Three biggest errors people make when investing in properties

By Michael Tan

“You cannot make money buying properties in Malaysia!” exclaimed a relatively disgruntled investor from Singapore. It was a statement made when we made a visit to our neighboring country. We were in Singapore in collaboration with Malaysian Property Incorporated (MPI) to promote real estate investment in Malaysia.


We ended up having a meal with the gentleman and listening to his experience of investing in properties in Malaysia. To my surprise, he was an extremely well informed person with amicable knowledge of investments and had invested in other countries as well. However, his ventures have had somewhat mixed results. Some turned out mediocre results, some incurred losses and some were profitable ventures. He concluded saying: “Nothing beats investing in your own country”.

His story is not uncommon. I have had similar encounters with many foreign investors - both in Malaysia and abroad. After some research, I realised there were some fundamental errors that most investors made when they ventured into unknown territories or countries. I would like to share three of the most common errors made by foreign (and even some local) investors.


1st common error: To FLIP or to KEEP?
The first common mistake most investors committed is to invest without figuring out who their target market is.


First things first. Are you investing to FLIP or to KEEP? What’s flipping or keeping? Well, flipping is buying with the intention to sell with profit. Keeping is buying with the intention of profiting from renting the property out.


Properties for flipping are usually the ones with has the highest capital appreciation in the shortest amount of time. These are usually the landed properties.


Here’s a simple formula to calculate capital returns:


                                               SELLING PRICE - BUYING PRICE
CAPITAL RETURNS (%) =      -----------------------------------------------  x 100%
                                                           BUYING PRICE


The returns will be the total returns you would get. Assuming you achieved 30% returns in 3 years, the next thing you need to do is to divide that to determine your simple returns per year (as compared to compounded returns)


                                                               SELLING PRICE - BUYING PRICE
CAPITAL RETURNS PER YEAR (%) =    ---------------------------------------------  x 100%
                                                                           BUYING PRICE
                                                            -------------------------------------------------------------------
                                                                                      NO OF YEARS


Properties for keeping are the ones that fetch rental returns higher than 6%. These are usually high-rise in nature.


Here’s the formula for rental returns:


RENTAL RETURNS (%) = MONTHLY RENTAL x 12
                                        -----------------------------------   x 100%
                                                  VALUE (RM)


It is key that you decide what strategy to adopt before deciding what type of property to invest into. Also, it’s crucial to estimate the returns of investment you desire and the timeline of which to exit. Having exit strategies prior to starting is critical to your success.


Knowing your strategy before investing is crucial. Assuming you are planning to flip, next question is, who is your target market?


2nd common error: Not getting to know the area well.
“I bought into an apartment in the city center (worth RM1.8mil) three years back and I couldn’t sell it out till today!” claimed the Singaporean investor. “Who were you planning to sell it to?” I asked then. “Anyone la!” he replied.


If you go around with a strategy like that, you might end up including the super natural market as well! Look, if you don’t know who you are going to sell or rent your properties out to, why buy it in the first place?

You should know your target market very well before even investing into real estate in the area. Understand what the market needs, and what it is lack of.


What I see most investors do is to trust the developer or the agents to do the research for them. Why would you trust someone else with hundreds of thousands of ringgit (if not millions) of your own money?! Even if they were right, you still need to verify it. Remember, regardless of whether the developer or agent is right or wrong, they make their money when they sell their properties to you, and their liability stops there!


My advice for both locals and foreigners investing in Malaysia is to make the effort to visit the places of interest for you over and over again. Study the market and get to know the locals before you finally make the decision to invest.


3rd common error: Not understanding the locals
How many of you would invest into a RM14.5mil condominium near the city center with the intention to rent? How many of you would invest RM10.5mil for 1,250 sq ft of retail space in a new retail mall in Dengkil? While there may be some sane reasons to do so, majority would agree that you wouldn’t do either one of the deals. Although the examples are extreme, the common errors people do in investment are obvious here.


Some investors lose money because of this error - not understanding the lifestyle of the locals. You should always study the lifestyle of the locals.


Allow me to give a couple of examples:


"I once met an investor who focused only into FLIPPING properties. I asked him how he’s able to consistently make returns of 50% to 70% in the market, regardless of whether it was an up market or a down market.


He shared with me that he only invests in properties of RM500k to RM700k. He focuses on the trends of the people buying in the area. In other words, he focuses on the lifestyle of homeowners and what they were seeking. He further shared: “I usually ask my working colleagues, around the age group of 30 to 40, where they would buy to stay. I take note of the areas and the type of properties they would buy, should they be able to afford properties within my investment range.”


“I also keep track on the latest types of properties the developers are rolling out into the market. They usually have done their research before investing millions into marketing and developing such properties. Then I look into the areas and types and buy the best deal.”


“I never guess. I always make sure that whatever I invest into, I am 99% sure that its going to give me at least 30% returns or more, before I even bother to go it. It’s all in the research and it’s all in the network. If you want to make money, must consistently be in the market la. There’s no such thing as a good time, only a good buy!” he added with a smile."


So, if you want to make money investing to FLIP or to KEEP, does he’s advice make good investment sense? Again, most of us fail to do any sort of research prior to investing into the properties. The key to successful investment is to gather enough good information from the marketplace and make the money in the difference.


In many of my talks that I give these days, I mention to people that while it can be a good time to make money in the market, invest wisely. Keep yourself grounded and stick to the fundamentals. The best way of losing money is when you start speculating in the market.


Last advise, always remember to focus on the bottom line. Define your entry and exit points, keep to your strategies and always focus on making money.


Happy Investing.


(This article is extracted from:  http://www.starproperty.my/PropertyGuide/Finance/12111/0/0)

9. Eric Ooi, MD of Knight Frank

His view on the real estates market in Malaysia: extracted from THEEDGE FINANCIALDAILY 13th June 2011:

Snapshot of the residential market 
This market segment is the most active property sub-sector both in transaction volume and value. In 2010, residential transactions accounted for 60.2% and 47.1% of the country’s total volume (376,583 transactions) and value of transactions (RM107.44 billion) respectively.


The high-end condo market in Kuala Lumpur, which performed strongly in 2007, was dented by the global financial meltdown in 2H08. However, there was no widespread “fire sales” though selected developments reported sharp declines of about 20% from their peak in 2008.


The high-end condo market has also bottomed and stabilised since and the near term outlook remains cautiously optimistic.


In the landed homes segment, the trend is towards boutique projects within gated and guarded communities. Recently, the launch of The Mansions @ ParkCity Heights, a 19.6-acre gated and guarded development comprising 127 units of 2½ to 3½-storey parkhomes reportedly achieved 86% take-up during its priority sales launch despite the hefty pricing from RM2.7 million to RM7.5 million.


Outlook 
Landed homes growth in the next 12 months is expected to be more subdued due to rising borrowing cost with anticipated further hikes in the near term, coupled with the LTV ratio for the third loan. However, landed home prices in established locations and popular suburbs are expected to continue rising at a slower pace of 5% to 10%.


Similarly, high-rise residences in selected parts of KL City and its fringes are expected to perform well. Smaller-sized high-end units are gaining interest due to their affordable pricing.


Medium high-end condos in established and new growth areas with good accessibility, particularly along the proposed new MRT route may see more capital appreciation. They become more attractive as prices of landed properties in popular areas skyrocket. In 1H11, there has been a slight increase in average asking prices while demand remains relatively low due to limited tenants.


The outlook is cautious in the near term but competitively priced projects in good locations by reputable developers will continue to attract buyers.


Significant projects since 2007
1.  The Intermark
Developed by MGPA Asia Fund II, it involved the redevelopment of the former Empire Tower, City Square, Crown Princess Hotel and Plaza Ampang into an integrated first class asset with a prime A office building and a 4-star 540-room Doubletree Hotel which opened in August 2010.
The development of a new international green Prime A 39-storey office building named Integra Tower (NLA 736,000 sq ft) with LEED accreditation is expected to be completed by end-2012. The Intermark was recently recognised as a MSC Malaysia Cybercentre.


2.  Bangunan Lestari Kumpulan EMkay
Is the first LEED Gold certified building in Malaysia. Located in Cyberjaya and developed by the Emkay Group, the five-storey office building is occupied by Shell. Green features include use of materials with a high recycled content, energy saving equipment, storm-water management and high-efficiency bathroom fixtures.


3.  Bangsar South
Completed and ongoing components include The Horizon Phase 1 boutique offices with MSC status, Phase 2 with Green Building Index accreditation and the Park Residences.

8. Jerome Hong, MD of PA International

His view on real estates market in Malaysia:  extracted from THEEDGE FINANCIALDAILY 13th June 2011:

Snapshot of the residential market 
The growth of Malaysia’s property market generally mirrors the growth of the country. In 2010, a total of 376,583 residential transactions valued at RM107.44 billion were recorded, reflecting increases of 11.4% in volume and 32.6% in value respectively. Comparatively, in 2009, a total of 338,089 transactions valued at RM81.02 billion were recorded. There was a strong rebound from the global financial crisis, with average value per transaction peaking at RM223,270 (2007: RM182,927), reflecting an increase of 22.1% between 2007 and 2010.


Outlook 
Prices of landed homes in selected locations in Klang Valley are expected to rise further in the next 12 months due to pent-up demand and limited new supply albeit at a slower pace (5% to 10% on average) compared to 2010/early 2011 where some locations registered price increases exceeding 20%. Further possible interest rate hikes and cooling measures could dampen the market.


Prices of condominiums, particularly the high-end segment in locations such as KLCC, Mont’ Kiara and Ampang/U-Thant are expected to remain relatively flat due to lower occupational demand. In general, smaller units are in greater demand due to their lower entry costs as well as ease in leasing.


However, mid-market condominiums are expected to perform well especially those located within established and emerging suburban locations or along the proposed MRT route. The recent sharp spike in prices of landed homes has made this segment a more affordable alternative for those looking to own homes.


Significant projects since 2007
1,  Bangsar South
The development has transformed the former Kampung Kerinchi into a much-sought after commercial spot.


2.  Garden Residence in Cyberjaya
This project by Mah Sing Group has helped transform the residential market in Cyberjaya and set new benchmark pricing levels.

7. Anthony Chua, Director of KGV-Lambert Smith Hampton

His View on Real Estates Market in Malaysia:  extracted from THEEDGE FINANCIALDAILY 13th June 2011:

Snapshot of the residential market 
The residential property market was due for correction in 2007/2008 if we subscribe to the view that the property market moves in a 10- to 12-year cycle. The last property downturn was in 1998 brought about by the Asian financial crisis. The property market generally takes six months to a year to react to the economic situation.


The global financial crisis’ impact was felt in our local property market in 2009 and this was seen in the HPI recording a small growth of 1.5% for that year. Since then, the market has rebounded strongly. As the impact was not so severe in 2009, some felt the downturn in the market has been delayed while others believe that we are on a new cycle.


Outlook 
Landed house prices are expected to appreciate further in the next 12 months in spite of the recent hike in interest rates. The perceived short supply of landed homes will contribute to their demand. The high-rise residential market is likely to grow at a slower rate mainly due to the large supply. The number of incoming landed houses in Wilayah Persekutuan is 1,575 units compared to apartments/condominium at 17,922 units.


Significant Project since 2007
Sunway Giza by Sunway group is a hybrid of a typical shop development where rows of shops dominate, and a shopping centre. It is designed to overcome the disadvantages of conventional shop lots such as parking and security problems. Prices for a 3-storey in Sunway Giza are about RM4 million while those just outside are about RM2.75million. It is envisaged that this project will set a new trend in coming commercial developments.

6. James Tan, Associate Director of Raine & Horne

His View on Real Estates market in Malaysia:  extracted from THEEDGE FINANCIALDAILY 13th June 2011:

Snapshot of the residential market 
The residential market has seen steady growth since 2007 with minimal impact from the global financial crisis. Currently, local demand is dominating the market due to the availability of cheap financing.


The property market is on an upward trend, and as long as interest rates remain as it is now, prices are unlikely to fall.


Outlook 
Prices of landed property will continue to rise unless a drastic situation akin to 1997, where liquidity was low and interest rates were around 12.3%, emerges. There is a strong inverse correlation between interest rates and prices.


The high-rise residential segment is expected to remain stable in light of the huge existing stock. Projects in certain locations such as Petaling Jaya, Bangsar and KL are likely to do well while there has been limited new launches in the KLCC vicinity for more than a year.


Significant Projects since 2007
Link homes in Desa ParkCity, Nadayu Melawati in Taman Melawati by Mutiara Goodyear and Setia Alam link homes in Klang by S P Setia — these three projects have set benchmark prices in their respective localities and helped pushed prices to stratospheric heights in the Klang Valley. The latest launch of link houses in Desa ParkCity fetched more than RM2.75 million, while the latest link houses in Setia Alam went for more than RM550,000. As for Nadayu Melawati, the minimum price is RM5.5 million.

5. YY Lau, Director of YY Property Solutions

His View on Real Estate Market in Malaysia:  extracted from THEEDGE FINANCIALDAILY 13th June 2011:

Snapshot of the residential market 
The market began to feel the pinch in 2008 when buyers adopted a wait-and-see attitude during the global financial crisis. Developers also took a cautious approach.


During the recession in 2009, transaction volumes registered a negative growth of 2.4%. Several prominent developers such as S P Setia offered attractive financing packages to stimulate sales.


Backed by improvements in economy, the low interest rate regime and attractive financing packages, the market recorded a 7.2% increase in transaction volume and 21% increase in value in 2010.


The improvement attracted speculators especially in urban centres. In November 2010, the central bank imposed a LTV ratio of 70% to the third house loan to moderate speculative activity.


While affordable houses continue to dominate sales, demand for high-end houses of above RM500,000 rose from 2008 to 2010 in new prime residential townships in the Klang Valley. Another notable trend is the increasing development of smaller sized high-rise residential units.


Outlook 
Prices of landed homes in the Klang Valley are expected to continue rising, albeit at a slower pace. The trend is backed by demand from young first time home buyers and rising construction cost as supply of vacant land becomes increasingly scarce.


However, the price increase is unlikely to be as drastic as 2010 considering higher interest rates and the measures taken to curb speculative activity. Inflation is also expected to dampen consumer confidence and may delay house buyers’ decisions.


The scarcity of land and the expected higher prices for new landed homes in the Klang Valley may drive house buyers to more affordable high-rise residences. Thus prices for condos are expected to remain stable or increase within a reasonable percentage.

Significant Projects since 2007
1.  Desa Park City
Since its first launch of strata-titled terraces at RM550,000 a unit nine years ago, prices have increased three-fold to surpass RM1 million in the secondary market, setting new benchmarks in the Klang Valley.
It is the first to introduce strata-terraced developments and the first complete strip mall. Home buyers are drawn to its New Urbanism living concept, with meticulous town planning and high security services.


2.  Bangsar South
Since the project began, the transaction value of surrounding land had surged from around RM53 psf in 2005 to RM280 psf in 2010. Prices for its condominium, The Park Residences, have increased from RM320 psf in 2008 to RM550 psf today. Prices for its offices have also jumped to RM780 psf today. Phase 1 of The Horizon, comprising 14 blocks of 10- and 11-storey boutique offices with an average gross floor area of 55,000 sq ft, has set an unprecedented concept for office building developments in Malaysia.


3.  KL Sentral
Among the main buildings completed since 2007 in the 72-acre integrated development are 1 Sentral, which houses PricewaterhouseCoopers, MRCB and General Electric, and the UEM Group’s headquarters at Mercu UEM. The upcoming Nu Sentral Shopping Centre  is expected to further transform Brickfields into a shopping attraction in KL.The transportation hub is also home to KL Hilton Hotel and Le Meridien Hotel. They will be joined by St Regis Hotel in 2014.

4. Vincent Ng, CEO, Kim Realty

His View on Real Estates market in Malaysia:  extracted from THEEDGE FINANCIALDAILY 13th June 2011:

Snapshot of the residential market 
The market prior to 2007 was rather sluggish. Properties purchased four to five years earlier, even in many good areas, had generally realised a gain of only up to 10% in asset value. The exceptions were properties in Bangsar, Sri Hartamas, Taman Tun Dr Ismail and Bandar Utama.


The global financial crisis in 2008 affected buyers’ confidence all over the world. Malaysia had fewer foreclosures because our loans were better regulated. The post 2008 recovery has been amazing though the upbeat trend is not totally unprecedented. Similar trends were seen in the early 1980s and 90s.


Outlook 
House prices will continue to rise regardless of interest rates. This trend will be sustained by the government’s Economic Transformation Programme to bolster the economy.


Significant Projects since 2007
1.  Sentul, East & West, Sentul East d6 & d7
The transformation of Brickfields as a backwater part of KL by YTL Corp into an upper middle-class enclave has been spectacular. Its most recent successful launch was The Capers where units are priced from RM695 psf, a price unheard of in the area two to three years ago.


2.  Bangsar South
This was formerly Kampung Kerinchi. Today, the UOA Development Bhd project is much sought after by MNCs, medium-sized corporations and MSC companies. Its success can be attributed to good planning, infrastructure and its proximity to Bangsar, Mid Valley and KLCC.


3.  Kota Damansara
This is one development in Petaling Jaya that has successfully removed the stigma of leasehold properties. Its properties are among the most sought after mainly because they are in gated communities. These properties were among the first in PJ to experience a surge in demand during the economic recovery, leading to rising prices. The whole area started growing when the infrastructures connecting Bandar Utama and Mutiara Damansara came up.


It struck gold when it was renamed Kota Damansara from its original Sungai Buloh. Everything in Kota Damansara now sells like hot cakes benefiting developers such as Sunway, Encorp Bhd, Mitraland Group and Sunsuria Development.

3. Saleha Yusoff, Head of Research, Rahim & Co

His view on Real Estate Market in Malaysia:  Extracted from THEEDGE FINANCIALDAILY 13th June 2011:

Snapshot of the residential market
Malaysia’s All House Price Index (AHPI) (base year 2000=100) shows an increase of 17% from 125.9 in 2007 to 146.9 in 2010. The highest growth recorded was for terraced and semi-detached houses with an increase of 18% each. The highest increase in prices was recorded in Sabah with a 30% jump reflecting an annual growth rate of 9% during the 2007–2010 period. KL and Selangor’s HPI increased by 14% and 13% respectively, while Penang grew by 14.

This shows the residential market was not adversely affected by the global financial crisis as demand was (and is) driven mainly by the local market. Even for high-end condominiums in prime areas such as the city centre, the market is dominated by a growing number of local buyers.

Outlook 
Developers of landed homes seem optimistic about the market as seen from the various launches of such homes. Prices for most newly launched projects start at RM280,000 or higher, making it less affordable for young home buyers. Prices are expected to continue rising at about 5% to 6%, especially in established areas.


Developers are also active in Johor, especially within Iskandar Malaysia as key projects such as Legoland Malaysia, Newcastle University Medical Malaysia and Chelsea Premium Outlet edge towards completion in 2012.

High-rise homes will continue to gain popularity among young home buyers. The AHPI for high-rise homes rose 12% from 121 (2007) to 135 (2010) with an annual growth rate of 4%. Prices are expected to rise, but at a slower rate compared to landed homes, due to high volume of supply, especially in the Klang Valley. Encouraging demand for high-rise residential is also seen in Penang with new launches recording good sales.

Significant Projects since 2007
1.  Ken Bangsar
the luxury serviced residence in Bangsar is certified under the Green Building Index and Singapore’s Green Mark. Its developer Ken Holdings Bhd opted to transform rather than demolish the former uncompleted office building.  About 70% of the original structure was re-used and other parts were recycled.  A wind tunnel in the lobby helps cool the area while an innovative engineering system is also used to condition and recycle condensated water into an evaporative feature wall. The project was also awarded The Edge-PAM Green Excellence Award 2010, has also added value to the surrounding community.
2.  Sunsuria 7th Avenue, Setia Alam
This modern 2- and 3-storey semi-detached retail offices by Sunsuria Development Sdn Bhd has set a new standard within the neighbourhood commercial centre. Each unit comes with its own rooftop garden and a private lift.

2. Foo Gee Jen, Managing director, C H Williams, Talhar & Wong

His view on Real Estates market in Malaysia:  extracted from THEEDGE FINANCIALDAILY 13th June 2011:

Snapshot of the residential market 
There has been phenomenal growth from 2007, particularly in the Klang Valley, in terms of supply and capital values, especially for high-end housing. The trend gained momentum in tandem with growing affluence and a growing expatriate population in the urban centre.

Demand for high quality homes spurred  better-designed world-class residential developments. The government’s efforts to maintain low interest rates,  improvements in transport infrastructure and its master plan to create world-class cities further fuelled growth.

Outlook 
A stable to low growth in prices is projected due to higher supply. High quality products in prime locations will continue to enjoy high demand.

Landed home prices will continue to rise as developers continue to innovate product features such as adding green and smart home features.

The trend is towards furnished serviced apartments with concierge and security services. Apartment sizes are also shrinking to make them affordable. It is still uncertain whether such a lifestyle shift will become a reality or whether such apartments will eventually turn into alternatives to long-stay hotel accommodation.

Significant projects since 2007

1.  Desa Park City

The self-contained 473-acre freehold township is expected to have about 7,280 homes serving a upper-middle class population of 35,000 upon its completion in 2014. Its most unique characteristic is that each residential precinct is a gated and guarded enclave. A recent launch, Casaman 2- and 3-storey terraced homes were reportedly sold out within five hours. The township has won several awards including the 2010 Fiabci Prix d’ Excellence Award for Best Residential (Low-rise) Neighbourhood for its Adiva neighborhood.

2.  Cyberjaya

From oil palm estates, this intelligent city today houses numerous commercial buildings, MSC Status offices and  universities. It has attracted many big name developers recently, including Mah Sing, UEM Land, S P Setia and OSK Property. There are currently 2,833 residential units with over 5,000 units  under construction.

3.  Sri Tanjung Pinang, Penang

Developed on reclaimed land by Eastern & Oriental Bhd,  this project has transformed the surrounding area into an upmarket enclave. Spanning 980 acres, Phase 1 (240 acres) is almost fully developed with an estimated GDV of RM4 billion while Phase 2 which will begin soon has an estimated GDV of RM12 billion.

1. Tang Chee Meng, COO, Henry Butcher Marketing

His view on the Real Estates Market in Malaysia:  Extracted from THEEDGE FINANCIALDAILY 13th June   2011.

Snapshot of the residential market 
The market peaked in 2H07, thanks to investors’ confidence streaming from the bullish stock market and investor-friendly measures.


The exemption of real property gains tax (RPGT) in April 2007 attracted strong foreign investment, particularly in the high-end condo sector around Kuala Lumpur City Centre (KLCC), extending to Ampang Hilir, Bangsar, Damansara Heights and Mont’Kiara. It was the first time residential prices topped commercial office values.


The global economic meltdown softened the market after 3Q08 as foreign interest waned. Prices of KLCC condos dipped 20% to 30% off their peaks in 2008. The medium-cost segment however, remained stable.

The market picked up in 2Q09 with strong demand for landed homes. Developers managed to maintain sales volumes but with lower profit margins. However, the luxury condo sector remained soft due to low foreign interest and the reintroduction of the 5% RPGT.


The improvement in the residential market can be attributed to the introduction of attractive financing schemes, low down payments and the recovering Singapore market.


In 2010, total volume of property transactions jumped 11.5% compared with a 1% dip in 2009, and 36% higher than in 2005. The value of transactions increased 33% in 2010 against a drop of 8% in 2009, up 91% from that recorded in 2005.


Demand for landed homes increased, registering significant price increases of 20% to 30% in certain locations. Attractive financing schemes and other incentives drove sales in the primary market. Escalating prices of landed homes led to concerns of a possible bubble resulting in the reintroduction of the 5% RPGT and a cap on the loan-to-value (LTV) ratio for the third property loan onwards.


While new condos in popular locations did well, the secondary market for larger luxury condos in KLCC remained sluggish. A preference for smaller units priced below RM2 million was noted among local investors.


Outlook 
The residential market will see stable but slower growth than in 2010. Prices will stabilise and  any increase will be gradual of about 5% to 10%, aided by cooling measures.


Landed homes  are expected to perform better than high-rises with rising interest in properties along the proposed mass rapid transit (MRT) route. Suburban areas and smaller towns are expected to benefit from the My First Home Scheme.


In the high-end condo market, concerns of oversupply and slow rental market linger in KLCC and Mont’Kiara. Smaller units, more innovative concepts, designs and packaging are being introduced to stimulate interest.


Significant projects since 2007 
First:  The Kuala Lumpur International Financial District covering 34.4ha at an estimated cost of RM 26 billion is touted as the new financial hub and will change the city skyline.


Second:  Binjai on the Park in KLCC set the benchmark in luxury condo prices when one of its penthouses sold for RM38 million.

Property prices to climb higher

Written by E Jacqui Chan
13 June 2011

Housing property prices are expected to continue rising in the next 12 months, especially for landed homes. However, the increase for landed homes will be at a slower pace compared with 2010, at an estimated 5% to 10%. In 2010, a minimum 20% in prices was recorded in certain hot spots in the Klang Valley, according to property consultants polled by The Edge Financial Daily.


Among the contributing factors cited are pent-up demand and limited supply compared with high-rises. KGV-Lambert Smith Hampton puts the number of incoming landed houses in Wilayah Persekutuan at 1,575 units and apartments/condominium at 17,922 units.


The high-end condominium market is expected to remain stable with some price increase, though at a slower rate than landed homes due to oversupply and a slow rental market.


Some consultants believe the high cost of landed homes may drive buyers, particularly first-time home buyers, to more affordable condominiums. This is likely to benefit the mid-market condominium segment the most.


Two noteworthy trends have emerged in the past few years — the growing popularity of gated and guarded homes, and smaller, more affordable luxury high-rise units.


Consultants also caution that further interest rate hikes and the cooling measures may dampen the property market.


From 2007 to the present, the property market has seen significant changes, none  more significant than the growth in the landed homes segment.


The global financial crisis in 2008 had minimal impact due to better regulation by the central bank and the domestic-driven property market.


Luxury high-rise residences, which were performing well prior to 2008 with strong take-ups and rising capital values, were more effected by the crisis but are on the road to recovery.

Landed homes, however, held steady throughout the crisis and have shown tremendous growth since. Transaction volume and value hit record highs in 2010 with over 376,000 transactions valued at RM107.44 billion, of which RM10 billion was in the Klang Valley, which remains the most active market in the country.


Michael Yam, president of the Real Estate and Housing Developers’ Association, said developers held back launches in 2008 during the financial crisis. Better market sentiments returned as the world economy began to recover, pushing up demand for housing.


“Due to the long lead time for construction, housing could not be supplied upon demand, resulting in rapidly rising home prices, particularly in urban areas where demand and costs, particularly land, are high,” he said, adding that the situation was exacerbated by rising oil and steel prices.


“Based on the five major cost components that make up selling prices — cost of land, materials and labour, interest cost, approval process and profit margin — prices of properties, particularly landed homes, will continue to rise,” Yam said.


Coupled with inflationary pressures and fundamental demand underpinned by the socio-demographics of our population, rising costs and prices are here to stay, he added.


The article appeared in THEEDGE FINANCIALDAILY on 13th June 2011 at page 24.


In the next 9 days, you will be able to read the views of 9 property consultants.  Stay tuned.

Is the real estate agent liable if a potential buyer steals something from my home?

"Unless the agent showing your home was negligent, such as giving your house keys to a buyer, it's unlikely that he or she is responsible for thefts. Sellers should take the precaution of securing small, valuable items. If your agent wants to use a lock box, which allows agents access to keys to your home, make sure the agent uses an electronic lock box. Unlike a manual lock box, an electronic lock box gives a printed record of all the agents who have shown the home. This deters any agent who might be unscrupulous."





Extracted from the website of American Bar Association -- http://www.americanbar.org

What is the role of the seller's agents?

In practice here, at least in KL, both the listing agent and the showing agent are the same person, except that some owners would like to show the house themselves to the prospective buyer.

"The seller's listing agent helps determine the price of the home, suggests how to market the home, schedules advertising and open houses, shows the home to prospective buyers, and otherwise facilitates the sale. The showing agent works with buyers to show homes, contacts the listing agents, monitors the transaction, and, perhaps, helps to obtain financing. In most cases, the seller pays the sales commission that is shared by the two agents."


Extracted from the website of American Bar Association -- http://www.americanbar.org

What is the real estate agent's role in a home sale?

As i have been thinking about the "role" of a real estate agent, or negotiator, i find the information shared below is important as it shows a clear distinction between "seller's agent" and "buyer's agent".

"Typically, two real estate agents are involved in the sale of the home-the listing agent, with whom the seller lists the property, and the agent who shows the property to prospective buyers.

For the buyer, it is important to keep in mind that both the listing agent and the agent showing properties are agents for seller. This means that both of these individuals work for and on behalf of the seller, not for the buyer. For a prospective buyer, this is an absolutely crucial point. It means, for example, that neither the listing agent nor the showing agent is permitted to disclose negative information to a buyer about the property-that is, information that is adverse to the seller's interest in selling the property.

As a buyer, you can avoid this information gap by hiring a buyer's agent. Because this individual represents you as the buyer, he or she will be required to disclose to you all relevant information-the bad as well as the good-about the property you are considering. In addition, a buyer's agent is there to negotiate the best possible purchase terms for you."

Extracted from the website of the American Bar Association -- "http://www.americanbar.org"