3 important points. Is property an asset or liability?

I love property investment. I repeat, property investment. It’s not simply buying a property and think of it as an investment. I also disagree with property speculation yeah. Certainly not using whatever method which enables anyone to buy a property or properties beyond what their salaries could afford.

For this article, we revisit the thought that buying a property is good because this is a good debt and good debt is always be an asset, right? So, property is an asset?

Well, if we asked property owners who bought a few units during the wrong years, gotten the keys  to all of them and is now struggling to pay their mortgages, they will tell you that those few properties are liabilities and not assets.

They may even go bankrupt because of all these properties they bought all at once. Well, if we have treated property as an investment versus a gamble (because we were too greedy), this situation may not have happened.  Frankly, buying a good property, one at a time, will always be a good advice I will give to the ones who have started working and needing a place to stay. In future, you will understand.

Coming back to whether the property becomes an asset to us or not when we buy a property?

#1 – Property is not an asset in the beginning.
Frankly, that property we bought actually ‘belongs’ to the bank. We may pay a 10 percent like usual or we may pay more or we may get rebates or cash back in the beginning. In brief, whether we pay or we get back some money, the property is still not ours yeah. It belongs to the bank.

If we fail to pay the monthly mortgages, very soon the bank will auction off that property and we have just lost everything and more. Bankruptcy may be looming too. This is about how one becomes a bankrupt in Malaysia.
How much unpaid debt to be declared a bankrupt?

#2 –
Property is not an asset if it does not increase in price.
I think this is the main thing everyone is worried about? What if the property price stayed almost the same after a few years? This is the reason why the first purchase should usually be the one we stay in. When we do this, we do not need to pay rental which essentially 100 percent goes to the owner.

An even important note is that if we are looking at long term, property prices will always rise because salaries of people will rise, construction material cost will rise, land cost will rise and even the marketing costs will rise too.  This is also why property investment is also known as a hedge against inflation. In other words, the value of our money will stay the same because the increase in price will compensate for the inflation.

#3 – Property is not an asset if it’s overvalued in the beginning.
Secondly, we should not just buy a property which we like without knowing if the price we bought is above or below the typical price for the area. One resource we could use to benchmark is
brickz.my
 This site has the transacted prices which will help to guide our buying price as well. Remember, property price cannot just simply keep rising. Important note here:
property price we buy matters.

Be knowledgeable, reading more is easy and it’s free

Every time we invest our money, we hope for good returns. The term ‘good’ will be different for everyone.  However, with property investment, the increase should be ‘pretty slow.’ My wish is only for the property to appreciate based on just 2-3% per year. (Must buy the right property yeah)

 Actually, even that 2-3% is already attractive to me. Imagine a RM400,000 property appreciating at just 3% per year. That’s already RM12,000 per year or RM1,000 per month. Based on statistics, the typical property price increase after all the ups and downs over the periods of 1990 – 2013 is 6.3%.
Image below is from housingwatch.my

I know, we technically do not own it yet until we finish paying for it. However, how many of us have an increment of RM12,000 per year? (conservatively speaking?)

Well, no one should be investing into property thinking that it will suddenly gain 10% every month…right? Happy investing into good debts which may eventually turn into an asset once it fully becomes ours in the future.

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Property bubble bursting only after 2019. Two reasons, says expert.

Remember just days ago the brouhaha about property bubble about to burst? Here’s that article:
Property bubble close to bursting due to 3 reasons. Government must be ready.

This ‘prediction’ was widely shared. Anyway, I shared my personal views too about property bubble bursting. There are usually three reasons. Please be reminded that I just a working professional like most Malaysians yeah, not some experts you hear everyday.
Here’s the 3 reasons why property bubble may burst.

Even before the dust settles, here’s another prediction. This is as per an
article in FreeMalaysiaToday (FMT): Property prices not coming down soon, says expert.
  While the title appears to be mild but this is the first line within the article,
“A property expert believes the property bubble is only likely to burst after 2019 when developers and banks are no longer able to sustain the oversupply and inflated prices of homes.”

The expert, Ernest Cheong said that the impending sales and services tax (SST) was unlikely to affect prices, sales of property. He shared, “The SST is unlikely to affect property prices because manufacturers of construction materials and developers are likely to absorb the extra costs, given that property sales is slow. Developers thinking of taking advantage of the SST will only be hurting themselves, so I believe the impact will be negligible. Cheong also said that prices and transactions would continue to be sluggish because many people simply can’t afford to buy homes. He gave two reasons on when would the bubble burst would only be triggered. First one is when banks could no longer afford to sustain loans taken by developers and defaulters. Second is when developers could not afford to hold to existing prices and inventory. Once these two conditions are met, he said, “Then it is likely that there will be panic selling by developers and panic foreclosures by banks. This is out of the government’s control and they shouldn’t interfere, let market forces dictate prices.”

His views were not shared by Anthony Adam Cho who is from a Melaka-based developer He shared that with the country’s growth expected at around 5.3% this year and despite the initial market contraction and capital flight after the May 9 polls, the situation wasn’t as bad as it was made out to be. He said that the demand for homes would always be there with the country’s population growing 3 to 4% annually. In fact this was what he said, “Roughly, the country needs 25,000 new homes annually to meet the demand. All these years, we have only managed to produce about 60% every year, so we have pent-up demand.” His prediction is that there would be a temporary slow down in sales of houses for 2018 and 2019. This will improve when the economy grows. Plus the positive news from the new government’s commitment to reduce corruption and ensure a more friendly business environment.
The full article in FMT here for reference.

I have already stated my views earlier actually, so let’s just let everyone decide what they wanted to hear yeah. On one hand, another new prediction of a property bubble bursting but it’s after 2019 and not something happening soon. Happy believing and taking actions yeah. If one believes truthfully that property bubble is bursting soon, then one of the best ways to take advantage of it is to hold as much cash as possible and wait. We could sell what we have currently to raise the cash well in advance of the anticipation. Cheers.

written on 30 July 2018

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Property bubble bursting? Two things to watch out for.

I read an interesting and easy to understand article in South China Morning Post (SCMP) about the state of property market in Hong Kong.
Here’s that article.
 Hong Kong is an advanced property market and usually, they will experience whatever is to happen first, way before Kuala Lumpur. According to the writer of the article, the Hong Kong property market has experienced a 9-year UP and no prices can keep rising forever. In December 2009, the International Monetary Fund has already warned of the potential risks from a dangerous bubble in the Hong Kong property market. The warning did not mean much as prices continued to rise and according to the Centa-City leading index of secondary market prices, the prices has hit a new high. It is now fully 124 percent above its level when the IMF first issued its bubble alert back in 2009. 9 years and 124 percent up.

Next would be examples of why things are really super overpriced. Luxury flats are now selling for HK$130,000 (RM68,000) per sq ft. Nope, not a typo. I repeat. RM68,000 per sq ft. As for affordability, Hong Kong people would have to make do with a flat as big as a parking space for a TESLA. Here’s that earlier article:
Tesla versus micro-flat. Similar sized.
This is not all because even the car park prices are becoming crazy. Here’s that earlier article too.

RM2.8 million for one parking spot!
When we google for ‘coffin homes’ we would realise that there are so many people who could not afford even a decent place to stay and within the same place, there are people paying a few million for a car park. Unfortunately, the pace of development was too fast and many people just could not keep up.  So, do all these point to an upcoming property bubble bursting? Well, in order to answer that, the writer, Tom Holland pointed out two forces.

First one would be the influx of mainland China buyers. The second one would be the high liquidity in Hong Kong’s financial system due to the rock bottom mortgage rates. The mainland buyers are now accounting for about 10 percent of purchases in number and 15 percent in value.
(Yes, this means that they are buying more expensive properties or they are simply paying more since they are trying to outbid the Hong Kong buyers)
 10 percent is still a very high percentage and as of now, the sign points to a continuation of these purchases. Second, we

look at the mortgage rates.

It says that as recent as six months ago, interest rates for Hong Kong buyers were as low as1.75 percent.
(YES, this is very low).
 However, that same mortgage rate would already be 2.12 percent.
(Not that high, actually and should not be sinking too many people unless they are already overstretched currently)
If the gap between HongKong and US interest rates closes and if the US raises interest rates by 0.75 percentage points over the next 12 months, then interest rate on floating rate Hong Kong mortgages will climb to 3.4 per cent. This is almost double the number 6 months ago. So, is it considered a trouble yet?

For this, we need to understand about the Hong Kong borrowers. HKMA’s figures show that the average borrowers take out a mortgage for just half their property’s purchase price and less than 5 per cent getting top-up loans from developers. The writer goes on to show that assuming everything as per the numbers above, then a couple would have paid roughly HK$16,500 a month in mortgage costs 6 months ago. If the rates double then, they would be paying HK$19,800 within the next one year.  This is steep but according to the Census and Statistics Department of the Hong Kong government, the median monthly income for an “economically active” household living in private sector housing is HK$42,200. In percentage, the couple’s mortgage bill would have risen from 40 percent to 47 percent of their monthly income. In conclusion, this is definitely bearable. It means that the day for the property bubble to burst is not about to arrive anytime soon. It will come one day….
Here’s that full article again.

What about Malaysia then? Well, first of all, Bank Negara Malaysia’s responsible lending advice to banks started a few years back, not this year. Secondly, banks themselves have been lending cautiously and in many cases would not even follow the listed prices from developers. Anyone buying the 3rd property onwards would have to have 30 percent downpayment which is an extremely high wall to climb. Investments from the Chinese (from China) are also increasing and I think the Chinese like Malaysia as a gateway to ASEAN and we have many
 advantages compared to all other ASEAN nations too.

So, just like Hong Kong, these Chinese investments would help to push the economy along. Next would be the news about
BNM potentially raising the rates in Q1 2018.

Again, the percentage is going to be small and the increment to the mortgage bill is likely to be insignificant too. So, I think Hong Kong is a very good barometer and we should keep ourselves updated of what’s happening to their property market too. It can provide some clues on how we should also be looking at our property market. Some other clues? Here.
property bubble bursting. Signs to look out for.

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written on 10 Dec 2017

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Property bubble close to bursting due to 3 reasons. Government must be ready!

Edited as at 5pm on 25th July 2018. (Added in the IDEAS paper for download at the end of the article) As well as additional comments after reading the paper.

Just a few days ago, I was telling the crowd about the three signs to look out for when it comes to property bubble bursting; continuous property price increase, total unaffordability of all properties and Non-Performing Loans. There’s now a prediction that the property bubble is about to burst and that the government should allow it to happen but be prepared to remedy it to ensure the economy is not badly affected. As per article in
FreeMalaysiaToday (click to read full article)
 The idea that Malaysia’s property market may be bursting soon comes from The Institute for Democracy and Economic Affairs (IDEAS). IDEAS senior fellow Carmelo Ferlito says that the property bubble which has been building up over the past few years will burst soon and this is due to three main push; spectacular growth of the high-end property segment was ignited by rising profit expectations, growing demand and a supportive credit market. These three elements had generated a bubble which, following the property transaction dynamics, reached its peak between 2012 and 2013.

There has been more reports over the past few years highlighting the glut in supply of office space and high-end residential establishments in certain parts of the country, particularly the Klang Valley. At the same time however, people wants affordable housing. Ferlito presented a n IDEAS policy paper titled “Affordable Housing and Cyclical Fluctuations: The Malaysian Property Market” in which he explored the problem behind the local property market and provided some policy suggestions. He shared, “The focus on the high-end segment was justified by high demand, and it is therefore natural that investment expanded in that sector. However, now that it appears clear that unexploited profit opportunities are disappearing, a capital allocation restructuring appears necessary. The high involvement of government agencies in the affordable housing market risks crowding out private initiatives and preventing the necessary restructuring from taking place.”

He said the government should let the bubble burst instead of keeping prices artificially high, putting at risk the financial solvency of buyers. His suggestion? “Without credit support, the crisis will happen faster and force both capital restructuring and prices to move downwards.” Recommendations to the government is to respond with market-oriented solutions and pay special attention to household financial exposure. In terms of affordable housing market, it has suggested that the downplay its role in the property market and instead encourage the private sector to get involved in the affordable housing market. Besides that, it says that the government should also enhance financial literacy, especially encouraging people to save and rent instead of buying properties. Besides that, the government should also ease regulations to allow foreigners in possession of a regular working visa and who paid taxes “to help the industry in a crucial moment of difficulty”.
Full article in FreeMalaysiaToday.

I would love to read the full paper by IDEAS and understand what’s his (Ferlito) take on the current mushrooming of affordable homes in the country. Also the new government’s policy to complete 1 million new affordable homes within 10 years. In terms of high-end property segment, perhaps it’s best that we talk with the price range because even an affordable apartment at RM400,000 could be a luxury property to many M40 and B40 Malaysians. As for property bubble bursting and the government preparing for it, perhaps just leave it to BNM and the government to handle it when the bubble bursts. By the way, when the property bubble bursts, it will not impact just the luxury home owners yeah. It will affect the whole market’s sentiment and when everyone spends lesser, the businesses would start shrinking too. This will affect the job market which will cause the property market to be even more critical. Hopefully, our BNM and government have a copy of IDEAS paper. Happy following.

This is the paper from IDEAS for download (click here).
Let’s understand that Ferlito is not predicting the typical property bubble type of crisis. He shared, “Market observers are still reluctant to talk of a crisis, but a crisis does not necessarily take the shape of negative percentage changes. A slowdown is already the emergence of a crisis, which is more appropriately labelled as a ‘readjustment process’.”
(In other words, Ferlito himself is also saying that the ‘crisis’ that he is talking about is more of a readjustment process).
  He also added, “It is also not surprising that with the increased amount of investment in a peculiar segment of the market we observe a growing number of unsuccessful initiatives (i.e. unsold units): new products enter the market too quickly to be absorbed smoothly. As soon as entrepreneurial impetus loses steam, and credit policy tightens, the system embarks on a struggle towards a new equilibrium, and such a struggle is what we call ‘crisis’.”
(Please be reminded that just the mere increase in unsold units will not crash the property market. We need to know the reasons for these unsold units which if it is not solely due to super high prices, then the possibility of a crisis is much lower. Let us understand that the buyers still have access to the secondary market as well as new supply of affordable homes and does not need to ONLY be confined to these unsold units)

written on 24 July 2018

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Property Bubble everywhere

There has been nearly no talk about property bubble in Malaysia. Except for Forbes report recently. Is this because there is no property bubble yet? Or is the market too small and thus, not many analysts are covering it? The worst scenario predicted was that the market would be flat till 2016 before prices start to go up again. What about property bubble building? I am not sure if everyone has been reading the property news from overseas but nearly every market near us or favoured by Malaysians are said to be nearing a property bubble or even potentially bursting soon.

UK / London – According to a report in The Telegraph, there is a fear of bubble because house prices jumped the most within the past four years. Prices in some areas went up by 21%! House prices are also rising in all UK regions which should not be the case and this has raised the fears of a bubble further. Nevertheless, this is not a view shared by everyone. The Prime Minister, David Cameron said that there are however no fears of a bubble and he rejected concerns about high demand fueling a bubble.

If you were to type in ‘Australia, bubble’ there would also be lots of news about bubble building up in Australia due to the fact that prices are rising much faster than salary. There has never been any year where salaries rise faster than 10%. yet, properties in Australia, especially in big cities are rising much higher than that. Note that your salary rise is based on your salary but the property price is rising based on its price!

Recently, Forbes said that SIngapore is facing a bubble and wrote a very long article arguing why they think so. The Singapore government has had to explain that this is not true and in fact pointed to a cooling down of price after their aggressive cooling measures for some time. Based on some reports, it is true, transactions are dropping but the prices has just dropped slightly.

There are also a number of articles arguing for an upcoming bubble in Malaysia but I think there’s a significant difference because while I agree that certain places, the prices are so high that I think bubble should have formed for many years and perhaps just awaiting bursting. However, the secondary market remained lower in terms of actual pricing versus primary properties. Furthermore, the slowdown in transactions did not start in 2013 but since 2012. Include in the cooling measures and stricter lending regulations and BNM ever vigilant, I think this has pushed out a lot of speculators. It may still potentially burst of course but at this point in time, many other countries would have to burst first. Ok, no hurry, let’s see what happens in the next few months.

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Property bubble in 2016? Huh?

Would falling demand in 2016 cause a potential of a property bubble? Well,I read this from an article in a foreign owned media a few days ago. I disagree, at this juncture. First question, is it true that there are no more demands? Second question, is it true that every property we can find whether primary or secondary is already beyond the affordability of every one of us? Third question, has the unemployment risen so much that it has caused the non-performing-loans to suddenly spike? Fourth question, which country in the world would be causing the next financial crisis? Well, to be serious, based on all the usual stats and even the growth for 2016, Malaysia is unlikely to be the country to start it all. Some signs for potential property bubble? Read here:
Spotting signs of a property bubble, 3 points (updated)

To answer all the three questions above, the demand remains huge because of our population demographics. The earliest Malaysia becomes an ageing nation is 15 years away. Read here:
Malaysia – Ageing population – Stats and Steps

Of course, even with an ageing population, as long as the population is a growing one, demand would continue. Perhaps one worry is only our birth-rate which has fallen a lot these few years. Read here:
2015: Fertility rate dropped to 1.9 for Malaysia
 Lastly, please do ask around, many among the working adults have yet to own a home.

Second question. There is certainly no truths in that every single property is so expensive or that majority of couples are struggling to buy a home, unless of course everyone of them must buy only a certain type of property and only within a certain area. For them, I wish them the best. Read here:
Sometimes, secondary property is a better choice

Third question. Unemployment has not yet risen to a worrying level even if last year, some in the banking sector lost their jobs and this year, many more from the oil & gas are losing their jobs. In case you believe oil is going to face a bleak future until the end of the world, read what Warren Buffet is doing here:
Falling oil price and actions of Warren Buffet

A further check in JobStreet.com.my showed job numbers remain huge and shortage is continuing for many areas and specialisations.

There are however some good information within that article worth noting and sharing. Foo Gee Jen, WTW’s managing director said, “Going into 2016, we see headwinds and home buyers will remain cautious.” In fact he said there is an oversupply of premium apartments with many “shoebox” units unoccupied. Foo added that developers would need at least a year to clear these units before building more. Next year, another 13,000 high-rise apartments are entering the already bearish market. Read my personal comments on small units here:
The big idea for small units, be real

Happy anticipating. In case you believe this is a wait-and-see year, read here:
Flat 2016? Good 2018, 2019 and great 2020?

written on 26 Jan 2016

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Property bubble in Malaysia? Look for these 4 signs.

This topic has NOT been mentioned for some time. Is there a property bubble in Malaysia? Well, if no one is talking about it, should the answer be a NO? Property bubble usually ends with a property market crash. Better not ask too many people. Housing developers will tell you that there’s no bubble. Potential buyers with cash may be telling everyone that a crash is coming so that they could buy a property at a discount. So, who should we listen to? Well, here are the 4 typical signs for building up of a property bubble in Malaysia.

Photo by Alexander Dummer on
Pexels.com

#1 – Non-Performing Loans (NPLs) are increasing

When more and more people start to fail to pay their loans in time, these loans would soon become a non-performing loan (NPL) to the financial institutions. . It’s not possible to ask our friends if they have been failing to pay their mortgages. No one would tell you their sob stories. However, it’s really possible to look at what banks are reporting every quarter. So, how’s the NPL for the Malaysian banks?

This is
comment from CEICDATA (click here for full report)
 “Malaysia’s Non Performing Loans Ratio stood at 1.4 % in Aug 2020, compared with the ratio of 1.4 % in the previous month. Malaysia’s Non Performing Loans Ratio data is updated monthly, available from Dec 2005 to Aug 2020. The data reached an all-time high of 9.5 % in Feb 2006 and a record low of 1.4 % in Aug 2020. Non Performing Loans Ratio is calculated by CEIC. Bank Negara Malaysia provides raw data on Non Performing Loan and Total Loans. Non Performing Loans are defined as loans overdue for more than 90 days.”

Briefly, as at August, NPL numbers remain low by international standards.

#2 – Everyone could buy a property!

Let’s not forget that buying a property is not like buying vege from the market. Be very afraid if the news indicated that everyone who needs a home loan gets approval for a home loan. Banks kept lending and the approval rates are super high. (Remember… this was what was happening before the 2008 mortgage crisis. Yes, it’s called mortgage crisis for a reason…)

As of today, the news most people are accustomed to would be how hard it is to get a loan. How banks are being so conservative. How one is not able to get 90% loan but only 80%. How developers had to sell the 200 units over 500 times because the potential buyers could not secure a loan for it. Calculations on buyers’ income is based on net income and not gross. Basically, Bank Negara Malaysia is still very much in control to prevent any property bubble in Malaysia due to speculative activities.

#3 – There are really nothing affordable out there!

Many say we could look into certain period of years where the property prices rose faster than the income increments. By the way, before the years when property prices rose faster than the income increments, there were many years where property was really just a home instead of an investment. At the time, salary increments would be a better bet than to wish for property price increase. So, it’s best not to try and put forth some certain periods versus certain periods just to prove a point.

However, at any point in time, the following applies. When there are NO properties which people could afford to buy, then the property market needs a correction. Today, if we MUST buy a landed property, there are still sub RM400,000 ones (much further away from city centre). If we MUST buy a property within the city centre, there is the secondary market to choose from. The homes would not be contemporary but you still have choices.

If one really just need a roof over one’s head, a check with property sites would reveal that choices below RM200,000 are aplenty even within Klang Valley. Just do not expect something spectacular. In some countries where the property market is REALLY just for the rich, we will see that affordability is no longer possible. Malaysia is not at that level currently. (as at 18th October 2020)

#4 – Unemployment is rising super fast

Someone said
unemployment rate in Malaysia is now 30%. (read the article here)
  The calculation for the typical countries are NOT based on this calculation proposed yeah. Anyway, our unemployment rate (as at latest available data) is around 5 percent. There were also predictions that it will drop to 4.5 percent by end of 2020. These predictions were before the COVID-19 3rd wave. Will it be worse? It may.

What we need to understand is that if unemployment numbers continue to rise very fast; people are losing their jobs very quickly and unable to find one back soon, then they will start to face financial difficulties. When this happens, they may not be able to continue paying for their loans. This is when many people will start to sell their properties and when many people try to sell their properties at the same time, many will try to push prices ever lower. The result would be disastrous yeah.

So, here are 4 signs which we could watch as it unfolds when it concerns property bubble in Malaysia. Briefly, there are no strong signs of a property bubble in Malaysia now. There is no need to wait for the formal announcement that we are in some property bubble. That would usually be too late. Do note that no one can predict if there are unforeseen circumstances yeah. Just like if a financial crisis suddenly start in some advanced nations, it will affect everyone else too. Let’s hope the central banks in those countries are also vigilant and not just keep printing ever more money…

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Property bubble in Malaysia

On 17th October 2013, National Property Information Centre (NAPIC)
reported that the average housing completion yearly was 100,000 units relative to the average annual household formation, which was 140,000.

On 25th October 2013, in The Star, according to Urban Wellbeing, Housing and Local Government Minister Datuk Abdul Rahman Dahlan1.7 million households yet to own houses’. He also said that the government intends to build up to 1 million new homes within the next 5 years.

On 20th November, in The Sun, it was reported that Alliance Research Sdn Bhd said that the new Bank Negara Malaysia (BNM) ruling that requires banks to give out property loans based on net selling price, which excludes rebates and discounts, rather than gross selling price may affect loans growth for banks this year.

With these three pieces of important information, I personally do not think a property bubble is about to burst. Nevertheless, a price correction may happen next year as the property boom years started in 2010 onwards and by 2014 we may see the new supply coming online. Let’s see how resilient is the market then.  🙂  Note though that should the world market  crashes, then Malaysia is not insulated.

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Property Bubble is negative. Travel / Green Bubble is positive. Which country to start first?

If the question is whether Malaysia will welcome international visitors again, the answer is yes. If the question is when, then it may be a little more tricky. Malaysia does not wish to open its borders to all countries and for countries which it opens its borders to, it expects that country to reciprocate too. There were talks of a travel bubble between Covid-19 safe countries. Again, safe is not zero cases. Safe means situation is under control.

A few countries have been mentioned for this potential travel bubble. Means we can go to their country and they can come to our country. Brunei, Singapore, Thailand, Indonesia, New Zealand, Japan, South Korea and latest, Australia. I think if we are talking about travel, it’s with flights yeah. At the moment, I am really not sure how many are eagerly waiting to go into a cruise liner yet. So, what’s up with the proposal for Australia-Malaysia travel bubble?

Article in NST.com.my
   Health director-general Datuk Dr Noor Hisham Abdullah said that preliminary discussions on the implementation of the ‘green bubble’ with Australia has started. There were earlier discussions with Singapore and Brunei too. He said, “We (the Ministry of Health) should look at the current situation in the respective countries and the SOP (standard operating procedure) that can be adopted in both countries.”

As for Singapore, the talks were aimed at identifying the groups to be allowed. Nothing has been finalised yet. The concept of ‘green bubble’ involves the easing of travel restrictions between two or more countries that record low local Covid-19 infection.
Do read the full article in NST.com.my.

For those who thinks that we can only allow travelling once the COVID-19 is fully eradicated, I need to remind that this will be 12-24 months away at least. Should be more. However, the most important thing about COVID-19 is to follow the SOPs and continue to stay vigilant and always take precautions. Economy remains very important to the country because even the doctors and nurses and other front liners would have to be paid and countries cannot continue to have zero tax earnings but continue to pay them and for all the required equipments, medicine and more in this fight against COVID-19. Happy understanding and yes, perhaps even start making plans for a holiday in some countries which will be inside the travel bubble.

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Why we must stop property bubble potential? No new private equity funds for residential property developments.

Just yesterday evening, I was sharing about the Penang property market with one group of real estate negotiators. Slightly over 100 of them from Penang, Melaka and Klang Valley. After the session, many questions were asked and one of them asked about the potential property bubble for Penang.

Briefly, I do not foresee any numbers supporting this property bubble potential. However, if there are some potential bubble building up, it’s very important that the authorities take immediate action to stem any potential bubble building up. When the government acts too late or believe the market will correct itself, we may have another mortgage crisis like in 2008. Maybe this is why China is taking some immediate action?

Article in nst.com.my
  The government-endorsed Asset Management Association of China, or AMAC, has verbally informed private equity firms it would no longer be accepting the required registrations to set up funds to invest in projects, people familiar with the decision said, requesting not to be named because the matter is private. Applications that have already been made would also be denied, while existing funds wouldn’t be affected, the people said.

This suspension adds to the challenges for Chinese property developers after regulators tightened funding channels including bank loans and trust funding as part of a campaign over the past years to reduce risks.

As traditional avenues of funding were choked off, real estate companies turned to private equity funds backed by high net worth individuals and institutions to raise money, often using land or cash flow income from the project sales as guarantee. Please do refer to the comprehensive article here:
Article in nst.com.my

How property bubbles may form because of buyers and developers?

For example, potential buyers who actually do not qualify should NOT be allowed to buy a property. If they have no down payment and needed a super huge cash back to buy, they should not be encouraged to buy. Perhaps we find some ways to help them instead. Rent-to-own as a start perhaps? Else, find them some affordable property choice instead.

Property developers should also not be given funds to continue their development if they did not manage to secure sufficient buyers in the first place. If these ‘unwanted’ developments continue, imagine what will happen when they are completed? It will create chaos in the market with supply and it will affect even the properties which was fully sold earlier.

Hope this explains which I have never believe a total hands-off approach when it comes to the property market. Without any intervention, the more powerful will control the whole market and the poorer ones will get poorer as they have very little negotiation power. Happy understanding and I do hope there are no property bubbles happening anywhere in the world.

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Property Bubble Signs? Here are 4 signs to be aware of so that we know what’s happening. Else, we may not know enough especially when someone mentioned to us that a property bubble is building up. If we know, then at least we could refer to them and decide if indeed the property bubble sign is really showing.

Investopedia says this about property bubble a.k.a known as real estate bubble or housing bubble. “A housing bubble a sustained but temporary condition of over-valued prices and rampant speculation in housing markets.”
Read that full article about real estate bubble here.

How does a Property Bubble start?

Property Bubble usually starts to happen when the interest with the property market is way too much for its own good. Speculative purchase (mostly overpriced property) happens and if the property bubble really did burst, then the last batch of buyers would now be faced with the prospect of huge losses if they were to sell that property OR they will have to hold on to the purchase until the property market recovers its lost ground.

Usually, the property price increase to that overpriced level may take years to happen. In many cases, an overpriced property may just be overpriced for a very long time and the buyer loses valuable time in his property investment journey since he / she is stuck with that property.

In 1998, when the ASEAN financial crisis happened, property price dropped by double digits in one year! Look at the chart below. Property price dropped below negative 20 in 1998 / 1999 period before suddenly recovering as soon as the whole market recovered.

The ones who could hold on for 1 year, they have suffered a scare but not a big loss.  Unfortunately, many may have been forced to sell at a depressed price. In order for us to prepare to identify some of the signs, here are the 4 typical signs for building up of a property bubble in Malaysia.

#1 – Non-Performing Loans (NPLs) are increasing

When more and more people start to fail to pay their loans in time, these loans would soon become a non-performing loan (NPL) to the financial institutions. NPL are defined as loans for which the repayment has not happened for 90 days. It’s not possible to ask our friends if they have been failing to pay their mortgages.

No one would tell you their sob stories. However, it’s really possible to look at what banks are reporting every quarter. So, how’s the NPL for the Malaysian banks? This is the latest numbers as compiled by CEICDATA. (Click here to view the full report with comments. Briefly, NPL at around 1.6 percent is considered low by international standard.

#2 – Everyone could buy a property!

Let’s not forget that buying a property is not like buying vegetable or fish from the market. Be very afraid if the news indicated that everyone who applies for a home loan gets approval for a home loan. Banks kept lending and the approval rates are super high. (Remember… this was what was happening before the 2008 mortgage crisis happened in THAT country. Yes, it’s called mortgage crisis for a reason…)

Now, banks are being so conservative (and calculative and does not trust the developer’s selling price). How one is not able to get 90% loan but only 80%. Calculations on buyers’ income is based on net income and not gross. Basically, Bank Negara Malaysia is still very much in control to prevent any property bubble in Malaysia due to speculative activities.

#3 – There are really nothing affordable out there!

Many say we could look into certain period of years where the property prices rose faster than the income increments. By the way, before the years when property prices rose faster than the income increments, there were many years where property was really just a home instead of an investment. At the time, salary increments would be a better bet than to wish for property price increase.

Below shows the chart for property price increase over the years. Above 0 means it’s positive price increase and below 0 means the price actually decreased.

However, at any point in time, the following applies. When there are NO properties which people could afford to buy, then the property market needs a correction.

If one really just need a roof over one’s head, a check with property sites would reveal that secondary choices below RM250,000 are aplenty even within Klang Valley. Just do not expect something spectacular. In some countries where the property market is REALLY just for the rich, we will see that affordability is no longer possible. Malaysia property market is not at that level currently.

#4 – Unemployment is rising super fast

Someone said
unemployment rate in Malaysia is now 30%. (read the article here)
 The calculation for the typical countries are NOT based on this calculation proposed yeah. Anyway, our unemployment rate (as at latest available data) is around 4.8 percent.

What we need to understand is that if unemployment numbers continue to rise very fast; people are losing their jobs very quickly and unable to find one back soon, then they will start to face financial difficulties. When this happens, they may not be able to continue paying for their loans. This is when many people will start to sell their properties and when many people try to sell their properties at the same time, many will try to push prices ever lower. The result would be disastrous yeah.

Conclusion

So, here are 4 signs which we could watch as it unfolds when it concerns property bubble in Malaysia. Briefly, there are no strong signs of a property bubble in Malaysia now. There is no need to wait for the formal announcement that we are in some property bubble. That would usually be too late. Do note that no one can predict if there are unforeseen circumstances yeah.

Just like if a financial crisis suddenly start in some advanced nations, it will affect everyone else too. Let’s hope the central banks in those countries are also vigilant and not just keep printing ever more money… (as what is happening now and somehow everyone still needed to hold on to that currency)

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Property bubble? US$286,000 versus AUD660,000

When we google for property bubble under ‘News’, Australia is one of the first few one countries to be mentioned. Of course, no one has any idea if a bubble is forming and there are points supporting both sides of the debate. However, an article I read in The Sydney Morning Herald pointed out the current difference between the median property price in US which is US$286,000 and Australia which is AUD660,000 (US$468,000, as per current ex. rate). This meant that the Australian median price is around 64% higher when compared to the US today. The US median property price went up 2 percent in 2015.

Slightly earlier in June, for the Australian property market, two housing economists predicted a potential bubble bursting scenario. The article appeared in The Sydney Morning Herald as well. Both of the them, Lindsay David and Philip Soos said that there is already a huge oversupply and pointed out that Melbourne is the epicentre for this property bubble burst. Full article here:
australian-housing-market-facing-bloodbath-collapse-economists-20150622-ghu8a6.html

Both pointed out the similarities in the US before the 2008 mortgage crisis which started in the US and went global.

Very briefly, the mortgage crisis in 2008 which happened in US was simply because property prices grew so high that it was unsustainable and burst. It became totally unaffordable to majority of everyone who bought one  then. Everyone was greedy and wished for ever higher prices. Banks kept lending and many of these banks were so badly hit that the US government had to step in to save them.

The article did not conclude on the possibility of a property bubble or the timing. However, it asked a good question. It asked readers to answer whether Australia have a housing bubble by knowing what US$286,000 (AUD403,000) would buy in Sydney or Melbourne.
As I also wanted to know what can US$286,000 buy in Sydney, I did just that. Using the largest property site in Australia, realestate.com.au, I searched for any type of units for below AUD400,000. Answer is, there are still units for this price! I found some units when I searched under  Sydney (NSW 2000). Refer to the image on the left. Choices are really confined to small units and mostly to cater for students or single working adults. Most of these are nearby universities too which explained that most of these units would be for rental instead of for a family.

Another check for Melbourne (VIC 3000) found slightly fewer choices. Refer them here.
For the question asked, please proceed to decide based on even more readings. AUD400,000 is already RM1.2 million and this is not a small amount that we may want to invest without understand the potential returns. Do note that if the unit is rented out to students, it is not likely that the university will suddenly close down in future, so I guess it is still okay because rental income continues even if the prices suddenly drop. Happy reading more.

written on 13 Sept 2015

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Median income: 57,400 Median property price: 680,000 No bubble yet

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Property Bubble? What Bubble. There’s no bubble.

Today, if you were to google ‘property bubble’ there are lots of articles about the Australian property market, on the arguments about whether or not a property bubble is building, about to burst or still manageable. Australia is considered a developed nation and its property market is a very developed one, both in legislations, implementations and enforcements. The central bank of Australia said that there is no housing bubble in Australia but it is monitoring the surging property prices closely. The Reserve Bank assistant governor Christopher Kent said that prices of properties has been growing and most of the growth came from the investor market.

I seriously think this is not a price growth that is healthy if most of the growth is coming from the investor market. He said, ‘Don’t assume prices will always go up, don’t assume the price increase that we’ve seen in the past is a reflection of where prices will be going in the future and don’t always assume interest rates will stay low for the length of your loan.’ What a direct statement.  How high has prices risen? Well 16% in Sydney within past one year and 11% on average of all the capital cities. Double digits price growth to me is considered high because salaries seldom rise by double digits even on good years.

The Reserve Bank’s statement was supported by David Rees, head of Australasian research at Jones Lang LaSalle. He said, ‘although Australian housing was very expensive compared to much of the rest of the world, there was no housing bubble.’  He further elaborated that the price increase in Australia is mostly due to a few factors such as low interest rates, population growth and an undersupply of new housing.

A few of my friends in Australia owns their own homes. All of them, in the suburb. In other words, even with their Australian dollar salaries they could not afford a home inside the city, closer to where they work and they have to stay up to 1 hour away. Today, whenever you see advertisements on Australian property within the city, it’s more likely to be a studio unit and even these studio units are already well beyond what we can afford. It may be suitable just for students but for families, affordability is well beyond many. Yet, as all the experts say, there are no bubbles in Australia yet, at least not now. Let’s wait for the next ‘bubble’ report on Malaysian property market.

written on 18th Sept 2014

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We should always worry about property bubble potential right?

Yes, I am worried with advanced property markets when their markets have way too high property prices and their banks with way too relaxed lending. Hopefully they can learn something called ‘Responsible Lending Policy.’ 🙂   Anyway, when prices too high and lending too relaxed are combined together, disaster is sure to strike, sometime in the near future. There are some signs actually.
‘When borrowers need not even qualify for it, better be fearful!”

Reminder, even if there are no strong predictions of a property bubble bursting here in Malaysia, anything happening in some faraway country is sure to affect sentiments and when it’s affected, the market reacts negatively. Anyway, if the banks did not simply lend and buyers did not simply overstretched themselves, then the effects from these ‘disaster’ will be mild. Just look at the 2008 mortgage crisis? Well, that was also the time when the property market in Malaysia started its momentum upwards…

We are fortunate because since 2012, three key things happened. First would be all

the cooling measures by Bank Negara Malaysia (BNM)

which meant that speculators or the less than spectacular investors are no longer able to buy many units all at once. We must be worried if a junior executive in some company could buy 5 units of condos all at one go? Second would be the push towards affordable units. From the federal government to the state governments and even private developers themselves, just look at the market today. The number of sub RM400,000 units are aplenty. Remember yeah, markets cannot crash when there are plenty of affordable choices. Here’s the
four signs to know if a property market is about to crash.
Third is the fact that with all these slowing downs, the prices has sort of corrected somewhat and has also allowed incomes to catch up a bit. Buyers are also savvier and more objective because now they have more time to THINK IT THROUGH. These days, buyers do not flock to properties which they deem to be too expensive versus the size, location and design anymore. So, it’s either the properties are selling very fast (when the requirements are met) or properties are selling very slowly.

What’s upcoming then? Well, there’s that
General Election which has definitely stopped many purchases

from happening. Secondly would be the potential of property bubble bursting in some advanced property markets. Just google “property bubble” and start reading a bit. Third would be the unsold unit numbers which will provide a barometer for the health of the property market mismatch which is said to be causing the number of unsold properties to rise. If it continues to grow, it meant that the
units are still not what the buyers need.
 If the unsold numbers start to reduce, we know that demand is greater than supply which is a good sign. If the unsold unit numbers stay stagnant and at the same time prices continue to inch upwards, we know that whatever launched was sold and buyers are willing to pay premium for certain locations. (including buying from the secondary market since the supply for some of these areas may not be increasing). Happy following and nope, we are not looking at a crash due to some internal financial matters. If a crash is to happen, it will start externally.

written on 27 April 2018

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Property Buyer beware. Easier to identify real from fake now.

We always hear of agents who are unprofessional. Some took the money and disappeared. My friend Mr. Michael Geh who’s the Senior Partner of Raine & Horne said, ‘to avoid situations where the agent runs away with your money, you should issue the cheque to the agency name instead of the individual’s name’. The reason is simple. It is not easy to operate an agency and no one would be running with your money even if it is RM50,000 and lose everything overnight. Recently, the Board of Valuers, Appraisers and Estate Agents (BOVAEA) started a registration of all Real Estate Negotiators and this exercise saw 10,000 RENs registering.

Now, all the negotiators or even project marketing staffs who are working whether it is in sales galleries, shopping complexes, hotel function room or exhibition halls are required to wear the newly issued tags. These tags have a specially assigned REN number and a QR code, allowing the buyer to quickly get information about the negotiator with just a smartphone. The identification tags also come with security features to prevent it from being imitated. This is believed to lead to the the increase of professionalism of the RENs here in Malaysia.

The surprising this is, I still see many ‘fake’ agents in the shopping malls not wearing such tags. Seriously, the enforcement has to be stricter. Why not make it clear, what the punishment would be to the agency involved if the RENs under their agency does not follow the procedure? A fine? A suspension? Sometimes, I really hate it when Malaysians complain that the enforcement is not strict but when it comes to all these things, they would prefer to use brokers instead since brokers are giving them ‘special deals’. Come on, if all of us are also serious, these things would not happen. You are selling a property, you need a service, you pay for that service.

written on 26 June 2014

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Property buying? Up in H1 2015

Assuming you can have just one choice. Do you think buyers would buy more within the H1 of 2015 or H2 of 2015? Actually, this is a trick question. If you have answered ‘H1′, it meant that you are positive about the market. In brief, it meant buyers may be rushing to buy before GST or that demand is slowly recovering. Yet, if H1 picks up, it is very likely that H2 would continue the momentum. From other countries’ experience with GST, most of the time, demand may be subdued just right after GST as they are not sure how to react. What if right after GST is implemented, the developers launch a ‘promosi besar-besaran’? Advertisement banners saying that they are absorbing all the GST and on top of that offering some free stuffs such as electrical goods or renovation packages? Fuel prices remain at current prices and the people have more money to spend since they are spending less on fuel? Economy moves along and Malaysia hits a lower growth than 2014 but still hit 5%? Okay, all these are presumptions but what’s the likelihood of this happening?

Personally, I believe buyers of today are much more informed than yesterday due to the easy availability of information. I also believe that Bank Negara Malaysia is more likely to adopt a pro-growth stance instead of worrying about inflation. Petrol prices downtrend is considered a good thing since it takes away the GST effects. Thus, the pressure to increase interest rates are much lower than when oil prices were high and yet GST was looming. Many people continue to predict that the market would continue to slowdown as the cooling measures are still around. I think they are right but be reminded, the current slowdown will not last forever. If you are still ‘homeless’ and are not buying to speculate or even buying for investment, it may be best that you view and offer a price you are comfortable with. As long as it’s also considered equitable, the chances for the seller to accept is much higher than say, 2011, 2012 and even beginning of 2013. Today, it’s buyers’ market after the crazy price increases for many years.

What has happened in 2014? According to National Property Information Centre (NAPIC), eventhough on an overall basis, the numbers of primary transactions increased, this was mainly contributed by property market transactions in Johor. In Klang Valley, this has dropped while in Penang, it has showed a very marginal increase. Do note that Penang is still a very small property market in comparison and even if it increase more, it is nowehere near Johor or Klang Valley. Second half would have shown that the growth is now negative. Even Johor was not spared. There’s just too much negative news; the toll rates increase, the fall in Singapore’s own property market, the way too many new supply from the huge China developers and more. Competition will be stronger and developers would be holding back, postponing or even launching at much ‘better’ prices.

I think for Klang Valley it should recover when the MRT project is nearer to completion. When people can see, then they have higher confidence to buy. When we ask around we would notice that many people are still saying they want to buy but has yet to buy. Some can even afford but still want to see if prices weaken further. Many of the 2012 transactions are entering the market this year, increasing the supply of new units. With the high prices, rental yield has gone down too. In fact for the new units, it is likely to be negative. The incentive to buy for rental yield is thus lower than few years ago. My personal 2015 plans? Buy a good unit for rental yield, even if the yield is zero. Perhaps I may just get a good unit at a lower than usual price. Wish me luck.

written on 5 Jan 2015

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Property buying – objectivity matters

A friend told me that she could not rent out her flat. She said she bought the flat long time ago and until now still not rented out. On and off she would bring potential tenants but none of them wanted to rent. I asked her a few questions and she told me this, ‘everytime I go to my flat, I feel bad. It’s already so old, paint is peeling off, even the toilet is not really working anymore.’ Friend, IF YOU HATES the place, why would people love the place? Rule no.1 is, never buy a property which you do not feel good about. Chances are others would dislike it too.

Buying a unit below the road level. There are a lot of people who said, they don’t mind to buy properties which are below the road level. If it is for your own stay and you intend to stay there forever, sure, go ahead and buy. However, please be reminded that if floods come, you better start packing. Secondly, when you need to sell, at least 90% of your potential buyers would not even view your unit if you tell them that your unit is below the road level.

Two condos, one basic unit with 2 car parks and you are single and have just one car, another unit is fully renovated and you love it a lot but with one car park. Same price. Which would you buy? To those who said the one with one car park, you can stop reading this article and move on to the next. Renovation, you can do it even better if you engage a better interior designer. However, it is IMPOSSIBLE to buy one more car park in the future and today, any new condo comes with 2 car parks as standard. Thus, your unit would be minority in the future! If the rental of one car park is RM150 today, it is RM1,800 per year. To earn back RM1,800 from FD, you need to deposit RM60,000 into the bank and leave it untouched for 1 year!  Car park rental can only increase……

An area, right next to a popular area is 30-40% cheaper. Lots of land undeveloped. Your friends all say, don’t buy, no one buys there. Be diligent enough to do more homework. Get to know who owns the land parcels. Be objective enough to know that it may take time but if an area right next to it is already 30-40% more expensive, it is just time which stands between you and potential capital appreciation. Of course, if you can ONLY afford to buy one unit, then perhaps you can be objective enough to buy somewhere else easier to rent out instead of buy and wait……….

In property buying, objectivity is very important. If I was not able to think objectively, I would not have bought leasehold, bought nearby cemeteries and even bought in a less popular area which have all proven to be profitable. Or perhaps I was just lucky though I always believe luck follow those who work hard and do more than others.

written on 31st dec 2013

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Property buying turning into unit trust buying? My view.

In The Star business today, one article caught my attention. According to Fundsupermart Malaysia general manager Wong Weiyi, with the rising property prices especially in Klang Valley, Penang and Johor, investors may just shift out from physical property assets into unit trusts. Wong also said that if investors were to go into unit trusts, for the equity ones he would recommend looking out of Malaysia and he personally recommended a country which he rated a five star “Very Attractive” rating, China. According to him, “China, which is a large part of Emerging Markets, Asia ex-Japan and BRIC strategies, sports some of the strongest potential upside amongst all markets under our coverage, owing to the market’s immensely depressed valuations at this juncture,”.

For those who has read kopiandproperty.com for some time, you would know that when I listen to developers who talk about property prices rising, I tend to read more before I believe what they said. This is the same as a property guru who is the chief of a property investor club telling you that the property that he is representing is the best investment. So, when it is a general manager of a company which markets 237 funds tell you that there is a potential that property investors would choose to buy unit trusts instead, what do I think? I think it can be believed. The reason is because when you look at the transactions, it has gone down but the prices has done up. This meant that sellers may be earning good profits over the prices they bought earlier but they were not buying any new ones. I seriously do not think they would leave their money in FD and thus, yes perhaps Unit trust, at least those more conservative ones may just be sought after.

Nevertheless, if you ask me, I would still prefer going into the secondary market instead. This is because I think I stand a good chance in the slowdown to get a slightly better deal. Oh yeah, he recommended China. My view remain the same, China represents huge possibility but it also carries with it huge risks especially if the economy is slowing down. The properties are also way over-priced, even in secondary cities and I am not sure if the property bubble can be avoided. So buying unit trusts to me, still okay but if I have extra cash, I would not be buying unit trusts which are linked to China. Just a personal view, please still do your own homework before deciding.

written on 26 June 2014

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Property Clock, where are we?

Property Insight Malaysia shared a very concise chart / property clock. Where are we now? Depending on where you read and whom you ask, the answer may be different. Even the readers in Property Insight Malaysia has different opinions despite everyone reading the same magazine / facebook page! 🙂   In real terms, transactions has been going down since 2012. This may mean affordability may be severely tested as the prices has continuously been going up for a few years. If you were to drive past some newly completed condos, even after 12 months, not many has their lights on at night. Perhaps there are more buyers of the stock than genuine need? This indicated ‘stock oversupply’. Thus, this means we are in the ‘Slowdown’ or between 12 o’clock to 2pm. So, are we in this scenario today?

Many are taking a much more cautious approach, indicating lacking in confidence. The number of postings for sales are also increasing. In fact the advertisements in newspapers, online, radio and every type of media is also increasing. Is it getting harder to sell? Then again, there are still projects which opens to queues due to location and pricing. This brings us to the 4pm – 6pm category albeit not all the time. Dato Jerry Chan, the REHDA President in a recent press conference said that ‘prices are definitely lower today compared to six months later’. He may be biased but there are truths in what he said because CIMB Research said the same thing few weeks ago.

The best part is, everyone has their own interpretations and they may be right because someone in Penang may tell you that his investment in Batu Kawan has not moved for at least 5 years. Rental yield hardly existing but it is definitely not seller’s market because if it is why is the property price still so low? I think the answer may be stock mismatch, at this moment. This may just be solved by the opening of the Penang second bridge or the MRT project in the Greater KL. The Iskandar ‘overhype’ and negative sentiment may also be solved by a simple agreement to bring forward the RTS (Rapid Transit System) by the two Prime Ministers. The question is, which side you believe more. As at today, I am the 4pm – 6pm believer. What about you?

written on 25 Jan 2014

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Alternatively read about
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Property Conference (PCON) 2019 (sign up asap)

My friends love to ask me ‘where and what to buy.’ My favourite answer has been and will always be ‘focus on the WHY instead.’ Instead of location, question ourselves first because that location that everyone loves may already be overpriced and in actual fact there are other cheaper locations which meet our needs! Instead of whether it’s landed or a high-rise, focus on what we really want. Super Convenience? (Then go for mature neighbourhoods) Big size and more greens? (Either the buyer is super wealthy or new townships lah…). Next to mother-in-law? (You can’t escape… must buy) Moving forward however, one major keyword is the 4th Industrial Revolution. What is it? How will it affect us? What are the upcoming opportunities which we should know and perhaps grab hold of? These and more will be shared during the
Property Conference (PCON) 2019.

Press Release as follows:

Don’t go to another property conference if it is still telling you what to buy and where to buy! This year at Property Conference (PCON) 2019, our speaker will share with you the property market insights that will change your perception about property market moving forward. There are so much possibilities and opportunities available in the property market that majority are not aware.

Like it or not, the 4th Industrial Revolution is happening, without us realizing. It is undeniable that it will leave its mark on everything and anything, the Real Estate Industry included. With the introduction of novel technologies and their direct application in real estate, the market will be forced to transform and the transformation is not only about how we buy, sell, or even rent house; it also includes how the property is going to be developed in the future.

Although PCON 2019, organized by BiGe and Wealth Wolves, will be held on 23
rd
 and 24
th
 February in Quill Convention Centre, Kuala Lumpur.

The 2 days conference will be addressing on topics that surrounding 3 different areas:
1. The rise of Property Technologies (PropTech) in Malaysia and South East Asia Region
2. Malaysia Property Market issues and solutions
3. Non-Technology Disruptive Factors such as culture, trend, and social behavioral changes.

Reputable and experienced real estate professionals will share insights during speeches and forum sessions at the conference. Among the speakers, and forum panellists are:

1.     Dato George Stewart Labrooy, Chairman @ Alpha REIT Managers Sdn Bhd

2.     Georg Chmiel, Chairman @ Juwai.com

3.     Leo Lo, Founder @ Asia PropTech, Hong Kong

4.     Vincent Wong, Father of Lease Options Malaysia & Executive Chairman @ Wealth Dragon Group PLC

5.    Premendran Pathmanathan, Founder @ Brickz.my

6.    Mahathir Mahzan, Founder @ Mahzan Sulaiman

7.    Timothy Tiah, Founder @ Colony Space Asia

8.    Loong Kok Wen, Head of Regional Property Sector @ RHB Research Institute

9.    Elizabeth Siew, Director @ LePro System Berhad

10. Dato’ Sri Dr. Vincent Tiew, MD @ APS Management Services

11. Teh Kim Seng, Chairman @ CrowdPlus.Asia

12. Dr Daniele Gambero, CEO @ REI Group of Companies

And more…

You might had attended many conferences before, but this is really one that you should not miss! Grab your final rush offer here:
https://bit.ly/2Efyl9O
 and key in your promo code FINALRUSH to enjoy the 50% discount!

See you there!

— end of press release —

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Property deals worth highlighting in 2021

When property developer sees a piece of land for sale, they see the potential of that piece of land versus the price they are willing to pay. If the gross development value (GDV) is not high enough to support the land price, the property developer will not proceed. Many times, the seller of the land may also be selling the land so that they have money for their future investments. I do not think we have that many land owners who sell land to keep the money in Fixed Deposits. I hope not by the way.

As for developer, no point in buying that piece of land if what they could build could not be priced affordably to attract buyers. Despite everyone saying 2021 is a quiet year for property, land transactions continue to happen. Below would be all those deals which are supposed to be property deals of the year 2021. Here is one article for all those deals.

Article in theedgemarkets.com
 Please do read the full article yeah. It has a lot of explanations on why those land deals were chosen as the property deals of 2021. Very briefly, below are the choices of all these experts in the industry. I am very sure they have done their homework and has their own reasons why they chose these deals.
Article in theedgemarkets.com

Here’s the full
Article in theedgemarkets.com

Someone said buying land is better than buying a residential property as investment

I agree totally with this statement especially for a prime piece of land. The price per sq ft appreciation can be out of this world in just a few years’ time. Plus… they do not build more land…

The only issue is that majority of all Malaysians could only afford to buy a property instead of a big piece of land. As for that property, they could also enjoy price appreciation. It may not beat that of a prime piece of land but buying a property is certainly way better than many other investments. So, keep viewing and investing even if land investment is supposed to be better than buying one high-rise unit being built on that piece of land. Cheers.

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Property developer: When one has liabilities of RM1.25 trillion. (yes, this is a lot of money)

Property developer: When one has liabilities of RM1.25 trillion.

The size of Singapore’s economy is US$324 billion (RM1.35 trillion) and Malaysia’s at US$315 billion (RM1.3 trillion).
Source: worldometers.info
. The market capitalisation of Tesla is over US$700 billion  (RM2.9 trillion). Source: google for ‘Tesla market capitalization’ today (15th September 2021) Just need to note that Tesla’s profit numbers are smaller than most of the car manufacturers whose market capitalisation is much smaller than Tesla yeah.

Now that we some idea of how big some companies have become, let’s look at a property developer which has liabilities of RM1.25 trillion.

Article in themalaysianreserve.com
  China’s government is assembling a group of accounting and legal experts to examine the finances of China Evergrande Group. This is a potential precursor to a restructuring of the world’s most indebted developer.

Guangdong officials have turned down at least one bailout request from billionaire Evergrande founder Hui Ka Yan, who owns a controlling stake.

Evergrande said yesterday that the company hired its own advisors, Houlihan Lokey and Admiralty Harbour Capital, to “assess the group’s capital structure” and “reach an optimal solution for all stakeholders”.

Evergrande has about US$300 billion (RM1.25 trillion) of liabilities. China’s Financial Stability and Development Committee, the nation’s top financial regulator, gave its blessing to an Evergrande plan last month to renegotiate payment deadlines with banks and other creditors on a piecemeal basis. There are much more details in the article here:
Article in themalaysianreserve.com

When companies go bust, it does not benefit anyone yeah

When a company has liabilities, it means many would be affected if this company shuts down forever. Everyone will not get paid. However, if the company receives sufficient lifeline, then the chances that it could repay these debts would be a possibility. This is the reason many restructuring deals do not start with closing down the company.

That’s usually the last resort and taken only after no parties could agree to any deal. When that happens, everyone loses, including the employees of the company who will have to find a new job too. With a company with super big liabilities, it will not just affect the creditors yeah. It will affect even the banking system and this is not a good news for any country.

This is perhaps why property developer Evergrande is now a big news. This is also why I hope no Malaysian developers ever grow to such a big size that it may affect the whole industry. Top 10 developers or more is perfectly fine… just not the only 1 biggest developer.

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Property developers, which is bigger, which gives higher returns etc?

Property developers, which is bigger, which is more attractive etc?

I read a Hong Leong Investment Bank research report a few days ago.
(click here to download the full report if you like to refer to it)
  There are many interesting views and I have extracted one which I think provides an easy overview to everyone who just want to look at the property developers side by side in terms of actual numbers. Please refer below for a peers comparison among the listed property developers in Malaysia.

Source: HLIB

Biggest property developer among the companies under spotlight by HLIB?

Sunway is the biggest with a market capitalisation of RM8.98 billion. Buying 1,000 units of Sunway is not too hard to do. It’s just RM1,820. (as at 8th April) This is then followed by IOI at RM5.561 billion market capitalisation. Buying 1,000 units is just RM1,010. (as at 8th April). Then comes S P Setia at RM5.248 billion market capitalisation and buying a 1,000 unit would need an investment of just RM1,290. Ratings are BUY – BUY – HOLD respectively.

Highest yield? Higher return is always better.

For FY22, Matrix has the highest yields. In other words, buying the share and the dividend which one would receive is potentially 5.4%. This is a very good number especially if compared to the fixed deposit rate. The next in line where dividend return is concerned would be Lagenda, with a dividend yield of 5%. The third highest would be Mah Sing with 4.2%. So, if you are looking at returns, then these three does provide the opportunity.

Highest potential price appreciation?

Using potential % increase, the highest three developers for current price versus target is IOI Property, followed by Sunway and then Lagenda and Simeprop, almost the same. IOI Property has a potential price appreciation of 77%! Yes, it’s really high. Just need to remember target price is just target price. It may or may not come true.

If we look at the potential price increase in absolute number, then it’s 78 sen for IOI PG, 76 sen potential for Sunway and 51 sen for Lagenda yeah.

Source: HLIB

Property Investment is not just about buying the property

It can be a property or it could be property stocks yeah. Look at the ones highlighted today and take your pick. As usual, these property developer stocks can only do well if their property developments do well. In other words, we can use the performance to also gauge the attractiveness of the properties they are selling too.

We can also see that it’s generally quite affordable to buy any property developer stock from the current price too. Happy deciding.

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Property development in Melaka? RM118 million for land parcels.

As soon as we are allowed to travel and the number of cases become manageable, I will be back to my hometown, Ipoh. After I have visited Ipoh a few times, then I intend to drop by Melaka again too. I do not wish to fly, yet, so I do not think Langkawi will be in my itinerary for the moment. by the way, Melaka is also a favourite destination for Singaporeans who has cars.

So, Melaka is definitely a busy place during holidays and it will be a busy place as soon as Malaysia reopens its borders to Singapore. Perhaps this is also the reason why some developers are taking a long term approach when it comes to Melaka by spending RM118 million on parcels of land in Jasin, Melaka.

Article in nst.com.my
  Teladan Setia Group Bhd is buying five parcels of land in Jasin, Melaka, measuring a total of 136.9 hectares for RM117.9 million. The five parcels of land are strategically located between Tiara Melaka Golf and Country Club and Orna Golf and Country Club, just after the northeast boundary of Central Melaka.

Managing director Richard Teo Lay Ban said, “Thanks to our strong cash position and healthy gearing ratio, we can make the most of the current opportunity, and these landbank expansion efforts will sustain our pipeline developments well into the future.”

Teo also shared that the five parcels of land are expected to be used to develop gated and guarded townships. He said, “Due to the pandemic, people are spending significantly more time at home these days.” Do read the full article here:
Article in nst.com.my

When do I think travelling to Melaka is possible?

For Malaysians, some time within October 2021 may be possible. For Singaporeans, November 2021 may be a more realistic date for it. After all, reopening to foreigners would be a major step. if it is Singapore, then at least the agreement would be on ministerial level. By the way, Singapore is already moving towards living with Covid-19 yeah. They are treating it as endemic and no longer pandemic.

Do Melaka offer property investment potential?

Melaka is a small state. It is loved by many people including even Singaporeans and it just below 2 hours by driving from Selangor and Kuala Lumpur merely next to Negeri Sembilan and Johor Bahru. It even has a UNESCO Heritage city status, the same one and same time as Penang.

As long as it remains popular, visitors would need accommodation. There is definitely a need for more rooms in the future. Hotel rooms do not cater to every type of travelers too. Just not at the moment since no one is allowed to travel. Yes, I do hope that I have a small unit in Melaka in the future. Haha. Just no idea when, yet.

In the mean time, stay safe. Soon, happy travelling yeah.

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Property downpayment – own stay (updated)

When a colleague and I had lunch recently, she said she is saving money for a property. I asked her, what kind of property. She said, I am not sure yet. Once I have enough savings I will then look. I asked her how much is enough. She said she has yet to identify. Actually, if you are saving for a property, always determine the purpose. If it is for your own stay, try to save as fast as you can. My personal opinion. Your savings may increase by 10% or more per year and property prices may only increase 3% per year but your 10% is very little compared to 3% of the overall property price!

As long as your finance is healthy and you are buying the property for your own stay, buy it as soon as you can and not when you think you have saved enough. If you are paying a rental of RM600 per month, that’s RM7,200 per year. Do you know how much savings you need to earn RM7,200 in interest? Based on current FD rate of 3%, you will need to save RM240,000.  If you have RM240,000 cash, would you even be renting?

There are some who have started to advocate that since property prices are so high, you might as well rent. Let me tell you that the time is not now. There would be a time in the future, when Malaysia becomes a fully developed nation. There will be a time when ageing population becomes a norm in Malaysia. At that time, maybe this argument has some valid points. As of now, no. It is better to buy than to rent except for very special circumstances such as there is you are only going to be there for less than one year.

Paying for mortgage is totally different from paying for rental even if mortgage payments are typically higher because at the end of the day, the place is YOURS. If you can’t afford a big place, why not start with a smaller one? Rent one room out if you must. There are lots of websites that you can use to rent it out. One example
http://www.ibilik.my
 or
http://www.mudah.my
 If you are looking to buy and compare, there’s
http://www.propertyguru.com.my
 and
http://www.iproperty.com.my
 which are two prominent property sites in Malaysia today.

written on 29 nov 2013

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Property fair which is ‘attracting big crowds’

Are there still property fairs which are attracting big crowds? Well, according to The Star, there is one in the Tropicana City Mall. Yes, it’s the four-day StarProperty.my Fair. 14 developers are there, offering their developments to different needs of buyers. These 14 includes IJM Land, Tropicana Corp Bhd and Matrix Concepts Holdings Bhd, Ekovest Bhd, IJM Land, Mah Sing Group Bhd, Matrix Concepts Holdings Bhd, UEM Sunrise Bhd, See Hoy Chan Sdn Bhd Group, DK-MY Properties Sdn Bhd, Ireka Engineering & Construction Sdn Bhd, Land & General Bhd, Naza TTDI Sdn Bhd, Setia Haruman Sdn Bhd, Sime Darby Brunsfield Holding Sdn Bhd, Titijaya Land Bhd and Alfranko Development Sdn Bhd.

To be honest, whether there are big crowds or not does not really matter these days. It is about the actual response that the developers got from the fair. In the article, there were no interviews with the developers about the number of units they sold. Secondly, big crowds may happen because the property fair was organised in a mall. To know if interest remain high, organising it in some hotels may yield a more direct result. Thirdly, big crowds can be any number. It would be great to actually have a number which everyone can relate to. I seriously think for any large scale events thus far, the number of visitors are normally announced and not just by saying there’s a big crowd.

For now, I am no longer that interested in visiting property fairs unless I come across one when I happen to visit some of my favourite malls. I am however still interested to attend workshops, talks, seminars especially for the topics which I think I can gain new knowledge. When markets are not that hot, it’s time to quickly learn and take relevant actions. I also think for property fairs, it may be best to only organise it in popular malls. Alternatively, if it is a totally new launch at a good location and at an attractive price level, market it well. The interest for good new ones are still there. However, interest for the projects that have been selling for quite some time is waning. There’s just too many choices, both existing, new and even completed ones where developers are still having unsold units! Happy visiting if you want to have lots of choices to compare under one roof.

written on 25th Oct 2015

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Jom Cari Rumah. Drop by and say Hi!

Are you looking for a property to buy? Do you want to learn more before buying? How about getting to know if you can get the loan that you want? Okay, it can even be a fun-filled weekend for the family. Jom Cari Rumah is back. This time it is at NuSentral Mall. It will start from 26-28th October 2018 from 10am to 10pm. the highlight for property shows are aplenty. First up, go with your young kids and they will have fun joining the colouring contest. I know my kids may not win but as they say, just join for the experience. Secondly, for those without kids, do not miss the free talks from 12 noon till 6pm. everyday. The topics are as per the below images and yes, I will be sharing my thoughts about property investment on Saturday at 1pm. Hope to see you guys there.

Besides me, there will also be other relevant talks which will help us in our property investment journey too. One of the speaker is flying in all the way from Singapore too. I believe he has lots of confidence with our property market too. Third and more importantly, know what are the available properties in the market. I think this is the easiest to compare them side by side instead of going to a few galleries which will take up a lot of our precious time.

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Property Fairs @ your competitor’s place?

As a developer, would you join a property fair at your competitor’s exhibition hall? I personally know of a few developers who would not. One of them rejected a property fair in Singapore because the good locations were no longer available. One developer said that they want to occupy the whole room out of the few exhibition rooms or else they will not participate. One asked who is in the same area as me. Another rejected by saying, ‘My CEO said, if we do not get the best spot, it is ok not to go. We will just do our own because the marketing expenses are already made available. We do not need to join fairs just to cut some expenses.’ All these are real replies when I was still with my previous company.

Truth is, if a property fair is to be FAIR, then it should be done in a venue acceptable to all developers. Perhaps there can be a few different entrances where the few top developers can each occupy their own corners. If you do the fair in a venue which is part of an integrated project by another developer and you expect many of the big developers to participate, you seriously have to think again. None of the branded developers would want to face a disadvantage versus the owner of the exhibition hall. The owner of the exhibition hall would of course be very happy because they can have their full resources there. They can choose the best spot and when all other developers market their properties by using brochures and leaflets, this exhibition hall developer owner can bring the visitors to REAL SHOWROOMS right next to the hall!

After I read through the exhibitors participating in this upcoming property fair, it confirmed my suspicion. I could not see any of the major names. Only one which I consider ‘big’ amongst the names. No worries, even without mentioning the name of the Media organising this, you would be able to see it. Just buy the leading English daily today. As for whether should you visit, yes, sure, why not. Every visit enhances your knowledge and when you visit more, you would be able to know if the developers are selling old stocks or new ones too. Happy visiting.

written on 30 Aug 2014

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Property for rental – Kepong

My colleague bought a new property recently and told me that he has a good deal. I asked him why. He said he bought it for just RM240,000 but rental can be as high as RM1,300 per month. It got me interested and I asked for the name and I did some checks online. It seems that what he said is true and for those who wants to buy to rent out, this may be a property which you may want to consider. Further checks reveal that the there is a cemetery just beside which explains why the price has not spiked like many other condos which rental are also within the rental range of RM1,300. One example, Pangsapuri Menara Manjalara. However, all other points are favourable. For example: near to KTM station, near to schools, near to hypermarkets. Then, again these days, majority of all apartments / condos are near to hypermarkets. 🙂

Source:
http://www.propertyguru.com.my

From the above, we can see that the price of the condo is low enough so that the rental yield should still be positive. For those who are questioning if the price would increase further, let me tell you objectively that the price will continue to increase if the rental continue to be strong or increase. In fact, the choices are not that many for properties below RM300,000 and still giving RM1,300 rental. Also, secondly, considering the price goes up by just the same inflation rate per year of 3%, if the price is RM240,000, then the yearly increment is RM7,200. Three years later, the increment would have almost equalled your 10% downpayment. This gives you a simple ROI of 30% per annum if you sell three years later. It is indeed a good buy. I agree with my colleague.

I am very sure there are other opportunities in the market. We just need to be slightly more hardworking and conduct checks online for rental and then use the information to find apartments / condos to buy. Happy buying and renting.

written on 11 Jan 2014

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It’s just a hedge against inflation. (A super important one)

As a property owner, I do not think of inflation as such a bad thing. The reason is because I am a property owner. Inflation will usually drive costs of construction up and when this does up, property prices naturally go up. However, I do not want property prices to rise like the years from 2009 – 2012. It’s NOT healthy yeah. My wish is very simple. Property prices to rise at a slower pace than salary increase so that more Malaysians could also own a home instead of renting.

By the way, do we know that if we look at inflation over a very long period of time, the average is around 3.4% per year for Malaysia? Yeah, it’s actually pretty close to what the government has always been announcing to the public, that inflation is around 3%. As for the latest inflation numbers, well, it’s extremely low yeah. For 2020, it’s forecasted to be just 2 percent.
Here’s that article for reference.
Below image shows the inflation number for Malaysia.

When we are renting a home, especially during these few years, the owner may not be increasing the rental much. In fact I think many felt lucky to have a tenant who pays on time every month. What is happening to the property prices then? Well, the increase in price is moderating but it’s still trending upwards. Latest figure for the home prices movement as below. From the average of 6.4% from 1990 – 2016, the latest number shows just 1.7% up.

By the way, Malaysia is not alone yeah. Our neighbour is also experiencing a slowdown in economy and the property prices are no longer increasing like 2018. In fact for 2019, it was only up by 2.5%. Earlier article here:
Moderating prorperty price, just 2.5%
  What this tells us is that even when the market is not doing well, inflation will continue to pay its part in ensuring everything is still inching upwards.

Whether it’s the salary increase for the construction workers which will then also increase the material prices or even the slowly but surely increasing land prices, all these will mean that the final selling price of newer projects in the same neighbourhood will have to be priced higher than the earlier ones. This is why there is NO NEED to see property investment as a very profitable investment. Just look at it as a natural hedge against inflation. I think that’s good enough. Happy understanding.

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