Property Insight February 2015 by PropertyInsight

PUBLISHER MESSAGE Publisher KK Chua (kkchua@propertyinsight.com.my) Editor Syamil Zahari (editor@propertyinsight.com.my) Sales & Marketing Janet Loh 012-2050 911 (janet@propertyinsight.com.my) Andy Fam 012-6019938 (andy.fam@propertyinsight.com.my) Chia Kee Woon 017-662 0600 (keewoon@propertyinsight.com.my) Chong Wei Yeen 012-627 2863 (weiyeen@propertyinsight.com.my) FOR ENQUIRIES: enquiries@propertyinsight.com.my

Gong Xi Fa Cai! year of challenges and opportunities awaits us with the coming of the Year of the Goat, beginning with crude oil prices at its five-year low worldwide, sending the value of Ringgit down amid concerns over Malaysia’s finance as one of the net exporters of crude oil. Meanwhile, Bank Negara Malaysia remains its posture of imposing stringent policies, affecting both the property investors and home buyers. Malaysians still feel the effects of property cooling measures implemented a few years ago as banks continue to tighten lending. Furthermore, the Goods & Services Tax (GST) will be implemented starting this April, and we have yet to fully understand how it will impact the property industry in Malaysia. Taking appropriate steps such as educating yourself will help cushion these uncertainties for investors. The year will bring its share of bumps and detours for property buyers, but smart investors will know how to eventually find ways to profitable prospects. To bring this to a closing, I’ll part you with this saying by Confucius:

“When it is obvious that the goals cannot be reached, don’t adjust the goals – adjust the action steps.” Publisher Armani Media Sdn Bhd (1032085-H) No. 32-3, Jalan Pekaka 8/4 Sec 8, Kota Damansara 47810 Petaling Jaya, Selangor Tel : +603 6156 3366 Fax : +603 6156 3399

- Confucius Happy Chinese New Year!

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Although every reasonable care has been taken to ensure the accuracy of the information contained in this publication, neither the publisher, editors, writers nor employees and agents can be held liable for any errors, inaccuracies and/or omissions. The contents of this publication do not constitute investment advice. It is intended only to inform and illustrate. No reader should act on any information contained personal circumstances. We shall not be responsible for any loss or damage, whether directly or indirectly, incidentally or consequentially arising from or in connection with the contents of this publication and shall not accept any liability in relation thereto. The views by our contributors expressed here are their personal company, organisation, person, investment strategy or technique mentioned in this publication unless expressedly stated otherwise. The publisher does not endorse any advertisements or special advertising features in this publication, nor does the publisher endorse any advertiser(s) or their products/services unless expressedly stated to the contrary. All rights reserved. No part of this publication may be reproduced in any form or by any means, including photocopying and imaging without the prior written permission of the publisher.

KK Chua Publisher Armani Media Sdn Bhd

Content 16

COVER STORY

FEATURE Security in Developments Property Insight takes a look at how security companies and developers strive to strengthen the security of properties and protect the peace of minds of homeowners

No Impact From Weak Ringgit and Cheap Oil

Mix Report Card Results For 2014

Costs of Residential Investment in Asia-Pacific Report compares foreign investors’ tax burden across the region

DEVELOPER OF THE MONTH Ipoh developer forges new paradigm with big plans for an innovative retirement village in Malaysia

Inspector General of the Royal Malaysian Police Tan Sri Khalid Abu Bakar talks aspects of security and dishes advice for property investors and developers

Bank Negara’s latest statistics reports stable interest rates, ample liquidity, moderation in household loans, and further tightening of mortgage activities

The Trailblazer

Security and Properties

Depreciating currency and falling energy prices will not distress property industry; group points to compliance costs

AREA FOCUS Uncovering the Beauty of Sentul From its days when most people would think twice before investing, Sentul has now been transformed into a highly sought after place

INTERNATIONAL MARKET The Kingdom of Thailand Against all odds, the property market remains bullish

PERSONALITY OF THE MONTH Sky is the Limit The pursuit of success with Datuk Dr Maznah Hamid

56 60 64 68 72 74 78 80

HOME PLUS Better Safe Than Sorry Additional security measures to safeguard properties of home and commercial owners

INVESTOR NEXT DOOR The Belief in Numbers An investor’s formula for property investment results in financial rewards

LEGAL Assets of the Incapacitated Property Owners

FINANCE BR vs BLR All about that base (rate)

STRATEGY Property Market in 2015: What Can We Expect Buy Property Now or Buy Later: Which is Riskier? Simplified Financial Planning For All How to Plan for Maximum Security for Your Property with the Lowest Cost Mr Know-It-All

DeCentrum Magazine_210 x 285_150109 FA(OL).pdf

CMY

1/9/15

6:35 PM

NEWS & EVENTS ASET KAYAMAS UNVEILED AN ICONIC RESIDENTIAL HAVEN roperty developer Aset Kayamas Sdn Bhd recently unveiled Parkhill Residence development project, a new iconic haven amidst the lush greenery of Bukit Jalil. Parkhill Residence will be built over 5.65 acres of land encompasses two condominium towers, with a total of 1,062 units priced from RM555,000, with two types of units: 1,100 sqft (3 bedrooms and 2 bathrooms) and 1,300 sqft (3+1 bedrooms and 2 bathrooms). The first phase of Parkhill Residence will be exclusively offered to government servants under the PPA1M scheme, while the second phase is open to public. The residence will feature full condominium facilities such as swimming pool, kid’s pool, gym, surau, multipurpose hall, covered parking, clubhouse, children playground,

24-hour guarded security and many others. Aset Kayamas managing director Yvonne Chai Woon Yun said, “We believe a project of Parkhill’s stature is timely to remain true to our diversity. The concept of luxury living redefined will cater to an entirely different segment of dwellers. As more and more urbanites seek the calmness and serenity of lush greenery surrounding their homes, Bukit Jalil has still much of that preserved, making it an ideal location

to escape the hustle and bustle of the city, yet be close enough to all the action.” The total GDV for Parkhill Residence is about RM680 million, and project completion is estimated to be in mid2018. Speaking at the unveiling of the project showroom and logos of Aset Kayamas and Parkhill Residence, Federal Territory minister YB Datuk Seri Utama Tengku Adnan Tengku Mansor commended Aset Kayamas for the foresight in selecting a

(From left) Ministry of Federal Territories secretary general Datuk Seri Adnan Hj Md Ikhsan, Aset Kayamas chairman Tan Sri Datuk Chai Kin Kong, Federal Territories minister Datuk Seri Utama Tengku Adnan Tengku Mansor, Federal Territories deputy minister Datuk Dr Loga Bala Mohan

A REVOLUTIONARY NEW IOI TOWNSHIP IN BANGI he town of Bangi will be adorning a vibrant landscape with the launching of IOI Properties’ Bandar Puteri Bangi township – a 370-acre freehold integrated mixed development. Its master plan includes 167 acres dedicated to the development of a commercial hub that will make it one of the biggest centres of business and economic activities within the Southern Corridor of Klang Valley covering Kajang, Bangi, Semenyih and Nilai. The whole site comes with a GDV of RM4 billion and will be transformed into a fully integrated modern lifestyle township over the next eight years. The development is based on the concept of ‘the living theatre of nature and people’; while the landscape concept is called ‘The Streets of Dreams’ which offer visitors a glimpse of the famous California Street, Tropical Street and

Art Street; and complemented by tree-lined boulevards, lush flora and spectacular landscape. Collectively, The Streets of Dreams create a green network that reconnects the urban population with the natural landscape through a system of parks, paths and open public spaces. The other components are the arenaOasis Clubhouse and ecoOasis Parkland. Bandar Puteri Bangi is strategically placed within the Southern Corridor of Klang Valley, which has been experiencing booming growth, thanks to the emergence of Putrajaya, Cyberjaya and the vicinity around Kuala Lumpur International Airport as popular choices for residential and commercial developments. In addition, Bangi is also fast emerging as a genuine hotspot location due to the increasing demand for affordably priced properties by investors and house buyers. Bandar

FEBRUARY 2015 | www.propertyinsight.com.my

Puteri Bangi offers a wide range of residential and commercial products with thoughtful architecture and sustainability elements. From the total of 370 acres, 40% will be developed as residential precincts, 40% dedicated to a commercial hub (3- & 4-storey shop-offices, integrated retail lifestyle commercial developments & Tesco Hypermarket), and 20% to landscape, parkland and public amenities. The spectrum of properties to be launched includes Kubica Square 3 & 4-storey shop-offices (built-up 5,237 - 17,465 sqft, priced from RM1,525,800), The Terresse 2-storey superlink house (built-up from 2,510 sqft, priced from RM728,800) and

strategic location with easy access and public transport facilities in Bukit Jalil. “This development can be a role model for other industry players to emulate the responsibility, innovations and diversity in coming up with future developments within the respective guidelines, the minister said. “Sustainability as far as development is concerned is a development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Focus needs to be given to issues such as recycling and environmental preservation. This Parkhill Residence project is a fine example of responsible development ensuring that Bukit Jalil continues to flourish and be well on its way to become one of the most sought after suburbs in Kuala Lumpur,” he added.

Almyra serviced apartment (builtup from 969 sqft, priced from RM360,800). They will cater to the growing demand for affordable and mass housing that follows the recent spike in prices for landed properties in selected locations within the Klang Valley. Located within the growing Southern Corridor of Klang Valley, Bangi has been experiencing booming growth since the advent of the 21st century, thanks to the emergence of Putrajaya, Cyberjaya and the Kuala Lumpur International Airport and transformed into a popular suburb for both residential and commercial developments.

CHINA’S UPBEAT HOUSING SENTIMENT ROLLS INTO 2015 hina’s stronger-thanseasonal property sales in December point to a recovery in market sentiment thanks to looser housing and monetary policy, with the upbeat momentum expected to swing into 2015, analysts said. But with oversupply still looming large, any recovery – especially in home prices – is likely to be slow, tempering hopes that housing could provide a badly needed boost to the Chinese economy as it struggles to overcome the slowest growth since the global financial crisis. “December sales figures were a positive surprise because they were better than the September and October figures which were traditionally the golden and silver month,” Macquarie analyst David Ng said. “They’re stimulated by loosening policies.” Ng said however that sales would see slow, healthy growth rather than a big rebound. China’s top listed residential developer China Vanke reported a 129% surge in sales in the last month of 2014 from a year earlier, while sales over the same period for mid-sized Country Garden leapt 167%. Sixty percent of China’s major cities recorded a rise in sales volume in December, according to housing data researcher CRIC, with first-tier cities rising the most, up more than 15% from November and over 45% from a year earlier. China has put in place a series of stimulus measures including interest rate cuts to spur home buying demand and market liquidity since the third quarter. Betting on even looser policy to come, investors have been snapping up property shares, pushing the property sub-index in Shanghai to its highest since February 2008. But housing supply remains excessive despite the pick-up in

sales, with only two major cities out of 23 seeing a decline in inventory at the end of December, CRIC data showed. “Inventory is high. We can’t raise prices until after the market digests them,” said a chief executive officer of a developer based in southern Guangdong province. “The sales went up but prices didn’t; it won’t be easy for us to raise prices.” China’s new home prices fell for the 11th consecutive month in November by an annual 3.7%, the biggest drop since 2011. Property sales hit 132.2 million square metres, the highest level in 11 months, though still down 11% from a year earlier. The Chinese Academy of Social Sciences (CASS) said in a report last month it expects home prices in first and second-tier cities to continue to fall in 2015 on high inventory, while prices in third and fourth-tier cities would stabilise. In terms of full-year results, a breakdown of sales figures also underscores the increasing polarisation between large and small players, leading to quicker consolidation. CASS forecasts that half of the developers will “vanish”. China has an estimated 50,000 developers although only 80 account for close to 40% of market share. The largest companies tend to grow faster. Seven developers with over 100 billion yuan in sales, including Dalian Wanda Commercial Properties and Evergrande Real Estate, on average sold 24% more in 2014, while those with 30100 billion sales grew at 14.6%, according to housing researcher China Index Academy. Unlisted state-backed Greenland Group said its 2014 contracted sales jumped 50% from a year earlier to 240.8 billion yuan (RM137.71 billion), topping China Vanke for the first time. – Reuters

www.propertyinsight.com.my | FEBRUARY 2015

COVER STORY

FEBRUARY 2015 | www.propertyinsight.com.my

SECURITY AND PROPERTIES Inspector General of the Royal Malaysian Police Tan Sri Khalid Abu Bakar talks about aspects of security and dishes advice for property investors and developers By: Zuhaila Sedek-De Booij

afety is one of the key indicators investors think of before purchasing a property. Its importance is acknowledged universally, so much so, that property sellers use it as a strong selling point. The safer an area is, the higher the value of a property would be. For a housing estate, a good safety level means there are fewer crimes such as home burglary or home intrusion. But these days, the crimes are not limited to just those. Incidents such as rape, gunning and even bombing, too, are starting to make local headlines. For those with strong purchasing power, hiring a home guard or using hi-tech home safety features might not be an issue. But those without such means are highly dependable on the public and the police. Inspector General of the Royal Malaysian Police (RMP) Tan Sri Khalid Abu Bakar spent some time to speak to Property Insight on the importance for the public and the police force to work hand-in-hand to ensure citizens get to live safely in their respective housing areas.

www.propertyinsight.com.my | FEBRUARY 2015

COVER STORY “Safety level of an area is measured by crime index. As a whole, crimes are divided into two types – property crimes and violent crimes,” Tan Sri Khalid explained. “In Malaysia, the crime index is -11.3 (Jan to Sept 2013) and this is considered low. In 2013, the total crime was 16,844 cases while in 2014 there were 14,944 cases,” he added. “The crime index figures are calculated via a computerised system,” he emphasised, adding, “There is no way we can manipulate the figures and I am very strict about this. The figures are important so that we know what actions need to be taken to curb crimes.” Speaking at his office in Bukit Aman police headquarters, he reassured property investors that Malaysia’s housing areas are safe. Despite the low crime index, there are some quarters who feel that the country is still lacking with regard to safety, and Tan Sri Khalid blamed the ease in information-sharing for it. “Nowadays, if a crime takes place, somebody will share the incident on the social media channels and later it became viral. Eventually the issue is blown out of proportions and this creates fear among the public,” he said. “The fact is our crime index is low,” Tan Sri Khalid asserted. “Most crimes in the country are committed by the locals, and foreign people account for only 15 to 20 percent of the crimes. We keep telling people this but still, they think otherwise,” he added. In Malaysia, according to the Inspector General, the main hotspots for crimes are Kuala Lumpur, Selangor, Penang and Johor. This proves that the most developed areas are prone to crimes due to their population density. In the Klang Valley area, the main contributors of crimes are Petaling Jaya and Damansara. “Nowadays we included Perak, too, in the hotspots list,” Tan Sri Khalid said. Reducing crimes is one of the elements in the country’s National Key Results Areas (NKRA) and the Royal Malaysian Police is working tirelessly to meet NKRA’s safety-related objective.

FEBRUARY 2015 | www.propertyinsight.com.my

“THE FACT IS OUR CRIME INDEX IS LOW. MOST CRIMES IN THE COUNTRY ARE COMMITTED BY THE LOCALS, AND FOREIGN PEOPLE ACCOUNT FOR ONLY 15 TO 20 PERCENT OF THE CRIMES. WE KEEP TELLING PEOPLE THIS BUT STILL, THEY THINK OTHERWISE. -TAN SRI KHALID

“So far, RMP has managed to reduce crimes by 20 percent through many initiatives. The government has given us about 2,000 motorcycles to be used by our officers in the Patrol Unit. This eases patrolling by the officers in housing areas as well as in commercial centres,” the IGP said. Tan Sri Khalid mentioned that ever since the initiation of the patrol unit, there are less crimes reported. According to him, the patrol is being done 24 hours a day, with emphasis on night time. Other than the motorcycle patrolling, there is also the RMP’s Horse Squad, which is targeted at monitoring the public’s safety during events such as demonstration or at public areas “We do patrolling with horses but of course there are limitations given that the horses need proper caretaking,” Tan Sri Khalid shared. He said that, at the International level, the ratio is typically set at one policeman to 250 people. However, according to him, this ratio may not be applicable today. “I think the ratio

should be bigger but I can’t say for sure what is the ideal norm for this ratio. However, rest assured…we do have enough [police officers],” said Tan Sri Khalid adding that there are about 120,000 police officers in the country and all are enforcement officers. The frequent presence of patrolling police officers will diminish chances of crimes occurring. “Criminals are opportunists,” he emphasised. “They don’t discriminate; once there is an opportunity they will grab it. It doesn’t matter whether you have a luxurious home or not. Once the opportunity is present, there is chance for a crime to take place. That is why we should not give that opportunity and be very careful at all times,” added Tan Sri Khalid. So, what should property investors do when a crime happens in their homes or in their housing areas? Tan Sri Khalid advised that, if such event takes place, ideally the public should immediately ring the police force. “You must know the contact number of the police stations near your home. Keep it at a place where the numbers are easily seen. The response time depends on the location. In the city centre, the response time is set at 15 minutes. More often than not, we respond much earlier than that. But in rural areas, it may take longer due to proximity issue,” he said. Tan Sri Khalid reminded the public that the police are always available to serve and protect the public. “We are here for you, no matter what. All the officers, regardless of their divisions, are responsible to look after public’s safety. Even the traffic police will be acting on request by the public to look after their safety. That’s why we often hear stories where traffic police officers caught snatch thieves, and so on,” he said. “Sometimes, you may not know that the person next to you is a police officer. They are not always in uniform (plain-clothes officers) and will be among the public, working in disguise while monitoring the situation and keeping the order,” Tan Sri Khalid added. The police also encourage the

Crime Trend of Malaysia 2000-2012 & 2013 (Jan-Jun)

TOTAL INDEX CRIME

TOTAL PROPERTY CRIME

TOTAL VIOLENT CRIME

Source: PDRM

Crime Reduction Analysis 2010-2012 NKPI Reduce index crime

Reduce street crime

Reduce fear of becoming victims Improve public satisfaction of services

2010

2011

2012

15 %

11 %

7.6 %

35 %

39. 7 %

41. 3 %

compared with 2010

compared with 2009

Unchanged from 2010

58. 5 %

from 52.5%

55. 8 %

70. 5 %

from 35.8%

from 55.8%

compared with 2011

compared with 2009

57. 3 %

from 58.5%

65. 7 %

from 70.5%

Source: PDRM

public to always keep an open eye on the happenings in their housing areas, according to Tan Sri Khalid. If there are any suspicious activities in their housing areas, citizens are advised to alert the police quickly. This concept is called ‘Community-Policing’ where the public works hand-in-hand with the police force to monitor their area’s safety, shared the IGP. “This is what we want. You are the

best watchdog,” Tan Sri Khalid said. When asked about community arrest, the Inspector General of Police said that, under certain circumstances, the public is allowed to perform ‘citizen arrest’. “It is permissible by law but must never be abused. I am not encouraging people to do it but if it is necessary then you can do it, provided there are other people to assist you and the

www.propertyinsight.com.my | FEBRUARY 2015

COVER STORY

GTP 1.0 Reducing Crime

REDUCTION OF INDEX CRIME

• Index crimes comprise 13 different categories, and are deemed to be serious offences occurring with sufficient regularity to serve as a measure of the overall crime situation in the country. • The targeted goal of the GTP 1.0 was to achieve a 5% reduction in overall reported index crime annually from 2010 to 2012, but the actual results easily surpassed this target after reducing index crime by 15% in 2010 and 11% in 2011. • Nine key initiatives, including the Omnipresence Programme, implemented in the GTP 1.0 were responsible for bringing the level of index crime down. These initiatives focused on several key areas including motorcycle theft, house break-ins and car thefts. • Street crime comprises three categories – snatch theft, robbery with firearms and gang robbery with firearms. Street crimes are highly visible and thus tend to perpetuate public feelings of fear and insecurity.

REDUCING REPORTED STREET CRIME

• The initial goal was to reduce street crime by 20% in the first year of the GTP 1.0, and this figure was handily surpassed with the NKRA reporting a reduction of 35% in 2010 from 2009. The target for the second year was a reduction of 40% based on the 2009 baseline, which was narrowly missed after the numbers from 2011 showed a reduction of 39.7%. • The goal is to reduce street crime by a further 5.3% in 2012. The Safe City Programme, built on CPTED (Crime Prevention through Environmental Design) principles, is credited for having greatly reduced street crime levels. • In tandem with the efforts to reduce the incidences of crime and to raise public confidence in the Malaysian justice system, the GTP 1.0 saw several initiatives directed towards improving the justice system.

IMPROVING THE JUSTICE SYSTEM

• The goal in the first phase of the GTP 1.0 was to clear the backlog of violent crime cases, and this was achieved in 2010 after 2,001 old cases were processed. • As the initiative had accomplished its goal, the NKRA changed its focus to increasing the ratio of charges made to investigations papers opened. In raising the charging rate, the Reducing Crime NKRA again saw several major accomplishments. • In 2011, the NKRA set a target of bringing at least 20% of arrests to trial, and this target was surpassed, with the ratio coming in at 23.4%. The goal is to further improve this ratio to 25% of all investigation papers opened in 2012.

INCREASE PUBLIC SATISFACTION WITH POLICE PERFORMANCE

• Public satisfaction with police performance is a crucial component in reducing crime as the rakyat’s trust and cooperation with the police can only be secured with increased satisfaction of the latter’s performance. In line with this initiative, customer service rating (CSR) devices were rolled out to all 82 police stations in Selangor with the goal of expanding the initiative nationwide. • As a result, public satisfaction of the police’s performance rose from 35.8% to 55.8% in the 2010, and subsequently to 65.3% in 2011. The target is to raise this number to 70% in 2012. • Encouragingly, this change in perception was also mirrored in external studies conducted by both national and international bodies. The World Justice project, for instance, named Malaysia the safest among 19 upper middle-income countries, and 12th safest overall, ahead of the United States and the United Kingdom.

Source: Pemandu

FEBRUARY 2015 | www.propertyinsight.com.my

situation permits you to do so,” he said. “If you perform the citizen arrest, you have to contact the police and let the police deal with the suspected criminals. Do not cause any physical attacks to the suspect and do not go over-limit,” he added. The RMP fully supports any Neighbourhood Watch or Resident’s Association in maintaining an area’s safety. The police will be assisting them and the government has even allocated funds for the Neighbourhood Watch. “In fact, the Resident’s Association can apply through the local government (Ministry of Urban Wellbeing, Housing and Local Government) for funds to do any patrol activities. The police can offer advice to the associations,” Tan Sri Khalid said. While there are individuals who do not care much about Resident’s Association and refuse to put in any contribution on efforts to ensure their housing area’s safety, the Inspector General lauded residents who volunteer their time and energy in policing their own neighbourhood. “I think it is good for the community to come together and work to look after the area’s safety. They get to generate better ties

IGP Tan Sri Khalid with Property Insight publisher KK Chua

“I ALWAYS TELL DEVELOPERS TO INCLUDE THE POLICE WHEN THEY ARE IN THE PLANNING STAGE OF THEIR DEVELOPMENT. WE COULD BE PRESENT AT THEIR MEETINGS AND GIVE OUR IDEAS TOO. INCORPORATE US IN YOUR PLANNING; DON’T DO THIS AT A LATER STAGE. THAT IS WHY SOMETIMES YOU DON’T SEE ANY POLICE STATIONS IN AN AREA BECAUSE THERE IS A FAILURE TO INCLUDE THE POLICE IN THE PLANNING STAGE. -TAN SRI KHALID

amongst them,” Tan Sri Khalid added. Some Resident’s Associations do appoint outsourced security companies to look after their housing area, though this is optional and depends on the willingness of the people in the area. “The appointment of the security company is under the purview of the Resident’s Association, not the police,” Tan Sri Khalid said. In 2010, the Royal Malaysian Police collaborated with the Ministry of Urban Wellbeing, Housing and Local Government to introduce the Safe City program, which is still currently up and running, where the RMP plays an advisory role to any safety-related development. In that respect, Tan Sri Khalid highly encouraged property developers to seek advice from the RMP before commencing with their development plan. The police can inform them of any feature in their development that can promote better safety, according to him. “I always tell developers to include the police when they are in the planning stage of their development. We could be present at their meetings and give our ideas too,” Tan Sri Khalid said. “Incorporate us in your planning,” he advised property developers. “Don’t do this at a later stage. That is why sometimes you don’t see any police stations in an area because there is a failure to include the police in the planning stage,” Tan Sri Khalid said. “We would like to be in tandem with the development and have the synergy with property developers to ensure the safety of the public,” he concluded in the end.

www.propertyinsight.com.my | FEBRUARY 2015

FEATURE

No impact from weak ringgit and cheap oil he current slide of ringgit due to plummeting global oil price is not likely to affect the local property sector, Real Estate and Housing Developers Association (REHDA) officials said. REHDA President Datuk Seri FD Iskandar Mohamed Mansor recently shared with the media, “In terms of construction, unless you go for highrise buildings, most of our materials are local-based. If you were to look at escalators or high-speed lifts, then you talk about importation. If you were to talk about affordable homes, landed properties that are five storeys and below, the majority part of the construction would be local, not from overseas.”

LOWEST DROP

In terms of impact of lower oil prices on the property market, Iskandar said, “Oil and gas sector is only a very small part in the total cost of property development. If you look at the international crude oil prices, it has gone down since the last revision was done... By right, we hope there will be a downward revision by [early 2015]. By how much and what percentage, once it is there, we will do our study, and how much more we can save,” Ringgit had reached as low as 3.5975, the lowest in more than five

years, according to Bloomberg. The currency has fallen 9.3% in the past three months, the worst performance in emerging Asia, and has lost 2.4% this year. The fall of the currency follows the growing concern over a prolonged drop in crude oil prices which will erode Malaysia’s revenue. At slightly under US$50 per barrel, Brent crude has sunk to levels not seen since 2009. In its latest report, Bank Negara Malaysia said, “The ringgit, together with other regional currencies, depreciated against the US dollar during the month as concerns over the health of some key economies, such as Japan and China, led to a decline in investor interest in regional financial assets. Lower global oil prices also led to concerns over the economic outlook of some oil exporting countries. The ringgit further depreciated…following the sharp fall in global oil prices.” The drop in oil prices is further pressuring the Malaysian government, which derives 31% of its revenue from oil-related sources. Already, Prime Minister Dato’ Seri Najib Tun Razak is reported as considering a review on the government’s 2015 budget to take into account the impact of falling energy costs. The sliding ringgit and low oil prices, however, will not impact housing

INDEX OF RINGGIT PERFORMANCE AGAINST MAJOR TRADE PARTNERS* Index (Dec’11 = 100) 112 110 108 106 104 102 100 98

indicates MYR appreciation

Dec’11 Mar’12 May’12 Aug’12 Oct’12 Jan’13 Mar’13 Jun’13 Aug’13 Oct’13 Jan’14 Mar’14 Jun’14 Aug’14 Oct’14 Dec’ 14

Depreciating currency and falling energy prices will not distress property industry; group points to compliance costs

* Currencies in the index: USD, CNY, SGD, JPY, EUR. Each currency carries equal weight.

Source: Source:Bank BankNegara NegaraMalaysia Malaysia

prices as much as high compliance cost being shouldered by developers, according to Iskandar. He commented that the cost of doing business through the policies and regulations introduced by state government, such as premium charges, has increased from 3% to 18% (of gross development value) in some states, and quit rent has increased from 2.5% to 7.5% in some states. He also cited that development charges used to be at 8% to 12% (of GDV), about 10% of total development cost, property portal EFY.com.my reported. Iskandar said, “But today, development charges have doubled or have become 2½ times, if we were to compare four or five years [ago].

“DEVELOPMENT CHARGES HAVE DOUBLED OR HAVE BECOME 2 1/2 TIMES, IF WE WERE TO COMPARE FOUR OR FIVE YEARS [AGO]. THOSE ARE THE THINGS THAT I THINK THE STATE GOVERNMENT CAN LOOK BACK, ESPECIALLY FOR AFFORDABLE HOMES, TO ASSIST IN THESE CHALLENGING TIMES. — ISKANDAR 20 FEBRUARY 2015 | www.propertyinsight.com.my

Those are the things that I think the state government can look back, especially for affordable homes, to assist in these challenging times.” REHDA vice president Datuk Anthony Cho Tian Han also believed there will be no impact on the property market by the weak ringgit, “The factors affecting property prices are very limited. 90% of [construction] products, for example tiles or cement, are locally based. It’s very seldom that these are imported.” Cho pointed to other factors, however. “In the production of houses, a lot of the cost was actually from land prices. For example, 3-4 year ago, most land prices were around RM3 per square foot. Today you see nothing less than RM10 psf. That’s a 300% increase,” he said.

RINGGIT-US DOLLAR EXCHANGE RATE 6-MO HISTORICAL DATA

0.32

0.31

0.3

0.29

0.28

AUG’14

SEP’14

OCT’14

NOV’14

DEC’14

Cho echoed Iskandar about the high compliance costs as more significant factors to housing prices. State governments can reduce compliance costs, for example the conversion premium, according to Cho. He pointed out how the conversion premium per house for affordable homes in Melaka is inexorbitantly more expansive than, say, in the state of Pahang. “If the state governments reduce the compliance costs, the housing price will go down,” Cho argued. Penang branch REHDA chairman Datuk Jerry Chan told the media recently that the fall of ringgit even makes it attractive for Malaysians to invest in local properties instead. Foreign assets are comparatively more expansive now, due to the dollar appreciation, and Chan advised locals should look into local properties. During that heaviest crunch of Asian financial crisis in 1997, when ringgit collapsed to as low as RM4.88 per US dollar, Chan said local investors bought local assets instead of foreign assets. Today, he pointed out, these investors have since reaped huge returns from their purchases. Chan also believed that the weak ringgit will not entice foreigners to purchase Malaysian properties, saying that foreign investors would wait until there was stability in the ringgit. “Now there is no stability yet. If there are concerns that foreigner buyers will cause property prices to increase, I think we will not see that happen. “We won’t see an immediate effect like that since they are not coming in right away,” he told the media.

JAN’15

Source: Bloomberg

3-MONTH GLOBAL CURRENCY PERFORMANCE

Base Currency

Source: Financial Times

Relative Currency Performance : Loss

Gain

Pe r fo r m a n c e C o m p a re d U S D o l l a r ( U S D )

www.propertyinsight.com.my | FEBRUARY 2015

FEATURE

Mix report card results for 2014

Bank Negara’s latest statistics indicates stable interest rates, ample liquidity, moderation in household loans, and further tightening of mortgage activities

n its most recent monetary and financial development report, Bank Negara Malaysia (BNM) reported that household loandeposit growth gap narrowed slightly but remained wide in November 2014. “The annual growth in outstanding household loans, however, continued to moderate to 10.2% in November. Overall loan demand was sustained with higher loan applications from businesses,” BNM cited. While household loan growth eased to 10.2% year-on-year (Oct: 10.5% y-o-y), deposit growth was maintained at 6.0% y-o-y, according to Hong Leong Investment Bank research analyst Sia Ket Ee. “With unfavourable economic environment looming, the gap is projected to narrow somewhat going into 2015. Household credits would be curbed by flagging consumer sentiment and strict lending criteria

while deposits would be boosted by competitive interest rates offered by banks,” Sia said. Household sector’s mortgage activity continued to lose traction, “judging by weaker performance across all loan indicators,” Sia said. “Loan applications for the purchase of residential properties recorded a bigger contraction of 27.2% in Nov (Oct: -22.2%) while loan approvals for housing sector tumbled by 10.8% (Oct: +4.8%),” he added. On the other hand, business credit growth gained further momentum, according to Sia, rising to 9.3% (Oct: +8.3%) for the third straight month with a larger loan amount extended to the real estate, among many sectors. The month of November 2014, BNM reported, was driven by higher growth in outstanding banking system loans amidst a moderation in the growth of net issuances of private debt securities (PDS). “Outstanding

Key Monetary and Financial Statistics Sept 14

Oct 14

Nov 14

O/stg

Ann. growth

O/stg

Ann. growth

O/stg

Ann. growth

(RM bil)

(%)

(RM bil)

(%)

(RM bil)

(%)

1,740.9

8.6

1,754.8

8.7

Banking System 1,728.2 8.9 Net financing1 Loan-deposit ratio (%) 2 86.8 93.3 Financing-deposit ratio (%) 2&3 Loans applied (during the period) 76.1 6.7 Loans approved (during the period) 38.0 12.1 Loans disbursed (during the period) 94.8 16.7 Loans repaid (during the period) 83.8 16.6

86.6 93.1 71.6 37.4 96.9 89.1

86.6 93.1 -4.4 13.1 19.0 21.8

1 Comprises of banking system loans outstanding and private debt securities (PDS) outstanding (excludes non-resident and Cagamas) 2 Excludes transactions by financial institutions. 3 Refers to the ratio of loans and holdings of PDS by the banking system to deposits of the banking system.

Source: Bank Negara Malaysia and Department of Statistics Malaysia 22 FEBRUARY 2015 | www.propertyinsight.com.my

75.6 35.2 87.8 80.2

0.1 10.8 10.8 6.8

business loans registered a higher annual growth rate with a larger volume of loans extended mainly to the real estate and transport, storage and communication sectors,” it said. Sia added, “Net issuance of PDS more than doubled to RM3.3bn from RM1.4bn in Oct, bringing the cumulative 11 months of net issuance to RM25.5bn (Jan-Nov 13: RM19.6bn).” “In view of the subdued household financial activities and rising downside risks to domestic growth momentum, we expect BNM to extend its OPR pause at 3.25% for the rest of the year of 2015,” Sia said. “Facing the short-term risk of negative real interest rate, BNM will remain vigilant on its lending guidelines while balancing both the need to sustain growth momentum and uphold financial stability,” he explained. Sia also said that excess liquidity shrank to RM228.6bn as at end-Nov (Oct: RM238.4bn) mainly on account of foreign capital outflows. “However, deposit-loan gap widened to RM293.1bn in Nov (Oct: RM288.3bn), indicating that current level of liquidity remained ample to support banks’ lending activities ahead,” he said. Bank Negara also reported that short-term interbank rates were broadly stable in November. “Interbank rates of longer maturities, however, trended higher due to an increase in demand by banks for more stable funding, which led to competition among banks to attract corporate deposits by offering higher deposit rates.

“LOAN APPLICATIONS FOR THE PURCHASE OF RESIDENTIAL PROPERTIES RECORDED A BIGGER CONTRACTION OF 27.2% IN NOV (OCT: -22.2%) WHILE LOAN APPROVALS FOR HOUSING SECTOR TUMBLED BY 10.8% (OCT: +4.8%). — SIA KET EE “The resultant increase in funding cost was transmitted to lending rates in the interbank market. In terms of retail lending rates, the weighted average lending rate (ALR) of commercial banks was stable at 5.50%. Retail deposit rates were also stable over the period,” BNM said. In terms of monetary indicators, signs showed some marginal improvement in November, according to Sia. “Narrow money (M1) growth advanced to 6.3% y-o-y (Oct: +6.0% y-o-y) while that of broad money (M3) hit an 11-month high of 7.1% y-o-y (Oct: +5.4% y-o-y). Meanwhile, growth of loan disbursements slowed to 10.8% y-o-y (Oct: +19.0% y-o-y). BNM reserves declined by US$2.4bn to US$125.7bn (RM394.1 billion) as at end-Nov, the lowest level since Apr 2011,” he said. Although money supply recorded higher growth in November, it remained stuck at mid-single digit levels, suggesting moderate

Loan Applications to the Banking System RM bil

% YoY change in HPI: Malaysia 10-yr average change in yearly HPI: Malaysia

14.0%

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Source: BNM, CEIC, Kenanga Research

Loan Disbursements by the Banking System 120

Loan Approvals by the Banking System RM bil 45

Businesses* Households

100

14.0%

12.0%

RM bil Businesses* Households

Malaysia House Price Index (HPI): Malaysia, KL, Selangor, Penang, Johor

Businesses* Households

35 30

50 60

40 30

20 15

20 20

Nov’14

Jul’14

Sep’14

Mar’14

May’14

Nov’13

Jan’14

Jul’13

Sep’13

Mar’13

May’13

Nov’14

Jul’14

Sep’14

Mar’14

May’14

Nov’13

Jan’14

Jul’13

Sep’13

Mar’13

May’13

Nov’12

Jan’13

Nov’14

Jul’14

Sep’14

Mar’14

May’14

Nov’13

Jan’14

Jul’13

Sep’13

Mar’13

May’13

Nov’12

Jan’13

Nov’12

Jan’13

* Includes domestic financial institutions, government, domestic other entities and foreign entities. Source: Bank Negara Malaysia

www.propertyinsight.com.my | FEBRUARY 2015

FEATURE economic activity in fourth quarter of 2014 (4Q14). “We expect the subdued trend to persist until 2Q15 before picking up in 2H15, attributed to the negative impact of GST implementation in April 2015, plunging oil prices and weak external demand. As such, we maintain our GDP growth projection of 4.8% for 2015 (2014 projection: +6.0%),” Sia concluded. Separately, Kenanga Investment Bank reiterated its neutral ratings, with slight negative bias, on property developers. “Hopes of a pre-GST demand rally have been squashed by buyers’ wait-and-see attitude and tighter lending liquidity, which will unlikely abate in 1Q2015. Developers are likely to see flat to declining sales

Household Loan & Deposit

% yoy 16 14 12

10.2

10 8 6

6.0

4 2 0 Jan-09 Oct-09 Jul-10 Apr-11 Jan-12 Oct-12 Jul-13 Apr-14

Household Deposit

Household Loan

Source: BNM

Excess Liquidity RM bn

320 300 280

267.1

260 240 228.6

220 200 180 Jan-09

Jan-10

Jan-11

Jan-12

Excess Liquidity

Jan-13

Jan-14

2010-2013 Average

Source: BNM & HLIB

Deposit - Loan Gap RM bn

320 300

293.1

280 260 240 Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Deposit-Loan Gap Source: BNM

Jul-14

over 2015 and even affordable players will not be spared, meaning there is another 1-2 more quarters of earnings downgrades by consensus,” according to analysts Sarah Lim and Adrian Ng. “There is also risk of a structural de-rating in the sector due to GST where secondary properties may steal the limelight away from primary ones; we will have to reassess the situation post GST implementation. Ironically, in a challenging market, it will give way to more landbanking and is likely to be more visible in 2H2015,” they said. House price growth has tapered off significantly, according to the analysts. “We observed that 3QY2015 House Price Index (HPI) growth had tapered off to 4.6% from 8.4% in 2QY2014, which is below its 10-year average growth rate of 6.1%. Clearly, the cooling measures have been effective in reigning property price increases. We view the slower growth in HPI positively as it could potentially imply less likelihood of more stringent property measures being introduced moving into 2015,” they added. Residential volumes improved marginally with Sept 2014 data of residential transacted volume for Malaysia was up by +3%, year-onyear, (compared to -14% y-o-y in Sept 2013), with transacted values coming in higher year-on-year as the Malaysian average residential transacted price per unit rose by +15% y-o-y to RM332k/unit. “The positive growth in residential transacted volume despite a higher average transacted value indicates that the market has somewhat adjusted to the higher price environment or what we call ‘normalization of prices’,” the analysts reported. “We also wonder if there is a pickup in secondary property transactions since overall residential transacted volumes has risen while quite a number of our developers under our coverage have not been able to meet their targets for the year or have reduced targets, resulting in flat to declining sales growth over 2014. We continue to reiterate that a ‘pre-GST demand rally’ is not likely to happen due to tight lending liquidity while buyers are adopting a wait-and-see stance on the back of a shakier economic outlook.”

24 FEBRUARY 2015 | www.propertyinsight.com.my

Lending situation remains gloomy, according to the analysts. In Oct-14, total loan applications for residential properties have decreased 22%, y-o-y, vis-à-vis a +44% y-o-y growth in the same period last year. On a 10M2014 cumulative basis, residential (nonresidential) loans applied has registered negative growth of 7%, y-o-y (-15%, y-o-y). “We believe that the negative growth in loans application could be possibly due to buyer adopting a wait-and-see stance due to growing uncertainties on the impending GST in 2015 and weaker economic prospects. Moreover, banks are still relatively tight on lending as we observe that 10M14 cumulative loans approved for both residential (+2%, y-o-y) and non-residential (-3%, y-o-y) properties are still showing flattish to negative trends despite smaller pool of loan applications,” Lim and Ng said. Lending rates, however, are stabilizing. AVL for Oct-14 has come off to 4.67% (Sep-14, 4.72%), but still slightly higher than 2013’s average of 4.62%. However, BLR lending spread is still attractive at -2.12ppt (2013 average: -1.91ppt). Said the duo, “Our Banking analyst has highlighted that the current lending spread trend are likely to stay as banks need to strike a balance between its yield and loans growth. We subscribe to our Banking analysts view and are heartened by this as buyers would not have additional ‘uncertainties’ to worry on top of GST. Also, our Economists opine that Bank Negara Malaysia (BNM) is unlikely to raise OPR in the next six months.” The analysts cautioned that lending taps will likely remain tight in 1Q2015. “We opine that the lending environment will remain tough in 1Q2015 due to the shrinking excess liquidity in the banking system. Also, we note that banks are concerned about asset qualities of primary properties because prices have soared significantly over the last few years. Hence, banks manage their asset quality risks by offering lower LTVs on primary properties, which either deter buyers or add burden to buyers with regards to cash outlays,” they said.

FEATURE

COSTS OF RESIDENTIAL INVESTMENT IN ASIA-PACIFIC FIGURE 1

Tax Burden (% of House Price): Foreign vs local investor

15% 10%

Thailand

Singapore

South Korea

Malaysia

Japan

Malaysia

Foreign investor

Hong Kong

Cambodia

Local investor

Source: Knight FrankFrank ResearchResearch Source: Knight FIGURE 2

Investment Premium (% of House Price) 10% 8% 6% 4%

Premium on foreigner buying 1st home for investment vs 1st home for self-use

Premium on local buying 2nd home for investment vs 2nd home for self-use

Premium on local buying 2nd home for investment vs 1st home for self-use

Thailand

South Korea

Japan

Hong Kong

Cambodia

region. The ‘Knight Frank Asia-Pacific Residential Review January 2015’ report, in investigating the tax liabilities borne by cross-border investors, found that Singapore and Hong Kong impose the highest tax burdens on residential property investments in the region, with Cambodia having some of the lowest. Not only are these two markets more expensive than the other markets, foreign investors have to shoulder a significantly heavier tax burden than their local counterparts, the report said. The disparity between tax burden on foreign and local investors is explained by factors such as a higher income tax requirements and cooling measures such as Stamp Duty and higher Real Property Gains Tax imposed on foreigners. Some markets effectively charge an ‘investment premium’, essentially the additional tax a purchaser would pay on the property as an investor as compared to self-use. The premium also varies between foreign and local buyers, according to the report.

20%

Australia

lobal property consultancy Knight Frank recently released a report that provides a thorough view of the major taxes incurred by foreign investors when buying, holding and selling a residential property in Asia-Pacific

25%

Australia

Report compares foreign investors’ tax burden across the region

30%

No investment premium on foreigner and local

Source: Knight Frank Frank Research Research Source: Knight

Global House Price Index (Q2 2009 = 100) 240 220 200 180 160 140 120 100 80

Jun’09 Sep’09 Dec’09 Mar’10 Jun’10 Sep’10 Dec’10 Mar’11 Jun’11 Sep’11 Dec’11 Mar’12 Jun’12 Sep’12 Dec’12 Mar’13 Jun’13 Sep’13 Dec’13 Mar’14 Jun’14 Sep’14

Source: Knight Frank Research Source: Knight Frank Research 26 FEBRUARY 2015 | www.propertyinsight.com.my

Australia China Hong Kong India Indonesia Japan Malaysia New Zealand Singapore South Korea Taiwan

Purchase adds to housing stock. One established dwelling allowed for temporary residents.

Foreign Ownership Conditions

VAT on Property

Estate Duty

0% - 20%

20%, plus 5% business tax if sold within certain period.

5%, plus 1.5% business tax for nonresidents.

Shanghai: 0% 0.6%; Chongqing: 0% - 1.2%. Tax base depends on transaction price and floor area.

≥ 1 year of residence, for self-use only.

30 years

70%3

0% - 0.05%, plus 1% - 3% deed tax.

China In general, 0% - 8% depending on state, plus 0% - 3% VAT in case of primary sale, 1% registration tax and additional 1% if price ≥ INR 5 million.

India

Approximately 0.5%, depending on state.

Residence or inheritance.

30 years

15% 10%

> 6, ≤ 12 > 12, ≤ 36 -

SD 20%

Month(s) held ≤6

≤ 3 years: part of income tax (0% - 30%). > 3 years: 20%.

Buyer’s Stamp Duty plus Additional Buyer’s Stamp Duty. Buyers are required to purchase a National Housing Bond, but usually sell it back immediately at a loss. However, loans to finance the 30% down payments are available. 4 100% LTV allowed under “My First Home” scheme. Source: Knight Frank Research

Source: Knight Frank Research

1st

Loan

60%

70%

60%

70%

2nd

50%

60%

50%

60%

≥ 3rd

≤ 0.3% on sale value less non-taxable threshold. Exact rate and threshold (minimum IDR 10 million) determined by local authority.

Residence, leasehold only.

30 years

70%

> 70

80%

22 - 70

≤ 21

70%

Apartment

> 70

22 - 70

Landed house

5% of transfer value

10%, plus 20% luxury sales tax if applicable.

15% of net assessable value, Part of income tax 10% plus 0.25% - 1% stamp duty. (0% - 30%) after 30% standard deduction

30 years

Indonesia IDR 3,000 – IDR 6,000 per document, plus 5% land and building transfer duty on the higher of market value and sale value if value exceeds regional non-taxable threshold.

70% or 90% under Mortgage Loan ≤ INR 2 million: sqm Insurance Programme. 90%; otherwise, 80%.

For R owning no other houses, HKD 100 – 4.25% of sale amount; otherwise, 1.5% - 8.5%. Additional 15% for F.

Hong Kong

Rates apply to house price unless otherwise stated. C: Citizens. F: Foreigners. R: Residents, includes citizens and permanent residents (PR).

Part of income tax (R: 0% - 45%; Non-residents: 32.5% - 45%). Principal residence exempted.

Stamp Duty (SD), etc.

Tax on Net Capital Gains (CG)

10%

Part of income tax (R: 0% - 45%; Non-residents: 32.5% - 45%)

Rental Income Tax

Selling

0.1%. Rate applies to market value less KHR 100 million.

< 2.67% land tax, depending on state. Principal residence exempted.

Apartment: above ground floor. Landed property: leasehold only.

4% registration tax

Cambodia

Property Tax

Holding

30 years

Maximum Loan Tenure

Loan-to-Value Ratio Cap

Stamp Duty (SD), ≤ 6.75%, depending on etc. state, whether property is for self-use or investment and if buyer is a firsttimer, plus mortgage registration and transfer fees.

Buying

Australia

A Guide on Major Taxes for Individual Homebuyers

www.propertyinsight.com.my | FEBRUARY 2015

1/3

> 200

B 2/3

1/3

30% + 9% 15% + 5% 10% + 4% if taxable CG ≤ JPY 60 million; otherwise, 15% + 5%

≤5 > 5, ≤ 10 > 10

70%

≥ 3rd

30%

Rate applies to CG less deductible (higher of 10% of CG and MYR 10,000). One exemption on one property allowed for R.

15% –

20%

30%

≤3

Year(s) held

R: Part of income tax (0% - 26%). F: 26%.

Assessment tax plus quit rent. Rates depend on state.

Purchase ≥ minimum price threshold (MYR 300,000 – MYR 2 million, depending on state).

35 years

Rates applies to net selling price.

90%4

1st

> 500

Cap

> 100, ≤ 500

House

≤ 100

11% – 13%

8% – 10%

1% – 3% 11% – 13%

6% – 8%

Year(s) held

4% ≥4

12% 8% -

SD 16% 3

R: part of income tax (0% - 20%). F: 20%.

Owner-occupied: 0% - 16%. Non-owner-occupied: 10% - 20%. Rate applies to annual rental value.

Public housing (leasehold): PR for ≥ 3 years. Private apartment: -. Landed property: only one allowed in Sentosa Cove. PR can buy elsewhere depending on economic contribution.

Public housing: 30 years. Private housing: 35 years.

3.3%

> 900

0.25% 0.4%

> 300

10% – 50%

≥2

≥ 1, < 2

Year(s) held

Part of income tax (6.6% - 41.8%)

44%

55%

CG plus local income tax

Part of income tax (6.6% - 41.8%)

Rate applies to tax base = 60% of current standard value.

0.15% > 150, ≤ 300

0.1%

≤ 60 > 60, ≤ 150

Non-villa tax rate

Villas: 4%.

3.5%

2.4%

1.3%

Tax base (KRW million)

2.2%

> 600, ≤ 900 70%

1.1%

≤ 600

≤ 85 sqm > 85 sqm

Acquisition tax & others

KRW 20,000 – KRW 350,000, plus acquisition tax and others2.

16% –18% Price (KRW million)

South Korea

RESIDENTIAL RESEARCH

Public housing: if tenure ≤ 25 years and tenure + age ≤ 65 years, 80%; otherwise, 60%. Private housing: if tenure ≤ 30 years and tenure + age ≤ 65 years, 80% for 1st house, 50% for 2nd, 40% for 3rd onwards; otherwise, 60%, 30%, 20% respectively.

≥ 3rd

2nd

1st

House1 C

Singapore

0.5% (SD)

≥5

3.3% (business tax + municipal tax)

Tax rate <5

Year(s) Held

Part of income tax (0% - 35%)

Part of income tax (0% - 35%) after standard 30% deduction

12.5% on unit rent (40% - 50% of total rent) and 7% VAT on furniture rent (50% - 60% of total) if house is rented out.

Apartment: foreign equities of development ≤ 49%, beyond which only leasehold is allowed. Landed property: leasehold only.

If price > THB 10 million, 80%; otherwise, 90% for condominium and 95% for low-rise houses.

2% transfer fee

Thailand

The information contained in this report with regard to various taxes is correct to the best of our knowledge at the time of going to press. It is written as a general guide and we recommend professional legal and tax advice be sought.

10% - 50%

Rates apply to taxable CG.

CG tax + local inhabitant tax for R Year(s) held

Part of income tax (5% - 40%, plus 10% local inhabitant tax for R)

≤ 2.1% fixed asset tax on A, plus 0.2% - 0.3% city planning tax on B.

1/6

≤ 200

Land area Assessed property value (sqm) (proportion)

Price (MYR thousand)

Malaysia

ASIA-PACIFIC RESIDENTIAL REVIEW

JPY 200 – JPY 480,000, plus 8% consumption tax on building (excluding land), 3% acquisition tax and 2% registration tax. Owneroccupied, fireproof property > 50 sqm, ≤ 25 years old qualifies for 1.7% registration tax relief till Mar-15.

Japan

FEATURE Global financial crisis (GFC) has affected the fiscal revenues for countries around the world, according to Knight Frank Asia Pacific head of Research Nicholas Holt. The crisis forges in the rapid changes of the global tax landscape. In the report, Holt stated, “Not only there has been more aggressive clamping down on loopholes and a pressure to improve tax governance, we are seeing more cooperation between countries on international scale.” In his opinion regarding the countries in Asia-Pacific, the fiscal stimulus that majority of them took to prevent GFC, at the same time trying to help the region lead the global recovery, “has led to deteriorating fiscal positions, with implications as to the future path of public debt.” Holt also explained, “As a macroprudential tool, taxes have been introduced to cool residential markets – markets ironically buoyed by the very same stimulus measures and the low interest rate environment we have seen since 2009.” Hence, the policy makers have to make numerous

rounds of interventions as they address the issues of affordability and household debt, with tax being one of the key tools at their disposal. Knight Frank Asia Pacific research analyst Tan Ying Kang commented, “The purple columns in Figure 1 show the total tax burden borne by a foreign investor as a percentage of house price in different markets,” described Tan. This includes stamp duties, property taxes, rental income tax, value added tax (VAT), capital gains tax and so on, if applicable.

The green columns, on the contrary, indicate the tax liability on a local investor purchasing a second property for investment purpose, all things being equal. “The disparity between the purple and green columns, therefore, reflects the ‘foreigner premium’ that overseas investor has to pay,” Tan added. Interestingly, “In Cambodia, if the investor opts for a ‘hard title’ registered with the national Land Office, as opposed to a ‘soft title’ issued by local authority, he will incur the 4% transfer tax which accounts for the huge cost difference,” said Tan. Tan justified that the tax burden ranges between 12.6% and 15.5% in Australia mainly because stamp duty varies among states. Tan also mentioned, “A foreigner buying a property in Australia for investment is subject to 7.4% more taxes than if he purchases it for self-use, excluding income tax on rents which is not applicable to an owner-occupier.” This can be referred to the purple columns in Figure 2. In addition, Tan conferred, “For a local buying a second property for investment purposes, the premium varies considerably depending on the reference point. If the second home is for self-use instead, he pays only slightly less in tax. However, when compared to the taxes on his first self-use home, the investment premium is substantial.” By referring to the green and blue columns in Figure 2, the huge difference in premium implies that Australia taxes more on the purchase of a second property per se than on the purpose of the purchase. Furthermore, Holt claimed that the Australian mainstream residential market registered robust growth in Q3 2014, with prices rising 1.5% quarteron-quarter and 9.1% over the past year. This is due to the weak currency that has supported foreign demand, which accounted for one in six new properties purchased in the quarter. “Foreign buyers’ preference for highrise residences has pushed the annual capital appreciation of apartments in Sydney to 13.3%, the highest rate since 2011,” said Holt. While in Hong Kong, Holt recorded that the three-month price

28 FEBRUARY 2015 | www.propertyinsight.com.my

“SOME MARKETS EFFECTIVELY CHARGE AN ‘INVESTMENT PREMIUM’, ESSENTIALLY THE ADDITIONAL TAX A PURCHASER WOULD PAY ON THE PROPERTY AS AN INVESTOR AS COMPARED TO SELFUSE. THE PREMIUM ALSO VARIES BETWEEN FOREIGN AND LOCAL BUYERS, ACCORDING TO THE REPORT.

appreciation surged to a stellar 5.4% in Q3 2014 from 1.4% in the preceding quarter, helped by the relaxation of Double Stamp Duty. Nonetheless, a cooling measure of 15% Buyer’s Stamp Duty is still implemented on foreigner. Holt said, “The expected interest rate hike in 2015 and strong supply in the years to come will limit the future increase in capital values.” As for Singapore, the market is continuously softening, with prices in Q3 2014 down 0.4% on the previous quarter. According to Holt, this is because the government has re-iterated its commitment to the property cooling measures it has put in place over the last few years. Thailand market remained active, after six months on from the militaryled coup. Holt expressed that the “prices in Bangkok continued on their upward trajectory, with foreign buyers creeping back into the market following the political uncertainty.” However, Tan opined that, on top of the income and capital gains taxes paid overseas, investors may still face taxes at home on income earned abroad, depending on the provisions of the tax treaty on double taxation avoidance agreed between the relevant countries.

pg54_NEW.pdf

Bukit Suburban Living

Within the City

6/17/14

9:31 AM

DEVELOPER OF THE MONTH

The Trailblazer Ipoh developer forges new paradigm with big plans for an innovative retirement village in Malaysia

By: Syamil Zahari

otal Investment Sdn Bhd’s impressive growth began in 1995, barely two years after its inception, when it acquired a major proposed housing scheme which the company christened ‘Bandar Baru Tambun’. The launch of its flagship project of Bandar Baru Tambun, and the enormous success which followed, signalled the coming rapid expansion of the company from a humble beginning of developing 10 shops along Jalan Kuala Kangsar in Tasek area near Ipoh, and 31 residential homes adjacent to Taman Ipoh Jaya. “Our company was incorporated in 1993, and we just recently celebrated our 20th year anniversary,” said executive director John Chong. Now called Total Investment Group, the company holds various big projects in the Ipoh area and prides itself as a developer synonymous with quality homes, building and delivering over 1,000 homes and fulfilling the dreams of thousands of homeowners. The company later adopted the brand ‘TI HOMES’ with the tag line ‘The Lifestyle Homes’ to further reinforce the company’s business philosophy and branding, reflecting the strategic direction towards which the Group desires to satisfy the needs of its customers. Today, the Total Investment Group comprises of Total Investment Sdn Bhd (developer of Bandar Baru Tambun, Taman Ipoh Indah and Project Manager of Taman Perpaduan Koperasi ), Kay Synergy Sdn Bhd (developer of Bandar Pulai Jaya), Radiant Homes Sdn Bhd and Malim Bakti Sdn Bhd. Bandar Baru Tambun, the project that gave TI Homes a boost, was a mixed development project comprising 1,504 residential and commercial properties on 130 acres fronting Jalan Tambun and site in the fast growing neighbourhood sandwiching

30 FEBRUARY 2015 | www.propertyinsight.com.my

between Ipoh Garden East to Sunway City Ipoh. Parcelled out by the Perak State Authority in 1980 and initially developed but abandoned, this project was successfully resuscitated and turned around by Total Investment to become the most prime and sought after housing development project in Ipoh. Dubbed ‘The little Gui Lin of Ipoh’ after the scenic city in China, Bandar Baru Tambun saw new launches of two-storey terrace houses sold within a day, and more than 1,000 registrants still in the waiting list when all the two-storey terrace houses were launched and sold. Other than Bandar Baru Tambun, TI Homes also has developments in Bandar Pulai Jaya, Taman Ipoh Indah, Taman Perpaduan Koperasi, Tiara Lake Park and Taman Meru Mutiara. “Our market is primarily in Ipoh. Of course, the Ipoh market has always been a little behind compared to KL or Penang, so most of our first 15 years had been more towards conventional housing – terrace houses, semi-Ds,” he told Property Insight. “It was about seven years ago when we finally went into a more high-end market such as gated guarded community. It was a project called Uplands,” Chong described TI Homes’ responding to the changing needs of the market, when the company converted a commercial centre occupying a land area of 24 acres in Bandar Baru Tambun into a premiere gated community. Marketed as a private sanctuary, Uplands is a tropical enclave strategically located near the Ipoh city – a home for a quiet retreat, away from hustle and bustle of life, yet near centre of activities, with the peace of mind of a gated community, 24-hour guards and outer perimeter wall.

Uplands has now been fully sold out and delivered, and TI Homes is now eyeing more launches. “We have two launches coming up in early part of 2015,” Chong shared. “One would be our next high-end project, the Upland 2 phase, a boutique development which only has 18 units of bungalows,” he added. Priced at around RM2.2m-2.3m each, with GDV of RM40 million, Upland 2’s soft launch of sales has already commenced, and the project’s showhouse is targeted to be unveiled just in time to ring in the Chinese New Year. The other launch is an ambitious project of a 170unit retirement village called GreenAcres. Ground breaking ceremony took place last November with prominent former statesman Tan Sri Datuk Seri Lee Lam Thye officiating. “The space for retirement villages is new in Malaysia,” Chong said. “We are probably the first proper retirement village project in Peninsular Malaysia, and it’s a very new and exciting industry that we are trying to encourage in Malaysia because

Chong

GreenAcres Aerial view

www.propertyinsight.com.my | FEBRUARY 2015

DEVELOPER OF THE MONTH we foresee that firstly, the Malaysian population is aging – already many of the baby-boomer generation are already in their 60s and 70s and are looking for space to move into. Secondly, this aging population is only going to increase in the next 5-10

so on. So they prefer to stay in Ipoh,” Chong said. The concept of a retirement village has been successfully developed in countries such as the United States and Australia for many decades now. Ipoh is a city that is ideal for

“The idea for this has always been at the back of the mind of my mother, Mrs Chong, twenty years ago when she first saw a retirement village in Australia, seeing how it was run, the care model, etc. That was when she thought, ‘Why can’t we have something like this in Malaysia for our own senior citizens?’ “But of course back then, we didn’t have any expertise, we couldn’t get any partners, and the market wasn’t quite ready yet,” Chong explained. Fast forward 20 years later, the market is much more ready because the

years,” he explained. According to the Department of Statistics Malaysia, the life expectancy for both men and women has increased dramatically since 1960. For men, the life expectancy was 52 years in 1960 compared to 72 years in 2014; similarly, female life expectancy was 55 years in 1960 compared to 77 years today. In addition, by 2020 the number of Malaysians aged 60 years and older is projected to increase to 3.4 million, which is 9.9 percent of Malaysia’s population. “We feel that the need is there, because many of those in the baby-boomer generation are in the situation whether their children are not living with them, out-stationed or overseas. This is particularly true for those living in Ipoh because there are many other economic opportunities elsewhere such as KL, Singapore, Penang. “So, there are many senior citizens whose children are not here and they don’t want to move out of Ipoh because they are used to life here. Once in a while, they will visit the children in KL and they would say, ‘Oh I don’t like it there, I want to be with my friends, the traffic jam is so bad,’ and

retirement living. In April 2014, US News recognised Ipoh as the 3rd most affordable place to retire in the world. The city boasts a lower cost of living, cleaner air, a relaxing lifestyle and a foreigner-friendly environment. Ipoh is an ideal destination for retirees who do not want to be caught up in the fast paced living of other major cities in the country. “That is why we decided to move into this new industry. It’s actually something that we have been thinking about for almost twenty years,” Chong said.

needs are becoming more apparent. “More Malaysians have travelled abroad and they have seen new things for elderly over there,” Chong said. “We also in the last few years have been able to find and work with a partner to bring this project forward. Even the planning for this project started 4-5 years ago when we finally decided to move ahead with it. We first got in touch with our partner in Australia, working through with architects on the planning, and all that. Finally, building plans have been submitted, approved, and we can start construction.”

32 FEBRUARY 2015 | www.propertyinsight.com.my

The unique part of a retirement village such as GreenAcres is that all the buildings, together with the facilities and activities within the project, are catered specifically for the retirees. “The houses themselves have features that are elderly-friendly. For example, the doorways are wider to accommodate wheelchair access if they need it in the future. Even the light switches are larger and lower than normal. The standard is five feet, normally as people age, their mobility will decrease so they can’t lift their hands too high, so the switches will be lower to be reached easily. “Most of the doorknobs, instead of the rounded types, will be lever handles, because as people age their grip strengths are not as good. So lever handles will be easy to turn. Even for drawers, we have drawers designs that have wider handles, and so on. So, there are little touches in the house itself,” Chong said. GreenAcres will also have emergency call response so that people, in case of emergency such as a heart attack, can press a panic button. Aside from those, the other extras will be the facilities, amenities and activities. “We want to make sure that the residents are active, so we will organise activities such as tai-chi or lion dancing. So there will be timetable for activities,” Chong said. “There will also be a club house, the social centre of the development, where the residents can go mingle and socialise. There will be a minicinema, karaoke rooms, game rooms if they want to play Mahjong without disturbing their neighbours. “The whole purpose of the retirement village is almost like a hybrid of a resort and a home. You will be living in a resort-like environment,” he added. The home will be a small condominium unit, all on one level – so there are no stairs to climb – ranging from 730 sqft to 1,100 sqft, compact enough in size but requiring less maintenance. “You’ll have the kitchen, bathroom, lounge, dining area, just like any place that you can live well,” Chong said.

Another innovation incorporated in GreenAcres is the inclusion of age care services and facilities. “When we talk about a retirement village, it is for mobile and independent seniors. It is not meant for people permanently in wheelchairs or people needing more care and assistance,” Chong said. “So when it comes to the time that people need more care and assistance, you will then go to what is called an Age Care Residence.” Age Care Residence model is slightly different, according to Chong. “Think of it as moving from a home into something like a service hotel suite. So instead of a big home, you’d be getting a smaller suite, say about 200-250 sqft, like a hotel suite. And instead of having to cook or do laundry yourself, here in Age Care residence, all will be taken care of. So it’s a different environment for different needs.” Recently, there has been a revolution

in how the retirement village industry grows, Chong explained. “In the past, retirement villages have been quite separated from age care centres. The downside is that somebody mobile and independent living in a retirement village will have to pack up and move further away to another place. “This is a little distressing especially for seniors, especially husbands and wives who, because of age and health difference, one party is mobile and independent and another party is not. So they got separated away. “Over the last few years, retirement villages tend to be integrated into the same site. So even though the couples are at different buildings, they are still at the same site.” This concept is called a fully integrated retirement place, according to Chong, and plans are already in motion for GreenAcres Age Care residence to debut in 2019. TI Homes already has ambitions to venture beyond Ipoh on its retirement village concept. “Our primary landbank is around Perak area. We are looking to acquire more landbanks outside of Perak, particularly in Klang Valley and Penang. We are still in negotiations and we are still exploring for the right place and the right price,” he said. “In Ipoh, the land here is cheap, so we are able to give GreenAcres a more resort feel with more landed type, as www.propertyinsight.com.my | FEBRUARY 2015

DEVELOPER OF THE MONTH

THE ADVANTAGES OF GREENACRES RETIREMENT VILLAGE COMPARED TO NORMAL HOUSING House

Apartment

Green Acres

Gated & guarded



Single level home design



Basic communal facilities (gym, etc)



Extra communal facilities (karaoke, games room, minicinema, etc)



On-site clubhouse



Age restriction



Activities & programs to engage you



Active & vibrant community of like-minded people



Senior specific management team



Senior friendly house features



24/7 Emergency call system



Maintenance supervisor to help with minor tasks



In house shuttle service



Lower population density



Less car traffic/movement



Features

Source: TI Homes

34 FEBRUARY 2015 | www.propertyinsight.com.my

opposed to condominiums, and we keep our price between RM300,000 to RM450,000, which by KL standard is very cheap. Can we do this type [of retirement village] in KL? Yes, of course, but the pricing won’t be similar.” The reason a lot of developers have not rushed into this field is the financial factor, according to Chong. “If you structure it the leasing way, as it is commonly done overseas, it is definitely not as financially attractive as conventional development. In a conventional development, after you sell, you already made and collect your profit. For most developers, the turnaround for each project is probably about 4-5 years from the time they buy a land, conceive the plan, get approvals, build, and then they start making money. “Whereas for retirement villages, it’s a longer term, very much like hotels or shopping malls. You spend a lot of capital to develop the project, and the return is over time,” Chong explained. The second issue is of course that the key in retirement villages is in management and services. Because this is a very new area, getting experienced professionals is a challenge. “That’s another hurdle that developers have to think about, because a retirement village development is a continuing obligation. A lot of houses, once you sell them, you are only liable for the two-year defect liability period. After that, you wash your hands, and you’re onto the next project. Whereas here, your obligation continues, just like hotels or resorts.” The dynamics is slightly different because, unlike hotels where guests stay for a few days, the residents at retirement villages are there for years. “For GreenAcres, we will be managing it ourselves in collaboration with our Australian partner. The key consideration for us is that because this is our project, we want it to succeed. We also don’t want to hand over complete control to strangers. We want to do this right. We have already committed significant resources to it, Yes, we have no experience. That is why we need to learn, pick up, and collaborate with our Australian partner. “Our Australian partner also expressed that because this is their first time in Malaysia, while they may know about things in the Australian context to fit in the Australian culture, they need to localise it. They are also happy to have us partner with them to localise their expertise. “We do want to develop the expertise and we feel that the best way to ensure that it will succeed and that we will be able to meet our vision for the project is by managing it ourselves but we bring in our partners from Australia to guide us, to advise us, and to develop operational and management models to fit the local requirements.” The GreenAcres units are freehold; however, TI Homes will not be selling the units, but rather selling lease to the units. Explained Chong, “A person buys a lifetime lease over the unit, and has the right to use the unit in his or her lifetime.” He added, “The difference in our leasing model, which is adopted from Australia, is that when you leave, there is a formula for us to return part of the money to you, and not only that, we will also factor in the unit’s appreciation value

over time. So there is a likelihood that if you exited after, say, five to ten years, you will get a bit back more than what you initially put in.” The reason TI Homes chose a leasing arrangement is to maintain control of the development and to ensure that it retains its character as a retirement village. “The whole idea is that this is very targeted, very purpose-built for retirees,” Chong said. Problems may arise when buyers decide to rent out to young families, or that they decide to sell to young couples, or they pass the units to their children to move in. “After a while, the character of the place will deviate from our objectives,” Chong said. “We went for this leasing model, which ensures that residents have rights over the property. People don’t have to worry or feel insecure that, like a rental, they’d be kicked out. The lease will be registered in the title for their lifetime. “Plus this model, as I said, has a formula to return some amount to the residents. This will ensure that people have this feeling that when I pass away I want to leave something to my kids. In this case, you are not leaving the property to your kids, but the cash value of it.” Aside from GreenAcres, TI Homes is keeping busy with several other big projects. “Bandar Pulai Jaya is still ongoing, heading towards last few phases. Meru Mutiara will be our key driver in the next five years.” Meru Mutiara, where GreenAcres will be a part of, is a new upand-coming township in Ipoh under Perbadanan

Kemajuan Negeri Perak (PKNP). “The whole piece of land that we have there is 70 acres. We took out 13 acres for GreenAcres, and the balance 57 acres is for conventional housing, all cluster semi-Ds,” Chong said. Previously a palm oil estate, PKNP bought over 1,900 acres with goal to transform it into a masterplanned township for Ipoh. “The plan is to move quite a number of government departments there, so it’s almost like a miniPutrajaya for Ipoh,” Chong informed. “I would say Meru Mutiara about 40%-50% completed. The [state] government has already moved a number of offices there. A lot of shopping outlets are now coming up. The largest Mydin Hypermarket is in Meru Mutiara. The second animation theme park proposed in Perak will be in Meru Mutiara.” As for GreenAcres, Chong has high hopes and is confident that the retirement village development concept will catch fire. “I would say that quite a number of Malaysians, who have seen or have heard about retirement villages in their travels, are very excited. They have been waiting for something like this for a long time, mainly because most people in Malaysia are aware of the standards of a typical old-folks home that we have here – a bungalow or a house that is renovated, with perhaps a maid

or two coming in as helpers – and many do not like that. “They have seen, or heard about, people or friends who have been put in such homes and they say, ‘That’s not what we want. We want something of a much better quality.’” However, Chong stressed that TI Homes are not promoting GreenAcres as an investment. “The reason why we enter this space is to provide that quality of lifestyle and care for you as you go to your senior years. That’s what we are selling. If you are looking for investments, there are plenty out there – shoplots, rental properties, bonds, unit trusts, shares – those are traditional investments that will make money for you, but those won’t take care of you, they won’t give you the peace of mind when you need help,” he said. “GreenAcres provides that for you. If you get some extra money when you leave, that’s a bonus,” he concluded. www.propertyinsight.com.my | FEBRUARY 2015

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Sentul

AREA FOCUS

UNCOVERING THE BEAUTY OF

From its days when most people would think twice before investing, Sentul has now been transformed into a highly sought after place By: Benignus Cheah

he Sentul neighbourhood had been plagued with a blemished past, but it is already shedding this stigma among home buyers and investors, and set to become the latest and among the last localities that is close to the Kuala Lumpur city to experience a major rejuvenation in years to come. Sentul was founded in the late 1800s when the first Malayan railway line opened between Taiping and Port Weld, which gradually expanded to connect the North and South of Malaya. The town claimed the honour of establishing Sentul Works, one of the finest integrated engineering railway workshops in the country in early 1900s. This development helped to elevate Sentul’s prominence and grew its community. However, it declined into a rundown aging district of Kuala Lumpur in the 1960s, due to the diminishing economic and social dependence on the railway line. Since then, up until a few years ago, Sentul had suffered from a negative image of old dilapidated buildings, a large squatter population, high-crime rates and gangsterism. As a result, despite the fact that Sentul’s impressive accessibility to various parts of the Klang Valley via the Duta-Segambut Highway, Damansara-Ulu Kelang Expressway and the Sentul Link, combined with public transportation infrastructure such as the Light Rail Transit (LRT) and the KTM

“IT IS A LIKE A WALK INTO THE YESTER YEARS WITH THE BEAUTIFUL PRESERVATION AND CONSERVATION PROJECTS UNDERTAKEN BY YTL AND THE EXISTING 35-ACRE PARK. — KHONG

Kommuter stations, Sentul was often overlooked when compared with other real estate investment locations. However, in recent years, many of these issues have been addressed and resolved, with the squatter population, high-crime rates and gangsterism declining. Like dark raining clouds dispersing to reveal the

38 FEBRUARY 2015 | www.propertyinsight.com.my

clear blue sky, it is becoming clearer that Sentul is on the rise, and that its investment prospects are promising. Property agent Dianni Tai from ECG Affirm Properties tells Property Insight, “Whenever people mentioned about Sentul, they will think about a lot of old commercial shop, buildings and often plagued by criminal activities. But the mixture of old and new buildings, stratified properties seem to be still the major preference by the residents and investor.” Today, Sentul is experiencing a rapid transformation, with several big developers having development projects in this neighbourhood. YTL Land & Development’s flagship real estate development is in Sentul, and they set the benchmark for luxury living in this neighbourhood. Its Sentul Masterplan has been honoured as runner-up in the FIABCI-International Prix D’Excellence Awards in 2008 in the Master Plan category. Commercial real estate services firm CB Richard Ellis (Malaysia) executive director Sr Paul Khong says, “Sentul has always been branded with the old railway area which is largely dominated by Indian gangs in the early days. This impression has been chipped away slowly with the new projects undertaken by YTL through their Sentul Raya project.” He goes on to add, “It also took YTL a while to change the image for Sentul and for its project to gain acceptance with the local populace. They have done well over the past many years

Menara Sentul

and the major boost to the location came through with the opening of Duke Highway connecting the other parts of Sentul vicinity. “Sentul West and Sentul East by YTL sit on a large acreage of land (about 294 acres) and cover the entire old railway station of Sentul Raya. It is a like a walk into the yesteryears with the beautiful preservation and conservation projects undertaken by YTL and the existing 35-acre park.” The flagship development of YTL has become the catalyst for the urban renewal of Sentul, resulting in the neighbourhood becoming a new urban address for residents, and spurring new commercial developments with office buildings. In very recent years, other developments have jumped on the bandwagon of Sentul’s transformation, and have begun developing mixed and residential developments. For example, UOA had recently launched its UOA Sentul Village mixed development which features serviced apartments and retail spaces with street boulevards and natural landscapes. Meridian Maxim is also having a mixed development within neighbourhood, and this development would consist of residential, commercial and retail elements. “With the controlled unit launches, we expect the selected Sentul areas to perform well at reasonable prices especially given its strategic location to the city,” Khong says. On top of that, YTL Land’s efforts in the development of Sentul have since been growing. Starting from their commercial developments such

Sentul LRT

“THE FEW UPCOMING DEVELOPMENT AND HIGH RISE PRODUCTS ARE OF LUXURIES KIND AND DEFINITELY WILL BE ONE OF THE GREAT OPPORTUNITIES IN THE EYES OF THE INVESTORS AND HOME BUYERS. — TAI

as their D6 shop-office with 80 units and built-up from 1,105 ft2 to 3,876 ft2 as well as D7 comprising a total of 100 units of office and retail, with built-up from 870 ft2 to 1,500 ft2 with new developments like their D2 and D5 internationally designed low-rise commercial developments in the pipeline.

YTL Land executive director Datuk Yeoh Seok Kian was reported saying in the media recently that both the new projects have been awarded MSC Malaysia Cybercentre statuses which will serve to reinforce Sentul East’s credentials as a business address. Through the years YTL has also gone on to develop a number of high-rise condominiums such as the Tamarind, The Maple, The Saffron , The Capers as well as their on-going project known as the Fennel which has estimated to see its completion in the fourth quarter of 2017. “We envisage the transformation of Sentul into a world-class public transportation hub. This is an exciting direction for us as the master planner as it serves to achieve our vision of a sustainable neighbourhood where land use and public infrastructure upgrades are integrated into vibrant hubs of mixed-used activities,” Yeoh said. Located merely five kilometers away from the KL city centre, Sentul is easily accessible via not only the KTM commuter but also the Star LRT line going to both its Sentul and Sentul Timur station. On top of that, Sentul can also be accessed via various highways, namely Jalan Tun Razak, Jalan Ipoh, Jalan Pahang, Mahameru Highway (MRR1), the Duta–Ulu Kelang Highway (DUKE) and the SMART Motorway Tunnel via Jalan Tun Razak. With the Sungai Buloh-SerdangPutrajaya MRT Line expected to proceed ahead, there are expectations that the MRT Line will pass through Sentul, but questions remain on the alignment of the line and the locations of the various stations.

www.propertyinsight.com.my | FEBRUARY 2015

AREA FOCUS

Prices of Residential Properties Sample Size

Avg Land Area (m²)

Avg Floor Area (m²)

2012

2013

Avg Price Change (%)

Taman Mastiara

108

350,000-439,800

420,000–450,000

8.6

Jalan Ipoh

164

197

700,000

650,000-730,000

Stable

Taman Wahyu

154

207

520,000- 580,000

560,000- 638,000

8.3

Taman Mastiara

114

420,000-600,000

420,000-528,000

Stable

Three Storey Medium Cost Terrace

Taman Sentul Jaya

240,000- 290,000

250,000- 290,000

3.7

Low-Cost Flat

Sentul Murni

75,000- 110,000

85,000- 95,000

5.4

Ran. Per. Sentul Fasa 3

70,000- 90,000

75,000- 80,000

Stable

Pangsapuri Bandar Baru Sentul

90,000- 130,000

110,000- 135,000

13.5

Pangsapuri Melur

215,000- 300,000

290,000- 305,000

10.5

Pangsapuri Mawar

160,000- 280,000

230,000- 300,000

12.2

Villa Angkasa

140,000- 143,000

145,000- 190,000

21.4

Pelangi Condominium

118

270,000- 370,000

400,000

22.8

1 Sentul

100

415,000- 530,000

460,000- 525,000

10.8

Casa Idaman

285,000- 380,000

300,000- 380,000

3.2

Sentul Utama Condominium

175,000- 300,000

250,000- 350,000

15.8

Villa Angsana

103

280,000- 383,000

360,000- 447,000

17.7

Villa Angsana

123

390,000- 450,000

380,000- 440,000

Stable

Villa Angsana

132

380,000- 445,000

423,000- 491,000

8.5

The Saffron

101

580,000- 610,000

580,000- 650,000

6.6

The Tamarind

103

460,000- 545,000

550,000- 600,000

13.6

The Tamarind

125

515,000- 710,000

590,000- 725,000

13.9

The Tamarind

450,000- 550,000

540,000- 638,000

19.0

Type

Double Storey Medium Cost Terrace Double Storey Terrace

Medium-Cost Flat

Apartments

Condominium

Location

Price Unit (RM)

Rentals of Residential Properties Type

Location

Avg Floor Area (m²)

Rental Range Per Month (RM/Unit) 2012

2013

Avg Rental Change (%)

Avg Gross Yield (%)

Double Storey Terrace

Taman Wahyu

185

800–900

950–1,000

14.7

1.9

Condominium

Pelangi Condominium

1,200

Stable

4.3

Source: JPPH

40 FEBRUARY 2015 | www.propertyinsight.com.my

Rentals of Ground Floor Shop Location

Avg Floor Area (m²)

Jalan Ipoh

Rental Range Per Month (RM/Unit)

Avg Rental Change (%)

2012

2013

128

4,800

Stable

Sentul Raya (Boulevard)

134

4,500-4,750

Stable

Taman Wahyu

133

1,000-1,700

Stable

Source: JPPH

Rentals of Office Space in Shop Rental Range Per Month (RM/Unit) 2012

2013

Avg Rental Change (%)

190

1,800-3,000

Stable

134

1,300-1,500

Stable

188

780-2,500

Stable

Location

Floor Level

Floor Area (m²)

Jalan Ipoh

Sentul Raya (Boulevard) Taman Mastiara Source: JPPH

Recent Transactions of Selected High-Rise Residential Properties High-Rise Residential Name of Scheme / Developer

Typical Unit Sizing (sqft)

Brief Details

Average Transacted Price (RM per sqft) 2013

2014

1,066

506.70

525.50

1,355

414.00

1 Sentul (Sentul Perdana Sdn Bhd)

2 blocks of 23-storey with total of 28 units

The Saffron @ Sentul East (Sentul Raya Sdn Bhd, of YTL Group)

4 blocks (2 blocks of 17-storey and 2 blocks of 24-storey) with total of 467 units

1,087

594.25

635.80

The Tamarind @ Sentul East (Sentul Raya Sdn Bhd, of YTL Group)

2 blocks of high rise and 2 blocks of low rise with total of 498 units

1,346

506.20

519.00

The Maple @ Sentul West (Sentul Raya Sdn Bhd, of YTL Group)

2 blocks of 30-storey with total of 318 units

1,536

609.30

619.50

1,569

547.75

577.50

Source: JPPH / Knight Frank Research

Some Pricing of Residential Developments in Sentul Area Southern Region (Below DUKE)

Northern Region (Above DUKE)

Development

Price

The Capers, Sentul East by YTL

RM800 to RM1,000 psf

The Fennel by YTL

Approx. RM750 psf

Panorama Residences, Sentul

RM475 to RM500 psf

Rivercity, Sentul

RM425 to RM475 psf

Sentul Village by UOA Group

RM500 psf to RM550 psf

Bayu Sentul @ Arus Embun

Approx. RM450 psf

Sentul Utama, Sentul

RM375 to RM425 psf

Source: CB Richard Ellis (Malaysia)

www.propertyinsight.com.my | FEBRUARY 2015

AREA FOCUS

Selected Current / Launched Schemes High-Rise Residential Name of Scheme / Developer The Capers @ Sentul East (Sentul Raya Sdn Bhd, of YTL Group)

The Fennel @ Sentul East (Sentul Raya Sdn Bhd, of YTL Group)

Sentul Village (UOA Group)

Brief Details

Year Launched / Expected Completion

2 blocks of 36-storey condominiums and 5-storey low-rise suites with total of 338 units

4 blocks of high rise (38-storey) with total of 916 units

2011 / 2015

Typical Unit Sizing (sqft) Condominium 695 - 1,567 Low-rise Suite 999 & 1,965

Average Pricing (RM per sqft) 550 – 600 Current asking: 780 - 820

Phase 1 August 2013 / 2017

Blocks A & D 1,186 – 1,554

650

Phase 2 November 2013 / 2017

Block B 1,081 – 1,554

760

Phase 3 – Yet to be launched

Block C

N/A

2014 / 2017

948 – 1,032

From 562

Block Mercury (26-storey) with 462 serviced apartment units

Source: JPPH / Knight Frank Research

Recent Transactions of Selected Commercial Commercial Name of Scheme Sentul Raya

Type

Typical Unit Sizing (sqft)

Shop Office (5 to 6-storey with lift)

Commercial Name of Scheme D6 and D7 @ Sentul East

Source: CB Richard Ellis (Malaysia)

Type

Boutique Office Lot

2,160

Typical Unit Sizing (sqft) 737 – 1,281

Average Transacted Price (RM/unit) 2013

2014

3.5 million

3.3 million

Average Transacted Price (RM per sqft) 2013

2014

603.95

560.00

Source: JPPH / Knight Frank Research

According to the Land Public Transport Commission’s National Land Public Transport Master Plan final draft, the North-South Line is meant to link developing areas such as Sungai Buloh, Kepong, and Selayang, with the Eastern land freight of the city centre, including Kampung Baru and Tun Razak Exchange. With information that is currently available, there appears to be reasonable probability that the North-South Line will pass through Sentul, given its close proximity to Kepong, Kampung Baru, and also existing rail infrastructure. For investors, the question begs, will Sentul benefit further from the implementation of the MRT 2 Line? Would such expectations become reality? This is where the challenge for investors lie, where there are risks involved for investing in real estate, based on speculated information. Then again, if such expectations become reality, this could result in lost investment opportunities. Therefore, investing in Sentul requires a leap of faith on the part of investors, if they believe in the long-term growth of Sentul. “People buy/ invest properties in Sentul because of the 42 FEBRUARY 2015 | www.propertyinsight.com.my

location accessibility. Sentul is located pretty close to the KL city centre,” describes Tai. “There are several main road link and connected to KL city. In term of well-established scheme with sufficient amenities and facilities such as school, hospital, bank and shopping mall are just nearby. “Other than that, the convenience and plentiful of the public transport such as KTM and LRT or even when the MRT completes will be another reason why people will choose Sentul area. When the location becomes accessible and convenient to the people, and the market value will be increasingly impacted by high demand,” she says. Tai adds, “The most popular within the township is condominium/apartment. Transacted price of all the strata properties have shown a steady growth and positive, no sign of decrease. Even property asking price now is approximately RM1,000 psf and above for the high rise building.” The appreciation in capital values of condominiums in Sentul is an indication of a booming property market in this region. According to the Valuation and Service Department’s (JPPH) 2013 Property Market Report, 100

1. The Capers, Sentul East 2. Sentul Timur LRT Station 3. UTC Sentul

m2 and 125 m2 units of 1 Sentul had appreciated by 10.8% and 7.2% respectively, from 2012 to 2013. 82 m2 units of Sentul Utama Condominium had appreciated by 15.8% in the corresponding period. However, Tai says, “There are some facts that are turning buyers away because of the crowded and hassle in getting around lies in the traffic jam on the main roads of Sentul. Roads are always congested and traffic gets heavier during peak hours. Besides that, there are low-cost areas that have the usual social stigmas associated with such areas. So, this will be one of the safety and security issues needed to be considered by home buyers.” However, says Tai, “The few coming development and high rise products are of luxuries kind and definitely will be one of the great opportunities in the eyes of the investors and home buyers. As the current on-going projects are mostly of high rise buildings, the façade and appearance of the township shall in near future evolve into much higher density, crowded and convenient in Sentul.”

AGENT SAYS: Sean Seng HARTAMAS REAL ESTATE (MALAYSIA) SDN BHD.

“When The Fennel and The Capers by YTL is completed, I believe that Sentul will be attracting more high-end crowd and make the place more attractive than it is now.”

Jay Teoh TECH REALTORS PROPERTIES SDN.BHD

“When The Maple was launched, it took the market by storm as condominiums being sold for half a million ringgit is not a common thing surpassing and rivalling all major condominiums. It took YT just three years to complete the project . The Maple houses many prominent people, including celebrities; Dato’ Jimmy Choo, Puan Sri Tiara Jacquelina, H.R.H. of Perlis stay there too.”

www.propertyinsight.com.my | FEBRUARY 2015

INTERNATIONAL MARKET

THE KINGDOM OF

THAILAND Against all odds, the property market remains bullish By: Fara Aisyah Firdaus Petial

FEBRUARY 2015 | www.propertyinsight.com.my

he property market in Thailand remains strong despite the political crisis that happened in the country for the past few years. According to the Bank of Thailand, a strong economic growth helped increased the Thai price index for single detached houses by 5.1% in Q4 2014, a growth percentage retained since Q2 2013. The condominium index rose by 8.6%, the price index for townhouses was up by 7.6% to end-Q4 2014, while the residential land price index surged by 7.1%. The value of land and building transactions surged by 16.5% in 2013 to THB991.3 billion (RM105.5 billion), according to Thailand’s Department of Land, Ministry of Interior. Residential building licenses increased by 12.8% in 2013 to 84,023 units, condominium registrations surged 25.1% to 102,200 units, while new houses in Bangkok Metropolis, including apartments and condominiums, selfbuilt houses, and housing projects, increased by 5.6% to 131,954 units in 2013. Yet, all this growth in Thailand property market occurred while yellow-shirted demonstrators clashed with authorities in the streets until martial law was declared mid-2013. Currently, Thailand is progressing along with the development of The Bangkok Mass Transit System, also known as the Skytrain, the Metropolitan Rapid Transit (MRT) that is serving the Bangkok Metropolitan Region, as well as the much anticipated IconSiam development consisting of two shopping malls, a convention centre and posh condominiums expected to be finished in 2017. Kwanchai Ping, a successful Thai property investor, told Property Insight that IconSiam is a really big project. “They are going to build a really big shopping mall like Siam Paragon. [They] plan to develop a lot of building on board of Chao Phraya riverside. So this is going to be the next interesting point because I can see that people really like to buy [property] at the riverside. And Chao Phraya is the only river in the centre of the city. That area is quite interesting also. Now there are a lot of hotels, but residential is coming in the next three to five years,” Ping said. IconSiam is being developed by three of Thailand’s most successful businesses, including Siam Piwat which is the owner and operator of prestige retail developments such as Siam Paragon; Magnolia Quality Development Corporation, a top-end residential developer with projects such as Magnolias Ratchadamri Boulevard; and multi-national conglomerate Charoen Pokphand Group. Magnolia Quality Development Corporation Ltd CEO Tipaporn Chearavanont stated in a press release, “IconSiam is like a new city and embraces residential, retail, and cultural components. It is located at the heart of a broad catchment area for international and local customers, with three million residents, 200 upscale

residential projects and more than 10,000 rooms in 50 world-renown hotels within a five-kilometer radius.” Thus, it is foreseeable that the property market in Thailand will be boldly developed and a lot of foreign investors will start giving extra attention on Thailand. Another aspect that is encouraging investors, either local or foreign, to buy properties in Thailand is because the process is quite simple. According to Ping, who recently visited Malaysia to help educate Malaysian investors, “As I can see, between the property markets in Thailand and in Malaysia, I would say Thailand is quite simple than Malaysia. The transaction is really fast. If you have cash, you can buy within one day. You just make the S.P.A. and then go to land authority and transfer. That’s it, because in Thailand we accept the contract that the buyer and the seller make. If the buyer and seller agree to the contract, it already can be used despite absence of lawyers. If you use a loan from bank, normally the process should be around two weeks to one month to get the loan from bank.” However, Ping suggested that foreign buyers sign agreements in the presence of a lawyer. Although the Sales and Purchase Agreement can be done between the buyer and seller, it is advisable to have a lawyer verify the documents. “Then, you can transact the payment within a day if you are paying by cash,” Ping said.

“IF YOU HAVE CASH, YOU CAN BUY WITHIN ONE DAY. YOU JUST MAKE THE S.P.A. AND THEN GO TO LAND AUTHORITY AND TRANSFER. THAT’S IT, BECAUSE IN THAILAND WE ACCEPT THE CONTRACT THAT THE BUYER AND THE SELLER MAKE. IF THE BUYER AND SELLER AGREE TO THE CONTRACT, IT ALREADY CAN BE USED DESPITE ABSENCE OF LAWYERS.

Ping www.propertyinsight.com.my | FEBRUARY 2015

INTERNATIONAL MARKET

There are no regulations in terms of the price, but there are some rules in terms of the types of the properties foreigners are able to purchase. According to Ping, “Foreigners cannot buy land in Thailand, cannot buy empty land, cannot buy landed properties also. Foreigners can only buy high rise units, because buying high rise is not considered that they own the land. The whole idea is that the government does not allow foreigners to own a land in Thailand.” In addition, there is a quota for a foreigner’s purchase in a building. “The foreigner quota is not over 49% of a building. Because if a foreigner own more than 49%, that means the foreigner owns the land already,” Ping explained. “In the case of a foreigner who really wants to buy landed properties – let’s say the foreigner comes in to do a business, to buy land to build a factory – one way to do it is to form a company. But in the company, they should have locals holding for 51%, foreigners 49%.” Siam Legal International Co. Ltd elaborated more on the certain restrictions when doing business in Thailand. According to the group, Thailand’s law separates foreigners in terms of juristic persons into two different kinds: 1. Juristic person not registered in Thailand 2. Juristic person registered in Thailand having the characteristics as follows: • Limited company or public limited company whereby over 50% of its capital shares are owned by foreigner(s), • Limited partnership or registered ordinary partnership whereby over 50% of its capital is invested by foreigner(s), or • Limited partnership or registered ordinary partnership having a foreigner as the managing partner or manager. Referring to the above definition, if dominant parts of the shares of a limited company are held by Thais, it is viewed as a Thai organisation and consequently not subject to this rule. This implies that foreigners are by and large permitted to partake up to 49% in a company occupied with restricted business. However, the approval prerequisite must be conformed to. Firmly speaking, any company with dominant part of foreign shareholders is obliged to request the Foreign Business License (FBL) in the event that it participates in a restricted business. There are a few exemptions which permit foreigners to set up business in Thailand where greater part of the holders 46

FEBRUARY 2015 | www.propertyinsight.com.my

“THE MOST POPULAR AREA IN BANGKOK ARE THE PROPERTIES NEAR BTS (BANGKOK TRANSIT SYSTEM). BTS IS THE NEW SKYTRAIN IN BANGKOK. SO, THAT’S A SIMPLE INVESTMENT. THE MOST POPULAR AREA IS SUKHUMVIT BECAUSE WE HAVE BTS IN SUKHUMVIT. AND A LOT OF FOREIGNERS STAY NEARBY SUKHUMVIT. IT’S THE CENTRE OF THE CITY. -PING are foreigners. The Thailand Board of Investment (BOI) is another exception which may permit foreigners in Thailand to hold majority of shares. Foreign investors may hold a majority shares or all shares in promoted project depending on the BOI consideration. Such BOI-promoted company will not be restricted under FBA. Thailand has a long history with the Japanese migration, and in recent years, the Japanese population has grown to a large extent. According to the Ministry of Foreign Affairs of Japan, Thailand has the fourth-largest Japanese expatriate population of any city in the world and outside of Japan, only behind Los Angeles, New York City, and Shanghai. Bangkok is the home of two-thirds of all the registered Japanese residents in Thailand. As an investor, Ping sees the opportunity and is narrowing his target market on the Japanese. “My focus is Japanese expats. In Thailand we have a very big industry of estate, which is I will say more than 40% foreigner factories are Japanese. And Japanese, their habit is to stay together. I myself focus on Japanese expat market because it’s really stable and you can get high rental return. The Japanese, they don’t pay rent themselves. The company pays for them, so that’s why the money from Japanese is quite stable and the price is quite good,” said Ping, who disclosed that he normally receives 8%-12% of rental return from the Japanese. The recent hotspot target in Thailand property market is the Sukhumvit area, near Bangkok city centre. Sukhumvit Road is a major road in Thailand, and winds through a major surface road of Bangkok and other cities. It follows a coastal

Rental Yields in Bangkok BANGKOK Apartments 65 sq. m. 120 sq. m. 200 sq. m. 350 sq. m.

TO BUY 208,910 474,240 792,400 1,165,150

COST (USD) MONTHLY RENT 1,188 2,029 3,360 5,982

YIELD (p.a.) 6.83% 5.13% 5.09% 6.16%

TO BUY 3,214 3,952 3,962 3,329

PRICE/SQ.M. (USD) MONTHLY RENT 18.28 16.91 16.80 17.09

Districts researched: Bangkok: Bangkok: Sukhumvit Road, Silom, Sathorn, Riverside, Rama III, and Central Lumpini Source: Global Property Guide (Last Updated: Apr. 15, 2014)

House Price Index (Commercial Bank Mortgage Loan)

Single-detached house (including land) Town house (including land) Condominium Land

Index Growth (% Y-O-Y)

NOV 2014

OCT 2014

SEP 2014

119.7

119.6

119.3

5.1

4.7

4.2

Index

134.4

134.5

134.2

Growth (% Y-O-Y)

7.6

8.4

Index

155.9

155.4

156.0

Index

153.7

152.9

153.0

Growth (% Y-O-Y)

7.1

9.0

11.4

Source: Bank of Thailand Remark: 1) Single detached house including land, town house including land and condominium price indices have been constructed by using hedonic regression method. (seasonally adjusted, 3-month moving average) 2) Land price index has been constructed by using mix adjustment method with fixed weight. (seasonally adjusted, 3-month moving average) 3) Quarterly house price index is the data of the last month in each quarter. 4) Semi-annual house price index is the quarterly average house price index. 5) Annual house price index is the semi-annual average house price index.

route from Bangkok to Trat in the far southeastern corner of Thailand, and runs over 400 km in length. “The most popular area in Bangkok are the properties near BTS (Bangkok Transit System),” said Ping. “BTS is the new skytrain in Bangkok. So, that’s a simple investment. The most popular area is Sukhumvit because we have BTS in Sukhumvit. And a lot of foreigners stay nearby Sukhumvit. It’s the centre of the city.” The developments in Sukhumvit are mostly condominiums, Ping added. According to Ping, foreigners typically come to Thailand for its residential properties. Fascinatingly, most of the properties in Thailand are freehold. As for Malaysian investors, while numbering a few, there are indeed some who already owned properties in Thailand. “I’ve seen some, but not many,” said Ping, “I would say in 100 units, if I see Singaporeans buy six, Malaysians buy maybe one or two.” Foreign buyers should consider investing in Thailand property market since there is no regulation on the price, but only on the type of properties. The current developments are assuring that the property market as well as tourism will be surpassingly magnificent in a few years to come.

“FOREIGNERS CANNOT BUY LAND IN THAILAND, CANNOT BUY EMPTY LAND, CANNOT BUY LANDED PROPERTIES ALSO. FOREIGNERS CAN ONLY BUY HIGH RISE UNITS, BECAUSE BUYING HIGH RISE IS NOT CONSIDERED THAT THEY OWN THE LAND. THE WHOLE IDEA IS THAT THE GOVERNMENT DOES NOT ALLOW FOREIGNERS TO OWN A LAND IN THAILAND. -PING www.propertyinsight.com.my | FEBRUARY 2015

PERSONALITY OF THE MONTH

SKY IS THE LIMIT The pursuit of success with Datuk Dr Maznah Hamid

By: Fara Aisyah Firdaus Petial

alaysians might know her as ‘The Iron Lady’, but those who know her better might be familiar with her moniker ‘The Jerlun’. Datuk Dr Maznah Hamid, a native from Jerlun, Kedah, is the executive chairman of Securiforce Group Companies. Datuk Dr Maznah, who admires the success story of Oprah Winfrey, shares her personal stories with Property Insight and reveals how her quest of success did not come easy. Hardship is the main reason of her triumph, Datuk Dr Maznah believes. She stresses that to achieve dreams, one must “start on your own and from below,” she says. The stepping-stones towards success are meant to be climbed one after another. At a young age of 17, Datuk Dr Maznah moved to Kuala Lumpur to seek success. Her first job was a teacher in an academy, and after two years of being someone’s employee, she quit and started being an independent home-tutor at the embassy and VIP residential. This was the turning point of her life when she realised that in order to be prosperous, she must not rely on jobs with salaries. In fact, she personally requests Property Insight to deliver this message to the readers: “In order to be successful, one must not depend on salaried jobs. You can do salaried jobs, but make sure to do it only for temporary.” That moment sparked her passion of entrepreneurship. Interestingly,

48 FEBRUARY 2015 | www.propertyinsight.com.my

she believes that she has one of the important traits of an entrepreneur: being observant. While she was pondering the first business she would want to venture in, she observed her surroundings and realised that all of the residential homes where she went teaching had a guardhouse with armed bodyguards. At that instant, she could foresee that security will be a demand for years to come, and the idea of Securiforce came into being. In 1979, she married her husband Datuk Shaheen Mirza Habib, and

together took a vow to make their security company dream come true. “We begin our married life and business, in the life of hardship. We had to move to ‘illegal home’ with no electricity and water supply, because it cost only RM50 per month,” she remembers. A year later, Datuk Dr Maznah successfully established Securiforce using her own savings, not borrowing a single sen from the banks. She pursued more capital to the extent of doing a lot of jobs at the same time,

such as selling insurance, teaching, translating, becoming an estate agent, as well as doing multi-level marketing. In her business principle, Datuk Dr Maznah believes that the foremost capital is the entrepreneurs themselves. Datuk Dr Maznah has built Securiforce from the ground up by her own perseverance and tenacity, without help from financial and government institutions, making her one of the respected businesswomen. Her entrepreneurial spirit was rewarded when Datuk Dr Maznah was nominated for the prestigious Entrepreneur Award by the Malaysian Malay Chamber of Commerce in 1990, and she bested all the other prominent male businessman for the honour, earning her the title of ‘The Iron Lady’ ever since. Throughout its over 30-years history, Securiforce now has earned the reputation of being a truly reliable provider of security services, gaining the trust and confidence of a broad range of commercial organizations extensively across the country most notably for banks and other financial institutions, government agencies, retail chain outlets and other commercial entities. The company’s venture into Logistics Service vis-a-vis groundto-air and air-to-ground services has now enabled Securiforce to have branch offices outside Malaysia. The company currently has branch offices in Singapore, Bangkok, China, Korea, Turkey, and Germany. Then, by using the returns she made from Securiforce, she established a number of subsidiaries under it, and among them was her first venture into property development via Danau Lumayan Sdn Bhd. With Datuk Dr Maznah as chairman and her husband as the director, Danau Lumayan began developing 102 acres of land in Bandar Tun Razak in June 2000 and to date the company completed approximately 3,000 units of residential apartments, condominiums and shop lots. The inspiration to start property development comes mainly from her love of entrepreneurship. From there, comes the desire to share and help

other people. “Our interest started off when we received feedback from the public indicating the needs of having properties with affordable pricing,” Datuk Dr Maznah recalls. “Responding to the public needs, we started looking into the industry and try to understand how the system works and whether it is possible to assist the public on the issue of pricing. We noticed that most developers had priced their products on the higher side and it is possible to actually develop the product being requested. From there onwards, we formed the company and started our development projects till to date.” Her development projects are performing well beyond expectations. Since Danau Lumayan is supported by the affordable pricing, all of their projects are able to appreciate between 80% to 100% within the time frame of one year. “Our recent completed project Astana Lumayan were sold at RM269,900, before Bumi discount, and the highest subsale value was at RM670,000,” she discloses. Suasana Lumayan is Datuk Dr Maznah’s current development project with the expected GDV of RM280 million and rental yield estimated to be more than 10%. “At the moment, we are constructing 900 units of Suasana Lumayan, a condominium with sizes of 1,142 sqft and 1,364 sqft. The selling price is at RM299,990 and RM345,990 respectively. The project is now 95% complete and will be delivered for VP sometime in September 2015,” she shares. Datuk Maznah’s next development project is the Rumah Mampu Milik (512 units) in Taman Naga Mas with a GDV of RM154 million and size of units at 1,035 sqft. The selling price will be RM300,000 per unit, according to her, and the project will be launched in the first quarter of 2015. For this particular project, Danau Lumayan is assisting the Dewan Bandaraya Kuala Lumpur to fulfill the federal government aspirations to provide affordable homes to the public. At the same time, the company is looking into pockets of land in Sepang, Selangor, as well as small parcels within Kuala Lumpur itself.

www.propertyinsight.com.my | FEBRUARY 2015

PERSONALITY OF THE MONTH She considers the land price to be the most important part in a project investment. “As we are involving ourselves with affordable houses, the Gross Development Cost (GDC) is very much paramount in ensuring the viability of the project involved,” she says. “There are the high-end and the middle-class projects. The purchasers are also classified in both areas, with the higher volumes being within the middle class groups,” she explains. “The pricing is now somewhat going into higher end, thus causing the market to be very much competitive for the middle class as they compete in procurement with the higher income groups. More developers who are willing to sacrifice their margins are required to be made available to assist the middle class groups. The government should assist and provide guidelines and a clearer regulation to ensure that the middle class groups are protected at all times whilst ensuring no overpricing of bubble effect to take place within this industry in Malaysia.” Additionally, she asserts that most Malaysian developers priced their products on the higher side, “most probably due to their size of land bank which is relatively small.” As a developer, she believes that the price can be lowered, provided always that the land price is somewhat reasonable. “The developers with large land banks should always try to assist the market by controlling the price structure and not to allow others to take advantage

“HER ENTREPRENEURIAL SPIRIT WAS REWARDED WHEN DATUK DR MAZNAH WAS NOMINATED FOR THE PRESTIGIOUS ENTREPRENEUR AWARD BY THE MALAYSIAN MALAY CHAMBER OF COMMERCE IN 1990, AND SHE BESTED ALL THE OTHER PROMINENT MALE BUSINESSMAN FOR THE HONOUR, EARNING HER THE TITLE OF ‘THE IRON LADY’ EVER SINCE.

from the house buyers. This can be done by assisting the government to cap the price at reasonable rates rather than allowing developers to charge excessively,” Datuk Dr Maznah says. She also advises young investors to always study the property markets before committing themselves. “They need to study on the price structures and compare the rates accordingly. This will ensure that the market price remains stable. Panic purchase will only contribute to hike in pricing and will only benefit developers rather than themselves.” Despite her over 15 years’ experience in financial and business management, Datuk Dr Maznah believes that it will not benefit her if she does not share it with other people. Therefore, she created Maznah Motivational Centre (MMC) to organise seminars for entrepreneurship and human development. The key assets that she is trying to apply to the public through those seminars are resilience, guts feeling, immunities, persistency and sustaining power, and she aims to raise and instill the spirit of entrepreneurship into every mankind. Apart from that, she is also the Board of Advisor of Accelerated Business Schools Inc., USA and Success Resources Pte Ltd. At the same time, she is also actively 50 FEBRUARY 2015 | www.propertyinsight.com.my

involved in Yayasan Sultanah Bahiyah, Kedah, as the Board of Trustee member. Besides from being the president of Malaysia Association of Professional Speakers (MAPS) and Persatuan Usahawati Wanita Wilayah Utara (USAHAWATI), she is a member of Institut Keusahawanan Negara (INSKEN). She also holds a PhD, Doctorate in Business Administration in Entrepreneurship, Motivation and Human Development Capital from Central State University of New York, and decided not to keep her knowledge to herself. She sincerely wants everyone to also learn from her experience, so she published a book entitled Motivasi Memburu Kejayaan (Malay and Chinese versions), Book Mini Series 3K Secrets - Success, Wealth and Happiness, Transformasi Diri (Menuju Kejayaan, Kebahagiaan dan Kekayaan), and Himpunan Doa Harian. Datuk Dr Maznah Hamid’s love for entrepreneurship is endless. She remembers her tough days like it was only yesterday, at times oblivious that she has now become people’s inspiration and has changed so many lives. She is the living proof that anyone can be successful in both business and personal life, while at the same time not forgetting our responsibility for the society. She has wholeheartedly proven to us that the sky is the limit.

“IN ORDER TO BE SUCCESSFUL, ONE MUST NOT DEPEND ON SALARIED JOBS. YOU CAN DO SALARIED JOBS, BUT MAKE SURE TO DO IT ONLY FOR TEMPORARY. — DATUK DR MAZNAH

www.propertyinsight.com.my | FEBRUARY 2015

ADVERTORIAL

BETTER SAFE THAN SORRY ADDITIONAL SECURITY MEASURES TO SAFEGUARD PROPERTIES OF HOME AND COMMERCIAL OWNERS By: Benignus Cheah

n today’s modern society, the term security at home would allow the mass public to think up of gadgets such as CCTV cameras, alarm systems, gated communities and such. Yet, even with all these in placed, break-ins and burglaries still take place with nothing to stop these events from happening the moment they get through into the house of their victims. With important documents stored at one end of the house, jewelleries and precious metals on another, and cash hidden in various spaces in their homes,

I 52

homeowners convince themselves that all of their valuable possessions are safe. However, little do they realise that seasoned thieves and burglars are well aware of how to find the locations of such precious items. Furthermore, in times of emergencies such as when a fire breaks out, it will take homeowners time to rush and gather all their important documents and precious items of gold and cash, spread across the premises of their house, before they need to evacuate to save themselves. Swooping into the industry with

FEBRUARY 2015 | www.propertyinsight.com.my

a leading brand, just as its name implies, Falcon Safe brings years of expertise with its locally manufactured and internationally imported safe deposit boxes. With over 30 years of experience in the industry, Falcon Safe brings only the best to provide for the peace of mind of homeowners. Falcon Safe, a top local brand of Malaysia, prides itself with safe deposit box products that are catered and customised to every need of its customers. Internationally recognised and certified by both SIRIM and the Forest Research Institute Malaysia (FRIM), safe deposit boxes by Falcon Safe have been tested and proven effective in real life situations. Falcon Safe Marketing Sdn Bhd director Francis Yeoh states that the certificates received are important as they determine the standards of not just the industry but also the value paid by their customers. “Certificates say everything,” he emphasises. “We tested all the products, the full range of the safes, in SIRIM and in FRIM. They would do burglary test which is compliance to the international rating, the UL certificate. So they tested all the safe following their procedures: drill, hammering, jack attack to try to force open, or torch attack,” says Yeoh. At times of unforeseeable emergencies such as when a fire engulfs homes and factories, owners would be spared from the frenzied scramble of having the need to collect and salvage what little documents

they can as Falcon Safe provides them with their Fire Resistant Safe, which is industrially tested by using world class standards. “In our test, we actually put [the safe] in the furnace and burn at 1000o Celsius. It will take at least one hour before the paper inside the safe turn into charcoal. Papers inside safes turn into charcoal at 180o Celsius, so we managed to make the content inside the safe lower than 180o Celsius inside the 1000oC furnace,” says Yeoh. Just as we cannot expect a single function to solve all the problems in the world, we also require different characteristics of a safe in order to

safeguard our precious items, be it gold, cash, jewelleries or important documents such as our birth certificates and passports. Among most owners’ concerns, other than preventive measures which compel them to look at alarm systems and complex locks for their doors, are the concern of when a break-in happen. However, security measures can only prolong break-ins and burglaries from happening by buying enough time to either make the burglars to give up or for the enforcement authorities to arrive at the scene. This statement is true especially for the owners who possess safe deposit boxes in their premises. “When you buy a safe, it’s like you’re buying time,” says Yeoh. “There’s no safe in the world that can completely resist burglar attacks. You’re buying time – how long it takes for burglars to force open the safe.” Nowadays, technological advances have pushed forward innovations only imagined in the world past. The same can be said with the evolution of safe deposit boxes. “A safe is not just a safe to us,” says Yeoh. “We’re not just selling a safe to keep things. How do you get alerted if someone opens the safe while you’re away? So, for our safe, we integrate them with the latest technology from

Germany and USA.” He elaborated, “The first generation of safe boxes are fixed with normal combination lock – the mechanical combination lock and key lock. That’s it. When it comes to second generation safes, you can know who opened the safe and at what time someone opens the safe. So, this is what house owners can integrate in their purchase when they choose their safes.” Yeoh continues on to say, “In case someone opens your safe, it can link an alert to your smartphone, and it can also link the alert to the police. The police will come to the house within 15 minutes. How we made this happen is that we changed the conventional mechanical locks to digital locks connecting to your alarm system or to the police” In some movies, we have seen vaults and safe deposit boxes filled to the brim with endless amount of cash in them. While in today’s society, most would go to the bank to deposit their cash, there still exist businesses and homeowners who prefer to keep their money near them. To cater to such clients, Falcon Safe also manufactures safes using modern day technology that outdoes the second generation safes. “Safes cannot tell you how much the cash you put in. You only can know

Falcon safe deposit lockers

www.propertyinsight.com.my | FEBRUARY 2015

ADVERTORIAL

“THERE’S NO SAFE IN THE WORLD THAT CAN COMPLETELY RESIST BURGLAR ATTACKS. YOU’RE BUYING TIME – HOW LONG IT TAKES FOR BURGLARS TO FORCE OPEN THE SAFE. –YEOH

who the users are. Now we have the 3rd generation safe, we call it the ‘Smart Safe’,” says Yeoh. He explains, “Today, if you bank in say, RM1,000, the safe will tell you immediately, ‘This user A already banked in RM1,000.’ Today, an owner, let’s say me, I’m traveling in the USA, yet I can know what time my staff banked in cash and how much. This is a smart safe, a third generation safe. If Property Insight readers are interested

ABOUT FALCON SAFE

alcon Safe Marketing Sdn Bhd was named to symbolize that our safety box is compatible yet leading in the market. The company’s vision and mission is to provide solutions for cash keeping, valuable items storage

and document protections. We manu-facture safety boxes and cabinets with high technology safety elements and features which are able to create the sense of security and peace of mind for the users at their workplace or home. The company has now become the market leader domestically, providing services to 80% of the banks in Malaysia. We also specialise in OEM customisation and export to the countries worldwide .

FEBRUARY 2015 | www.propertyinsight.com.my

The manufacturing operation is based in Meru, Klang, with a factory built up of six hectares wide space with state-of-the-art production machineries. The production teams are experts in safety boxes and security products with 33 years of experience. Backed by a strong, experienced and excellent production and management team, Falcon Safe has constantly improved its product design by incorporating the latest technology to ensure high quality and innovative products. Our security products are famous for its strong and solid design. Our prices are economical despite its high quality compared to others. As Falcon Safe is moving towards ISO 10201, we embarked on rapid products innovation through Internal Product Testing which was done by group of expertise internally and by

in this kind of safe, they can come to us and we will consult them. The smart safe is only for cash.” With all this features installed into the safe, burglars would think twice about wanting to waste their time in order to attempt breaking into the vault while risking their necks with the possibilities of getting arrested. However, some would argue that there exist thugs nowadays who would just hijack the entire safe to a remote location before taking their sweet time in breaking open the access to the safe. To counter this and to provide a peace of mind to owners and would-be owners, Yeoh reassures, “If the door is attacked, there is a vibration sensor that you can install in the safe. If the safe vibrates by any method, drill or whatever, it will still trigger the alarm. This alarm will send a signal to your phone. In addition, in case someone robs the safe away, you can still install a GPS device in the safe to track where the safe is. This is very commonly used in Australia. They have this kind of tracking device in their safes. Everywhere the safe goes, it can still trigger.”

As there are investors in many forms, even property investors who would like to invest in other forms of investments where opportunity lurks and rise, Yeoh shares that having a safe deposit box can also be presented as a form of investment for opportunistic investors. “There is an investment opportunity for a safe. Why I say so is because you can rent it out actually. If you have extra money which you wish to invest, you can always consider. There are a lot of banks that shut down their safe deposit box services. Some investors, see this an opportunity, and they open their own safe deposit boxes rental services. What you do is you actually construct a strong room in your premise. Then you hire security guards, secure the six-sided of your walls, and then you can just open business like this. For customers who don’t want to keep their valuables in their house,

they can come to your safe deposit box service.” He gives a tip: “How you make money is by leveraging the risk. Nowadays, a safe deposit box company can get their Return-on-Investment (ROI) between 18 to 24 months, based on your investment amount.” He reiterates, “Safe is not just a safe, you can also invest and make money from there.” With the ever growing need for security of every kind to protect the people from burglaries and safeguard them from the possible natural disasters, Falcon Safe strives to provide only the best of the best in Safe Deposit Boxes to not only keep with current trends but also to be one step ahead in the industry. For more info, you may contact Marcus Eu, general manager of Falcon Safe Marketing Sdn Bhd at 013 – 754 4333.

external independent bodies such as SIRIM and FRIM. These independent laboratories are responsible in proving their security products are on par with other international brand by undergoing tough independent tests that certify our products for a certain level of burglary and fire resistance. Today, Falcon Safe is renowned as a leading local brand in Malaysia and countries in South East Asia. It is also an international trademark as most of the safes are exported to more than 30 countries including Australia, Middle East, Africa continents and Asia Pacific. We aim to expand our product lines and achieve scales in our international market such as European, US, and China mainland.

www.propertyinsight.com.my | FEBRUARY 2015

INVESTOR NEXT DOOR

THE BELIEF IN NUMBERS An investor’s formula for property investment results in financial rewards “ONCE YOU DO YOUR MATHS RIGHT, YOU’LL NEVER GO WRONG.

By: Fara Aisyah Firdaus Petial

oming from a middle class family, Pang Hiok Boon realised that he would not be able to save much if he depended only on monthly salaries. When he graduated college at the age of 24 years old, Pang started working as a computer programmer, and after a lot of efforts working overtime and saving money, he went searching for ways to invest. Not long after, an opportunity came along that made Pang and his brother jumped into a property investment devoid of specific vision and mission. Without any knowledge in investing nor a decent plan, the two brothers bought a shoplot in Johor Bahru, combining their hard-earned money to buy the commercial property only because of the price. “The price was too good to resist,” Pang recalled. During launching, the property was worth RM420,000, Pang told Property Insight. “Because the developer couldn’t sell the properties, they dropped the price by almost half. So I bought it at RM260,000.” When Pang and his brother started receiving a good rental return on the property, more than enough to cover the instalments, the two brothers decided that property investment was a good deal after all. Five years later, they bought another shoplot for RM200,000 in Happy Garden, Kuala Lumpur, again buying without any strategy but mainly because of their growing belief in property investment numbers. The second investment was another success. The desire to be a better property investor finally persuaded Pang to enroll in a property investment training course in Kuala Lumpur to start honing his skills. The two brothers then decided to part ways due to the distance between them, with Pang’s brother remaining to invest in Johor Bahru properties, and Pang on his own in Kuala Lumpur. “After the training, the research, and the teamwork, I managed to find my first properties with no money down,” Pang said. “This one is on my own. Starting from 2009, I was full force on my own. Because I already acquired the skills, I believed it’s going to work.” The course taught him a formula that offered not only purchasing with no money down, but with money returns as well. “I bought my first property at the price of RM250,000 and rent it at RM1,700 per month. The market price was RM285,000,

56 FEBRUARY 2015 | www.propertyinsight.com.my

so it’s below market value. Our strategy is that we need to find a property below 20%, and with 8% returns.” This first property of his, a condominium in Subang USJ which he rented out to students, quickly provided him with RM6,500 cash back. Using that amount as capital, Pang then bought a high-end condominium in Sri Hartamas. “The best deal I ever had during that time,” Pang described proudly. He bought the property at the price of RM430,000, a lot below market value of RM530,000, which gave him cash back of RM47,000 in three months. His target market for the unit was expatriates, hence Pang engaged an interior designer for the condominium, which cost him RM40,000, but the rental yield proved the renovation was worth it. Pang’s main focus since then has been studio units of condominiums. “Most of my portfolios are studios,” Pang said. “I found that studio’s capital

appreciation is much faster and the demand for studio is higher. The demand for rental is also higher.” Interestingly, Pang also has passion in interior design. He attended a course in interior design, and with the knowledge, Pang now does the interior design of his properties by himself. He also came to know several direct suppliers and hence can lower his renovations budget, and consequently lower his rent to compete for renters. Pang, whose day job is a manager of software development company, described himself as naturally good in numbers and he found that his knowledge in mathematics and computer science have been very useful in his property investments. He counselled that investors always need to get their numbers right in property investment. “Once you do your maths right, you’ll never go wrong,” Pang said.

CAPITAL APPRECIATION

With his math expertise, he created a worksheet that eased the calculation tasks in his property investment. “I came out with my own Excel worksheet with formulas. So I just put in the price and it will generate all the figures: how much the down payment is, how much the rental returns, all the expenses - it will calculate all. That way, it will be very fast and I don’t have to worry. As long as it meets the criteria and the location is good, I’ll buy. So starting from 2009, it’s non-stop buying.” Yet, Pang sold the two properties in 2013 because of a false alarm that property bubble burst was coming. He waited for a year, and after nothing actually happened, he started to

regret his decision to unload his portfolio, and decided to start buying again. Now, Pang said that regardless of the floating fuel price, GST or other measures announced by the government, he will continue investing in the property business. “After the lesson learned, I think that all the properties I selected, and why I selected it, they must be good properties. I shouldn’t even sell it. If the location is good, I should keep it since I don’t even need to serve the loan [because of rental], and on top of that I have a good cash flow. The longer I keep them, capital appreciations will be higher.” Pang thinks that property price is definitely going up in 2015. “It will go up because of the GST. If the [construction] materials go up, prices have to go up and developers have to charge you a higher price.” However, he added, “Property market is always up and down, but I think for a property in a good location, the price will never go down. It goes up all the way.” Now, Pang owns a number of properties in Johor Bahru, Melaka, Kuala Lumpur, Petaling Jaya and Klang, focusing more in the southern region with plans to eventually invest abroad. His target markets have been either students or expatriates, and his properties are all for long-term rental yields.

TOUGH LOVE

The ‘tough landlord’ and ‘landlord from hell’ are aphorisms jokingly given by Pang’s friends to him for being extremely strict to his tenants. Pang even once had to firmly order

“AFTER THE LESSON LEARNED, I THINK THAT ALL THE PROPERTIES I SELECTED, AND WHY I SELECTED IT, THEY MUST BE GOOD PROPERTIES. I SHOULDN’T EVEN SELL IT. IF THE LOCATION IS GOOD, I SHOULD KEEP IT SINCE I DON’T EVEN NEED TO SERVE THE LOAN [BECAUSE OF RENTAL], AND ON TOP OF THAT I HAVE A GOOD CASH FLOW.

a particularly troublesome tenant to vacate the property in the middle of the night. Tenancy maintenance is the most challenging part and has the most headaches in the property investment, according to Pang. Hence, before he accepts any tenants, he will firstly lay down his rules with them. “These are the rules. If you break the rules, I’m sorry, I have to ask you to leave,” he would forewarn them. “I have many challenging experiences in tenancy management, and I take it as a learning process. But I managed to solve it and end it quite well. In tenancy maintenance, you need to have the skills. You have to be very firm. You don’t have to be violent, but be very firm,” he explained.

www.propertyinsight.com.my | FEBRUARY 2015

INVESTOR NEXT DOOR

ADVICE ON PROPERTY INVESTMENT Pang had some experience in stocks investment before he became a property investor. “When I worked on a project in Bursa Malaysia, we also invested in stocks. We always hear a lot of rumours. So we just followed the rumours to buy, and then we got stuck. My shares, until now, I still cannot sell. I think it’s high risk and it’s based on a lot of rumours,” he described. “I’m more interested in properties because properties can appreciate over time. It’s like an asset that everybody wants to have,” Pang said. Property investment has changed his life by earning money for savings, he believed, while still being able to work in his chosen field of software development. “Property investment is totally different. To save RM50,000, RM100,000, is not a problem at all. It’s so easy to get RM50,000. I find that property investment, starting from the beginning to the end, you’ll have a lot of money to earn. If I know a property and then I

recommend my friend to buy, I’ll earn a commission. If I find a good lawyer and I recommend to my friend, I’ll earn a commission. So, along the way, at every point I can earn money. Even from the interior design, I can also earn money.” Pang’s advice to the new investors is to go for the small developers who sell reasonable price and at below market value. He also advises the future investors to start early. This is because, according to Pang, the earlier investors start, the longer tenure they will have. As a consequence, longer tenure will give investors smaller instalments in the long run. “Compared to me, I started very late – in 2009. So my tenure is getting shorter. I need to fight for time. When I started in property investment, age was one of the factors. I have to do it fast. Even after I do it fast, it’s still not fast enough. The government imposed LTV 70%, so I need to be even faster. The later you buy, it’ll get expensive,” Pang said. “So the earlier you buy, the better. That’s why I always encourage people: you should start as early as you can.”

PROFITABLE INVESTMENTS

PANG’S FIRST PROPERTY Location

Subang USJ1

Property Type

Condominium

Year of Purchase

2009

Purchase Price (2009)

RM250,000

Market Price (2009)

RM285,000

Price psf

RM235

Rental

RM1,700

Loan Margin

90%

Loan Repayment

RM1,400

Loan Tenure

Resell Price (2013)

RM340,000

PANG’S SECOND PROPERTY

58 FEBRUARY 2015 | www.propertyinsight.com.my

Location

Sri Hartamas

Property Type

High-End Condominium

Year of Purchase

2009

Purchase Price (2009)

RM430,000

Market Price (2009)

RM530,000

Price psf

RM430

Rental

RM3,200

Loan Margin

90%

Loan Repayment

RM2,600

Loan Tenure

Resell Price (2013)

RM660,000

Source: Pang Hiok Boon

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LEGAL

ASSETS OF THE INCAPACITATED PROPERTY OWNERS

FEBRUARY 2015 | www.propertyinsight.com.my

enerally, according to acts such as Income Tax Act, “incapacitated person” means a minor or a person adjudged under any law to be in a state of unsoundness of mind, whereas in some circumstances, we may use incapacitated persons to refer to “persons with disabilities” include those who have long term physical, mental, intellectual or sensory impairments which, in interaction with various barriers, may hinder their full and effective participation in society.

However, in any given instances, incapacitated person generally means person who has undergone unfortunate event that either caused them to lose sanity of mind, or physical impairment that ultimately resulted limitations in earning a living or making legal decisions. Normally, assets will be maintained just as they were prior to the occurrence of the incapacitation. Family members cannot simply think that they have inherited the rights or duty to help make conscious decision on how to manage assets when a person becomes incapacitated. Having said that, you cannot sign on behalf of your spouse who was incapacitated even though you have a medical officer certifying on the condition. I once helped a client complete a permanent disability life insurance claim, and in doing that, we had to get the thumbprint of the incapacitated person in place of signature; the spouse could not sign on behalf of the patient, despite the obvious close relationship. All movable and immovable assets shall remain in the ownership of the incapacitated, thus rendering the assets in passive state. Any stock investment will be riding the volatility, and next of kin can only watch in pain as the family wealth shrink in a falling market. Many people have not thought about this consequence but it will be hugely impactful, and could be worse than the event of death because at least we could distribute the assets to the beneficiaries in that case.

POWER OF ATTORNEY Power of Attorney (POA) is a legal document where the principal appoints an agent to act on the principal’s behalf to deal with certain things and scope that will be outlined in the document. Related to healthcare and incapacitation, a special type of power of attorney that is used frequently is the “durable” power of attorney (DPOA). DPOA differs from a traditional power of attorney in that it continues the agency relationship beyond the incapacity of the principal. Most often, DPOA is created to deal with decisions involving either property management or health care. One can use durable power of attorney to appoint a family member or friend to make decisions in the event one cannot make them. Of course, a person must be legally competent at the time he or she signs a DPOA for it to be legal.

“IF THEY ARE DEEMED TO BE MENTALLY INCAPACITATED, THE ASSETS WILL BE BINDING TO THEIR NAME PERMANENTLY UNTIL DEATH HAPPENS, AS THIS CONDITION WILL PUT THEM INTO A SITUATION WHEREBY THEY ARE LEGALLY INCAPACITATED TO EXECUTE TRANSFERRING OF THE ASSETS. If the incapacitation is related to mental, then of course the patient will not be able to make informed and sound decision as he or she is of unsound mind. Interestingly, even if the incapacitated person who are of unsound mind had the awareness and wrote a Will in that condition, the Will would not stand and assets are going to be frozen as well since no one could do anything to those assets. This is because for a Will to be valid, some conditions must be fulfilled. For instance, there must be two witnesses (who are not the beneficiaries of the Will), and more importantly, the person who write the Will (Testator) must be in sound mind. A person can be conscious, have awareness, but he may not be having a sound mind or be able to make independent decision and thought process. If such is the situation, the Will won’t be valid if it is challenged because the Will resulted from someone who is not able to think independently and logically. Therefore, the patient’s assets will still be at its status quo, as of prior to the unfortunate event. The incapacitated patients will still have the asset being registered to their name. Basically, they still own the assets. It may also simply mean that if they are deemed to be mentally incapacitated, the assets will be binding to their name permanently until death happens, as this condition will put them into a situation whereby they are legally incapacitated to execute transferring of the assets. The next of kin also cannot do anything to represent the patient to make any decision on how to manage the assets, unless there was a power of attorney signed prior to this. Obviously, liabilities of the incapacitated person will continue to be liable against his wealth and capacity. Generally, in a mortgage agreement there is a clause stating “any legal limitation, incapacity or the borrower or the power of any attorney, partner, agent, or other person purporting to act on behalf of the borrower or irregularity in such borrowing or the incurring of such liabilities shall not affect the borrower’s liabilities under this agreement.” So, someone has to come out to help on the repayment, or the most convenient and wiser way is that there are insurance proceeds planned for the purpose of debt cancellation if the incapacitation www.propertyinsight.com.my | FEBRUARY 2015

LEGAL has its root in being permanently disabled or due to critical illnesses such as cancer. If the properties are still under encumbrance, such as mortgaged to bank, then the bank may execute its rights and use the Power of Attorney to foresell the properties to recover the bank’s stake, in the event the mortgage repayment ceases. If the property is shared and mortgaged to the bank, then the part-owner(s) will have to make sure the repayment will continue to be made, or else the property will be repossessed or simply be force-sold. If the shared property is not mortgaged to bank, then the part-owner will be stuck with the property until the incapacitated part-owner regains capacity or passes away (and that shareholding will be inherited by the deceased’s beneficiary, who may invoke some challenges to the part-owner such as objecting to sale of the property or insisting to have the right to reside in that property since they hold equitable share of the said property). Cases and numbers related to mental incapacitation are on the rise in part because culturally we lack the awareness of consulting with psychologist or psychiatrist, and to be open to communicate on our personal stress and pressure with loved ones. Their support could mean a world when we face mental stress, so do not let it develop into a serious issue. An obvious plan before we become afflicted with an incapacitated disease is to consult medical advisor. The not so obvious, but equally important move, is consult a legal advisor as well as financial planner. Both will be able to help you to deal with different aspect of the problems. Under financial planning practices, we at VKA Wealth Planners will conduct our first line defense by conducting a comprehensive Financial Plan for our client. By doing such processes, we are able to identify areas of financial concerns and find ways to address them before it happens. It will limit or even address most of the financial concerns we talk about earlier. Read more next month on what property owners and their family members can do to prepare themselves prior to or after the unfortunate event of incapacitation.

FEBRUARY 2015 | www.propertyinsight.com.my

“IF THE PROPERTIES ARE STILL UNDER ENCUMBRANCE, SUCH AS MORTGAGED TO BANK, THEN THE BANK MAY EXECUTE ITS RIGHTS AND USE THE POWER OF ATTORNEY TO FORE-SELL THE PROPERTIES TO RECOVER THE BANK’S STAKE, IN THE EVENT THE MORTGAGE REPAYMENT CEASES.

ABOUT THE CONTRIBUTOR

Kevin K.M. Neoh is a Licensed Financial Planner who is licensed by the Securities Commisions Malaysia and Bank Negara Malaysia. Kevin is one of the financial planner from VKA Wealth Planners Sdn. Bhd. Malaysia’s fastest growing home-grown financial planning firm. Kevin can be contacted at kevinneoh@vka.com.my

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FINANCE

VS BLR

IT’S ALL ABOUT THAT BASE (RATE) ffective from 2nd January, 2015, the Base Lending Rate (BLR) system was replaced by Base Rate (BR) framework. BR will be used as the main reference rate for new retail floating rate loan such as mortgage, overdraft, unit trust loans, personal financing, share margin financing, which are applied for individual customers. So what is BR? Why is there a need for change? How about the existing loans on BLR? What should we do as a borrower? All these will be answered in this article.

consumers. Under this cost-plus structure, spreads will always be positive as it would not be possible for financial institutions to offer lending rates below the reference rate. Financial institutions will be given the flexibility to determine their respective benchmark rates. The expected strong link between the Base Rate, market interest rates and the Overnight Policy Rate (OPR) will facilitate more complete adjustments to retail loan repayments when market interest rates adjust to an increase or decrease in the OPR.

WHAT IS BR? BR is a new interest framework where the interest rate charged by banks on a loan comprised of BR and the desired spread. The BR will be determined by the banks’ benchmark cost of funds (COF) and the statutory reserve requirement (SRR). Other components such as borrow credit risk, liquidity risk premium, operating cost and profit margins will be reflected in a spread that charged on top of the BR. This increases the visibility of factors underlying changes to the Base Rate. The greater transparency in turn will enable more informed decision making by

WHY THE CHANGE? “The BLR has become less meaningful as a basis for the pricing of loans, as the retail lending rates on new loans being offered by the industry are at a substantial discount to the BLR,” argued Governor of Bank Negara Malaysia (BNM) Tan Sri Dato’ Sri Dr Zeti Akhtar Aziz. The BLR framework, which has been introduced since 1983, served as the main reference rate on consumer’s loans in Malaysia. Since then, the determination and implementation of BLR has evolved with the development of the financial sector. In the recent period, however, BLR has become less relevant as a reference

FEBRUARY 2015 | www.propertyinsight.com.my

rate for loan pricing, as lending rates on new retail loans are being offered at substantial discounts to BLR. On top of that, BLR lacks transparency, which makes it difficult for consumers to make an informed decision. The BR framework aims to gives a better and more transparent reference rate to provide better decision by consumers in making choices among the many loans products that are offered by banks. The BR system will be better in reflecting the changes in cost arising from monetary policy and market funding conditions, while encouraging greater discipline and efficiency among financial institutions in the pricing of retail financing products.

WHICH EXISTING LOANS ARE ON BLR? The BR is used for new loans and refinancing of existing loans extended from 2 January, 2015, and onwards. After the effective date, BLR-based loans prior to 2015 will continue to be referenced against the BLR. All banks are still required to demonstrate the differences between BLR and BR for consumers. Figure 1 illustrated how BLR and BR work. If the bank previously offered ELR of 4.85% on the loan amount, the same ELR should be offered under BR. All banks are advised to offer the same effective lending rate with the implementation of BR in Q1 2015 by BNM.

10 INTERESTING FACTS THAT YOU NEED TO KNOW ABOUT BR!

WHAT IS EFFECTIVE LENDING RATE (ERL)? ELR, in other words, means what is the interest rate we will have to pay for the mortgage. Each individual bank has its own way of deriving the BR and hence create situation where BR differs from bank to bank, unlike the old BLR where all the banks are the same. However, all the different rates can be compared with the ELR to know the ultimate rate changed by banks. The formula is as below: BR + SPREAD = ELR The major banksâ&#x20AC;&#x2122; BR and indicative ELR reported to BNM are indicated in Figure 2. WHAT SHOULD WE DO AS A BORROWER? 1. Compare the ELR quoted by different banks before taking out a new loan. 2. Ask for a Product Disclosure Sheet (PDS) providing you with the ELR and total repayment amounts for the loan/ financing facilities plan to take out. 3. Ask the bank to explain the factors which may lead to a change in the BR. 4. The monthly repayment amount will increase or decrease when there is a change in the BR. 5. Assess whether you can continue to afford the loan repayments if the ELR increases in future.

1. All revolving loans such as overdraft will need to be replaced to BR from BLR upon annual review or renewal of the loan. 2. There should be no price hike with the implementation of BR at least in Q1 2015 as advised by BNM. 3. If you refinance your existing loan which is on BLR, your new loan will be priced on the new BR framework. 4. However, for any top-up loans offered under an existing housing loan reference against BLR, your existing bank may continue to use the BLR. 5. The new BR framework is only applicable to loans applied by individual customers. For the pricing of other loans such as corporate or SME loans, banks have the flexibility to determine the choice of adopting the BR or continue to use the BLR. 6. Banks are allowed to adjust the BR to reflect changes in market rates even though the OPR has not been advised in the future on your loans that is referenced to BR. This is the same like BLR framework today. 7. On the other hand, banks are not allowed to make changes on the spread during the financing tenure unless you do not service your monthly repayments promptly. This means the spread rate on your mortgage will remain constant throughout your mortgage tenure. 8. When banks adjust the BR in the future, the same corresponding adjustment will need to be made on the BLR by the same magnitude. Nevertheless, exception is given for the year of implementation. 9. For any upwards or downwards adjustment to the BR and the BLR, banks will need to revise the monthly instalment of your loans to reflect on the changes (not to revise the mortgage tenure) unless the differences in the instalment amount is less than RM50 per month or by a small percentage as predetermined by the bank, whichever is lower. 10. The mode of notification by banks to you on the revised repayment amount could be in writing or via electronic means (including emails and SMS) but banks are required to notify you at least seven days ahead of the change in monthly instalment.

www.propertyinsight.com.my | FEBRUARY 2015

FINANCE Figure 1

Source: Smart Financing Co.

Figure 2: Banking institutions: New Base Rate comparison

Source: Business Times, Affin Hwang Note: ELR is effective lending rate

ABOUT THE CONTRIBUTOR Smart Financing Co. was founded by a team of senior bankers and the primary objective is to help consumers to stay abreast on the latest banking policies especially towards Mortgage Financing and to educate consumers on various banking practices and policies.

FEBRUARY 2015 | www.propertyinsight.com.my

BUSINESS AS USUAL? Experts weigh in on how, if any, the new Base Rate affect loans and property market By: Fara Aisyah Firdaus Petial

he new Base Rate (BR) has no impact on lending for the property sector, according to Sarah Lim, vice president of Equities Research Department at Kenanga Investment Bank Bhd. “Effective lending rates are likely to remain flattish as banks still want to remain competitive,” stated Lim. However, she thinks that “what may change is the type of financing products offered by different banks depending on their BR – but like I mentioned earlier, effective impact will be largely unchanged.” Michael Yeoh, mortgage consultant and CEO/founder of GM Training Academy PLT agreed with Lim’s opinion. “From my personal view, the new base rate will have a very minimum effect on new loans application and also the property market. I would say there is not much difference on new effective lending rate as compared to before Jan 2 under the Base Lending Rate (BLR). Give the market a couple of months to stabilise as the rate is still very new.” He added that “although different banks have different base rate, unlike the old BLR where most banks are the same, the average lending rates are determined by the spread. It is the spread above the base rate that determines the Effective Lending cost.” Yeoh explained, “Like the past, borrowers who have good credit rating will be able to negotiate for lower spread on a case to case basis which is lower than the banks official published rate. I have also noticed that, under the new base rate, there is a bank who prices the spread depending on different category of credit risk of the

borrower. Higher risk would mean higher spread. Going forward, not only the banks determine the interest rate, loan borrowers will also have a role to play. They must make sure that their credit standing is good in order to get better interest rates.” Charles Tan, founder and principal writer at real estate portal kopiandproperty.com, elaborated further, “Currently, most banks have decided to adopt the three-month Kuala Lumpur Interbank Offered Rate (KLIBOR) as their BR. This not the most important because whether it’s BLR or even BR, the final rates would depend on many other circumstances especially the borrower’s current credit history. All banks would like to keep their Non-Performing Loans low, thus they would strive to attract those with good credit history first, and offering competitive rates.” His advice is that a good credit history helps a lot in determining the final effective lending rates offered. “Size of the loan and the type of property would be the other two inputs for consideration as well. Most of the time, the higher the amount that you borrow, the lower the rates would be.” Tan also emphasises that all banks would have their own computation of the BR and final Effective Lending Rate. “Do note that whatever indicative rates being published, there are always cases where under certain circumstances a lower rate may be given. The spread would have to depend on how efficient (lower cost of operations) as well as their cost of funds.” He furthered his point: “For example, banks with lots of depositors, whether in savings or in Fixed Deposits, would have a lower cost of funds and can thus offer a lower effective lending rate when necessary. That’s why, on and off, you may see some banks offering slightly higher fixed deposit rates than usual for a short period of time. This is for them to get ‘cheaper funds’.” In Tan’s opinion, BR is not meant to affect the loans and property market. “The loans would still be based on how competitive the banks are in the market and the property market is still based on demand and supply. Thus, BR is just an enabler and will not be a main

determinant. “In terms of interest rate policies however, it will be up to Bank Negara Malaysia (BNM). For example, if the property market is getting way too hot, BNM can adjust the rates upwards resulting in higher effective lending rates which will curb some of the borrowing and thus in theory may cool down the property market,” Tan said. Per contra, licensed financial planner of VKA Wealth Planners Sdn Bhd Kevin Neoh opines a different point of view regarding BR. “If you buy into the press release from banks and central bank that BR has little or no impact on your loan, think again,” Neoh cautioned. He believes that “under BR framework, banks that lack cost efficiency will have to drive down their own profit margin in order to remain competitive with the bigger firms or with firms that are run more efficiently. This will also punish banks who have higher cost of fund and they may not be able to squeeze their own profit margin for long run, thus it may also results in some merger or credit risks for these banks as they may have to take up borrowers with sub-standard credit rating or history in order to protect their margin and profitability, at the expense of higher business risks, of course.” Neoh added, “In order to maintain lower cost of funds, banks are also rushed into FD war nowadays.” Hence, he urged consumers to be smart and financially literate to avoid falling to FD promotion that offers attractive rate, as most of these FD promotions actually have effective rate that is much lower than the advertised rate. Neoh concludes by reminding that “BR for each banks will likely change over time and therefore do not fall into the fallacy that in few months from now, the one with lowest effective lending rate today will remain the same, because the BR today is reflective of the bank’s cost of fund. It is higher today than in the past maybe partly due to the higher rate they offer for FD. This may change again soon, unlike the BLR framework whereby the Effective Lending Rate will most likely remain same unless BLR is increased or reduced.”

www.propertyinsight.com.my | FEBRUARY 2015

STRATEGY

PROPERTY MARKET IN

WHAT CAN WE EXPECT he year 2014 has been a relatively stable year for our property market with many cooling measures introduced by the federal and state governments. In 2015, the market is expected to face more headwinds ahead, starting with sharp drop of crude oil price which is anticipated to affect the economy domestically and worldwide. The cooling measures of increase rate of Real Property Gain Tax, lower loan margin for multiple housing loan owners, abolition of Developer Interest Bearing Scheme (DIBS) and minimum purchase price for foreign purchasers have been putting a lot of pressure onto the property market since 2014 and, with the volatile crude oil price, the market is expected to be a somehow challenging year.

LESS PRIMARY PROPERTY MARKET SUPPLY Developers are adjusting to the market conditions by offering less launches and at the same time reviewing their plans and strategy. This applies only to those big gun developers who sit on low holding cost of development land they have owned for a while before the price surge in the last few years. Those who have purchased land recently probably have no choice but to take a hit on their profit margin by offering more attractive promotion to capitalise their sales. We can see developer is trying to “subsidise” the purchase price by offering delayed payment scheme and early bird discount. With slower take up rate, less launches and longer interval between launches will be a new norm in contrast to the good old days of selling off in few hours’ time. Next phase launches being pulled forward on the same day will not be something that we take as normal anymore in this year’s market. MORE AFFORDABLE/MID-RANGE PRICED FROM DEVELOPERS With new recent ruling in 2014 of limiting foreign investors owning property with minimum purchase price depending on location indicates that Malaysian government is trying

FEBRUARY 2015 | www.propertyinsight.com.my

to cool down the market in the affordable priced sector. Thus, most developers have been adjusting their offerings towards to the more affordable priced market segment. The market is responding to various government introduced measures and thus it is not foreseeable that more measures shall be introduced in 2015, which may further negatively impact the demand. Under such cooler market condition, it will never go wrong by selling affordable housing with increasing migration and growth of population. However developers, being a profit-oriented organisations, will always try to maximise profit by selling lifestyle and high-end products which normally bring in a higher profit margin. This also means that less lifestyle products will be introduced in the market, such as high-end condominiums and luxurious bungalows. It will be a challenge for those who have recently entered the market with

Malaysia HPI Percentage Change Over 12 Months 01/2000 - 02/2014 % 15 12 12.2 9 6 6.6 3 0

0.6

01/2000

Figure 1 Source: LaurelCap

All Houses

01/2014

expected high land cost to launch high margin products into the market under a robust market condition previously.

PERCENTAGE CHANGE NUMBER OF PROPERTIES TRANSACTED 20 15 10

9.1

8.9

5 1.6

% Change

0 -5

-1.9

0.2

-2.7 -5.2

-10

-9.5

-15 -20 -25

H1 2010 H2 2011 H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 H2 2013 H1 2014

RUSH FOR GST DEADLINE AND COOLING PERIOD AFTER This will be a year of GST implementation and there have been talks and worry about inflation. In general, inflation will be there with the introduction of GST but it is also expected to normalise thereafter. It is expected that people will try to purchase any big ticket items that attract GST such as commercial properties before its implementation and thereafter take a wait-and-see position for few months. Thus, Q1 will see some surge in commercial property sales and thereafter a cooling down period in Q2 and Q3. The market should be expected to acclimatise to the new normal GST-era starting Q4 and 2016. With the low oil prices, the market may be cushioned off with less price push effect, but nobody knows what will happen next as the Saudis might just change their minds and lower their oil production supply to give crude oil price a push. This GST will serve as a price pushing factor for the property market but we should not be expecting it to be an overly major effect as GST is fixed at 6%.

SUBDUED NUMBER OF TRANSACTIONS AND LOWER TOTAL VALUE TRANSACTION It is no secret our market is slowing down in 2014, with the government introducing various cooling measures inclusive of lower loan margin allowed for third housing loan and limiting developers from offering developer interest bearing scheme or commonly known as DIBS. The number of transactions has decreased, according to National Property Information Centre (NAPIC) latest report of first half of 2014. All sectors of property inclusive of residential, industrial and commercial except agricultural property reported a decrease of -1.9% to -9.5% in the half year reported period (See Figure 1). It is believed that this trend is going to stay on for a while in 2015 due to cooling measures from the authority and generally more cautious sentiments from purchasers and investors. However, we think the market is generally cooling down moderately but we definitely do not expect any meltdown. Developers will continue to introduce products that match market conditions such as more landed residential houses and more affordably priced properties.

LIQUIDITY AND COST OF FUNDS The market has been enjoying easy accessible funds with low interest rate since global quantitative easing and is still enjoying the low funding cost. Our market has been fuelled by optimistic sentiments and easy financing, resulting in accelerated property prices. However, with Bank Negara ruling of tightening leading guidelines, loan rejection rate has increased and market is expected to consolidate. The tighter lending guidelines have chased away many speculative purchasers; nevertheless, cost of funds remains low and is not expected to shoot up significantly in view of stable inflation rate and no signs of overheating of our economy on a macro level. Overall, 2015 seems to be of a mixed bag or rather a consolidating year ahead. While we foresee a cooler year, we are also expecting some opportunities from many subsegments of market. It is probably a relatively good year for first time purchasers by taking their own sweet time to view and compare before deciding. As for property investors, they might want to enter the market, as ownersâ&#x20AC;&#x2122; asking prices have started to become more realistic. Speculators will surely be taking a holiday with many cooling measures working against them at this point of time. Projects offering the right products with reasonable pricing will continue to attract buyers. Thus, property hunters should start and continue to look around for good deals in this buyersâ&#x20AC;&#x2122; market. Good deals are always available when the market is cooling down.

STABLE PROPERTY PRICES Property prices will be stable and may experience slower growth in 2015. The housing price has been slower in growth in 2014 with general price growth of 6.6% from the peak of double-digit growth reported by NAPIC (see Figure 2). It is expected that housing price will stabilise this year as the buyers are no longer in a rush to enter the market.

PROPERTY LOCATED ALONG LRT /MRT LINE The extension of LRT and new line of MRT will be a game changer for Klang Valley folks. People will definitely have more options in terms of where they stay/work and commute to, with more stations and better connectivity. The effect will be fully realised come 2017/18 when the whole

RESIDENTIAL COMMERCIAL

INDUSTRIAL AGRICULTURAL

Figure 2 Source: LaurelCap

www.propertyinsight.com.my | FEBRUARY 2015

STRATEGY line is in full operation. Many urban folks can opt to commute by train instead of relying mainly on private cars. It is also important to note that since we have been habitually so heavily relying on private cars when travelling, people will need some time to adjust to this mode of travelling. In the mid-term if not long-term, many places will surely be enjoying the benefit of such rail connectivity and will increase in value. Emphasis should not only be limited to newly launched properties but also existing buildings which are connected to the stations or at least within walking range. OFFICE SPACE LIKELY TO EXPERIENCE INCOMING SUPPLY WITH PRESSURE ON RENTAL Newer offices located in centralised strategic locations will continue to be sought after. While we know that the office market continues to face new supply of space with new buildings completing this year, vacancy rate may not be affected across the board. Newer buildingsâ&#x20AC;&#x2122; vacancy rate in Klang Valley is still healthy, especially in the city centre and sought-after area such as Petaling Jaya with overall vacancy rate stood at 79% and 74% for Kuala Lumpur and Selangor state respectively.

NEW LAUNCHES OF EXCITING MAJOR PROJECTS TRX, KL 118 (Menara Warisan) and Sg Buloh will be closely followed in 2015. These places will be catalysts of growth to the areas themselves and areas near to the projects with better amenities and connectivity developed as part of the developments. CHANGE OF GOVERNMENT POLICY Township development is still an While we have a few cooling measures attractive option. Big developers will imposed, and in fact may seem to have continue to introduce new launches too many at this point of time, the by phases, offering new attractive government may reverse or backtrack lifestyle in the township. In Klang Valley, some cooling measures to keep the there are a good number of township property market buoyant in 2015. One developments still attracting interest segment of the market worth looking from the market such as Rimbayu into by the government is the first time near to Kota Kemuning, Eco Majestic purchasers segment or own-occupy and Setia EcoHill in Semenyih. This purchasers who genuinely need a shows that preference of township house but having difficulty in terms living is still very much favoured for its of deposit and loan approval. Housing facilities, gated security, open space needs is still a primary social concern which our government need to take care and highway connectivity. In 2014, deals of some large tract of land were of. We have seen, over the years, our government made changes to its policy announced and those developers may launch their development, but we donâ&#x20AC;&#x2122;t in respond to the market condition. foresee it coming into the market in full Changes in policy will have a significant bearing on the market which may affect scale under such market condition. the source of demand and supply. This means tenants have more choices and may be able to bargain for better terms for existing purposed-built office space, while it may not be so for those looking for newer buildings with strategic location, prime address and near to train stations.

FEBRUARY 2015 | www.propertyinsight.com.my

ABOUT THE CONTRIBUTOR Kit Au-Yong and Stanley Toh are from LaurelCap Sdn Bhd, a property valuation, consultancy, auction, real estate and property management firm with HQ in KL and a branch in East Malaysia.

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Harvard-educated Tan Sri Dato’ Dr Lin See Yan talks about the paradox between the economy and real estate

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STRATEGY

BUY PROPERTY NOW OR BUY LATER: WHICH IS RISKIER? hen I bought my first property 12 years ago, it was the toughest – both financially and mentally. Financially because both my wife and I had only worked for five years and our savings were not high, plus both of us had never read a lot about properties before and thus had never prepared for it financially. Mentally stressed too because we felt buying a property was very risky. What if we lose our jobs? What if the apartment that we bought loses its value? There were many unanswered questions. Majority of friends our age then did not own property, so we had nowhere to ask. Between buying early or buying later, which is riskier? How about if we rent? Would there be less risk? What can we do to manage some of these risks? Let’s explore a few today.

CAN YOU AFFORD? Save more before we buy, some would advise. True? The truth is, our salaries are growing slower than property prices. Since the majority of us are working people, there is no way that our salaries would rise faster than the rise in property prices. The reason is because whatever the quantum of increase that may happen, it will be based on the base. We may have a 10% increment but this number is likely to be smaller than a 5% increase in price of the condo that we intend to buy. That’s because the 10% based on a RM5,000 salary can give us an additional RM6,000 per year. The condo that we are aiming might be RM600,000 but 5% meant it has increased in price by a whopping RM30,000. The solution is to buy one when

ABOUT THE CONTRIBUTOR Charles Tan is the founder and principal writer of kopiandproperty.com, where he blogs about his personal views about the property market. He is also a regular contributor to some property related publications in Malaysia.

we can afford it. If we could not afford a RM600,000 unit, how about RM400,000? If not RM400,000, what about RM200,000? Never stretch our financial limit too thin – that is the highest risk of all! We may lose everything! A good property is a hedge against future price increase and of course once we have bought, the price increase is now an advantage to us. ‘Time awaits no men’ is applicable in many situations including the purchase of our first home.

OPPORTUNITIES LOST Property bubble is bursting soon, some say. First, do we believe a bubble is bursting soon? If we believe in one, the next question would be when is ‘soon’? 6 months? 12 months? 18 months? What’s our strategy today and after the bubble bursts? If we believe, then have we saved as much money as we can for the past many months? Did we refrain from any unnecessary spending? If we have saved none but continue to cry ‘the bubble is bursting soon,’ it is not a risk but it is a huge loss of opportunity if the bubble really did burst as per our expectation. When we always miss all these great opportunities, in the long run it becomes a huge loss. To those who believe that they must wait until the bubble bursts before buying, think really carefully: if we did not dare to buy before the bubble burst, would we suddenly be so brave to buy when everyone we know tells us not to buy during bad times? The younger generation can no longer afford anyway. It’s better to just rent. Renting forever is never a risk. However, if we’ve been renting for 10 years and suddenly we feel like it’s time to buy our first property, that is a risk. Can we afford one at that time? Do note that the difference between paying rental and paying for a mortgage may be very little. The major difference would just be the first 10% before we get a loan for the remaining. In other words, the rental money could have been your mortgage payment. Assuming the property price rises only 5% per year, after 10 years, that is a compounded 63%. A RM500,000 home today would be RM815,000 by then. That’s not too bad right? The

“THE REASON WHY WE SHOULD NOT THINK OF PROPERTY AS A ‘SURE RICH’ FORMULA IS BECAUSE IT IS NOT. IF THERE ARE ‘SURE RICH’ FORMULAS, WHY ARE MAJORITY STILL IN THE MIDDLE CLASS?

FEBRUARY 2015 | www.propertyinsight.com.my

only issue is that house prices for the locations we like has been rising faster than 5% while areas which have hardly moved may not be something that we like. So, the younger we are, the better it is to buy because we can stretch the repayment period longer and when we are more capable, we can choose to shorten or pay faster LATER. Do not kill ourselves right from the beginning. Understand the risks when we are not using our wealth to continue creating new wealth. My friend told me proudly that she aims to finish paying for her RM700,000 property within 10 years. She wants to be debt-free. A good goal, but to be honest, there is very little difference in having RM700,000 and doing nothing with it versus finished paying for our first home and staying in it. In both cases, the RM700,000 is not doing anything. Yes, the house price is increasing but we are not doing anything with it unless we refinance. If we want to do a refinance, then why pay so much in the first place? If we do have some money, use it to create wealth. Please remember that overstretching financially is far riskier than paying off the home loan early and doing nothing with it. The rich are becoming richer. We the middle class are becoming poorer. Take out our smartphones, google for ‘income disparity’ and look at all the countries shown. Except for countries we have never heard of, income disparity is happening in every

country in the world today, even in our neighbour down south. Rich people are becoming richer because of how they manage their wealth creation process. The middle class thinks they are poor and believe there’s nothing that can be done. Without any doubt, this would become true after a while. One reason for some of these richer ones is because they create more wealth with the wealth they have. Most of the time, it includes property investment. The question is, do we want to think like the rich people or the middle class? The choice is actually for us to make. However, if we think that we should now rush out and buy a property, that is a big risk. The reason why we should buy a property when we can afford one is so that we do not need to struggle even harder a few years down the road when our savings are even lower versus the property prices. The reason why

“THE YOUNGER WE ARE, THE BETTER IT IS TO BUY BECAUSE WE CAN STRETCH THE REPAYMENT PERIOD LONGER AND WHEN WE ARE MORE CAPABLE, WE CAN CHOOSE TO SHORTEN OR PAY FASTER LATER. DO NOT KILL OURSELVES RIGHT FROM THE BEGINNING.

we should not think of property as a ‘sure rich’ formula is because it is not. If there are ‘sure rich’ formulas, why are majority still in the middle class? Personally, how many friends have told us about their failed property investments? I have quite a number. One told me that he bought a huge semi-detached in a very new area. He thought staying there would be awesome. When it was completed, he did not like the location enough and today, he could not sell that property and yet he has to pay for another one for which he is staying today. Think clearly. If we do not like the location, never believe someone would like that location. Majority of us actually think alike. That’s why middle class is the largest pool in all countries including developed ones. In conclusion, I ask: have we invested in ourselves? For those who are reading this now, I think you are on the right track because you are reading a property magazine. Sufficient knowledge allows us to make a better decision. It does not mean there are zero risks. However, with the right mindset and a good understanding about ourselves and the property market, we are able to manage the risks much better. Under normal circumstances, it may be better to buy earlier than later. However, the highest risk of all is to pretend like nothing is going to happen and do nothing. Happy investing or waiting for the right opportunity.

www.propertyinsight.com.my | FEBRUARY 2015

STRATEGY

Simplified Financial Planning for All inancial planning (FP) is often misconstrued as only for the rich. Whilst it does present an opportunity for the wealthy to grow their wealth, it remains a necessity for those who are not. But is FP all about growing wealth alone? The Financial Planning Association of Malaysia (FPAM) defines FP as a process of meeting one’s life goals through proper management of one’s finances. With competing goals in life such as retirement and providing for children’s education while managing life’s uncertainties and risk, achieving the right balance may be a daunting task. Speaking to the right professional such as a Licensed Financial Planner would definitely help one in fitting the pieces together. In essence, financial planning can be broken down into three main components as depicted in the FP Pyramid in Figure 1, namely Wealth Protection, Wealth Accumulation and Wealth Preservation or Distribution.

WEALTH PROTECTION This component essentially deals with financial instruments such as life and health insurance, accident coverage and the like. It can be observed

DISTRIBUTION

Figure 1: Financial Planning Pyramid

that Wealth Protection sits at the bottom of the FP Pyramid, forming a foundation for the financial plan. As such, it is the first component that requires attention when reviewing your FP. Most are usually excited about Investments and some even end up prioritising Investments over Protection. Whilst growing wealth is important, having to withdraw investments (due to illness, disability or loss of income) in an untimely manner may have serious risks to your investment portfolio as one can’t guarantee whether the markets will be up or down then. Using an instrument like insurance, one can transfer the risks on his or her financial plan to an insurance company. The risks being referred to here are of two types: the first is one’s ability to draw an income (e.g. premature death, disability and illness) and the second is potentially unexpected large expenses (e.g. hospitalisation). In times of need such as premature death, disability, illness or hospitalisation, most would agree that no other asset class can match the returns that comes with the pay-out from an insurance policy. In this day and age, there are various types of products offered by insurance companies which covers different events of risks. Essentially, there are five areas of protection one needs to look at for a comprehensive coverage: 1. Premature Death 2. Total and Permanent Disability 3. Critical Illnesses 4. Partial Disabilities 5. Hospitalisation Coverage The first four is associated with income protection whereby if any of the covered events takes place, the sum insured under that particular event is paid out to the policy holder or the

74 FEBRUARY 2015 | www.propertyinsight.com.my

ABOUT THE CONTRIBUTOR Fazrul Farouk is a Licensed Financial Planner with I-MAX Financial and specialises in the area of personal financial planning for individuals and families as well as the corporate segment. He can be contacted at fazrulfarouk@imaxfinancial.com.my.

family of the policy holder. The payout can then be used for medical and living expenses of the policy holder and his or her family due to the temporary or permanent disruption to their income. Hospitalisation coverage on the other hand takes care of the hospital bills incurred due to the illness or disability, which would otherwise have to come out from one’s savings or disposable income. It is also important to note that today, it’s not just about having insurance in place – the emphasis is mainly on having the right types of policies in place and having a meaningful amount of it, enough to make a difference. Whether a whole life (policies with cash value) or a term policy is most suitable is really dependent on one’s needs and financial situation. One can determine the right type of policy and the ideal amount of coverage for him or her by speaking to a licensed financial planner who would be able to demonstrate the methods to determine coverage needs.

WEALTH ACCUMULATION The need to grow your wealth is to meet life’s goals such as funding for children’s tertiary education and retirement needs. Beyond these two core objectives in one’s financial plan, the idea of growing your wealth is to at least keep up one’s purchasing power with inflation. Many, however, go into investing their money without first establishing the objectives or goals for their investment. It is important to first establish the objective as this will guide one on how much is required to be invested in order to meet the goal (be it lump sum or regular investments

Monthly Retirement Income (today)

Actual amount (monthly income) required @ 55*

Total Retirement Fund Required @ 55**

RM5,969

RM1,242,708

RM5,000

RM9,949

RM2,071,180

RM8,000

RM15,918

RM3,313,888

RM10,000

RM19,898

RM4,142.361

RM3,000

*Current age of 35 with inflation @ 3.5% p.a. ** Post Retirement Investment Income @ 7% p.a., inflation @ 3.5% p.a. and Retirement period of 25 years (to age 80)

Table 1: Calculating Retirement Needs

Course

Average Cost Today*

Actual Cost in 18 Years**

B. Arts

RM105,000

RM252,695

B. Business & Commerce

RM120,000

RM288,794

B. Engineering

RM180,000

RM433,191

MBBS

RM600,000

RM1,443,972

* Total Tuition Fees for Private Universities in Malaysia (@2015) ** Education inflation @ 5% p.a. Actual cost in 18 years time

“MOST ARE USUALLY EXCITED ABOUT INVESTMENTS AND SOME EVEN END UP PRIORITISING INVESTMENTS OVER PROTECTION. WHILST GROWING WEALTH IS IMPORTANT, HAVING TO WITHDRAW INVESTMENTS (DUE TO ILLNESS, DISABILITY OR LOSS OF INCOME) IN AN UNTIMELY MANNER MAY HAVE SERIOUS RISKS TO YOUR INVESTMENT PORTFOLIO AS ONE CAN’T GUARANTEE WHETHER THE MARKETS WILL BE UP OR DOWN THEN.

Table 2: Tertiary Education Fund Needs

or a bit of both), the time period one needs to stay invested and the right type of investment vehicle that may be considered for that particular objective. Table 1 outlines two main points: firstly, the actual monthly retirement income required (at the age of 55) to have the same purchasing power for a similar amount today (with general inflation at 3.5% p.a.) and secondly, the associated fund required at age 55 for a retirement period of 25 years (to age 80). Likewise, Table 2 outlines the targeted education fund required by the time one’s child is ready for tertiary education assuming planning is done as soon as the child is born. These two observations simply highlight the importance of setting your objectives and starting early. Upon understanding investment objectives, one can evaluate the investment vehicles that can best fulfill the investment objective. As the saying goes, “Don’t put all your eggs into one basket,” diversification is key in minimising risks in an investment portfolio. Hence, one may consider several asset classes into his or her portfolio. The two traditional methods of growing wealth include investing in properties and the share market. Whilst property investment is more self-managed, investing in the share market can be done through professional management via funds (unit trust funds) and private managed accounts (discretionary accounts).

WEALTH DISTRIBUTION Commonly referred to as estate planning (EP), wealth distribution has to do with how one’s assets (and liabilities) are distributed after his or her demise. This component of the FP Pyramid is often an overlooked one – it is perceived to be only required to be in place once a person has many assets in place. The truth of the matter is that regardless of the number of assets one has, EP is of utmost importance especially if one has dependents and would like to ensure that his or her estate is administered and distributed in the most efficient way as possible (time & cost) according to his or her wishes. Upon death, all assets are frozen; to unfreeze and to get it distributed to the family, it may easily take up to 3-5 years, depending on the complexity of the estate. The instruments that come into play when talking about EP would commonly be a Will and possibly a Trust as well. Other than having the estate distributed according to his or her own wishes, one would also be able to cut down the time significantly for the estate to be fully distributed with a basic Will in place. For parents, having guardians of their choice appointed in the event of a common tragedy (taking away the lives of both parents) is also done through a Will. A Trust on the other hand allows wealth to be preserved and transferred to family on a gradual manner. This is important

especially if the family members are not used to dealing large amounts of wealth and to ensure it sustains them through a specified amount of time. It is important to note that having a Will in place does not necessarily ensure the wealth is distributed in the most efficient manner. It has to be done together with EP (with a professional). Having a Will written is itself the final and implementation stage of EP.

SUMMARY As described earlier, financial planning is really a process – products only come into play at the implementation stage. While it is important to have the bigger picture in place through planning, a plan will remain as a plan until it is implemented using financial instruments or products. Emphasis also needs to be put on having a review done periodically (ideally once a year), to ensure that one’s heading is in the right direction towards his or her financial goals. Speaking to the right professional like a Licensed Financial Planner would definitely make it easier for one in striking a balance between competing goals in life.

www.propertyinsight.com.my | FEBRUARY 2015

STRATEGY

How to plan for maximum security for your property with the lowest

esidential burglaries are quite common in Malaysia. In KL, burglaries are found to occur mostly in single residences which have a neighbourhood with large expatriat ecommunities. Some burglars have entered homes while the occupants were there, tied them up and threatened with weapons. While violent incidents during residential burglaries are rare, one U.S. citizen was killed in an apparent home burglary in 2013. Ensuring proper security of your property is an extremely important issue. Think over it for a while, and you’ll actually see that it’s not too difficult to get into most homes. Most residential robberies take place in broad daylight. The main problem lies in the fact that most properties have very weak points, which can be easily discovered and taken advantage of by seasoned thieves. Some weak points are actually very obvious. For instance, an open door, a tree within a few steps from your upstairs window, or even a window left open on a warm night, allows easy access to potential criminals. Despite people thinking that they are careful enough, burglaries are still very common. However, while the weak points leading to most burglaries today are somewhat hidden, you can fix them easily. Just making a few changes, property additions or modifications of behaviour can help you become a less appealing target.

ENSURING MAXIMUM SECURITY AT THE LOWEST COST A properly secured property provides extra appeal for both the insurers

and the prospective tenants. The improvements do not cost a fortune if you know a few tricks. Let’s check out these low-cost ways to secure your property:

BASICS YET INEXPENSIVE ADDITIONS ● Checking the locks on windows and doors can be a good point to start with and in most cases, absolutely compulsory. ● Adding padlocks to garden gates, front and back doors makes it difficult for intruders to break in. ● A peephole on the front door allows residents to identify visitors before rushing to open the door. ● Street and house numbers should be clearly visible to allow emergency services find your property with ease. ● Add an extra bolt or door closer to back door, which will stay locked when residents leave through the front door. ● Signs or window stickers saying “These premises are under CCTV surveillance” or “Beware the dog” can warn the burglars that the property is secured with alarms, even if there is no dog or alarm there. ● Add some dummy security cameras at visible locations. Remember to install it tight, not by using a double-sided tape which won’t last long. ADDITIONS FOR BETTER SECURITY ● Motion-sensitive security lights run by solar power can be very effective and cost-efficient. ● Curtains can help prevent burglars from checking out what’s available inside for stealing. ● Security screens or grilles on windows and doors provide good barriers against burglars. ● Use small household safes, which are available at a very cheap price.

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“THE MAIN PROBLEM LIES IN THE FACT THAT MOST PROPERTIES HAVE VERY WEAK POINTS, WHICH CAN BE EASILY DISCOVERED AND TAKEN ADVANTAGE OF BY SEASONED THIEVES. ● Use an alarm system. There are different types of home security systems including monitored, self-monitored, wired and wireless systems, all available at different pricing points. OTHER COST-FREE SECURITY TIPS These common-sense tips can help to reduce the risks of burglaries or intrusions: ● When you’re not at home, remember to keep all your doors and windows locked. ● Don’t leave around ladders, garden tools or such things outside as they can be used to break into your property. ● It’s wise not to write your address on random items like a keyring. ● Spare keys should not be left outside your home. Expert thieves know how to find them. ● Don’t leave your car keys at a location where it’s visible from the windows. ● When you go on a holiday, stop all mails and deliveries. ● Maintain good relationship with neighbours.

● Don’t store the exact location of your home on your GPS devices. If your car is stolen, you don’t want the same criminal to be eyeing on your house, too. ● Posting about your holidays over social networking sites can alert the thieves that your home is unoccupied. Make sure your privacy settings are toggled properly before posting any credible information. ● Always have an inventory list prepared for all your valuable items including the detailed descriptions, makes, models, serials and price, in case you need to claim for insurance in the future. It’s a good idea to take photos of the items as well. ● Engrave solid possessions where possible with specific markings such as your special code or driving licence number. By marking your possessions, not only do you stand a higher chance of recovering your personal belongings, it also makes it harder for the thief to sell your items.

PROTECTION USING HOUSEOWNER INSURANCE Insurances can be a good way to secure your property in case of burglaries or intrusions. Houseowner insurance is the most popular and effective insurances for protecting your precious property. It is quite cheap compared to other insurance policies. In general the premium of houseowner insurance is less than 0.3% of property’s value and less than 1% of contents’ value.

ABOUT THE CONTRIBUTORS KC Lau and Dr Ong Kian Leong are both co-founders of the first ever online property investment course for Malaysians, called Property Method (www.PropertyMethod.com).

The biggest benefit of houseowner insurance is that your investment will be fully protected. You will never have to worry about anything bad happening to your property. Houseowner insurance pays you for loss or damage to the building including fixtures and fittings, interior decorations, walls, gates and fences caused by specified perils, such as theft and violent breaking into or out of the building. Some houseowner insurances even cover loss or damage due to fire, lightning, explosion caused by gas, riot, landslip, etc., which are more extensive

than fire insurance. There are even some insurers offering extended coverage to personal valuables and liability.

PREVENTING BURGLARY WITH SECURITY SYSTEM CCTVs or security cameras are a great way to protect your property from burglary. There are great assets for both single-family and multi-family properties. They can help to monitor the driveways, parking lots and the exterior boundaries of your property to make sure that all criminal or suspicious activities are recorded. Just like any other property investment, a security system at residential homes can make you feel more secure. When set off, these security systems will alert you with a loud, blaring alarm and alert the security companies and other authorities. It’s an excellent way to protect your tenants and also for alerting you to trouble. It’s really helpful particularly when your properties are vacant and the residents or tenants are not on site.

By having the CCTV surveillance system, you can watch the feeds from the cameras when your alarm is set off. Instead of rushing out of your room to check on the security breach, you can first make sure there are no strangers in your home before you unlock your bedroom.

ALTERNATIVE SECURITY SYSTEMS Dogs are said to be man’s best friend for a reason. Apart from being your constant companion, they are great protectors of your home security. Guard dogs and watch dogs are different. If you’re looking for watchdogs, small, excitable breeds are the most suitable ones as they have an ear-piercing and high-pitched bark. However, watchdogs are not able to fend off any unexpected intruders. For that, there is the guard dog. They will attack any unwelcome visitor and its bark is good enough to scare off the intruders. Guard dogs do whatever they can to protect the owners. They can be really loyal if they are welltrained and nurtured. If you want full protection of your home, you should not leave that responsibility solely upon your dog. You can’t really put a price on the safety of your family. So the best way to ensure total protection of your property is to have both a dog and a good home security system. Now how can you find the perfect balance between cost and security of your property? It’s all very relative. If you have a small single-family home, it’s probably enough to have a guard dog and an inexpensive home security system. You definitely won’t need a high-tech, super expensive security system used in a bank vault. So it all boils down to your priorities. Security systems are available at varying price points and depending upon your need. Choose the best security system for your property, and stay safe and secure!

www.propertyinsight.com.my | FEBRUARY 2015

STRATEGY

Mr Know-It-All just listened to Kelly Clarkson’s song ‘Mr Know-ItAll’ playing on the radio. Nice song with catchy tunes. Don’t you agree we don’t really need to be Mr KnowIt-All when it comes to living in general and investing in particular? Sometimes, in these information overload era, people actually ask too much of themselves. They expect to be an expert on something before they embark on anything. Thinking you need to know it all before you do anything will mean you end up doing nothing. Nobody can know it all. There is no point in trying to know it all. All you can know is as much as you can, just so you can make the best decision at that point of time.

“AS LONG AS YOU ARE WILLING TO LEARN AND TO ASK QUESTIONS ABOUT THE STUFF YOU DON’T KNOW, THEN YOU WILL BE DOING ALRIGHT. 80

When I first bought my property, I don’t know what to do after I placed my booking. The sales agent was inexperienced and the developer wasn’t that motivated to sell (can you believe it?). I have totally zero knowledge in applying loan, didn’t know anything about property investment and basically just wanted to buy a house to stay in. From knowing nothing to slowly learning the ropes in property investing, I survived. Looking back in hindsight, how bad could property investment be? You need to learn to live with uncertainty. You can’t know everything, nor should you. But, as long as you are willing to learn and to ask questions about the stuff you don’t know, then you will be doing alright. Property investment is not a long lost art, nor is it a rocket science. In essence, it is simply buying and selling properties. If you’re good at it, you will make good money. Feeling scared is natural. Being in unknown or unfamiliar situations means you won’t know what to do. But as long as you are prepared to learn, you will know what to do. If not, you can find someone else who knows what to do. All you have to believe is when you don’t know what to do, you will find someone who does.

FEBRUARY 2015 | www.propertyinsight.com.my

It is vital to know your strengths and what you are good at. We are not built the same: where you might be very good at analysing a new project, I might be very good at structuring the loan. It’s all about leveraging and matching your skills, and understanding where you need help, especially in those areas you don’t know. For example, I don’t know plumbing. If the flush toilet is not working, I will open up the tank to check if the valve is intact. Anything beyond that, I will call my handy plumber. He deals with anything beyond that level of complication. And it’s OK for me to not know this. It’s also OK for me to continue not being Mr Know-It-All when it comes to plumbing, because I know somebody who does know. And the same applies for the best rate from which banks (cause it keeps changing), legal matters, accounting, roofing, etc. I stick to what I am good at and I find other people to do what they do best.

ABOUT THE CONTRIBUTOR KK Chua is the publisher of Property Insight magazine. He is also a registered real estate agent and an investor with more than 10 years of experience in the industry. He can be contacted at kkchua@propertyinsight.com.my