COVER STORY MIG’S INVESTMENT APPROACH
MAIN FEATURE ARE YOU PREPARED TO RETIRE?
AREA FOCUS PJ CENTRAL August 2015 RM7.50(WM) RM9.00(EM)
KDN PP 18181/04/2013 (033492)
VISTAS ABOVE THE ORDINARY 4 -Storey Green Cour t yard Villas
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FREEHOLD | GATED & GUARDED | 24-HOUR PATROLLED SECURITY
semi-Ds and 4-storey courtyard villas is enveloped in pristine rainforest tranquility, complete with cascading creeks and waterfalls. Nature’s magnificence meets urban
Wangsa Walk Giant
AEON AEON Big WANGSA MAJU
TA
Minutes away from highways and KL city | Mountain fresh air | Cascading creeks |
TO KLCC
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TO KLCC
KLCC
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TO MONT’KIARA / HARTAMAS DUKE
Exclusive clubhouse | Perimeter fencing | Cool temperatures | Scenic city views |
SR Agama Muwafaqah
AKLEH Gleneagles Medical Centre
Sayfol Great International Eastern School Mall
MRR2
inspiration - make it your daily experience.
JL N
SMK Taman Melawati
AN
TAR College
M
with sweeping panorama of the world below, this elite enclave of 2 & 3-storey
Seri Utama School
M EL AW AT I
TO GOMBAK / GENTING
Luxury homes perfected for the ultimate in urban green living. Perched on a hilltop
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TO CHERAS
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EMBUN SHOW HOUSE
PT 18223 T/Supply Jalan Melati Indah 2, Kemensah Height Taman Melawati, 53100 Kuala Lumpur.
www.titijaya.com.my
Download the Titijaya free app on your smartphone or tablet for more info!
MS No.: 05 100 14023
~1431941345~Titijaya_H20_June issue.indd 2
MS ISO/IEC 17027 : 2011 QS 16122006 CB 05
Brought to you by Titijaya, winner of the prestigious Asia Pacific Commercial Property Awards 5 Star Best Mixed Use Development Malaysia 2010.
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@
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AMAN KEMENSAH SDN BHD (429811-K) | EPOCH PROPERTY SDN BHD (955473-D) (A MEMBER OF TITIJAYA GROUP) N-16-01, Penthouse, Level 16, First Subang, Jalan SS15/4G, 47500 Subang Jaya, Selangor. T 03.8022 9999 F 03.8022 9988 AMAN KEMENSAH SDN BHD Developer License No.: 12369-1/08-2015/0476(L). Validity: 17/08/2013-16/08/2015. Advertising & Sales Permit No.: 12369-1/08-2015/0476(P). Validity: 17/08/2013-16/08/2015. Approving Authority: Majlis Perbandaran Ampang Jaya. Approve Building Plan No.: (9) dlm MPAJ.BS.KB.740-1/2-03/13. Tenure of Land: Pegangan Bebas. Expected Completion Date: Dec 2016. Land Encumbrances: Malayan Banking Berhad. No. of Units: 51 unit. Selling Price: RM1,590,000(min) - RM3,500,000(max). Diskaun Bumiputra: 7%. EPOCH PROPERTY SDN BHD Developer Licence No: 13556-1/06-2016/0591(L). Advertising & Sales Permit No.: 13556-1/06-2016/0591(P). Validity Period: 20/06/2014 – 19/06/2016. Approving Authority: Majlis Bandaraya Petaling Jaya. Approve Building Plan No.: MBPJ/120100/T/PT10/36/2014. Tenure of Land: Freehold. Expected Completion Date: Dec 2017. Land Encumbrances: HSBC Bank Malaysia Berhad. No. of Units: 1,357 units. Selling Price: Block A, B and C: RM520,800.00 (min) - RM1,253,035.50 (max), Block D: RM335,730.00 (min) - RM934,719.75(max). Discount Bumiputra: 7%. The information contained herein is subject to change and cannot form part of an offer or contract. All renderings are artist’s impressions only. All measurements are appropriate. All plans are intended to serve as a guide only and are subject to approval by the relevant approving authorities and may be modified or amended as directed by the approving authorities and/or project consultants. All built ups indicated are approximate measurements only and are subject to final survey/confirmation by the land surveyor/appropriate authorities. While every reasonable care has been taken in preparing this material, the developer cannot be held responsible for any inaccuracy. The numbering and postal address for the said/parcel when issued by the appropriate authority may not be the identical description as stated in this advertisement. Any dispute arising therein shall not be the subject matter of any claims for damages, compensation and/or whatsoever. Disclaimer: The developer cannot be held liable for the security of the occupant and users of the property or for any injuries, death, loss or damage to property or self in connection with the provision and maintenance of the service or lack or shortcoming thereof. Hourly patrolling is subject to developer’s discretion.
~1431941345~Titijaya_H20_June issue.indd 3
www.h2o-aradamansara.com.my
PL E A S E C A L L :
6 019 - 5 8 7 6 8 8 8 6 0 17- 3 8 2 1117 6 012 - 2 9 3 10 3 3
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PUBLISHER’S MESSAGE
W
e are faced with interesting times for our national economy. While the Ringgit has experienced a fair amount of volatility, Malaysia’s fiscal finances have improved, due to support from Goods and Services Tax (GST), and fuel subsidy reform.
GST had a subdued direct impact on the national property market, given the fact that residential developments are exempted from it. Furthermore, in the case of commercial properties, GST is claimable by GST-registered businesses, resulting in a negligible impact on them.
PUBLISHER KK Chua kkchua@propertyinsight.com.my CHIEF EDITOR Mak Kum Shi editor@propertyinsight.com.my BUSINESS DEVELOPMENT
Volatility in the Ringgit should not have a major impact on development costs as materials are mostly sourced locally. This said, our properties are becoming more attractive to foreign investors as a result of this volatility.
Janet Loh 012-205 0911 janet@propertyinsight.com.my
Given the current state of the market, it is important for investors to keep an open mind, as challenges and opportunities can occur at any time. When they occur, investors should overcome those challenges and grasp emerging opportunities.
Chong Wei Yeen 012-927 2863 weiyeen@propertyinsight.com.my
Andy Fam 012-601 9938 andy.fam@propertyinsight.com.my
Hagenz Choo 016-221 9077 choo@propertyinsight.com.my FOR ENQUIRIES: enquiries@propertyinsight.com.my
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
KK CHUA Armani Media Sdn Bhd
PRINTER
PROPERTY SHOWCASE 2015
KHL Printing Co Sdn Bhd (235060-A) Lot 10 & 12, Jalan Modal 23/2 Seksyen 23 Kawasan Miel Phase 8 40300 Shah Alam, Selangor, Malaysia COVER PHOTO MIG CEO Dato’ Brian Wee
Date
07 - 16 AUGUST 2015
Time
10am - 10pm
www.propertyinsight.com.my
TROPICANA CITY MALL, PETALING JAYA
Property Insight Malaysia
Venue
(Fri-Sun)
www.youtube.com/Property Insight Malaysia www.twitter.com/propinsightmy PropertyInsight 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 or 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 in this publication without first seeking appropriate professional advice that takes into account their personal circumstances. We shall not be responsible for any loss or damage, whether directly or indirectly, incidentally or consequently 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 opinions and do not necessarily reflect Property Insight’s views. The publisher does not endorse any 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.
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CONTENT
COVER STORY 16
MIG’s Investment Approach
Dato’ Brian Wee’s take on property investment locally and abroad
16
FEATURE 38 Buying Your First Home The steps of buying your first home
42
Qi Men Dun Jia: Sun Tzu Warcraft
Understanding the art of war with Dato’ Joey Yap
AREA FOCUS 46 Petaling Jaya Central
The future looks bright for property investments in the area
DEVELOPER OF THE MONTH 55 Home Is Where The Heart Is
Bukit Kiara Properties proves that innovation and sustainability are worth building
55 MAIN FEATURE 22 Are You Prepared To Retire?
The importance of investing for retirement
INTERNATIONAL MARKET 28 UK’s Vibrant Property Market This international market has reasons for its attractiveness
FEATURED PROPERTY 36 Contemporary City Living In Manchester Planning to invest in the UK? Consider The Mill – Phase B, the last phase of the refurbished 19th century industrial mill, Orchid Point
36
INVESTOR NEXT DOOR 62 Be Different From The Usual
Being unorthodox is the key to successful property investment for this lawyer
STRATEGY 66 A Conveyancing Practitioner’s Eyes 68 What Is Perfection? 72 GST And Auction Properties 74 Mitigating GST Impact On The Property Market 77 More Property Investment Biases That Are Holding You
Back
79 Respecting Your Tenant
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NEWS AND EVENTS
INVESTORS’ HOT PICKS PROPERTY EXPO 2015 Property Insight’s Expo was well received by the public
W
hat a turnout it was at Property
Insight’s
2015
Investors’ Hot Picks Property Expo! From July 3 to July 5,
thousands of excited visitors thronged the Mid Valley Convention Centre to check out the numerous developers’ booths on display and of course, to attend the informative talks given by notable figures in property investment. Showing off their wares were some of the biggest players in property development – the Mah Sing Group, Sime Darby Property, the Hatten Group, Titijaya and many more. Their sales and marketing representatives were kept busy for all three days as they had to answer the myriad of inquiries posed
by
the
eager
attendees.
The
weekend saw RM40 million worth of properties transacted. But the main highlight of the last two days of the fair were the talks – each talk covering a different topic relevant to property investment and conducted by a prominent expert in his respective industry, from investing in the Klang Valley to knowing where the hotspots are based on public transit. Although property investing or buying a new home is a matter not to be taken lightly, there was plenty of opportunity for fun and games at the Expo. Several lucky attendees went home with goodie bags won from lucky draws and those who actually placed a booking at one of the booths walked away with gifts ranging from BonusLink points to book vouchers. It is not a stretch to say that the Investors’ Hot Picks Property Expo 2015 was a tremendous success. Keep an eye out for future fairs as the Property Insight events calendar is far from empty.
10 | AUGUST 2015 www.propertyinsight.com.my
www.propertyinsight.com.my AUGUST 2015 I 11
NEWS AND EVENTS
SOFT LAUNCH PROPERTY INSIGHT GUIDE TO INVESTING
2015/2016
T
he launch of the Property Insight Guide to Investing 2015/2016 was held with much pomp and splendour at the Boulevard Hotel, Mid Valley on July 3. Invited guests and members of the media were treated to a scrumptious ‘Buka Puasa’ feast while browsing through the preview copies of the soon-to-be published coffee table book. In his welcoming speech, Armani Media publisher K.K. Chua explained the rationale behind the book’s existence. He said, “The classy
12 | AUGUST 2015 www.propertyinsight.com.my
display of essential information, within the inaugural Property Insight Guide to Investing 2015/2016, aims to appeal to affluent groups of potential property investors, who are ready financially, for good investment opportunities. The analysis reports capture the interest of readers in a quick manner and highlight the investment value of the properties.” The final version of the book will contain detailed information that property investors will find useful such as real estate analytics, profiles and words of wisdom from successful
investors, and most significantly, a list of properties from big name developers, inclusive of highresolution images and unique selling propositions to entice investors to check them out. It will indeed be an allinclusive guide specifically designed to be the ultimate companion for the contemporary property investor while looking attractive as a coffee table collectible. The book will be available in major bookstores in September. For enquiries, call +603 6156 3366.
www.propertyinsight.com.my AUGUST 2015 I 13
NEWS AND EVENTS
XIAMEN UNIVERSITY MALAYSIA CAMPUS
X
iamen University Malaysia Campus (XMUMC) is set to open for its first intake of students by the first quarter of 2016. XMUMC is the first Chinese university branch campus in Malaysia, as well as the first overseas campus set up by a renowned Chinese university. It aspires to become a university with a distinct global outlook, featuring first-class teaching and research, and embracing cultural diversity. The campus is built on an area of 150 acres and is located within the 525acre township known as Sunsuria City, a flagship development by Sunsuria Berhad in Putrajaya South. Just 22km to the Malaysian Government Administrative Centre in Putrajaya and 12km to KLIA, the campus is
President - Designate of Xiamen University Malaysia Campus, Prof. Wang Rui Fang and the management team of Sunsuria Berhad
conveniently connected to a series of highways such as Elite Highway, Maju Expressway and Dengkil Bypass, which is then connected to an exit along FT29. In addition, reliable public transportation via the Express Rail Link connects the campus to KL and the airports. Right opposite the Campus East Gate is the Salak Tinggi ERL Station, where Kuala Lumpur International Airport is only 7 minutes away by train and KL Sentral just 28 minutes away. The total investment
of the campus is estimated to be about RM1.3 billion. The 150-acre campus will have a planned total floor space of 470,000 m 2 and will provide on-campus accommodation to all enrolled students. The total enrolment is expected to grow to 5,000 students in 2020, while the fully completed campus will have a capacity for 10,000 students. It is anticipated that most of the students will come from Malaysia, China, and other ASEAN countries.
THE NEXT BIG EVENT ORGANISED BY
Find out how Transit Oriented Development (TOD) i.e. LRT/MRT/HSR will change Greater KL’s property market. Top International Master Planners from the UK (Benoy) & USA (Jerde Partnership) will be flying in to share insights about TOD urban real estate trends in HK, Singapore, Japan and UK.
POSITIONING MALAYSIAN REAL ESTATE:
Post GST
& th 11 Malaysia Plan 2015
&
14 | AUGUST 2015 www.propertyinsight.com.my
MARK YOUR CALENDAR... Thursday, 6th August 2015 Royale Chulan Damansara Call Aisyah/Adilena at +603-7724 1878 or email us at events@malaysiapropertyinc.com http://malaysiapropertyinc.com
PROPERTY SHOWCASE
7-16
Friday – Sunday
August
2015
Tropicana City Mall Petaling Jaya
OCTOBER
PI PROPERTY SHOWCASE 2015 06 - 11 October 2015 (Tue - Sun) Cheras Leisure Mall, Cheras NOVEMBER
PRISM 2015 The Largest Investment Summit & Expo
14 - 15 November 2015
(Sat-Sun)
Sunway Pyramid Convention Centre, Sunway
BOOK NOW! CALL US at +6012-6019938/ +6012-627 2863/ +6016-221 9077 V3_calendar Aug.indd 15
7/14/15 1:46 PM
COVER STORY
MIG’S INVESTMENT APPROACH Dato’ Brian Wee’s take on property investment locally and abroad BY: DANIEL SIM
London is one of the world’s largest financial centres
W
ho doesn’t want to get rich and richer until they become a millionaire? One of the many ways is to start networking with the right people who will be able to change your mind set, to hunger for success, and to be transformed from being a zero net worth individual to a high net worth individual. This is now a reality with the Millionaire Investment Group Network International (MIG), founded by Dato’ Brian Wee and Dato’ Stanley Wong, who both came with a background from the coaching and training industry. “How we came about with the idea of setting up MIG was that we started up 16 I AUGUST 2015 www.propertyinsight.com.my
with a small group of investors, who have been our ardent followers, due to the various investment successes we had in doing some investments inside and outside of Malaysia,” said MIG chief executive officer Dato’ Brian Wee. According to Wee, the investments are focused in Singapore, Hong Kong and in the United Kingdom. “From this small group, we continued growing to about 1,000 investors. The group is getting bigger and the members are not limited to Malaysian investors, but also in HK, Macau, China, UK, Australia, and the United States of America by the end of this year,” shared Wee. “We are just a platform for investors
to know, and gain investment strategies. We are a platform for aspiring entrepreneurs, especially young adults who want to make a mark in the market by establishing new businesses,” said Wee, who pointed that MIG is there to provide sound business advice. At the same time, MIG would like to assist young adults to achieve their lifelong dream of investing in properties. Wee mentioned that MIG invests in other asset classes, such as commodities, financial products, and shares. He shared, “We do all kinds of investments, but at the end of the day we believe in continuous innovation and creativity.”
He said, “MIG is into other sectors and industries as well, investing in property is just the fundamental of who we are, and subsequently MIG is moving out of property even right now. “We are into natural resources, IT, farming, food and beverage, and even social media. At the end of the day, we believe, we are introducing the right business model to the market and giving more opportunities to people around us to know more about investing. The last puzzle of MIG is about charity,” opined Wee. “MIG has embarked in a lot of charitable works, and at the same time, we believe that we want to give equal opportunities to those underprivileged individuals to realise their dreams, because MIG is all about dreams and aspirations, and about achieving something that is unique, something that people can only imagine,” stated Wee. THE ‘IN’ AND ‘OUT’ OF INVESTING Wee opined, “Owning a property overseas seems like a taboo to many people, especially Malaysians, who thought that buying a property overseas is a challenge, and these are due to various reasons, including the distance between Malaysia and the UK, and the currency exchange rate between the Ringgit and Great Britain Pound (GBP).” “But for MIG, to be able to equip those aspiring individuals to own a property outside of Malaysia, I believe there is certain information they need to know, not even to the extent of mastering it, but to know that buying property outside Malaysia is just like buying property in Malaysia. It’s the same thing, the only difference is you are paying it in a different currency,” shared Wee confidently. Wee didn’t compare MIG with other industry players of similar sorts in the market, even in Malaysia, because what MIG has been doing is to add value. “We wanted to provide something that is very different, because we are not just a property investing group to begin with, we are
beyond that.” “If people were to ask me the same question, I wouldn’t say I am better or as good as the other industry players, but we are providing to a niche market to begin with, something that the market is not providing right now,” informed Wee. Wee stated that by investing in education, and investing in a platform, this can allow individuals who aspire to grow from someone insignificant, to someone who might own 50 properties in the next 10 years. “That is who we are, we want to see growth in individuals, not just ‘you buy and I sell’, and then that’s it.” Wee expressed disappointment when he stated, “That is what other industry players are doing now in the market. They recommend property for you to buy, and they get the commission.” According to Wee, that is not the only part that MIG does (the selling), MIG wants to facilitate the whole purchasing and investing process. At the end of the day, MIG wants to see the end results where people are able to experience the monetary returns, as well as the long-term portfolio growth. HUMBLE BEGINNINGS “I came from a background whereby I needed to strive for success. I started my coaching business at 18 years of age to sustain my own studies and subsequently, I got the opportunity to be exposed to property in the late 20’s,” said Wee. “Somehow, this opportunity was presented when I attended a boot camp on sales. My mentor questioned me on my dream. Somehow I was given the insight on what to do on my subsequent business,” he shared. “My mentor said, ‘since you want to be successful in life, you need to sell, and you need to sell really well’, followed by this question, ‘what are you selling right now?’” “I was pondering for a while and I told my mentor I was selling myself. His following questions were ‘How much are you worth? What is the value that you can present to your client?’ It
We have seen individuals who are nobodies, and they purchased their first property, subsequently, they sell it off and then that was when they made their first bucket of money, during the years 2011 to 2012,” - Wee
kept me wondering for a while.” “Subsequently he gave me this advice, since you are selling Brian, why don’t you sell something that is niche and expensive that only the rich can afford it. I got his message, that was when I started to invest in property and my dream is to do even better than that,” shared Wee. He added, “I hope to sell islands and even countries. That is a challenge — to be selling property, jets and yachts. That is my life-long ambition now, which is to be selling, and selling it well, but at the end of the day, by selling and getting a very handsome commission, it is not just what I want to achieve in life.” “I would like to leave a legacy, I would like to have my grandchildren’s grandchildren to know about me, I want to build a legacy on this, to be transforming not only property but also investing as a whole in the world,” explained Wee. www.propertyinsight.com.my AUGUST 2015 I 17
COVER STORY
United Kingdom is a famous education hub of the world
“That is why we at MIG are embarking on a lot of projects and R&D, in different sectors and industries,” highlighted Wee. PASSION — THE REAL DRIVE “As for my partner and I, Dato’ Stanley, we were both in this industry together. We started off seven or eight years back, we came from a background of coach, teacher, and trainer,” said Wee. “We have this dream of helping as many people as we can to achieve their life-long goals, be it in investing or in achieving their professional goals. It doesn’t limit what we can do, we will try our best to help them achieve their goals,” expressed Wee. “I have encountered cases where from the very beginning, people aspire to own property, they started off owning nothing,” stated Wee. He shared that through MIG, these aspirants will be prepared well-inadvance. What this meant was that the aspirants will be given the proper education with the proper channels so that they can understand mortgage and taxation, be it outside or inside of Malaysia, and how to leverage on them. He shared that these aspirants would need to go through this basic education to know the process of acquiring a property, and at the same time, to know where would be the best place to acquire property whether for their own use, or for property 18 I AUGUST 2015 www.propertyinsight.com.my
investment purpose. “We have seen individuals, who are nobodies, and they purchase their first property, subsequently, they sell it off and then that was when they made their first bucket of money, during the years 2011 to 2012,” shared Wee. “They are able to make that kind of return, and subsequently, they invested more, and today, after six to seven years of knowing us, they have been doing this for two to three rounds, and from zero networth individuals, they are now millionaires,” expressed Wee excitedly. “(Of course) like any other business, we see reputation, and credibility is always in question. So people who come to us for the very first time, they will ask who we are and then at the end of the day, we believe that fulfilling our client’s expectation is the bottom line,” said Wee. “People come to us as they want to know more about us, and we educate them by giving them the insight on what to invest in and what to avoid, and the know-how and because of these reasons, the credibility and the trust begin to develop,” stated Wee. “Subsequently, we feel that after a few years down the road, people who are able to make it, they not only make some small returns, but they are also able to make big returns and then they are now millionaires.” “Now the followers are increasing and we hope we can deliver consistently over the next 20 years or
30 years down the road,” he added. MIG always believed in empowering people. Wee boldly stated that, “I am here to empower people to achieve their dreams, that is my motto. MIG’s mission is summarised into three words — business, education, and charity.” Wee has been coaching people on economic policies. He would share with people thoughts about the economic conditions around the world, and at the same time, he also touches on marketing and consumer behaviour. “As of now, is Malaysia in a right economic climate to invest in? I would say I have some reservation, due to the current conditions, whereby the loans are not easy to come by anymore.” “The supply of properties is at an all-time high, MIG believes this will pose a challenge to many investors out there, especially since speculation is not the word to go around now,” shared Wee. “People can’t really speculate now, although property prices are comparatively lower here than in many other parts of the world, but I would say sustainability is the key word now,” he further adds. Wee asked, “As a beginner and also as an investor, how many more properties can you acquire now? He elaborated that at the end of the day, you must realise whether you have the next takers for your property, for if there are no takers, “I would say
that the challenge is going to be so huge, the probability of a default is real, my advice to the public is that you need to be really prudent when it comes to making a choice on the property you are planning to buy.” He stated that good property investment is about having the wisdom to make a decision during this current economic climate. He showed an example, our neighbouring country Singapore which is facing a total standstill now as people are not buying properties in the country. MIG decided to move upward north to China and have been in China for a few years now. MIG has slowed down in China due to the ever changing government policies. “We have decided to put on hold all our future developments in China, but somehow we realised that Hong Kong is where the market is still robust,” opined Wee. He said that investors in HK are ever ready to invest, their disposable income is really high, and individuals are ever ready to invest in places like Australia and in the UK. Their average monthly income is in the 50,000 Hong Kong Dollar bracket. “So for them to invest outside of their own country is not much of a challenge compared to what we are
Manchester Opera House
doing in Malaysia.” According to Wee, Malaysians who are making the Ringgit as their income will have a bit of a challenge for them to invest outside of Malaysia. THE REAL SCENARIO “I would say the economic cycle comes and goes in different nations, so based on the current situation, for us, we at MIG encourage investors from Singapore to move out of Singapore, and the same thing for Malaysian investors, due to the falling Ringgit and mortgage policies that are undergoing in Malaysia,” highlighted Wee. “For our investors in China, they are ever ready to move out of China. For my investors in the UK, I would ask them to stay put and continue to invest in the UK,” advised Wee. “This is a real challenge to many investors especially those who go on the speculation path, I would say that this should come to a halt now, the hardcore speculation era will be officially over really soon,” advised Wee. “People buy properties in the long haul, I always believe in Robert Kiyosaki’s methodology of buying and keeping sustainable property over the long run. You will be the ultimate
MIG co-founder Dato’ Stanley Wong
winners,” he said. “To those speculators out there, if you are still embarking on this strategy, buying and flipping it at the very near future, you are in danger now. My advice to those speculators is not to speculate further,” gestured Wee. PROPERTY MARKET BUBBLE “Nothing is so conclusive, other than the implementation of government policies, and I follow these government policies and economic policies around the world very closely.” “Little things like interest rate hike are going to influence the economy as a whole in a country, and it is going to
Manchester Town hall in Albert Square
www.propertyinsight.com.my AUGUST 2015 I 19
COVER STORY
Etihad Stadium
Greater Manchester Metrolink
Business School In Birmingham
Queen Elizabeth Hospital in Birmingham
affect the GDP of the country, which will affect the taxation and ultimately everything,” shared Wee. “I believe that there has been a lot of speculation and a lot of news going around about the possible property bubble in Malaysia, but I would still say that this is applicable for high-end properties above RM2million.” “This is a real scenario whereby people who don’t have the holding power, they will just let it go at a discount, and they are probably going to default on the loan, and then you will see more auctioned properties coming out,” pointed Wee. He said, “But for properties below RM1million, there is still demand, people who can still make repayments on that kind of pricing region. I would say that anything below RM1 million should be safe to invest in for now. “ “For first-time Malaysian investors, I would advise you to buy properties below RM1mil, if you don’t, don’t get anything at all. Just get anything 20 I AUGUST 2015 www.propertyinsight.com.my
within your comfort zones.” “If you are making RM10,000 a month, you should consider something within the region of RM800,000 to RM1,000,000, which is 40 to 50% of your monthly income,” added Wee. INVESTING IN MAJOR CITIES “Any investment in the major cities of the world is going to be something of a long run thing, so for those individuals who are more capable, especially those high networth individuals, I would advocate them owning as many properties in the greatest cities in the world, like London, New York, Hong Kong, Beijing, Shanghai, Singapore, Melbourne,” said Wee. “We own properties in all the cities that we mentioned, we are subsequently turning those properties that we own, our portfolios right now, from individual houses into shop houses and hotels, slowly and steadily we are changing some of our portfolios now,” he added.
“For the UK, it is ever green in terms of property investing due to the reason that the UK is an education hub for the world, for that reason only, UK is a sure go for individuals who are ready.” “For individuals who have the insights about UK property, it is much cheaper to invest outside London. It still poses a great deal of opportunity for individuals who are able to own a property in Central London,” opined Wee. (Read an in-depth analysis on the UK property market in our International Property market section, August edition) Some of MIG’s developments are located in the UK. “Except London, we have our developments in Birmingham, Manchester, Leeds, Liverpool, Bradford— the second-tier cities. The property prices are growing exponentially, especially Manchester and Birmingham, so that is where our developments are and where most of our assets are based,” said Wee. “Because property prices in these
areas are going to appreciate either steadily or exponentially, I would say that exponentially is not the word now, but steadily is a definite sure, so for investors who are ready, who have the capital and the resources to go into these major cities, yes, by all means, go ahead,” he advised. “But then for those who are not so ready, then we have to be more selective, on building our own portfolios, the UK government is making Manchester city a second London now, with that government’s recommendation, I would foresee that Manchester which is now about a quarter of what it is going to cost you in London,” shared Wee. He pointed out that a one bedroom apartment in London will cost you about GBP400,000, but in Manchester, it barely hits GBP100,000, but if you look at the capital appreciation in Manchester, “you won’t be surprised if it hits above 10% per annum, whereby in London, it is going to be significantly smaller in terms of percentage growth.” In Wee’s opinion, Manchester will be the next big thing in the UK, and Glasgow and Birmingham have that kind of potential growth as well. But Manchester is definitely a big hit outside of London. WHAT DOES IT TAKES TO START INVESTING IN THE UK? “In terms of resources, to be buying a property and hoping to get a mortgage, that can only be done in zone 1 and zone 2 of London, outside of London, everything will be in cash terms, due to the property prices, because they are below GBP100,000,” shared Wee. He stated, “I believe banks in the UK are quite reluctant to give out a mortgage that small, we are talking about Central London in zone 1 and zone 2, the banks will give you a mortgage of up to 70% depending on your background, and who you are, so for you to be investing in Central London, you need to have borrowing capacity.”
“The advantage of us investing outside of Malaysia, is that if you are over-leveraged in Malaysia, the CCRIS won’t cover London or even Australia, so you are safe to borrow more outside Malaysia.” For example, if it is a GBP100,000 property, most likely you are going to end up paying about RM600,000, you have to prepare for that kind of cash, cash that you need to pay outright,” illustrated Wee. He highlighted that “100% of the payment is spread over before completion and upon completion, we are separating it into two stages, so you pay a booking fee of 50% ,and subsequently, upon completion, another 50%. We hope we can encourage investing in the UK by allowing our investors to enjoy future yield, since we provide rental facilities and management for them.” UK A PROPERTY HOTSPOT Wee shared that as a developer, if you were to acquire land in the UK, developers will normally acquire it under freehold status. “But when we subsequently sell it to investors or to purchasers, we give them a leasehold title, it could be 100 years, 150 years or even 250 years, it doesn’t really matter,” explained Wee. “But what really happens is the advantage of developing in UK as a developer, we are able to collect the quit rent, from all individual owners, year in and year out. On the other hand, in Malaysia, the government is receiving that. In the UK, the developer is receiving it,” added Wee. “We are in the midst of acquiring more land in the UK, as much as we can.” “(Of course) we also offer the opportunity to co-develop with us, to be injecting either resources or their expertise in whatever field that is relevant to what we are doing, we invite them on board as well,” said Wee. WEE’S DREAM “We are going to have a few companies
listed on NASDAQ in a few years’ time. We are flying to the USA this year to source for opportunity and we are going to have more companies that are going to be listed on American soil,” shared Wee. “Our ultimate business goal is to be putting as many companies as we can onto the NASDAQ, and maybe the Shanghai exchange, as well as the Hong Kong Hang Seng exchange,” Wee related. “Beyond that, it is about empowering individuals, educating them, and about contributing back to society, and not only in monetary form.” “I always believe that when you do charity, you don’t just give money, you meet their ‘wants’ and their ‘needs’,” Wee shared enthusiastically. “We see so many children out there but they lack the opportunity, so what do I do, I give them the opportunity, they could be good in business, or they could be talented in music, so my role is to facilitate that process and see them grow, and achieve success.” MIG’S SOCIAL RESPONSIBILITY He stated that many property experts in Malaysia are out there to make a quick buck. “No doubt about that, they are here in the market to make fast money, and I believed that as much as money is important, I also believe in giving back to the community.” “I don’t like to call it a responsibility, rather I would rather call it a gift, back to the community.” “So how can I contribute back to the community? That’s why I don’t mind spending my hours or even days doing charitable works. I do it with my staff as well as my sales team, we do a lot of work, regardless of our background,” added Wee. “My objective or my target is to assist at least 1,000 orphans to succeed within the next five years, so that is my ambition and my goal. At the end of the day, I always believe in setting a goal and a blueprint to follow through with that goal,” mentioned Wee excitedly. www.propertyinsight.com.my AUGUST 2015 I 21
MAIN FEATURE
ARE YOU PREPARED TO RETIRE? The importance of investing for retirement BY: DANIEL SIM
“Y
oung adults investing early in their lives are something that we have been focusing on as well. We want to educate young adults, and kick-start them to invest at a very early stage in life. Personally, I don’t believe in pension plans, retirement plans, and saving plans,” said Millionaire Investment Group Network International (MIG) chief executive officer Dato’ Brian Wee. Wee stated, “If we immersed ourselves only in conventional investment schemes, which include fixed deposits, some mutual funds and pension plans, they will not sustain us over the long haul. If we are going to retire by the age of 60, most likely we will use up our retirement funds by the age of 65.” That is why you see people in their 60’s and 65’s going out to search for job opportunities because they have used up their retirement funds. “So what happens is, property prices over the past six or seven years have been able to deliver about 10 to 20% 22 I AUGUST 2015 www.propertyinsight.com.my
annual appreciation in Malaysia, but I am going to state it clearly and strongly, this is not sustainable growth. Meaning to say that properties will not grow at the rate of 10%, 15% or even 20% per annum over the next 20 years,” said Wee. In other words, you need to source for something that is sustainable, which is logical when it comes to demand and supply. He further stated, “Only then, will your investment be able to sustain you beyond your retirement age.” He emphasised that investing early is a must—it is a pre-requisite for one to enjoy a healthy and fun retirement. “To invest in real estate for retirement, aspiring and seasonal Malaysian investors need wisdom for them to begin doing the right thing. This means mixing with the right group of people, at the right time, together at the right location,” said Wee. Wee stated that Malaysia might not be the ultimate destination, therefore we are to spread and manage our portfolios
in a healthy manner, rather than place our money in an organisation that gives us petty returns during bull years, and makes us absorb our own losses during the bear year. “That is not how things should be done, we (MIG) believe in controlling our own destiny, which ultimately means moving forward for Malaysians who want to invest and who want to retire young and rich,” added Wee. Previously, MIG had done some seminars on property investment. “I think as a whole, Malaysians need to be equipped not just with knowledge of property investing, but also all the way down to identifying economic policies and understanding interest rates, because all this makes up the wisdom of a real investor,” pointed Wee. He elaborated that sometimes it is a go or a no-go in property investment. One needs to make the right decision. “You don’t have to be buying or selling properties all the time.”
INFLATIONARY PRESSURES The value of the Ringgit is failing, and Bank Negara is expecting inflation to rise by 4%-5% this year, partially because of factors such as the rationalisation of subsidies in Malaysia. At the same time, the world oil price fluctuation is causing uncertainty among investors and commoners alike. As of 2014, Malaysia has a population of 30,073,353. A majority of Malaysians are between the ages of 25-54 years old, constituting 41.2% of the total population. This age group typically falls under the work force category. A total of 13.1% of the population is under the senior category of those aged 55 and above. “Things are getting more expensive” is the common tone you hear from the ordinary man on the street, when in actual fact, inflation has caused the value of our Ringgit to become smaller. What is even more worrying is that Malaysians are not saving enough or do not have the necessary funds available to cover for their retirement. According to Manulife, there are three key determinants of retirement duration. They are, the retirement age, life expectancy and marital status. The official retirement age across Asia ranges between 50 to 65 years old. For women, it is even mandatory to retire by age 55 in China. In Malaysia, the minimum age to retire is 60 years old. RETIREMENT AGE With average lifespans across the region increasing and retirement ages remaining flat or creeping up only slowly, an ever-increasing portion of an individual’s lifespan is being spent in financial deficit where consumption is exceeding labour income. While the financial deficit experienced during childhood is largely funded by parents, the elderly must fund that deficit via a combination of the five key components of retirement income identified by Manulife in the Aging Asia report titled ‘Asset rich, income poor’: • Salaries and wages, such as delaying retirement or holding a full- or parttime job in retirement
So what happens is, property prices over the past six to seven years have been able to deliver about 10 to 20% annual appreciation in Malaysia...” - Wee •
Government social spending in public healthcare • Pension benefits • Family financial support • Income arising from household wealth such as investment income or drawing down savings As the length of time elderly individuals spend in financial deficit extends, the quantum of the deficit is growing thanks to inflation and an increasing strain is being placed on these income sources, often significantly exacerbating longevity risk. LIFE EXPECTANCY AND ECONOMIC DEVELOPMENT The second core driver of retirement duration is life expectancy, which is rising in much of the world due to improving healthcare, better nutrition, and higher standards of living. Longevity in Asia has increased particularly quickly, albeit from a low base. From 1950 to 2010, average life expectancy at birth increased by 22 years on a global basis and by 28 years in Asia. Longevity improvement has been uneven across genders. While the malefemale life expectancy gap has been narrowing in much of the world, this has not been the case in Asia, where life expectancy has generally improved more rapidly for females than males. In the 1950s, Asia’s male-female life expectancy gap was less than a year, but by 2010, this had widened to almost four years. Modest levels of economic progress for developing countries and territories can have an outsized impact on longevity, but in more developed economies further gains in economic attainment
have a diminishing effect. One factor that helps explain widelydiverging life expectancies across Asia is the relatively high correlation between economic attainment and longevity – our calculations reveal a 66% positive correlation between per-capita GDP in purchasing power parity (PPP) terms and a country’s life expectancy at birth. According to the UN, Asia’s malefemale life expectancy gap is not expected to widen much further in the coming decades, suggesting that the challenges posed by divergent life expectancies are likely to be contained. However, the existing gap – combined with the fact that husbands are often older than their wives – means that female retirement can last an average of a decade longer than male retirement. This poses a potentially significant challenge to governments across the region, as widows are often the least secure from a retirement income perspective and could place significant fiscal stress on government budgets. The average life expectancy of Malaysians according to the CIA World Factbook is 74.52 years old. Malaysian men live to an average age of 71.74 years, while Malaysians females live to an average age of 77.48 years. MARITAL STATUS The third core input to our retirement duration analysis is marital status. The fact that the vast majority of Asians entering retirement do so as part of a married couple influences retirement duration in two key ways. First, and most critically, married couples cannot consider individual longevity when assessing their retirement duration. www.propertyinsight.com.my AUGUST 2015 I 23
MAIN FEATURE
They must instead consider the very real likelihood that one may outlive the other by a potentially significant margin, meaning that it is the joint life expectancy of husband and wife that is relevant to retirement planning. Second, as mentioned above, because females typically live longer than males and are often younger than their husbands, it is highly likely that they will experience far longer retirements. Thus, while being mindful that the institution of marriage is changing rapidly in Asia, the analysis of longevity risk focuses on married couples. In fact, it is believed that many governments in the region do not provide European-style financial support for households as they do not want to undercut this social support network. In developed Western society, the institution of marriage has been diminishing for some time, as divorce rates have risen and the number of children born out of wedlock has increased. As populations in Asia have urbanised and female labour participation has increased, the region has begun to see similar changes. 24 I AUGUST 2015 www.propertyinsight.com.my
Save for China, which has actually seen an increase in marriage, almost every Asian economy has seen marriage levels fall, with the largest declines occurring in the most economically accomplished economies. As these trends are taking root, we expect a growing proportion of the elderly in Asia to enter retirement unmarried. Malaysia has roughly the same life expectancy at birth as China, but research suggests that Malaysians attach far less importance to retirement as a financial objective. This attitude is influenced by the fact that a high proportion of Malaysians expect to receive financial support from their adult children during their retirement years. This, combined with a low official retirement age which was only recently raised from 55 to 60, is no doubt a key reason why Malaysians leave the labour market relatively early. Accordingly, Manulife considers Malaysia to be facing a relatively high degree of longevity risk—only time will tell whether the new, higher mandatory retirement age will contribute to changing retirement behaviour and lessen the
degree of risk. Rapidly aging populations represent a challenge to governments, households and financial institutions across Asia from the perspective of retirement income security. This challenge is significantly aggravated by the fact that life expectancy is improving in the region, retirement ages remain generally low and marriage patterns are beginning to mirror those in the West where Asians are now marrying later in life, and having fewer children. The situation is further aggravated by the fact that households in the region do not fully appreciate the potential duration of their retirements and thus tend to exacerbate longevity risk by not saving enough to cover their extended periods of financial deficit. This disconnect is magnified for married couples, which are significantly underestimating their potential retirement duration if they base their calculations on single rather than joint life expectancy. Retirement planning should be based on significantly longer retirement duration expectations than the averages that most households currently rely on.
www.propertyinsight.com.my AUGUST 2015 I 25
MAIN FEATURE WHAT CAN WE DO TO INVEST? There are several key ways that households can enhance their retirement income security and decrease their degree of longevity risk. These include efficiently deploying household financial wealth, and extending labour force participation into retirement. According to Allianz International Pensions senior economist Renate Finke, “We have to expect that our customers and employees will get older. Key focus areas will be around financial preparedness, long-term care and the trend that family systems tend to be weaker.” Finke stated that in Europe, old age homes for pensioners in need of longterm care and day-to-day services are growing very fast. “The integration of pensioners into the workforce is another phenomenon, which is a win-win situation for retirees who are still active and also for companies. Leisure industries like travel will need to prepare for this new opportunity and growing target group,” shared Finke. “They should review their planning process after certain periods, for example, every five years, or when major changes in life happen, like getting a new job, marriage, birth of a child, when their children go to school/college or when they want to purchase a property,” said Finke. Finke’s advice was to educate Malaysians to start as early as possible for their retirement savings and also to have savings plans in place until their retirement age. She said that so far, most Malaysians still think in shorter terms and are not yet really aware of their financial needs for their retirement. MRTA & MLTA One way to protect our loved ones and ensure they will have a roof over their heads is by insuring our homes. Why do you need to insure home loans? Well, most importantly, it is to pay off your loan in the unfortunate 26 I AUGUST 2015 www.propertyinsight.com.my
event that you can no longer settle the loan instalments. This is normally due to death and permanent disability. Insuring home loans will be vital to protect your family from losing their home to credit collectors when you pass on. Mortgage insurance, like any kind of insurance, also comes in different types. Presently in Malaysia, one can either subscribe to the Mortgage Reducing Term Assurance (MRTA) or the Mortgage Level Term Assurance (MLTA). MRTA would be suitable for buyers who aim to own a house in a longerterm, while buyers who are expecting to sell a house in the short-term are more suitable for MLTA. Most home owners and home buyers buy MRTA for protection purposes while they buy MLTA not just for protection, but also for the purposes of savings or cash value. This is because MRTA coverage covers the outstanding housing loan on a decreasing sum assured basis while MLTA covers the outstanding housing loan on a fixed level sum assured basis. MRTA’s premium is either a lump sum payment by cash, or is financed into the housing loan, while MLTA is paid periodically on a monthly, quarterly, semiannually, or annual basis. Therefore,
the MRTA’s premium is lower than the premium paid for MLTA. MRTA is not transferable and the bank is the beneficiary. On the other hand, MLTA is transferable and anyone can be the beneficiary. IN CONCLUSION Investing plays an important role in retirement, and people need to take this seriously in order to enjoy their golden years. “In Malaysia, people need to aim at reaching an adequate replacement rate of their former income. They need support in planning and understanding what lifelong income they can get from their accumulated assets,” commented Finke. “This is increasingly important as preparing for retirement is becoming ever more complex. Effects of inflation, increasing life expectancy, changing family structures, and health issues at older ages, all have to be taken into account,” opined Finke.
www.propertyinsight.com.my AUGUST 2015 I 27
INTERNATIONAL MARKET
UK’S VIBRANT PROPERTY MARKET This international market has reasons for its attractiveness BY: DANIEL SIM
W
hich country do you think is making headways even during times of economic uncertainty? You will guess it right, if you think it is none other than the United Kingdom. The country has a stable government with good policies in place, and a relatively stable population to sustain the economic growth of the country, particularly in the property sector. THE ADVANTAGE OF INVESTING IN UK PROPERTY “In the UK, you either do development from ground zero or refurbished properties. It takes about 24 months for a ground-zero development to be completed, compared to Malaysia, where the duration can be anywhere 28 I AUGUST 2015 www.propertyinsight.com.my
from 36 months and more,” said Millionaire Investment Group Network International (MIG) chief executive officer Dato’ Brian Wee. He pointed out that, it is also very good for investors to invest in refurbished property. “The whole refurbishment process is going to take a maximum of 12 months, you can take over old mills, and refurbish it, and issue strata titles to purchasers, we give out fully furnished units and the target market could be students or working adult,” added Wee. “United Kingdom is a country whereby people who reside there, don’t really own many properties in the UK and do not buy properties to begin with. The reason being was because
there were so many migrants from Eastern Europe,” mentioned Wee. “Five years back, the UK was very open to those Europeans to come into the UK, so they are here to make a living, but they don’t end up buying properties, so that presents an opportunity to Asians to move over,” opined Wee. He highlighted that, “In fact, there are so many write-ups about Hong Kong’s richest man, Li Ka-Shing, almost buying half of the United Kingdom, he seems to be investing in everything, and recently, he even bought a UK telecommunication company, O2.” “The UK’s refusal to enter into the EURO is a sign that tells us that the UK is in for the long haul, they don’t
want to be exposed to the EURO traps. Their first decision not to enter EURO doesn’t surprise me as I have been following the UK’s economic policy for a very long time,” according to Wee. “What excites me is the consistency that the UK has been able to deliver, and even the global financial crisis didn’t hurt them as much as other European nations, due to their conservative components in their economic policies,” said Wee. “The sustainable growth is what we are looking at in the UK, compared to the world. The UK continues to be a sustainable country, their growth is going to be slow but steady over the years,” Wee elaborated. Wee opined that “If everyone is a follower of Robert Kiyosaki, I would say picking up a property in the UK is a definite yes.” SHOULD MALAYSIANS INVEST IN UK PROPERTY? “The most popular destinations for overseas properties are currently still the UK, followed by Australia. Many are looking around elsewhere to the US and Japan but in much smaller numbers,” said Savills (Malaysia) deputy managing director Paul Khong. He commented that with the falling ringgit in recent months, many local investors are actively looking at foreign investments, especially in properties, to hedge their risks. He shared that many are looking at reorganising their investment baskets with a little more emphasis on overseas properties now. “We expect many will be looking for some investments, especially in the UK.” “They are looking for strong currencies to house their money and/or investments and also capital appreciation from property investments,” added Khong. Apart from being a viable hedge, it provides a good stream of income and also some potential for capital gains, as compared to pure Forex investments. With professional property management services available, minimal supervision is
required. London has been the top favourite destination for investments worldwide, being an international market which is popular to international investors, ranging from the Mainland Chinese, Russians, and Arabs to Asians and especially the Malaysians. According to Khong, Malaysians relate well to London/UK, “as many have shopped, lived, studied and graduated from there. It is a familiar place for us and many would want to own a piece of real estate in either zone 1 or 2 in London.” Khong said, based on recent reports, UK house prices are reported to be on the rise again after the Conservative election victory. Prices in London reported an average increase of about GBP47,000 in 12 months with above 10% increments in 28 boroughs from the Capital’s 33. Buyers’ demand and confidence are still robust and moving strongly into the summer now. “Foreign investors are also treated equally here with no ‘additional buyers stamp duty’ or other special conditions to deter foreign investments such as restriction in re-sales,” pointed Khong. Savills was established in 1855 and is currently a leading real estate provider listed in the London Stock Exchange. It has 600 offices and associates worldwide with 27,000 staff in the UK, Europe, Americas, Asia Pacific, Africa, and Middle East. Khong highlighted that Savills Malaysia (www.savills.com.my) is bringing a host of new residential units for sale in London for summer 2015 in Malaysia offering more than 50 projects in and around London and about 10 more new project releases for the year. “In our latest summer offerings, we currently have 15 projects in Central London, 18 in South West London, 8 in City and East London, 4 in North London and the remaining stock in Greater London,” said Khong. Savills is doing a sneak preview for the top-end premium ‘Chelsea Barracks’ (developed by Qatar Diar
If everyone is a follower of Robert Kiyosaki, I would say picking up a property in the UK is a definite yes.” - Wee UK) on Chelsea Bridge Street in Belgravia in zone 1 (with postcode @ SW1). This is a super high-end offering sited on a 12.8-acre prime site in the heart of London. It is sited only a short distance away from Sloane Square Station. On the top of the list, the higherend offerings include One Hyde Park (Knightsbridge), Fitzroy Place (Fitzrovia), Chelsea Galleries (Chelsea), The Mansion (Marylebone) and Rathbone (Fitzrovia) to name a few. There is another interesting entrylevel project at Croydon vicinity (29 minutes to Oxford Circus) known as ‘Ruskin Square’ which is being offered over GBP600 per sq.ft. “Ruskin Square is a new residential redevelopment project here lying near the new ‘Westfield Mall’ which is due for completion in 2018 with 250 new shops. We are selling it at its initial phase now and launch prices are attractive,” said Khong. A 2-bedroom apartment (about 800 sq.ft.) on the upper floor (15th Floor) in Ruskin Square @ Croydon will costå about GBP520,000. For something closer to the city centre in a good address, like Fulham for example, will costs 2.5 times more. However, there are also quite a number of HNWI (high net-worth individuals) who have also bought into the high-end segments in the UK for investments. Khong believes that the majority of average Malaysians will be looking at 1 to 2-bedroom apartments at a pricing of GBP 600 to 1,500 per www.propertyinsight.com.my AUGUST 2015 I 29
INTERNATIONAL MARKET
Source: Nationwide,ONS
Source: Nationwide,ONS
ANNUAL COSTS OF HOUSING PER HOUSEHOLD BY AGE
Source: London Central Portfolio
Source: Nationwide,ONS
ANNUAL COSTS OF HOUSING PER HOUSEHOLD BY AGE
Source: Savills Research
“Occupier take-up is being supported by record employment growth, with 2014 seeing the fastest growth in London since the late 1990s and the fastest growth for the UK as a whole since 1988,”
- Burston sq.ft. at a total cap of about GBP1.8 million (approx. RM10million) per unit generally. THE PROS OF INVESTING IN UK With a population of 63,742,977 million (year 2014) people and rising, the United Kingdom (UK) is the 22nd most populous country in the world. The land area covered 241,930 sq. 30 I AUGUST 2015 www.propertyinsight.com.my
km of mostly rugged hills and low mountains, level to rolling plains in east and southeast. It is twice the size of Pennsylvania, slightly smaller than Oregon. The UK is one of five permanent members of the UN Security Council and a founding member of NATO and the Commonwealth, and pursues a global approach to foreign policy. An active member of the EU, the UK chose to remain outside the Economic and Monetary Union. The majority of the UK’s population or 41% of them are categorised between the ages of 25-54 years old. With a relatively stable population consisting of the young and the seniors, this country definitely has a good potential for investors wanting to invest in the UK. More citizens of the United Kingdom, are moving to more urbanised areas in the country. 82.3% of the population are located in urbanised areas as of last year. Some of the urbanised areas in
the United Kingdom are London, which recorded a healthy population of 10.2 million people, 2.62 million people in Manchester, 2.5 million in Birmingham, 1.22 million in Glasgow, 876,000 in Southampton, and 869,000 in Liverpool till the end of last year. Annually, the rate of urbanisation stood at 0.88% which is considered a healthy indication of the urbanisation growth for the country. The United Kingdom is the thirdlargest economy among the European countries after Germany and France. The country’s capital, London, is a leading trading power and financial centre in the world. Services such as banking, insurance, and business services, are currently driving the UK’s GDP growth. The UK was hit hard during the 2008 financial crisis due to the importance of its financial sector. The UK’s economic problems drove the economy into recession in the latter half of 2008, prompting the then
MAINSTREAM MARKETS FIVE-YEAR FORECAST VALUES 2015-2019
NB: this forecasts apply to average prices in the second hand market. Now build values may not move at the same rate
Source: Savills Research
Source: Nationwide,ONS
REAL AVERAGE WEEKLY EARNINGS AND REAL AVERAGE HOURLY WAGE, INDEX 2005
AVG VALUE (JUNE 2015)
600.000
£ Property type
400,000 200,000 0
Detached Semi-detached Source: Nationwide,ONS
Labour government lead by Gordon Brown to implement a number of measures to stimulate the economy and stabilise the financial markets. In year 2010, the coalition government lead by David Cameron between the Conservatives and the Liberal Democrats initiated austerity programmes, which aimed to lower London’s budget deficit from about 11% of GDP in 2010 to nearly 1% by 2015. In year 2012, weak consumer spending and subdued business investment weighed on the economy,. However, in 2013, GDP grew by 1.8%, accelerating unexpectedly because of greater consumer spending and a
Terraced Flats
Source: Nationwide,ONS
recovering housing market. THE RIGHT INFRASTRUCTURE Outside central London, Acton has seen the largest increase, 77% over the last six years, a third more than the average for the area. In central London, Farringdon and Paddington have both outperformed the local area by approximately 24%. Sheffield, at the easternmost end of the Crossrail line, has outperformed the local market by nearly 12%. Knight Frank has predicted London prices will rise 18% by the end of 2018, but said the areas around Crossrail stations would continue to rise rapidly.
The tunnelling for Crossrail, Europe’s largest infrastructure project, is nearly complete, and the 73-mile (118km) railway line is expected to open in late 2018. The high-speed line will increase London’s overall rail capacity by 10%. The company’s survey shows that 91% of tenants in London want to live within 1km of a transport link. “Over the last 12 months, the price ‘ripple’ effect in London has really started to take effect, with stronger price growth in areas surrounding central London,” commented Knight Frank UK head of residential research Gráinne Gilmore. House prices within a 15-minute www.propertyinsight.com.my AUGUST 2015 I 31
INTERNATIONAL MARKET PRIME LONDON SALES AND RENTAL MARKET PERFORMANCE, YEAR TO NOVEMBER 2014
LONDON REVIEW WINTER 2015
RESIDENTIAL RESEARCH
HAMPSTEAD SALES RENTS
Prime London sales and rental market performance, year to November 2014
3-month 1.6% 0.9% price change
SALES RENTS
3-month 0.0% -0.8% price change
Prime gross yield: 2.52%
NOTTING HILL
ST JOHN’S WOOD
SALES RENTS
3-month -3.5% 1.1% price change 6.6%
SALES RENTS
12-month 0.4% price change
Prime gross yield: 2.97%
KENSINGTON SALES RENTS
SOUTH KENSINGTON SALES RENTS
-0.6%
3-month 2.4% price change
5.8%
12-month 6.0% price change
-1.5%
3-month 3.1% price change
1.4%
12-month 5.3% price change
Prime gross yield: 2.62%
PRIME LONDON MARKET PERFORMANCE
ISLINGTON
12-month 4.9% -7.5% price change
12-month 11.2% 0.8% price change
Annual growth in prime central London was 6.1% in November, driven by residential markets north of Hyde Park as well as Islington and City & Fringe in the east.
MARYLEBONE SALES RENTS
CITY & FRINGE
3-month 0.2% 2.1% price change
3-month -0.3% -0.1% price change
12-month 2.6% 9.5% price change
12-month 5.9% 10.9% price change
3-month 1.1% 0.7% price change
Prime gross yield: 3.66%
Prime gross yield: 3.09%
12-month 10.8% 3.1% price change
SALES RENTS
Buyers are seeking value away from traditional prime postcodes to the immediate west, south and east of the park due to strong growth in these areas which has driven prices higher in areas like the Hyde Park Estate.
WAPPING SALES RENTS
HYDE PARK ESTATE
MAYFAIR
SALES RENTS
1.0%
SALES RENTS
3-month 1.4% 0.0% price change 12-month 12.9% 1.3% price change Prime gross yield: 2.69%
3-month 0.7% price change
3-month 1.0% -0.5% price change
12-month 12.7% 3.9% price change
12-month 3.3% -4.1% price change
Prime gross yield: 3.10%
CANARY WHARF SALES RENTS
Prime gross yield: 2.01%
Prime gross yield: 3.04%
1.9%
3-month 1.4% price change
13.9%
12-month 4.3% price change
Prime gross yield: 4.23%
KNIGHTSBRIDGE SALES RENTS
0.3%
3-month -0.1% price change
5.5%
12-month 0.2% price change
Prime gross yield: 2.41%
CHELSEA 0.9%
3-month 0.7% price change
3.0%
12-month 1.3% price change
Prime gross yield: 3.32%
RIVERSIDE
SOUTH BANK
SALES RENTS
SALES
3-month 0.0% price change
3-month 1.6% price change
12-month 10.9% -2.7% price change
12-month 10.2% price change
2.1%
SALES RENTS
BELGRAVIA SALES RENTS
RICHMOND SALES
3-month 0.1% price change 12-month 5.6% price change
0.9%
3-month 1.1% price change
2.2%
12-month 1.8% price change
Prime gross yield: 3.47%
SALES RENTS
3-month -4.2% -0.2% price change 2.0%
BATTERSEA
12-month -0.4% price change
SALES RENTS
3-month 0.2% -1.4% price change 12-month 6.3% 3.6% price change
For the same reason, prices in Fulham have softened in recent months due to its high proportion of family homes between £2 million and £4 million.
SALES RENTS
3-month 2.0% -1.2% price change
Prime gross yield: 2.97%
WIMBLEDON
In prime outer London, growth in the eastern districts of Wapping and Canary Wharf exceeded that in south-west London or Hampstead. Both eastern areas benefit from their relative proximity to London’s two financial centres of the City and Canary Wharf, a series of high-quality new-build schemes and the fact they have fewer £2 million-plus properties that could be subject to a mansion tax.
Further afield in south-west London, prices continue to be underpinned by a flow of buyers from more central areas like Notting Hill and Kensington seeking more space for their money.
Prime gross yield: 2.84%
FULHAM
We forecast cumulative growth of 22% between 2015 and 2019 as demand continues to exceed supply. However, a trend among buyers to focus increasingly on the right specification and facilities and less narrowly on the right postcode suggests overlooked residential areas like Bayswater, Victoria, the City and the Midtown district, which includes Holborn, Covent Garden and Bloomsbury, are likely to outperform the prime central London average due to the high-quality new-build pipeline in these areas.
12-month 11.6% -4.1% price change
WANDSWORTH & CLAPHAM
PRIME CENTRAL LONDON
PRIME OUTER LONDON
SALES RENTS
SALES RENTS
0.2% 0.7% 3-month price change
SALES
3-month 0.6% 0.1% price change
3-month 0.9% price change
12-month 6.1% 2.9% price change
12-month 9.0% -0.3% price change
12-month 13.9% price change
Prime gross yield: 2.92%
Prime gross yield: 3.59%
Prime gross yield: 4.48%
Source: Knight Frank Residential Research
LOCATION OF £2 MILLION-PLUS RENTAL PROPERTIES IN LONDON
Rental properties worth £2m+ (% of total housing stock worth £2m+ by postcode sector) High (Max: 36%)
Low Less than 0.04%
Source: Knight Frank Residential Research
32 I AUGUST 2015 www.propertyinsight.com.my
walk of western Crossrail stations have risen by an average 28% since 2008, 6% more than the local market. In the eastern section, values have grown by 21%, outperforming local markets by a more modest 3%. “This could help feed into stronger price growth around stations towards the east and west, especially those which have underperformed to date, and where housing supply is set to be delivered in the coming years,” said Gilmore. She added that the planned levels of development along the outer sections of the Crossrail route should provide scope for price uplifts as the public realm is improved. The amenities received a boost and buyers have new reasons to visit the area. The relative ‘discount’ in terms of price per square foot in these areas, compared to more central locations, is also likely to work in their favour.
CROSSRAIL ROUTE THROUGH LONDON STATION ENTRANCES CROSSRAIL ROUTE Overperformance
In line Underwith market performance
Source: Knight Frank Residential Research
HOUSING MARKET CONSTRAINTS AND THEIR LIKELY IMPACT OVER THE NEXT FIVE YEARS
Source: Savills Research
THE RENTAL MARKET IN THE UK North West, East Anglia, Yorkshire, and Humber are the only three regions in the country to have shown a decline in rental prices. Knight Frank’s analysis shows there are approximately 20,000 rental properties in London with a capital value of more than GBP2 million. The highest concentration is in the prime central London boroughs of Westminster, Kensington and Chelsea, and there are clusters in Camden and an area of south-western London that stretches from Hammersmith & Fulham to Richmond. Prime central London rental values have been rising this year as the UK economy improved, though growth was zero in November due to a
seasonal slowdown and a degree of caution over economic conditions in other parts of the world. Rental yields in prime central London rose to 2.92% in November 2014, continuing a climb back towards 3%, a figure they last surpassed 18 months ago. The data collected by HomeLet shows that rents have shot up 12.5% across the country with tenants on average asked to fork out GBP751 a month outside the capital. The cost of renting property is spiralling out of control with the average price of a flat or a house in London now hitting GBP1,500 a month. Rental values above GBP 1,500 per week in prime central London
grew 3.8% between January and November, while the figure was 2.9% for properties below GBP1,500 per week, reflecting how properties in higher price brackets are performing better. The surveys are based on 13,000 tenant reference applications last month, 3,000 of which were in London. Therefore, tenants in the capital will be hit the hardest. Its survey also shows rental costs over the past three months, have gone up five times faster than tenant income. The spike in rental reflects the general crisis in the UK with a shortage of housing pushing the cost of buying a property beyond the reach of many first-time buyers. The super-prime market, which covers rental values of GBP5,000 per week and above, is buoyant versus last year and indicates how relocation budgets are growing for the most senior positions in companies. TEMPERATE PROPERTY INVESTMENT CLIMATE “Growing uncertainty has caused demand to become more subdued in the prime London market. As highvalue property comes under political focus in the short-term, the grounds for longer-term optimism remain strong,” said Knight Frank head of London residential research Tom Bill. Knight Frank forecasted cumulative www.propertyinsight.com.my AUGUST 2015 I 33
INTERNATIONAL MARKET PRICE GROWTH IN THE YEAR TO NOVEMBER 2014 (Rebased to 100) 110 108 106 104 102 PRIME OUTER LONDON
100
Oct 14
Nov 14
Sep 14
Jul 14
Aug 14
Jun 14
Apr 14
May 14
Mar 14
Jan 14
Feb 14
Dec 13
Nov 13
98
UK PRIME CENTRAL LONDON
Source: Knight Frank
THE RENTAL RECOVERY
YEAR TO NOVEMBER (2014 VS 2013)
39.5%
43.8%
19.9%
TENANCIES AGREED
TENANCIES COMMENCED
22.4%
NEW PROSPECTIVE TENANTS
VIEWINGS
Source: Knight Frank
PRIME LONDON PROPERTY OUTPERFORMS OTHER ASSET CLASSES TOTAL RETURN (YEAR TO OCTOBER 2014)
13.9% 9.4% 3.5%
1.6%
PRIME CENTRAL LONDON
PRIME OUTER LONDON
HEDGE FUNDS
0.7%
-10.5%
SHARES
(FTSE100 (HFRI total return composite index) index) COMMODITIES (S&P GSCI index)
Source: Knight Frank
34 I AUGUST 2015 www.propertyinsight.com.my
growth of 22% between 2015 and 2019 as demand continues to exceed supply. Forecast indicates the London population will grow by in excess of 100,000 every year for the next 10 years while it remains the city of choice for the global wealthy. Last year, in December, Chancellor George Osborne increased stamp duty for properties above GBP 937,500. Knight Frank’s report stated that in the short-term, the stamp duty changes will lead to some harder negotiations, between buyers and vendors, and instances where values may adjust downwards slightly to account for the new higher charge. Given the phlegmatic way in which the London property market has reacted to previous similar changes, history indicates it will absorb the changes in the short to medium-term. However, the stamp duty changes have also redrawn the parameters of a long-standing debate surrounding the taxation of high-value residential property. After numerous changes in recent years that include capital gains tax reform for overseas-based buyers and higher taxation on ‘enveloped dwellings’, the stamp duty changes mean it is now difficult to argue that high-value property is under-taxed. A comparison of taxation in New York, Paris, Singapore, and Hong Kong shows London is in the middle of the pack in terms of property taxation. Stamp duty is higher in both Asian markets, while New York residents are taxed on their global wealth. Prime London property remained an attractive proposition for investors in 2014, with total returns in prime central and prime outer London markedly higher than other asset classes despite the backdrop of global economic uncertainties. Price growth of 9% in prime outer London was led by the eastern areas of Canary Wharf and Wapping. Annual growth in prime central London eased to 6.1% in November, with the strongest increases away from traditional prime areas.
HOW IS THE UK PROPERTY DOING SO FAR? The housing market in the United Kingdom saw a spring and summer boom last year, particularly the South of England and in London, before activity dropped away a little towards the end of the year. According to the Nationwide’s own lending data, there were some significant regional differences, the prices in London, the capital of the country rose by 17.8% over the course of the year, in comparison of only 1.4% in Wales. The Office for the National Statistics said that prices rose at an annual rate of 5.5% down from 9.6% in March indicating a sharp weakening in London property prices. Another survey done by rival lender, the Halifax, says that prices rose by 8.5% over the year, although its official house price index data has not yet been published. “Occupier take-up is being supported by record employment growth, with 2014 seeing the fastest growth in London since the late 1990s and the fastest growth for the UK as a whole since 1988,” said Jones Lang LaSalle UK head of research Ben Burston. “The weight of capital, competition for assets, and forecast rental growth makes investors more comfortable moving the risk curve,” explained Jones Lang LaSalle UK associates director Alyson Martinovich As a result, prime rents have risen by 2% in three months to GBP 117.50 per sq.ft. (assuming a 10,000 sq.ft. floor plate and a 10 year term), strong occupier demand in the core will drive further rental growth in 2015; JLL forecast rents to reach GBP125 per sq.ft. by the end of the year. “Yes, it is still a good time to invest in the UK as the fundamentals are still very strong and will underpin the market,” commented Jazmine Goh, Head of International Residential Property Service, JLL Property Services (Malaysia) Sdn Bhd.
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FEATURED PROPERTY
CONTEMPORARY CITY LIVING IN MANCHESTER Planning to invest in the UK? Consider the newly built The Mill – Phase B, the last phase of the refurbished 19th century industrial mill, Orchid Point BY: DANIEL SIM
The Mill –Phase B, the last phase of the Orchid Apartments
M
ore than just the shouts of Manchester United in the stadiums during football matches, Manchester is also a city ranked fourth most bike friendly city in the UK, and fifth best sport city in the world. It is therefore not surprising that Manchester is also the second most populous urban area in the United Kingdom with 2.55 million people (year 2014). Located in the North-western England, Manchester is a city that is set for exponential economic growth. A metropolitan district, Manchester is ranked third largest for its economy in the UK. Manchester‘s commercial area is in Manchester city centre. This city is progressively instrumental in linking their region or state into the world’s economy and is therefore the 36 I AUGUST 2015 www.propertyinsight.com.my
only city except London in the United Kingdom to be recognised as a Beta City by the Globalisation and World Cities Research Network today. According to KPMG’s Competitive Alternative 2012 report, Manchester is among Europe’s most affordable cities. It is also a city that attracts many foreign tourists, recorded as the third-most visited cities by foreign visitors, only after London and Edinburgh. Manchester is notable for housing the first inter-city passenger railway station called the Manchester Liverpool Road railway station. Many global companies from Europe have their headquarters in Manchester, such as Kellogg, Adidas, Siemens, tote sports, even companies from United Arab Emirates, Etihad Airways and India’s Aegis. Manchester is also at the forefront of cloud computing with
companies such as CISCO, Oracle, EMC based in this city. Manchester also has the highest number of ‘premium retailers’, such as Harvey Nichols, Marks and Spencer, and Selfridges, as well as a number of designer boutiques. EDUCATION There are three universities in the City of Manchester. The University of Manchester is the largest full-time non-collegiate university in the United Kingdom, followed by the Manchester Metropolitan University, and the University of Law. These three universities are grouped around Oxford Road on the Southern side of Manchester City Centre, and form the largest urban higher education precinct in Europe.
Living room
INFRASTRUCTURE Machester City is ranked in the top 10 by Cushman and Wakefield European cities monitor 2011. Located in the central region in the UK, it has better connectivity as it has more motorways than any other cities in the country. The fifth-busiest world freight terminal is the Manchester airport, just behind Heathrow, East Midlands airport, Gatwick and Stansted where major airlines serve global destination from Manchester. There is only better news when it comes to rail, as under the UK’s government plans, Manchester will be connected to London via High speed 2, a high-speed railway by 2033. The train will also stop at the Manchester airport, persons using this train to London will have their journey time reduced from 2 hours to 1 hour. Currently Manchester is served by UK’s largest light rail network, the Metrolink. This network reaches key destinations such as Etihad Stadium, East Didsbury, Central Park, MediaCityUK and Kingsway Business Park. Manchester Piccadilly, Manchester Victoria, Manchester Oxford Road, and Deansgate are four stations in Manchester that serve a combined passenger usage of 37 million in year 2011-2012 alone. Central to the GBP560 million Northern Hub developments is Manchester. This is a rail project aimed at stimulating economic growth across Northern England. Reducing journey times by increasing rail frequency, between major cities, and towns in the north. UK Chancellor George Osborne approved the budget and the first trains
bathroom
are expected to run on the new linking track in next year, the project will be completed by 2018. The only city in the UK to offer next generation fibre optic broadband speed is Manchester, with download speed at 100MB per second. Manchester is the converging place for all primary telecom carriers and fibre optic networks for UK. ORCHID POINT, MANCHESTER Sitting just around the corner from Trafford Park, and strategically located within 5km from Manchester City Centre via Chester Road, is a GBP30 million refurbished, 19th century industrial mill, named as Orchid Point Apartments. This is a development that reflects the thriving Manchester that continues to grow as a successful metropolitan hub. Just a stone’s throw away from the vibrant and the buzz of MediaCity UK and Salford Quays, The Mill – phase B is currently being developed by Absolute Living Developments. The Absolute Living Development is a property development and project management company, with the core experience in the delivery of new and refurbished UK developments to international investors and will be listed on the US NASDAQ stock exchange with Arem Pacific Corporation. The Mill - phase B is the last phase of the highly popular Orchid Point scheme. The Gross Development Value (GDV) of this development is approximately GBP 20 million and is expected to be completed by April 2017. Home-owners will have the option to either choose to stay in one of the 62unit serviced apartment ranging from a comfortable size of 410 sq.ft. to a
spacious 1,500 sq.ft. or buy one of the five exclusive commercial units. The serviced apartment is spread over 6 floors with 8-person passenger lift access, homeowners will also enjoy privileges which include underground covered car parking facilities, and even private car parking spaces for selected units. These serviced residence units also have en-suite shower room and family bathroom with boutique styling and designer fittings and sandstone coloured vinyl sheeting flooring. The bedrooms, halls and living rooms are pre-wired for BT and broadband, as well as Freeview, SKY and DAB radio services. With fitted worktop and splashbacks, homeowners will find a contemporary Technik Oak Kitchen in their units. The kitchen comes with free standing oven, with integrated 4-ring induction hob and large format ceramic floor tiles in four colour options. Among the interior finishing’s highlight, include solid fire rated doors with Dulux grey finish and polished chrome handles, wood effect laminate flooring to entrance and also a door entry system with two way speech facility and call panel. These leasehold units have tenure of over a century or 125 years, enough to pass it on as an attractive investment and a beautiful place for your children to stay. The prices start from an affordable price range of as little as GBP 77,000. Investor would love to know by investing in this development, they will be provided an assured rental guarantee period of 2 years GRR paid in advance. Interested persons can contact +6010-2179 777 to find out more or place a booking for one of the units now. Product Name: The Mill Development Concept: Serviced Apartment Tenure: 125 years lease Lot Size/Land Size: From 410 sft to 1500 sft No. of units : 62 apartment units & 5 commercial lots Gross Development Value (GDV): Approx. GBP 20mil Completion Date: April 2017 Developer Name: Absolute Living Developments Website: http://www.themillmanchestercity.com
www.propertyinsight.com.my AUGUST 2015 I 37
FEATURE
BUYING YOUR FIRST HOME The steps of buying your first home BY: FARA AISYAH FIRDAUS PETIAL
E
ach and every person in this world needs a roof above their heads, a shelter they call home. However, in the current economy and property market climate, people have become uncertain and cautious in buying properties, whether for their own stay, or even investment. Needless to say, those who are planning to buy their first home are in a worse situation. According to property financier KC Lau, “Due to the recent hike in property prices, owning a home has become more challenging.” However, he added, “If you are not yet a homeowner, you’ll find that buying your first home may be one of the most exciting events in adult life.” On the other hand, PPC International CEO Siva Shanker advised those who wanted to buy their first home “to start as early as possible.”
38 I AUGUST 2015 www.propertyinsight.com.my
DETERMINE YOUR BUDGET Siva said, “Number one, the most important thing is to determine your budget. Many people make mistakes and suffer because they did not identify their budget. So determine your budget. Don’t worry about anything else. Many people make the mistake of over-reaching. They pluck their budgets from the air. ‘How much is your budget? Around RM500k’. That is not your budget, that is what you want.” “Because you know you want a double-storey house in this location, and you know the house in this location is around RM700k, so you say your budget is RM700k. Your budget is not RM700k, maybe you can’t even afford it. So how to determine your budget? Work backwards. Don’t fix the budget first and then try to find the money, and then only do the calculations. Do the calculations first and then only fix
the budgets.” What is the first step in determining your budget? According to Siva, the first step is for you to go to the bank. “Go to the bank and talk to the banker about how much of a loan you can get. Don’t worry about which property you are buying, it doesn’t matter. Just give your payslip, your wife’s payslip, and your bank statement, ask the bank to analyse and tell you how much you can borrow. The bank will look at all your documents and then they will tell you based on your income. For example, ‘I can give you a loan of RM400k’. So now you know the bank can loan you RM400k.” Then you calculate, “How much money you got in the hand? RM100k? Sometimes you’ve got no money at all, you have zero. If you’ve just started working, you have zero. So now that you know you can get a loan of RM400k, so what’s the deposit you
have to pay for the property?” “Let’s say you have RM100k in hand, and you get a loan of RM400k. You probably can buy a property of RM450k. For RM450k, the 10% down payment is RM45k.” Siva added, “Maybe we look at RM300k. You have to pay 10% down payment and that costs you RM30k. You have a balance of RM200k. How much is your stamp duty? How much is your transfer fee? How much is your loan documentation? You add all that. Is that within RM200k? Yes. That means RM30k for down payment, RM200k for all these, RM500k just nice, so yes you can buy a home of RM300k. This is how you determine your budget. So work from the back, don’t work from the front. Because now we already know, working from the front is RM500k, working from the back is RM300k.” Lau said “When making a home purchase, there are also other one time fees that can’t be neglected. You may need to pay commission to a real estate broker who helps you hunt for houses. There are also legal fees involved to prepare the SPA and also the loan agreement.
SPA Stamp Duty Rates: First RM 100,000.00 = 1% Next RM 100,000.01 - RM 500,000.00 = 2% Next RM 500,000.01 - RM 2,000,000.00 = 3% Above RM 2,000,000.00 = 4%
Besides that, the biggest amount of all is the stamp duty payable to the government.” “Meanwhile, the loan agreement stamp duty rate is 0.5% for any amount. So all these transaction expenses can add up to a total of about 5% of the purchase price, easily,” said Lau. Lau agreed with Siva as he believed one must first have an adequate downpayment before buying their home. “Whether you are buying directly from the developer or from a seller at the
sub-sale market, you must have the down payment of 5-15%.” “The first step of buying after you’ve identified your desired house, is to sign the booking form and pay a 1-2% earnest deposit, or the booking fees. This will allow 14 days for you to arrange the SPA signing. Upon signing the SPA, you will be required to pay the remaining down-payment that adds up to the total of 10%,” Lau added. Lau justified, “After that, you’ll need to finance the rest of the purchase price with a bank loan, assuming that you don’t have the cash ready to pay in full. In some cases, depending on the type of the property and your credibility, you may get lower or higher financing margin compared to the industry standard of 90% financing. If the banks only lend you 85% of the purchase price, you will need to fork out another 5% for the difference.” Lau also emphasised that it is important to estimate how much you can borrow. “After you’ve got your down payment ready, the next thing you want to find out is how much instalment you can afford to fork out every month. This will determine how big the loan amount you can take.” “Nowadays, banks are getting more stringent. Your loan servicing affordability is assessed by calculating your personal Debt Service Ratio (DSR). DSR is equal to your total monthly debt repayment obligation, divided by monthly take-home income (that’s after tax and EPF contribution). Bank Negara requires the bank not to lend borrowers more than 60% DSR.” Lau pointed out, “In other words, if your take-home pay is RM5000/ month, you will be able to serve a loan payment of RM3000. However, it is really not recommended to go for the limit. I would recommend that you keep your DSR under 30%. This 30% should also include your car loan.” However, it is “dependent on the loan tenure. The younger you are, the longer term you can take, probably up to 30 years to completely pay up the mortgage. At the current interest
Lau
rate of about 4.3%, and 30 years loan tenure, a monthly payment of RM1000 can serve a loan amount up to RM200,000.” YOUR AFFORDABILITY “After knowing how much you can borrow, the next financial must-have is to understand how much you can really afford to pay every month,” affirmed Lau. “When you have your own home, there are other related expenses that come with it, other than the monthly mortgage instalment. First, is the maintenance fee if your property is in a gated-and-guarded community, or a high rise building. Secondly, you will also need to pay yearly fire insurance premium, quit rent and assessment. Thirdly, there are also regular expenses, such as Indah Water Konsortium, water and electricity bills, not forgetting the initial deposit for all these utilities.” “Therefore, you’ll need to understand that your expenses will increase when you are staying at your own house, compared to staying with your parents or renting a place. So how much exactly can you afford? A thorough calculation is recommended,” Lau suggested. Siva also mentioned about choosing the right location where you can afford to buy your first home. “Decide your location. Where do you want to buy a property? Most people want to live near where they have already lived. Let’s say you’re living now in Cheras. Okay, so you want to look for property www.propertyinsight.com.my AUGUST 2015 I 39
FEATURE in the Cheras area. But, with RM300k in Cheras you’ll get nothing. Then go further to Kajang. Nothing ah? Go to Semenyih. Nothing? You go to Nilai. Nevermind, don’t worry about going far. As long as there’s highway and trains, and whatnots, you can live faraway. Young people, the first homebuyers, need to get used to the fact that there is not going to be anything around KL city that they can buy. You have to go further away.” REAL ESTATE AGENTS AND LAWYERS Siva highlighted that it is important to get a real estate agent and lawyer in buying your first home. He said, “Choose who’s your real estate agent, whether you want to buy from a developer or a secondary property. Work with someone you know, someone you trust, someone who is a specialist in the location, or coming from a reputable firm. Make sure they come with a tag. Either you find the real estate agent that you know and trust, or if you cannot do that, go and find agents who specialise in the location you want to buy. But if you know the real estate agent, you can go to the location and ask them to find one for you.” “Once you buy the property, make sure everything is legal. How do you do that? You have to hire a lawyer. Don’t try to be a cheapskate and save on this. This is very important,
40 I AUGUST 2015 www.propertyinsight.com.my
somebody must represent you legally. Unless you buy from a developer, and the developer has assigned you a lawyer and you just pay the fee. It’s simple. But in the secondary market, you have to get a lawyer. Don’t try to share the same lawyer with the vendor, etc. Because your lawyer takes care of your interest, his lawyer takes care of his interest.” “When you’ve found the property that you want, then your lawyer will go to work already. Your lawyer will make sure every legal document is ready and then go to the banker, make sure the bank approves your loan. Time is very important, so you have to chase everybody and make sure everybody follows the timeline. Every time you delay, you pay interest. They all never pay interest,” reminded Siva. RENOVATION BUDGET Siva’s final advice of buying your first home is to “Go and see enough properties so you’ll know what type of properties are there. Sometimes, some properties are in bad condition, some in good condition. Go and see until you’re satisfied. Once you’re satisfied, make sure you check everything carefully, so that you know what kind of renovation you must do. Don’t forget that your RM500k is finished already, now you have no money for repairs. For every property you buy, you must do some repair and
Siva
renovation. So now you know already, ‘Eh I cannot buy this’. Even if you buy a new house, and you have no money, when the house is given to you by the developer, it’s empty. So you need another RM20k-RM30k to renovate the house. For many people, they move in and then they do renovations progressively.” Lau said, “After the house keys are handed to you as the proud new home owner, you will get to do more alteration and enhancement, which will definitely incur some renovation and furnishing cost.” “You can always decide the enhancement that suits your budget. No matter how frugal you are, there will be some basic furnishing required before you can stay comfortably in your new home. So get ready with a minimum fund to cover this inevitable expense.” Lau said, “Buying your own home is probably one of the biggest and most important financial decisions in your life. Some people depleted all their accumulated savings after the purchase. Some even incur more consumer debt when they swipe credit cards and opt for instalment payback to furnish their home.” “However, at the end of the day, it is a different feeling, which is more towards satisfaction and fulfilment when you are able to stay in a property that has your name on the ownership title,” concluded Lau. The more you wait and delay buying your first property, the higher property prices will get. Another day you hesitate is another penny you lose. Don’t just keep on waiting! Start buying!
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FEATURE
QI MEN DUN JIA: SUN TZU WARCRAFT Understanding the art of war with Dato’ Joey Yap BY: FARA AISYAH FIRDAUS PETIAL
Yap
T
he strategic use of the art of war together with metaphysics can help investors to evaluate favourable times and places when investing in property. Mastery Academy of Chinese Metaphysics founder Dato’ Joey Yap, who is also the Joey Yap Consulting Group chief consultant, recently held the Qi Men Sun Tzu: The Art of War live seminar at the Plenary Hall, Kuala Lumpur Convention Centre to more than 3,000 people. According to Yap, the absolute wisdom from Sun Tzu’s Art of War masterpiece, and its connection to the ancient art of Qi Men Dun Jia, was used by renowned military strategists, such as Zhuge Liang, to gain a competitive advantage over rivals. METAPHYSICS “First of all, I’ll start with the point of view of what metaphysics is. Most people think that it is just another physics discipline. The problem is that most people approach it in a more personal level. They check their Feng Shui and astrology signs, but they don’t know why they do so. They think that this is something they can do to check their luck. I took the important bits and pieces from metaphysical studies and eradicated the non-essential superstitious stuff, and then applied it to the business world. What most people want to see is the result.” 42 I AUGUST 2015 www.propertyinsight.com.my
“For example, in the property field, among the things they want to know are ‘Is this property aligned to their direction of growth?’ Most investors will understand that if the property is not in the direction of growth, then there is no future value or the growth is very small.” “Qi Men Sun Tzu is actually the part where business strategy is used in metaphysics. So Qi Men Dun Jia is a study that incorporates Feng Shui forecasting. Forecasting is similar to economic forecasting, and business forecasting. The only difference is forecasting natural vibrational changes, and that affects people’s decisions. For example, market conditions are influenced by grief and fear.” “So if you focus, you can actually understand how conditions change, and you could forecast outcomes. We can’t predict the future but we could forecast it, much like how the economists do that. Of course, in economics, everything is theoretical, nothing is real. So in metaphysics, it’s similar to economics. There are some studies, there are reasons as to why something good happens. Qi Men Sun Tzu is similar to economics but in a metaphysical point of view.” HOW TO START? In order to start understanding Qi Men Dun Jia, Yap said, “You can start by reading a book called Sun Tzu’s Art of War. I think most people have read this book if they study
business. That’s where you start. Now if you read that book, it’s philosophical, it gives you a concept. I’ve also written a book on Sun Tzu, but I don’t just explain these business principles, I also explain the tools aspect. The tools come with the energy chart that maps the time dimension, so that you could see the vibrational energy that affects people’s decisions. So I put in the second layer. Actually I have a book on that, it’s called the Qi Men Dun Jia: The Art of War.” Qi Men Dun Jia can be traced back over a few thousand years through history. It was a crucial tool for Chinese military strategists in ancient times. Yap had broken down the translation of Qi Men Dun Jia to provide insight into its meaning: ‘Qi 奇’ : Qi refers to an essence with an esoteric nature, with nuances of intrigue connected to the universal rules of cosmos. (It should be noted that this differs from the Chinese word for energy which is Qi 氣) ‘Men 門’ : Taken literally, this means ‘door’ or ‘gate’. ‘Dun 遁’ : This is translated as ‘hide’ or ‘escape to remain hidden’. ‘Jia 甲’ : This final part of the puzzle alludes to the first of the Ten Heavenly Stems. ‘Jia’ is also a coded reference to the General or Grand Marshal related to warfare. When combined, Qi Men Dun Jia may be interpreted as ‘Mysterious Doors Hiding Jia’, a term, which is not only cumbersome but also misleading. Today, the more common translation, which is easier to grasp, is ‘Mysterious Doors Escaping Technique’. QI MEN DUN JIA SUN TZU WARCRAFT Yap wrote in his book, “By viewing the wisdom contained within Sun Tzu’s Art of War through the lens of Qi Men Dun Jia, you can become a formidable strategic player in your field.” “The Chinese metaphysical art and science of Qi Men Dun Jia reveals the hidden secrets of the present and the future. Qi Men Dun Jia is used to calculate the configuration of Qi (cosmic energy) at a given point in time and space. A Qi Men Chart is one way of looking at the Qi map (cosmic energy map) of the Universe. This map describes the complex interactions between Qi (cosmic energy), an individual, their actions and the Universe. Qi Men Dun Jia is a multi-dimensional analysis tool and we can use it to gauge the impact of different operational directions, timing, actions and interactions. In other words, it is the ultimate strategic assessment tool because it allows you to forecast the outcome of an action (or a decision).” He mentioned in his book, “Qi Men itself has four basic applications, all of which I’ve covered individually and extensively in my other books. First, it can be used to determine an environment’s Feng Shui characteristics. Second, for Strategic Execution (Time and Activity Selection). Third, to perform Destiny Analysis for an individual. Fourth, and most important, for forecasting
the outcome of an event or activity. When you combine these four applications together and filter them through the teachings of Sun Tzu, you obtain the power of Qi Men Warcraft. Qi Men Dun Jia is the Art of Warcraft. Qi Men Charts can be used to support strategic decision-making and expedite victory against others. When you combine Qi Men Dun Jia with Sun Tzu’s philosophies then you will have an immeasurable advantage in all areas of competition.” QI MEN CHART: THE FIVE FACTORS
Source: Qi Men Dun Jia Sun Tzu Warcraft, Joey Yap
There are 9 boxes, or sectors, in a Qi Men Chart. Each of these boxes is known as a Palace. They are named Xun (Southeast), Li (South), Kun (Southwest), Zhen (East), Centre, Dui (West), Gen (Northeast), Kan (North), and Qian (Northwest), each representing one of the compass directions. Yap stated, the contents of these 9 Palaces are like a snapshot of the Qi pattern for the time period that the Chart is plotted for. So, if you look at a chart that represents a different time or time period, the 9 Palaces will have a different makeup. Qi Men Charts are dynamic and relevant. “Within each Palace lies information that we can interpret in terms of the 5 Factors. They are The Universe, Heaven, Earth, Man and Direction. These 5 Factors give depth and dimension to a Qi Men Chart. By considering each in turn and examining their interaction, it is possible to predict the results of any given activity. In other words, there are 5 variables or Factors that create events and happenings in life and help shape the outcome. All five are described in a Qi Men Chart.” www.propertyinsight.com.my AUGUST 2015 I 43
FEATURE The 5 Factors are as follows: • The Universe describes forces above our understanding and beyond our control, such as divine intervention and cosmic influence. In Qi Men, these forces are represented by the 8 Deities. • Heaven represents the weather, and the environmental and economic conditions. In Qi Men, this variable is represented by the 9 Stars. • Earth denotes activity and action. In Qi Men, this variable is represented by the 8 Doors. • The Man factor represents the influence that humans have. In Qi Men, we analyse the 10 Stems to learn about the contribution of human perception and behaviour. • Palace – This refers to the 9 Directions or Sectors in the Qi Men Chart. Each Palace corresponds with one of 9 possible Directions; see how they are arranged like the points on a compass. THE APPLICATION “First of all, you need to know what you want. Use Qi Men and get it, that’s all. The question is how we use it. Plot the chart. That’s all we need. So I think the missing link is, you think it is difficult to get the chart, it’s easy. Because we have the software. You click the button and the chart comes up, follow the chart and get the result. That’s all. It cannot be easier than this. There’s no difficult concept about Qi Men. You see the light goes in, you go that direction. That’s all. It’s hardest to plot the chart, easiest to apply,” explained Yap. “The software would be an interesting place to start. For example, when we want to make a decision, we just go to the website and we print the chart. That’s number one. Step two is to look at the chart and look for where the positive energy is. Generally, that’s the direction you should go.” “The problem is, most people don’t know what to do in life. I think that’s the challenge. That has nothing to do with metaphysics. Metaphysics is the tool, it’s like the car, but most people don’t know where they are going. You can get the greatest car in the world but if you don’t know where you’re going, that’s a big problem. So I think the part where people need time with themselves is to think about what they want to achieve.” “In terms of property, for example, when most people say they want to invest, they are actually not investing. They don’t know what to do. That’s the majority that don’t know what to do, and they don’t know what to buy. They’ll ask you instead, “what should I buy?” That’s where the danger is. If you don’t know what to buy, you don’t buy anything. The worst you could do is listen to somebody else,” advised Yap. “Now, suppose you’ve gone past that stage, now you know what you want to buy. For example, you want to buy a condo or a house. The next stage is to know where. That’s when you start using the Qi Men chart. So if the 44 I AUGUST 2015 www.propertyinsight.com.my
By viewing the wisdom contained within Sun Tzu’s Art of War through the lens of Qi Men Dun Jia, you can become a formidable strategic player in your field.”
- Yap
Qi Men chart points east, then you look at the property developments in the eastern side.” “It’s different for everybody and every year is different. This year, if you don’t want to buy then don’t buy. See whether the direction is relevant to you or not. That is where you made it confusing, because you may think that you must buy it every year. This year might be the best year for you to invest in the east, but next year, you might not find such opportunities in the east anymore because it changes.” Yap emphasised, “Let’s say you are not buying every year. Then you buy on the year you wanted, you go east or west. Wherever it tells you to find them, then you go find them. The problem is we make very weird assumptions like deciding to buy and sell. You did not do those things. As an investor we don’t think like that. At the certain months only, the opportunities will open like that, few months later it’s sold already. Qi Men chart gives us the clue and advice to do something, so that we can find the best thing for us at that given period of time.” The advanced steps in application of Qi Men Sun Tzu for investors would require professional assistance. This is to provide them with more in-depth explanations instead of assumptions. For more details about Qi Men Sun Tzu, visit www.joeyyap.com or www.joeyyap.com/Media/ propertyinsight
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AREA FOCUS
PETALING JAYA CENTRAL The future looks bright for property investments in the area BY: FARA AISYAH FIRDAUS PETIAL & JAMES LIM
P
etaling Jaya is a major Malaysian city originally developed as a satellite township for Kuala Lumpur. It is located in the Petaling district of Selangor with an area of approximately 97.2 square kilometres and was granted city status on 20 June 2006. Petaling Jaya is the central hub of Klang Valley as it is located in between Kuala Lumpur and West KL which includes Subang Jaya, Puchong, Shah Alam and Klang. PETALING JAYA OLD TOWN The development of Petaling Jaya commenced in 1952 with the construction of 800 houses centred around the area known as ‘Old Town’ today. The first two main roads built in Petaling Jaya were simply called “Jalan 1” or Road 1 and “Jalan 2” or Road 2. Road 1 was later named Jalan Templer while Road 2 was 46 I AUGUST 2015 www.propertyinsight.com.my
named Jalan Othman after Othman Mohamad, former Menteri Besar (Chief Minister) of Selangor. Section 1 and Section 2 are considered the oldest parts of Petaling Jaya Old Town. Nowadays, Old Town has been developed into one of the busiest areas in Petaling Jaya, filled with not only residential but also commercial lots. Commercial lots are seen all around Petaling Jaya Old Town, especially along the main roads, and even on nearby streets. Petaling Jaya City Council’s (MBPJ) one-stop centre (OSC) head Lee Lih Shyan said that some parts of Section 1 and Section 2 in Old Town had been granted limited commercial status. According to the Petaling Jaya Local Plan 1, only certain business activities are allowed under the limited commercial status. These include small-scale enterprises that do not have high
traffic, like art galleries, old folk’s homes, as well as law and accounting firms. Business activities which are not allowed include car workshops, vehicle showrooms, used-car dealers, and eateries. “Those along the main road of Section 1 and Section 2, such as Jalan Othman and Jalan Pasar, have been zoned as limited commercial. Activities there are controlled,” he said. PETALING JAYA CENTRAL Oregeon Property Consultancy director Sr Kok Chin Yee said, “Section 13, 16, 17, and Old Town of Petaling Jaya are very well-established schemes within Klang Valley. These places are wellknown to have rather high density and they are still growing at a high pace. Nevertheless, many of the buildings are aged, and new buildings are being built to replace the older buildings,
especially the industrial buildings where the commercial potential could possibly go way ahead of the current use.” “Attraction points include the University of Malaya, which significantly increases the student population, not to forget about Tropicana City Mall, Jaya One, and Jaya Shopping Centre, which also play an important role in the vibrancy of the said area,” Kok added. The first shopping complex in Petaling Jaya was Jaya Shopping Centre (better known as Jaya Supermarket), located in Section 14 and was built in 1974. This shopping centre was completed recently after undergoing demolishment and is contributing to the neighbouring vibrancy. Jaya One is a commercial development located in Section 13, Petaling Jaya. It is a one-stop hub for dining, entertainment, and retail experience. It was carefully designed as a commercial property to cater to those who sought a good address for their retail business, as well as food and beverage outlets. Other than that, Jaya 33 is an integrated office and retail mall development sited in Section 13 in Petaling Jaya. This integrated commercial building consists of three blocks of 5-storey office space, 3-level car park below the office space and a 2-storey retail podium. This building sprawls over four acres of leasehold land. The three tower blocks comprise a total of 300,000 sq. ft. floor area. Apart from retails and entertainment,
Columbia Asia Hospital – Petaling Jaya is also one of the important amenities in the area. Located at the heart of Petaling Jaya and opposite Jaya One, the hospital is easily accessible from the Federal Highway, LDP and Sprint Highway. The hospital serves the neighborhoods of Section 1 until Section 52, PJS and PJU areas. There is also University Malaya Medical Centre (PPUM) located within the vicinity and also serving patients not only from Petaling Jaya but outside as well. As for educational institutions in the area, there is the foremost Research University (RU) in Malaysia, namely Universiti Malaya. It is located at Jalan Universiti, a major road in Petaling Jaya. The university has more than 27,000 students and 1,700 academic staff with 17 faculties and research centres, which covers the whole spectrum of learning from the Arts, Sciences and Humanities. Along the Jalan Universiti, there is also the Centre for Foundation Studies, International Islamic University Malaysia (IIUM). There are more than ten programmes offered and quite a number of student’s enrolment every year. PROPERTY DEVELOPMENTS CentreStage development by the Inspiration Group, is situated in the heart of Petaling Jaya’s affluent Central Business District. Its prime location at the crossroads of major expressways, such as the Federal Highway, Sprint Highway, LDP Highway and other major roads, makes it an attractive
Kok
location for conducting business or making a home. Nearby amenities, ranging from retail outlets, financial services, and seven educational institutions, are also a plus point in the property’s favour. Its aim is to blend living, working, and leisure in a single self-contained complex. The development comprises a series of boulevard shoplexes, serviced suites and designer suites. The boulevard shoplexes offer a range of shopping and dining options for office workers and tenants, while also serving as a lifestyle hub for the surrounding neighbourhood. The serviced and designer suites are decked out like business hotels, with the former having furnishings provided by the award-winning hotel chain, Best Western. Apart from the convenient access to the shopping and dining options on the lower levels, tenants are also able to enjoy a number of on-site facilities including meeting rooms, banquet halls, gymnasium, Sky Bar and swimming pool, just to name a few. www.propertyinsight.com.my AUGUST 2015 I 47
AREA FOCUS SEKSYEN 13 - COMMERCIAL - OFFICE
SEKSYEN 14 - RESIDENTIAL, TERRACE HOUSE
SEKSYEN 16 - RESIDENTIAL- NON-LANDED
SEKSYEN 17 - RESIDENTIAL, TERRACE HOUSE
Source: Brickz
PETALING JAYA: SELECTED TRANSACTIONS OF LANDED RESIDENTIAL PROPERTIES Project / Location
Land Area (sq ft)
Type
Estimated Built-up Area (sq ft)
2014 – 2015 Transacted / Current Asking Price (RM) 1.95 – 3.0 million
Section 6, Petaling Jaya
Detached house
5,937 – 7,909
N/A
Section 11, Petaling Jaya
Detached house
6,760 – 10,282
N/A
1.9 – 2.8 million
Section 12, Petaling Jaya
Detached house
5,623 – 7,680
N/A
1.3 – 3.1 million
Section 16, Petaling Jaya
Detached house
8,550 – 9,480
N/A
2.45 – 5.1 million
Jalan 17/17, Section 17, Petaling Jaya
Detached house
5,542 – 6,579
N/A
2.25 – 2.5 million
Source: JPPH / Knight Frank Research
PETALING JAYA: SELECTED TRANSACTIONS OF HIGH-RISE RESIDENTIAL PROPERTIES Type
Typical Built up Area (sq.ft.)
2014 - 2015 Transacted / Current Asking (RM)
Ken Damansara, Petaling Jaya
Serviced apartment
1,002 – 1,270
680,000 – 810,000 (average: 659 per sq.ft.)
Five Stones, SS2 Petaling Jaya
Condominium
1,799 – 2,747
612 – 790 per sq.ft.
Li Villas, Section 16 Petaling Jaya
Condominium
1,895
1.45 million (circa 765 per sq.ft.)
Menara Jaya,Section 14, Petaling Jaya
Condominium
1,335 – 1,355
527,000 – 610,000 (average: 429 per sq.ft.)
Millenium Square, Section 14, Petaling Jaya
Condominium
887 – 947
450,000 – 490,000 (average: 512 per sq.ft.)
Project / Location
Source: JPPH / Knight Frank Research
PETALING JAYA: SELECTED TRANSACTIONS OF COMMERCIAL PROPERTIES Type
Land Area (sq.ft.)
Estimated Built-up Area (sq.ft.)
2014 – 2015 Transacted / Current Asking Price (RM)
Jalan 14/20, Section 14, Petaling Jaya
3-storey Shop
1,875
5,051
3.8 million
Jalan SS2/4A, SS2 Petaling Jaya
2-storey Shop
1,625
3,075
1.3 million
Section 21, Petaling Jaya
2-storey Shop
1,540
2,266 – 2,558
2.3 – 2.55 million
Project / Location
Source: JPPH / Knight Frank Research
The site of the former Sentosa cinema in Section 17 of Petaling Jaya is now the home of a new mixed development by Conlay Construction Sdn Bhd and Kampung Manis Realty. Comprising of two 17-storey serviced apartment blocks and a 10-storey podium, the development blends residential properties with commercial space and includes one floor of recreational facilities, seven levels 48 I AUGUST 2015 www.propertyinsight.com.my
dedicated to parking lots and a couple of floors devoted to retail outlets. AEON Maxvalue is currently planned as the anchor tenant. While the apartments are generous in size (relatively speaking), with an area ranging from 1,024 to 1,059 square feet and the available amenities are adequate, the development’s location, amidst old shop lots that date back decades, and a wet market in close
proximity, raises a number of issues, such as traffic congestion, especially since the surrounding streets are quite narrow. There is no denying its strategic macro-location, as it is halfway between Kuala Lumpur and Subang Jaya and easily accessible via the Sprint and Federal Highways. Students from out of town will make a good rental market, as there are two universities – UTAR and Universiti
ALTERATIONS IN THE PETALING JAYA LOCAL DEVELOPMENT PLAN 1
1
Limited Commercial (Industrial)
11
Hawker Centres (Stalls)
20
Residential
2
Commercial
12
Commercial
21
Limited Commercial (Institutions)
3
Commercial
13
Limited Commercial (Institutions)
22
Limited Commercial (Institutions)
4
Religious Institution
14
Commercial
23
Commercial
5
Residential
15
Commercial
24
Residential
6
Commercial
16
Commercial
25
Educational Institutions
7
Commercial
17
Residential
26
Commercial
8
Commercial
18
Community Centres / Library
27
Residential
9
Residential
19
28
Markets
10
Commercial
Residential, Hawker Centres & Recreation
29
Residential
www.propertyinsight.com.my AUGUST 2015 I 49
AREA FOCUS RECENT TRANSACTED PRICES: SEMI-DETACHED HOUSE Type
Area
Section 1
Section 3 SemiDetached House
Section 16
Section 17
No. of Storey
1
1
3
2
Land Area (sf) 3,200 3,800
3,460 3,940
3,360
2,770 3,825
Year
Min
RECENT TRANSACTED PRICES: SEMI-DETACHED HOUSE Max
2010
300,000
620,000
2011
190,000
420,000
2012
450,000
480,000
2014
510,000
510,000
2010
205,000
360,000
2011
310,000
590,000
2012
315,000
700,000
2013
350,000
500,000
2014
1,000,000
1,100,000
2010
2,980,000
3,000,000
2011
2,700,000
3,000,000
2012
2,800,000
3,230,000
2013
3,300,000
3,300,000
2010
1,715,000
2,850,000
2011
1,600,000
2,550,000
2012
1,000,000
1,800,000
2013
1,140,000
2,430,000
2014
1,800,000
2,250,000
2015
2,300,000
2,580,000
Type
Scheme
Built-up Area (sf)
Astana D’sara / Desa Pesona (Sec 16)
936 - 2,000
797 - 980 LI Villas Condo (Sec 16) 1,170 - 1,765 Condominium
Prima 16 (Sec 16)
1,130 - 1,960
Source: Oregeon Property Consultancy Sdn Bhd
RECENT TRANSACTED PRICES: SEMI-DETACHED HOUSE Type
Area
Section 4
No. of Storey
1
Land Area (sf)
1,540
1,430 Terraced House
1
1,650
Section 17
2
1,650
Year
Min
Tiara Condominium (Sec 16)
Max
893 - 1,680
Year
Average (RM psf)
2010
318
2012
415
2013
380
2014
464
2015
494
2010
506
2011
578
2012
643
2013
702
2010
449
2011
506
2012
536
2013
647
2014
628
2010
317
2011
362
2012
405
2013
497
2014
591
2015
623
2010
320
2011
371
2012
435
2013
496
2014
497
2015
566
2010
170,000
365,000
2011
120,000
380,000
2012
200,000
355,000
2013
300,000
395,000
2014
250,000
450,000
AVERAGE COST PSF AND PRICE BASED ON TRANSACTIONS FROM APRIL 2014 TO MAY 2015
2015
500,000
500,000
Transactions are recorded based on stamp duty paid from Aug 2014 to May 2015
2010
220,000
256,000
2011
240,000
390,000
2012
365,000
Source: Oregeon Property Consultancy Sdn Bhd
Type
Average PSF
Average Price
Transactions
Section 13
Office
820
370667
15
Section 14
Terrace House
312
547353
17
Land Use
Location
450,000
Commercial
2013
330,000
580,000
Residential
2014
683,000
700,000
Residential
Section 14
Bungalow
283
1686250
8
2010
300,000
370,000
Residential
Section 14
Condo
453
545000
4
2011
320,000
500,000
Commercial
Section 14
Office
164
215000
1
2012
430,000
550,000
Commercial
Section 14
Shop Unit
431
220000
1
2013
460,000
625,000
Residential
Section 16
Bungalow
386
3383333
3
Section 16
Condo
637
1086000
13
2014
620,000
830,000
Residential
2010
400,000
590,000
Commercial
Section 16
Shoplot
467
100000
1
2011
548,000
710,000
Residential
Section 17
Bungalow
377
2632500
4
2012
600,000
750,000
Residential
Section 17
Condo
523
644667
6
2013
700,000
928,000
Residential
Section 17
Terrace House
498
861385
13
2014
630,000
918,000
Residential
Section 17
Semi-D
357
2271667
6
900,000
Commercial
Section 17
Shoplot
414
2052222
9
2015 Source: Oregeon Property Consultancy Sdn Bhd
50 I AUGUST 2015 www.propertyinsight.com.my
895,000
Source: Brickz
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KUALA LUMPUR
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AREA FOCUS Malaya – nearby. Trilight Residences, one of the core projects situated within the larger area of Fraser Square at Section 13, was intended to be one component in an ambitious multi-phase project, comprising of three 32-storey apartment blocks totalling 900 units, a shopping mall below, SOHOs, corporate offices and even a 16-storey hotel, to be developed over a period of six years. The developer is none other than food and beverage conglomerate Fraser & Neave Holdings Bhd (F&N), together with their Singapore-based affiliate, Frasers Centrepoint Ltd, through their subsidiary Vacaron Company Sdn Bhd. Originally the site of F&N’s dairy manufacturing plant before they moved to Port Klang, the massive former industrial plot has seen quite a bit of action in recent years, with MPPJ approving a number of commercial and residential projects under their Special Area Action Plan. However, the project was not without hiccups. A weakening currency and unstable financial markets have prompted the developer to postpone the launch of Fraser Square until the sometime in 2016’s third quarter. In the meantime though, other developers are trying to make their mark in this upcoming economically lucrative area which covers almost 13 acres. Island Circle Development Sdn Bhd is currently building Pacific Star Towers, a massive mixed development of commercial space and residential units. Heavily skewed towards a ‘futuristic’ aesthetic while emphasising sustainable building design, the project consists of two office buildings of 14 and 16 storeys respectively, three service apartment blocks of 24 to 33 storeys and four storeys of parking space. Then there is PJ Midtown, a joint effort between IOI Properties Berhad and Sime Darby Brunsfield. Targeted at individuals and families alike, the development offers fully serviced suites of one, two, and three bedrooms, complemented by 52 I AUGUST 2015 www.propertyinsight.com.my
premium amenities such as a private garden, a tight security presence and a sky terrace. Built-ups for the suites range from 600 square feet to 1,200 square feet. All three of these properties will benefit from their proximity to major highways and existing residential communities. They are practically opposite Jaya One, and therefore benefit from the same transit connections such as the Federal, LDP, NKVE and Sprint Highways, and the Asia Jaya LRT Station. They are also within a short driving distance (less than an hour barring heavy traffic) from nearby shopping centres such as Mid Valley and Tropicana City Mall. PETALING JAYA SUB-REGIONAL CENTER According to the latest report by Majlis Bandaraya Petaling Jaya, PBSW52 (Pusat Bandar Separa Wilayah) is the existing commercial center in Petaling Jaya and the RSDPDSDK (Rancangan Struktur Daerah Petaling Dan Sebahagian Daerah Klang) has established it as the sub-regional center. The area has been expanded to a part of Section 14 and 8. Petaling Jaya central now includes Section 52, as well as a part of Section 14 and 8. The commercial activities in Section 52, which are retail and services, are centered on the MBPJ tower, which is bounded by Jalan Sultan, Jalan Yong Shook Lin, and Jalan Selangor. The commercial activity in Section 14 is more to retail and Section 8 is a mixed of retail and services. Section 52 consists of 107.30 hectares of land, and there is pressure on the changes of land use in the north side of the area. The development of the proposed commercial land is 14.01 hectares. The area of Section 14 which is a part of the PBSW is 41.31 hectares. The business center is also experiencing the same pressure of changing the land use to commerce, and the area that is involved in the development of commerce area is 0.43 hectares. The change of housing density in the PBSW area will become negative
due to the reduction of housing units per hectare. All housing units in Section 52 and a part of Section 14, which is on the Jalan 14/20 (including all residential lots between a mosque and existing shops on the Jalan 14/20 and Jalan 14/14) and Jalan 14/24 will change its land use to limited commercial (institutions). The proposed change of use for housing to limited commercial is for a limited expansion PBSW. While other residential areas will be maintained, any change of use would not be allowed. Lot PT 3 Jalan 14/64 is allowed for property development. The developers are required to submit the development proposal report (Laporan Cadangan Pemajuan), a traffic impact assessment report (Laporan Penilaian Impak Lalulintas) and the report on the effect of the development on the surrounding area (Laporan Kesan Pembangunan Terhadap Kawasan Sekitar) and in compliance with the technical requirements. Interestingly, there will also be a Mini Universal Studio, which houses various film sets for the filming of movies on Tapak Filem Negara Malaysia and is open to visitors. This will not only be able to support the national film industry, but also, the studio will be a unique landmark in the area MBPJ. Commercial development in Lot 11 Section 52 is allowed, with the terms where developers must provide 222 parking spaces (part of the original condition) and additional development on the availability of space. The rate of parking charges is in proportion with MBPJ parking fee. The ratio and building height should be controlled in accordance with the capacity of infrastructure and traffic. The proposed development should not have a negative impact on LRT users and traffic flow. The developers are required to submit LCP, LPIL, and LKPTKS, in compliance with the technical requirements. Lot 8 Section 52 is also allowed for commercial development. The
developers are required to submit LCP, LPIL, and LKPTKS, in compliance with the technical requirements. The trend of the development in Petaling Jaya is the limited commercial title. According to the MBPJ assistant officer of urban planning (Penolong Pegawai Perancangan Bandar), Norhisyam Bin Hj Mat, “We need to have the limit because we cannot go fully commercial just yet. We have to consider a lot of capacity aspects, such as the traffic. We limit it to a certain elements.” However, Norhisyam added, “There is possibility that the land use for future development would be fully commercial. For example, the Section 13 area. There is possibility that some parts of Petaling Jaya would be fully commercialised such as the Section 13. However, it’s yet to be confirmed. We have to wait for the next research plan.”
PETALING JAYA COMMERCIAL ZONE5 Commercial Zone5 includes Section 13, 16, 17, 17A, 19, 20, 21, and a part of Section 14 and SS2. The location of this zone is in-between north side of Jalan Damansara, Jalan Dato’ Abu Bakar, Jalan Kemajuan, Jalan Utara on the east, LRT reserve in the south, and Jalan 2/72, Jalan SS 2/24, Jalan 21/34 in the west. The area is about 638.92 hectares and Section 13 will have its own Local Plan which covers 100.94 hectares of area. It consists of mixed land development of residential, industrial, commercial, community and recreational facilities, as well as infrastructure and utilities. Residential area is the largest with almost of 33% of the whole development. There are three business centers with the standard of city center in this zone, which are Pusat Perniagaan Seksyen 17, Pusat Perniagaan SEA Park and Pusat Perniagaan Seksyen 16.
Lot 1 and Lot 4, Section 17, is allowed for residential development. However, the developer still required to submit LCP, LPIL, and LKPTKS and in compliance with the technical requirements. The redevelopment of the commercial units involves the cinema area in Section 17, 20, and 21. The changes of land use from residential to limited commercial units outside the business center is at Jalan SS2/24. The proposal of changing the land use of the whole industrial area in Section 19 to limited commercial (services) is within the 30.25 hectares of land. PETALING JAYA IN THE FUTURE “Empty lands doesn’t sound real in the said area, new developments are mostly of refurbishment and replacement of the old buildings. However, this is difficult to be applied to the existing residential dwellings. Therefore, it can be foreseen that more newly designed and modern commercial buildings and high-rise dwellings will be built, and the existing landed dwellings shall maintain how it appeared to be in at least a decade or two,” said Kok. There are a few upcoming developments in Section 13, Petaling Jaya area, and according to SK Brothers general manager Chan Ai Cheng, the future projects are, “Trilight by Fraser Group (F&N site), PJD’s project on former Diethelm’s site (Jalan Universiti), as well as Paramount’s project of 5.2 acres of development, and more to come as
THE NEW LAUNCHED / ON-GOING PROJECTS ARE AS BELOW:-
Project
Developer
Location
Type
PJ Midtown
PJ Midtown Development Sdn Bhd
Jalan Kemajuan, S13 PJ
2 blocks of 22-storey serviced apartment (702 units)
Trilight Residence @ Fraser Square
Vacaron Company Sdn Bhd (Fraser Neave Holdings)
Jalan Universiti, S13 PJ
1 block of 32-storey serviced apartment (300 units)
Pacific 63 @ PJ Central
Pacific Place Land Sdn Bhd (Island Circle Dev. Sdn Bhd)
Jalan 13/6, S13, PJ
1 block of 21-storey commercial building
Pacific Star
Jaks Island Circle Sdn Bhd (Island Circle Dev Sdn Bhd)
Jalan 13/6, S13, PJ
2 blocks of 14 to 17-storey office building, 3 blocks of 25 to 34-storey serviced apartment
Avenue D’Vogue
One-Inspiration Dev. Sdn Bhd (Inspiration Group)
No. 3A, Jalan 13/2, S13, PJ
1 block of 20-storey commercial complex
CentreStage
Cherish Springs Sdn Bhd (Inspiration Group)
Jalan Kemajuan 13/8, S13, PJ
2 block of 11 to 14-storey office suite, 1 block of 11-storey serviced apartment (352 units)
Biji
Kampung Manis Realty Sdn Bhd
Jalan 17/38, S17, PJ
2 blocks of 17-storey serviced aparment (425 units)
N/A
Vistayu Sdn Bhd
Jalan Semangat, S13, PJ
1 block of 21-storey commercial building
Source: Oregeon Property Consultancy Sdn Bhd
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AREA FOCUS the demand for properties in this area is steady.” Kok added, “Besides the notable ones, there are also other projects that are yet to be finalised or verified, such as the office building and serviced apartment project by Paramount Property Development, serviced apartment project by Mulpha Properties, hotel, SOHO, and serviced apartment project by PJD Central, office building project by Roset-Blg (Ipmuda Berhad), and hotel, SOHO, and serviced suites project known as Oxley @ Damansara by Oxley Diamond, which are the coming largescale developments that can possibly contribute in the facade change of the said areas.” “Population and job opportunities have become an advantage to these areas and these advantages have tagged along other benefits such as the transportation system like highways (Federal Highway, Sprint Highway, LDP and etc), the current LRT, and the coming MRT services,” said Kok.
Petaling Jaya has three access points to the national highway system: North-South Expressway via Kota Damansara, Damansara, and Subang. Internally, highways such as the Damansara-Puchong Expressway, Sprint Expressway and the Federal Highway exits enhances accessibility to other parts of the Klang Valley. Currently, new public transportation infrastructure is being constructed in the form of the Sungai Buloh-Kajang Line, the first MRT line in the Klang Valley, as part of the Klang Valley Mass Rapid Transit Project. Ten of the thirtyone stations will be located within Petaling Jaya. The extension of the Kelana Jaya Line towards Subang Jaya and Putra Heights and the planned Bandar Utama-Klang Line also serves to increase public transportation infrastructure in Petaling Jaya. “Reasons for demand for this locality is firstly the road network with easy access to Federal Highway (which connects KL to Klang), SPRINT highway, NKVE, LDP which makes it centrally located. Secondly
(is the population) catchment universities, hospitals, businesses. Thirdly, established and matured neighbourhoods with expanding families,” said Chan. In addition to that, Chan stated, “Most of the early residents of this location have grown-up children also wanting to live in the vicinity. I can’t speak for all PJ people but generally those who grew up in PJ and now having their own families will still stay on in PJ area, although perhaps at a different part of PJ or moving into high-rise living in PJ.” With the facilities, amenities and future developments in line, Petaling Jaya central is a promising area for the investors who are looking for their next portfolio. As Chan herself said, “Personally I continue to seek investment opportunities within this locality of familiarity and the same goes with my PJ friends. Purchasing a property is not all the time based on numbers alone, sentiments and familiarity also contributes in the decision-making process.”
AGENTS SPEAK A. GANESAN Team Leader of Universal Properties “PJ is a matured township, and the biggest growth area in Selangor, It is a self-contained township with all amenities located at almost every part of the city, it has well developed infrastructure and well-connected roads to compliment. Basically, PJ is divided into three segments, PJU (PJ Utara); PJS(PJ Selatan) and Central PJ. Let me talk about the area where I am specialized that is, PJ central. It is divided into two areas, which goes by sections and SS. The section areas are form Sect 1 to sec 22, mainly comprises of lease hold titles and the SS areas are from SS1 to SS26, mainly freehold titles. There has been constant demand for properties in PJ and it is no surprising to see developments in every pocket of land available, PJ has been the favourite for many developers because of its ever growing popularity and price of properties. So being so densely populated area it cannot escape from the ever growing traffic which basically choked the city but nevertheless PJ is still the most sought after residential area.”
CHAN AI CHENG General Manager Of SK Brothers “Personally I have always preferred this part of Petaling Jaya, primarily because I grew up in Section 11 Petaling Jaya, schooled in Petaling Jaya (Section 14) and then worked in Petaling Jaya. SKB’s office had been in Seapark (started here in 1979) then to Section 19 Petaling Jaya till today. Over the last few years, there has been much redevelopment of Section 13, beginning with Jaya One and Jaya33, followed by CentreStage and Pacific Star. Property prices have steadily increased with later launches like PJ Mid Town.”
54 I AUGUST 2015 www.propertyinsight.com.my
DEVELOPER OF THE MONTH
HOME IS WHERE THE HEART IS BY: JAMES LIM AND DANIEL SIM
Bukit Kiara Properties proves that innovation and sustainability are worth building
T
he name Bukit Kiara Properties (BKP) should strike a familiar cord with veteran investors. After all, they were the ones responsible for the outrageous but well-received Sky Beach – a fullyfunctional beach perched atop the roof of VERVE® Suites Mont’Kiara which till this day, remains one of their most celebrated and successful projects. The company traces its roots all the way back to the year 2000, when in
the wake of the Asian Financial Crisis, accomplished property developer Dato’ Alan Tong Kok Mau founded a new organisation with his son, aimed at developing innovative properties that not only offered top-notch amenities and services, but were also of value to their owners. 15 years later, the company is stronger than ever, having built up a reputable brand for quality and excellence through their three flagship
projects, all of which are located in the exclusive enclave of Mont’Kiara with more on the way. While Dato’ Alan Tong continues to oversee the firm as the Chairman, lending his expertise and experience wherever and whenever necessary, it is his son Datuk N.K. Tong who leads the team as Managing Director. Under his leadership, BKP’s workforce has grown to almost 100 dedicated staff, while their customer base boasts www.propertyinsight.com.my AUGUST 2015 I 55
DEVELOPER OF THE MONTH more than a thousand satisfied clients. As for profits, the figures speak for themselves. Their three flagship properties have collectively generated a combined revenue of close to RM1billion. Mont’Kiara holds a special place in BKP’s history. Formerly a vast rubber estate, the area became one of the most prestigious neighbourhoods in the greater KL area thanks to BKP. “We were very familiar with what was available in Mont’Kiara and we saw the potential to do things that we hadn’t considered in our previous company,” said N.K. in reference to the publiclisted company he and his father worked for before the economic woes of the late 1990s. The three projects that have propelled BKP to national renown are as follows, in order of completion: Aman Kiara, Hijauan Kiara and VERVE® Suites Mont’Kiara. The last of which was so successful that its name was reused for BKP’s current project – VERVE® Suites KL South – a new development of luxury serviced apartments strategically located on Old Klang Road in between the bustling metropolis of Kuala Lumpur and its rapidly expanding satellite city, Petaling Jaya.
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NO COMPROMISE ON THE CORE PRINCIPLES BKP takes pride in following the vision of its founders. “Our core purpose is ‘enriching lives through meaningful engagement.’ When you think about it, that doesn’t sound like a developer whose purpose is to build buildings, but we realise it’s not about buildings but touching people’s lives. So when we say enriching lives, it can be either through the lifestyle we encourage or through investment. To develop meaningful engagement at all levels, we engage our team members, our construction workers, our business associates, our customers, our shareholders, as well as the community.” “We do that through our four core values. For our products, we strive for quality and innovation, so in everything we do, we have to make sure that it’s done well and it’s innovative. For our people, it’s all about caring and integrity. The most important of the four is integrity – that’s the bedrock and foundation for our values,” explains N.K. Indeed, integrity plays a role in BKP’s dealings not only with their customers and staff, but also in how they plan and carry out their projects. Elaborating on how planning incorporates integrity,
N.K. mentions how all of their projects are designed for user ergonomics as well as ease of maintenance while also pushing the envelope when it comes to innovation. It’s a delicate balance, but one essential to the core values. “At BKP, we want to be on the leading edge but not the bleeding edge. It’s a very fine line. If you are innovative that you’ve gone and done something no one’s ever done before and then you run into problems, how would you fix it? If we do something that’s innovative that when we hand it over it becomes a problem for others to maintain, then we’ve gone from the leading edge to the bleeding edge. We have to think about how anything can be cost-effectively maintained before we offer it as a feature.” “Just like the Sky Bridge (at VERVE® Suites KL South), do you know why we didn’t air-condition the whole space? We could, but then homeowners will have to pay a lot in electricity bills every day, especially in the afternoon when not many people are there.” “So instead, we purposely let the Sky Bridge be naturally ventilated. Then, we will have air-conditioned pockets where people can get away from the heat. It’s because we see that space being mainly used at night. So that’s both innovation but also done
Living & dining area, Terra Spring Suite
Sky Kitchen & Sky Diner
Master Bedroom, Summer Canvas Suite
with integrity because we didn’t do anything that would become a white elephant.” As for customer and staff interactions, the four values are present as well, particularly integrity and caring. BKP doesn’t consider itself merely a developer whose relationship with the customer ends as soon as the property is sold. On the contrary, the company spends a lot of time getting to know their customers through events in order to understand their wants and needs and also to make them feel
Vercadicos Sky Bridge, VERVE® Suites KL South
more comfortable on a personal level – quite literally, ‘engaging lives through meaningful interaction.’ The same appreciation extends to BKP’s staff as well, even those who work on site. “With our construction workers, although we subcontract to contractors, we do a lot of engagement programmes with them. For example, every quarter, we benchmark some of the better workers and reward them. We’ve done a day trip to Malacca, we’ve taken them to Sunway Lagoon, I think they’ve even gone and watched Transformers!” commented N.K. He adds, “We score our workers with our supervisors and the contractor’s supervisors based on their quality, punctuality and cleanliness. In the time leading up to the trip, you can see that they’re already very conscious about the quality and the cleanliness. After the trip, they will share how much fun it was and inspire everyone else to do the same. You’ll see the standard improving.” AFFORDABLE LUXURY While BKP’s projects are certainly on the high end, N.K. prefers to call them ‘affordable luxury’. “It is luxurious but we try and keep the costs down as well. We try to give more value to the customers…So it could be luxury but affordable.” “For example, when we launched
VERVE® Suites Mont’Kiara, it was about 50% more expensive than any other project in the neighbourhood. But if you look at the average rental price for apartments in Mont’Kiara, they range around RM 3 a square foot. For VERVE® Suites Mont’Kiara, it’s about RM 5 to RM 7 a square foot. So in the end, the return is at par or slightly better than some of the other properties in the neighbourhood. So we are giving them value.” CHAMPIONING SUSTAINABILITY If there is one thing in common that unites all of BKP’s projects, it would be the emphasis on communal living in comfort amidst a green environment. Nowhere is this more obvious than in the VERVE® suites, both in Mont’Kiara and at KL South. It helps that N.K. is actively involved in various other associations. Currently, he is on the Investment Committee and the Board of Directors for KSC Capital Berhad, a unit trust management company based in Malaysia and previously served as the Chairman of the Real Estate and Housing Developer’s Association (REHDA) Kuala Lumpur. One of his most important positions outside of BKP, is Chairman for the World Class Sustainable Cities Conference (WCSC) 2015, a conference on sustainable urban www.propertyinsight.com.my AUGUST 2015 I 57
DEVELOPER OF THE MONTH
Our core purpose is ‘enriching lives through meaningful engagement.’ ”
- Tong
development that has been running for seven years. At each conference, international speakers from all over the world were invited to talk on various topics of urban development and some of their ideas have even been adopted by DBKL. N.K. is very passionate about this movement and is very keen to see Kuala Lumpur grow as a sustainable city. “KL is quite a new city. You look at Europe and they have cities that are like a thousand years old while we are only a couple of hundred years old, but I think we have the advantage of learning from other cities that have come before us. We have the benefit of not needing to reinvent the wheel and actually learning from what came before us and hopefully improving it as a result. So I’m very optimistic about the city itself. It is an expensive endeavour to put in all this infrastructure but I think it will yield manyfold returns in terms of not just property values, but more importantly, the quality of life.” According to N.K., DBKL is very focused on making Kuala Lumpur a world-class city, specifically, one of the top 20 which he believes will bring a lot of benefits not only to the citizens’ standard of living, but also commercially, as foreign investors will find it more lucrative to do business in Malaysia. The road will not be an easy 58 I AUGUST 2015 www.propertyinsight.com.my
one though, as even convincing the people to accept such an idea will take time. However, he remains confident that given enough outreach and engagement, getting into the top 20 is not an unreasonable goal. Specifically, he cites the benchmarking conducted by DBKL and the success of Kuala Lumpur’s Car-Free Day as milestones. As the man in charge of BKP, N.K. is determined to pave the way for sustainable homes. Citing the example of how Lake Gardens became the Perdana Botanical Gardens and how smaller parks may also get revamped in the future, he explains that BKP’s projects not only encourage innovative lifestyles, but can also serve as benchmarks for future developments. “I think all of us play a part in upgrading the infrastructure of the city and when I say infrastructure, most people think roads, public transport, maybe parks, but it’s not just that – everything is actually infrastructure. Your home, your office, even all the cafes that pop up, I loosely call them infrastructure because they’re part of the living experience.” “So I think that if each one of us can focus on our area of core expertise and continue to improve the lifestyle, while contributing better quality and innovative ideas, that would help develop the city in unison as well as take the pressure off some spaces.” “The traditional way of living within the city centre is going away – terraced houses are going to get smaller and smaller, gardens are getting smaller, there’s not much area for recreation, parking is an issue, etc. So with highrise residential living, you’re able to put the facilities back, you’re able to put the open spaces back.” With this goal in mind, BKP has been looking for new ways to rejuvenate
Kuala Lumpur with their creative residences. VERVE® Suites Mont’Kiara was a major success not only because of the design of the apartments but also for its unique feature, the aforementioned Sky Beach on the rooftop. With regards to the Sky Beach, N.K. revealed that the idea was so unbelievable that it was initially dropped, but before it was fully discarded, it was brought back to the planning table and elaborated on. Little did the team realise that this seemingly unfeasible idea would become one of the project’s most memorable features. “Each quarter we go away for two days to brainstorm ideas. And the Sky Beach came out of a brainstorming session of seven groups of five to six people. I get ideas from everyone and then if an idea sounds ridiculous, we would put it up there and before we throw it out, we say, ‘Look, anyone want to defend it?’ And other people get behind the idea and eventually the Sky Beach became the main feature! If you asked an engineer, he would never recommend to build a Sky Beach on top of a building.” ONE PROJECT AT A TIME “We take it one project at a time,” explains N.K. “It gives more benefits to our customers, we have more attention for them, and we can also keep a better eye on the project.” BKP started out with Aman Kiara, completed in 2004 and heralded as the first approved strata bungalow concept in Malaysia. Spread out across six acres within the burgeoning Mont’Kiara neighbourhood, Aman Kiara offered a mix of 19 bungalows and 12 duplex condovillas, the latter of which boasted their own private lifts to the upper units. The entire community was nestled within an enclosed minineighbourhood which contained its own clubhouse and shady greeneryfilled walkways. Although it was BKP’s first project, Aman Kiara already embodied the
principles that would come to define a BKP development – namely a design that emphasised green communal space and a commitment to the owners to provide support long after the project was completed. Hijauan Kiara followed not long after in 2008, and raised the bar for luxury residences even further. Exclusivity was the name of the game here as Hijauan Kiara was the first completed condominium project in Mont’Kiara to have its own private lift lobby concept and with only 188 units and a maximum of only two units per floor, it also has one of the lowest occupant density out of all the properties in Mont’Kiara. As usual, BKP’s hallmarks such as green spaces and private amenities ranging from swimming pools to spas are present at Hijauan Kiara. Then came BKP’s most ambitious project yet, VERVE® Suites Mont’Kiara. BKP wanted to take luxury apartments to a whole new level for the contemporary, fast-paced urban professional. With premium, fully-furnished suites, not one but four uniquely-themed Sky Lounges including the Sky Beach, and an attached retail and shopping space – VERVE® Shops, it was natural that VERVE® Suites Mont’Kiara became the talk of the town even before it was launched. Each of VERVE® Suites Mont’Kiara’s four towers was launched separately. Viva, Vibe, and Vogue Towers were fully sold and handed over to purchasers in 2009, 2010 and 2011 respectively while Vox Tower was settled some time later in 2013. Each tower hosts one of the four Sky Lounges with Vox Tower boasting the Sky Beach. BKP’s innovative efforts with VERVE® Suites Mont’Kiara won them several awards including ‘Project of the Year’ during the Malaysia Landscape Architecture Awards in 2013, the ‘Best High Rise Residential’ award at the FIABCI Malaysia Property Awards in 2014, and the ‘World Gold Winner’ of the FIABCI Prix d’Excellence Awards 2015 in the Residential (High-Rise) category.
Sky Beach, VERVE® Suites Mont’Kiara
CARRYING THE FLAG As the son of the famous Dato’ Alan Tong, N.K. has a lot to live up to. His father was affectionately known as the ‘condominium king’ for his efforts in developing Mont’Kiara but N.K. has become quite the property giant himself, having built a name and reputation as a second-generation leader. “I am very grateful for the legacy that the Chairman has left on the company and to KL as a community and we are there to continue to live up to his reputation,” commented N.K. on the subject of taking over the reins. “Everything that we do, especially with regards to the core values that we promote within the organisation, are very much in line with what he has done and exhibited as an example for
everyone. Sometimes, people might say that there is a lot of pressure, but I think the team uses that positively as a challenge to continue to keep the flag flying high or to raise the beacon even further.” He added, “I think it’s like any parent-child relationship. It’s the ability to get the best ideas and continue to evolve. Some of the other things I’ve learned from him are discipline, the caring part definitely comes from him – he’s a very caring person – and also the discipline to execute and follow. And just like him, we as a group tend to underpromise and overdeliver in everything that we do.” But working in the property industry means one must always be on one’s toes, and BKP clearly recognises that being at the forefront is no easy feat. www.propertyinsight.com.my AUGUST 2015 I 59
DEVELOPER OF THE MONTH N.K. looks up to his dad for guidance and wisdom but he also understands the value of changing with the times. “I think everyone has a unique personality, and it’s in recognising and celebrating diversity where your strength comes in. There are some things that he was better at, and we would use that methodology, but the rest of the team might have better ideas and we would leverage on those as well. But I would say, nothing stands still. Things are moving very fast so all of us have to keep evolving, even our Chairman.” MOVING FORWARD BKP is currently launching their second VERVE® project, VERVE® Suites KL South. N.K. sees a lot of potential in that region to expand, hence the decision to build a new development at Old Klang Road. “Never call anything old,” he said as a passing reference to Old Klang Road. “Because if you call something old, then the name gets stuck for a couple of years, decades even – Old Klang Road, Old Town PJ, old road to Ipoh…What’s happened in the last 20 to 30 years is that KL has grown on that side, PJ has grown on this side, they’ve both grown and they’re connected now and the Old Klang Road that used to service the port has now started to thrive again.”
Like its counterpart in Mont’Kiara, VERVE® Suites KL South also has a distinctive element that enables it to stand out from the crowd, and not just in a metaphorical sense. Spanning its two towers is the Vercadicos Sky Bridge, named after the Arkadiko Bridge from the Bronze Age of Ancient Greece. The Sky Bridge’s inspiration once carried chariots and trade carts between the cities of Tiryns and Epidaurus in the Peloponnese region. The Vercadicos will instead serve as a symbolic link between the cities of Petaling Jaya and Kuala Lumpur. Residents will be able to enjoy the amazing view from the Sky Bridge which looks out upon the Kuala Lumpur skyline as well as the attached amenities such as a Sky Kitchen and Sky Diner area for special occasions, a lounge for hosting meetings or just chilling out, a gymnasium complete with punching bags in the appropriately titled Combat Zone, and even a mini theatre where you can experience high fidelity audio and video for an authentic cinematic experience. The actual structure that will become VERVE® Suites KL South is an existing building which is currently undergoing refurbishment. It’s scheduled to be ready in 2016. In all, the development covers 1.36 acres and will consist of 321 Service Suites, 45 SOHO Units
and three retail units on the ground level, spread out across 24 storeys. As for the apartments, the suites will range in size from 555 square feet for the smallest 1-bedroom unit to 1,800 square feet for the largest SOHO. The price will be RM 600,000 onwards for the 1-Bedroom suites and from RM 750,000 onwards for the 2-Bedroom ones. All units are fully-furnished except for the mattress and television, items which homeowners would usually have personal preference. Even though BKP focuses on one project at a time, they are already looking ahead for what they will do next. N.K. shared a little on what BKP has in the pipeline. “We are flexible, we can look at different options for development, but again, it has to come back to fit our core purpose of ‘enriching lives through meaningful engagement’ so we tend to look for opportunities that add a lot of value whether it’s a high rise, communal or landed property.” Whatever they have in store, it’s a given that innovation and ‘affordable luxury’ will define it as they have for all of their past projects. But having already demonstrated their ability to build a Sky Beach and a Sky Bridge, there’s no telling what they will come up with next.
Combat Zone, VERVE® Suites KL South
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INVESTOR NEXT DOOR
BE DIFFERENT FROM THE USUAL Being unorthodox is the key to successful property investment for this lawyer BY: DANIEL SIM
A
ngeline Ngoi was introduced to property investment by her friend who happened to be her client, the famed property queen of Malaysia, Dr. Renesial Leong. “In those days, I put a lot of effort as a property conveyancing lawyer, working more than 10 hours a day, as I was new and chambering. Dr. Renesial Leong became my good friend and even gave me a special discount for me in to attend her property seminar in 2002,” said Ngoi. She went to the seminar and it changed her perception of how and what property investment was all about. As a conveyancing lawyer, she was in a privileged position, as she was exposed to property transaction data. She had wondered how her clients made lots of money from property investment, but it never crossed her mind, to start property investment on her own. “I told Dr. Renesial that I am going to make it as a property investor in eight years,” said Ngoi after attending her friend’s seminar. “I began venturing into property investment from 2002 to 2003. I invested in a linked house in Bandar Utama. In those days, properties in Bandar Utama were built-to-sell, and usually have greater demand than supply,” shared Ngoi. She highlighted that buyers would usually need to queue up for one week in order to book the property, but because she has an aunt who was working for the developer, she managed to buy it immediately and make quick money. As the property was already completed, she went and flipped the property within three months, earning 62 I AUGUST 2015 www.propertyinsight.com.my
Ngoi
a profit of RM100,000. “I considered this a good profit, more than what I would have received if I solely depended on my full-time job within that short period,” said Ngoi. “It has been 13 years and I have continued to invest in property. I have the confidence, and am convinced that investing in property is a form of generating good and stable passive income, I really have to thank Dr. Renesial Leong for this, as I can now go for holidays and not worry about the money,” said Ngoi. She learned many important principles when it comes to property investment from Dr. Renesial Leong, such as starting with something small,
and building up your property portfolio until you get to a bigger property. Had she known about property investment earlier, she would have started to invest in property the moment she received her first salary. “One of the many things I learned from her was about delaying my gratification,” shared Ngoi. She said that the profit received from property investment needed to be accumulated and kept for future investment, rather than spent immediately on a hedonistic lifestyle. “After I earned my first RM100k,I moved upwards to RM200k, and then to a million after a few property flips,” said Ngoi, who became a millionaire
by age 30. She mentioned that the good property investment climate in the country at that time, was the reason why she became a millionaire in such a short time. Unlike the rest, she followed the property development updates from developers with good track records, located in what she termed ‘good’ areas to invest. Her skills and experience as a property conveyancing lawyer really helped her in knowing who are the good developers, where to find property hotspots, and how to leverage on the bank loans, since it was not very difficult for her to obtain a bank loan as a professional. “In those days, when I was new to property investment, I used to think that with RM100k, I can only buy one property, but now I know that you can actually split it up as a down payment to buy five properties,” said Ngoi. She shared that she could easily have doubled up her property portfolio had she been more aggressive back then, but she was glad that she was a moderate risk-taker as she said, “I do not have to worry about not being able to sleep at night because I had too many liabilities.” MAKING PROFIT AT THE TIME OF PURCHASE “I’ve already won part of the game when I did my research,” she shared. She opined that one who invests in property investment should not buy expecting the price of the property to increase in the future, but to make a profit at the time of the purchase. This is true when you know that there is demand in the market, and the market price is more than the selling price. One example is when people are rushing to sell off their properties because they are migrating overseas. It is these kind of properties that you can profit from at the time of the purchase. “That is why it is always important to be close with good property agents, because the moment they have good
deals, they will come to you. This is still what I practice today to build a good and solid network,” she advised. Her strategy in those days was flipping the properties, making a profit by holding them for only a short time. “I changed my strategy halfway into my investment, because if I wanted to continue receiving a substantial amount of passive income, I would need to keep up with the everincreasing property prices,” shared Ngoi. She realised that one day, the returns were no longer there, because in the earlier days when she bought the property at a cheaper price, she could get a rental yield of between 10% to 12%. The borrowing interest at that time was only 3% to 4%, so she could use the surplus to invest in new properties, but the investment environment has changed. She shared that now it is probably not worth it to buy to flip, because of the RPGT and GST (for commercial properties) and other charges has stamp duty before real profit can be made. The rental yield would be considered acceptable, or even good, if the returns are between 4%-5%. “I turned my investment into shortterm tenancy, focusing on the Mont‘ Kiara market, because to me, there are so many condominiums there,” said Ngoi. She would like to be known as Malaysia’s condominium queen someday, just like how Dato’ Alan Tong, a legendary figure in the property industry, is recognised as Malaysia’s condo-king and famed for his condominium development projects in that area. “I just love condominiums because they are easy to rent out, the returns are higher than landed property, and my heart has always been with condominium development. When I first stepped into a condominium, I fell in love immediately, and therefore, I believe that there will be buyers and tenants who will feel the same way too,” commented Ngoi.
Because of her love and passion for condominium development, Ngoi started Jewel residences. “We have a numbers of properties, from studios with one bedroom to properties with two to three bedrooms.” She recently bought a doublestorey bungalow in Puchong which she rented out on a short-term basis. Ngoi lamented that it was very difficult looking for property agents who were willing to help her secure short-term tenants for her properties. “If we can get international travellers from Europe and Japan to stay, rental will no longer be an issue as it will all be prepaid via credit card,” shared Ngoi. “I started this because my husband was working with an MNC called General Electric. Five years ago, he used to travel around the world, and I was busy with my business as I had two legal branches to attend, one in Dutamas, and the other in Kelana Jaya,” shared Ngoi. After discussing it between themselves, her husband decided to quit his job and manage their property portfolio, because in property investment, she said, “You need to maintain and manage it, because if you don’t, you cannot maximise the return.” “I will go out and buy the property while my husband does the maintenance part, where he handles the bookings of the property by the travellers,” said Ngoi. She is glad to have invested in property early in life, because she and her husband are now reaping the fruits of their labour. She said, “All our properties are fully-rented for short-term tenancy, yet the demands never seem to slow down. Therefore, I am still planning to buy more properties, and some of them are not even completed yet.” RENTING FOR SHORT-TERM “I feel that property investment is a legacy I can leave for my children, as I bring them along when I go and look for good properties. It’s like telling www.propertyinsight.com.my AUGUST 2015 I 63
INVESTOR NEXT DOOR them how to fish rather than simply giving them the fish,” she said happily. “I don’t want my investment to expand into a business because it’s more of a personal touch issue. I want my property investment to generate sufficient income for me, so that I can do the things I look forward to doing,” she added. This means that she can be in control of her investment, because she can go on holiday without being forced to make a decision, whether or not to rent it out, as it is not a business which normally comes with huge costs involving not just the hiring but also the time. “In those days, places like Mont’ Kiara, will have the same group of expatriates moving into a new building from an older building with the same rental rates that landlords are fighting over,” shared Ngoi, who then decided to go for the niche but premium market of renting on a short-term basis. She said that investing in serviced apartments overseas is popular, but not many people are doing it in Malaysia. The serviced apartments come with a maid and utilities, just like a hotel, but are owned by an individual owner. Her target market strategy is catered to big corporations, such as expats working in Toyota, because most of them are from Japan and they only visit Malaysia on a short-term basis. Most importantly, they have the income to sustain the monthly rental. “I rent out a 500 sq.ft. studio room for about RM4,000 when the market price is normally around RM1,800.” “It seems as if the price is hugely inflated, but in actual fact, it costs less than the hotel rates. The room is larger, with utilities such as WiFi, and the only downside is that we do not serve breakfast like a hotel would do,” said Ngoi. CHALLENGES IN PROPERTY INVESTMENT She emphasised that investors should not be afraid of the ups and the downs of property investment cycles because 64 I AUGUST 2015 www.propertyinsight.com.my
I told Dr. Renesial that I am going to make it as a property investor in eight years,”
- Ngoi as seasoned investors,“you will love it, especially when you have extra cash to invest, as this is the best time to get good bargains for good properties.” She said, “Don’t carry the herd mentality of investing only when others are investing.” Besides the location, maintaining the cleanliness inside the property such as your own serviced residence is important, because perception plays a very important role in retaining customers. “I mostly have good reviews and good comments from tenants who stay at my place. When they come over, we treat them like a guest. I foster that kind of good relationship and that’s another reason why they come back to stay,” added Ngoi. PROPERTY INVESTMENT ADVICE Instead of hearing the usual “start investing as early as possible”, she shared that it is important for an investor to not “go overboard and don’t go in with too much of risk and greed, or even hearsay.” “One investing in serviced residences should buy a property that they can see, touch and maintain, in a working or living area as it will be easier to market it when the tenant leaves,” said Ngoi. “I like to hold parties, corporate events, and weddings. Therefore, I venture into a new line of property business providing the venue for such services,” she added. For example, she rented out her bungalow in Puchong for RM1,000 per day, with a minimum stay condition. “You always make the first move. You know what is the market demand
and when you see that demand and no supply, go for it, although it may be unorthodox,” she concluded. PROPERTY 1 Location
Mont Kiara
Property Type
Condominium
Purchase Value & Year
RM385,000 & 2009
Market Value & Year
RM680,000 in 2015
Price PSF
RM539 PSF in 2009
Rental per month
RM4000
Rental Yield
12%
Loan Margin
70%
Loan Tenure
34 years
PROPERTY 2 Location
Sri Hartamas
Property Type
Condominium
Purchase Value & Year
RM450,000 & 2009
Market Value & Year
RM780,000 in 2015
Price PSF
RM450 PSF in 2009
Rental per month
RM5000
Rental Yield
13%
Loan Margin
70%
Loan Tenure
34 years
Foresthill.indd 1
6/18/15 5:48 PM
LEGAL
A CONVEYANCING PRACTITIONER’S EYES Investing in property through unconventional means
T
he normal perception of property investment involves the acquiring of ownership to a property through conveyance of the title deed from the property owner to the buyer. Typically the process encompasses the entering into a sale and purchase agreement (SPA) and transfer instrument between the property owner with the buyer. In the case of a property with individual or strata title, the parties will execute a Memorandum of Transfer where the title deed will be conveyed or transferred to the buyer. In the case of a property under master title (where individual or strata title is yet to be issued), the conveyance of property is done through a Deed of Assignment, where all the owner’s rights, title, benefits, interest, obligations and liabilities are assigned absolutely to the buyer. Some of the normal or conventional ways where one could acquire property are as follows:(i) the easiest (but not common) of all, through inheritance; (ii) buying an off-the-plan property (be it residential, commercial or industrial properties) from a developer or builder. This is generally known as primary market purchase. Purchase is done while construction is ongoing or in most cases prior to commencement of construction; (iii) buying a completed property from a developer or builder. This may be referred to as a built-then-sell project, where a developer actually completes construction of the project and obtain certificate of completion and compliance, before offering the project for sale to the public; (iv) buy from an existing owner a completed property or a property due for completion soon. This is generally known as secondary market purchase or sub-sale. One may buy from an existing owner of a property, enter into sale and purchase agreement and instrument of transfer. Upon completion of the 66 I AUGUST 2015 www.propertyinsight.com.my
sale and purchase transaction, ownership of the property will be conveyed or transferred to the buyer; or (v) buy through an auction. It could be a public auction or private auction, where one will bid for the property. Upon successful bidding and payment of full auction price, the auctioning party (more often than not, will be a financial institution) will affect transfer of ownership to the successful bidder. UNCONVENTIONAL MODE OF PROPERTY INVESTMENT This article serves to assess and analyse some of the unconventional or uncommon methodologies used by property investors in Malaysia and other parts of the world as their means of investing and obtaining ROI (return on investment) in real estate.
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Buy from an existing owner of a property SOMETIME IN THE FUTURE. This is a future contract of purchase of property from the existing owner. The agreement may be executed NOW but the conveyance of title may take effect some time in the future. The sale and purchase agreement may be signed in escrow by the parties, deposit with a Solicitor, with specific instruction to date and stamp the said agreement on a specific date in the future. Upon the dating and stamping of the sale and purchase agreement on the specific future date, the sale and purchase transaction shall take effect. In the meantime, the buyer may even have arrangement with the owner for early vacant possession or temporary license to occupy the property on a temporary basis.
2
Take over the company that owns the property: This happens to some commercial properties transaction. A particular property is bought and held under a company. It
could be a limited liability company, partnership, limited liability partnership or corporation. The purchase is done via acquisition of 100% paid up shares in the company. The are two setbacks in this type of acquisition :- (i) bank will not finance purchase of shares, as opposed to purchase of property; and (ii) the risk of acquiring an existing company is one may inherit the debt and liabilities of the company. It is important to ensure all liabilities accrued up to the date of completion of the transaction shall belong to the previous owner.
3
Investing in REITS: This is an indirect investment in prime properties, especially prime retail and commercial malls, which otherwise will be beyond reach of a normal man on the street due to its high cost of entry. The benefit of investing in REITs is low starting capital and regular earning of dividends.
4
Invest in property developers’ shares: Another indirect investment in property is by investing in the stock of property developers that is listed on the stock exchange. The set back is the lack of direct control over the management of the property and the company. The performance of the stock may not correspond with the performance of the property but rather a reflection of the management of the company. One may end up hoping and wishing for a dividend that never materializes. Due diligence and study of past performance of the company is important.
5
Buying Power of Attorney (PA): An irrevocable full PA granted by the owner to the purchaser for good consideration, provide the purchaser with full power and authority to deal with the property, sell, dispose, transfer, lease, receive proceed of sale, to sue, receive insurance money and recover debt owing and all matters relating to the property.
6
Buying a Trust: A deed of trust is an equitable instrument where the legal title of a property is vested in the trustee for and on behalf of the beneficial owner. The trustee may be appointed or nominated by the actual owner to purchase and hold the property of behalf of the real owner.
7
Buying Option: An option granted by the owner of a property to the option holder gives the holder the right but not the obligation to purchase the property some time in the future. Once option is exercised, the owner is obliged to sell and transfer the property to the option holder. During the option period, the option holder may negotiate for right to temporary occupy the property or right to lease out the property to third party at a certain rent.
8
Lease options: Lease option is where an option is granted, at the consideration of an option sum, by the owner of a property to a prospective buyer (holder) to purchase the property sometime in the future. Meanwhile the holder takes the property on a monthly rent, until such time the holder exercises the option to purchase.
9
Buying lease rights: A lessee or lease holder of a property may sell the right over the lease to third party, normally with the consent of the owner or lessor. The prospective investor may by virtue of a deed of novation or assignment, assume the right as lessee of the property. DISPOSING PROPERTIES THROUGH UNCONVENTIONAL MEANS The same methodology discussed above could be adopted by owner of property who intends to sell, dispose or part obligation of their property to a third party. These could be processes and methodology where one could ‘release’ or ‘offload’ his/her duty and responsibility over a property to a third party without parting legal ownership.
1
Granting a lease: A lease is a tenancy exceeding a term of three years. One way for a property owner who needs to ensure that his/her responsibility of mortgage repayment is by securing a long lease, especially a fixed term lease. He is somewhat guaranteed of the monthly inflow of revenue.
2
Invite a Joint Investor to one’s property or disposing to third party a portion of equity in a property, while maintaining himself/herself as the registered owner. The portion owned by the third party can be hold by the existing owner on trust, by virtue of a deed of trust. The risk of investment is hence shared and spread.
3
Granting Call Option and Put Option to sale and purchase of the property in the future. Whilst the option holder may exercise option to compel the owner to sell in the future, the owner may compel (by way of put option) the option holder to purchase his/her property some time in the future. CONCLUSION In conclusion, be it a conventional sale and conveyance of a property or unconventional disposal methodologies, the fundamental issue guiding one’s decision in selecting the mode of acquiring or disposing an investment property is conducting the necessary due diligence. Proper and thorough due diligence ought to be conducted on the subject matter property, the property owner, the developer of the project, the management of the project, the State’s guidelines, the legality of the structure and scheme of arrangement. It is an investment and therefore calls for risk analysis and feasibility studies.
ABOUT THE CONTRIBUTOR Elizabeth Siew is an advocate & solicitor. She has vast experience in conveyancing, commercial and corporate legal practices, particularly in respect of land acquisition and joint project development matters, property development for commercial, residential and industrial projects.
www.propertyinsight.com.my AUGUST 2015 I 67
STRATEGY
WHAT IS PERFECTION? Waiting for the lowest price before buying the perfect property
R
ecently, I followed my brother and his wife to a property viewing. It was a semi-detached house which was just a few units away from our parents’ home in Ipoh. The owner was only willing to sell it at RM560,000. It was a fully-renovated unit and my brother may only need to buy a few pieces of furniture and electrical goods. My mother told us that she paid RM85,000 for her current unit while our neighbour who moved in a few years after us, bought hers for RM111,000. My parents bought their unit 25 years ago. My brother and I discussed and agreed that RM560,000 is considered low enough. Perhaps not the lowest price but both of us were willing to accept it and buy. Is it a perfect property? Almost, since it’s so near to my parents’ place. Thus, my brother may have found a close to perfect property at a price low enough for him to afford. This is despite the fact that a long time ago, the price was much lower. GETTING STARTED Do you own a property today? Have you started to pay for one so that you and your loved ones have a roof over your heads? Are you still waiting for the lowest price before buying your perfect property? After all, with the current negative sentiment, surely the property market will crash soon? Many of your friends who have not yet bought one have also shared many tips on when is the best time to buy. You think they share the same opinion as you and thus you feel confident not to buy one for now. Do not worry, I have no issues with anyone who would like to wait before buying a good property. Honestly, someone who chose not to buy would not fare worse than someone who bought the wrong property and thus got stuck with a bad deal for a very long time, or even lost a fortune for the wrong buy. Yes, this is true because most of the time, only those who earned a lot from their property investment would tell you this while those who lost money simply blamed their bad luck. However, let us discuss this ‘waiting’ period. How long should we wait? To me, we should wait until we are ready with enough capital to buy an affordable property. Ready with sufficient funds to cover the down payment as well as
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renovation and furnishing costs. Affordable in this sense means the mortgage instalment should be at most, 40% of your income every month. Thus, the waiting period is based on our personal circumstances and not when our friends tell us to buy. Always remember that once you have begun to pay for that property, your investment towards your retirement has started. The earlier, the better. As for waiting for the lowest price, let me be very honest and real. The lowest price would normally be the price offered by the developer. Thus far, unless the project is going nowhere or the developer ran away, the price would never stay the same after completion. It would just go up, even if it follows the usual inflation percentage. We should however, learn about the area that we are buying and the usual price for the type of property that we are buying. Using this information, we should be able to ascertain a very good price level. The lowest price may also occur during a financial crisis, but if you were skeptical to buy during good times, would you dare to buy during bad times? Ah, the perfect property. When we were still single and with only a few years of working experience, the perfect property might be just a small 700 sq.ft. clean and cosy
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STRATEGY
apartment in a secondary area for less than RM250,000. Saving just RM5,000 a year for five years would enable you to have enough down payment for this ‘perfect’ property. After getting married, and with a combined income, the ‘perfect’ property might now be a condo in a secondary area of 1,000 sq.ft. or more. This is to also include the potential for one or two babies in the near future. The price can now be increased to just below RM600,000. With this in mind, choices are aplenty. Simply search the online property portals. If we are somehow ahead of everyone else, then we should be able to afford a much higher priced ‘perfect’ property. The question that we should ask is thus, “what is the perfect property for me, now?” Once we objectively answer this question, the ‘perfect’ property will appear. In conclusion, waiting for the perfect property at the lowest price may not work according to what we have in mind. This is especially so if what we have in mind is just not what we can afford. The property market is always changing and in fact, if we take a look at some of the hotspots today, they were the secondary areas of earlier days. Urbanisation and the migration of people from smaller towns to bigger cities is happening all over the world. Just look at the number of Malaysian fresh graduates heading off to Singapore and you will understand why property prices in Singapore have become one of the highest-priced 70 I AUGUST 2015 www.propertyinsight.com.my
in the world today. Last but not least, if you are a man, your future fatherin-law may appreciate you better if you already have a property, even if it’s a small one, as opposed to who told his future father-in-law that he is waiting for the perfect property at the lowest price. After all, would the married couple live in a rented room first? Yes, my first property was just a 700 sq.ft. apartment and yes, my father-in-law really did ask me that question when I asked for his daughter’s hand! Today, I am living in a 1,743 sq.ft. condo and my father-in-law looks up to me a lot more than the young man he met over 15 years ago. The best time to plant a tree was 20 years ago. The second best time is now. Let us take the right action today. Whether you are buying one now, or waiting for the perfect property at the lowest price, happy investing!
ABOUT THE CONTRIBUTOR Charles Tan is the founder and principal writer of kopiandproperty.com, where he blogs about his personal views on the property market. He is also a regular contributor to some property related publications in Malaysia.
+60168591911/ +60178510500
Belka.indd 1
7/15/15 4:08 PM
FINANCE
GST AND AUCTION PROPERTIES Is GST applicable to auction properties?
S
ince the inaugural nationwide GST implementation kicked in at the beginning of April, the real estate fraternity has been kept busy with stakeholders having to digest the loads of practical changes required from the primary to the secondary market. While there are many differing views, one thing is clear, confusion has already begun to set in for the end buyer or seller. Aside from these markets, there is also the auction property industry which is nevertheless affected and we shall take a look at how the taxable supply chain involving this – industry can affect investors and homebuyers alike. The word ‘GST’ has been by far the most mentioned threeletter-word for the longest time. More so in the context of the property investment industry where all s t a k e h o l d e r s— especially the ever daring and hungry investors—are concerned. As every investor tries to understand how GST affects their precious assets, we study how GST affects auction property investment and where it matters most. UNDERSTANDING THE LAW The Goods and Services Tax (GST) is a multi-stage tax on domestic consumption. Hence it is charged on all taxable supplies of goods and services, except those specifically
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exempted. In the context of real estate, for example, residential properties are GST-exempted, whereas commercial and industrial units are those where GST is applicable. Anyone who is registered under the Goods and Services Tax Act 2014 is known as a ‘registered person’ and is required to charge GST (output tax) on all taxable supply of goods and services made to his customers. He is allowed to claim back any GST incurred on his purchases (input tax) which are inputs to his business. Therefore, the tax itself is not a cost to the intermediaries and does not appear as an expense item in their financial statements. AUCTION PROPERTY LANDSCAPE In the property auction process, an auctioneer is a person who acts as an agent or intermediary to sell goods in the form of properties to the highest bidder. Auctioneers are either individuals or a company that receives a commission or fee for carrying out the auction and they are regulated by different state laws and authorities. Besides providing an auctioning service for their clientele, an auctioneer also charges for services such as advertising, assessment, consultation on price and other miscellaneous fees, which are incidental in nature. These are considered taxable supplies too, and he is required to register as a GST-registered person, provided he has achieved the threshold required in total turnover in his auction business. Now let’s look at who gets affected in the supply chain process of property auctions. SUPPLY CHAIN STAKEHOLDERS Owner A person who owns the property that was put up for sale via auction. Also called the principal.
1
2
Financier An institution such as bank that has provided loan financing or credit to a buyer for their purchase of property. This party usually got involved due to default payment from the buyer in their scheduled repayment. Subsequently, the property will be repossessed and put up for auction in order to recover the loan.
TABLE 1: GST TREATMENT AND PAYMENT ON TAXABLE AUCTIONED ON BEHALF
3
Auctioneer A person or company acting as an agent to dispose the repossessed property on behalf of an owner or financier via auction.
4
Bidder A person who bids for property in an auction. A auction process and shall be subject to GST, chargeable to them as output tax by the owner through the auctioneer depending on whether the principal is a GST-registered person or not. OWNERSHIP AND TAX LIABILITY Property sold under auction does not belong to the auctioneer as they merely act as an agent for the financier and owner. However, the liability is on the auctioneer to account for tax if the auctioned property belongs to a taxable person. Output Taxes Whether an auctioned property is to be charged with output tax wholly depends on the owner’s status under GST. An owner who is registered with GST shall have his or her property auctioned with output taxes. If the owner is not a taxable person, there cannot be output tax charged to the auctioned unit. As for the services rendered during an auction, investors and homebuyers need to be aware that the cost of acquiring an auction unit also relies on the GST status of the auctioneer, since a registered auctioneer will be able to charge output taxes for his services. These include commissions or fees that were charged to the owner or financier as part of the overall cost of the auctioned unit. Successful bidders are advised to bear this in mind as well. It is important to note here that for an auctioneer who is not a taxable person, commissions and fees charged by the auctioneer to the owner or financier are not subject to taxes. Input Taxes While this may not affect the bidders very much, input taxes do have bearing on the auctioneer who cannot claim input tax credit on properties that were auctioned off as the input tax credit would have been claimed by the owner at the time he acquired the property. Input taxes can be claimed by the auctioneer on GST
paid or incurred incidental to the business of running an auctio. SUMMARY In general, there are four possible outcomes of taxation applicable to auctioned property for budding auction investors and homebuyers to be aware of while hunting for their prized auction units. They are as follows: 1. Owner non-GST registered, residential property 2. Owner GST registered, residential property 3. Owner non-GST registered, commercial & industrial property 4. Owner GST registered, commercial & industrial property From the above, it is crucial to know that NO GST is required to be imposed on any residential properties that are prescribed as exempt supply goods when such properties are auctioned off, irrespective of whether the owner is GST-registered or not. While the above may be outlined by the Royal Malaysian Customs, its practical interpretation is subject to the actual presiding factor which is settled on a case-by-case basis so the drastic impact it will have on all stakeholders in the auction property industry has yet to be seen. All in all, one needs not worry if the facts above seem confusing. Auction property investment does present itself as one of the better options to source for below market value properties amidst the GST landscape, while we enjoy and thrive in these challenging times.
ABOUT THE CONTRIBUTOR Alan Poon is a real asset value investor, who focuses on tangible and undervalued assets, specifically real estate, as his choice of investments. He founded Superior Wealth Mastery, an organization dedicated to the mastery of wealth education as the cornerstone of success and happiness in life.
www.propertyinsight.com.my AUGUST 2015 I 73
STRATEGY
MITIGATING GST IMPACT ON THE PROPERTY MARKET
W
e are now into the fifth month of the Malaysian GST implementation. Whether you are ready or not, it is here to stay. To accommodate Malaysian’s habit of last-minute-rush, the Royal Customs had opened its door over the final weekend of May 2015 to allow GST Forms to be submitted and payments to be made by businesses. Like all things that are being introduced the first time, it comes with minor havoc for those who did last minute filing. Educational workshops and awareness road shows by Customs would need to be continue and on-going fine tuning of the system and procedures are unavoidable. GENERAL GST IMPACT Goods and Service Tax (GST) is a tax that is being introduced to replace the old Sales and Service Tax (SST). However, while replacing the old taxes, the scope (i.e. the goods and services) that covers under the new GST has been widen as compared to the old SST. Hence, GST is rather a “new” tax to certain industries. One of the industry that would consider GST as a rather new tax is the Property Industry. Before we begin, let us look at GST in a positive light. Why is SST need to be replaced? Under the old SST, when it is charged, it cascaded from one level to another and indirectly created higher cost on products and services that carried SST. On the other hand, GST is a more transparent and efficient tax if compared to the old SST. This is because, when GST is charged, GST amount must be transparently displayed on the Tax Invoice. If this GST is used for business purposes and it is not an item that comes under the Customs’ Block Input Tax category, it is recoverable – in GST term we call it “Claimable”. When Goods or Services are imported, GST begins and is charged. When Goods or Services are exported, GST stops and zeroises. The change from the old SST to the new GST, also marks the change in the tax regime on indirect taxes. Like the Self-Assessment System (SAS) introduced into income tax regime 15 years ago, the implementation of GST is the responsibility of the GST Registrants. Customs’ responsibility will now shift to providing continuous tax updates and clarifications with Tax Audit methodology in place to govern and monitor GST compliance. List of penalties has also been in place under the GST Regime to assist compliance.
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With this paradigm shift in tax regime, the cost of doing business for many entrepreneurs, especially Small Medium Enterprises (SMEs), will go up due to costs of complying with the new law. The top three costs of compliance includes the following: • Educational and training costs for the management • Funding costs, as GST effects cash flow management • Staff costs, to ensure accounts are being write up periodically GST IMPACT IN THE PROPERTY SECTOR In the Malaysian economy,the property sector is one of the major sector that creates the net worth of our people. There are two (2) categories of property supplies under GST :– EXEMPT SUPPLY Land used for agricultural, residential purposes
Including any parking facilities which is ancillary to the supplies of residential properties
STANDARD RATED SUPPLY Land and building used for commercial and industrial purpose Example: • Shop lots • Office • Retail • SoHo • SoVo
• SoFo • Factories • Hotel / motel / inn /hostel • Warehouses
Land for general use • Burial • Playground, and • Religious
The major different between the two property categories is that developers who develop exempt supplies, cannot claim the GST incurred in the construction of the property (i.e. Input Tax Credit is not claimable). Whereas developers who develop standard-rated supplies can claim the GST incurred from the construction cost. Basing on the research done by REHDA and published to public in the last quarter of 2014, GST imposition will result in an increase in house prices by about 2.6%. Hence, such increase in price is inevitable. There are generally three (3) stages of GST impact in the supply chain of property industry :STAGE 1 : Those who build – developers, contractors, landowners and related parties STAGE 2 : Those who buy the first-built – primary / first- hand market STAGE 3 : Those who eventually sell the first-built – secondary market
STAGE 1 : Those who build – developers, contractors, landowners and related parties
STAGE 2 : Those who buy the first-built – primary / first- hand market
Personally, I find the GST impact on the property industry the most interesting to learn on. This is because to build a property, it takes everyone from lawyers, architects, Quantity Surveyors, contractors, engineers, raw material suppliers, furniture and fittings suppliers, heavy machineries suppliers, workers – both local and foreign, plumbers, land owners, developers, landscaping contractors, environmentalist, the state authorities, TNB, Telcos, Syabas, the bankers, and not forgetting - the buyers. To further complicate the matter, a development can be done on various business arrangements : • Developer’s own land bank • Via a joint management agreement with land owners • Via Joint Venture (JV) arrangement • Many other forms of working collaboration Different business collaborations gives effect to different GST treatment for the developers and landowners. Understanding the difference in GST treatment for the different business arrangement is important as it assists both the developers and land owners to decide on the bestsuited GST treatment right from the beginning to avoid wrong GST implementation which can be a cost of doing business. Let’s see how many of the above parties were under the old SST regime :
People buy property for various reasons. To name a few a purchase can be done for own use, for investment and for immediate sale. For whatever reason, in GST era, when a standard-rated property is sold, GST is included in the selling price of the said property. To mitigate the GST impact, the purchaser would need to do the following : Become a GST-registrant Purchase in the furtherance of business For sales as a supply of goods or For rental collection purposes In order to be able to claim back the GST incurred.
PREVIOUSLY UNDER THE OLD SST
PREVIOUSLY NO UNDER THE OLD SST
Lawyer
Raw Material Suppliers
Architects
Furniture And Fittings Suppliers
Quantity Surveyors
Heavy Machineries Suppliers
Contractors
Workers – Both Local And Foreign
Engineers
Plumbers
Landscaping Contractors
Land Owners
Environmentalist
Developers
Telcos
The State Authorities TNB Syabas The Bankers The Buyers
Based on the above, it shows that GST is rather a new tax for most parties in the property industry. One of the major challenges of the property industry is cash-flow management. SME contractors or suppliers that are within the supply chain of a development will depend on 1) the response from the sales and 2) the cash flow strength of the developer to ensure its liquidity and continuous payment down into every step of the supply chain. Cash flow can be effected, if one needs to finance the payment of GST in his business. Of course, the recent weakening of the Ringgit also affects imported costs, which may also push up prices, not just the GST.
STAGE 3 : Those who eventually buy and sell in the secondary market When the standard-rated property comes into the secondary market, the sale of a standard rated property by a GST registrant seller will need to charge GST to his buyer. If the buyer is not a GST registrant, the GST charge by the seller will become the final tax for the buyer. To mitigate it, the buyer will need to look into its eligibility to become a GST registrant so that the GST incurred by him can be claimable. This cycle of supply chain in property investment will go on and on. IN CONCLUSION GST is a tax to be borne by the end-consumer. Purchaser of goods or services will become the end-consumer when he/she is NOT a GST registrant or does not use the goods or services in the furtherance of business. In the property sector, especially for property investor, to mitigate the GST impact, one needs to decide on the “vehicle” use to purchase coupled with the “intention” to purchase a standard-rated property. This is a GSTregistered “vehicle” that allows purchasers to look into the possibility to recover the GST incurred that flows through the property supply chain and into the Sales & Purchase Agreement. With the first GST submission having fallen due on 31 May 2015, there is no more turning back for Malaysians as far as GST implementation is concern. Let us start to get used to having GST in our lives, and happy investing and property hunting in GST Era!
ABOUT THE CONTRIBUTOR Agnes Wong is the managing partner of Syarikat Ong Group of Companies. She is a chartered accountant, a licensed tax and GST consultant. She holds membership in the Chartered Tax Institute of Malaysia (CTIM), Malaysian Institute of Accountants (MIA), Certified Practising Accountant (CPA) Australia and Malaysia Institute of Chartered Secretaries and Administrators (MAICA).
www.propertyinsight.com.my AUGUST 2015 I 75
Property King_July.pdf
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STRATEGY
MORE PROPERTY INVESTMENT BIASES THAT ARE HOLDING YOU BACK
W
hat is standing between you and property investing success? It could be YOU! In the last issue, I introduced you to the concept that there are a number of biases that can significantly impact your investment decisions. These include some fairly common ones, such as being biased towards overwhelming negativity or positivity – which often becomes apparent when couples are investing, and they realise they are in opposite camps. Today in part two of this four part series, let’s look at a few more biases that may be preventing you from reaching your investment goals and dreams. STATUS QUO BIAS This describes our tendency to stick with what we know, whether or not it’s the best course of action. It could be as simple as buying the same brand of groceries that you always have or as complex as holding on to that underperforming property. People do this partly because they want to avoid costs, even when it’s apparent that those costs will be offset by a larger gain, namely the long-term growth of a better performing property. Psychologists call this ‘loss aversion’ and it explains why so many Australians are willing to stick their money in a plain old bank account earning minimal interest, rather than taking the ‘perceived risk’ of a property investment. Most investment decisions have an alternative – one of which is to maintain the status quo and do nothing. Psychologists have shown that most of us disproportionately stick with the status quo because “doing nothing is within the power of all men” as we often weigh the potential losses from switching from the status quo more heavily than the potential gains. SURVIVORSHIP BIAS The misconception here is that you should focus on the successful if you wish to become successful, while the truth is that when failure becomes invisible, the difference between failure and success may also become invisible. You see, if all you’re looking at are other people’s successes, you could be missing the most important lessons for getting ahead from those who got it wrong. If you spend your life only learning from ‘survivors’, buying books about successful people and reading property investment success stories, your knowledge of the world will be strongly biased and enormously incomplete. The trick when looking for advice is to not only learn what to do, but also look for what not to do. BANDWAGON BIAS This is the psychological phenomenon whereby people do something primarily because other people are doing it. The bandwagon effect has wide implications, but is commonly seen during strong property markets where the media stirs up a frenzy and it’s one of the factors that leads to asset
bubbles. This tendency of people to align their beliefs and behaviours, with those of a group, is also called ’herd mentality’, but we know that ‘the herd’ is usually wrong – most property investors never build a substantial portfolio. So it pays to remember that just because everyone else is doing it, that doesn’t mean you should follow the crowds. In fact, smart investors tend to invest counter cyclically. As Warren Buffet said “Be fearful when others are greedy and be greedy when others are fearful.” RESTRAINT BIAS Following on from bandwagon bias, restraint bias is the tendency for people to overestimate their ability to control impulsive behavior. Will you have that extra chocolate when you’re watching your weight? Will you spend that extra hour on the Internet when you have more important things to do? Our lives are full of temptations and some of us are better at resisting them than others. Psychologists say the very people who think they are most restrained are also most likely to be impulsive. I’ve seen property investors plan to hold on during the flat few years that occur every property cycle knowing real estate is a long-term investment. They might even have created a strategy or discussed a plan of attack to help guide their decisions under various circumstances. But, when the time arrives, panic kicks in, and they react just like so many others and sell up, often near the bottom - just before the cycle turns. BIAS BIAS Failing to recognise your cognitive biases is a bias in itself. Arguably this is the most damaging bias, because having blind spots means you’re less likely to recognise any of these psychological influences in yourself. When you think you’re more objective than you really are, you may be at risk of having bias bias. The reality is that everyone comes into investing with their own predispositions and we are all prone to errors in judgment. The sooner you realise and acknowledge these tendencies in yourself, the more open you will be to improving and making better investment decisions. Simply becoming aware of these biases means half your battle against your own worst enemy - yourself – is won. Next month, I’ll continue this four part series on cognitive biases with some more ways our mind plays tricks on us.
ABOUT THE CONTRIBUTOR Michael Yardney is a successful property investor and developer in Australia.
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STRATEGY
RESPECTING YOUR TENANT
U
ntil today, it is still surprising for me to see landlords having the wrong attitude towards their tenants. They are landlords who think they have a right to enter their properties at any given time, in spite of their tenants living there, wouldn’t be bothered to perform maintenance work, leaving their tenants to endure the stinking smell of their blocked toilet bowls, or ignoring basic safety warnings. These landlords should not be in the business of renting out properties. Fortunately, they are a minority, and most landlords have the right attitude. They understand the rules of the game, where property investment is a long-term business, and they know that their tenants are their customers, so landlords treat their tenants with respect. Landlords respect the tenant’s right to privacy, as tenants want to live in a safe, secure, and conducive environment. With this respect, landlords recognise that these rights are stated in tenancy agreements that have been agreed upon by both landlord and tenant. Beyond respecting what’s been written and agreed upon in a contract, it is also important to respect tenants as persons. They take the effort to pay their rent every month punctually, look after the property, informing you when something is
not working, being available for a contractor to attend to maintenance issues, and making your property their home. Respect is much bigger than what is contained in the rental agreement. It is a state of mind and a way of being. People will hold you in high regard and respect you when you treat your customers, properties, and business with respect. A relationship with respect begins from the first day of your tenancy agreement. From the beginning, the rules of respect for the property and relationship need to be clear. Standards, expectations, and service levels should be openly discussed. From then on, this relationship needs to be nurtured. You need to be sure that you are earning, and not losing, the respect of your tenants.
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
www.propertyinsight.com.my JULY 2015 I 79
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