles.’ Increase productivity, not just the salary.

Many people were forwarding an infographic from TheEdgeMalaysia with the title, ‘Half of Malaysians earn below RM2,000 a month.’ Their comments? ‘Oh dear, how sad…’ I am not sure if everyone read the infographic thoroughly or only the title because it is clearly stated that only 32 percent of wage earners in Malaysia have tertiary education. In other words, 68 percent does not have a minimum qualification of a diploma or higher. This 32 percent of the people earns a median income of RM3,274 while 54 percent of those with a secondary qualification is earning a median income of RM1,600. Logically, even when compared to neighbouring countries or advanced nations, should we be looking at secondary school leavers earning above RM2,000 per month? If our secondary school leavers are all earning RM2,000 or higher, let’s be honest, all the MNCs would have moved elsewhere. As for all the other advanced nations, it’s a similar situation for those without a degree versus those with one. Please do proceed to read about them. Google for it to understand why. Moving on, all our SMEs would also have to close shop if they have to pay RM2,000 or higher to all secondary school leavers. I would definitely want every Malaysian to earn higher incomes but it must come with better skills, experience and even qualifications (by gaining more knowledge for example). It should not be just higher salary but productivity remains the same. We may be killing ourselves in the medium term if we do so.

I do not think there’s anything wrong with this infographic and it has nothing to do with how sad the economy is for example. The damage will be far greater if it’s otherwise. Malaysia is not the most special country in the world. If the costs to operate is high, no one would come here and even our very own companies will find it hard to compete. What we must do however is to ensure that all Malaysians continue to have access to tertiary education, especially the vocational tertiary qualifications because there are many who just hate academics. Let them learn a skill (or force them to) but at the same time provide them enough business and financial knowledge for example so that their end product could be marketed well and they would earn above average incomes. The market is not just Malaysia but the world.

One day, when our tertiary educated workforce reaches 50 percent and we STILL have this same infographics, then there is really something wrong with our nation.  By the way, based on the article, half of all working population earning below RM2,000 meant that there are at least another 15 percent of the working population without a tertiary education earning more than RM2,000. This number already tells us that some of these secondary school leavers are either doing well above their peers or that they were those who have moved up because they were better than the rest. They may even be a blogger at night or driving GRAB in the weekends. I have no idea but please look at the infographic again. There is nothing to be sad about if. Everyone have to UP our productivity and of course, qualifications too.  Happy understanding.

written on 2 April 2018

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Nothing in Iskandar yet for me but does not mean it’s NOTHING to me.

I have no properties in Johor yet. Am I thinking of buying in Iskandar? My next property is most probably in Kepong, a secondary one, for rental. However, for those who kept saying that Iskandar is too overpriced, all the Johoreans cannot afford and that everything seems to be in millions and millions, let me honestly tell you that it is not true. Based on today’s search result, a casual search for 2 storey terrace houses which would cost you a bomb here in Kuala Lumpur or Petaling Jaya is still less than RM400,000 in Johor. I used PropertyGuru but you would easily have similar results even if you used iProperty. It is very true that the newer launches, for primary ones are pushing the limits. It is also true that RM700psf seems pretty common for primary property launches. It is also true that the demand has slowed down due to some uncertainties in the market and most recently, the VEP. However, to simply say that Johor is becoming way too expensive is totally untrue.

My personal opinion about VEP is simple, it will not affect the long term demand as long as everything planned comes to fruition. The new theme parks, all the educational institutions, the links between Iskandar and Singapore and all the new and modern industrial parks. If we always think that Singapore has a better planning, be informed that Singapore intends to have 6 million population from current 5.4 million. That’s an additional 600,000 new people. If you think that’s due to babies, think again. Majority would be new people from everywhere, including Malaysia. These 600,000 new population cannot all be staying within Singapore. If they do and we do a projection of 5 to 1 small HDB flat, another 120,000 small HDB flats are needed within the next 6 years. If I remember correctly, 20,000 new units are built on a yearly basis in Singapore. In other words, catering to this growth would meant every single unit planned must be built. This has yet to include the demand from the current population in Singapore.

Of course, there is a possibility that Singapore’s plans may fail. There is also a possibility that all the investments promised in Iskandar may not come in. The High Speed Rail reaches a negotiation deadlock. There is so any other possibilities that everyone can think of and as they say, whatever can go wrong may go wrong? Sorry, if you think I am telling you to buy Iskandar, I AM NOT. I do not even have a plan yet. However, if you may have a totally different perception and understanding, it’s really time for you to read more, even if you don’t want to read the publications in Malaysia, then read those from outside Malaysia. Investments are all about knowledge first, action later. Some people told me that East Malaysia is worth a look. I tell them, as long as you have read sufficiently and you think the risks are already calculated well, anywhere is worth investing. Otherwise, you may be those who bought, lost money and kept quiet and kept on telling people property is a bad investment.

written on 19 Aug 2014

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Nothing much until 2018/ 2019 and peaking in 2020 / 2021

I wrote about this before. Assuming recovery of
property transactions by 2018
, what should be our actions today? Wait? View? Or better start identifying some potential buys? It’s individual decision. It’s definitely nowhere near the
buy, buy, buy
 state of course. In fact most of my friends still believe property investment is a must but when pressed for an answer of when to buy, most answered not anytime soon. The fear of prices falling continuously remains high. Negative sentiment is still prevailing.

Another prediction about the state of the property market here in Malaysia was reported by
The Sun Daily
. These are the two comments by AXIS REIT Managers Bhd head investments Siva Shanker. “In 2018/2019 we will see the market beginning to level out and start its
upward trend again
 while in 2020/2021 we will see the market peaking again.” He also said something which I shared with a property developer GM just hours ago. Current sentiment is negative even if there are still buyers who can buy. Siva shared, “Although things are looking bad now, it won’t be like that forever. Everything is a cycle. 2017 will see the market finding its level and the kneejerk reaction will subside.” He was speaking at the Rahim & Co Research’s seminar entitled “The Malaysian Property Market: Opportunities amidst Uncertainties.”

Everyone should note that the prediction icon the
recovery of number of transactions
 and not on the actual property prices. Based on what we can see from the ever increasing number of affordable homes being offered, I believe the average property prices would continue to stabilise at current levels or even fall slightly. Let’s see if I am right. However with falling prices, it also meant the size of the homes would fall too.  A friend who’s a GM of a listed developer company said, ‘with some of the sizes being offered today, it is mostly suitable for bachelors / singles. It’s definitely not built for families.’ I think he is right especially for the SOHOs but from 2002 till 2006, I was staying in an
apartment of 700 sq ft with my wife, my sister
 and my brother-in-law. Yes, total of 4 pax with occasional visits by my brother. Somehow, when it’s necessary the willingness to accept will be higher. Just look at more advanced property markets to understand what’s happening in future. Happy following.

written on 3 Nov 2016

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Nothing wrong with monthly salary. Success is not about founding a business.

There’s really nothing wrong with monthly salary. Stay focused on what we love and the other side is not wrong from their perspective yeah.

Salary is a bribe to forget our dream(s)?

I read an interesting view point from someone who’s trying to be successful with his tech venture. It goes something along the lines of salary being a bribe to people from finding their real success. Serious, why do we keep looking down on working professionals and always think anyone successful must be a business owner? Happiness can only be found when one is successful with a business venture while all the working people are all suffering but they did not know? Since they were given a ‘bribe’ every month in the form of salary to forget their dream(s)?

Photo by Karolina Grabowska on
Pexels.com

For every successful business owner…

For every super successful founder of businesses, there are hundreds, thousands and even millions of business owners who have failed or are STILL struggling with their business venture. In fact many who are struggling constantly questioned their own thinking of being successful by ditching their monthly salary a.ak.a as ‘bribe.’  I do think it’s time we realised that ONLY the successful ones would have their stories told to the whole world while the failed ones, they just disappear from the news. This is the world today yeah.

If you are thinking to become a successful business owner

Do not hire people and pay them monthly salary. Make them as partners where the success of the company will also be their drive since it will also be their success too. However if we are a business owner and we try to pay as low salary as possible and yet try to extract more from that staff, then stop thinking that the staffs we have will actually be working super hard so that they could get a monthly salary and we as the founder will become super rich and successful.

The mindset of a business owner of past generations are definitely no longer applicable today. There’s transparency of information and if the people whom you hired are good, they will join a better company in the near future. Period.

If you are still earning a fixed salary

Do note that every year when we get an increment, ask ourselves this important question. “Did I improve my knowledges, skills and attitude within the last 12 months?” If we keep getting higher pay but we continue to provide the SAME input, do note that we will be replaced as soon as the company could find someone who could do the same job for less pay.
Second question. Did I save enough and learn how to invest some part of my salary which would have remained the same but lower value every year since inflation will eat into it? Remember, we can have a salary of
RM8,000 (M40, click here to know)
and an increment of 10% every year (which does not make sense) but this 10% is just RM800.  Compare that to paying instalment for a RM500,000 property (which we stay) which have a price appreciation of 5% per annum. This is RM500,000 x 5% = RM25,000 per year and divided into 12 months = RM2,083 per month.

Hope everyone can see the huge difference. Note: Buying WRONG property is still suicidal and this is the same as a failed business venture. All these may happen to anything and everything we do. It’s all about risk management. Of course, the stock market could even give faster returns with the right counter too. You can do these and more.

Third question.  Did you do something good for people you love. Spend time for them and ditch that smartphone for an hour every day?  Visit your parents in the hometown (when CMCO ends) Did you contribute positively to the community? Perhaps even give free effective communication lessons without thinking how to profit from it?  This third question is true whether we are a business owner or a salaried professional. Did we do good?

Photo by Tim Gouw on
Pexels.com

It’s definitely not a bribe. It’s just a different way to become successful

By the way, my friend (who’s a simple lady) earns a pay of less than RM4,000 per month but she owns two properties. (Second one bought after listening to my talk) Even assuming she has just these two until the day she retires and the property price only moves up very, very slowly, she would still be a multi-millionaire just by selling her two properties 20 years later. She does not face that 99% failure rate for most business owners. She can sleep well at night. She just could not go to fancy restaurants every day. Do we consider her successful or a failure since she did not have a dream to become a business owner?

Conclusion

By the way, being passionate is not enough. We need to be logical too and know how to be happy.  We live this life but once. If going for a holiday once in a while makes us happy and we could achieve that with a salary, just be happy with it. If we really must start that business venture and become a multi-millionaire or billionaire and then only we will be happy, then go for it. In fact jump in and really strive hard even when the whole world does not believe you.

Everyone is different and there’s no need to keep labelling the other side as not being successful just because they are not doing what you think ought to be done for YOURSELF. There’s nothing wrong with monthly salary. Oh yeah, happiness can also be just playing video games with your kids and watch them beat you. Haha.  Cheers.

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Now everyone cannot fly.  That’s a huge problem.

Buying flight tickets online? Air Asia, definitely. Now everyone can fly. Wow. COVID-19 has hit them hard. Now everyone cannot fly. Okay, not everyone but you get the idea.

I am a supporter of both Malaysia Airlines and Air Asia. They are our airlines which are serving the world. They bring millions of tourists into Malaysia. Now, both are not doing well. I really hope they hang on because when rain goes away, bright sun will be back.

Article in themalaysianreserve.com
  AirAsia Bhd and AirAsia X Bhd have confirmed that they will be retrenching 10% of their 24,000 employees a week ago. AirAsia Group chief executive Tan Sri Tony Fernandes said the move was because the aviation sector is facing difficulty in recovering in the near future.

He said, “AirAsia is all about its people. Whatever people want to say, we built a great company because of great people, 24,000 great people, and we lost some though it was through no fault of theirs. So my responsibility is to try to get the airline back (on its feet) and provide them other jobs.”  Please do read the news in full here:
Article in themalaysianreserve.com

Photo by Anna Shvets on
Pexels.com

No one could anticipate what has happened. Now everyone cannot fly. I was just speaking to a friend the other day and we realised we have not met for over 6 months. WOW. COVID-19 has really impacted lives. It has changed how we interact, how we buy things and even locked most of us within the country we were in when COVID-19 arrived. I think I am fortunate to be in Malaysia even if we are currently facing 3rd wave. Let’s just keep those numbers low.

Airlines have not been so lucky. Without people flying, they have no ticket sales. Pilots and stewardess and even all other administration and technical staffs may not have that much to do. The company is meanwhile ‘burning cash’ because they needed to pay the staffs salary every month even when they have no sales coming in due to this circumstance.

Some airlines were reported to sell some fried stuffs and said to be earning some money but it’s really just too little. Some started the flight to nowhere and some say they will open a restaurant serving the food on the airline. Seriously… all these will not amount to much. More costs would need to be cut. More funds would need to be found because the airlines needed the funds to keep going. This has got nothing to do with whether they were successfully restructuring or not. This is just, ‘now everyone cannot fly.’

Some updates on other airlines. I do hope all would survive and come back again. That’s when I could travel again too.

Singapore Airline raised S$11 billion (RM33.56 billion) to weather the COVID-19 storm.

Thai Airways open flight simulators to public and launches restaurant serving plane food.

President Trump asks for ANOTHER US$25 billion (RM103.47 billion) bailout for US airlines

Over 40 airlines have failed within 2020 thus far

Airlines will burn US$77 billion (RM318.7 billion) in cash only within H2 2020 alone…

When the sky is busy again, these airlines will be back much stronger because many have fallen. Thus, supply of air tickets have already shrunk. We just need demand to restart the engine so that everyone can fly again. For now, probably till the time when vaccines are fully approved and totally ready to be shipped out from manufacturing plants, I guess airlines will just have to find ways, somehow to hold on… as we are currently at this situation: Now everyone cannot fly

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Suddenly, now everything’s good? Haha.

I remember just weeks ago, reports after reports said that Ringgit was doomed, that the Bursa will be continuously negative because of a host of many reasons. One recent report even stated that Malaysia is the weakest ASEAN country. It’s ok, I am very sure they must done their research using statistics I do not have access to. However, based on my little knowledge thus far, fundamentals do not suddenly change. Thus, how can everything just turned around suddenly within this one week? One of my colleague even said that the current uptrend is because the government is doing something behind the scene. I think this colleague must be right and he must be a very well connected person. 🙂  It has been a good week. Ringgit is up again vs some of the currencies it went down against and is up versus many other even weaker currencies such as Yen and Pound. So, would this trend be continuing? Well, a report said that based on the usual calculations for the stock market, Bursa is expected to continue its rebound next week. Haha. What if the US market dropped next week? Would their predictions still come true?

I hope you now get what I wanted to say. Whenever we invest, invest with sufficient knowledge. Not based on full knowledge because no one would have full knowledge. Not even those who tell you their predictions have been true all these years. Should we buy a certain stock? That should depend on it’s actual performance for the past many years and how much you believe its performance moving forward. Buy with a long term view, not based on short term expectations. When we speculate and we won, it’s called luck. Nothing more nothing less. Should we buy a property? It should depend on the property and whether the market is up or down. Would it better to buy when the property market is up or down? Even better question, why are the super rich snapping up properties during bad times? Why are so many greedy people got caught for buying a property during the uptrend and in the midst of completion, the market slowed and suddenly they got to know that they have bought an overpriced property?

For past many weeks, the stock market is volatile and coming down because of the faltering oil prices. Today, the oil prices remain low. So, it meant nothing has changed, right? Ringgit is said to be depreciating but if you compare it versus many other currencies, is it true that that is the sole reason? I think the only currency which is contributing to whatever changes thus far, at least for the short term is just the US$. It’s always about what happens there and then people would find some reasons to explain about the fluctuations. Oh yeah, the latest report said that the equity investors suddenly feel that lower oil prices may not be that bad after all. So, suddenly, now they accept lower oil prices. In US, The Dow has surged 2.43% and S&P 500 gained 2.4% too. Do not be too happy if S&P continues to rise though. Once it hits 2,250, the stock market will crash and recession will start. Read here:
Bubble will burst when S&P 500-stock index reaches 2250.

Great. Now, what should we believe? I believe we should believe ourselves and I believe we should read more from all different medias. Sometimes, we may be wrong but truth is, the probability of us being wrong versus the experts are not that high. The experts are right 50% of the time. I think we may stand a chance for a 50% right too. Happy reading and investing.

written on 20th December 2014

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Now I can buy Penang affordable properties too. (I am not a Penangite)

Once upon a time, the affordable homes in Penang were only available for sale to Penangites. Not even for someone who has worked in Penang for 15 years like me. The buyer(s) must be Penangite. The affordable homes come with an attractive price tag too. The price range are between RM150,000 and RM300,000 on the island, and between RM150,000 and RM250,000 in Seberang Perai. The Penang government announced that 20% of units under the affordable homes category are now open for sale at market price to those from outside the state. Eligibility of buyers have been adjusted too. State housing committee chairman Jagdeep Singh said in each category, the income limit had been raised by RM2,000. For the RM150,000 homes, the eligible household income is now RM8,000; RM200,000 homes, RM10,000; and RM300,000, RM12,000. This applies to the affordable home units in the entire state.
Article in FreeMalaysiaToday.com for reference.

Beyond just the local, Jagdeep also announced a waiver of the one-off 3% approval fee for foreigners purchasing properties in the state for the entire month of February to boost Chinese New Year sales. Currently, foreigners can only purchase landed properties on the island priced from RM2 million to RM3 million. As for the mainland, foreigners can only purchase apartments priced above RM500,000, and RM1 million for landed properties. With this 3% fee waived, foreigners save RM90,000 for a property worth RM3 million. He said, “Penang is a place where your investment in property cannot fail because it is a sought-after address. The earlier you come, you stand to get a lot, your property prices will increase.”
Article in FreeMalaysiaToday.com for reference.

I think it’s okay to let non-Penangites buy these affordable properties too. This is because Penang attracts many non-Penangites who are working in Penang and helping to grow the state economy too. Let’s not discuss on why non-Penangites were not allowed to buy previously but I think what’s most important is that we continue to see the pro-activeness of the state government to manage the number of unsold properties in the state. When developers start to clear these units, they could then build more. Else, developers are also stuck because they are wary of not keep adding into the pile of unsold units. Happy buying a unit.

written on 29 Jan 2019

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Finally, people are getting more rational and objective?

On 22 January 2016, Ringgit rallied the most within 8 weeks. Actually, up till end of 2015, ringgit was on an uptrend but everything fell apart by week 1 of January 2016 beginning with China. To those who have been following kopiandproperty.com for a while, you would note that I disagree with the current value of ringgit. It’s simply too undervalued. This is especially so when we benchmark all the usual numbers with that appreciating currency Why is their stock market at such a high level while here in Asia, every bourse look bad. Yes, I am talking about the usual external debts, foreign reserves, economic growth, banking sector health, unemployment rate, actual GDP growth thus far and even the stock market’s current price versus stock price value. Sorry, even our Bank Negara Malaysia lady is definitely better than their Fed Reserve lady who still have to show more courage in her decisions. Enough of my personal opinions. I am still a nobody.

Let’s hear what UBS Group AG, the world’s largest private bank is saying just end of December 2015. It’s telling clients that “little room for further dollar appreciation.” This is after the growth for the past 3 years. Stamford Management Pte’s CEO Jason Wang which oversees $250 million for Asia’s rich will review its outlook for greenback gains after Q1 2016. The same Bloomberg article also revealed that in the 4th quarter of 2015, the Indonesian rupiah is up 7.3 percent, the Malaysian ringgit 2.5 percent and the Singapore dollar 0.9 percent. Next commentary by Russ Koesterich, chief investment strategist at BlackRock Inc., the world’s biggest asset manager is interesting. He shared that long-term investors willing to withstand short-term volatility should consider Asian emerging stocks and bonds because prices are attractive.

I still personally think currencies are very volatile and would not want to speculate which will be up or down etc. If we believe Ringgit is going to go down further and believes Singaporean Dollar is safer and more stable, then instead of hedging by buying the Singaporean dollar, one may want to consider buying stocks (shares) in some undervalued Singaporean listed companies instead. This is still considered a hedge somewhat but not on currency vs currency basis. Do note that volatility is very high for currencies but for companies doing well, even if the share price takes a beating, you would still expect dividends. Warren Buffet said, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” Happy believing and taking actions.

written on 23 Jan 2016

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NPL Malaysia on the way up. How up?

Let’s look at NPL Malaysia today.

Referring to investopedia.com
, “A nonperforming loan (NPL) is a loan in which the borrower is default and hasn’t made any scheduled payments of principal or interest for some time.”
Click here to look at a full explanation yeah.
Briefly, it meant that the lender (usually the bank) would have to expect that the loan may not be paid and they may have to make provision for it once this (NPL) happens. They could also restructure the loan repayments too.

During the COVID-19 pandemic, a moratorium was given instead of having a lot of loans suddenly turning into NPL. As a licensed auctioneer, I can safely tell you that if the banks forced the borrower into default during this COVID-19 pandemic period, that property they take back may be auctioned off at a price which is even lower than what the borrower owe. Thus the moratorium is considered a win-win situation to all. This includes the owners of similar properties, else, the auction price may also affect their property value too.

In Malaysia,
Non Performing Loans
 are
defined
 as
loans
 overdue for more than 90 days. Let’s look at Malaysia’s NPL from 2010 all the way to Dec 2019. If you like to see even more,
 you can also refer to ceicdata.com here.

Is Malaysia’s NPL on the way up. The answer is a firm yes.

Is this the highest we have ever seen. The answer is a firm no.

In 2008, there was a Mortgage Crisis which was triggered by that biggest economy of the world. We could see that it has also definitely caused some worry in the market. This situation has continued to become better from 2011 to 2012 to 2013 and have reached a low point in 2016 and then it has started to have an uptrend again, most probably is also because at the height of the property boom, many bought properties they struggle to afford in 2012 and when it’s completed in 2016, some of it turned into non performing loans for the banks.

Source: ceicdata.com

Conclusion

It’s always good to see the numbers in a wider context versus a very narrow view. Would another financial crisis be on the way? I have no idea but seriously, do not ask any economist as well because the only way they could know is by looking at history yeah. More importantly, did we manage our borrowings based on what we could afford. If we did, then chances are we are able to hold on for a while even if unforeseen circumstances do happen. Let’s manage this well yeah. Continue reading kopiandproperty.com too.

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NPLs as at October 2019? Erm… second highest since 2011. Start worrying for 2020?

I was just having a conversation with a founder of a startup the other day and we talked about property auctions. I told him that sometimes, when the auction has happened a few times and the price has gone very low, the banks themselves may step in and purchase the property instead. Else, someone may buy the property at prices so low it hurts all the stakeholders. They (the banks) have the ability to hold these properties and may sell it again when times are better. However, in the mean time, that property goes into the Non Performing Loan (NPL) numbers first.

NPLs happen when borrowers default on their payments. The banks would then try and recover as much as they could. However, for a start, the loan amount goes into the NPL provisions when borrowers did not pay for 6 months. When this happens, we will then see a NPL number rise for the banks. It will show a rise when more people default and this usually happens during bad times. For example, NPLs were in double
digits way back in 1998 (22% to be exact)
 and it was close to 10 percent in 2006. Here’s that earlier article:
Ability to repay is very important
  So what has happened to the NPLs today?

Article in themalaysianreserve.com
   Bank Negara Malaysia’s recent data has revealed that the NPLs for the overall banking system has risen to RM28.3 billion as at October 2019 and this is the second highest since May 2011. However, despite this higher number, the ratio of total provisions in October was only 1.44% of the financial systems overall loan outstanding of RM1.75 billion.

MIDF Amanah Investment Bank Bhd senior analyst Imran Yassin Yusof does not expect the situation to become worse. He said, “There hasn’t been a broad base default trend as yet, nor are we expecting any for 2020. Some of the provisions were due to bigger financial assets such as bonds or sukuk that are held by the banks.”  He added, “As such, we do not expect provisions to balloon up in 2020, despite the possibility of higher impaired loans.” To look more deeper into what the banks are provisioning, please refer to the
Article in themalaysianreserve.com

Many times, looking at just the overall number of RM28.3 billion will seem extremely worrying. However, it is much more important to look at the ratio of NPLs to the overall loans in order to have a better understanding. With a ratio of 1.44% of NPL to the overall banking system, we are definitely healthy. Plus, remember those complaints about rejection of loan applications? Earlier article here:
80% of loans were rejected

The banks are conservative enough as a first layer of defense too. They have their shareholders too.
BNM’s Responsible Lending advice is quite strong.
Happy knowing yeah.

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NPLs for RESIDENTIAL properties at 8 year-high. Worrying sign for 2020?

Non-Performing-Loan (NPL) happens when the borrowers fail to repay their borrowings and the banks decided that getting it back voluntarily may not be impossible. They will have to classify these loans as NPLs while at the same time they try to recover them in the near future.  NPLs for Malaysian banks have always been on the low side, even by international standard. Do take a look at
the image from ceicdata.com below. (click to view the full list)

Article in themalaysianreserve.com
 . According to Bank Negara Malaysia’s monthly data, bad loans for the residential properties borrowings have reached RM6.83 billion in October 2019 and this is an 8-year high. The last time it reached higher than this was in 2011 when it reached RM6.91 billion. Fortunately, in comparison to the overall outstanding borrowings of RM1.7 trillion, this remains small. The ratio is just 1.44 percent.

Public Investment Bank Bhd head of research Ching Weng Jin said despite the rise, the NPLs for housing sector should be measured against the total portfolio size and not in isolation. He said, “Back in 2011, the mortgage portfolio was only RM240 billion, and today, it’s slightly under RM600 billion. So, as a percentage of the entire portfolio, the NPLs situation is actually better, so to speak.”

Institute for Democracy and Economic Affairs senior fellow Dr Carmelo Ferlito said, “I think it is good that NPLs remained stably low for so long and it is important to avoid the conditions that may make things worse. If we want to avoid a new cycle, with NPLs skyrocketing again, we should avoid expansionary monetary policy and easy credit. The two things walk together.”  Please read the full
Article in themalaysianreserve.com

It’s super important to understand the real issue and not be alarmed by just any figure. The NPL numbers in Malaysia remains low because BNM is very stringent and our banks have their own lending guidelines which should be a responsible one.  Many of these banks are publicly listed and has also to manage the risk versus profit because their shareholders would want a stable and continuous returns too versus extremely high profits one year and then going into the red the year after with lots of provisions for NPLs.

Happy understanding that things are not as bad as what people are saying even if they are not as good as what some property experts are saying when they want you to buy the properties they are selling.

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Good news. Klang Valley moves into NRP Phase 3

This is the news article in nst.com.my
 Will not say too much. Just showing you three images from Majlis Keselamatan Negara. Yes, it starts 1st October 2021 and that’s just 1 day away technically since it’s Friday and tomorrow is Thurday. There are no huge changes, inter-state is still not allowed of course. Read here on why I say so:
ICU utilisation still high, no need rush

Second image gives an overview of where we are for all the different states

As we can see, more states are now in Phase 3 while there are no more states in Phase 1. Good news indeed. Phase 4 is still just Negeri Sembilan and W.P. Labuan. Both have super high vaccination coverage over its population and already at very low ICU bed usage if compared to all other states.

Hey, it’s possible to go watch a football game if we are fully vaccinated

Pretty good. Just ensure mask is on and social distancing lah. Keep numbers low so that ICU usage can keep dropping. We need the hospitals to be going back to its normal state and could begin serving everyone again. ICU is for all, not just Covid-19 cases yeah.

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Klang Valley and Melaka enter NRP Phase 4 on 18th October 2021

Good news and also a warning for this NRP Phase 4

Good news indeed when I heard about it today. Hopefully everyone really appreciate this latest announcement and really do not go and cause lots of new Covid-19 clusters. Remember yeah, just the news about Melaka state election is already such a potential big thing and now with this further relaxation, Covid-19 virus will be looking for every opportunity to make a strong comeback. Deny it please…

Article in nst.com.my
   Prime Minister Datuk Seri Ismail Sabri Yaakob has announced that the Klang Valley and Melaka will enter Phase 4 of the National Recovery Plan (NRP) effective Monday. Meanwhile, Kelantan, Perak, Penang, Sabah and Kedah, meanwhile, will move from Phase 2 to Phase 3.

He said the decision to transition the states was made based on the dip in fresh Covid-19 infections, decline in overall infectivity rate, or R-naught, and the high adult vaccination rate. He said, “The infectivity rate or R-naught also continued to decline, registering a figure below the 1.0 level at 0.86.”

Meanwhile the vaccination rate of the adult population for the first dose stood at 95 per cent as at yesterday. Ismail Sabri said the Standard Operating Procedures (SOP) for states entering Phases 3 and 4 are available on the National Security Council (NSC) official website at
www.mkn.gov.my
. Please do read here for the full article:
Article in nst.com.my

Keep it up yeah. Masks on, Social Distance on and Alertness level continue to be on

I could feel some people start to think that things are getting okay, so it’s okay to do many things they did not dare to do previously. For example, simply going to anywhere they like and somehow forgetting to wear the mask correctly, somehow forgetting to sanitize the hands frequently and even forgetting that the children are still unvaccinated and thus definitely need more protection at this moment.

Photo by
MART PRODUCTION
 from
Pexels

Hiking where there’s full social distancing is of course okay. Dining in open areas and with really huge social distancing should be okay (I am not as comfortable yet). However, bring them to pasar malam for example…? Or to the market? Or even to some gathering of friends? Let’s hope nothing bad happens and that we get to keep this status and looking forward to the next stage of normalisation where we start to allow vaccinated foreigners back into Malaysia.

I am very happy we reached this stage. They say this is called cautiously optimistic. Yeah, that’s the word. Happy enjoying NRP Phase 4 everyone in Klang Valley.

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Isn’t it obvious that one must buy a property next to the MRT?

An old friend told me this today after my talk in Sunway Pyramid. The title of my talk? “Should MRT affect your property buying decisions?” He said, ‘why are there so many people listening to your talk? It’s obvious, they should buy properties next to the MRT stations, right?’ Haha. Anyway, the answer is NO, not necessarily. For a family man like me, with two young kids and a Home Minister wife, I would prefer an integrated development instead plus LOTS of greenery. MRT is to me, secondary. How far or how near the home from the MRT station is of no concern. I am the only one driving to and fro work anyway. My wife drives the kids to nursery and anywhere she like after

that without the need to face jams.

Within the neighbourhood, within 10 minutes, there should be supermarkets, there should be hospitals and clinics, there should be primary schools and even nice restaurants but I do not need a home next to the MRT!

However, this ‘magical’ word is getting popular. Transit Oriented Development (TOD). This would be homes that have direct connection to the LRT or the MRT or the BRT (if this becomes popular). TOD is not just being connected though. it’s also about lifestyle changes. We can forget about jams, we can reduce our expenses due to parking and petrol and we will always be on time. (usually, anyway). The homes built closer to these TODs may also not have lots of car parks provided because frankly, they are actually not targeted at a 40 plus adult like me.
Malaysia’s median population age is currently 29.

This is the actual target market. Working professionals who wants to live comfortably and go to work without much hassle; step into one LRT / MRT station and get down from the next one within metres away from their office? That’s the MAJOR POINT. Look at the offices today, the new ones, there are NONE built OUT of these public transportation network. Its suicidal…

Within these three weeks, I have gone to three different projects from three different developers. Their concepts are almost the same! Haha. Modern designed homes; duplex for that awesome feeling of spaciousness due to the 20-22 feet ceiling height. The homes are connected directly to the LRT / MRT or shuttle busses are provided. Two are below 1,000 sq ft but just like any duplex, it’s possible to design it based on our needs and maximise the space available. Then again, as long as there are already 3 rooms provided, it’s enough for many years, even when the single got married and the married have babies. Would people stop driving and fully go into the
Malaysians Ride This (MRT) revolution?

Perhaps the POLICIES will help to decide. Singapore made it SO EXPENSIVE to buy a car. Hong Kong made it SO EXPENSIVE to park the car in the city centre. Both are extremely successful. Yes, I firmly believe TOD developments are the way forward but not for someone like me; one lovely home minister wife and two naughty kids. Cheers.

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written on 17 April 2018

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OCBC: Singapore home prices drop 3-7 percent in 2017

When we look at the property market a regional basis, I always see Singapore property market as the leader of the pack. The pack includes Malaysia, Indonesia, Thailand and of course, Singapore which is already considered an international property market. Leader in this case meant that it would be the market to first implement measures to slow down or even boost the market. As of  now, Singapore’s cooling measures are staying put. Do google for earlier news or read one of it here:
Lifting cooling measures? Too soon: MAS

Due to it staying put, the market would remain subdued, right? Well, based on an article the number of transactions are actually going up. This was reported just days ago by
Bloomberg.
Not the best media but always good to read more. They wrote an article about Iskandar just weeks ago which I disagree. Haha. Here:
That ‘scary’ article about RM100 billion Chinese investment in Iskandar

What about the prices in the Singapore home market then? As per OCBC Investment Research, the private home prices in Singapore should drop 3 to 7 percent in 2017 while rents are falling by 5 to 10 percent. Two main reasons? Persistent housing oversupply and imminent rise in interest rates. Oversupply means demand is not catching up fast enough while interest rates up meant that some may choose not to buy as they would have to pay more every month. I think the Singapore market has been accustomed to low rates for a long time. Thus any rate movements up meant some adjustments in mindset may be needed. This is quite usual for any market at all. Do read the full article  in todayonline
here
. Most of my friends working in Singapore are staying in HDB flats and as they own just one property, I think any price changes would not affect them much unless they are thinking of upgrading.

The OCBC Treasury Research team expects that domestic benchmark rates, i.e. short-term Singapore Interbank Offered Rate and Swap Offer Rate, for mortgages will broadly rise 80 to 200 basis points from now to end 2020. The OCBC analysts do not expect too much changes in the primary residential sales.It said, “Despite prices continuing their downtrend in 2015 and 2016, the rate of sales appears to have stabilised near that in 2014 (about 1,800 to 2,000 units sold per quarter), with about 5,700 units sold in the first nine months of 2016.”

I would also hope that the property market in Malaysia continue to be orderly and the average prices continue to drop slowly as more affordable homes are launched and sold. Seriously, rising prices are not sustainable and the days of 2009 – 2012 is unlikely to return. The prices are now already at a level which many
Malaysians are complaining
 (KL average at over RM700k is definitely high) and with the current lifestyle, unlikely to be able to afford or even get their loans approved. Read here:
Important question on distance vs affordability and expenses
.
This is why I make it a point to read about the Singapore property market. Happy following.

written on 11 Dec 2016

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Occupancy at 85% BUT 75% over 16 years old.

There has been many reports about the state of office occupancy in KL city centre. Most of the reports point towards oversupply. Well, six more new buildings have joined the office space scene. They are Menara Bangkok Bank, Ilham Baru Tower, Naza Tower KL City, KEN TTDI, Menara MBMR and The Crest Sultan Ismail. These towers added an additional 2.1 million sf into the KL city office space. So, would these be making the oversupply even worse? According to PPC International managing director Datuk Siders Sittampalam, “The questions today are, what is going to happen to the new supply coming in? How fast can the space be filled? The occupancy of office space in KL today is about 85%.”

This brought me back to a discussion with a fellow colleague just weeks ago. He said that why are developers continue to build office space when the existing office space is already said to be oversupplied. I asked him why he said so? He said there are a few office buildings which are no longer occupied. I told him that I feel that if we are always talking about survival of the fittest when we talk about business, why are we also not talking about survival of the fittest when it comes to office space? Why not let those which are competitive take office space business away from the buildings which are no longer competitive? Where the maintenance might have been bad and thus after 10 years, the building is no longer attractive? He said he disagreed but the conversation stopped.

In an article in an online news portal, it quoted Chris Boyd, executive chairman of Savills Malaysia as saying that despite Greater KL having a lot of office space it is important to note that 75 percent of these office stock is more than 16 years old and 40 percent were built between 1990 and 1999. Yes, if 1990, it meant the building is already 25 years old! Remember everyone would tell you to stop buying a condo if it’s over 20 years old? Well, there are office buildings which are older! Chris then said that “Less than 15% of the existing stock is less than five years old.”

Actually, do we now see one major reason why the newer places are still being sought after and the office rental is still increasing while some older places are finding it harder to maintain its tenant even with lower rentals? Think very objectively. Assuming you are a new multinational or you are a listed company which is growing very fast, would you want to be based in an old building? Would you not want a nicer place where it may be integrated to shopping malls or other public transport like the LRTs or the Monorail? At least within walking distance?

Office buildings build for needs of yesterday may not be suitable for today. Older lifts also break down more often and it may take major refurbishment for some older buildings to be on par with the newer ones. If the office building was managed well, it should have no issues to keep its tenant while at the same time providing very competitive rental rates. If it is not, why are we stopping the building of new ones and trying to ‘save’ these buildings? Restructuring is common in many industries and I think this applies to the office building marketplace too. Happy renting a better place for a lower price with more office choices.

written on 3 May 2015

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OECD Cuts growth. Another negative.

In case anyone missed an earlier article, do read about Citibank’s prediction of a global recession in 2016. Read here:
Getting ready for the next global recession?
  In some recent news, the OECD has cut its global growth forecasts, sounding the alarm on stagnating trade. This also meant that the global recession may be coming soon. Who is OECD anyway?  It is the Organization for Economic Cooperation and Development and is a unique forum where the governments of 34 democracies with market economies work with each other, as well as with more than 70 non-member economies to promote economic growth, prosperity, and sustainable development. (source: google)  So, the answer is yes, they are a pretty reliable source when they announce something.

Before everyone panic, they further said that due to China’s stimulus measures as well as other countries, the impact may be mitigated. It said that the global growth forecast for this year would now be at 2.9 percent. (Malaysia’s GDP growth is definitely on the higher end) For the next year, it will be 3.3 percent. A recovery nonetheless compared to 2015. OECD however foresees that growth would pick up in 2017, up to 3.6 percent growth. (By the way, all the forecasts for Malaysian GDP for 2015, 2016 and even 2017 easily exceeds all these world average). I still do not understand why Ringgit is still at his current low value. Read here:
Impossible, how can Ringgit be most attractive?

Other forecasts by OECD? China’s growth, after the stimulus should be 6.8 percent for 2015 and 6.5 percent for 2016. Brazil will have a contraction of 3.1 percent this year and 1.2 percent contraction in 2016. (This was also the country that some investors believe is on the same level as Malaysia for currency strength). UNITED STATES is said to be “relatively solid’ at 2.4 percent for 2015 and 2.6 percent for 2016. Seriously, the US better do well and I will pray for them to do well. Read here:
  I hate it when US economy has bad news

Eurozone will strengthen and the forecast is 1.5 percent for 2015 and 1.8 percent for 2016. Read carefully and understand what’s really happening in the world today. Still believe Ringgit is unlikely to recover from its current ‘bad performance?’ Remember to hedge externally then. My thoughts remain the same for now, I will just scout for opportunities and take them if any good ones come along.

written on 12 Nov 2015

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Office vacancy rate is up to 16.7 percent as at end 2020, higher than even 2008 crisis!

What is office vacancy rate

Office vacancy rate (how much office space is not occupied) is one metric used to measure if the demand for office space is sufficient, increasing or decreasing. It could also indicate an acute oversupply of office space if the vacancy rate is 50% for example. This meant that half of all the office buildings are NOT occupied.  Thus, the lower the vacancy rate number, the better.

What if office vacancy rate is too low

Do note that if the office vacancy rate is too low, it will also meant demand far outstrips the supply of units and this will usually push up rental prices. Great for owners but not awesome for the tenants. Cost will then be higher because office rental is a huge chunk in operating expenses.

Decision Science versus Political Science

This is why the government must always ensure the supply is not simply approved and cause an oversupply but must also not be so strict or slow that demand far exceeds supply. It’s not easy job and needs professionals to do it yeah. Decision science is needed and please do keep political science out of the picture when it comes to real estate development for the people.

What is occupancy rate then?

Some countries may use occupancy rate instead of vacancy rate.  Occupancy rate tells the same story about office demand and supply but it’s just the opposite. The higher the occupancy rate, the better it is and the lower the occupancy rate, it meant that the supply may be too overwhelming or the demand is just not forthcoming. One latest number I could find as per published by
The Edge Markets as below:

Now let’s look at one country which is badly affected by COVID-19 and some OTHER issues currently.
Article in nst.com.my
.
  San Francisco’s office market is being hit very hard by the pandemic. Commercial real estate brokerage Cushman & Wakefield in a report showed that the city’s office-vacancy rate reached 16.7 per cent at the end of 2020. This is a level worse than the aftermath of the 2008 recession.

It says that companies have been reevaluating their office needs after months of pandemic lockdowns showed them that it was possible to function with employees working from home. That’s caused a spike in vacancies, especially in cities like New York and San Francisco, where the cost of renting space is higher.

With vaccines, there are early signs of recovery.  Do refer to the comprehensive article here:
Article in nst.com.my

COVID-19 and Vaccines’ Arrival

COVID-19 can be stopped with the vaccines. The only issue right now is how fast we could get everyone vaccinated. The process, even in America remains slow. In some countries, it is even slower. Malaysia will only get the first batch of vaccines in February 2021. However, what the report so indicate is this. When recovery starts, then the demand for office space will certainly inch upwards. Just remember that there are choices; cheaper office rentals, working from home option and also the business needs.

My good friend who owns a retail unit in a major mall told me that her online sales have exceeded that of her retail shop since the start of our first MCO until today.

Happy understanding that perhaps things which happen in some developed real estate markets may offer us some clues on some of the potential happenings here as well. They were hit by COVID-19 and we were hit by COVID-19. Learn and take appropriate actions. It usually helps tremendously too.

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Office tenants can rejoice? Since more upcoming choices

An earlier article about the Kuala Lumpur offices occupancy is here:
Occupancy at 85% but 75% over 16 years old
.
It has not changed a lot since then. Reported in
The Sun Daily
, Siva Shanker, the past president of the Malaysian Institute of Estate Agents shared that the current “tenants market” will continue because there are more additional office space completing by end 2016. Within just Kuala Lumpur and Selangor, there is a total of 92.7 million sq ft of purpose built office space with a further 5.8 million sq ft of supply on the way. These new office buildings include Public Mutual Tower, JKG Tower, Menara Ken and Menara Hong Leong. Occupancy rates of offices in Kuala Lumpur is now at 83 percent, falling from nearly 90 percent in second half of 2015.

He also shared that the new
MRT line will help decentralised locations
 as it could be 20 – 30 percent cheaper. He cautioned however that rental reduction is not the answer to attracting tenants because with lower rents, there would be less money for maintenance. This may mean the office buildings would only attract lower quality tenants. He also shared this statement, “Many MNCs are not keen to come in and are willing to spend a little bit more to stay in Singapore while those staying here are those who are already invested here.”

MRT lines, with many new stations

will change a lot of the current area dynamics. However, moving to these areas outside the city centre would also mean some staffs resigning as they may not be staying nearby. Just imagine if someone were to work in Damansara and staying in Puchong. Using LDP in the morning, say at 715am would really test his / her patience…. Perhaps driving into the city centre from either Damansara or Puchong may still make good sense.

Lower rents meant lower quality tenants may be quite true but for maintenance of older office buildings, it will be very hard to complete with newly completed modern looking office buildings. In fact ask any Gen-Y workforce today and we would notice that even the working place plays an important martin attracting them. Older offices will definitely keep many of them away, regardless of how awesome the maintenance is. Employers would have to keep this in mind when they are thinking of an office change.

As for MNCs shying away from Malaysia or staying in Singapore, I disagree with this statement because there are even more foreign outsource hubs being set up here in Malaysia and not lesser. This is despite some other neighbouring countries having lower labour costs. As for oil and gas companies, please do read a bit. Some are actually moving their hubs to Malaysia. Once moved and stabilised, moving back to higher cost countries would be a no-no. Let’s focus on attracting them here. Happy following.

written on 2 Nov 2016

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High rise occupancy is 69% in KL

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