100 square feet home? Potential solution for just RM60,000.

It’s really pretty ‘impossible’ to buy a proper property in Hong Kong. This is because it is already the most expensive in the world and it seems that the price has no ceiling. This is the case even for someone who’s earning HK$38,000 (RM20,175) per month. My friend told me that even with her salary, there’s no way she could afford a home. After combining her income with her husband’s as well as a little bit of help from the parents, they bought a decently sized apartment in Hong Kong. (Less than 1,000 sq ft) Here’s one hope for Hong Kongers who take home lower pay than her on a monthly basis. A “stackable, retro-fitted water pipe tube homes called “O-Pods.”

The article in businessinsider.my here.
 It says that Hong Kong properties has been ranked the least affordable in the world for the last 8 years. Hong Kong architect James Law has designed a low-cost solution to the problem: stackable, retro-fitted water pipe “tube homes” called “O-Pods” that could be rented cheaply to young people. He said, “We are facing a tangible affordability problem in our cities,” architect James Law told Business Insider. “It is almost beyond the reach of most people to afford to live in a proper home in Hong Kong.” He said that, “If we can work with governments, and even private landowners and manufacturers, we could very cheaply build the O-Pods, and we could rent them out very cheaply to young people who are struggling to afford housing.” The size of the O-Pod is around 100 sq ft. The reason that it is so cheap to build is because the O-Pod uses concrete water pipes, which are already being mass-manufactured, they are “low-cost, well-engineered, and being concrete, these pipes have good insulation properties.”

His plan is to rent out the O-Pods for HKD3,000 (RM1,592) per month. Two-thirds of that money would be invested in a savings account for the tenant, while one-third would go towards maintaining the homes. The reason for suggesting HKD3,000 was because of the global rule of thumb that one-third of one’s income should go to rent in order to consider housing to be affordable. Most recent university graduates in Hong Kong earn an average salary of 14,000 HKD per month. After taxes, that comes out to around 10,000 HKD. For a full article, please refer to:
Please refer to businessinsider.my

Malaysians are fortunate because we have not reached this stage in our property market. However, we should always note all these world happenings because it’s just a matter of time. If we are X years behind Hong Kong’s property market, then we are X years away from this potential happening. As for whether 100 sq ft is bad, well, I think if it’s for a single working professional who would usually use the home only for sleep and rest, it should be good enough. All other stuffs could be done outside anyway. Happy thinking and following.

written on 22 Oct 2018

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Hong Kong aims to reopen borders with China. (Also means China reopens yeah)

China is an ‘engine’ to the world economy

China has a population of 1.4 billion. if we assume just 3% of them would travel somewhere out of China, that’s 42 million people. It’s bigger than the whole population of Malaysia. Assuming each of these spending just RM200 per day and that’s a staggering RM8.4 billion. With a multiplier effect of 4, it’s RM33.6 billion to the world economy. Has China reopened? Not yet but they are indeed more open to reopening. Hong Kong’s leader John Lee announced that Hong Kong aims to reopen its border with China by mid-january 2023. Let’s read more.

Article in nst.com.my
 The border between Hong Kong and China has been shit for nearly three years as China enforced a zero-Covid strategy. Hong Kong’s chief executive John Lee said that the border would be restored to pre-pandemic state.

He said, “The central government has agreed to the full reopening of the border in a gradual and orderly manner.”

Local authorities on both sides of the border will present a proposal for Beijing’s approval, “intending to be implemented before mid-January”, he added.

Hong Kong has pursued a lighter version of Beijing’s zero-Covid strategy and has also recently begun unwinding restrictions in a bid to reboot its international business ties.

Currently, Hong Kong residents travelling to China can only do so through a handful of border control points and are subject to mandatory quarantine. Do read the full article here:
Article in nst.com.my

Do we welcome Chinese tourists?

Malaysians are travelling overseas. I think everyone has friends who are doing so. Number of new Covid-19 cases all over the world is very close to 560,000 PER DAY. As per all reports, these are usually lower than what’s really happening. So, if we assume the actual number is just 3x higher, it means every day, there are close to 1.8 million cases.

Source: google.com dated 30th Dec 2022

Malaysians are travelling overseas and when they arrive at these countries, chances are the people there are not wearing masks and Malaysians may also be tempted not to wear masks as well. If we see the whole road are people without masks… These Malaysians would then return to Malaysia and there are NO additional checks for all these travellers beyond just temperature scanners I think?

What about some other selected countries?

Source: google.com dated 30th Dec 2022

Source: google.comdated 30th Dec 2022

I am the first batch of AZ vaccination ‘volunteers’

Just yesterday I was speaking to a good friend who told me he still remembered how he struggled to secure an AZ appointment. I told him that I never had any issues to register both my wife and myself because we were thre first batch. When Malaysians were all against AZ because it’s more dangerous etc. I told him that when AZ arrived, it was already widely administered in the UK. That’s why I do not believe in all the fear mongers. I believe in actual facts. By the way, it was also established that AZ is as good if not better than any so-called better brands yeah. This is why if you ask me, I just prefer to look at facts and not based on why people fear or say or shout.

I do not think I would personally benefit directly from more Chinese tourists. However, I am definitely against banning them from coming in for 30 days or 60 days or even 90 days. Do the necessary. Period. Thank you.

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Financial news: My city has MORE Billionaires than your city.

How many zeros are there in a billion?

If we write a 1 followed by nine zeros, we will get
1,000,000,000 = one billion!
  If we write a 1 followed by six zeros,
we will get
1,000,000 = one million
. Are you aiming to be a millionaire or are you already on the road towards becoming a billionaire? Well, investing along may be tough to reach RM1 billion. Probably becoming an entrepreneuer would provide such a possibility. Here are all the richest Malaysians. Yes, they are all within the billionaires group. Ranking usually do not rank anyone without at least a billion to their name.
Who are the richest Malaysians in the world?

Where do billionaires love to stay?

If I am a billionaire, I would not want to stay at any one place for a long time. I would prefer to travel to a different city every few weeks. I want to see the world. I like to eat lots of good food. I hope to go to gym in many different cities. I like to hike up mountains in different countries. Well, I also need to be a billionaire who’s no longer working or needs to work. Okay, coming back to the real world, let’s look at all the real billionaires. Let’s know where they love to stay.Which city would they love to buy a property and stay for a long time?

Article in themalaysianreserve.com
  There are 129,500 millionaires in Hong Kong between 2012 – 2022. It has grown by 40% to 240,100. This is now a low number but it has fallen down the ranks. It is now ranked 7th in the world and is behind Singapore which is ranked 5th. In 2012, it was ranked fourth.

The top 3 cities where there are the highest number of millionaires are New York City, Tokyo and San Francisco Bay Area. These three cities are then followed by London which is 4th in the list.

Juerg Steffen, Henley & Partners’ chief executive officer, said, “Being able to relocate yourself, your family, or your business to a more favorable city or have the option to choose between multiple different residences across the world is an increasingly important aspect of international wealth and legacy planning for private clients.”

Here’s Henley & Partners’ ranking of the world’s richest cities:

Ranking
City/Area
Number of millionaires
Change between 2012 and 2022
Number of billionaires
1
New York City
340,000
40%
58
2
Tokyo
290,300
-5%
14
3
San Francisco Bay Area
285,000
68%
63
4
London
258,000
-15%
36
5
Singapore
240,100
40%
27
6
Los Angeles
205,400
35%
42
7
Hong Kong
129,500
-27%
32
8
Beijing
128,200
70%
43
9
Shanghai
127,200
72%
40
10
Sydney
126,900
35%
15

Please do read the full article here:
Article in themalaysianreserve.com

Who are at the top of the top currently?

Do refer to forbes.com for the full article here. Click here:
https://www.forbes.com/real-time-billionaires/#79aed9843d78
 By the way, the top is NOT from the online world yeah. It’s all to do with luxury, luxury and luxury.

Read an earlier article about luxury goods here:
If you are looking to invest, perhaps luxury can be a good place to start

Keep it up in whatever you are doing. As they say, aim for the stars. At least you would hit the clouds and that’s a really great achievement already.  Cheers.

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Severely unaffordable but property price still uptrend

According to the Census and Statistics Department of Hong Kong, the median salary for an employee is S$16,200 (RM8,114) in 2016.
Please refer here for the full set of numbers.
In other words, most employees in Hong Kong would be earning around RM100,000 per year which is already categorised

as the upper end of M40 in Malaysia.
The cost of living in Hong Kong, minus the property part is actually okay. Food, transportation and even the occasional Happy Hour is accessible to most people. Property is however something which has spiralled out of control and even all the cooling measures have failed to dampen the mood for properties. According to US planning consultancy Demographia, Hong Kong is ranked the least affordable city in the world for the eighth successive year. It leads even cities from the US, China, Singapore, UK and Japan.
 Here’s that survey by Demographia for download.

The survey follows a typical standard used by even our very own Bank Negara Malaysia (BNM). When the median multiple between yearly income versus house price is 3 or below, it’s considered affordable. In between, there’s moderately unaffordable, seriously unaffordable and lastly severely unaffordable once the median multiple is 5.1 or higher. There are no special ratings even when the median multiple hits double digits. Try and use your current home price divided by your current annual income. Compare the median multiple to the chart by Demographia. If it’s low, congratulation, you may be earning a higher income than most other Malaysian professionals or you are staying in a home which is cheaper than most other properties.

Some other summaries from the Demographia survey? Please refer to the chart. Chart shows that after Hong Kong, the next few least affordable cities include Sydney (Australia), Vancouver (Canada), two U.S. cities followed by Melbourne in Australia. Many more U.S. cities followed before London, two cities in New Zealand followed by two more Australian cities. There’s no need to look for Singapore, it’s nowhere near all these cities here and in fact the median multiple is only 4.8 which meant it’s only categorised under ‘serious unaffordable.’ I think the median multiple is also not applicable to Singapore citizens who are able to get subsidized HDB flats when they qualify for one. The survey also concluded that in many situations, the government is the one who could directly influence the direction of more affordable homes. This is because it is able to influence through policies as well as constructing more affordable homes; more supply. Full report for
download of the comprehensive report by Demographia here.
Happy following.

written on 22 Feb 2018

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You can only visit once per week. Shenzhen – Hong Kong.

Nothing to do with relationships or divorce settlement. It is what was implemented by China for residents of Shenzhen city with regards to their visits to Hong Kong. There were no restrictions but now, Shenzhen residents can only visit Hong Kong once per week. One major reason stated was that there were too many Shenzhen residents who profit from buying things in Hong Kong and selling them in Shenzhen. It is said that the goods in Hong Kong especially food are much safer compared to those sold in Shenzhen. Another reason was because of the many demonstrations and protests but Hong Kong residents recent few months which may have infuriated Beijing but this move is more to appease the Hong Kong residents instead of punishing them.

Would this happen to the visits between Singapore and Johor? Perhaps Singapore may want to curtail the visits of their citizens so that they spend more of their money domestically instead of ‘overseas’ which is just a bus or taxi or even a drive of half an hour away? Seriously, no. Indirectly? Yes, of course. Any responsible government would always encourage its citizens to spend domestically. Just look at the toll rates? Or even some of the articles which compared shopping in JPO to Orchard street in Singapore? Yes, as well as not being able to drive back into Singapore with a full tank of petrol and a few other indirect ways. Nothing too serious, really and the trips continue especially during the holiday seasons.

Actually Shenzhen or Hong Kong, both are part of China and whatever restrictions imposed today is unlikely to be a long lasting one. The reason is because you cannot impose something to appease one side but ignored the other side, right? So, somehow a win-win situation must happen or these protests would just continue to happen on and off, at both sides one after another. Some say another reason is because it’s harder to live comfortably in Hong Kong because of the ever higher property prices caused by the super wealthy mainland Chinese who got their wealth from the huge Chinese market. As they say, earning just 1 cent profit from every Chinese in China is better than earning RM1 from every Malaysian! For this, I think it takes much more than just restricting the movement. The current Hong Kong government may really want to seriously help Hong Kong people to own a roof over their head, affordably. When everyone has a property, perhaps the relationship would be cosier and happier. Oh yeah, recent numbers also showed the retail sales in Hong Kong has also dipped a small percentage. This is not something that both Beijing or Hong Kong want happening on a continuous basis. My 2 cent opinion. Will be visiting Hong Kong next year.

written on 1 May 2015

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‘Hope’ in a subdued (property) market?

A good title to an article usually attracts readers to read. There’s one in NST with the title of:
Henry Butcher Malaysia Study: ‘There’s still hope in subdued market’
It offers views from a famous real estate company about the state of the property market of Malaysia. I would say that the article is considered positive. For example, it shared that even though the property market is soft bu the corporate earnings for developers have been decent in first half of 2017. (Yes, we have been having a slow property market for some time, why do developers still report decent earnings… do you wonder? Transactions are still moving actually, contrary to beliefs that the whole market has stopped. In fact it is hundreds of thousands of units of residential properties still. 🙂  Total transactions including commercial units are still over 300,000 in 2016. Hope this explains why
the richer will become richer
 and why I seriously hope
 first-timers would buy in
stead of wasting their money on some new phones every year.

Henry Butcher’s study also showed that there are more new launches in H1 2017 compared to the same period last year. (This can reasonably point to the fact that perhaps there are now more units being launched since the prices are now lower. Or, perhaps confidence is really coming back? Based on my friends’ feedbacks, not really yet. Haha.) What are being launched? Mostly condominiums and serviced apartments.  (If you are just buying to stay, get whichever is cheaper for more. Size matters, basically.) Henry Butcher shared that the most popular sizes are between 1,001 and 1,200 sq ft. (This would also be my preferred size if we are talking about prices which are still affordable. As everyone noted, a lot of the affordable projects are 800 sq ft or higher but usually lower than 1,000 sq ft.
 For an in-depth coverage, do refer to the article here. Pretty comprehensive. 🙂

I hope no one is hoping fo
r
 property prices to fall back to the levels of before 2009.
If it happens, I do not think anyone has a job that pays them enough money to buy. The market will continue to adapt to focus on affordability and ácceptability’. Affordability simply meant buyers have to accept smaller sizes for more well known areas. Acceptability (my own term) is the willingness to look at
 WHY instead of just the usual WHERE.

The fact remains that there are already areas which most buyers would never afford no matter how long they save unless their pay is the top 10% in Malaysia they could really save a lot. (My ex-colleague told me that she could save 70% of her pay…. My wife, when she was staying with her parents could save almost the same. Haha. )  MRT has helped? Actually, LRT has been around for years but somehow, not many would think staying 10 minutes away from a LRT line is okay. Well, at least now MRT has become sort of a catalyst… or perhaps the property prices are the real çatalysts? Either way, property remains an essential buy, in my opinion. Cheers.

written on 13 Sept 2017

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Crazily hot, 28% of Melbourne apartments bought by foreigners

I went to Perth in November 2014. Until today, I have yet to exchange back the remaining AUD into RM. the reason is because RM is slightly stronger than back then. How could that be when RM is supposed to be pointing towards a crisis in Malaysia? Haha. No comments about that here. Please refer to the latest for RM vs AUD image.

According to a report in an Australian online site, Reserve Bank of Australia said that the current depreciation of the Australian dollar is inadequate. This is however welcomed by the many foreign investors buying into Australia. Their target? Melbourne. According to latest stats, 28 percent of all new apartments in Melbourne were sold to foreigners! Until today, Malaysia’s number for foreign buyers remain at a low single digit. I personally hope this number stays almost the same for many more years. On an overall basis, 16 percent of all apartment sales in the new property market were accounted for by foreign purchasers. (Source: National Australia Bank)

Oh yeah, despite the current uncertainty, as long as the foreign investors still see Australia property as attractive, the number of transactions is likely to spike up. This is because beginning December 1, 2015, non-resident buyers will pay a fee of $5,000 for property under $1 million, with increments of $10,000 for every $1M thereafter. A 3 percent stamp duty on foreign buyers will be levied beginning July by the Victorian government.In fact, if you buy and leave the property empty, you are liable for holding land tax. Haha. Yes, all these meant up to an additional AUD50,000. (RM140,000).

Ready to push that 28 percent foreign buyers into 30 percent? Happy buying if your next target is Melbourne. Some recent happenings:
Up in Sydney and Melbourne, Down for Perth

or this one:
Sydney properties? Opportunities soon, maybe
.

written on 25 July 2015

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‘Too’ hot property market is not good lah. Cooling momentum is good breather.

Hot property market?

Malaysia property market is nowhere near hot. However, there are countries where the property market has been hot for sometime. One of it would be Australia. It has been rising in double digits and that is definitely not a good sign because salaries do not rise by double digits. Do read here for the
earlier article. Property prices must not rise as if there’s no ceiling…

Article in nst.com.my
  Australia’s housing market advanced for a 13th straight month, even as signs mounted of a potential cooling ahead in response to worsening affordability, increased supply and the withdrawal of government support.

Residential property values in Australia’s major cities rose 1.4 per cent in October, to be up almost 21 per cent from a year earlier, according to CoreLogic Inc. data released Monday. House prices are outpacing wages by a “ratio of about 12:1,” it said.

Tim Lawless, research director at CoreLogic said, “This is one of the reasons why first home buyers are becoming a progressively smaller component of housing demand.”  Please do read the full article with more details here:
Article in nst.com.my

Reminder, salary increment should be higher than property price increase.

If salary is way behind property price, it meant that only the current owners will be happy while all the first-time home buyers are struggling to enter the hot property market or they are overstretched financially to enter the property market. This is not a good sign because this will become a bubble awaiting to burst when circumstances suddenly change. Do refer to the actual numbers stated in the article to understand why I say so.

Meanwhile when property prices reached a level no one could buy, then transactions will stop happening because no one could afford to buy in such a crazily hot property market. Of course, there’s also that factor of HOUSEHOLD income. So, prices may rise to unreasonable level for a single income professional but it could still be sustainable because of household income; two persons. Just remember, this is clearly risky already because what if one of these two working professional lost their job? Happy knowing.

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Hotels for sale? Many are fake and old listings yeah.

When we have some good news, NO ONE forwards.  In fact some even questioned why I always like to write about good news. Erm… even this is wrong? Haha. When we have some bad news, everyone talks about it. When we have some FAKE NEWS where no source were stated, somehow it will become a big news. One such case just got blown up, real big.

Someone forwarded to me but I deleted it way earlier because to me, if the news some with a legitimate article from a mass media site, then maybe it’s true. If it’s just a list with some messages as if that person is an expert, then guys ah… delete lah. This is the news we are talking about.

Article in theedgemarkets.com
 One list of hotels which is said to be up for sale via Whatsapp is  said to be fake.  Zerin Properties managing director and chief executive officer (CEO) Previndran Singhe said this about the list of hotels said to be on sale, “It has created a misconception about the future of the hospitality industry where it was the subject of a news report that further amplified the unease and concerns of those involved in this sector. I must stress that not all hotels on the list are for sale. There seems to be an element of fraud with prices obviously marked up.”

My good friend Penang’s Raine & Horne International Zaki + Partners Sdn Bhd senior partner Michael Geh gave his objective assessment of the viralled Whatsapp message. He said, “While some are for sale, many are not. They are operationally closed and most hotels usually do sales privately. Some of the hotels listed are held by big players and they are definitely not selling.” Geh also shared that some of these hotels were even offered to become a quarantine centre but the owners felt that it’s better to just close the hotels temporarily.  Do refer to more comments in the
Article in theedgemarkets.com

Actually, whenever I travel with my family, I would always prefer to stay in hotels. Somehow I feel that service remains very important and it’s not just about how cheap the accommodation could be. Plus, as usual I prefer to just walk down for breakfast versus having to drive out, find a car park in an unfamiliar territory and then having to walk if I were to park some distance away. However, hotels have been under a lot of pressure from all the additional homestay choices and this did not happen only after COVID-19.  It has happened for some time.

So, there’s really no need to keep forwarding. So, what do people get from more panic in the market? Actually, I have no idea. Maybe someone really wanted to crash the market so that they could pick up everything on the cheap. Happy following yeah.

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Hotels for sale is bad news? Maybe we ask 4 questions?

I know when a business closes down, it’s a negative news. I also know whenever a business closes down, people lose jobs. I also know when people loses their job, they will not have salary to support their life. Their livelihood is affected and if this situation continues, then soon their lives may also be affected.

Just look at what has happened in the US, many millions are facing the threat of eviction
(click here to read the news if you like to know exactly what is happening and whether their government is doing something about it to help these people who may soon be sleeping on the streets)
most probably caused by job loss during the worst times of Covid-19 previously.

So, yes, when hotels announce their closure, it’s a negative news too. However, many times, these negative news are temporary. As they say, we need to rest if we like to continue the journey of a thousand kilometres. Frankly, for example, when your hotel has 350 rooms and only 35 rooms are occupied everyday, it will be financially suicidal to keep it open.

However, whether it’s negative news for now or negative news forever and ever, we could also ask these 4 questions as below. The answers would provide a much better understanding about the future outlook. Famous military strategist, Sun Tzu said, “Victory comes from finding opportunities in problems.”

#1 – Are there buyers on the lookout for good deals?
 If we read frequently enough, we would know that there are always buyers on the lookout for hotels.

Examples?
An image from theedgemarkets.com

Image from:
https://www.theedgemarkets.com/article/cover-story-hotel-transactions-pick-near-term

Why do hotel transactions happen? The seller may prefer to have cash versus the hotel and the buyer prefers to have the hotel and willing to buy even under current negative times. Of course the only major reason is that the new buyer could see that the returns from their purchase will be realised in the near future.

#2 – Will these hotels reopen or it will be totally new development altogether?

If the closure is to ensure that the hotels will survive; reduction of the financial bleeding due to operations cost and yet no / low occupancy, then this is indeed a relevant strategy. Just need to note that not hotels which are closed are sold yeah. Some are just trying to hold on and quickly reopen then times get better. This is just business strategy and does not need to be applicable only to the hotels.

#3 – Will people stop travelling after pandemic becomes endemic?
 I can safely say that if they allow me to travel, I will travel. A staycation is fine, just need to have some change. If we look at countries which managed to handle Covid-19 well enough, as soon as travelling is allowed, the people just went travelling in droves.

Flights and hotels were booked well in advance when HK and Singapore signed a travel bubble previously. This tell us that travelling has not changed and new norm will still be the norm. People will continue to travel and they will always need accommodation. So, hotels, if they could survive the slow times will be rewarded with good times.

#4 – Will everyone stop staying in hotels?

This one is prompted by a friend who told me that he will no longer stay in hotels because there are so many choices in the AirBnB world. He is right. When I travel, I do stay in homestays and not hotels all the time. However, when I travel, my first choice is still to stay at hotels because I still feel hotel is safer, more welcoming and they offer services too.

There was once when I stayed in a very nice condo in Melaka. The facilities were amazing. However, as I walk back to my unit, the whole row only one unit is occupied. I am just not comfortable as my family was with me as well. I also prefer to just wake up in the morning and go down for breakfast versus waking up early and trying to find a place for breakfast in a place I have never been before. Haha. Not that adventurous maybe.

Hotels will always be needed, according to someone who has no money to buy up any hotel

Whatever the answer you provided to the 4 questions would be the answer you need. If they are all negative, then it does seem that the end for the hotels are very near. If the answers are positive, then I think when threats come, opportunities open up. I have no such funds lah. However, there are many companies with the extra funds to buy when the price is low and start receiving good returns once situation returns to normal. Happy answering yeah.

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Hotspot or emerging hotspot? Both look fine to me.

I was conducting my usual Handling Objections Better workshop for another developer sales team today and this question popped up. Given a choice, would I buy into a hotspot or an emerging one? Actually, it really depends on what we intend to do with the property that we are buying. If we are looking at rental income, hotspots would be much better than an emerging one. For one, it is definitely easier to rent the units out, whether they are commercial or residential units. I have a friend who tells me that he buys only commercial units which he knows he could rent out almost immediately; within one month of taking the keys. He does not mind the higher than usual prices because he reasoned that the capital appreciation over the next few years would more than make up for the low / negative rental yields currently. He has been right thus far.

As for emerging hotspots, I think this is suitable for first-time home buyers. Three reasons; it’s usually cheaper to buy (bigger-sized too), there’s usually already some amenities and many big brand names are already there which meant that the future will be bright. Else, all these branded developers will also have a bleak future there too. Reminder, there may not be a hypermarket yet but there’s definitely already a thriving mini-market. There may be just one bank operating there currently and for fast food restaurants, it may not yet have a McDonalds. It may have a nice budget hotel but definitely no 4-star branded hotel for example. Yea, all these differences meant that the price has to be lower than the hotspots of today; where everything is already within reach within the neighbourhood itself.

My second property was in an emerging hotspot as well. I bought it in 2007. There were no bank, no fast food restaurant and no hypermarket. In fact the shops were not even fully open! However, it is within 10 minutes from the airport, it is only 15 minutes from the second bridge, it has a few restaurants which were all doing well and there were many branded developers who has bought land within the area. In other words, all these developers saw its potential too. Anyway, if I was wrong, then all these branded developers have also gotten it wrong too…I bought one condo with 2 car parks for RM247,000.  Today, the same area has bank branch, fast food restaurants (KFC and McDonalds) and the shops are all fully open with many nurseries too. The price today? RM600,000 or higher. I sold mine at RM640k 4 years ago. (coz I have an extra car park I bought for just RM10k…)

The advice is not to overthink about which is better because there is no such thing as a perfect property at the lowest price. If it’s perfect, the price is surely at the peak. If it’s not at the peak, it’s surely not perfect.
Here’s that earlier article.
 We view the unit, we drive around the area and we get to know all the developments nearby. The gut feel from all these actual observations would usually be right. If it’s wrong, we just need to stay there longer. 🙂  By the way, it’s very important that the area is full of big name developers too. Happy buying.

written on 1 Nov 2018

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Assessing if an area may become a hotspot? Some reasons here.

Everyone likes to know where is the next hotspot. My friends and me would love to know this too! This is so that we could quickly buy and wait to sell in a few years’ time, right? Property is always an investment yeah. So, how do we know where are the future hotspots? Well, they could ask this question when they attend some talks by famous property experts. Hopefully they give some objective answers and not just telling you that the developer they were representing would be the next hotspot. 🙂  Anyway, let’s look at a few things that we can research and review in order to at least know what happens before a non-spot becomes a ‘warmspot’ and when the whole world knows about it, then it becomes a hotspot.

Many prominent developers
 are buying land in the area. The prices they are paying is also showing a rising trend. Within that potential area, every developer may have a piece of land but generally we do not find developers all buying land in the same area unless all of them believe in the same area. YES, there is a chance all the developers got it wrong but when we look at past records, I think the chances of this should be pretty slim. How to know this?
Buy maps from Ho Chin Soon’s office to know more.
 Alternatively, drive around the area to know more.

Public transport stations, linked is better.
This is going to be a norm in future. The closer the home is to the LRT / MRT / KTM and even BRT, the better it will be. When jams worsen further or when the space becomes a premium in the city centre, then the car parking rates will rise to a level that majority will not want to accept. Some parking space within the city centre today is already RM25 / day today. It can only go higher and not cheaper. Those empty space parking of RM10 per day? It will soon be occupied by another high-rise property.

Interchanges to expressways.
Developers who build interchanges to expressways will help to push up the premium of the property development. This is because for many developments, the expressway may be right next to it but without a direct connection, it will take ‘forever’ to reach it. A colleague once told me that just getting out from her high-rise project into the main road will take her 40 minutes every morning.

Jobs, Jobs, Jobs.
Within a radius of 10km, there should be industries or even office towers. We can easily do a rough calculation of the potential number of people working there. If we could see some huge MNC brands, this is a huge plus because it meant that professionals working there may be highly paid too. It does not matter whether these people will buy or rent. As long as own a home nearby, it’s either capital appreciation or stable rental returns, both a plus. Yes, an international airport is going to be a huge plus point and for a very long time too!

Education.
That SRJKC will help tremendously.
Here is one latest announcement.
 Yes, for those with teenage kids, a university with the course they love is usually a huge plus. Kids may not love to be near to their parents but parents would love to be near to their children. So, they may buy a unit nearby for their kids to stay and for them to have an eye on them too. Families with school-going children will be willing to pay a slight premium for these homes too. It’s good to have a POTENTIAL new university but it’s better to trust such news only when we see the foundation of the university being built.

Remember yeah, hotspots to some may not actually fulfil all our personal reasons to love the place. Thus it’s more important to look at all spots objectively, identify the potential ones and buy when prices are still not yet fully up. When many have yet to know about it, that’s when gems are found. When gems are found, that’s when the capital appreciation happens. Of course, there are a lot of other reasons too but these 5 would make any potential area be a potential hotspot in the future. Happy finding an awesome new property.

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written on 1 June 2018

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Better names, better prices. What if the names are changed?

Location is the main ‘ingredient’ in property investment. Anyone who does not know about this should know about this. Have we however wondered then what makes a location a good or even a great one? Lots of different reasons for different people. For this article, let’s assume this. Considering the location itself is ALREADY a famous one because of the many good things happening there, does the NAME then carry sufficient branding for new buyers to buy? Let me just name a few of the typical ones? Mont Kiara, Desa Parkcity and even Bangsar. Usually, just the name itself would help the new launch a few more seconds of reading through. If the name does not make any sense, the potential buyer may have missed it altogether. This is the reason why there are so many newer areas with new names which are related to the older and more established names. For example, North Kiara, Bangsar South or even Subang West? No one buys solely because of the name but a good name helps tremendously in marketing and promotions.

I like this article by
Khairie Hisyam Aliman in TheEdgeMarkets.com – Coffee Break: The new risk emerging in Malaysian property
  He was sharing on the topic of the recent suggestion that Bangsar South be reverted back to Kerinchi. Within the article, he asked if politicians are looking to reverse some of these strategic value-adding rebranding of places, how will it impact property values? Well, he said that some believe the inherent value of a good location will prevail, but market observers still expect some impact on subsale pricing. He then shared an actual marketing sentence by a developer. “The best example? Who can forget that one development where the tagline reads “Really Damansara. Where it is Damansara by name and location.” (Ouch.)”
His conclusion? He says, “Really, the best way forward is to just stop this nonsensical rebranding of places. Let’s just stick to location, location, location — and let the location sell itself.”  Please read his full article if you have not done so. It could be for knowledge or for humour.
Khairie Hisyam Aliman in TheEdgeMarkets.com – Coffee Break: The new risk emerging in Malaysian property

Do you agree? Frankly, I think if we are familiar with a certain location and we like it, we will like it whether or not the name was an old one or a new one. We will also like the area whether or not the name is a half-half, English + BM or BM + English or whatever language plus whatever language. True? However, when we are talking about property buyers, the number of new buyers are tremendous simply because for Greater KL itself, the urbanisation is continuing. This is why there are those who are familiar ONLY with Puchong and beyond (Seri Kembangan, Bangi, Kajang…). There are also those who are familiar with Damansara and beyond. (Sungai Buloh… Rawang… etc). This is the reason why certain names are cleverly associating themselves with an area which is more popular. This attracts potential buyers to take a closer look or even drop by to view the place. If the buyer likes the place, the area has a new supporter. However, if the name is a totally unfamiliar one and it did not attract potential buyers, then ‘tak kenal, susah nak cinta…’  Another very brief example? Just look at how we decide whether or not to read some articles. The title would have to contain some words or phrases that attracts us, right? Happy following.

written on 25 June 2018

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Why are hotspots HOT? (and how to buy into a future one)

If we are currently a young working professional in the KL city centre (office bound job) and we like to buy a place we can call our own, it will usually be a smaller sized home which we could afford and it should be nearby the LRT or MRT. In fact we will most probably only join companies which has access to a LRT / MRT station. As soon as we get married and planning for kids or even have babies, the needs change. Usually, when we want to buy a bigger home or even upgrading from a high-rise to a landed and we ask our friends about the areas they would love to buy in, their answers are usually similar; buying into hotspots. Anyway, as long as these hotspots are still affordable, that’s best. Let’s understand why the answer are usually hotspots. Usually, it will be due to these few reasons.

1. Availability of amenities.
These hotspots are usually self-contained townships. Once you are home, you have everything nearby your home. From banks to clinics to supermarkets and even F&B places, these mature neighbourhoods would usually have everything everyone needs. For families with kids, primary and secondary schools or even international schools would be a necessity.

Moving beyond these family necessities, petrol stations, recreational parks and even medical centres would all complement one another and this will make the area a hotspot. Due to all these convenience availabilities, many are willing to pay more for the homes located within these mature neighbourhoods. However, the prices have now grown to a level which is prohibitive to the majority, even senior managers! This is the reason why newer integrated developments are usually further away from the city centre so that it’s more affordable. With the availability of land space, it will have the potential and flexibility to build all the amenities which are available in mature neighbourhoods of today. Here’s one example 70km away from the KL city centre;
Bandar Sri Sendayan.

2. Connectivity for drivers or commuters.
Developers are touting the distance of their projects from the nearest LRT / MRT stations. This is a very important point especially for the young working professionals of today. They may not even need to own a car if they stay near the LRT station and their office is near the LRT station too. However, this does not apply to everyone, especially those with a family. A very good example would be my wife, my two kids and I. Every morning, my wife sends them to the nursery. She told me that driving is not just more convenient but definitely safer than walking to the nearest station with the two kids and later walking to the nursery from the station with the two kids. What happens during rainy season? As for me, I do take the MRT once every 2 weeks but that’s applicable only if I have no appointments. Else, it will not be easy to keep scheduling the meetings only at places with public transport. Perhaps integrated developments which is a short drive away from a major expressway will be a better choice when it comes to liveability vs affordability.

3. Potential for continuous capital appreciation.
Usually, when we buy a blue-chip counter in Bursa Malaysia, the price is already at or near the peak. The reason is because it’s already a famous and hot stock and everyone wants to have a piece of it. However, the world famous stock investor Warren Buffett would tell us, “Price is what you pay. Value is what you get.” He wants us to understand the business before we buy because if we buy a stock which is fundamentally sound at a lower price, the value in the future would be greater than the price we pay.

Property investment is the same. Everyone knows that the hotspots of today were not hotspots long time ago. That was why the prices then were much lower than today. Over the years however, as all the amenities were added, connectivity were enhanced the area would soon become a hotspot. The question we should always ask before we buy a property is this. “Will the area I am buying get even better in the near future. What are the developer’s plans for the area for the next 5-10 years.” If the answer is a positive one and the price is still affordable, I think we may have found a hidden gem. This maybe one which will offer a continuous price appreciation as the years go by. By the way, property prices should not be like a rocket, else the whole market will crash soon after. Happy investing.

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Perhaps a look at a cool project in Kuala Lumpur?

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Is a house really an asset? Or is it a liability?

Someone asked me this question many years ago. “Why is property an asset when most of everyone owes most of the value of the house to the bank?” I replied, ‘most of the price you bought, not the value.” As for whether it is an asset or a liability, maybe we look at it from the Why, When and of course that Where question since we are talking about a property. The reason WHY I would always encourage people to buy a property, especially the younger generation is because I hope they do not spend their money. Yea, SPEND their money versus paying mortgage instalments. In such a case, property is debatable as to whether it is an asset but spending their money on a cup of coffee (RM15) plus a slice of cheesecake (RM15) is just an expenditure and nothing more. In fact, if we are able to INVEST the money elsewhere, then property need
not be something we need for our future.

Looking at WHEN, well the the reason I bought my first property was also because someone much more senior than me; my future father-in-law forced me to buy a property instead of renting a room or even a home since his daughter would have to be staying with me after we got married. Well, when I am a father-in-law in future, I may also require my future son-in-law to buy a property first. As for a preparation ahead, perhaps 10 years later from today, I would have to buy two similar properties, one each for my daughter and son. I could always sell it to finance my daughter’s education in future and as for my son, he may need one to fulfill his father-in-law’s requirement? Haha. Yes, as someone who has travelled to many advanced property markets as well as having worked for over 20 years, I think I have slightly more wisdom and experience than many of the young executives today. Hopefully they listen to me (including my daughter and son) when it comes to investing versus spending.

Buying a property requires a little more research.
WHERE is extremely important.

The answer is not on some areas someone told us. To me, the answer lies at our evaluation when we are exploring the area where we intend to buy. One example. A young professional may want to drive to the area from his office to know what’s available along the way. From typical jams and food to groceries and even cafes, as long as it meets all his expectations, then that’s a good area to buy. Perhaps MRT stations too but it really depends on the lifestyle of this young professional.  Second example, new parents would definitely want areas with nurseries, daycare centres and even schools. Perhaps another baby in the near future? Then, somewhere closer to a good hospital helps tremendously.

WHERE is thus dependent and should never be just a choice based on popularity of a certain area because if everyone already know about it, the prices are usually already on the higher side. I know, someone would like to point out to me that these popular areas would surely increase in price in future. I agree and I would like to point out that as long as the economy continues to grow and urbanisation continues to happen, more areas become popular. Plus, those first few batches of buyers to some of the popular areas today, do you think it was popular then? Haha.

Let’s not kid ourselves yeah. Can a property be a liability? Of course it could be! If we somehow stretched our financial capability too much and lost our job even for a few months, it is much harder to pay for a house versus ending our home rental and going for room rental instead. If the house we bought was supposed to be an investment that we wanted to rent out but the developer did not complete it and ran away with our money… It could also be a liability when we bought at prices which are very high, much higher than everything else in the market and well, the market crashes, then the property would lose a lot of its value and we would be saddled with a liability. There are certainly never ending other liability reasons but as a
country with a median age of below 30

as well as a property market which is nowhere near advanced, I think property remains an “investment for a long time more. ” You would need to decide for yourselves. I have decided for me.

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written on 1 April 2018

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House sales will COLLAPSE. Prices will drop by 3%.

Falling property transactions and property price. Looks like a familiar situation in the Malaysian property market?
That 70% property price reduction prediction
 By the way, it’s quite a foregone conclusion that property transactions for 2020 will likely drop yeah. Already we have the Movement Control Order (MCO) for over a month and our Prime Minister saying that everyday that we have MCO, the economy loses RM2.4 billion.

With the MCO, property viewings (actual viewings, not just some videos online) has reduced. Booking may still happen for very seasoned property investors during the MCO but for most other Malaysian property buyers, not many will buy anything of a few hundred thousand ringgit or higher by just relying on videos. So, how about learning from advanced property markets instead of trying to forecast what will happen here in Malaysia?

Article in theguardian.com
   Global consultancy Knight Frank says that the house sales in the UK will collapse and goes into a deep freeze due to coronavirus pandemic. Prices will however fall just 3% and will rebound in 2021. Knight Frank says that the total house sales will drop to just 734,000 in 2020 versys 1,175,000 in 2019.  It does not however see property price to also collapse.

It forecast that mainstream UK house prices would fall 3% in 2020 but will then bounce back by a positive 5% in 2021. This is based also on an assumption that the British economy will shrink by 4%in 2020 before rebounding by 4.5% in 2021. Liam Bailey, the global head of research at Knight Frank, said: “The housing market was in a strong position in January and February. A sharp uptick in sales and price growth was seen across the UK, with even the prime central London market seeing a reversal of a five-year-long price decline.”   Please do read the full article here:
Article in theguardian.com

A couple of important learnings.  Number of property transactions may fall a lot but it does not mean property prices would also be dropping. Without a lot of transactions, especially from owners with financial distress meant that property prices continue to be orderly. Would we rush to sell at a much lower price than most other recent transactions unless we are facing financial difficulties?

If the answer is no, then the next question is, would we be dropping into some financial difficulties? The answer usually lies with our income stream. If our job continues to pay us, we will be able to maintain our current life.  If we operate a business and we can still at least derive some incomes from this or we have some savings to sustain the operation, we can still hold on and wish for the reopening to happen faster.  This is why when we go into a financial crisis, property transactions and property prices may just keep falling. For now, we are not and there’s also a
moratorium of 6 months as breathing space too. Earlier article here.

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No, house price increase was not 15% or 1.5% per year

A good friend who’s a super good startup senior management asked me if it’s true that home prices were increasing by 15% per year for the last 10 years or so. I said, it could not be so high. It should also not so high or else, market could have crashed. I told her that probably the house price increase would be closer to 6% if we stretch it longer, say over 20 years or so. Here’s that stretched over 20 year image of Malaysia House Price Index (MHPI).

If we look at periods of 1990 – 2013, it’s an average of 6.3% per year.  If we look at average of 2014 – 2019, it’s 6% per year.  Please note that recent few quarters, all the numbers are below 6% year. It has been below 6% per year since 2018. So, it’s not true about house price increase of 15% per year or even 1.5% per year. If you like to always get updated numbers, this is the
housingwatch.my site. Click here for the MHPI yeah.

Average for all may not tell the right picture

The above is an average number. It covers an average of all types of properties. It does not tell what’s really happening to different types of properties. Yes, different types of properties would have a different price appreciation too. Someone who love landed property will always tell you landed is the best and the reasons are etc etc etc. I put etc etc etc because I disagree yeah. Haha. Well, just look at the data below for MHPI by house type and average price 2010 vs 2020.

Best is Terraced and Second Best is High-Rise in % wise

Terraced has increased in price from RM188k in 2010 to RM395k in 2020. Meanwhile, a high rise unit could have increased from an average of RM174k in 2010 to RM374k in 2020. Please do not think too much because under the ‘worse’ scenario, it’s still an increase of RM382k in 2010 to RM659k in 2020 for detached. In other words, if we divide this 72% increase over 10 years, it is still a respectable 7% per year which is 3 times the FD rate of today.

Just need to remember, it’s not about landed versus high-rise

Please do evaluate a property properly and not be too concerned about whether it’s a landed or a high-rise unit. It matters very little depending on what you intend to do with the property. If you will only feel good to stay in a landed, by all means buy a landed and stop convincing yourself that a high-rise may be good. If you prefer to let your kids go crazy in the swimming pool in a high-rise,  there’s only one in a high-rise. Unless of course you are buying into an expensive landed home which comes with a club house and club membership fees.

Whichever you love, that’s the best property to buy. Property price over a long period of time will always be okay as an investment. That’s as good as it gets. In the mean time, happy viewing, selecting and deciding yeah. Cheers.

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Property prices around the world

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House prices? 3 important things: savings, preference and interest rates.

By the way, there are many other factors affecting house prices, not just these three stated in the title of the article but we look at these three for this article as these are the three main factors said to be pushing UK’s home prices up by double digits and it is said to be the highest rise since the 2008 financial crisis.

Actually the 2008 was a mortgage crisis started by the biggest economy in the world and it affected many other markets too. Briefly, it was all due to greed. Hopefully they have learnt their lesson well and will not repeat it. Coming back to the double digits growth in property price in the UK.

Remember yeah, there’s no way that the median salary increase in % could not have been even half of the price increase. In other words, this kind of crazy increase must not continue and it’s clearly not sustainable.

Article in guardian.com
   UK house prices rose by 10% in the year to May. This is the fastest rate since before the 2008 financial crisis. In some parts of the country there are stamp duty holiday and this helped to push some buyers to take advantage of it

Jamie Durham, an economist at PwC, said stamp duty was not the only factor pushing prices up. He said,  “The market continues to be supported by a shift in preferences towards more spacious properties,” he said. “It has also been supported by household savings during the pandemic, estimated to be about £7,800 per adult, and continued low interest rates.” Please do read the full article here:
Article in guardian.com

Do we have similar situation in Malaysia?

Okay, we are in a lockdown currently. However, we have Home Ownership Campaign (HOC) which is a stamp duty exemption campaign. We also have moratorium which will likely boost savings for the ones who actually does not need the moratorium in the first place. Assuming, the typical repayment is RM2,000 per month, then the savings could be RM12,000.  Malaysia’s interest rate is also as low as I could remember.

Our Overnight Policy Rate (OPR) has been reaffirmed at 1.75% by Bank Negara Malaysia (BNM) just last week as well. So, actually we do have the similar situations as the UK. So, we need to wait to see what will happen once things get better; vaccinations got to the point of 50%. With 400,000 per day or higher, this is really possible by end August.  Let’s hope okay.

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House prices are falling because interest rates are increasing. Oh dear.

Interest rates are raised to tame inflation.

What it means by interest rate being used to tame inflation is to ensure inflation caused by people buying too much or speculatively will be reduced. When people are not investing, not buying then interest rates may be lowered to make it attractive for businesses to invest and people to buy. For example when rates are low, buying a property looks cheap. Okay, in comparison to the rates I used to pay for my first property, the current rates are extremely low. Not even half by the way.

With countries all trying to tame inflation and also to keep up with that largest economy in the world which is increasing rates like it’s a race, one country’s property market seems to be affected. Sydney’s property price is down 10.1% in eight months and this equals to a loss of AUD116,500 (RM355,758). For the full article read below:

Article in forbes.com
   CoreLogic’s
daily home value index
 shows that Sydney’s highly leveraged property market home values are down 10.1% in eight months. This reduction is equivalent to roughly $116,500 lost in Sydney property values since the city hit its most recent peak value in February 2022.

CoreLogic notes that Sydney’s decline comes after a growth of 27.9% or roughly $252,900 in the city’s property values from the “COVID-trough to peak”.

The CoreLogic figures show Melbourne’s values are second to Sydney, falling -6.4% since January 14 while Brisbane is down -6.1 % since its June peak. Meanwhile, Hobart and Canberra are down -4.7% and -4.4% respectively since their month-end peaks, and Adelaide and Perth have both declined less than -1% since their highs. Full article here:
Article in forbes.com

When home prices are just too high, it needs a breather

People often ask if home prices will continue to increase. First of all, if it’s already way above fundamental; people’s salary versus all the available home prices, then we need to be very careful with what we buy. However, if the general market condition is normal, then yes prices would keep rising because inflation will continue to be around.

People will be paid higher because the value of money gets smaller. Yes, the sooner you realise that RM is not the ONLY currency to fall versus USD, the clearer your mind would be. It’s cheaper to travel to Japan if you are using ringgit now versus 1 year ago. In case you did not know. When people are paid higher, they can spend more, prices can also rise a little more. This is why the construction cost, the land cost, the material cost and the salary will continue to push up home prices. Slowly but surely.

Please do not rise by double digits, I do not need

Just imagine however if the home prices rose by double digits in one year, it SHOULD stop going another double digits the next year lah. Else, who can afford? If no one could afford, then we will have another mortgage crisis lah. Please do not be greedy and please understand that as a property investor, I just need the property price to rise at the same pace of inflation, that’s all I need. I do not need and do not want a double digit price increase every year. NO…..

Happy understanding.

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Household Debt Malaysia vs Assets, as per Allianz Global Wealth Report

Remember just days ago, Bank Negara Malaysia revealed that
75 percent of borrowers
 for home loans are for one property? Well, since they have just one property, it should be quite safe to assume that they will be able to pay for it, versus if they have a few. There’s another piece of news. I would not say it’s all bad or good. The article was in Starbiz that everyone should read, for both the good and the bad sides.
Here
. Do read it for a better understanding of where the household debts Malaysia is today.

In the article, Allianz Global Wealth Report revealed that in 2015, the loans to the households grew 7.2 percent and this is higher than the GDP growth of 4.6 percent and the financial assets grew 4.9 percent. In brief it shared, “Household debt climbed to 89.1% of GDP, while the financial assets to GDP ratio edged up only marginally to 182.9% from 182.4% in 2014.” In terms of debt per Malaysian, it is now at an average of RM33,500 versus the average financial assets at RM68,810. More importantly, the region Asia (excluding Japan) nearly trebled in financial assets growth since the year 2000 and is now ahead of even the eurozone. Out of total global financial assets of Euros 155 trillion, Asia (excluding Japan) accounted for 18.5 percent in 2015 versus eurozone at 14.2 percent.

Where
household debts are concerned
, are we on the tipping point of falling over or at this moment still comfortable? In brief, the fundamentals are weakening slightly though we are nowhere near crisis because assets remain above debts. 2 times more to be exact. Be reminded, these are average numbers. Some Malaysians may have a stronger foundation than others. It tells us also that ASIA will now be the centre of growth. Just looking at the typical GDP growth in Asia versus Eurozone would reveal that Asia is not leading only currently. It should continue to lead Eurozone. Yes, I am a proud Asian too. Happy investing and believing.

written on 22 Sept 2016

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Household Debt Malaysia? Better.

First of all, the household debt to gross domestic product has risen marginally to 87.9% compared to 86.8% a year earlier. Actually, in percentage, it’s getting worst! However, look one level deeper and we can heave a sigh of relief because 80% of all new loans had a debt service ratio (DSR) of less than 60%. In other words, the recent transactions were mostly by people with more cash and not those who borrows 90% loan. Two words would be ‘higher quality.’ It’s definitely not just any Tom, Dick and Harry.

In fact the household debt has gone done to 9.9% from 11.7% one year ago. This is reflected by the number of transactions for properties which is still down compared to 2012. I think one major reason is what every agent and developer has been telling you, the rejection of loan applications are high. In other words, banks are still very frightened to simply lend because of the perception that affordability has become a luxury. Besides that, Bank Negara Malaysia is also breathing down their necks too.

Another piece of good news would be that 92% of the outstanding for credit card balance being current. Imagine if the statistics tells you that majority of all the credit card balances are old debts!? For the lower earning category of RM3,000 and below, their share of loans with DSR of less than 60% was very high, at 91.8 percent. Yes, this meant that they are buying within their means. I think it is definitely not new properties though. Secondary may be much more realistic in terms of pricing currently. On an overall basis, the ratio of household financial asset to debt is still more than two times.

If you have been following the statistics closely, all these continued to show a positive sign that bubble is a little far away. Today, the developers are struggling to sell their properties as soon as people felt that their pricing is on the high side. Without these continuous and high increase in prices, the pressure on property bubble has been lowered tremendously. There’s a property fair in One Utama currently. Drop by, ask a few of the developers how long have they been selling the same project. Sales are definitely slower these days. Thus, only those with deeper pockets could buy and this contributed continuously to the slightly healthier growth in terms of household debts in 2014. I believe this will continue in 2015, at least until after everyone understood that GST should not be a main reason or worry whether should they or should they not buy.

written on 13 Mar 2015

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Restoring household debt sustainability before cooling easing

Singapore started its cooling measures earlier than Malaysia. Of course it’s also because their property prices went up too fast for comfort. Every few months, there would be some news about the potential for the
relaxation of these cooling measures.
 It does not seem to be happening anytime soon. As per the Monetary Authority of Singapore (MAS), “There is still some way to go, to entrench the gains in stabilising the property market and restoring household debt sustainability.” This was said by MAS Managing Director Ravi Menon at the central bank’s annual report briefing on Monday (25 July).

Some good news include the fact that household balance sheets have started to strengthen. In fact the annual growth in household debt moderated to just 1.7 percent in Q1 2016, down from around 8.0 percent in the past five years. Prices in the
property market has also stabilised
 and moderating from their peak in Q3 2013. (Timeline looks familiar to us, right?) Anyway, on an overall basis, the prices have only adjusted by a cumulative of 9.4 percent while the growth between 2009 and 2013 was 60 percent! Menon did not mention if they would like the prices to keep moderating but he said that nominal incomes rose by only 30 percent during the same period. Hmm….

I think we should appreciate the fact the central banks of both Singapore and Malaysia do take
pro-active measures

and the likelihood of a mortgage crisis like the one in the US is unlikely to start here. However this also meant that the property market is likely to be quiet for a while more unless all the investors from overseas start to look at Singapore again. It is after all the most international property market here in South East Asia. As for Malaysia, I do think that the prices for the cheaper secondary homes which has not appreciated as fast as the primary ones would be worth a more serious look. My Facebook friend commented this about Malaysia’s property market. “long winter?” I think my answer to her would be, “most probably.” Happy following.

written on 29 July 2016

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Since household debt vs GDP so high, should we stop buying properties?

Should we rethink our property investment? Perhaps to hold back till the GDP starts growing faster again? The reason is because when we buy, we would add to the numbers for household debts and this would then impact the Household debts versus GDP percentage. I read a very long article in The Star yesterday. While the title does seem to indicate that Malaysia is in real trouble, the content within does not really indicate so. At least not yet. As usual, majority would not have the time to sit down and read newspapers these days. I understand fully.

Thus, let me summarise the content of the article as below, plus my usual conclusion at the end. Before we even start, do be reminded that with a slowing Gross Domestic Product (GDP) for Malaysia in 2016, the debt to GDP may get worse in 2016. UNLESS of course, property transactions in 2016 go down even further. From indications thus far, this is not really happening.

1. Debt to GDP ratio almost doubled between 2008 and 2015. It’s now at 89.1 percent versus 86.8 percent in 2014. (Yeah, extremely high when compared to all the regional peers)

2. Due to this high percentage, private consumption could come under pressure where domestic demand is really needed when the external demand slowing down.

3. As per Bank Negara’s Financial Stability and Payments System report, the household debt is actually supported by higher asset quality. An earlier report here:
Household Malaysia: Financial assets up RM97.9 billion vs RM70.4 billion up in debt

4. Ability to service the debt remains sound. This is especially with the banks having taken a very conservative approach in approving loans. Earlier report here:
Jan 2016: Whopping 62 percent loan rejection

5. Due to number 4. above, the growth in household debt has moderated. It’s only 7.3 percent up versus 9.4 percent in 2014.

6. Assets are more than two times liability.

7. Non performing loan is at 1.5 percent which is extremely low regardless of whatever country in the world that we are comparing to. It simply meant people who borrow has ability to repay what they borrowed.

8. Housing loans is however STILL expanding at double digits; 11.9 percent in 2015. This is still lower than the 13.3 percent in 2014.

9. Independent economist Lee Heng Guie said, “As we don’t have a recession or a major economic shock, I think we should still be alright,”

10.
VERY IMPORTANT: Areca Capital Bhd CEO Danny Wong said, “We are in a situation where our expenses are rising. Do we continue waiting to buy a property? Prices will just keep going up. So sometimes, we just have to lock in that certain cost. If our salaries or even our normal increment can grow faster than the loan amount of an asset, taking on the debt is fine. The financial asset that we purchase will also increase in value.”

11. Moody’s is seeing GDP growth at 4.4% this year while Bank Negara is projecting 4%-4.5% growth. (Still low, when compared to the potential of household debt increases…..)

12. An economist from a local house said that while the household debt to GDP seems high, many of the property buyers are relatively wealthy people and thus are financially strong and would be able to service their loans.

Seriously, if I have evaluated objectively on the property that I would like to buy, I would still proceed. Do note that the household debt versus GDV numbers will definitely rise for this year and even next year as Malaysia’s GDP continue to moderate. If the world is not growing and the sentiment is negative, even the domestic consumption would be affected. The question is, should we buy when everyone is not buying or should it be the other way around? Happy deciding.

written on 2 Apr 2016

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Malls, household debts and bankruptcy?

Would you get someone who dislikes golf but likes badminton to write about golf? I think majority of everyone would answer, of course not. Well, read on then. In an article of a few hundred words and published in a local free English daily, one writer wrote negatively about malls. Actually, right from the start, I think he has already lost the plot. He admitted that he only shop online. Huh? The writer said he shops online, seldom go to malls, hate malls and even mentioned that everyone visits malls BUT its always the same stores and the same prices. My advice? Please, visit malls more often before you (the established writer) rewrite your article. Yes, there are definitely similar shops but if you have really shopped, you would notice there are still clear differences!

He proceded to say that he does not meant to be negative about new malls but Standard & Poor’s August report stated that household debts are rising faster than their incomes. Come on, this is happening already even before all these malls have opened. Why link those who are foolish with their money matters with opening of malls which were actually welcomed by many in the first place? I can safely say I hate to queue for one hour just to find a parking in one of the largest malls in Klang Valley. I call that ‘total waste of time.’ Also, it would be utterly foolish for one to visit the exact same malls every weekend for one whole year…..

Next he said that in 2014, there were 5,547 individuals below age of 35 who were declared bankrupt and that this number has doubled when compared to 2005. Wow, the number has doubled after 9 years? We are supposed to blame this on the opening of more malls? HUH?

He then said ‘with the economy being what it is.’ Next time, explain this. Do you meant we are in a recession? Crisis? VERY slow growth? Huge unemployment? What? Sorry, even if 2015 GDP growth comes in at 4.5 percent, this is definitely considered well above average versus the world no matter where you look.

Yes, he did say a good thing about malls? It creates job opportunities. One line. Then, he restarted the ‘bad parking,’ and ‘traffic woes,’ in the neighbourhood where the mall is. My advice? There are many malls which offer low parking rates, some even provide free parking rates for a certain period of time. This is my advice to him because I think he does not know. He said we could not afford ice-creams in the current economic situation. I seriously hope the writer is NOT using an iPhone or a Samsung because it would be so lame when compared to eating ice-cream in a mall.

My only tiny little advise to the writer is, visit malls first before you write about them. Understand also why more malls were built as well, I mean do read a bit on property development trends. Shopping online is great, cool and whatever but it DOES NOT beat touching the fabric, it DOES NOT give you opportunity to bargain with the shop owner, it DOES NOT give you opportunity to do it together with your loved ones; buying a shoe for your mother and she trying it or even a blouse for my wife and seeing her try it out.  Sorry, I do not wish to go on and on. Perhaps this is because I love shopping? Does not matter, since the writer dared to write despite having near zero mall shopping experience, then I should be allowed to reply as someone who shops very often, both online and real one. Oh yeah, I do agree, the 40 new malls are too many and I do believe some would close in the near future. Does not mean I am negative with every one of them though. Happy shopping.

written on 25 Sept 2015

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Financial News: Household Income Classification – B1 to T2. What’s the actual number?

Some earn 5-figure monthly income, still renting. Some earn 4-figure monthly income, owns three properties

The radio DJs have been talking this topic for days. I do not agree with everything they say but hey everyone has their own perspectives, right? Since they are DJs, they get to say whatever they want in their radio show. I am the founder of kopiandproperty.com so this is where I have my own say.

I have friends who are no longer working and is way below the typical retirement age. One just came back from Pakistan and few weeks later went to Laos and few weeks from today will be going to another city in China. Another flew overseas and attend cooking classes. Another friend who is within the stsrting point of M40 classification below bought he third property a few years ago.

At the same time, there has been so many times when someone I know is struggling with finance bought a new non-national car (RM80,000 plus type) and another is renting a room but just shown everyone the latest overseas holiday photos (yes, I know how much on average that person’s job pays)…

My good friend who used to work for a Continental car brand told me that many buyers are at borderline for the approval for their car loans. Oh yeah, I drive a 12 years old Persona manual which was fully paid for 7 years ago. It’s so hard to force myself to buy another car and start paying car loans again…

Our lifestyle (DEMAND) would determine whether we can cover our needs

Do take a look at the below numbers. T2 may be highest but T2 may also be overspending every month and is now struggling to pay the credit card debts yeah. Meanwhile someone in M1 may be a single who’s still staying with the parents and saves consistently every month. It’s easy to see who could withstand some time without income and who would struggle when income suddenly stops yeah.

What could we do?

When we could afford RM2,000 for car loan repayment, buying a car with RM1,000 repayment is a much wiser decision. If you truly want to show off, then a car with RM2,000 monthly repayment is unlikely to impress most of the big bosses out there. You are only able to show off to the Proton Persona owners like me, as long as I do not know you well… 😛   Happy pushing for higher pay. Do more, get paid more. Spend less and suddenly the world’s a better place in the future for you.

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New income threshold for B40, M40 and T20. Makes more sense?

Did you know that there’s now a new income threshold for B40, M40 and T20. Maybe you did not even know that Malaysian households were classified into the B40, M40 and the T20 groupings?

Do you know which grouping are you currently in? The B40 may say they do not have enough, the M40 may say they also need as much help as the B40 while the T20 will definitely still say that cost of living is too high… Anyway, statistically, this is how Malaysian households are classified for government policies.

For example, the B40 households get a Bantuan Sara Hidup of RM200 per year. As for the incomes, the Bottom 40 (B40) has a household incomes of up to RM4,360. Median salary for B40 is RM3,000. M40 are households whose income ranges between > RM4,360 – RM9,619. Median income for the M40 is RM6,275. T20 are those with household income range of RM9,619 or higher. Median income for T20 is RM13,148. Image as below:

This was what Khazanah Research Institute (KRI) is proposing to replace the current B40, M40 and T20.
Article in theedgemarkets.com
   Khazanah Research Institute (KRI) has proposed an alternative classification, dividing households into B20, M50 and T30. KRI senior research associate Hawati Abdul Hamid said, “We feel that B40 is both too wide and too narrow a target. If we really want to raise the livelihoods of people above the minimum standard of our society, we think this is too big [of a group] because 40% of the households translates into 2.6 million.”

One main reason she said so is because she felt that the current B40 aid from the government is spread too thinly as it is a large group. KRI Director of Research Dr Suraya Ismail added, “We believe the B40 group could be defined better and, therefore, we did this study. We now have a B20, which would reduce the funding needed to cover B40.” This new proposal is based on the 2014 Household Income and Expenditure Survey by the Department of Statistics Malaysia.  Please do read the article for full explanation too:
Article in theedgemarkets.com

I seriously do think the bottom group, regardless of B40 or B20 must be assisted with their housing needs. It’s either long term low rental or assistance under the rent-to-own concept. Be very realistic, if this group do not have enough today and yet have to pay rental forever and ever, then their lives would forever be under tremendous pressure. One day, they will retire and if they still have to pay rental… New income threshold for B40, M40 and T20.

Even if they own just an affordable property of say RM250,000 by the time they retire, at least they could stop paying for rental then. Even a RM600 rental (for one room) x 12 months x 20 years (based on life expectancy) = RM144,000. This amount could have been saved if they own the property they live in. At that time, they could even rent out one room out of the three rooms in their affordable apartment and earn that RM600 instead… maybe.

Happy understanding why I always say ONE property is a must.

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Household income group Malaysia and how much one should pay for a property

Do we know about the household income group Malaysia chart? That latest one? The latest one based on data from Department of Statistics Malaysia. Instead of just B40, M40 and T20, we now have a total of 10 categories with median income as well as the income range. Do not be too carried away with these groupings. The second most important thing is that are we are moving up every year. As for the most important thing, what are we doing about it.

Not everyone is within B40, M40 and T20

Anyway, there are many entrepreneurs who have made it big. Even among my friends, I would love to have their lifestyle too. They are no longer within these categories. Many more would love to become like them. However, there are probably 15 million Malaysians who are within the working population. Yes, these are the people as per above image: Household income group Malaysia. For now, just staying focused on these may be more appropriate.
Salary – Savings – Invest. (earlier article on how here)

What’s the property most suitable for these households?

Regardless of how many studies, research and survey done, I still think it’s important to go back to the basics when it comes to buying a property. In my personal opinion, 30% is the maximum number one should use out of the net monthly income for property. RM5,000 salary? Get a property with a maximum repayment of RM1,667.  What’s the price of a home one could get with a RM1,667 repayment then? Up to RM420,000 maybe?  Image below showing the calculations:

What if I earn more and needing a landed home?

What about someone with a RM8,000 salary then?  Well, it’s possible to buy a property with a monthly repayment of up to RM2,400.  That’s not a small number if one is willing to buy slightly further away for a landed property. Started homes usually start from RM500,000. Thus, if we could pay up to RM2,400 per month, it can be slightly better than starter homes. Starting right is the main priority. Stop dreaming of a so-called dream home. That dream home will keep changing as we move up the salary range. Our dreams get better and bigger once we earn higher. That’s a fact by the way. Image below:

Do we really need to spend to the max?

Just go to any property listing sites. There are many starter landed homes for RM500,000 if not lower. Of course, it is usually not within Kuala Lumpur. If there are, please do let me know yeah. Let’s go view and write about it. if we chose to buy a RM500,000 property versus a RM630,000 one, then we can make this RM500,000 home much better and yet not spending more. Remember, there’s the renovation fee which everyone would need to budget for as well. Thus, any savings would be good as it may mean a better built-in cabinet, a bigger refrigerator and even a more luxurious sofa too. As for how much do we need to pay for a RM500,000 home:

Decision is about choices and what we do about it

Our life depends on what we do. What we do depends on how much we know what we should do. What we should do also depend a lot on how much we earn, every month. Do more, climb higher in the corporate world but do not spend it all on gadgets. Buying a property will not make you an overnight millionaire, that’s quite certain. However, not buying a property, that will definitely zap away a lot of your wealth and make some home owner you rent from a potential millionaire instead. You pay his mortgage and he enjoys the potential capital appreciation.

No matter which household income group Malaysia you are in, all the best. Keep pushing and never settle. For now, take care.

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Household income Malaysia. How much do T20, M40 and B40 actually earn per month?

There has been report saying that some M40 households have dropped to the B40 category in terms of income because of the Covid-19 pandemic. Thus, it’s B50 instead of B40.

Let’s hope this is temporary and more B50 will be in M40 instead of the other way round. How much do the top 10% households in Malaysia earn every month? According to the latest numbers from the Rancangan Malaysia 12, the top 10% households in Malaysia should be earning an income which is higher than RM15,040 per month.

The M40 households earn an income between RM4,850 to RM10,960. The B40 households earn a monthly income of RM2,208 to RM4,850. Truth is, if they are staying in the Klang Valley, this income is hardly enough to pay for the cost of living. So, hopefully more could be done to assist them alleviate some of their financial burdens.

Image below shows the household income for Malaysian households.

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From household appliance into property development

I have a Milux oven toaster which was given to me by someone during the house warming of my first apartment 12 years ago. It served me for many years and when I sold my apartment, that oven toaster was also part of the deal. Basically, the buyer got everything I left behind including even washing machines, fridge and more. Today, I read in The Star that Milux will be diversifying into property development and its maiden development would be in Bentong, Pahang. The development consists of five blocks of condominium with retail and club facilities.

I am a little surprised with the gross development value which has been announced as RM2.13 billion. This is definitely not a small project and is expected to begin in June 2017 complete in the year when Malaysia celebrates the year of Vision 2020.  The project would be a joint-venture between Milux’s wholly-owned subsidiary and RGF Land Sdn Bhd’s RCSB. RGF Land is also a major shareholder of Milux, with a 13.78% stake. The proposed project is known as “Pentagon Genting Highlands.” I think this meant that it will be a cooling place which is a good attraction indeed as Malaysia is HOT all year round.

Milux said that it is venturing into the property segment because of the increasingly competitive market in the household appliance industry and that this new business will generate additional income to the group. Actually, as long as it has a capable team to execute this, it should be okay. The worry for companies which are venturing into property development for the first time is always on the experience and expertise. Many times, a good potential project may not be marketed well or the construction was not proceeding smoothly etc. Well, 2017 is some time away, we will see what they announce in the near future. I have never been to Bentong, Pahang yet.

written on 23 Oct 2015

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In an article in TheMalaysianReserve recently, This was what Real Estate and Housing Developers’ Association Malaysia (Rehda)’s president Datuk Seri Fateh Iskandar Mohamad Mansor said,  “It is said that the maximum affordable price for a house in Malaysia is RM282,000. But the World Bank said Malaysia is one of the affordable places to own a home. So, we have two conflicting views. The RM282,000 figure is because the salary has not gone up.” Here’s that full
article
“Houses become unaffordable as salary remains flat, says Rehda.” in The Malaysian Reserve.

(When I look at my salary, I think it has gone up by a few percentage points yearly but when I look at my role, actually my responsibilities have gone up many times more as well. Perhaps that’s the reason why my salary did not stay flat and has inched upwards throughout the years? My current company’s advisor, a Dato’ was an O-Level school leaver when he started working but over the years, he took up courses after courses and later graduated with a law degree and he has recently enrolled in a PhD course. He’s already over the retirement age…)

Moving on in the article, Fateh Iskandar shared that data released in 2017 showed houses in Kuala Lumpur (KL), PJ, Johor Baru and Georgetown are the “most unaffordable” in comparison to the average household income levels. Georgetown is top with the highest median house price at RM600,000 when the maximum housing-cost burden (HCB) is only RM256,000. KL is second with an average house price of RM580,000 when the maximum HCB is RM385,000. In its most recent annual report, Bank Negara Malaysia (BNM) said houses continue to be unaffordable, especially in key employment centres. The central bank’s annual report 2017 also underlined that the bottom 40% of households by income only grew from RM2,537 to RM2,848, about a RM150 increase annually between 2014 and 2016.
Here’s that article for reference again.

Actually if we look at RM150, this is an increment of close to 6 percent which is the typical increment percentage yearly. The only reason why someone is paid a normal increment is because he was still doing the exact same role as he did the year before. If his employer was underpaying him versus the market, it’s almost immediate that this person could get another job with a better pay. This is Malaysia. We are NOT in a financial crisis currently…  My experience in the job market? I worked in a recruitment company for over 14 years of my working life and have been helping MNCs to SMEs look for people. Good people have lots of options. I think I agree with REHDA president that when salaries are flat, then house prices become expensive. However, I think the solution is not just by building cheaper homes or making loan applications easier. Perhaps the person may also have to change too.

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written on 6 April 2018

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