Malaysian property market set to reap lucrative rewards for investors

News has just been released by Thinkproperty.my, a highly reputable news source specialising in the Malaysian property market, that there are strong signs that that the market is going from strength to strength, making a popular choice with investors.

Said Asim Qureshi, CEO of Thinkproperty.my has said that “data confirms that confidence has truly returned back into the Malaysian property market. The results of this survey suggest that we will see higher prices over the next few months, which will in turn likely lead to further confidence. Now is an excellent time to buy.”

The market has seen a 3% rise in equity and the survey also revealed that 61% of respondents favoured investing in the property market than the other two main classes of investment.

“Now is an excellent time to buy. Interest rates are low, banks are becoming increasingly aggressive, and of course, market confidence is returning.”

Malaysia Property Market Will Continue to Grow

There are reports on the web saying that Malaysia property market is set to plateau this year but it just isn’t true. Everyone knows that Asian markets are going to continue to grow throughout any global slowdown, and Malaysia is one of the biggest benefactors of its growth. Areas like Sabah, Borneo are seeing massively rising tourism numbers from Asia’s rapidly expanding middle class, and Kuala Lumpur is developing into a chique commercial hub, on par with any of the world’s great capital cities.

The rising cost of building materials had people running for the hills shouting about how it would cause developers to wait and see what the market held in store before bringing their new Malaysia property onto the market. But that has not been the case; there are still plenty of new developments being unveiled in Malaysia.

DSR have just brought the Vivaldi development in Kuala Lumpur onto the books, an amazing development of luxury off-plan apartments, in the stunning Mont-Kiara district of Kuala Lumpur. Residents enjoy unique luxuries like a private lobby and elevators opening straight into apartments etc, as well as the obvious benefits of capital city life: being walking distance from great restaurants, high-end shops and boutiques, and even international schools.

Liam Bailey, head of international research for DSR gave his views on Malaysia’s potential:

“With global markets and economies having become so intertwined, when a big market like the U.S. starts to wean, it does trigger a domino effect, and that makes it easy for everyone to start battening down the hatches. But global markets becoming intertwined, and companies becoming so multinational as flights got cheaper and the massive growth in internet use, means there is sufficient money in global business, even in the likes of China and India alone, to regenerate global economies through foreign direct investment. For instance: China and India buying massive amounts of grain from Brazil because it is the cheapest supplier.”

“Malaysia grows because Asia is growing, not least through regional and medical tourism, the former increasing by around 20% per year, as the Asian Middle Classes grow, (In India, the number of people earning more than $5000 will double to 20million in the next two years), through new employment, promotion, and rising affluence in start-up businesses.

“Not to mention, the massive number of graduates from Asia’s shining educational systems some, going off to be doctors and high-earning lawyers, but some starting up businesses and becoming the next wave of property tycoons, or any other business they think up. Make no mistake, Malaysia property will continue to grow in value, the only effect the global slowdown may have is bringing capital growth down from 15-20% to 10%, which is still solid growth for an established market. Rental yields will continue to be strong at around 8%”

Regroup: Market will take 3 years to recover

Malaysia’s property market will take three years to recover from its current slump, the slowest revival in more than two decades, reflecting the reach of the worldwide financial crisis, Regroup Associates Sdn Bhd said.

“In the past four weeks, I’ve been staring at an abyss,” said Allan Soo, managing director and founder of Regroup, a Kuala Lumpur-based property consultant and home seller. “What’s changed is the global recession.”

A worldwide slowdown has sparked real-estate slumps from the UK to Singapore, causing Malaysian developers such as Magna Prima Bhd to scale back projects. Values of luxury homes in Kuala Lumpur, where prices surged to a record last year, may fall as an oversupply looms, according to Soo, who declined to give a specific forecast.

Malaysia’s property market took about a year to recover from the 1997-98 Asian financial crisis, Soo said. The rebound from the latest slump may start in 2010 and take as long as the recovery from the 1985 recession, Soo said.

Compared with 2007, interest from prospective buyers has dried up, Soo said in an interview in Kuala Lumpur last Thursday.
“Inquiries would come in right after we put up a sign board on properties,” Soo said. “Now, there’s none.”

Home prices will come under further pressure as the number of high-end apartments in Kuala Lumpur doubles to more then 30,000 in the next three years, according to Regroup.

Economic growth in Malaysia in 2009 is expected to slow to 3.5 per cent from about five per cent this year, according to the government’s estimates. Still, losses for homeowners may be capped because most bought properties in 2006 before the peak for less than RM1,000 a square foot, Soo said. The entry of foreigners last year pushed prices to more than RM2,000, he added.

Signs of fewer home purchases have already emerged. Bank loans approved for Malaysian home purchases in October fell to its lowest since February, according to Bank Negara Malaysia.

SP Setia Bhd, Malaysia’s largest developer, expects a 22 per cent decline in property sales to RM1.1 billion in fiscal 2009, Citigroup Inc said last Thursday. SP Setia’s officials couldn’t be reached in their office last Friday for a comment. The Kuala Lumpur Property Index has slumped 51 per cent this year, outpacing the main index’s 40 per cent slide.

Magna Prima said last month it cut the projected revenue from its biggest property development in northern Kuala Lumpur by almost half.Malaysia’s property market will take three years to recover from its current slump, the slowest revival in more than two decades, reflecting the reach of the worldwide financial crisis, Regroup Associates Sdn Bhd said.

“In the past four weeks, I’ve been staring at an abyss,” said Allan Soo, managing director and founder of Regroup, a Kuala Lumpur-based property consultant and home seller. “What’s changed is the global recession.”

A worldwide slowdown has sparked real-estate slumps from the UK to Singapore, causing Malaysian developers such as Magna Prima Bhd to scale back projects. Values of luxury homes in Kuala Lumpur, where prices surged to a record last year, may fall as an oversupply looms, according to Soo, who declined to give a specific forecast.

Malaysia’s property market took about a year to recover from the 1997-98 Asian financial crisis, Soo said. The rebound from the latest slump may start in 2010 and take as long as the recovery from the 1985 recession, Soo said.

Compared with 2007, interest from prospective buyers has dried up, Soo said in an interview in Kuala Lumpur last Thursday.
“Inquiries would come in right after we put up a sign board on properties,” Soo said. “Now, there’s none.”

Home prices will come under further pressure as the number of high-end apartments in Kuala Lumpur doubles to more then 30,000 in the next three years, according to Regroup.

Economic growth in Malaysia in 2009 is expected to slow to 3.5 per cent from about five per cent this year, according to the government’s estimates. Still, losses for homeowners may be capped because most bought properties in 2006 before the peak for less than RM1,000 a square foot, Soo said. The entry of foreigners last year pushed prices to more than RM2,000, he added.

Signs of fewer home purchases have already emerged. Bank loans approved for Malaysian home purchases in October fell to its lowest since February, according to Bank Negara Malaysia.

SP Setia Bhd, Malaysia’s largest developer, expects a 22 per cent decline in property sales to RM1.1 billion in fiscal 2009, Citigroup Inc said last Thursday. SP Setia’s officials couldn’t be reached in their office last Friday for a comment. The Kuala Lumpur Property Index has slumped 51 per cent this year, outpacing the main index’s 40 per cent slide.

Magna Prima said last month it cut the projected revenue from its biggest property development in northern Kuala Lumpur by almost half.

Investing or buying condos in Kuala Lumpur.

The global credit crunch and the sub-prime crisis in the US has prompted investors to look to new markets and Malaysia is one of many developing Asian countries that appears to be benefiting from investment dollars that would likely have gone elsewhere – if not for the fears of a looming recession in the United States and western Europe. The threat of a continuing, long-term downturn stateside could mean Malaysia, and Kuala Lumpur real estate in particular, can expect this extra attention to last for some time yet.

The price of land in KL is high and shows no sign of slowing down so an increasing number of property developers with land banks in good locations are opting to develop high rise luxurious condominium projects. The selling price of such developments can be as much as RM2000-00 per square feet or more in Kuala Lumpur depending on design, specifications and location. Kuala Lumpur City Centre (KLCC), Ampang, Bangsar, Brickfields, and Mont Kiara have all enjoyed strong appreciation and are in demand among the city’s ex-pat community. Another promising area is Jalan Ceylon – the site of a new luxury condominium project by property developer Starpuri Development. The $87 million condominium is expected to be completed by December of 2010 after a 32 month build.

Financing is available for foreign investors once potential purchasers show proof of possessing some source of income to enable repayment. For foreigners, the maximum loan normally allowed is 80 per cent and the term of loan depends on the age of the purchaser. Those looking to buy a condominium in Kuala Lumpur are currently looking at a range of between US$ 66,000 and US$ 250,000 for mid-range units.

The fortunes of the companies responsible for KL’s recent developments have differed widely, in line largely with their targeted market area. Those with a focus on high-end segment such as IGB Corp Bhd, Sunrise Bhd and E&O Property Development Bhd have seen significant earnings growth this year, while the ones with focus on the mass market, such as MK Land Holdings Bhd and LBS Bina Group Bhd, have seen earnings down sharply due to poor sales. The recent history of these companies is a clear demonstration of the shift occurring in the city’s market at present.

Waldorf Tower Serviced Apartment, Sri Hartamas

Waldorf Tower – an EXCELLENT Investment opportunity. Newly completed, located in a prestigious neighborhood of mixed low density development of landed bungalows and properties. Sri Hartamas is known as the quieter, tranquil and relaxed environment in the area. Next to integrated shopping and eateries of Hartamas Shopping Centre. Easy access via highways and link roads to KL City, Damansara and PJ within minutes. Proximity to various International Schools. Excellent skyline facilities.

Privileged few units in KL with unobstructed bird’s eye view of future Palace (Istana) and KLCC skyline. Expected rental yield 7% to 10%. Sizes available are studio (480sf), 680 / 1,000 / 1,130 / 1,460 / 1,710 / 3,569 sf. Capital value from RM410psf and Rental from RM1,800/mth.

Facilities

The facilities provided in Waldorf Tower includes:

• Swimming Pool
• Wading Pool
• Jacuzzi, Poll Deck & Grotto
• Spa Pool & Sauna
• Squash Court
• Activity Room
• Gymnasium
• Snooker, Movie, Aerobics & Dancing , Music and Karaoke Rooms
• Nursery
• Bistro / Cafeteria
• Aquatic Garden
• Children’s Playground
• BBQ Pit
• Business Centre

Intelligent features of the apartment include:

• 24 Hour Security
• Smart Card Access System
• Security CCTV
• Central Cable for ASTRO
• Broadband Internet Access

Is Your Home an Asset or Liability?

Assets vs liabilities

One of the basic points he tries to get across is to think of an asset as simply something that puts money in your pocket, and a liability as something that takes money from your pocket.

Thus your own home is always a liability under this thinking, and only an asset for the bank, since the mortgage payments take money from your pocket and puts it in the bank’s. Even after the mortgage is paid off, the home is still a liability because of rates and maintenance.

Whether an investment property is a liability or an asset depends only on whether rental income exceeds the costs of interest, rates and maintenance.

How Financial Institutions Assess Your Credit Rating For Home Loan Applications

Financial institutions in Malaysia generally assess the credit rating of potential borrowers through the Central Credit Reference Information System (CCRIS) and Credit Tip Off Service (CTOS) or similar type of bankruptcy search.

CCRIS

A majority of financial institutions report to the Credit Bureau at Bank Negara Malaysia (BNM) monthly on all their loans. CCRIS is a computerised database system that stores information reported to the Credit Bureau. CCRIS currently contains credit information on about 5 million borrowers in Malaysia. CCRIS processes the credit data received from the financial institutions and summarises the information into credit reports, which can be made available to the financial institutions upon request.

Your CCRIS report shows your total principal, interest and charges outstanding on each of your loans including your housing loans, personal loans, credit cards, car hire purchase and overdrafts. It also shows the number of months your payments are in arrears on a monthly basis for one year. A CCRIS report also shows other loans you have applied for as well as brief information on summonses or bankruptcy petitions if any.

Financial institutions assess your credit rating by analysing each debt item, looking at your loan balances and trends in your repayments track records. In general financial institutions will either reject or query debt repayments in arrears of more than 2 months. Some financial institutions are stricter than others. Financial institutions will also use existing debt and debt application balances in the CCRIS report to estimate how much total debt commitments you have or are likely to have and the likely total monthly debt servicing amount. This information is used to calculate your debt service ratio. In general, financial institutions will reject or query a total debt service ratio of 50% of your monthly income.

You can obtain your own credit report by visiting BNMLINK at:

Ground Floor, D Block, Jalan Dato’ Onn, Kuala Lumpur.
Tel: 1-300-88-5465 (1-300-88-LINK) (Overseas: 603-2174-1717)
Fax: 603-2174-1515 E-mail: bnmtelelink@ bnm.gov.my

For more information on CCRIS go to http://creditbureau.bnm.gov.my.

CTOS or similar bankruptcy searches

CTOS Sdn. Bhd. and other similar organisations, collate public information usually from national newspapers on bankruptcy and summons information of individuals and companies into an electronic database.

Bankruptcy information include information of individuals and companies petitioned, declared, released or deceased bankrupt. Bankruptcy reports usually provide information such as the Court filing number, the location, the date of the Notice or order, the name of the individual, the identification card number and, in the case of petitions, the date of the court hearing.

Summons information usually include details of individuals and companies where substituted service of a summons has been issued, the Court filing number, the location of the filing, the date of the Notice or order, the name of the individual or company , the amount of the summons (if available), the identification number of the individual or company (if available) and the date of the court hearing.

You can currently obtain your CTOS report free from:

CTOS Sdn Bhd (209649-U)
Unit A-8-4, 8th Floor, Megan Avenue 1,
No 189, Jalan Tun Razak, 50400 Kuala Lumpur,
Malaysia
Tel: 603-2770 8833 Fax: 603-2770 8834
Website: www.ctos.com.my

You can also enquire with the Jabatan Insolvensi Malaysia on your bankruptcy status. The department recently launched e-insolvency. The purpose of e-Insolvency is to facilitate individuals in checking their bankruptcy status and company’s liquidation status via the Internet through the e-Insolvency portals. An individual can perform a search through appointed agents such as www.myeg.com.my, www.e-services.com.my or www.rilek.com.my.

For more information see http://www.bheuu.gov.my/jim/index.shtml.

Customer enquiry Information from your CCRIS and CTOS statements are often analysed at the start of your loan application. Your loan officer will usually enquire with you to clarify on any negative results in your loan accounts reflected in the reports. It may be a good idea to consolidate your debt or at least have a plan for debt consolidation prior to your application for a home loan. The loan officer would likely want to see that you are making an effort to ensuring that you can pay your debts as and when they fall due and maintaining a good credit rating in the long run.

Ten Reasons to Consider Malaysia as Your Second Home

What Makes a Good Real Estate Deal?

So often, beginning real estate investors focus on techniques that they lose sight of the important issue: Is this a good deal? Learning to recognize a good deal takes research, education and, above all, experience. Here’s a good formula to determine whether a potential real estate purchase is a deal. It’s a simple acronym called C.L.E.A.R.

Cash flow

“Will this property cash flow?” Well, that depends on a lot of factors, such as the strength of the local rental market, the interest rate on the financing, and how much of a down payment you make. It also depends on whether it is a single-family or multi-family dwelling. All of these factors considered, ask yourself, “Will this property provide income?”

Then ask the question, “How will this property cash flow compared to other potential properties?” For example, a $150,000 house that rents for $1,000/month has a better income potential than a $300,000 house that rents for $1,600/month. A four-unit building that costs $400,000 may bring in $3,000/month in the same neighborhood.

Now, of course, whether the property will provide income to you begs the question of whether income is important to you. Is it? Do you earn other income? Do you need more income now, or is future equity growth more important? There’s no right answer to these questions, but are all factors to consider when looking at a potential purchase.

Leverage

Leverage is important for investors because the less cash you put down on each property, the more properties you can buy. If the properties go up in value, your rate of return goes up exponentially. However, if the properties go down in value and you have a lot of debt on the property, this can result in negative cash flow (see above).

Since real estate is generally cyclical, negative cash flow is only a short-term problem and can be handled if you have other income or a cash reserve to handle the negative. “Nothing down” investing is very attractive for the high-leverage investor, but should be approached with caution.

If you are a long-term player, leverage will generally work in your favor if the markets in which you invest appreciate in the long run and your income from the properties can pay for most of the monthly debt service.

Equity

Does the property you are purchasing have equity? Equity can take a number of forms, such as:

• A discounted price

• A potential fixer upper

• A rezoning opportunity

• A poorly managed property

• A foreclosure

There are many ways to create equity, but buying into equity is your best bet. Find a motivated seller who wants out of his property and is willing to give up his equity for less than full value. Or, buy a property that needs work that can be done for 50 cents on the dollar or less.

In other words, if the property needs $10,000 in work, make sure you get a $20,000 discount on the price or better.

Appreciation

Buying in the right neighborhoods in the right stage of a real estate cycle will result in appreciation and profit. However, timing a real estate cycle is difficult and is speculative. If you buy properties without equity or cash flow solely for short-term appreciation, you are engaging in a very risky investment.

Buying for moderate, long-term (10 to 20 years) appreciation is safer and easier. Look at long-term neighborhood and city-wide trends to pick areas that will hold their values and grow at an average 5% to 7% pace. Combine this tactic with reasonable cash flow and buying into equity, and you will be a smart investor.

Risk

Risk is a consideration that too few investors consider. Now ask yourself, “What if my assumptions are wrong?” In other words, do you have a “plan B”? If you bought for appreciation and the property did not appreciate in value, can you rent for positive cash flow?

If you buy with an adjustable rate loan and the rates go up, will this put you out of business? If you have a few vacancies, can you handle the negative cash flow or will it break the bank for you? Expect the best, but prepare for the worst. And remember, whenever you look at a property to purchase, think CLEAR: Cash flow, leverage, equity, appreciation, and risk.

Are You First Time Home Buyer?

Basic Knowledge for First Time Home Buyer

TITLES

There are two categories of titles

Freehold – which gives the owner perpetual ownership;
Leasehold – which allows the owner to stay in possession only for a specified period. When the specified period ends, ownership reverts back to the authority which issued the title.

Generally, a house is issued a title for the piece of land on which the house is erected; and an apartment is issued a strata title for the specific area on the specific floor of the building in which the apartment or condominium is located. A search can be done at the relevant land offices or registries to determine whether the title is encumbered. If the title has not been issued, a search can be done on the master title on which the whole or part of the housing project is erected.

DOCUMENTATION AND PROCEDURES

All purchases direct from housing developers must use the Schedule G (for purchases of houses) or the Schedule H (for purchases of apartment respectively of the Housing Developers (Control and Licensing) Act 1996 as the sale and purchase agreements. Payment of the purchase price the said Schedules G and H is by progressive payment based on completion of work as certified by the architects. Payment of the last 5% of the purchase price will be held by a firm of solicitors as stakeholders for the defect liability period, which is currently 18 months from the delivery of vacant possession.

There are no fixed rules on the form of agreement for purchases from existing house owners (more commonly called sub-sale). However, it is common practice that upon signing of the sale and purchase agreement 10% of the purchase price be paid to the seller, and the purchaser be given 3 months to pay the balance of purchase price with an extension of 1 month if he fails to do so within the first 3 months’ period. Interest at the rate of 10% per annum calculated on a daily basis is normally charged for the extension period. Payment of the balance of purchase price is usually made to the solicitors acting for the seller as stakeholders to ensure redemption of the house (if the same is still charged or assigned to a bank or financial institution at the time of sale) and payment of real property gains tax by the seller.

Other than the sale and purchase agreement, a memorandum of transfer, which is Form 14A of the National Land Code 1965, must be completed to transfer the title from the seller to the purchase. In instances where the title has not been issued, then if the purchase is from a developer, the developer will undertake in the sale and purchase agreement to transfer the title when the same is issued; and if the purchase is through a sub-sale, the transfer will be through an assignment of the sale and purchase agreement between the developer and the seller (Principal SPA) to enable the buyer to take benefit of the developer’s undertaking to transfer the title contained in Principal SPA.

STAMP DUTY

Stamp duty is levied on the document of transfer (i.e. the memorandum of transfer if the title has been issued, or the deed of assignment of Principal SPA if the title has not been issued) based on the purchase price as follows:

a. 1% on the first RM100,000.00

b. 2% on the next RM400,000.00

c. 3% on the next RM1,500,000.00 and

d. 4% on the remainder
(item 32 [a] of the Stamp Act 1949)

LEGAL FEES

The first Schedule of the Solicitors Remuneration Order 1991 sets out the fees to be collected by lawyers for work done in handling the sale or purchase of house based on the purchase price as follows:

1% on the first RM150,000.00
0.7% on the next RM850,000
0.6% on the next RM2,000,000
0.5% on the next RM2,000,000
0.4% on the next RM2,000,000

OTHER FEES

Stamping fee( per document) RM10
Adjudication fee RM10
Search fee RM60
Registration fee RM100

For each sale and purchase of a house, the solicitors concerned can only collect fees based on the above scale from either the seller or the purchaser and not from both of them.

FINANCING

Mortgages : Loans of 90% of the purchase price are usually available. Current Base Lending Rate 6.75% per annum; loans are available up to a period of 30 years

Recent Posts

• Malaysian property market set to reap lucrative rewards for investors
• Malaysia Property Market Will Continue to Grow
• Regroup: Market will take 3 years to recover
• Investing or buying condos in Kuala Lumpur.
• Waldorf Tower Serviced Apartment, Sri Hartamas

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