KLIFD set to reshape Malaysia’s financial landscape

Published on 27th July 2012 in the freemalaysiatoday news portal:

By Saraswathi Muniappan

KUALA LUMPUR: The Kuala Lumpur International Financial District (KLIFD) is set to reshape Malaysia’s financial landscape in the region,as well as on the global front, with state-of-the-art infrastructure and technology.

The KLIFD, was one of the early Entry Point Projects (EPPs) under Malaysia’s Economic Transformation Programme (ETP), a national roadmap to more than double Malaysia’s per capita income to RM48,000 in 2020, while propelling the nation to a high-income economy.

The project will house a physical clustering of the right mix of key international institutions and support services, while estimated to grow to three times its current size by 2020.

Prime Minister Datuk Seri Najib Tun Razak is scheduled to launch the KLIFD on Monday.

The RM26 billion project also looks to deliver on the aspirations for Greater KL to drive rapid growth in parallel with upgrading the city’s liveability ranking to the top 20 in the world.

There would be strong emphasis on quality of life, appealing to the talent needed to support Greater KL.

“We plan KLIFD to be a space like no other, and this is our forte as urban planners. Buildings can always be good, but we want to emphasise that this project will resolve itself in the public realm,” Jorge Silvetti, Principal ,Machado and Silvetti Associates, the Master Planner for KLIFD said.

Machado Silvetti and Associates and its Malaysian partner, Akitek Jururancang (Malaysia) Sdn Bhd, are the master planners for KLIFD.

The 28.3-hectare (70 acre) project will also spearhead a greener Greater KL with green spaces, sustainable buildings, limited motor vehicle usage, large tranquil parks coupled with rooftop gardens and a solid waste management eco-system.

“The allocation of 30 per cent of the site for greenery might not be very different, but the way we are deploying it, the idea of creating the topography that not only hides cars, makes it more beautiful and pedestrian.

“It also allows for a water management programme that is going to be unique for a project of this scale,” said Silvetti.

Unlike ordinary projects, KLIFD’s core focus is sustainability with guidelines embedded from the master planning stage.

KLIFD’s green areas, for example, are highly functional, not just for beauty, but also encourages the creation of community, by making public spaces viable, and is vital for its water management system.

With the right ingredients for a world-class city, KLIFD is no doubt expected to attract top global companies to create a catalytic pool of world-class players.

Announced late 2010, work on the project by 1Malaysia Development Bhd (IMDB) has been on the fast track, endorsing the importance of the development in transforming the country into a financial hub.

Work on the project literally started on the day the plan was announced, but the journey was not easy given its magnitude. It sparked off not only tremendous interest among financial, construction and investment circles but also criticism.

1MDB Chief Executive Officer, Datuk Shahrol Halmi has been very clear from the beginning that the organisation would let its actions speak louder than words.

“We want the development to be on an orderly basis and ensure that there are marketing benefits,” he said.

Preliminary work started on July 1, 2012, with the first phase of the project expected to be operational in 2016.

Relocation, which started in early 2011, is now at the tail end. There were hurdles, but 1MDB fared considerably well, after reaching out to the United Nations High Commission for Refugees (UNHCR), Kuala Lumpur City Hall (DBKL) and political parties to help ease the process, and managed to solve disagreements amicably.

1MDB has successfully relocated most occupants and businesses from the site and the rest are expected to move out soon to make way for construction works.

Shahrol also said: “KLIFD is all about building the nucleus for talent and innovation, which is also in line with the government’s aim under the ETP.

“What KLIFD will create is the clustering effect to promote innovation, as that is what happens when institutions are grouped together, side by side.”

KLIFD also aims to further reinforce Malaysia’s position as a leader in global Islamic finance. It is a key component in Greater KL, which is identified as a National Key Economic Area (NKEA), to move Malaysia’s capital city up the value chain in the global economy.

The government, acknowledging the importance of the project, announced incentives for KLIFD in the 2012 Budget, including a 100 per cent income tax exemption for a period of 10 years, and stamp duty exemption on loan and service agreements for KLIFD status companies.

The rigorous process, interest and government support only goes to show that KLIFD is set to make a mark for itself in the global financial field.

-Bernama

http://www.freemalaysiatoday.com/category/business/2012/07/27/klifd-set-to-reshape-malaysias-financial-landscape/

Developers, distributors worry about cement price hike

This news was published in the MalaysianInsider News Portal:

July 26, 2012

http://www.themalaysianinsider.com/malaysia/article/developers-distributors-worry-about-cement-price-hike/

The VALUE is in HERITAGE

Published on 20th March 2012

Hot property in Penang

The cost of buying a pre-World War II shophouse in George Town, Penang, has reached RM2,000 per square foot equivalent to the price of the poshest Kuala Lumpur City Centre (KLCC) condominium units.

An entrepreneur, who declined to be identified, has just paid RM4mil for a 2,000sq ft shophouse along Lebuh Pantai (Beach Street) in order to continue an existing business located on the premises which she had been renting.

In the middle of 2011, Gooi paid about RM2 Mil
for his double-storey shop-house in
Lebuh Kimberley.

Before 2008 – the year, George Town was jointly listed with Malacca as Unesco World Heritage Sites - pre-war shophouses in Penang were generally going for about RM200,000-RM800,000 depending on size and location. Previously, an unrestored shophouse of 10ft by 36ft at Lorong Chulia only cost RM150,000 in 2009 but the asking price has since jumped to over RM300,000 of late.

Now, even the asking price of even the smallest shophouse that spans only 11ft by 30ft at Lorong Toh Aka is already RM600,000. Nearby, at Lorong Carnarvon, one unit of 17ft by 100ft has been sold for RM1.2mil while Lebuh Amernian shophouses can fetch RM3mil each.

Heritage value

Contrary to popular notion that foreigners and investors from Kuala Lumpur are pushing up prices of Penang heritage property, recent transactions show that Penang investors are the ones who are buying in a substantial way. This is particularly true among those who have lived abroad and recognise the heritage value.

According to informed sources, one businessman from Bukit Mertajam recently snapped up RM20mil worth of pre-war property including shophouses in one day.

Even derelict property such as the defunct Nam Wah Hotel & Bar, located at a prime location on Lebuh Chulia, was sold for RM7mil last year. The property comprises double-shophouse units with a land area of 14,000sq ft.

Such shophouse properties are often turned into “heritage” hotels, charging an average of RM300-RM400 per room per night.

According to local entrepreneur Seah Kok Heng, 42, he spent RM3mil in 2008 to acquire three derelict, triple-storey shophouses located at Rope Walk or Jalan Pintal Tali. Then, he spent another RM10mil to restore and transform the adjoining units into the Chinese-themed 1881 Chong Tian Hotel where certain suites sell for over RM2,000 a night.

Certain suites of the Chinese-themed 1881
Chong Tian Hotel cost over RM2,000 a
night.

Probably, the best-known heritage projects are by Penang-born businessman Christopher Ong who has lived in Australia as well as in Sri Lanka, where he once operated an award-winning hotel.

Together with business partners, he now owns and operates Muntri Mews, a nine-room hotel which was formerly a stable on Lebuh Muntri. This street has some of the finest Straits Eclectic shophouse facades in George Town.

Ong who is in his late 40s, is currently working on similar projects on Lorong Stewart and Lebuh Noordin, among other sites in George Town. He also used to own a double-storey, detached house built in the Colonial era located at Jalan Clove Hall. It was recently sold for close to RM8mil to Penang-born Jim Lim Teik Wah. Having lived in the UK for 40 years, Lim has returned to re-settle in George Town together with his English wife, Jo.

Another row of nine shophouses at Jalan Ariffin, just off Jalan Transfer, has been bought a local lawyer for an undisclosed sum. The units are being restored for another hotel project by the owner.

The Penaga Hotel project - which occupies Jalan Transfer, Jalan Hutton, and Lebuh Clarke – is another well-known development owned by veteran architect Hijjas Kasturi and his wife Angela, who reportedly spent RM50mil on it.

Obviously, such properties have also been bought by investors from Kuala Lumpur and from overseas.

Bought for RM2mil in 2008, Campbell House at Jalan Campbell is a 10-room hotel owned by Malaysian-born Nadya Wray and her Italian husband, Roberto Dreon. Nardya`s mother's great, grand uncle was Tunku Abdul Rahman, Malaysia’s first Prime Minister.

No. 23 Love Lane is another multi-million ringgit restoration project owned and funded by the art-loving wife of a former Malay Cabinet Minister from KL, who declined to be named.

Depending on the built-up area, restoring pre-war
shop-houses can cost at least RM200,000 for a
double-storey unit and considerably more for a
triple-storey house.

Nibong Tebal

While such buyers are tight-lipped, especially over the total costs of their acquisitions, lumber yard entrepreneur Gooi Kok Wah, 43, has no qualms about revealing the reasons for acquiring such properties.

The Nibong Tebal-based businessman has been eyeing and buying such shophouses since 2008 after the Unesco World Heritage Site listing. Apparently, that declaration fuelled the interest of astute locals as well as “outsiders” including Swiss, French, Australian and Singaporean investors.

“Current prices for such properties in prime areas like Beach Street can command RM2,000 per square foot, and RM1,000 per square foot and above, for touristy areas like Chulia Street, Love Lane, Muntri Street, Stewart Lane and certain heritage core zone sections. 

And even in lesser known segments like Prangin Lane, the asking price is at least RM400 per square foot,” explains Gooi, a former accountant.

To date, Gooi has bought six pre-war shophouse properties. His latest RM2mil purchase was for a two-

storey shophouse at Lebuh Kimberley that spans 20ft by 200ft with a built-up space of 6,000sq ft.

Heritage zone

He points out that George Town World Heritage Incorporated – an organisation under the State government – listed only 3,800 units of pre-war shophouses in the heritage core and buffer zones on the island.

The core zone covers an irregular-shaped site of 109 hectares on the north-east section of the island city. It is bounded by the sea on side and cocooned by the heritage buffer zone on the other side. The buffer zone covers 150 hectares.

The core zone is roughly hemmed by Pengkalan Weld, Jalan Tun Syed Sheh Barakbah, Lebuh Light, Lebuh Farquhar, Lorong Love, Lebuh Carnarvon, Lorong Carnarvon, Lebuh Melayu and Gat Lebuh Melayu.

And the buffer zone extends to part of the sea in front of Weld Quay and bounded by Jalan Prangin and Jalan Transfer. (Refer to http://www.penang-traveltips.com/george-town-unesco-world-heritage-site.htm)

“Such heritage property are in a classic demand and supply situation. The supply side is limited and cannot be increased in tandem with the increase in demand," says Gooi.

“Furthermore, supply can and will be reduced, due to accidents like fire and vehicle mishaps. There are also cases of misguided re-development with insensitive modification or illegal alteration destroying the heritage value of such houses as well as due to neglect and natural deterioration.

“However, demand is always increasing due to business opportunities with the increasing number of tourist arrivals as a result of more low-cost flights from other countries. Also, the rising interest of heritage buffs from outside Penang who desire to own such a property will further fuel demand.”

City residence

Born in Nibong Tebal, Gooi has lived and worked in London, Glasgow and Jakarta as well as Kuala Lumpur, Klang and George Town before deciding to re-settle in his hometown.

With his latest shophouse, the entrepreneur intends to restore the Kimberley Street property for his city residence.

As to the costs involved in restoring such shophouses, Gooi says there is no limit to "heritage building restoration" expenditure.

"It depends on how fine the quality you desire," said the father of three, "However, for ordinary or minimal cost restoration work, it would cost about RM300,000 for a shophouse unit of 1,400sq ft space."

Isn't it wiser to invest the total costs of buying and restoring a shophouse, in a newly-developed, landed property or condominium unit?

"No," advises Gooi, "I would say, heritage houses can command a much higher rate of return compared to other types of property."

Seah (left) says he spent RM10Mil restoring & refurbishing his 1881 Chong Tian Hotel.  Lim & Jo (right photo), bought
their colonial house on Jalan Clove Hall for close to RM8Mil.

High Court Case

One factor that contributed to the current high prices for pre-war shophouses in George Town can be traced to an incident at the High Court in Penang on Sept 29 in 2010.

On that day, a property auction by CIMB Bank attracted an unusually large crowd of over 70 people. The highlight of the sale was for an unrestored shophouse of 20ft by 125ft located on Armenian Street.

There were only five actual bidders including Gooi. The reserved price was RM450,000 and furious bidding pushed the price up to an astonishing RM1.1mil, setting a new benchmark in Penang. The eventual buyer was a veteran real estate consultant. And that property is now reputed to be worth at least RM2.6mil, as it is, without any restoration.

Observes Gooi, "Penang heritage houses and their stratgeic location means a unique combination. The value of pre-war shophouses still haven't been fully realised.

"One thing for sure, prices will continue to go up," predicts Gooi, who is still be on the prowl for such "heritage" property.

Think City

There have been efforts by the local authorities and Federal Government-backed bodies like Think City to help enhance the heritage value of these old buildings.

These organisations aim to engage stakeholders to improve the environment by maintaining the right architectural features as well as improve cleanliness and the drainage system, encourage more greenery, build pedestrian walkways and offer tourism attractions.

Anwar: "In those days, we were one
of the few houses with a toilet
inside."

No fun living in a shophouse

While new buyers of Penang's pre-war shophouses wax lyrical over the romantic notion of restoring and staying in a "heritage" home, those who grew up in such houses, don't fancy living in one again.

Tune Hotels strategic developments director Anwar Jumabhoy from the well-known Indian Muslim Jumabhoy family in Penang, recalls less than romantic memories of living in an old shophouse.

"Yes, I do remember living in Jalan Greenhall, Penang, just off Lebuh Light," says Anwar, who is in his 50s. He is bemused that new buyers were willing to pay so much money to restore such shophouses and even want to live in them.

"In those days, we were one of the few houses with a toilet inside and I used to watch in amazement at the 'night soil' trucks that used to come in the morning, and kids - without toilets - had to do their 'business' in the street.

"My parents' office was downstairs and we lived upstairs and learnt how to be well-behaved kids - you had to, as the floor was wooden, so too much running around meant a lot of noise for those in the office."

To the jetsetting corporate executive, a terraced house in those days meant, no windows except for the master bedroom. And the courtyard or air well was where the toilets and kitchen were located - at the back of the house. For a young child, going to the toilet at night was a scary experience especially through dimly-lit and long corridors.

"Now, would I consider living there again," reply Anwar, "not really, wooden floors, rickety stairs and a very, 'nice' attic. With options available today for modern comfort, the nostalgic experience might be nice for a couple of days, no more. For a more permanent home or hotel accommodation, I would much rather have a room with lots of windows and a view."

Lebuh Kimberley

A Chinese owner of a new double-storey, linked-house in the upscale neighbourhood of Seri Tanjung Pinang, who declines to be named, says she doesn't ever want to go back living in an old shophouse. 

She grew up on Lebuh Kimberley.

"Why would I ever want to live in such a home again? There's not much privacy especially when you have a big family," says the mother of a teenage girl.

While there are those who don’t have fond memories of living in rickety, old shophouses, a new generation of owners can’t wait to occupy their expensively restored heritage properties.

http://www.starproperty.my/PropertyGuide/Finance/19912/0/0

Time is of the essence in the property development sector too

Published on 9th June 2012

By DATUK ALAN TONG

HAVE you been to the Immigration Department recently to renew your passport? I was surprised to hear from a family member that 45 minutes was all that she needed to renew her passport. The process of renewing a passport has indeed positively changed with the time.

I recalled in the past that it took months before one could get a passport renewed. The processing time then reduced to weeks, followed by days and eventually to 45 minutes.

The evolution of improvement in the passport renewal process is beyond doubt, impressive. It is clear proof that things of bigger scale can become more efficient with continuous improvement and commitment to improve.

The improved passport renewal process brings forth many benefits such as less waiting time, and reduction in parking and transportation costs as a second trip to the immigration department to pick up the passport is no longer required. The government, businesses, common people and ultimately, the country are beneficiaries of these successes.

This form of efficiency is greatly required in other industries including the property development industry. Sadly today, the process of getting the necessary approvals for a property development project is extremely lengthy.

In my previous article, I highlighted the negative consequences of introducing “cooling off” measures to curb or control house prices and to stifle temporarily the buying appetite of home buyers.

All these measures not only slow down the rate of production of new houses by developers but create a massive housing backlog in the near future due to the anticipated demand and supply imbalance.

It is therefore essential to increase the supply of new housing units with greater pace to meet the increasing demand and maintain property prices.

Property developers today unfortunately have to wait a year or two to obtain the necessary approvals from several authorities before a project can be launched. Then there is a further two to three years required for the construction and completion of the building. Thus, a condominium project may require a total of at least four to five years before it is ready for occupation.

According to the latest World Bank Doing Business Report, Malaysia was ranked 18th when it comes to the ease of doing business. Last year we were ranked 23rd. However, in terms of Dealing with Construction Permits, our ranking dropped to 113th from 111th last year.

The report also highlighted that Malaysian developers need to go through 22 procedures and spend 260 days in total to obtain the necessary licenses, permits and complete the required notifications and inspections.

Comparatively, Singaporean developers need to undergo 11 procedures and the whole process takes 26 days, imagine if this can be achieved in Malaysia. As for Thailand, developers are required to comply with eight procedures and approximately 157 days to go through the whole process. In the case of Indonesia, the whole process involves 13 procedures and an expected processing time of 158 days.

Our closest neighbours definitely have the edge in terms of speed to start property construction i.e. 6 to 11 months advantage.

For Malaysia to remain competitive against its neighbours and in the same breath, meet the growing demand of its population for new housing units at an affordable price, immediate steps need to be taken to improve the approval process for new housing developments in the same fashion as the immigration department.

It is good to note that the Government is looking into the matter when the Chief Secretary to the Government, Tan Sri Mohd Sidek Hassan recently held a Public Consultation with relevant parties, both public and private, to improve efficiency in the construction industry.

As for Kuala Lumpur, the City Hall is also putting in noteworthy effort to shorten the processing time by taking the lead to allow developers to submit their plans online.

When the approval time is shortened and the speed of construction enhanced, the supply of new housing units will increase in momentum and able to respond to the growing demand.

The fear of continuous inflation will be curtailed and at the same time, there will be room for reasonable price appreciation in the future.

For these aspirations to be realised, time efficiency is the essence. It is vital that the relevant agencies, authorities and the private sector set their sights in the same destination and row in the same direction. After all, if you can get a passport renewed in 45 minutes, what else can you expect to speed up?

FIABCI Asia Pacific Chairman, Datuk Alan Tong, has over 50 years of experience in property development. He was FIABCI World President in 2005/06 and was named Property Man of The Year 2010. He is also the group chairman of Bukit Kiara Properties.

http://biz.thestar.com.my/news/story.asp?file=/2012/6/9/business/11432431&sec=business

Refinancing apartment to buy third property

Published on 25th April 2012

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Peter Yee

Our property investment consultant Peter Yee is the author of the books, You Can Become Rich in Property and The Certain Way to Life’s Riches.

Formerly an educationist, he has also been a management consultant, stockbroker, restaurant owner, property investor and investment coach.

Yee has a doctorate and master’s degree in business administration as well as a bachelor of science degree. He runs workshops on How to Make Money from Residential, Commercial and Auction Property in Malaysia.

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Question

I have one serviced apartment with a market value of about RM500,000 and a rental income of RM2,000. My loan is RM339,000 with a monthly repayment of RM1,200.

A year ago, I bought another apartment for my own use. But I was transferred to Pahang and I'm renting a house there. My second apartment was rented out for RM1,100 and I’m paying RM750 monthly for the loan. I will return to Kuala Lumpur next year and I plan to buy another house.

The current banking policy is that I can't get 90% loan for my third property. I'll only get 70% and I have to come up with 30% down payment, which is quite difficult for me. I have three options.

• Stay at my old apartment which is about 30km from my new workplace and lose my positive cash flow.
• Rent a new house near my workplace. Positive cash flow will go to apartment rent.
• Buy a new apartment by refinancing my serviced apartment. Since it is still new - completed in Oct last year - refinancing it will increase my monthly payment to RM2,000 per month. This means no positive cash flow for that serviced apartment.

What is your opinion on this matter.

Ramzul, Pahang

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Answer

Congratulations on your success of getting positive cash flow!

Property investment is getting more challenging partly due to the 70% loan limit for the third residential property. Such a loan consideration is now based on the net household income instead of gross household income. The challenge is also partly due to the inflated prices of property in general.

Your question relates to the future or about one year from now. Many things can change within one year and the future is uncertain. The general election is around the corner. Other considerations which may affect sentiments include the debt crisis in Europe, the US economic crisis tail off, stagnation of the Japanese economy, soft or hard landing of China's economy and a slower GDP growth (an estimate of 4.8%) in Malaysia this year.

Property prices in cities and major towns in China, Hong Kong and Singapore are beginning to decline. The pricing and rental rates of condominium developments and office space in areas with an oversupply such as KLCC and Mont’ Kiara have been declining since the second half of 2011.

The reason for the 70% loan limit is to reduce the increasing household debt to service ratios (expected to be more than 60% in 2012). The 70% loan limit may change within a year, so do not worry too much for now. Be flexible and adjust your investment plan, as and when, the changes occur.

If you plan to purchase another house or a third residential property, here are other factors to consider before making a decision.

In considering your second option, renting a new house near your workplace and using the cash flow from your apartment rental to pay for it, is a good idea. This is because you don't have to evict the existing tenant and it will help you save time and petrol.

For your third option, in refinancing your serviced apartment for the third loan – check with your banker for the maximum loan amount eligible – as the serviced apartment is sited on commercial land with a residential building on it. At the same time, consider the hidden costs such as maintenance fees, quit rent, assessment rates and rental vacancy rate.

I do hope the 70% third residential loan limit will be removed and you can continue your investment plan next year.

Peter

http://www.starproperty.my/PropertyGuide/Finance/20953/0/0

Old but expensive

High prices of PJ houses

Published on 7th June 2012

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Peter Yee

Our property investment consultant Peter Yee is the author of the books, You Can Become Rich in Property and The Certain Way to Life’s Riches.

Formerly an educationist, he has also been a management consultant, stockbroker, restaurant owner, property investor and investment coach.

Yee has a doctorate and master’s degree in business administration as well as a bachelor of science degree. He runs workshops on How to Make Money from Residential, Commercial and Auction Property in Malaysia.

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Question

In 2007, my wife and I, purchased a condo unit in Petaling Jaya SS2 for a low price. It was a good deal as property then was much cheaper compared to prices now.

However, my dream has always been to own landed property. Therefore, I plan to purchase a double-storey terraced house in Petaling Jaya.

I have been looking at numerous double-storey, freehold terraced houses in Taman Mayang, Damansara Jaya, SS2, SS3 and Taman Megah over the past year. But I am a bit deterred by the high asking price, usually RM700,000 to RM950,000.

I noticed that houses priced within RM700,000 to RM800,000 in PJ are usually basic units, requiring at least RM100,000 to renovate to upgrade it. These houses are almost 30 years old. Otherwise, the houses may not be in an ideal location, for example, near a power station, T-junction, sewerage pond or facing a highway.

Terraced houses with renovations and which require only a minor touch-up would usually be priced between RM800,000 to RM950,000.

Generally, owners like to price their property value above the market price and as such, I have difficulty in obtaining valuation assessment from the bank which matches the owner’s asking price.

Q1: Do you think that freehold, landed residential properties in PJ will appreciate further in the near future?

Property in PJ, especially landed residential property, is in a rather saturated market. Property here was built almost 30 years ago and since then, prices have risen almost 10-fold. Almost all freehold land in PJ has been developed and limited land is available.

However, due to its central location, PJ still remains a popular choice among investors due to its proximity to KL and other places in Selangor.

Other nearby townships, such as Subang Jaya, Shah Alam, Puchong, Bandar Sri Damansara, Desa Parkcity, are newer developments compared to PJ. Would property in such places appreciate more in the future, as these areas have more potential for growth?

Q2: The economy in Europe has been rather unpredictable lately. There are uncertainties and property prices are plummeting. Property in Australia has also been on the decline, where the market has been very slow and properties take months to sell. Would world economic events and the property market situation have an impact on the prices of property in Malaysia?

Q3: I have also been talking to many of my friends in the property industry (real estate agents, bankers, developers and property investors) and reading many property blogs about the so-called "property bubble". As we all know, almost all property in Malaysia has appreciated easily between 50% to 100% within the past few years.

Can the property market sustain such a huge growth? More importantly, can the Malaysian economy and property buyers maintain this growth? Even now, I can see that the property market is a bit slow, compared to say the same period last year.

I am keen to purchase landed property in PJ but I am uncertain about the current property market situation.

Budding Property Investor, Petaling Jaya

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Answer

Dear Budding Property Investor,

You seem to be an analytical person, capable of analysing the property market quite well. However, due to your relatively young age, you may lack the experience in identifying the property cycles.

Being older, and based on my experience and observation of more than 20 years, the property market is non-linear. It has its own up-and-down cycles as explained in my book: You Can Become Rich in Property (Chapter 17).

The Malaysian House Price Index shows that house prices have declined, since the second half of 2011. (Refer to Personal Money magazine #130, June 2012, page 63).

A1: The secondary market for landed, freehold residential property in Petaling Jaya will maintain its pricing level in the near future, possibly followed by a minor correction.

The secondary market for landed, freehold residential property in PJ will maintain
its pricing level in the near future.

And it will continue to appreciate after that, due to its strategic location and demographics. People would still want to stay there, as most of them are highly-paid professionals like yourself. However, no one can predict the future accurately. The situation of inflated property prices in over-supply locations, will most probably correct itself when it reaches a point where the affordability is beyond the masses. It is all about demand and supply and what the masses perceive as value to their lifestyle.

A2: The global economic uncertainty and changes in the property market will have an impact on the property prices in Malaysia. What is not certain is the duration and timing. The declining external economy may reduce exports from Malaysia. Reduction of exports will then affect Gross Domestic Product (GDP) and a decline in growth. This inevitably may increase the unemployment rate. If the property owner is out of a job and is unable to service the monthly repayment to the bank for more than three to six months, the bank will then auction their property until it is sold. The property prices will decline by then as there will be more supply in the market than demand.

A3: There are many conflicting information about the Malaysian property prices in the market. For those with a vested interest such as property developers, property agents and sellers, they will attempt to convince prospective buyers of the high potential capital gain of their property.

On the other hand, Bank Negara Malaysia (BNM) has been monitoring the property loan rates and putting in place, responsible guidelines such as:

- increasing the Real Property Gains Tax (RPGT) to 10% for the first two years
- third residential property loan capping at a maximum of 70%
- loan amount based on net income to help curb speculation and prevent a property bubble

For your case, I am guessing that you may still have an outstanding loan for the condominium and still a paying monthly repayment to the bank. It is likely you may also have a hire-purchase car loan. Being an IT professional, you may lead a manageable and comfortable lifestyle at this point of time. It is advisable to have prudent financial management so that your dream home improves the quality of life for your family rather than becoming a long-term payment nightmare.

You may plan your monthly repayment based on an allocation of 30% of your monthly income for buying your property. If you choose to upgrade your condominium to your dream home now, you may have to sell your condominium at an appreciated value, to help reduce your loan commitment. You may also choose to stretch your loan tenure to the maximum to minimise the monthly repayment.

In other words, if you choose to purchase your dream home now, you may have to pay your new monthly loan repayment until your retirement.

Generally, property prices in Malaysia have appreciated beyond the affordability of most people and the probability of a correction over the next few years is relatively high. After that it may appreciate again in tandem with the increased income of Malaysians, foreesably in the future.

In your case, start preparing yourself such as increasing your savings and studying the property market carefully. Purchase your dream home at the right time and at the right price as the purpose of the dream home is to not only improve your family's quality of life both physically and financially but also in the hope of achieving capital gain in the future.

Peter Yee

http://www.starproperty.my/PropertyGuide/Finance/22052/0/0

Should we park and ride?

Published on 14th April 2012

By DATUK ALAN TONG

RECENTLY, one of my long-serving staff decided to give up her job. In most cases, people leave a job for greener pastures. Her case was different.

She lives at one end of Kuala Lumpur (KL) and works at the other end of KL. It would be reasonable to believe that travelling within KL should be a breeze. Yet, on average she spends up to three hours each day on the road to travel to and from work. While she loves working with the company, the tiring years of spending many hours on the road has worn her down and her family time has been greatly shortened.

To many, the announcement of the Klang Valley My Rapid Transit (KVMRT) project is like a timely rain to ease the drought. The development of public transportation dictates the ease of mobility and connectivity in a city, which is a key factor for KL to become a world-class city, and for Klang Valley to elevate to the next level.

Attractive line

Being an architect and a developer, creating quality lifestyle has always been my keen interest, and I do look forward to the development of KVMRT. The first Sungai Buloh-Kajang line that has 51km in total length is expected to generate great benefits along the route once it is completed.

It will attract more people to move into Klang Valley, achieving the mission of growing the Greater KL's population, and eventually spurring the development of the country.

As the MRT project shoulders the important role of changing lifestyles of a huge population, it is important to be prudent in every single detail right from the planning stage to ensure the desirable outcomes are achieved, to the benefit of all, including the owner and operator of the MRT, as well as its end users.

Serving its purpose

Based on the plan, the Sungai Buloh-Kajang line is targeted to serve a catchment of 1.2 million people with 31 stations in total. Thirteen of these stations are expected to have the park-and-ride facilities. How viable are these facilities? Will they do more harm than good in solving the issue of traffic congestion, scarcity of land for housing and preservation of environment?

Before we delve further, let's ask ourselves this question: “How far are we prepared to walk under Malaysia's tropical weather?”

Answers may vary but the average acceptable distance will be 300m to 500m. If this is the comfortable distance for people to walk to the MRT stations, how many cars can we accommodate within the neighbourhood of this radius? How big a space should be allocated as parking bays next to the stations?

If one acre is allocated, it can only accommodate 150 cars, which is too few to satisfy the demand.

If the car park area is increased to three acres for 450 cars, it will be a huge waste of valuable space as the land next to the MRT station is a prime property. The construction and maintenance costs of these car parks will result in high parking fees for the users. Unlike shopping complexes which can charge reasonable parking fees to attract more shoppers and in turn, subsidise its car parks' maintenance cost.

In some developed countries, the same piece of land would be used to develop high rise dwellings or commercial buildings.

For example, instead of constructing a car park, the same three acres can be utilised to build 450 units of apartments of 1,200 sq ft each.

The idea of constructing 1,200 sq ft apartments will also attract more middle income group who can afford to own cars to use MRT instead. This will generate more volume to the MRT stations, increasing the economy of scale and thus lowering the price of ticket.

These stations will eventually become centres of attraction for commercial activities, creating more business and employment opportunities for the areas.

In addition to constructing high-rise buildings nearby the stations, feeder buses can be used to increase the accessibility to the MRT station. The MRT operator must ensure the feeder buses are frequent and timely in delivering reliable services to MRT commuters. Another option is to build covered walkways to encourage more people to use the MRT facility.

Riding quality

In order to attract people to stay near the MRT stations, noise and pollution from the MRT system should be reduced. One of the most effective ways of doing so is to go underground.

We should have more underground stations to ensure the quality of living for those who stay around the stations. Such areas can later on be expanded to become commercial hubs, complementing the existing business activities on the ground, such as what have been practised in Singapore, Hong Kong and Taipei.

Going underground may be expensive. Nonetheless, one has to consider the economic and social impacts of MRT stations in the long run. If it is not viable to go underground, are there any other options that are worth considering? What about building an elevated tunnel enclosed with fiberglass (similar to our KLIA's Skytrain) to cut down noise pollution?

There are many possibilities that can be explored with the development of MRT system. With proper planning, MRT system can ease the traffic flow and enrich quality of life for the people living in Klang Valley. However, with park-and ride stations, the concern is, does it serve the purpose of easing traffic congestion within if MRT commuters still need to drive to MRT stations?

Datuk Alan Tong is the group chairman of Bukit Kiara Properties. He was the FIABCI world president in 2005-2006 and was named Property Man of The Year 2010 by FIABCI Malaysia.

http://biz.thestar.com.my/news/story.asp?file=/2012/4/14/business/11082004&sec=business

Buying a second property

Published on 22nd May 2012

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Peter Yee

Our property investment consultant Peter Yee is the author of the books, You Can Become Rich in Property and The Certain Way to Life’s Riches.

Formerly an educationist, he has also been a management consultant, stockbroker, restaurant owner, property investor and investment coach.

Yee has a doctorate and master’s degree in business administration as well as a bachelor of science degree. He runs workshops on How to Make Money from Residential, Commercial and Auction Property in Malaysia.

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Question

I am a senior banker, aged 29, with a monthly salary of over RM10,000 (excluding my annual bonus). I am staying with my parents.

I bought a terraced house in Bandar Mahkota Cheras (Kuala Lumpur) for RM500,000. It is in a new development and will be ready by the end of the year. Currently, I am servicing the bank interest which is gradually increasing. When the house is completed, I would need to pay a monthly housing loan of RM2,000.

The proposed MRT project by the MMC-Gamuda joint-venture company will eventually link Sungai Buloh with Kajang. This will shorten the distance and travel time and create more business opportunities. Thus, I foresee that the property value of the surrounding areas will appreciate when the project is completed.

However, the project has yet to start and the notorious traffic jams in Cheras still remain unresolved. Initially, I planned to move to Cheras but could not bear the long distance - 33km to the KL city centre - and the traffic jams. Thus, in my plan to buy a second property, I am still undecided whether it should be for own stay or for investment. And which location in KL should be preferable - Bukit Ceylon or Mont’ Kiara? My budget is capped at RM650,000.

What should I consider in my buying decision? How should I start my research? How should I plan for the payment?

More importantly, what would be the most crucial point?

Home Buyer (via e-mail)

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Answer

Congratulations on being a senior banker earning a high salary at such a relatively, young age. I guess you may still be single as you are staying with your parents and still undecided on the purpose of buying your second property.

Your terraced house in Bandar Mahkota Cheras has probably appreciated in value even though it would only be handed over at the end of the year. Despite the traffic jam and travel time to your work place, the capital appreciation of your first property may have influenced you to invest in a second property.

When the first property is handed over, you will start servicing the monthly repayment of RM2,000 - which is approximately 20% of your monthly income. As such, you still have room, financially, to invest in another property.

Infrastructural developments such as the MRT link between Sungai Buloh and Kajang may reduce traffic jams in KL, as well as become a factor in the increase in property prices along the route.

However, no one knows the future for certain. The future of the property market will be influenced by Government policies. And Malaysia's economic well-being is also influenced by the world market situation.

In general, property prices have appreciated 20% to 80% over the past few years. Most people who bought property a few years ago have made money and feel lucky. The entry point or timing of purchase can be crucial point in property investment.

One of the factors fuelling this upward trend in demand, has been people who have not invested in property and who do not want to be left out from making money. This has caused a surge in property purchases.

As you are not certain about your second property investment objective, I will share three perspectives for you to consider. They are based on different objectives, such as:

(A) buying for your own stay

(B) investment purpose

(C) buying for own stay and later converting it into an investment

Factors you should consider, if buying for:

(A) Own stay 

1. Convenience - near your work place and parents. This will help you save time, money and avoid 

    stress from KL's traffic jams while helping you maintain closer ties with your parents.

2. Near facilities and amenities which you frequent such the supermarket, laundry services, food 

    outlets, banks, park and so on.

3. Located in a quiet, clean and safe place.

4. Neighbourhood, sun direction and view.

5. Feng shui factors.

(B) Investment purpose

1. Preferably ready-built so that you can collect rental income to offset the bank loan.

2. The return on investment or yield, should preferably be more than 8% for high-rise residential 

    property or more than 5% for landed residential property.

3. For rental income to be sustainable, the occupancy rate is preferably more than 90%.

4. Quality of tenants in the area.

(C) Own stay and investment 

This objective should consider all of the factors above (A + B).

You may search for the desired property by leveraging on the expertise and time of property agents by telling them what type of property you want. Property purchasers do not need to pay the agents commission. The agent's commission will be paid by the seller.

You may plan your monthly repayment based on an allocation of 30% of your monthly income for buying your property. For an investment property, it is preferable to have a positive cash flow. That means, after paying the monthly repayment with your monthly rental income, you should still have money left over. To increase the positive cash flow, you may choose to stretch your loan tenure longer to reduce your monthly repayment sum.

Crucial points to consider in property investment include factors such as the location, purchase price, timing of purchase, renovation and repair costs.

Peter

http://www.starproperty.my/PropertyGuide/Finance/21377/0/0