TEAM KERIS BERHAD
COMMERCIAL UNITS TO A HOTEL KDN PP 18181/04/2013 (033492)
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Taking September by the Straddle
KK Chua, Editor-in-Chief
Editor-in-Chief KK Chua firstname.lastname@example.org Writers Fara Petial Avinash Sagran Natasha Gideon CREATIVE
here’s only three months to a new year, to a new wave of challenges. While the market has been slightly unforgiving for some, we hope it will be better in 2017. Speaking of waves of challenges, this month we have the Executive Chairman of Team Keris Berhad, Dato’ Lee Seng Hee on our cover talking to Fara about the trials and tribulations of being a successful developer especially in this demanding market. Our main feature educates investors on how to leverage their return on investment by converting commercial properties to a hotel, instead of renting them out as a mean of investment. Speaking of challenging times, the recent change in the Overnight Policy Rate (OPR) is said to improve the economy, so how will that pan out? Avinash tells us all about how the OPR will affect the property market in our feature. As a developing country we are doing well for ourselves, just look at our recent performance in the Rio 2016 Olympics. We may be small, but we’re rising to the bar. Soon, Malaysia will have its own High Speed Rail from Kuala Lumpur to Singapore. Is that a good thing for us? Will we also be known for our own ‘Shinkansen’? Natasha spills all in our feature. Our Personality of the Month are usually investors whom put all their eggs in residential properties, this month we talk to the young and positive Kent Chua of Rhombus Group,
responsible for establishments like The Beer Factory and Fa Ying by Rama V. Take a look at this young entrepreneur’s journey with background in accounting, to being a location master for all his businesses! This month we take a look at the fast paced, but green North Kiara. Surrounded by urbanisation in areas such as Mont Kiara and Hartamas, the quietly nestled North Kiara is definitely a spot worth investing in. Get the scope from the in depth analysis Avinash has to provide for this hotspot. There is always something new in the horizon at North Kiara and it’s for everyone. If you’re looking to liven up your living space, or invest in great furniture for your properties, consider KARE as your go-to place for the best deals. If the brand seemed familiar, chances are, you may have seen it in One Utama. You’ll be able to find great centerpieces, elegantly designed and available at affordable prices. We are also happy to announce the launching of Property Insight Guide To Investing 2016/2017 coffee table book which is now available for your property investing needs for 2017. With detailed area analysis of each development and past years’ price analysis, it’s the must-buy guide in your investment arsenal. Lastly,maythelastquarteroftheyearbegoodtous. Happy Malaysia Day to all. May we remain united and never fall.
Creative Director Sarah Tan email@example.com Designer Irman Hakim BUSINESS DEVELOPMENT General Manager Janet Loh +6012 205 0911 firstname.lastname@example.org Andy Fam +6012 601 9938 email@example.com Hagenz Choo +6012 371 8831 firstname.lastname@example.org Iris Gan +6012 799 6685 email@example.com Wei Yeen, Chong +6012 927 2863 firstname.lastname@example.org
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Although every reasonable care has been taken to ensure the accuracy of the information contained in this publication, neither the publisher, editors, writers nor employees 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.
34 INVESTOR NEXT DOOR
14 COVER STORY
Manners Maketh Man
The man is none other than the Group Executive Chairman of Team Keris Berhad, Dato’ Lee Seng Hee
Building Hotel on Commercial Properties
Is it really giving you more return on investment instead of renting it out?
OPR: Is It Really Accommodating the Economy?
Going through another transitional period
High Hopes for HSR?
The hope for the connection between these two economies is so that they support and strengthen one another
Delivering Attainable Dreams
Developments by Mitraland offer everything purchasers want in a home, space, greenery and top-notch facilities
Embracing the North Kiara Diversity
Spacious living minutes away from the city at a redeveloped address
Never Too Late to Start Investing
Shariz believes in spending more to earn more
No Substitute for Hard Work
Taking ownership of your hard earn cash
Kim Realty Does Not Substitute Good Old Values
Research, preparedness, innovative and transparency the key to success
From Germany to Malaysia
KARE makes interior designing easier for homeowners and investors
DESTINATION - FOOD
Southern Rock Seafood Kitchen, a new address in Bangsar Seafood so fresh, you’d think you were right by the ocean
INTERNATIONAL MARKET - Cambodia
The Next Property Hotspot or Hot Soup?
FIVE Things Every Landlord Should State in the Tenancy Agreement
PERSONALITY OF THE MONTH
Kent Chua: Chasing Challenges
Chua left his well-established job at Deloitte Malaysia at 24 years old and started The Beer Factory in May of 2010, which managed to make back its capital in only six months
OPR Has Reduced!
Real Estate – is it a Business or Investment? Scarcity Works
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TITIWANGSA TITIWANGSA TITIWANGSA TITIWANGSA KLCC KLCC KLCC EAST EAST EAST TUN TUN RAZAK RAZAK RAZAK SERDANG SERDANG RAYA RAYA RAYA SERI SERI SERI KEMBANGAN KEMBANGAN KEMBANGAN UPM UPM UPM KLCC EASTEAST TUN TUN RAZAK SERDANG RAYA SERI KEMBANGAN UPMUPM TITIWANGSA KLCC TUN RAZAKSERDANG SERDANG RAYA SERI KEMBANGAN
(Proposed (Proposed (Proposed (Proposed MRTMRT Station) MRT Station) MRT Station) Station) (Proposed (Proposed (Proposed (Proposed MRTMRT Station) MRT Station) MRT Station) Station) EXCHANGE EXCHANGE SOUTH SOUTH (Proposed (Proposed (Proposed (Proposed MRTMRT Station) MRT Station) MRT Station) Station) (Proposed (Proposed (Proposed MRTMRT Station) MRT Station) MRT Station) Station) EXCHANGE SOUTH (Proposed MRT Station) (Proposed MRTEXCHANGE Station) EXCHANGE SOUTH SOUTH (Proposed MRT(Proposed Station) (Proposed MRT Station) (Proposed (Proposed (Proposed MRTMRT Station) MRT Station) Station) (Proposed (Proposed MRTMRT Station) MRT Station) Station) (Proposed MRT Station) (Proposed MRT Station) (Proposed MRT(Proposed Station) (Proposed MRT Station)
CYBERJAYA NORTH (Proposed (Proposed MRT MRT Station) Station)
www.decentrum.com.my CYBERJAYA CYBERJAYA CYBERJAYA CYBERJAYA NORTH NORTH NORTH NORTH CYBERJAYA NORTH (Proposed (Proposed (Proposed (Proposed MRTMRT Station) MRT Station) MRT Station) Station) (Proposed MRT Station)
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PROPERTY SHOWCASE 2016 EVENTS CALENDAR
A place where the right people meet to achieve their dream homes & investments PROPERTY SHOWCASE
PIPDA GALA DINNER 2016
PROPERTY SHOWCASE NU SENTRAL
KL Sentral, KL
4 – 6 MARCH 2016
1 APRIL 2016
13 – 19 APRIL 2016
INVESTORS’ HOT PICKS PROPERTY SHOWCASE
MID VALLEY EXHIBITION CENTRE
Mid Valley Megamall, KL
12 - 15 MAY 2016
3 – 5 JUNE 2016
15 – 17 JULY 2016
HOME+ & PROPERTY SHOWCASE
IPC SHOPPING CENTRE
CHERAS LEISURE MALL
25 – 31 JULY 2016
02 – 07 August 2016
12 – 14 AUGUST 2016
MALAYSIA’S LARGEST INVESTMENT SUMMIT
SETIA CITY CONVENTION CENTRE
27 – 30 OCTOBER 2016
5 – 6 NOVEMBER 2016
We look forward to collaborating and partnering with you Enquiries: +6012-2050 911 / email@example.com
NEWS & EVENT
PROPERTY INSIGHT GUIDE TO INVESTING 2016/2017
roperty Insight is back with the launching of the second edition of the annual ‘Property Insight Guide to Investing 2016/2017’. Apart from useful real estate analytics, property investment profiles, and investors’ inspirations, this tastefullydesigned coffee table book features the best property investment opportunities for investors. Armani Media Managing Director KK Chua said, “Nothing beats investing in brick and mortar when it comes to comparison with other investment options, as it presents a far better stability and more certain returns. Hence with that in mind, this year’s edition of the Property Insight ‘Guide To Investing 2016-2017’ presents more in-depth analysis and a detailed breakdown of growth and development in Malaysia’s property sector, presented in a classy design with great detail. The analysis reports capture the interest of readers in a quick manner and bring out the investment value of the properties.” These developments are indexed by Residential, Commercial and Industrial investment portfolios, with content focused on the investment value, rather than the physical product. “The participation from major key www.propertyinsight.com.my SEPTEMBER 2016 I 9
NEWS & EVENT developers, namely Mah Sing, Titijaya, UM Land, Hatten Group, and many more, have made this Guide the most anticipated and value-added for investors and the public. We are targeting a mass-distribution of this Guide by September 2016 to Property Investor enthusiasts, top management executives, business associates, major bookstores worldwide, as well through online purchase,â€? Chua added. The book is available at RM49.90 and can be purchased all major bookstores as well as via online via www.propertyinsight.com.my
10 | SEPTEMBER 2016 www.propertyinsight.com.my
HOME+ AND PROPERTY SHOWCASE @ IPC SHOPPING CENTRE
he recent showcase that Property Insight hosted at IPC Shipping Centre is a bit different from the others for its Home+ section. To cater to that particular section, Vishal J. Singh from Design Consultant Solar Design gave a talk on ‘Things you must do to save money for house renovations’ along with Shamir Rajadurai, a crime safety specialist from PreventCrimeNow.com who explained on ‘Enhancing the value of your property through better security’. Other than that, the Associate Director of Huttons One World, Patrick Fung was educating the participants on ‘How to turn $50,000 to $1.2 million in 10 years’. The Strategic Advisor & Managing Director of Armani Media, KK Chua complemented the Saturday’s evening with his talk on ‘Certainty in uncertainties’. On the second day, the founder and chief consultant of Affinity Consulting, Dr. Ivan Ho talked on ‘Use Feng Shui in property selection to maximise your capital appreciation’, the author of Property
buying for Gen-Y, Khalil Adis talked on the ‘Tips for Gen Ys buying their first property in Selangor’, the senior manager of Ho Chin Soon Research Sdn Bhd, Khairudin bin Ya’cob highlighted the topic of ‘New property mantra: Follow The Infrastructure!’, the Principal of Superior Wealth Mastery, Alan Poon talked on ‘Affordable Housing & Practical Ownership’ before Patrick Fung
concluded the day with his talk. The participated developers are Chester, Mah Sing Group, Titijaya Land Berhad, Janwell Properties Sdn Bhd, Macly Equity Sdn Bhd, YNH Property Berhad, Oriental Realty, De Centrum Development Sdn Bhd, M101 Bukit Bintang, Big House and Sime Darby.
SOUTH EAST ASIA PROPERTY AWARDS (MALAYSIA) 2016 NAMES THE YEAR’S FINEST REAL ESTATE
uala Lumpur, 11 August 2016 – It’s time to celebrate the most innovative developers and projects in Malaysian real estate once again at the South East Asia Property Awards (Malaysia), presented by Hansgrohe and organised by PropertyGuru Group. Sime Darby Property was awarded the year’s top honour – Best Developer (Malaysia) – for its long-term commitment to developing quality townships, in front of a 300-member audience that included Guest of Honour Yang Amat Mulia Tunku Seri Menanti Tunku Ali Redhauddin ibni Tuanku Muhriz, chairman of PropertyGuru Malaysia, and VIP guest Yang Berhormat Datuk Chua Tee Yong, the Deputy Minister of the Ministry of International Trade and Industry, who gave the opening address. Another big moment for the conglomerate
was when it was announced as one of the two victors – along with triple winner UM Land – in a new category: Special Recognition in Sustainable Development. The two companies were chosen for their exemplary track record and forwardlooking vision in sustainability. Putting
much emphasis on the importance of corporate social responsibility in the property sector, three equally deserving winners were chosen to receive the Special Recognition award in CSR: LBS Bina Group Berhad, Mah Sing Group and Matrix Concepts Holdings Berhad.
The winners of the third annual South East Asia Property Awards (Malaysia) 2016, with Guest of Honour Yang Amat Mulia Tunku Seri Menanti Tunku Ali Redhauddin ibni Tuanku Muhriz, chairman of PropertyGuru Malaysia
www.propertyinsight.com.my SEPTEMBER 2016 I 11
NEWS & EVENT
PROPERTY INSIGHT: PROPERTY SHOWCASE @ PARADIGM MALL
roperty Insight’s property showcase at Paradigm Mall received good feedbacks from participating developers, namely East West One, Mah Sing Group, WCT Berhad, Tee Land, Macly Equity Sdn Bhd, OIB, M101 Bukit Bintang, Sime Darby, Tropicana, See Hoy Chan, Gamuda Land and REI Group. Interesting redemptions such as 2x Bonuslink points redemption upon purchase, GLANZ kitchenware as lucky draw prizes and RM100 cash rebate upon purchase prompteed the good response from the crowd. The Property Talk @ Paradigm Mall also featured property industry experts - Khalil Adis, Alan Poon, Vishal J. Singh, Timothy Low, Looi Mun Goo, Dr. Daniele Gambero, Shamir Rajadurai, Khairudin Ya’cob, Tuan Bri Hashim and also Property Insight Editor-In-Chief, KK Chua.
IJM LAND AND AMONA DEVELOPMENT SHOWCASE GLASS CUBE ARCHITECTURE OF THE NEW ICE GALLERY AT PANTAI SENTRAL PARK
uala Lumpur, 21 July 2016 – IJM Land Berhad (IJM Land), the property development arm of IJM Corporation Berhad and its joint venture partner Amona Development Sdn Bhd, celebrated the official opening of the modern and contemporary cube-shaped IJM Land
Centre of Excellence or ICE Gallery at Pantai Sentral Park located within the Golden Triangle commercial and retail hubs of Petaling Jaya, Kuala Lumpur, Bangsar and Mid Valley. IJM Land has taken its latest property gallery to a new level, showcasing two
The good cooperation between IJM Land and Amona Group lays the foundation for the success of Pantai Sentral Park 12 | SEPTEMBER 2016 www.propertyinsight.com.my
transparent interlocking geometric glass cubes with organic structures in its interior which distinguish it substantially from the conventional and familiar/standard property gallery, turning it into an astonishing place of marvel and fascination. The use of cube shapes in the architecture of the ICE Gallery serves a number of purposes, from ensuring durability of the structure and maximum efficiency of the space utilisation, to harmonising the entire building with the surrounding environment. The ICE Gallery is designed for flexibility and adaptation. The volumetric form and column-free structure of the ICE Gallery coupled with the long span creates flexible spaces that facilitate the change of use during the lifecycle of the building. The highly adaptive form of the ICE Gallery allows the interior spaces to be transformed and aligned with new functions and purposes in the future when the nature-inspired township matures.
TOWER B OF FERRINGHI RESIDENCE 2 IS 84% TAKEN UP OVER A WEEKEND
PROPERTY SHOWCASE @ CHERAS LEISURE MALL
enang, 2016 – Mah Sing Group (Mah Sing) launched Tower B of Ferringhi Residence 2 last weekend at Menara Boustead. The first launched tower of the development opened up a total of 120 units for bookings. A total of 101 units were sold, which amounts to 84% takeup rate. Ferringhi Residence 2 has 3 types of layout; 2 bedroom (1,208 sq ft), 3 bedrooms (1,494 sq ft) and 3+1 bedroom (1,565 sq ft) options with price starting from RM720,000. This 9.95-acre resort condominium offers a high quality living experience from RM570 per square feet (sq ft). Group Managing Director of Mah Sing, Tan Sri Dato’ Sri Leong Hoy Kum shared that Ferringhi Residence 2 is the Group’s continuous commitment to offer resortstyle living in Batu Ferringhi. He continued, “We are very pleased with the impressive take-up rate of the Ferringhi Residence 2 launch. We believe buyers are confident with our brand because we continuously deliver homes that exceed expectations.”
he showcase held by Property Insight at Cheras Leisure Mall last month was filled with fun and joy from the appearances of Property Insight’s bear and dinosaur mascots. Children enjoyed themselves to the free cotton candies and balloons, as well as joyful time at the kids’ zone. A few investment experts also shared their opinions on the market – featuring Khalil Adis, Dr. Daniele Gambero, Alan Poon, Gary Chua and Dr. Ivan Ho. Their topics ranged from tips for Gen-Ys buying their first property in Selangor, understanding the ‘propenomy value booster’, affordable housing and practical ownership, rich debts poor debts, Malaysian
properties now and tomorrow ‘propernomy tips for smart investors’, use Feng Shui in property selection to maximize your capital appreciation. There were also 2x Bonuslink points redemption upon purchase, GLANZ kitchenware as lucky draw prizes and RM100 cash rebate upon purchase. The participants for the showcase were M101 Bukit Bintang, UM Land, Mitraland, Chester, GS Realty, Andaman Property Management Sdn Bhd, Tee Land, De Centrum Development Sdn Bhd, Tropicana Corporation Berhad, Law Development and East West One.
From left: Seth Lim, Ho Hon Sang and James Bruyns with previous winners of Miss Malaysia Tourism who made a special appearance to the launch www.propertyinsight.com.my SEPTEMBER 2016 I 13
MANNERS MAKETH MAN The man is none other than the Group Executive Chairman of Team Keris Berhad, Datoâ€™ Lee Seng Hee BY: FARA PETIAL
14 | SEPTEMBER 2016 www.propertyinsight.com.my
Times Square Ipoh www.propertyinsight.com.my SEPTEMBER 2016 I 15
I think in the process, we got recognised. People looked at us and said ‘Wow, this was an abandoned project and you came in and in the blink of an eye turned it around!’” - Lee Seng Hee
would have never imagined being chauffeured around Ipoh, but a very successful gentleman made it possible for me. The Group Executive Chairman of Team Keris Berhad (TKB), Dato’ Lee Seng Hee had recently invited Property Insight’s team, myself included to his manor. The manor was beautifully designed with accessories that are personally patterned by Dato’ Lee’s lovely wife, Datin Irene Lee. The moment I stepped into the home with a glass of fresh orange juice in my hand, I thought to myself, ‘He must love building homes very much’. Therefore, Dato’ Lee very generously fed my curiosity with an engaging narrative of his journey in development over lunch.
16 | SEPTEMBER 2016 www.propertyinsight.com.my
THE HISTORY OF TKB Dato’ Lee had returned from his studies in Belfast some 30 years ago to find the landscape of Ipoh riddled with abandoned development projects. Feeling responsible to improve the situation, Dato’ Lee established the Group which specialised in reviving and completing the struggling developments all over the State. “The Group was not established by chance nor fault, but in response to a calling that needed to be answered. Perak was struggling to graduate from mining to development and I wanted to change that.” “The capital market back then was retreating given the economic climate and it was a great challenge raising capital
especially for stranded developments.” “So what we did in those testing times was to go back to the fundamentals – building affordable properties – homes that families could afford and banks were comfortable to finance. I applied common sense during that time which was to build homes that the general public needed and in doing so bucked the trend in a slow property market.” He adds, “I think in the process, we garnered recognition. People looked at us and said, ‘Wow, this was an abandoned project and you came in and in a blink of an eye turned it around!’” Dato’ Lee is quick to add that there is no magic wand. “We decided on a slimmer bottom line. The important thing was
Times Square Ipoh - Overview
Times Square Ipoh - View to raise the capital needed to complete the development and return value to our buyers. That was the objective at the time.” BEING DISTINCTIVE TKB is different from the others in many ways. As a developer, TKB continues to expand its land banks through acquisitions while keeping true to its roots and relying on its ability to address distressed developments. He adds that the Group places a high value on thorough research and groundwork. “We will have aspirations of the developments that we undertake. The criteria is already there and we will then look around for locations. If there is a property that meets our specifications, we will seek
out the land owner and make propositions to buy it or to go on a joint venture. So, in addition to being approached with lands from interested parties, we also seek out lands on our own steam”. “In the process of doing business, we can plan what we can and should manage – product, location and everything else to return values to our buyers. What became a nightmare during 1997-1998, and the financial headwinds of 2008 – that was frightening. Overnight, the perfect storm hit the property sector and a lot of people were caught unprepared. Of course, you can never be prepared for a perfect storm.” Dato’ Lee reminisces, “In the run-up to 1997, there were many proposed
commercial, high-rise, high-end properties in the market and overnight, all the money of the purchasers disappeared, the lending institutions retreated and loans became scarce. My recollection of those episodes are in black and white – I can never recall 1997-1998 or 2008 in colour. It is useful as this sharp contrast creates a deeper appreciation for the good times which everyone remembers in colour.” Under Dato’s stewardship TKB overcame these challenges and emerged ever stronger today. How did Dato’ Lee do it? He says, “It is in the DNA of the company to find strength and grow in times of adversity. Bucking the trend, we expanded our landbanks during the downturns and launched sensible and practical www.propertyinsight.com.my SEPTEMBER 2016 I 17
Manor Born @ The Dales developments in those times. In adverse markets, we relied on our stocks to fuel the company and kept to our fundamentals which is to develop affordable properties. By the time the market recovered, the Group would have new development concepts primed for take off.” TKB’S DEVELOPMENTS Dato’ Lee explains that the criteria for buying residential and commercial properties are very different, and it is a good developer whom can marry the two. “If you want to build commercial properties, do not buy land that had no access to traffic. It must be visible, offering good connectivity and accessibility. It must also be surrounded by residential developments – the most important component in sustaining a commercial development.” “I believe the best residential projects are those that provide a ‘quiet nook in the midst of the hustle and bustle’. What does that mean? When you choose to walk out of your house that is your sanctuary, you will have the world at your feet.” “For Ipoh South Precinct, the story is that I was offered a 300-acre land and that is actually a very massive land bank. If you count the population and digestion rate, what do you do with that piece of property? We decided to do a joint venture with the land owner during that time, and subsequently acquired the property. This property links southern Ipoh with northern Ipoh and that link never existed before. So we immediately wanted to do that 18 | SEPTEMBER 2016 www.propertyinsight.com.my
project because it allowed us to roll out 12 different components. All of those multiple components allowed us to develop this integrated township meaningfully and reach out to various sectors with very tasteful planning.” “There is also our 5.3-acre Treetops Residency. If you’re going to look at where the building sits on, we occupy less than 23% of the entire project. In a market of rising plot ratios, Treetops Residency leaves 77% of the land area open to greenscapes, facilities and open spaces.” “Why the name ‘Treetops’? I always look at birds, perched on the tops of trees – always chirping away, the embodiment of freedom. Treetops Residency translates this into bricks and mortar. Residents enjoy a secure address, complete with panoramic aerial views, lifestyle amenities with every amenity at its doorstep.” “A retreat within a well-structured township, the positioning of Treetops Residency puts it within walking distance to a new hypermarket – a gentle stroll and an absolute pleasure.” How about Times Square Ipoh and what is the story behind it? “Ipoh is a great city and every great city must have a Times
Square. At the heart of every great city there must be a congregation point for celebrations – New Year’s Eve, Hari Raya, Merdeka celebration, whatever it is. And what I thought was, this is seriously lacking in Ipoh. Why don’t we build a perfect square that Ipoh deserves? Times Square sits right in the middle of Ipoh, overlooking the Perak Turf Club, surrounded by three major hotels and located in a very exclusive address,” explains Dato’ Lee. IPOH’S PROPERTY MARKET Dato’ Lee does not think that Ipoh’s property market is badly hurt by current market sentiment. He says, “Ipoh will always be resilient in property, having always grow at a steady and sustainable rate. It is a place many from near and far call home and the population swells during festival season as people flock to ‘balik kampung’. The slight overhang in the commercial property sector is felt in the market, but with replanning of development components, the market will surely self correct without too many casualties.” “The present market sentiment is affected by feelings of uncertainty. There is very selective buying in Ipoh
because there are so many developers to our resident population. In the context of Klang Valley and Selangor, they are buying the most convenient property – for example, nearest to where they work. In Ipoh, the distance between Point A and Point B is relatively close and purchasers consider more location – making Perak a very challenging market for developers indeed.” I realised one thing as I was touring Dato’ Lee’s manor. There are a lot of windows that overlooked the scenery outside. I asked Dato’ Lee about it and he says, “That is my style and it is very important to me that every window must have a vista. It is the same whether it is for my own home or my developments. Do not build a window if you do not have a beautiful view beyond it.” It was just a discussion about windows but it taught me to be thoughtful. Do not do something just for the sake of doing it, it will become pointless. Do something not only you can enjoy, but also everyone else. I have never felt as welcomed as I was when visiting Dato’ Lee’s home.
Ipoh South Precinct - Semi-detached basement concept home www.propertyinsight.com.my SEPTEMBER 2016 I 19
SEPTEMBER 2016 www.propertyinsight.com.my
BUILDING HOTEL ON COMMERCIAL PROPERTIES Is it really giving you more return on investment instead of renting it out? BY: FARA PETIAL
he current market sentiment and speculation have caused many investors to pull the brakes on their investment activities. They choose to ‘wait and see’, while some adopt extra precautionary measures as they are spooked by the uncertainty. The news that is going around town is that the rental of highrise units is abysmal to say the least, while there is nothing much that anyone can do to boost the rental returns of landed properties. If that is the case, what about commercial properties? Is it also suffering the same fate? As reported in NAPIC 2015, there is an overall softening of the property market. It stated that, “The commercial sub-sector is expected to be equally or more challenging in comparison to the residential sub-sector. The performance of the office market is expected to plateau.” With such news, what can investors do to leverage the rental of their commercial properties? The same report also mentioned that the leisure subsector is expected to remain positive. The budget allocation of RM1.2 billion to the Ministry of Tourism and Culture to achieve the targeted foreign tourists arrival of 30.5 million in 2016 may help support a key component of the sub-sector, namely the hotel industry. As such, enterprising investors have begun tapping into the trend of building hotels on commercial properties, especially shop-lot units. This trend has seen tremendous growth
Summer Suite - Premier bedroom www.propertyinsight.com.my SEPTEMBER 2016 I 23
MAIN FEATURE especially in the past few years. To find out whether those who have adopted such a strategy have seen a higher return on their investment or otherwise, Property Insight talks to a few big names in the industry. SANDEEP GREWAL, Founder Of Subhome Management Subhome Management has been in the industry for only a few years and started off with a students’ hostel in Cyberjaya. According to its founder Sandeep Grewal, the project was for them a way to ‘test the water’ before they ventured into the real deal. Sandeep’s team then converted the commercial units of Summer Suite in Kuala Lumpur into a hotel. “The problem we had with this property was that the building was a commercial building. Every unit in the SPA (Sale & Purchase Agreement) is state as for ‘office’ use. Each office lot in this building comes with a toilet and kitchen, so what’s left is for you to put in a bed and wardrobe. But it’s still an office and who wants such an office in the KLCC area? So we identified the problem and decided to convert it into a small hotel.” “We examined the location – it was supported by LRT and monorail stations, and it’s off Jalan Ismail. With all the amenities and accessibility, I knew since day one that it has to be a hotel.” “We actually started listing the units on Airbnb to test the market and to gauge the response. When we started to get enquiries, we became more convinced that this was something that we must do. Then we hired a few hoteliers as advisors to set up the whole structure for us.” Why did Sandeep do that? “These experienced hoteliers taught us how to get the necessary licensing and approval. There were many things that we did that other operators were not doing, so it was a little costlier to do it our way. We got our hotel license from DBKL last year.” “The whole market is now experiencing rental depression, and many people are not able to rent out their units. It is even worse for office units actually. Since it’s a tough market, it’s time to do something about it – so we decided to do this. The plus point of doing this business is that you get higher returns. Within three to six months, we were already getting higher rental compared to the rest of the market.” “We are doing this to provide solutions 24 |
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to developers as well as investors who want to do this. I am also an investor, so I understand the pain of not being able to get a good rental return. Besides the rental, doing this also spares us from having to look for tenants for each unit,” Sandeep advises. PK LEONG, President of Malaysia Budget Hotel Association Leong’s experience in budget hotels goes back many years, to the time he built Corona Inn at Bukit Bintang. Although he has since sold the hotel, he is still involved in the hotel business with Comfort Inn being one of the hotels in his portfolio. According to Leong, “The property price has gone up many times. My own property has increased in value 10 times in 20 years, so on average, that is an appreciation of 5% every year. If you run a hotel business on your property, you can surely get additional profit on top of the property appreciation.
If you are not running any business on your property, then it’s not generating any money.” “In addition to that, if the money you’re generating from your business increases over the years, the property value will also increase accordingly. The average ROI of buildings nowadays is 3% to 4%, but if you do business on your property – for example, a hotel in the Tengkat Tong Shin area, you can get higher returns than that. The property appreciation alone will net you 5%, not to mention the profit from the operations. That’s double the value already.” Leong bought a 6-storey property at RM600,000 in 1991. “It is a residential property that is located within a commercial zone. Now the property is worth RM6 million at least. But this is if you started 20 years ago. In doing business, you need to be ahead of the trend. If you are coming in a bit later, it will be tougher for you.”
“I started with Corona Inn. I was an engineer and was helping my friend to build the hotel. Then he asked me to join him in running the hotel business. We were one of the first players in the industry.” Leong thinks it is very important to ride the wave and adapt to the current trend. “People came and asked if we had a room that cost less than RM100. That’s when I realised that there was a market for rooms that cost below RM100 and decided to open another hotel to cater to that market. After that, people came and asked if we had a room that cost less than RM50 per night. So I built another one to meet the demand for that market. That’s how I started.” DENIS ONG, Vice President Of Malaysia Budget Hotel Association Ong started in this industry because he has worked at many hotels before. “The time came when I told myself, ‘Okay it’s time that I set up my own’. Instead of buying properties for this purpose, I decided to rent. I started the business in 2005 with a 3-storey shoplot and offered backpacker accommodation.” “At that time, I rented the property at around RM6,000 per month, but gave up the business around 4 years back because the rent had gone up to RM15,000. Since then, I shifted my focus to set up hotels in second tier cities like Klang and Shah Alam,” he elaborates. “If we are talking about property appreciation at this moment, the entry level is very high. You can imagine when Leong bought his property for RM600,000, the bank was quite flexible. But in this current market, if you were to buy a RM6 million property, the bank might need a 30% down payment, which is RM2 million. On top of that, you need money for renovation if you want to build a hotel. To do that, you need RM4 million, so you cannot match the game already.” As the Vice President of MyBha and the founder of Smart Hotel, Ong points out that, “The challenge in the current market is that hotels in Malaysia are not setting its rates right. For example, if a five-star hotel maintains a minimum rate of US$100 per night as a standard, then we would have an easier time of setting the minimum rate for the other hotel categories. When five-star hotels don’t adhere to the minimum rate,
Anggun Boutique Hotel - Rooftop Spa Entrance www.propertyinsight.com.my SEPTEMBER 2016 I 25
Anggun Boutique Hotel - Courtyard Atrium this will severely impact the pricing for the four-star and three-star hotels. The other problem is that many hotels claim that they are five-star hotels, but they actually don’t meet the standard.” KENNETH OH, Founder Of Anggun Boutique Hotel Oh is among those who ventured into the hotel business in recent years. “Previously, I worked in a travel agency and started off with a guest house. From one guest house, I expanded to two and three, until I realised I could not generate the profits that I wanted from it.” “I bought the property for Anggun Boutique Hotel a few years back and has since enjoyed an appreciation of more than 10%. I try to add more value to the hotel by including a restaurant and wellness spa. The moment the LRT operates in this area, the appreciation will easily be double. People come to this area for what it has to offer such as the nightlife, shopping, food and accessibility.” As MYBHA’s Chairman for the Kuala Lumpur Chapter, Oh says the challenge he faces is that the law keeps changing. “We are not able to keep up with the guidelines on how to do certain things. Before this, the law was quite straightforward, but along the way, it kept changing. When the council changes it and there is no communication, 26 |
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Anggun Boutique Hotel - Family room
Anggun Boutique Hotel - Family room
people like us are caught in the confusion. Also, there is also an oversupply issue in the industry. You can find budget hotels everywhere.” JERRY HO, Founder Of Apple Hotel Ho started out providing student accommodation before he ventured into budget hotel. “In 2003, my partners and I bought our 6-storey property at RM3 million and people told me that I was crazy because the market price was only around RM2 million. The price was not an issue to us because we believed that it was a good investment. We converted the shop-lot into a hotel. Today, the property is worth around RM20 million.” Is running a hotel really better than renting the shop lot out in the traditional sense? “If I rent my shop-lot out to tenants, I might only get a profit of 10% in terms of cash flow. But if you’re running a hotel, you’re easily looking at a profit of 30% and that excludes the capital appreciation on the property. The cash flow from a hotel business is definitely better in comparison to collecting rent. However, you do need to put in more effort in the beginning,” Ho says. “I have a hotel in the Bukit Bintang area which we bought for about RM6 million three years back. Now it is already worth RM15 million. Converting your shop-lot into a hotel can be very profitable depending on the location of your property.” He adds, “There are people who converted their shop-lots into hotels yet lost money because they did not go through the proper channels. These are the people who run illegal hotel businesses, and when you do it illegally, you don’t get to enjoy the true value of your hotel, hence the valuation remains as commercial properties.” “To unlock the full value of your hotel, you must own the property. If you are renting the units, you are indirectly helping the owners to increase the value of the building,” Ho emphasises. “The capital appreciation of the hotel can also help increase your cash flow. During bad times, your cash flow would definitely decrease, but the value of your hotel would remain stable.” CK MOO, General Manager Of Sovotel Boutique Hotel Sovotel is a hotel known for its character, soul, inspiration, personality and stylish
Apple Hotel - Family room
design. Its general manager, Moo says, “We adopted this concept because we want to revolutionise the budget hotel industry. The uniqueness of our hotel is that we provide massage equipment in all our rooms – i.e. foot massage, massage chair and massage bed.” “When people stay in a budget hotel, they are not expecting too much because they are paying for what they get. We are charging you an affordable price but we have more things to offer. We do not charge extra for the massage equipment; they are all complimentary.” Moo explains that they spent a lot of money on renovation and interior design
for branding purposes so that the look and feel at every branch is the same. “Our hotels are located in business or commercial areas. We target the working class who stay at our hotels for work purposes, hence the reason for providing massage facilities. Those are the things that would be useful for our guests.” Moo agrees that converting one’s property into a hotel can really benefit the owner. “If you are a landlord and you rent your units to a hotel, you are already at an advantage because the hotel business is a long term one. You can easily sign the contract for 10 years. And after 10 years, the value of your property would definitely have gone www.propertyinsight.com.my SEPTEMBER 2016 I 27
Sovotel Boutique Hotel - Interior so much higher. It is better to run a hotel instead of doing other businesses on your commercial properties. It is actually the best choice if you are the owner of the property,” he says.
putting the risk in one particular property, we split the risk of the business into different locations.” “It depends on the season and the location of the hotel. Looking into the outlets we are currently running, they have brought us at least double profit compared to earnings from renting. The figure could multiply during peak seasons for properties that are in good locations. By converting the properties, we realised that we are able to enjoy a profit margin of 200%.” Ng points out, “We encountered several challenges when we entered this business. We needed to do major renovation. We often faced technical issues and tight deadlines as we needed to deal with many parties to ensure the various issues are taken care of. The process begins with
RAYMOND NG, Director Of Best View Hotel Having rebranded in 2010, Best View Hotel has gained valuable insights and local knowledge to cater for guests that include individual travellers, as well as international business and leisure travellers. Ng started Best View Hotel because he and his partner, Dato D’Raja Kelvin Chow realised that the number of hotels within commercial properties has grown rapidly. “For us, to offer a standardised service in different locations for a standalone hotel would not be an easy task. Instead of
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Best View Hotel - Interior
the license submission where we need to seek approval from the ministry and local authorities. The process will definitely be a long one as it’s hard to get hold of the decision makers.” “Converting your commercial property into a hotel will help you generate more revenue than renting it out to a third party as we need to take note that, with the latter, it’s not a permanent income as the tenant would find alternatives.” IN A NUTSHELL Building hotels on commercial properties is indeed generating more revenue and appreciation for investors instead of merely renting it out. However, there are many aspects that need to be considered before investors take the plunge. The hotel industry is about providing services, be it a five-star or budget hotel. It is crucial for owners who want to build a hotel to familiarise themselves with the hospitality industry. It is advisable for them to go to the right people to seek the right knowledge, for example, getting in touch with the Malaysia Budget Hotel Association if they want to set up their own brand, or take up an existing hotel franchise. Since the entry level to this business is currently high, you might want to consider a joint venture with the owner of commercial properties if you want to do this right.
“WITH BUDGET 2017 BEING JUST AROUND THE CORNER, MANY ARE SCEPTICAL OF WHAT IS TO COME. WILL THERE BE NEW POLICIES AND IMPLEMENTATIONS REGARDING THE PROPERTY MARKET? BETTER INCENTIVES FOR BUYERS AND DEVELOPERS? WE TALKED TO A FEW EXPERTS, AND THIS IS THEIR ‘BUDGET 2017’ WISHLIST.”
DR DANIELE GAMBERO CEO, REI International Holding I want to see the BRT actually happening. One line was launched last year, one is completed and ten yet to be finalised. I want to see at least two or three more launched. Another wish is to see better treatments for first-home buyers, not just in terms of government schemes, but allowing the developers to be more flexible without being penalised. Thirdly, I would like to see the blueprint and development plan for Malaysia Vision Valley. What I’d also like to see is more aid in terms of international marketing for local tourism. We need more of that to advertise the beautiful tourist attractions we have.
GARY CHUA CEO, Smart Financing Firstly, is to focus on Gen-Y whom most have not owned their own home. We have a growing concern over the Gen-Y population. This is one area of which we hope more aid is given in the upcoming budget. Developer Interest Bearing Schemes (DIBS) for first-time home buyers will definitely help as well. Another key issue that is faced is difficulty in attaining bank loans. Those categorised as ‘vulnerable segments’ (net income below RM5k), only have an allowable DSR cut off at 60% vs others up to 80%-90%. They may start off with a lower income but both BNM and the government can step in to improve this to encourage first time home buyers. Secondly, during the property boom period in 2011 to 2013, there were a lot of property launched which are now completed. A lot of it are great properties but most owners or investors are unwilling to let go because of RPGT. Lowering RPGT is one of our wish list as this will enable prices to be more flexible as sellers pay lesser in taxes and will be more willing to let go of the properties with lower price.
PATRICK FUNG Associate Director, Huttons OneWorld Real Estate Group There should not be an increase in GST. Malaysia is on the road to recovery from 1H 2016, and we need to keep the momentum. With the right signals from the government, such as a 1% (or maybe 2%) reduction of Income Tax, and maintaining GST at 6%. We can see the market recovering until 2018/19. With the completion of major infrastructures in 2019/2020, KL will be a much improved city by 2020. Post 2020 we will be able to see new cities like Bandar Malaysia and TRX. We can expect a boom from 2020 to 2026 and I forecast a peak in 2026 with the completion of the Kuala Lumpur – Singapore High Speed Rail (HSR).
DATO TEH TAI YOONG Senior Partner, Teh Kim Teh, Salina & Co I’m hoping for more favourable policies to take place to revitalise the property market. There also needs to be more incentives for the lower income group to be able to own their own homes. Another wish would be for the reduction of the Real Property Gains Tax (RPGT). The RPGT is the deciding factor on when to buy or sell. It has gone from as low as 0% to 30% in the National.
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OPR: Is it really accommodating the
Going through another transitional period BY: AVINASH SAGRAN
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hose within the property industry can look forward to Q3 and Q4 this year with slightly more optimist with the reduction of Overnight Policy Rate (OPR) to 3.00%. The strict loan regulation coupled with poor Ringgit performance has seen buying power at its weakest. Bank Negara Malaysia’s move is projected to result in banks reducing their lending rates and making it cheaper for the masses and
implemented to stimulate the domestic economy, which so far has been lackluster. As the banks now adjust their lending rates according to the OPR Changes, there will be a ripple effect on the floating rates, which are common for property mortgages. Gary further adds, we do not foresee this to have any impact to the new loan applicants reason being banks will adjust their spread accordingly to maintain the current ELR about 4.45-4.65% for residential loans. However, this is good news for existing homeowners who have taken up a loan earlier. Banks have adjusted their BR or BLR in tandem range from 14bps to 25bps. RM600, 000.00 denotes the standard
companies alike to obtain loans. According to Gary Chua from Smart Financing, this is certainly good news for the property industry. “I have predicted OPR to drop some where in Q3 to Q4 this year and it has materialised. In my opinion, this good move by the central bank is needed to accommodate the current economic situation of the nation to ensure that the economy continues to remain on steady
growth part”. BIGGEST QUESTION HOW DOES IT AFFECT YOU? Banks reducing their base rates by 25 basis points will result in consumers having slightly more disposable income as the there is a reduction in interest payments. Now the public would have more cash on hand to spend. This move is largely
LOAN AMOUNT 30 years
Loan tenure BR: 3.65%
BR: 3.65% - 0.25% = 3.40%
Home loan interest rate
4.45% (3.65% + 0.80%)
4.20% (3.40% + 0.80%)
Total interest paid over 30 years
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housing price for someone who is looking to settle down and start a family. Based on the 25 bps reduction will result in RM31,755.42 savings over a 30-year loan tenure. Borrowers will now have additional RM88.21 as their disposable cash. The reality of the situation means borrowers will now need to manage their finances accordingly because with more cash in hand, the likelihood of savings is somewhat low. Any reduction in the BR will decrease the repayment amount, actual repayment amount is still subjected to the loan tenure.
your loan application being rejected. However, it is a good time for property buyers to examine banks offering better interest rates and to refinance loans though its subjugated on whether the existing loans are subject to a lock-in period. Kenanga Investment Bank Bhd equity research head Sarah Lim said in terms of monetary measures, Kenanga’s house view is that the Overnight Policy Rate (OPR) will remain for now and further cuts, if it happens, are unlikely to spur lending to the property sector.
IS BORROWING EASIER? Despite BNM reducing the OPR, banks are still under the mandate to scrutinize lending. Considering the national household debt-to-gross domestic product (GDP) ratio increased to 89.1% as of 2015 from 86.8%, borrowers will still have to face numerous challenges when applying for loans. According to Miichael Yeoh, the best method to overcome this problem is not to rush but to ensure all the documentations are ready so you minimize the chances of
PROPERTY MARKET Property demands has always been there, the mismatch of supply and demand coupled with the cooling measures introduced in 2013, poor Ringgit performance and implementation of the 6% Goods and Services Tax (GST) has significantly dampened the property market. According to Chee Kok Thim, Director of Valuation Services from Rahim&Co International “As a result of the slow down in the residential property
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market, developers are also delaying their launches and hence slowing down the construction activities.” Because of the drop in OPR, the BR system may benefit borrowers, since the transparent reference provides them with better monetary options when it comes to selecting the plethora of loan offered by the various banks. Therefore, with lower monthly repayments and increased disposable cash, the number of borrowers receiving loans should increase. WHERE DO WE GO FROM HERE? Tan Sri Dato’ Dr. Lin See-Yan, Former Deputy Governor of Bank Negara Malaysia says we are currently facing ‘liquidity trap’ as an economist would deem it. While Esther Lai, Head of Sovereign Ratings, RAM Rating Services Berhad says any further cut in OPR is not in our expectation for this year. The way we look at it, in terms of supporting the economy, as we do not expect a huge credit growth.
High Hopes for HSR? The hope for the connection between these two economies is so that they support and strengthen one another BY: NATASHA GIDEON
Image Courtesy : blog.coxandkings.com
alaysia aspires to be a developed nation, and progress so far is looking good on our side. With immaculate buildings and signs of glory such as the Petronas Twin Towers, we strive still to be at par with other developed nations, and exhibit A of that is the new Singapore-Kuala Lumpur High Speed Rail (HSR) that is still in its planning stages which will not only connect us with
Singapore, but possibly boost our economy. This month we extract the property aspect of the HSR. The precise locations of the other six Singapore-KL high speed rail (HSR) stations have yet to be fixed, with the exception of Bandar Malaysia and Jurong East in Singapore. MyHSR Corporation Sdn Bhd (MyHSR Corp), the project delivery company, claims Putrajaya, Seremban,
Ayer Keroh, Muar, Batu Pahat and Iskandar Puteri would have HSR stations, the exact locations of the six stations however, were still subject to change. The HSR line will run for 350km, with 335km in Malaysia and 15km in Singapore, and on two tracks going in opposite directions. The hope for the connection between these two economies is so that they support and strengthen one another. However, www.propertyinsight.com.my SEPTEMBER 2016 I 31
when compared to other HSR systems, only those such as Japan and South Korea have benefitted their respective countries due to the focus on urban development more than profitability such as the case of the Eurostar that links London and Paris and Brussels which took years to turn a profit. “Tourism arrivals will benefit as greater connectivity will promote easier tourism access via the HSR and there will be increased opportunities as there will be more Malaysian working in Singapore with higher pay as compared to local 32 | SEPTEMBER 2016 www.propertyinsight.com.my
Malaysians,” says Principal Director of REKARANCANG SDN BHD, Nik Mohd Ruiz Razy. “However, in terms of our air carriers it may not be a good idea as it may not work well as there will be preference to use Changi and carriers flying to Changi as they have greater connectivity and frequency options,” he continues. This is made in reference to the Sabena and Brussel Airport which suffered significantly when the rail from Brussel was connected to Amsterdam via Schipol. Khalil Adis, founder of Khalil Adis Consultancy and author of ‘Property Buying
for Gen Y’ says that the HSR will definitely increase the property value surrounding the HSR stations, especially what he has already seen in Jurong. “Now you can already see the asking prices for property is reflective of what is to come. Definitely a game changer due to the increase in infrastructure, master plans and industries like tourism, retail, and even the new Central Business District (CBD) coming up,” he exclaims. “Property especially in Jurong used to be seen as an industrial area as opposed to the financial centre it is deemed as now. It is now a highly
Singapore is an international hub and we have a lot of MNC’s so for them to be able to have such great access to Malaysia would be a great plus,” - Khalil Adis
desirable area that brings in a lot of traffic, and that is great for the property market,” he continues. From Ruiz’s point of view, he foresees an interest in KL residential properties as there will be demand for people to work in Singapore and live in Malaysia as cost of living is cheaper in Malaysia which definitely includes the along the HSR. “Even office spaces will likely be a challenge and the fact that growth for spaces for offices these days are compromised with opportunities to work at home and the advancement of technology,” Ruiz shares.
He adds that even retail spaces may see continuous demand as there are more opportunities and spending power, as per the aforementioned. Even as an investor, Khalil Adis says he would advise to look into investing in Bandar Malaysia as it will be a bigger and better KL Sentral. “The only options we have now are to take flights, but even then, you waste two hours checking in, let’s not even talk about spending an extra RM55 every time you want to get to KLIA 1 or 2,” he explains. The HSR will alleviate all these problems and get passengers where they need to be in 90 minutes, assuming you’re heading to Jurong from Bandar Malaysia. The problem with all this development and increase in property value, however, seems to be the cyclical issue we have even in Kuala Lumpur. As explained by Ruiz, the increase in residential demand will make homes more expensive and more difficult for locals to attain. “Even if we don’t talk about homes, and living in these areas, the cost of living itself will definitely increase for these hotspots and this will be a challenge for the local community whom work locally,” he adds. From an architects’ perspective, Khalil Khalid from ROA achitectural firm says the HSR project is a much needed infrastructure project but requires proper implementation in order to integrate well with the places and communities it will serve. “While Jurong Bandar Malaysia is the main highlight, the areas in between this route will need more attention - intermediate stations such as Seremban, Ayer Keroh and Muar,” he says. In hindsight, the project will attract new residential development, thus raising the value of nearby properties since the reduction in commuting costs. The problem
with that is the assumption that the value of surrounding land will increase, thus causing everyone to join the bandwagon failing to account local contexts such as pedestrian connectivity, public realms and neighbourhood facilities that will actually unleash the full potential of transit oriented developments. From an investor’s point of view, it is safe to say the HSR will bring you great value to properties in nearby HSR stations. However, it does seem like quite a challenge as a local just trying to buy a home. The question is, are we ready for such a drastic advancement when we do not even have a properly maintained railway system in our own country? As a town planner, Ruiz prefers the HSR being confined within Malaysia with Johor Bahru or Iskandar Puteri as the last stop in Peninsular Malaysia instead of Singapore. Economically, we would be able to tap into a larger, more diverse market with the highspeed rail. “Singapore is an international hub and we have a lot of MNC’s so for them to be able to have such great access to Malaysia would be a great plus,” shares Khalil Adis on the pros of the HSR. What can be done is an independent detailed analysis on the GDP and economic impact of the HSR without any political influence, according to Ruiz. Like any other anchor in an area, the HSR will create jobs and flourish the local economy, according to Tan Sri Dato’ Dr. Lin See-Yan, Former Deputy Governor of Bank Negara Malaysia. “It creates more jobs and the spillover effect will significantly increase across the HSR. The easiest example is the ease of people from Seremban to work in Kuala Lumpur, so it enhances the quality in our country as well.” www.propertyinsight.com.my SEPTEMBER 2016 I 33
Delivering Attainable Dreams Developments by Mitraland offer everything purchasers want in a home, space, greenery and top-notch facilities BY: NATASHA GIDEON
itraland Group is already a name developers look out for competition and end-buyers seek for their property acquisitions. This month we try to uncover the secrets to success of this renowned developer. Chuah Theong Yee is the founder of Mitraland Group and is currently the Group CEO. In 1992, he joined the construction industry upon graduating from the University of Malaya with a degree in civil engineering, serving as Project Engineer until 1995. Subsequently, he ventured
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into property development, and in 1998, established his own property development company, Mitraland Group. The success of Mitraland started with Kiara 1888, an exclusive high-rise condo located at elite Montâ€™ Kiara which was also awarded the prestigious PAM Gold award. Since then, Mitraland has grown from strength to strength earning international accolades along the way for projects like Cascades and 16 Quartz. Developments by Mitraland offers everything purchasers want in a home,
space, greenery and top-notch facilities. Their secret behind this is the close attention to detail from every step of the process starting from the planning stages to construction right down to the final product. These small details accentuate the developments and exhibits the value of handling even the smallest of particulars for such large end products. This is also proven with the many certificates that Mitraland has acquired like Conquas 21 as well as the Green Building Index for seceral of its developments.
Their newest development, Gravit8 is a complete mixed development comprising of retail, shopping, service apartments, SOHO, Hotel, office, surrounding an 8-acre lake park. This is a fully integrated development as it is self-sustained. Residents and visitors will be spoilt for choice by the number of activities and areas in which they can spend their time in. Not to mention, everything that they require will be within reach at Gravit8. The highly anticipated launch of Adria Residences which is 2nd Block of Gravit8’s service apartments will be on the 3rd & 4th September 2016 with a total GDV for Adria Residences being RM 176 mil. Adria Residences is perfect not only because of the surroundings, but also because of its direct access to the KESAS Highway as well as being nearby to two stations of the proposed LRT 3 line. These units are perfect for those who are younger, middle income earners whom may find it challenging to find affordable homes. The apartment’s price starts from RM330,000 and the majority of the
products are priced below RM 500,000. Mitraland defines their product as an affordable luxury as owners are spoilt for choice by the number of facilities that Gravit8 offers. Buyers will be happy to know that they will receive at least two carpark bays for each unit, with low down payment. The units come partially furnished, allowing buyers to spend more on other parts of their newly owned homes. Other developments that Mitraland plans to undertake in the future is Trivillion@ Kajang East which has an estimated GDV of RM550 million targeted to be launched the 1st quarter of 2017. Gravit8, phase 2B, Andaman Residences and Ashino Residences are respectively targeted to be launched in the 2nd quarter and 3rd quarter of 2017. In these challenging times most developers find it hard to even sell off their units, not because of a lack of demand, but due to the economic situation the country is going through, as well as cooling measures taken by banks. Fortunately, with developers like Mitraland group, whom deliver quality assured products, at affordable prices, buyers can now make it a reality to own their dream homes. In view of the unique proposition of the developer, buyer and investors alike can expect good capital appreciation upon completion and excellent rental view with the improved infrastructure by then. For more details, please visit www.gravit8.com.my or call +6016 623 7301 / +6016-561 7301 PROJECT DEVELOPMENT DETAILS Project Name: Gravit8 Type of Development: Mixed Development Developer: Mitraland Location: Bayu Emas, Klang, Selangor Land Tenure: Freehold AMENITIES • Lake Park • Residences • Shopping • Hotel • Office • Medical Centre Amenities Surrounded Aeon Bukit Tinggi • Tesco • Giant • GM Klang • SJK(C) Wu Teck • Hin Hua • Pandamaran A,B.
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EMBRACING THE NORTH KIARA DIVERSITY
Spacious living minutes away from the city at a redeveloped address BY: AVINASH SAGRAN
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ver the past four years, North Kiara located between Mont’Kiara and Desa ParkCity have witnessed a new lease of life. Developers have redefined the landscape of North Kiara to accommodate the spillover effect residential demand around the Mont’Kiara area. ALL ABOUT THE LOCATION The strategic location of North Kiara attracts locals and expatriates as readily available amenities such as prestigious schools Lycee Francais de Kuala Lumpur, Gardens International School, SMK Seri Hartamas and Mont’Kiara International School, commercial centers such as Publika, Solaris, Plaza Mont’Kiara, 1Mont’Kiara and hypermarkets such as Tesco and Giant. Due to the diverse availability of amenities, the crowd of North Kiara reflects the diversity, ranging from families to fresh graduates who need a one-stop living lifestyle residence. According to CBRE-WTW managing director Foo Gee Jen the target market of North Kiara property is the middle-income group. As the area is still undergoing redevelopment with plenty of upcoming
projects since the area is an extension of Mont’Kiara prices is still within the affordable range for buyers. OVERCOMING THE SPEED BUMPS Segambut area has been known for congestions due to narrow roads but the issues are being resolved with road widening and public infrastructure.
According to CEO of Ho Chin Soon Research Ishmael Ho, the improvement in infrastructure would likely to increase the appeal of the location. Furthermore, the pricing point is still reasonable to draw buyers in. As developers continue to rebrand and develop the area, the infrastructural concerns would be overcome with adequate changes. www.propertyinsight.com.my SEPTEMBER 2016 I 37
AREA FOCUS CONCERTO NORTH KIARA Concerto North Kiara is strategically located in the Dutamas area, the northern side of Mont’ Kiara. It offers a fusion of luxury, elegance and nature with beautiful landscaping, water features and recreational facilities. Concerto parades a three-tower façade that sits on a five-acre freehold land. This fine exclusive collection of homes comprises of 440 units, amidst the delightfully enchanting greenery located along Jalan Dutamas Raya. A melody of five different layouts will tease the taste buds of modern property owners. Units at Concerto Mont’ Kiara measure approximately 1,580 sq ft to 2,084 sq ft in size, comprising 3+1 bedrooms and 4 bathrooms with an excellent flow of ample natural light. All units are aligned north to south with large wide window panels in the main living room and bedrooms to provide natural lighting and ventilation, while providing great views of the city or garden. Each unit has been meticulously designed to let in the cool breeze of the wind and sunshine regularly. With only three units on each floor serviced by four lifts, each unit is served by two lifts with private lift lobbies. Personalised lift access cards ensure unrivalled security, matched by meticulous security personnel services. AREA ANALYSIS Sr Firdaus Musa managing director of Firdaus Associates Property Professionals Sdn Bhd mentions “North Kiara which was formerly part of Segambut is now an extension of Mont’Kiara, promotes the same lifestyle type of development with modern high end living concept but at a lower fraction of price compared to Mont’Kiara. The areas are relatively new in terms of the new buildings and are poised to achieve good capital value in the future. TRANSACTION SALES PRICE OF STRATIFIED COMMERCIAL UNIT M AVENUE
BUILT UP AREA (SQ.FT)
Source : FIRDAUS & ASSOCIATE PROPERTY PROFESSIONALS
38 | SEPTEMBER 2016 www.propertyinsight.com.my
As an extension of Mont’Kiara, the increase in critical mass for the area provides good demand and activities where we can see a 20% jump of price for commercial units in the area. The residential units are yet to show any change in the value as secondary transactions are still in its infancy. As the area matures, we could see that the area will provide quality lifestyle accommodation for the younger generation.
the 20% jump also highlight the booming potential for business who are capitalizing on the growing population within the area. Considering the slow economy last year, transactions prices have remained stable within all property type at North Kiara, as an extension of Mont’Kiara the area have lured home-buyers due to the proximity to Kuala Lumpur and accessible amenities minutes away.
Transaction sales price of condominium and apartments remained stable between 2015 and 2016. Despite the saturation of high-rise residential properties especially within the Mont’Kiara area, the prices remained stable due to the larger built up area of condominiums and apartments comparative to the surrounding area. Key highlight of North Kiara is the transaction sale prices of stratified commercial units,
TRANSACTION SALES PRICE OF HIGH-END CONDOMINIUM CONDOMINIUMS NAME
BUILT UP AREA (SQ.FT)
Source : FIRDAUS & ASSOCIATE PROPERTY PROFESSIONALS
TRANSACTION SALES PRICE OF CONDOMINIUM CONDOMINIUMS NAME
BUILT UP AREA (SQ.FT)
Menara Duta I
Menara Duta II
Source : FIRDAUS & ASSOCIATE PROPERTY PROFESSIONALS
www.propertyinsight.com.my SEPTEMBER 2016 I 39
AREA FOCUS TRANSACTION SALES PRICE OF HIGH-END TERRACE HOUSES SCHEME
LAND SIZE (SQ.FT)
BUILT UP AREA (SQ.FT)
Source : FIRDAUS & ASSOCIATE PROPERTY PROFESSIONALS
TRANSACTION SALES PRICE OF TERRACE HOUSES SCHEME
LAND SIZE (SQ.FT)
BUILT UP AREA (SQ.FT)
Taman Prima Pelangi
Taman Prima Pelangi
Taman Prima Impian
Taman Prima Impian
Taman Prima Pelangi
Taman Prima Pelangi
Taman Seri Bukit Segambut
Source : FIRDAUS & ASSOCIATE PROPERTY PROFESSIONALS
NEWLY LAUNCHED & NEWLY COMPLETED HIGH-RISE RESIDENTIAL CONDOMINIUMS NAME
BUILT UP AREA (SQ.FT)
NO. OF BLOCKS
NO. OF UNITS
DEVELOPER PRICE (RM/PSF)
Wisdom Realty Sdn Bhd
Prima Harmoni 2
Harmony Property Sdn Bhd
Source : FIRDAUS & ASSOCIATE PROPERTY PROFESSIONALS
NEWLY LAUNCHED & NEWLY COMPLETED LANDED RESIDENTIAL SCHEME
BUILT UP AREA (SQ.FT)
NO. OF UNITS
DEVELOPER PRICE (RM)
TYPE OF PROPERTY
Source : FIRDAUS & ASSOCIATE PROPERTY PROFESSIONALS
40 | SEPTEMBER 2016 www.propertyinsight.com.my
THE FUTURE With prominent developers such as UOA Group, BRDB Developments Sdn Bhd, Tago Malaysia Sdn Bhd within the area, and the prospect looks good for buyers who are looking for spacious living just minutes within all the desirable amenities. Projects within the vicinity has also seen new lease of life due to the rebranding of the area as North Kiara. Once abandoned project the Azaran Hill renamed to Royalle Condominium refurbished by Wisdom Realty Sdn Bhd has received positive feedback. As under construction projects such as Anjali@ North Kiara is completed next year, the unique composition residents of North Kiara would continue to see the area grow with vibrancy of diversity from the charming warung to expatriates jogging around the intermix of North Kiara.
Scan here for aerial view video of North kiara
AGENTS SPEAK PRABHBIR ROHIT, Jann Properties North Kiara has a brand new perceptive due to the rebranding. Developers are adding value to North Kiara by increasing the number of development of an area known previously as Segambut Dalam by leveraging on the address of Mont’Kiara and the expatriate market. Most Malaysians with a smaller budget who wants to live in a pristine address can look at properties at North Kiara, as for investors you definitely need holding power first as the area has only just began to pick up. With prime vicinity, it is just a matter of time for developers to capitalize the potential the area holds, as BRDB and UOA have already setup developments at North Kiara.
KS KUNNAM, Property Hub Sdn Bhd North Kiara consists of many redevelopments. A complete rebranding is in the making of this neighbourhood. Many reputed developers like HOMESTEAD ,BRDB ,UOA have created a presence here. North Kiara closer to the french school has a take up of 70 percent for their project called 28Dutamas which is marketed by Property Hub Sdn Bhd. A young couple, i know choose North Kiara as it’s affordable and close to Mont’Kiara where they initially wanted to live.This shows that North Kiara marks the emergence of a neighbourhood as a vied for affordable homes a hidden gem slowly making waves.
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PERSONALITY OF THE MONTH
KENT CHUA : CHASING CHALLENGES
Chua left his well-established job at Deloitte Malaysia at 24 years old and started The Beer Factory in May of 2010, which managed to make back its capital in only six months
BY: NATASHA GIDEON
42 I SEPTEMBER 2016 www.propertyinsight.com.my
PERSONALITY OF THE MONTH
ent Chua is a name to be reckoned with in the F&B world with such great milestones achieved in a short amount of time. That however, does not mean he is ready to stop anytime soon. This Kuching born and raised cofounder and executive director of the Rhombus Group started out with a degree in accounting, having the experience of working with one of the Big Four firms in Malaysia for three years, Deloitte Malaysia certainly has prepared him for the ventures he has chosen. If you have yet to hear about The Beer Factory, you should head over right after reading this article. Chua left his wellestablished job at Deloitte Malaysia at 24
years old and started The Beer Factory in May of 2010, which managed to make back capital in only 6 months. More impressively, by the second branch, the franchise was sold at RM1 million. Under Chua, the group grew from an annual sales growth of RM2 million in 2010 to an impressive RM48 million in 2015. Chua tells Property Insight he believes in being positive and resilient. “I truly live by the saying ‘Carpe Diem’, seize the day now because if not now, when?” Chua exclaims. As impressive as his portfolio is, he says he cannot achieve all this without the team he has, which is an integral part of his success. “We have a ‘Happiness Lab Department’ which acts as a check and
balance for the soul of the company, its team members,” Chua shares. Starting a business at the age of 24 is never easy, Chua says he had to go through many hardships and more so because of the age factor. “I resorted to buying ‘Running a Bar for Dummies’ and many other books for research. But the most difficult part was trying to convince landlords to sign for venues as we were fresh faces,” he says. So how does one become so successful at entrepreneurship before even turning 35? Chua says he focuses heavily on the development of his team. The heart of the company is with the team that helps build it. “During the expansion we made www.propertyinsight.com.my SEPTEMBER 2016 I 43
PERSONALITY OF THE MONTH
sure to include the fun element so that the team was happy in what they were doing. A happy team is a happy company. It’s a simple strategy,” Chua exclaims. “From where we started to where we are today, the ‘Happiness Lab’ has helped us see change on such a huge scale. The thing about it is that it is also for our customers, so we can gage how they feel about us as well,” Chua shares, excitedly. Once they receive information on the customers sentiment, it is easier for them to make shifts in strategies and approaches to improve how the company works. Personally, Chua advises those whom want to start up to make sure they are willing to sacrifice and persevere through hardship. “It will be difficult, no doubt, but how bad can it be? It can’t rain every day, can it? All you have to do is believe in yourself, and never back down,” he says, positively. Chua went through what most entrepreneurs have to go through, in fact, some have to go through it perpetually, the sleepless nights, the time away from family. But for Chua all this has made him a better person, and has reaped what he sowed. At present, Rhombus Group owns 12 brands and operates over 28 outlets across South East Asia. Notable brands include Rama V, Wondermama, Dancing Fish, The Beer Factory and The Rabbit Hole. Now, Rhombus Group has six Full Serviced Restaurant brands, one Café brand and seven Restaurant & Bar brands all through 44 I SEPTEMBER 2016 www.propertyinsight.com.my
PERSONALITY OF THE MONTH
Your location is important, but it is also dependant on the type of business you have. Just because you have transportation nearby your venues doesn’t necessarily mean it’s a good location for you!” - Kent Chua
a strategic growth strategy of empowering and grooming entrepreneurs in the industry through mergers and acquisition of local, independent F&B brands. They say if you have tasted success, do not stop and be content with what you have. That is Chua’s plan in the near future, to expand the business in South East Asia, namely Yangon, Myanmar and Vietnam. So far, Chua has accumulated many titles as a young entrepreneur such as the Top 10 Malaysia: Young & Dynamic Entrepreneur, he was named as Malaysia’s 100 Most Influential Young Entrepreneur 2016 and a proud receiver of Prestige Top 40 Under 40 2013 Young Achiever Award.
In terms of property and the venues of his business, Chua says it is just as important to study the area of interest, as it is to personally go to the areas and see how it is for the lay person whom will eventually be your future customers. “Your location is important, but it is also dependent on the type of business you have. Just because you have transportation nearby doesn’t necessarily mean it’s a good location for you!” he shares with a smile. When attaining good outlets as the ones Rhombus group has already done, Chua says it is he makes sure to look for locations with basement carparks for easy access and parking, alfresco areas and a
primary anchor such as a supermarket or an office building nearby. Chua has a team of researchers whom do the homework for him as well as do customer evaluations for the demographic at stake. The accolades of success have not made Chua forget his roots. Chua is a firm believer of intrinsically giving back to society and pursues a number of small philanthropic endeavours through various non-profit organisations and charitable programmes. Chua also spends his time grooming other entrepreneurs through talks and mentoring programmes in colleges, workshops and seminars.
www.propertyinsight.com.my SEPTEMBER 2016 I 45
INVESTOR NEXT DOOR
46 I SEPTEMBER 2016 www.propertyinsight.com.my
INVESTOR NEXT DOOR
NEVER TOO LATE TO START INVESTING Shariz believes in spending more to earn more
here is a saying by Andrew Carnegie saying, “Teamwork is the ability to work together toward a common vision. The ability to direct individual accomplishments toward organizational objectives. It is the fuel that allows common people to attain uncommon results.” This is probably the best quote to describe the teamwork between Shariz Azim and his investment partner, whom also happens to be his wife. The dynamic duo not only go through life and personal issues together, but also through their investment journey, and what better partner to ask for than your wife. Shariz works as an IT engineer in a multinational company since 2002 but has started investing in 2009. The first investment started with a house in Seri Kembangan meant to be a forever home for Shariz and his wife. “We took at least a year to make a decision to buy the house. It was situated in a dark, empty area, it almost looked like a wasteland,” says Shariz. Eventually Shariz and his wife decided to purchase the property using his EPF for the downpayment. “The funny thing is, the house was such a weird buy for people who probably don’t understand property, because even our banker asked us if we were sure about our decision,” Shariz said, chuckling. As of now Shariz and his wife have three properties under construction, and three more at hand. It took a lot to get to where they are today. “The difficult part is probably getting the best deal in town. Asking yourself, ‘is this the best purchase I will get?’, because you really want to make the best out of your quotas,” exclaimed Shariz. Shariz says, to ensure you are getting the best deals, it is always important to be equipped with the knowledge needed. He adds, “While it’s important to find the right guru with the right knowledge, it is also important to get the right guru that suits your investment style.” According to Shariz, most property masters have the knowledge, and are indeed willing to share
BY: NATASHA GIDEON
that knowledge with other investors, but finding the right guru is just as important as finding the right deal. Shariz and his wife both decided to invest in property to prepare themselves for retirement. “The strategy is to hold and rent out the properties we have, then after five years we slowly let go in stages,” shares Shariz. Shariz does his due diligence thoroughly before purchasing a property, by asking the neighbours what they think of the area. From mingling with the locals to eyeing the small details like looking for school busses in the area, Shariz makes sure he knows what his tenants can benefit from his property. “We target families when renting out our properties, so I put myself in their shoes and make sure their children will be able to go to school without hassle. It’s the small details that make a difference,” he claims. For those who are starting up, make sure that in order to invest, to start calculating the cost from S&P to the monthly payment so you know how much you have and how long you will be able to last, with a safe bet being having holding power for at least 2 years before investing. In terms of managing investments, Shariz and his wife both keep their investment earnings in a separate account for easy tracking of their cash flow. “Even when you rent it out, get everything in black and white, and ask your tenants 3 to 4 months before the contract ends, whether they want to continue or not,” shares Shariz. When writing up the contract for the property, take pictures of the property and include it in the contract, as it will be useful for both parties at the end of the tenancy for better transparency. Shariz believes in spending more to earn more. The properties he has are renovated to increase value in property. “If you want to earn, you have to spend, including renovation and hiring designers to beautify your property. You should also hire a good agent, and don’t be too stingy on that,”
Shariz shares with us. For now Shariz, together with his supportive and savvy partner and wife make sure they register with good developers for good deals and follow the trends and the developers updates via forums etc. This year they plan to start venturing into the auction property market. “This year is a good year for us to start buying auctioned properties as the market is really slow. There will be many investors desperate to sell. Many people find their soulmates in life, very few marry them, but a handful spend their lives with their exact equals. The marriage of Shariz and his wife isn’t only a personal journey of happiness, but also a journey together as property investors, being a good team with check and balances for each other.
PROPERTY INVESTMENT PROPERTY 1 Location
Landed 2 storey
Market value (2016) RM820,000 Price psf
Rental per month
PROPERTY 2 Location
Market value (2014)
Rental per month
www.propertyinsight.com.my SEPTEMBER 2016 I 47
SUBSTITUTE FOR HARD WORK Taking ownership of your hard earn cash BY: AVINASH SAGRAN
48 | SEPTEMBER 2016 www.propertyinsight.com.my
ho would have thought someone could get inspired to delve into the property industry through taekwondo class! Raphael Wong first heard about property investment through his taekwondo instructor. At the age of 17, a chance conversation with his instructor opened his eyes to the notion of investment. His instructor though was not earning much from training taekwondo but was cashing out through property investment. He told a young Raphael on how numerous riches people in the world listed by Forbes are property investors. A story which stuck with him was on how the Walmart business expanded, as the family bought land to setup the malls which then added value to the land and surrounding neighborhood. With that in mind, Raphael asked his instructor who he calls mentor now on what should be his next step. He was told before venturing into property investment; understand how the entire process of real estate works from all aspects. His next move was to study real estate www.propertyinsight.com.my SEPTEMBER 2016 I 49
ROOKIE INVESTOR management, at the young age of 18 he moved from Ipoh to Kuala Lumpur and pursued his studies for two and half years. TOUGH BEGINNING At the age of 20, Raphael became a property agent. In a little room with RM250 rental he began his quest to have transaction. The reality was tough; he went through six months of zero income. Finally things started to look up as he hit his first transaction on the 7th month and things begin picking up; not rushing into purchasing property yet, Raphael build his income by taking up several other jobs to ensure his income is sustainable. He minimized his living cost and focused on saving up for his seed money. 3 years after working and saving up he was finally ready for his purchase. Raphael says, “Initially I was financially not ready, with unstable income the risk is higher. During the time I was building my income, I began researching to understand which type of property I want to purchase and where I wanted to purchase.” Needing a lot of affirmation to get the courage to put the money on the table was no easy task as it is a huge commitment, Raphael did it anyways knowing his research was trustworthy and he personally knew that it was the right time. FIRST PURCHASE As a rookie investor, Raphael advises, “You have to gain confidence of the property you want to purchase. I was dealing with a lot of properties within Sri Hartamas area therefore I knew the transaction of rent and sales in the area. Knowing the figure would not run too much I decided to make my move.” He added, “Everyone should definitely obtain various bank valuation to determine the actual valuation of the property. Then understanding the foot traffic around the area, either from malls, colleges or offices. The familiarisation of the environment would determine target market and what you want to do with the property. Make friends with the management and know if the place is in demand, there is no substitution to hard work.” Raphael’s first purchase was below market value by about 10%, as a negotiator I bet we all saw that coming. His analogy “You have to be like a worm, always digging 50 | SEPTEMBER 2016 www.propertyinsight.com.my
You have to be like a worm, always digging tunnels and familiarising yourself with the surroundings, eventually all the tunnels will link together and you will get the best route to your destination” - Raphael Wong tunnels and familiarizing yourself with the surroundings, eventually all the tunnels will link together and you will get the best route to your destination.” ADVICE TO ROOKIES Purchasing from developers could be the easiest way as the entry cost is lower due to low down payment he mentioned. According to Raphael, “I bought secondary market property because it is easier to determine rental because it would not go wrong and you can know tenant profile comparative from buying brand new property from a developer.” He added, “Even though the commitment is higher but there is lower risk entering sub-sale market as you are purchasing within a matured area which could provide quicker rental returns. He encourages his friends to buy sub-sale property, as that would be a wise start to property investment, as you would not be bleeding during the completion stages.” ROAD NOT TAKEN Raphael embarked on this journey alone,
standing up to his family to give him time to prove himself that he can make it in the real estate business. Resilience and hard work earned him the seed money for investment. He says “When you earn it the hard way, you take ownership and responsibility of the money. Do not take up bad debts but focus on building positive cash flow.” He jokes do not spend too much time playing Pokemon Go, instead have the right balance in work and play, do not overdo either one. After his initial purchases four years ago, he was stuck as he could not expand his portfolio, whilst working and managing the tenants he realises that it could get one stuck. This is when he met likeminded people with similar objectives. Having a team together to go viewing, do calculation and solve problems changes the dynamic of property investment. He says, “I managed to get three properties through joint-venture the last year, as a result, it pushed my investment portfolio further, With everyone playing different roles in this purchasing process, it makes the journey fun and more stable.”
Knowledge & Information
S t ay n e t e n c d o C
KIM REALTY DOES NOT SUBSTITUTE GOOD OLD VALUES Research, preparedness, innovative and transparency are the key to success BY: AVINASH SAGRAN
incent Ng Eng Sim began his career working with Dunlop Industries and spent for first 10 years of his career in human resource. Deciding to further improve his knowledge to compliment his experience when he was working within the government industry, he pursued his degree in social science majoring in economics with an off campus degree program offered by University Science Malaysia. His journey in real estate began with the most unlikely exposure when he was working with a company, which provided rental units for expatriates. Aided with his contact, network and curiosity he decided starting up real estate agency is a viable long term business. He started Kim Realty 36 years ago as a small company and today it is one of the most reputable local real estate agency. SMALL BEGINNING Kim Realty started out by picking up the crumbs leftover by the big players in the industry. Vincent began by targeting rental market despite the small scale or volume of that segment. He decisively approached the market by targeting the expatriate market because MARA was having numerous preparatory courses, which require hundreds of American lecturers. By 52 | AUGUST
his admission “I was lucky to be appointed as one of the panelists to provide rental for these expatriates. The lecturers have to be settled in in short amount of time, by having handphones and a driver, I was able to corner the market quickly because I could approach and close deals quicker with the clients.” He was able to capitalise on the rise of the industrial park at HICOM Glenmarie. Through MIDA he generated few contacts to touch base with businesses in Japan. By approaching Japanese industrial players to purchase industrial land at Glenmarie. A key differentiation between other real estate agencies, Kim Realty plays it as good boys with registered licenses say Vincent. With any businesses to ensure longevity, the structure has to be run in honest manner.
Kim Realty was also the pioneer in promoting auction property. During the 1995 financial crisis, they were able to capitalise when the government created Dana Harta that was intended to absorb bad debts. Kim Realty was appointed as one of the 100 agents to obtain bidders for the properties, which were absorb by Dana Harta. Successfully obtaining bidders would result in 2% commission for the agent. During this period, Kim Realty won numerous accolades for closing out the most deals. Vincent says, “From that experience, we learn how to do marketing for distress properties and was engaged by foreign banks to organize auction. We did various road shows to create awareness of properties which were available through the auction market.”
MOVING INTO THE RIGHT SEGMENT Initially beginning with rental, Vincent realised the daunting challenges, which came with that market. With demanding clients needed specific attention to details, the cost of maintain that segment was higher due to the plethora tenants that had to be catered to. Numerous competitors focused on sub-sale market, it is a big-ticket item, which can provide handsome returns. So that was a lost for us but we decided to focus more on Project marketing. Challenges with project marketing is the payment due process with developers. Overcoming such problems, Vincent was very selective in selecting which developers to partner with. Our continuous success was based on the connection of all the previous transaction which as taken place.
KEEP CHANGING To survive in any industry requires, one has to stay ahead of its competitors and know what is their capital edge. Challenges faced by real estate agencies are the changing of guards; the newer generations demands specific attention and detail their predecessors did not require. Companies have to be updated in their IT department, Kim Realty have their own in-house IT personal to ensure smooth sailing in keeping them up to pace. According to Vincent, the biggest challenge facing real estate agency is having the right manpower with adequate knowledge and insights. To curb this issue, Vincent setup his own training academy to try recruiting and providing the market to have trained agents. He creates template presentations to ensure that prospective
clients get full visual aids of to understand the property as such they stand out comparative to their competitors. KIM REALTY WAY As an agent, nothing is more important than be well prepared. Gone are the days where you walk through a home with a prospective customer, now you need to be a wizard with all the information and data available on a property. Customers are more tech-savvy, if an agent brings data dating three months back that is outdated and irrelevant due to the fluctuation prices in the market. Vincent advises his agents to be transparent regarding the neighborhood and be mindful of the budget and preference of the customer. Furthermore , he encourages agent to be very specialised at a location, do not be greedy and focus on your knowledge to secure your deals. HOMEBUYER AND SELLERS Sellers want to sell their property at the highest price possible while buyers would like to purchase at the lowest price possible. He advises sellers not to waste time with false promises of agents who have not done proper research, often misleading client to close exclusive partnership. At the end of the day it is not about giving out your property to 10 agents but giving it to one you are able to trust. Kim Realty was founded upon this trust, Vincent mentions, “My clients often ask me to quote the price because the trust which was built before and they believe that I have done adequate research of the market and it will certainly make sell at the end of the day.” www.propertyinsight.com.my SEPTEMBER 2016 I 53
FROM GERMANY TO MALAYSIA
Kare makes interior designing easier for homeowners and investors BY: FARA PETIAL
54 I SEPTEMBER 2016 www.propertyinsight.com.my
016 is about being different and standing out from the crowd. The same goes when furnishing houses – everyone wants to freely portraying their own style in designing the interior. Thus, how would these homeowners and investors furnish their houses towards the end of 2016? They will be looking for unique, non-conformist and authentic furniture – ideas that are never boring and always full of imagination and inspiration. Kare is a well-known brand that has been bringing those kind of products in to the industry since 1981. With its own stores in Germany and Austria, 200 brand
partners worldwide including Malaysia and 2,000 trade customers KARE inspires cosmopolitan spirits and young people of all ages in over 40 countries with an enthusiasm for individual furnishing. What is the reason for bringing Kare to Malaysia? The Senior Operation Manager of Kare Malaysia, Brendan Ho says “The demand for interior designing and furnishing have been growing over the years where consumers are looking for specific styling that fits their character and personality. We see a gap in the Malaysia market, where generally lacking of excitement when it comes to home
furnishing. This is the point where Kare comes in. Kare’s style is fun, funky, eccentric and flamboyant where nothing is ordinary.” KARE’S UNIQUENESS Kare succeeds like no other brand in tracking down style icons, developing trends and innovations in furniture design, and then using them to fulfil the dreams of furnishing enthusiasts. However, how different is Kare from the other brands in Malaysia? “We incorporate fashion into furnishing where you can expect 1,500 new products www.propertyinsight.com.my SEPTEMBER 2016 I 55
from us annually. Other home furnishing stores typically have the same designs over a long period particularly furniture,” says Ho. “Kare’s design concept is eclectic where each pieces whether furniture, accessories or lighting may have been inspired from different concept, region or even culture and fitted into one style. For example, a baroque style is fitted into our rock star styling concept by merely utilising the right colour and finishing.” The brand has also been highlighting the maintenance tips of its wood, upholstered and leather furniture. According to Ho, it is important as Kare sees each of its collection as a masterpiece and needs to be maintained and cared so that they can be enjoyed over a reasonably long period. HOME ‘DIY’ As we all know, decorating your house can increase its value especially the one used for investment. When asked about how can Kare assist these investors, Ho says, “Come to Kare and be inspired. Expect mind boggling designs that will widen
56 I SEPTEMBER 2016 www.propertyinsight.com.my
your perspective and perhaps open up all boundaries that are usually the norm in home furnishing.” There are also the do’s and don’ts in decorating your own property. Ho advises, “Do start with the right structure, you should not start your design concept by deciding on your accessories first, it should always come in later.” “Don’t undermine the importance of accessorising as details matter. Don’t be over practical when accessorising as that kills creativity. Asians are typically practical shoppers and that often limits their creativity as first impression matters.” In addition to that, “Don’t over accessories, accessories are meant to complement and enhance. However, certain statement pieces are good as that reinforces the character of your desired styling and concepts.” Ho adds that most people often avoid strong or bold colours and decorations. While it is often these strong or bold colours and decorations that create the ‘wow’ factor in a property. It is a major misconception that people have in decorating their
properties. BEING RESILIENT It is amazing how Kare can deliver quality products with affordable prices. Ho explains that it is because Kare operates via a franchise system with over 100 franchise stores worldwide. “With that, we have the economy of scale in our production for each pieces and that is where the cost saving takes place.” “Our target market is very much towards anyone who wants to be different, someone who views their abode as a social gathering place and will like his home to represent their character and persona. That is pretty much how we brand ourselves to the market in general.” “We maintain our branding by constantly having new product range introduced in our store, with this we are able to create the hype and excitement for our customers, both regular and new. We are currently active in our social media activity where we constantly interact with our audience and followers.” “We also maintain close working
relationship with interior designers and architects. We will also be doing product launch mini parties and events in our store on a periodical basis and share with our partners and customers our latest collection in store. Moving forward, we will be participating at selected regional trade and consumer fairs.” MORE VALUES Why is it important to have perfect interior design if you are selling or renting out a property? Ho elaborates it as, “A raw vacant unit in the posh area does not say much, it’s pretty much like packaging. A good product needs to be packaged well in order to sell. This apply to properties as well, the better it is furnished and accessorised the more appealing it becomes.” Kare recently launched a new trend called ‘Cocktail 60’s’. “It comes with a retro themed and pretty much gives us a nostalgic feel in general. That’s the latest trend in store to look forward to.” Kare is also currently active in recruiting dealers and agents for each state in Malaysia.
www.propertyinsight.com.my SEPTEMBER 2016 I 57
DESTINATION - FOOD
SOUTHERN ROCK SEAFOOD KITCHEN, ASeafood NEW ADDRESS IN BANGSAR so fresh, youâ€™d think you were right by the ocean BY: AVINASH SAGRAN
beach shack styled concept, Southern Rock Seafood Kitchen (SRS) brings the Sydney Fish Market flair to Bangsar. SRS can boast having the freshest seafood around as it comes right next door. Josh Green and his teams journey began in 2009 as a fishmonger at Jalan Kemuja, Josh supplied fresh seafood to numerous restaurants. It is quite the feat in Malaysia to be both the supplier and restaurateur; with the partnership with Magnificent Fish & Chips Bar Paul James the sky is the limit to the potential SRS growth as a popular fresh seafood joint.
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DESTINATION - INTERNATIONAL INVESTMENTS
EXPLORING NEW STREET IN BANGSAR Located in the upcoming food street of Bangsar home to DR.Inc, Straits Food Company and Fierce Curry House; SRS is able to capitalise on the street credibility Jalan Kemuja offers. Josh mentions, “The uniqueness of being located at Bangsar is the centrality and accessibility of the location from various parts of Kuala Lumpur.” He adds “customers range around 60% locals and 40% expats, as restaurant providing a niche seafood menu; SRS has a steady following among seafood lovers.” With a balance selection of cuisine, the street is not saturated with competitors offering the same menu. Unlike other seafood restaurants, the theme and ambience of SRS is consistent. Stepping into the restaurant you are immediately taken by the lifeboat shapes structures and the Malay fishing trap as lighting fixtures. One might even forget they are in Bangsar and feel transported to beach shack anywhere around the world. OCEAN BREEZE As fishmonger, one would feel the freshness of the seafood as though you were right next to the ocean. A menu providing a range of eight different type oysters is remarkable anywhere around the world in terms of selections. As suppliers, SRS is able to bring in large volumes of seafood and maintain it fresh all the time. They have five flights a week of freshly imported
seafood from New Zealand, Australia, Netherlands, Ireland and Britain. Seafood is good on your calorie count, to ensure that everyone gets to enjoy a balanced healthy meal; SRS provides lunch sets at RM28.00. The set comes with soup and main course of choice within the available options. So for those health conscious crowd make your way for fresh and affordable seafood lunch. CHEF EXPERIMENT SRS can boast they have an adventurous chef who is willing to experiment and explore new recipes. Chef Naim heads the kitchen with 17 years of experience. He says, “Not all chef can cook seafood, there is an art which needs to be mastered with the doneness of seafood to please the palate of customers.” Creating instead of copying has allowed SRS stand out among the rest with unique signature dishes. SRS offers the kitchen dozen, offering two of each of their finest oysters during happy hour. Besides the legendary Gallagher Specials from Ireland known for flavor profile of a bit salty with the mixture of fresh water and salt water and smoky feel from the peat. There is an array of oysters seafood lovers need to try, afraid not! You will not be lost with oyster tasting guide and fine servers ready to assist you for a pleasurable experience. SRS Mussels infused slightly spicy laksa broth is one dish you are not going to find anywhere,
a special Chef Naim cooked up himself. Known as the wagyu of the sea, the Ocean Trout is a must try over at SRS. Customers can look forward to Alaskan King Crab and a decadent caviar selections in the menu in upcoming months. That’s exclusive from Josh. ALWAYS A PARTY You cannot tango alone with seafood; SRS provides the finest wine selection to pair brilliantly with their menu. While Guinness prices range at RM12.00 half pint and RM20.00 full pint. The restaurant also runs The KL Oyster Festival a weeklong celebration of oysters. Numerous activities all kind crowds are arranged, it is a festival, expect to have a good time, typically on a Sunday they open up the patio to have seafood barbeque, light music, performance by entertainers and shucking competition. SRS will be official host of Malaysian Oyster Opening the Championship, something you can look forward for come October.
For more information and booking, visit www.southernrockseafood.com Southern Rock Seafood Kitchen 32-34 Jalan Kemuja, off Jalan Bangsar, 59000 Kuala Lumpur Phone: 03 28562016 or 012 385 0266
www.propertyinsight.com.my SEPTEMBER 2016 I 59
MOST RENTED LOCATIONS IN KUALA LUMPUR AND THE KLANG VALLEY Q2 2016 60 |
SEPTEMBER 2016 www.propertyinsight.com.my
hese days, many people prefer
Valley Expressway (NKVE) links Petaling
beverage (F&B) outlets, hospitals, and the
to rent instead of purchasing a
Jaya to neighbouring suburbs. It is also
list goes on. This explains why the city tops
home for their own stay. There are
well connected in terms of its public
the most rented locations for Q2 2016.
many reasons for this, and the situation is
transportation network which includes the
Besides Petaling Jaya, the other areas
compounded by our country’s uncertain
light rail transit (LRT) service and the free
which made it to the top five most rented
economy, weak sentiments towards the
PJ City Bus.
locations are KLCC, Mont Kiara, KL City
property market, affordability concerns
This mature city has been experiencing
and tight lending rules set by financial
rapid growth for many years with numerous
At the moment, the rental market
developments pouring in. Now it can be
appears to be performing well as many
In addition to this, the recent exit of
considered almost wholly developed with
Britain from the European Union (Brexit)
the scarcity of land being a major concern.
However, this situation may take a turn
has added to the chaos, throwing the
Hence, the number of new developments
following the recent announcement by
global economy into jeopardy. This has
launches is very limited.
Bank Negara Malaysia on the reduction
caused the public to become extremely
Besides that, Petaling Jaya offers a
of the Overnight Policy Rate, which might
cautious in terms of investing, so the next
plethora of amenities including schools,
encourage property investment among
best option for many of them is to rent a
house. In Q1 2016, Puchong topped the list as the most rented location in Kuala Lumpur and the Klang Valley, while Petaling Jaya follows closely behind. In Q2 though, the situation changed with Petaling Jaya taking the lead. Unfortunately, Puchong did not make it into the most rented locations list. Being an established location in the Klang Valley, Petaling Jaya is preferred by many due to many reasons. Petaling Jaya comprises several prominent areas such as Bandar Utama, Kelana Jaya, Kota Damansara and Bandar Sunway – just to name a few. First and foremost, Petaling Jaya is a gem of a location. This enclave is located in between areas such as Kuala Lumpur, Puchong, Shah Alam, Seri Kembangan and Sungai Buloh. This city also houses many established and
encourages many people to consider staying in Petaling Jaya itself instead of staying elsewhere. This has lead the rental market to prosper, as the demand for rented homes is high even though it can be pricey. In terms of accessibility, major highways such as the Federal Highway, DamansaraPuchong Expressway (LDP), North-South Expressway
This article is contributed by PropertyGuru.com.my, Malaysia’s leading property site
www.propertyinsight.com.my SEPTEMBER 2016 I 61
INTERNATIONAL MARKET: CAMBODIA
THE NEXT PROPERTY HOTSPOT OR HOT SOUP? T
here are many opinions out there, both for and against the seeming real estate boom in Cambodia. In this article, let me add to the fray my thoughts on the factors you should consider when deciding to invest in Cambodia. When it comes to real estate, we have always believed that the legal framework, regulations, government structures, political stability and economic diversity
62 | SEPTEMBER 2016 www.propertyinsight.com.my
lay the foundation for long-term, financially sustainable assets. The Cambodian economy relies on several key industries such as tourism, agriculture, textile, tourism and mineral. While services dominate the economy at about 38% of the GDP, garments and footwear reached US$6 billion in 2014 â€“ a 10.7% growth over the previous year. Its economic growth is at slightly above
7%, and is forecasted to remain so through 2016. Inflation is averaging about 5% since 1995 to date. From the inflation history chart, inflation seems to be heading into a much more moderated zone from the fluctuations of 2007/2008. This indicates a maturing of the market and greater stability for investors. The government is investing heavily in infrastructural developments â€“ road
DESTINATION - INTERNATIONAL INVESTMENTS improvements, railways, deep sea ports, etc. The strategic location of the country makes it a key sea route between China, India and Australia. The current low taxes and pro business environment looks to stimulate its economic growth. As economic growth increases consumption, more companies will be setup and more businesses will bloom, thus creating jobs and prosperity. This will create a greater demand for housing, and therefore house price growth. However, investors should ensure that the assets they are investing into are aligned with the population segment which the monies are flowing to. As with all developing economies, property prices can quickly run away from local affordability. Seeing through the lens of Vietnam and Iskandar Malaysia, when prices rose too
quickly beyond local affordability, property bubbles can form quickly and pop just as easily. Depending on expatriates or the few wealthy for profits can be highly misleading and risky. Political stability plays an extremely important role in Cambodia. In most fast growing development nations, some form of undemocratic governance is common as they seek to grow quickly and achieve maturity. Singapore is one such example where it was able to achieve unmatched growth in 50 years under the same ruling party. Based upon good and well thought out economic policies, Singapore has progressed from a developing country to a power house in Asia and the world within a short time frame. It is pertinent to mention that Cambodia too has been having the same prime minister for the last 25 years and so has been enjoying political stability. All these might seem rosy from a macroeconomic perspective. But the devil lies in the details. Foreigners are allowed to own properties on the first floor or higher (not the ground floor) and up to 70% of a single strata titled building, or up to 49% of any properties in partnership with a Cambodian entity or citizen. Titles are divided into hard and soft titles, with the former being recognised at the district level and the latter by the Cadastral Office on the national level. Currently, it is estimated that about 10% of the properties have hard titles, while over 80% are on soft titles with the rest without any titles at all. It will take a while for the government to convert all into hard titles, which offers greater security and can be leveraged for bank financing. Things are positive, however, on the lending font. Increase competition has led to mortgage rates dropping from 10%-11% in the past to 7%-8% currently. Banks such as CIMB, Hong Leong and ANZ are all active in lending on Cambodian
properties at 60%-70% of the property value at tenures of around 15-20 years. Prices of properties in Phnom Penh average about US$1,400 per square metre, while rent averages at 6.91% for inner city and 5.94% outside the city. With a minimum wage of US$140 and skilled workers paid between US$400-US$500 monthly despite being in shortage, US$1,200 a month is considered high for the locals. Base on a monthly rental of US$400 and that being a 6% yield, fair prices targeting the high income group should be in the range of US$80,000US$90,000. Investors should also take note of the current glut of apartments in the market. While that might not deter developers and foreign investors, it might cause the banks to pull back their lending â€“ a sure sign for prices to soften. In evaluating investment products for our clients, we have always emphasised on three factors â€“ ownership, profitability and manageability. In general, we do not see a significant risk in ownership issues as long as investors stick to projects by reputable developers. The continual economic growth of the country does seem to point to further income growth, and hence property price growth. However, buying the correct type of property at the right price is key. Lastly, manageability is where many developing markets fail to deliver. This includes property and rental management, tax and accounting, etc. Finally, being an export driven market, Cambodiaâ€™s economy will be highly subjected to the global economy. As seen in 2008 during the global financial crisis, its inflation fell from 35% to almost -10%, marking a significant collapse of its economy. Investors must carefully weigh the risk of a global downturn against their investment in Cambodia accordingly
ABOUT THE CONTRIBUTOR Rakaesh Vijayan is a Portfolio Consultant at RunningStream International Pte Ltd. He analyses markets and customises property investment plans for his clients. Having had a keen interest in macroeconomics since high school, Rakaesh regularly explains complex economic principles in simple terms to educate his clients.
Image Courtesy : www.expatsandaliens.com www.propertyinsight.com.my SEPTEMBER 2016 I 63
FIVE THINGS EVERY LANDLORD SHOULD STATE IN THE TENANCY AGREEMENT
avid has received his key for his newly-completed condominium and found a potential tenant, Ah Cai, who was interested to rent the unit as soon as possible. In order to save time and money, David and Ah Cai signed a tenancy agreement downloaded by the former from http://www.never.trust.lawyers.com. Five months later, David received several calls from the condominium’s management requesting him to settle the outstanding water charges that amounted
64 | SEPTEMBER 2016 www.propertyinsight.com.my
to RM888. David visited his to remind Ah Cai to pay the utility bills. To the shocking of his conscience, he discovered that his unit was being used as a childcare centre and the walls were filled with the children’s ‘artistic’ scribbles. After vomiting two pails of blood, David confronted Ah Cai, “How can you use my unit as a childcare centre?!?” Ah Cai responded with an innocent look, “What’s wrong with that? There is nothing in the agreement which states that I am not
allowed to use your property to run a childcare business.” David yelled, “I don’t care! I want you to pay all the outstanding utility charges, restore the unit to its original condition and get out of my unit as soon as possible!” He then slams the door and left. He returned home and immediately checked the tenancy agreement, hoping to find some clauses to support his demand. He was shocked when he realised that the agreement is silent on how Ah Cai
can use the unit. David was even more depressed when he found that, according to the agreement, the landlord (meaning David himself) is responsible for paying all utility charges and maintaining the good condition of the unit. So what can we do to avoid becoming a victim like David when we are renting out our units? Here are some important clauses which your tenancy agreement should provide for: (1) Specify the purpose/use of the property • If you are renting out a residential property, make sure you state clearly in the tenancy agreement that the property can only be used for residential purposes • You should also insert a clause to restrict your tenant from sub-letting the property without your written approval, so that you can filter and manage the people who may be staying in your unit (2) Who pays the bills • It is common practice for the tenant to pay for the utility charges (i.e. water, electricity, sewerage charges) while the landlord will bear the management fees • To avoid any confusion/dispute, it is prudent for you to state clearly that your tenant should promptly pay the utility charges within a certain period (usually 14 days) upon receiving the relevant bills (3) Maintenance of the property • The tenant is usually responsible for maintaining the fixtures and fittings of the property (subject to fair wear and tear), while the landlord will maintain the structure (i.e. walls, drains, roof) of the property in reasonable and tenantable condition You should list down the furniture, household appliances and all other items which you have provided in the property and ask the tenant to confirm the good condition of these items • Make it clear in the tenancy agreement that the tenant is responsible for maintaining the good condition of these items (subject to fair wear and tear) (4) Restore and return the property • You should ensure that it is written
in the agreement the tenant shall restore the property to its original good and tenantable condition and return the keys of the property to you upon the expiry/early termination of the agreement (5) Empower yourself with self-help remedy • You can state in the agreement that if your tenant fails to perform his obligations within a reasonable period, you are entitled to carry out his obligations at his cost and expense • As such, you shall be entitled to fix
the damages, restore the unit, pay the outstanding bills and deduct the same from security/utility deposits Last but not least, you should take photos and record the original condition of your property and furniture before handing over your unit to the tenant. In the event of a dispute, you may use these photos as proof and justification in your favour. Be smart, don’t be like David. Stop downloading sample agreements from http://www.never.trust.lawyers.com
ABOUT THE CONTRIBUTOR Chiam Jef Fri is a practicing lawyer and is passionate in the areas of corporate and commercial, strata management and tenancy matters. He welcomes you to send your comments to firstname.lastname@example.org
www.propertyinsight.com.my SEPTEMBER 2016 I 65
OPR HAS REDUCED!
3th July 2016, Bank Negara Malaysia (BNM) announced 25 basis point dropped in overnight policy rate (OPR) in their bi-monthly Monetary Policy Meeting. Most analysts have the opinion that OPR should increase because of the impending up trend of interest rates in United States of America. End of 2015 and earlier this year 2016, I have been sharing my view with my members that OPR should be reduced in Q3 or Q4 2016 and it has been materialized. OVERNIGHT POLICY RATE (OPR) OPR is an interest rate/profit rate at which a bank lends to/receives from investment with another bank. OPR is determined by Bank Negara Malaysia in the Monetary Policy Committee Meeting held throughout the year. In Malaysia, changes in the OPR trigger a chain of events that affect the base rate (BR), base lending rate (BLR), short-term interest rates, fixed deposit rate, foreign exchange rates, long-term interest rates, the amount of money and credit, and, ultimately, a range of economic variables, including employment, output, and prices of goods and services which is the micro and macro factors on the economic. OPR has been trending at as low as 2% during global financial crisis in 2009 and
Source : Bank Negara Malaysia, July 2016
66 | SEPTEMBER
as high as at 3.5% in 2006-2008. Below is the OPR trend for the past 10 years. Does this spark the start of lower interest rates era or just merely a one-off change? Before we discuss more on this, let us understand more on the impact of the dropped of OPR. IMPACT OF OPR DROPPED 1. It has direct influence on Base Rate
(BR) & Base Lending Rate (BLR). When OPR is reduced, it is stated in the Reference Rate Framework that BR & BLR has to reduce in tandem in view of the OPR changes. This means reduction of OPR will directly reduce our effective lending rate (ELR) on exisiting loan that is using this floating rate. In otherwords, we are now charged with a cheaper interest rate. Below attached is the latest BLR and BR and their previous BLR and BR rate: 2. Lowering down OPR reduces the ELR for exisiting loan and this means lower instalment. This lower installment will lead to better affordabilty to consumer. In banks, affordability is measured by using debt service ratio (DSR) and DSR will reduce in view of lower interest rate. This means that now your affordability has increased and your chance in getting loan approval improves! 3. However, in my opinion, this may not be a good news for those who is yet to obtain a housing loan to finance their dream home. I foresee most banks
will be adjusting their spread with their new BR loan offered to be similar or same ELR of 4.40% to 5.10%. This means now the banks stand to enjoy a better profit margin on their housing loan business. 4. Fixed Deposit(FD) Rate usually follow OPR and since a reduction of OPR, and we have seen banks’ FD rate has lowered. This lower FD rate may create consumer to look for other alternative investment tools that gives better return. Consumer who don’t take such action will be impacted by the drop in deposit interest rates in view that price of goods and services will continue to soar due to inflationary pressure especially when inflation rate is higher than 3%. 5. When instalment reduces, this means we have additional cash on hand every month to spend on other needs and wants. Our spending power will increase and when spending power increases, this will potentially boost our economy. 6. In most instances, OPR in other country is normally used as a monetary policy tools to strengthen a country’s currency value. However, we are experiencing a drop in OPR, this normally would weaken Ringgit against other currencies in the world. MUST BANK REDUCES MY HOUSING LOAN INSTALMENT? In view of the reduction of BR and BLR by 14bps to 25bps (varies by bank) on your existing floating rate housing loan, all banks are required to make adjustment to your monthly instalment, not to make changes on your existing loan tenure. This is clearly stipulated in the BNM guidelines. Snap shot as attached below. Even though by default banks will be lowering your monthly instalment, they normally will still be providing the options for you to select whether you would like to shorten your loan tenure instead of monthly instalment. CONCLUSION OPR reduction is certainly a good news to all. Given that an interest rates reduction should weaken our Ringgit, but we experienced otherwise where Ringgit rallied against other major currencies right after the OPR reduction is announced.
Bursa rebounded from negative territory as well. This shows that most of the people are delighted with the change. Of course for an ordinary home owner like you and me, we are certainly pleased with the fact that our monthly instalment burden is reduced,
this also means we have had more money to spend! Last but not least, I do foresee BNM may further adjust statutory reserve requirement towards quarter 4 in 2016 and may possibly reduce OPR again in quarter 1 2017. Let’s see.
ABOUT THE CONTRIBUTOR Gary Chua runs workshops to educate people on latest winning formulas to stay ahead in these trying times! Please go to www.smartfinancingco.com to get the latest updates on upcoming events. He always welcomes feedback and valuable sharings. Please feel free to drop him an email at email@example.com or connect via social media at Facebook.com/Garychualw
www.propertyinsight.com.my SEPTEMBER 2016 I 67
REAL ESTATE –
IS IT A BUSINESS OR INVESTMENT?
read from newspapers the other day that McDonald’s Corp put 20-year franchise rights in Malaysia and Singapore on sale for at least USD400mil. In United States, the fast food giant’s revenue in 2015 alone was USD8.5bil and it earns one fifth of its revenue from rental payments from his franchisees. Amazing! Then, I was pondering about the real meaning of real estate investment. These few years, everyone in town talks about the property and spontaneously they concluded that it is arguably the most investable product compared to stocks, bond or commodity. Investors, regardless of keeper or flipper, make money from buy low and sell high. In the Malaysia property history, the real estate price will always go up in long term without fail. Some properties price even doubled in less than 3 years. In addition, investors can leverage on bank loan a.k.a. other people’s money
SEPTEMBER 2016 www.propertyinsight.com.my
to invest. As time goes by, the property price increased whereas the balance of loan principle reduced. Nah, it is indeed a dull topic! I will not cover this topic further before you flip to the next article. On the other hand, there are so many conventional or creative ways to make money from property other than owning it. Businessmen look at property in a totally different perspective. First of all, property investment takes time to reap the fruit, usually 5 to 10 years or more. Inevitably, there are many pitfalls throughout the span of 10 years investment, e.g. tax, legal, tenant management, physical defects, to name a few. In contrast, Businessmen use property as a tool to run their business, make money in shorter time frame and bypass all the hassle without holding that property for a long term. The most common way amongst all will
be the fix-and-flip, or in layman term that means investors buy, overhaul and sell it at a premium. Some even go for auction properties to fetch a higher margin. I have an investor friend in my network who specialise in acquiring bungalows in Penang island, design, renovate and furnish it and sell at a 10% profit, i.e. usually RM300k or more. However, with the raise of Real Property Gain Tax (RPGT) to 30% for first 3 years of property disposal on October 2013, many businessmen have to make some special arrangement to avoid the tax. Naturally, we perceive business as something we need to incur a lot of capital to start with. Worse still, we need to put in a lot of time and effort to make profit and most of the time it is risky. However, in property business, these are not always the case. For easier explanation, pls see the examples of some business model in property below.
STRATEGY More Time Involved
More Time Involved
More Capital Needed
1. Demand Creator 2. Paper Investor 3. Fix-and-flip
1. Project joint-venture
Less Capital Needed
1. Deals Introducer 2. Deals Matcher 3. Tenants Manager
2. REITs 3. Joint-development
Entrepreneurs have different characteristic among each other. Some are conservative and cautious that they only go for business that generates safest returns. Some are aggressive and they have much largest risk appetite. Some are cash flow sensitive that they are especially particular in managing their cash flow. In fact, there are many businesses that the more we put in our time, the lesser capital we need to inject in it. Moreover, it is relatively safer compare to investing a property. Let’s have a look at the strategies my investor friends used to make profit through real estates. ACTIVE BUSINESS MODEL (more time needed to involve in the business): • Introducer As a businessman, network is our networth. To become a good introducer, we need to have a network of all-time ready buyers and some experienced real estate negotiators who can bring us great deals. We make money by selling the deal to potential investor. You will understand this if you are familiar with Cashflow Game 101. The key is to make the deal owner look for you first before approaching other investors. • Deal Matcher One investor may faced constraint in investing property due to insufficient fund, whereas another investor do not have borrowing capacity due to age or other reasons. Just like introducer, we match the two investors who can share their resources to form a JV partnership. Then, we make profit by owning a portion of the property share or make monetary commision for our effort to bridge the 2 investors as agreed by both parties. • Demand Creator Property investment is all about supply and demand. In some newly developed
area, businessmen start up businesses as pioneer in that area to draw the crowd. When the area is mature after several years, they will sell off their business to other investors, keeping the property for rental collection. • Paper Investor There are investors who invest real estate without really acquiring the property. They will look for distress sellers who are no longer afford to pay the monthly installment. Then they come out with a legal agreement to settle the monthly instalment on behalf of the seller with the option to buy the said property at fixed price in the future, usually lower than market value. When the next buyer purchase the property, this investor will make the profit from the selling price less fixed price stated in the agreement. • Tenants Manager Managing tenants is a difficult tasks for most people who are not a full-time investor. One can actually help the investors to manage the property by searching for good-profile tenants, collecting rental, solving problems and arranging repair/maintenance jobs for their properties. In return, he will be paid 5 – 10% of the monthly rental payments. PASSIVE BUSINESS MODEL (no time needed to involve in the business) • Real Estate Investment Trust (REITs) There are many types of REITs in Malaysia. The 2 most common type of REITs are retail
REITs and residential REITs. The main source of income for retail REITs is the rent collected by tenants of their shopping malls. Residential REITs on the other hand invests in residential buildings such as apartments, condominiums, high-end and luxury high-rise residentials. This type of investment is particularly popular in the difficult time as investors do not need huge capital to own the expensive properties and yet they can enjoy the benefit of investing in it. JOINT-VENTURE (RAW LAND) Some individuals have a piece of raw undeveloped land (commercial or residential title) and they do not have the capability to develop it. They can jointventure (JV) with a developer to add value to the plot of land by planning and developing it. In return, they will own a portion of the project which will eventually make more money for them than just selling the land. JOINT-DEVELOPMENT This is a unique way of investing in a property development business which is popular in many European countries for more than a decade. Investors will fund the development project through a specially arranged legal structure within a specified time frame, usually 2 – 3 years. Upon exit, investors will make a fixed return as stated in the agreement. Investors will be protected by a corporate term note and/ or land charge as security. Generally, the capital outlay is minimal and the return is attractive. In a nutshell, the property market could be vulnerable in a prolonged economic slump. With all sort of options available, we can now choose the right investment and business model that best suited our financial portfolio. Diversification is always a good solution to reduce the risks, be it an investment or a business.
ABOUT THE CONTRIBUTOR Roy Ong is the founder of Property Network International (PNI), a property investors community that gathers monthly in Penang and Klang Valley. He helped investors to diversify their property portfolio globally using Property Investment Life Cycle (PILC). He can be reached via firstname.lastname@example.org or www.facebook.com/oyxiang
www.propertyinsight.com.my SEPTEMBER 2016 I 69
carcity is a well-known marketing strategy for increasing demand and perceived value. When a product or service is scarce, or perceived as scarce, and there is a limited time to act, people feel motivated by a sense of urgency and tend to act quicker for fear of losing out. This threat of a ‘potential loss’ makes the restricted item even more important to people. Potentially losing something before they’ve even had an opportunity to possess it drives people to action. This tendency is known as ‘reactance’. Reactance occurs when you feel someone or something is taking away your choices or limiting the range of alternatives. The Rule of Scarcity works because people feel that they will lose their opportunity to act unless they do so immediately. This means they are driven to acquire something to alleviate the threat of potential loss. Exploiting people’s response to scarcity is a well-known tactic and one often employed by blue-chip household companies, but how can you use this strategy in property investment? There are various ways you can create scarcity, or the perception of scarcity: • Provide a property that has something unique that your target audience values, and will find hard to resist and difficult to locate elsewhere (e.g. a top-of-the-range kitchen with highspecification appliances). • Position the property to ensure your target market understands how scarce the offer is, by using wording such as ‘rarely on the market’, ‘first time on the market’. • Set a higher-than-usual price for the property to capture a premium price-point. Usually, a scarce supply and high demand will mean customers are willing to pay a higher price for the product. • Alternatively, set a discounted price to increase the odds of a quick sale or let and to encourage a ‘must-see-it-now’ mentality. • Promote the need for people to act quickly by using words in 70 I SEPTEMBER 2016 www.propertyinsight.com.my
your advertising such as ‘first to see will buy’. Restrict and/or limit people’s choices in the availability of viewing times. People want what they can’t have and, if they are told a property may soon be unavailable, the desire to view will increase, as will the urgency to act. • Create allure by increasing the perception of competition. Conduct block viewings at set times to heighten interest. People who feel they are competing for a limited resource will be more motivated to take action. • Create deadlines by which people need to act; for example, offers must be submitted within twenty-four hours for consideration. • Point out the potential loss of not acting. People overvalue what you are restricting - the fear of loss is an overwhelming feeling that motivates people to act. Scarcity works by motivating people to act quicker; this can lead to increased levels of demand and perceptions of value. Of course, not all customers appreciate and value scarcity, and this tactic may turn off some clients. However, when executed well, scarcity builds a sense of urgency that motivates people to act quicker and value your property higher. Look at some of the advertising promotions used by companies trying to create a sense of scarcity. Learn from the language, tactics and positioning they use and see how you can employ these in your business. •
ABOUT THE CONTRIBUTOR KK Chua is the strategic advisor & managing director of Armani Media. 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 email@example.com
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BEGINS HERE ARE YOU 18 YEARS OLD AND ABOVE AND OWN YOUR OWN BUSINESS? IS YOUR COMPANY REGISTERED WITH SSM?
ENTREPRENEURS GROWING ENTREPRENEURS
HAS YOUR COMPANY BEEN OPERATING FOR A MINIMUM OF 2 YEARS? YOU ARE INVITED TO BE A MEMBER OF THE ENTREPRENEUR INSIGHT CLUB*.
Send your personal details and business information to firstname.lastname@example.org
IT STARTED WITH AN IDEA I HAVE AN IDEA I TOOK A RISK I BELIEVED IN MY PASSION I BECAME AN ENTERPRENEUR
*Confirmation of membership is subjected to approval. Annual membership fee of RM1,000 applies upon confirmation
Property Insight is a monthly property investing magazine.