Malaysia's Property Prices To Rise As Much As 20% Within 6 Months?

According to Datuk Michael Yam, President of Real Estate and Housing Developers' Association
Malaysia (REHDA), prices of residential properties will rise 10-20% over the next six months because of cost and inflationary pressures! He added that the current housing market is simmering, and there is neither boom nor bust, but property prices will rise. The increase will be in high-rise and landed properties in all price categories across Malaysia! The issue of rising property prices was partly due to an imbalance of supply and demand as more migrants move to land scarce Kuala Lumpur.

Interestingly, in a recent survey of 133 Rehda members, 81% expect price hikes by as much as 20% in the next six months!

Can you ever imagine a terrace-linked house being sold for about RM1.6 million? Well, that's happening in the upper-class enclaved Desa Park City!

Nevertheless, there are views that Malaysia's property prices are still under appreciated by foreigners. Some experts attributes this to a lack of liquidity in the market and competition from Hong Kong and Singapore where capital appreciation is better due to price volatility. In addition, when other important consideration comes into play, such as public transportation, the branding of the city and KL is considered provincial when compared to London, Hong Kong or Singapore. In simple terms, KL needs to be seen as world class and provides better livability.

For the full article on the above, click this link.

Is U.S. Housing Making A Comeback Soon?

Housing, which led the U.S. economy into recession, may be one of the forces that helps to pull it out of the ditch. Although nobody expects a renewed housing boom, at least sales and construction spending are not falling any further.

Some of the signs of stabilization include:

• Home builders are gradually becoming more hopeful, even though surveys show most builders are still very discouraged. The builders' housing market index has risen in four of the past five months.

• Housing starts have increased in four of the past five months after tumbling to a postwar record low. Building permits for single-family homes have risen at a 109% annual rate over the past three months.

• Sales of new single-family homes have risen three months in a row after falling to a record low in March.

• Sales of existing homes have risen four of the past five months, supported by a government subsidy for first-time buyers and by sales of foreclosed homes.

However, residential mortgages either in foreclosure or with at least one payment past due hit 13.16% in the 2nd quarter, the highest percentage ever recorded!

Mortgages somewhere in the foreclosure process reached 4.3% of all mortgages, up from 3.85% in the 1st quarter and 2.75% in the 2nd quarter of 2008

With current U.S. unemployment rate at almost 10%, it leads to the sign that mortgage performance is once again being driven by unemployment. In fact, prime fixed-rate loans now account for one in three foreclosure starts. A year ago they accounted for one in five. While 41 states had increases in the foreclosure start rate for prime fixed-rate loans, 43 states had decreases in that rate for subprime adjustable-rate loans.

Until the U.S. employment situation improves, it is unlikely that there will be meaningful improvement in the foreclosure and delinquency rates.

Data Source: MarketWatch

Interest Rate Cut: How Does It Impact You?

The Central Bank of Malaysia cut its interest rates by 75 basis point from 3.25% to 2.5%. The latest move is higher than the consensus expectation of 50 basis point. The higher than expected rate cut probably reflects a faster than expected deterioration in the country's economy.

In the same token, the Central Bank has also reduced the Statutory Reserve Requirement (SRR) of banks by 150 basis points, from 3.5% to 2%. This potentially neutralizes the expected margin squeeze on banks (due to lower rates) by reducing banks' cost of funds, expanding liquidity in the banking sector and thus increases the capability of banks to restructure loan defaults and helps reduce risk of non-performing loans.

With the latest low interest rates, it's a blessing to loan borrowers but a bane to depositors. For loan borrowers, it is a good time to refinance their existing loans. A low interest rate environment will most likely bring some relief to the property market too.

On the other hand, the lower interest rate should benefit bond yield.

With the slowing economy (and possibility of recession) and volatile investment climate, it is indeed imposing greater challenges to sustaining real wealth creation in the foreseeable future.

Budget 2009: What It Means For You?

As always, there were bundles of expectations on Malaysia's Budget 2009 which was released last Friday evening. As it turned out, it was a budget for the people in general and the measures were meant to contain inflation and accelerate economic growth. So, what is in store for you as an individual living in Malaysia? Here are some quick key takeaways of the goodies for individuals in general:

1. reduction in personal income tax rate from 28% to 27% for top tax bracket and from 13% to 12% for middle income groups with tax bracket at RM35,000-50,000;
2. increase in tax rebate from RM350 to RM400 per person for those with
taxable income of RM35,000 and below;
3. the eligibility criteria of monthly household income for welfare assistance is
raised to RM720/month from RM400/month;
4. all interest income from savings for individuals will be tax-exempted;
5. childcare allowances of up to RM2,400 per year for employees will be
exempted from tax;
6. travel allowances of up to RM2,400 per year for employees will be exempted from tax;
7. Household with monthly electricity bill of RM20 or less to be exempted from payment from 1st Oct 2008 to end 2009;
8. Fifty percent (50%) exemption on stamp duty for loan agreements for real estate properties valued below RM250,000 (USD75k). Current stamp duty rate is o.5%. This actually translates to a maximum savings of only RM625! Question is, will this be good enough to spur the medium to low cost property market?

Perhaps the only benefit from an investor's standpoint, is the long awaited change on the tax structure for Malaysia Real Estate Investment Trusts (REITs) - tax rate on dividend received by individuals will be reduced from 15% to 10%. For foreign institutional investors, tax rates on dividend received will be reduced from 20% to 10%. These measures will enhance the competitiveness of Malaysia REITs vis a vis regional countries such as Singapore and Hong Kong. However, do not celebrate too soon, as Malaysia still has a lot to do to boost its overall size and attractiveness of REITs. Cutting taxes is only one of the many incentives needed.

So, are these budget measures good enough for you? What do you think?

For the complete list of budget measures, please click this link.

End Of Global House Price Boom?

Year 2007 had seen eventful and glorified moments for emerging markets such as Singapore, Hong Kong and Shanghai (China), where housing prices had shot up from 30% to 40%! However, things have changed dramatically since the sub-prime crisis erupted in US. By 1Q 2008, weighed down by the global credit crunch and high inflation, the global house price boom appears to have ended, according to Global Property Guide's latest survey of house price indicators.

According to the survey, only 13 countries in which dwelling price indices are regularly published saw prices rise during the year to end Q1 2008, while 21 countries saw dwelling prices fall in real terms, i.e., after adjusting for inflation. Even in most countries where house prices are not falling, they are clearly losing momentum.

It is interesting to note that when adjusted for inflation, many of these price rises look much less impressive. The world’s top-performing housing market (after inflation) was not China or Hong Kong or Singapore, but Slovakia, where real house prices rose by 29.3%.

The biggest house price fall was in Latvia, down -38.2% by May 2008 from a year earlier, after adjusting for inflation.

US prices also fell during the year to end of Q1, from -4.2% to -18.1%, after inflation.

In Europe, significant real house price falls also took place in Ireland (- 13.2%), Luxembourg (-5.8%), Portugal (-4.3%) and Malta (-4.9%).

UK house prices were only slightly down at end-Q1 from a year earlier, the house price crash having begun in earnest in early 2008. House prices fell during the first quarter by between - 0.7% to -2.1% (inflation-adjusted).

In Japan, the housing market appears to lose momentum once again. The urban land price index for 6 major cities was up only 4.1% year-on-year (2.9% after inflation), down from 7.8% over the same period in 2007 (7.9% after inflation).

The survey also concluded that loan volumes are likely to fall going forward. Therefore, it seems likely that the world’s house price momentum will continue to go down.

For the full story, please visit Global Property Guide.

As for Malaysia, it is likely that the impact will be less severe given the country's limited exposure to sub-prime related securities, relatively unharmed credit liquidity and the relatively cheaper property prices (relative to other major cities). However, a slowdown is imminent.

Malaysia Real Estate Outlook: To BUY or not to BUY?

Last week I was invited to attend a property conference organized by one of Malaysia's leading universal broker, RHB Investment Bank. The conference aimed to provide the latest outlook analysis of the regional property market with emphasis of course on Malaysia's property market, mainly residential, commercial and retail in the mainstream Klang Valley arena. Key speakers include reputable senior personnel from Jones Lang Wootton, REHDA, Regroup Associates and Axis REIT.

"To BUY or not to BUY! Where are we in the Malaysian Property Cycle"? This was the exact catchy tag line presented by RHB before the event. It has certainly caught my attention! However, as some of my past experience tells me, this could be yet another one of those event that was somehow "engineered" to inform people of all the rosy outlook and the exciting stories such as record land or property prices transacted around the area! Worst still, they may even come with some marketing flavour!

Well, i was rather pleased to see that first and foremost, the event was very professionally organized, with nice food being served too! Secondly, i reckon i did get quite a fair bid of value from the speakers whom have (to a great extent) shared a rather unbiased view and offered some real intricacies within the local property scenes!

In a nutshell, NOT ALL IS ROSY! The following key phrase probably reflected the current environment pretty rightfully: "cautious but optimistic outlook" Well, what it means really is left to anyone's interpretation! On a personal note, i do agree with the consensus view that real estate property may soften for the foreseeable future, particularly going into 2009. According to one speaker, certain degree of "adjustment" is possible depending on location and choice of property, but it SHOULD NOT be a case of gate crashing! For 2008, it should still be a relatively good year (for the high-end condominiums and Klang Valley commercial sector, particularly quality or "grade A" office sector).

Other key takeaways include:
- Malaysia property prices are still relatively "cheap" among the other regional countries such as Thailand, Singapore, Indonesia, Vietnam, Hong Kong and major cities in China. However, the bad news is there is still an impression that Malaysia is relatively under-marketed! (i.e., no good if it continues to be a hidden jewel!)

- quality or "grade A" office sector in Kuala Lumpur is expected to offer a better prospect than other sectors for at least the next two to three years, due to current shortage in good quality supply.

- High-end condos, while promising (from price perspective), may not be everyone's cup of tea, due to high holding cost and likely unsustainable yield factor. This is better suited for investors (particularly foreigners) with deep pockets and people who just care more about the brand and prestige, and long term capital growth potential. Yield is not something these group of people are too concern about. (Bad for conventional wisdom, i.e., positive cash flow, good ROI)

- There are still signs of abundance of interests coming from foreign investors, particularly from Singapore, Hong Kong, South Korea and the Middle East.

- One speaker advocated that we are only in the beginning of the boom cycle, assuming it started from 2005.

- For the retail sector, market has generally soften, particularly for some mid to high-end shopping malls, due to lower consumer spending. In some cases, vendors have to give substantial rental rebates to merchants at some high end mega shopping malls including The Gardens and Pavilion!

To sum it up, it's fair to say that there is no best time or worst time to buy a property. However, it is likely that more better buys will emerge during challenging moments like this or if market soften further. At the end of the day, having a fair understanding of the potential demand and supply always helps.

Overall, i believe the economic slowdown has already happened since Q2 of 2008, ironically further accelerated by the recent "astonishing" 40% fuel price hike! I happen to call this a "political suicide" at the worst possible moment....A classic case of pouring "fuel" to fire!

Growth & Inflation: A Double-edged Sword?

The US sub-prime and credit crisis have affected most parts of the world in terms of huge tightening of funds availability, and a slowdown in global economy. However, we have yet to see whether the scenario of recession would happen to these major countries such as US, UK, parts of Europe and other emerging markets. On the other hand, the skyrocketing crude oil prices have caused severe inflation across the globe, the collapse of airline companies, food crisis and severe increase in cost of material!

Vietnam, for instance, has been labeled as the next emerging China, with solid GDP growth , rising real estate property prices and one of the best performing stock market last year! By the mid of 2008, the scenario has reversed completely, with property prices falling as much as 40% since late last year and is expected to continue until the end of the year, stock market crashing by about 55% year-to-date, and a dizzying 25% inflation that could potentially tear down Vietnam's economy!

In the meantime, US is still experiencing jittery economic environment, UK is potentially experiencing a real estate market collapse and financial tightening, China had just experienced a tragic earthquake that it should derail its solid growth going forward!

Back home in Malaysia, the Government is about to announce a new petrol subsidy program in order to reduce its huge budget deficit as a result of the huge subsidy it has to shoulder, despite the huge increase in the price of crude oil. Although the reduction (and ultimately the removal) of petrol subsidy is good to achieve an efficient economy in the long term, this will certainly put a huge dampener to all Malaysians and their consumption! It will also certainly create a spiral effect on inflation on all aspects of consumptions too! If this is not managed carefully, it could ultimately affect economic growth, something the present Government cannot afford to let it happen, given already the political pressure and uncertainties.

Stagflation, perhaps?

Malaysia Real Estate Take Five...

Below is some of the latest statistics compiled by Kuwait Finance House Research. For those who wish to invest in Malaysia's real estate properties but taken aback by the recent political uncertainties, this information could possibly help.

Malaysia’s population is expected to increase from 27.17 million in 2007 to 28.96 million in 2010. The median age of Malaysians is 27.4 years. In 2007, a total of 63.4% of the total population consist of those in the working age group of between 15 and 64. The Government expects that 63.8% of the population would be living in urban areas, resulting in a higher demand for more houses, schools and employment.

In recent years, the proportion of total potential buyers grew from 36.9% in 2002 to 39.1% in 2007, underpinned by an increase in the age groups of between 40-49 and 50-59 at a 5-year CAGR (Compound Annual Growth Rate) of 2.7% and 5.4%, respectively, in 2007. The 40-59 age group is likely to be more affluent than the younger age groups and also more likely to buy higher-end property and own more than one property for investment purpose or for their children.

The average lending rates continue to fall to as low as 6.27% in January 2008 as compared to 6.57% in January 2007, suggesting that banks are still competing for quality mortgage home loans. However, if the impact of the world economy worsens, the non-performing loans (NPL) for residential property may edge upwards, in particular for properties held for investments. purposes.

According to the research, real estate property prices are expected to widen between mass market and high-end residences given the spillover effects of petrodollar inflows on property demand in Malaysia as prices are relatively cheap compared to regional properties.

However, given the physical supply coming onstream in 2008 and 2009, the growth in rentals and capital value is expected to ease by the end of 2008.

Calling For "Order" On Hedge Funds

A hedge fund is an investment fund similar to mutual fund where there are a pool of funds invested in a collective manner. Hedge Fund is often structured to avoid direct regulation and charges a performance fee based on the increase of the value of the fund's assets. In the pursuit of maximum returns in today's competitive world, hedge funds has become very popular with estimation of about USD1 trillion in motion. As a hedge fund is largely unregulated, its investment manager is able to deploy a wide range of investment strategies and tactics than it could for a regulated fund, and is therefore considered to carry more risk. They often uses complex investment strategies such as short selling, futures, swaps and other derivative contracts and leverage. They will often seek to generate returns that are not closely correlated to those of the broader financial markets by hedging its investments against adverse moves in those markets.

For the purposes of consumer protection, in most countries hedge funds are prohibited from marketing to investors who are not professional investors or high net worth individuals. They therefore tend to operate in secrecy and is not required to report what they're doing. This is in fact an area of biggest concern.

Today's financial markets are filled with plenty of liquidity, despite the current US sub-prime issues that have threaten to derail global liquidity and credits. Yen carry trades have become a popular cheap source of funds, given Japan's low interest rates and stagnant or deflationary economy. Hedge fund is definitely one the major beneficiary of this source of funds to finance their investment activities. In the pursuit of greater financial returns, it is no coincidence that many of global asset classes have been driven up the roof. This includes real estate property, commodities such as palm oil and crude oil which are trading at record highs respectively! We have already seen the bubble of US housing real estate has finally burst as a result of overzealous speculation! So the big question is will others ultimately suffer the same fate as US housing? This could well happen given the following scenarios:
- US sub-prime issue continues to deteriorate to the extent of causing a collapse of consumer confidence and worst of all a US recession;
- unwinding of Yen carry trades as a result of stronger Yen or rising interest rates due to better than expected Japan's economy and/or higher inflation;
- Bubbles in emerging market's economy particularly China and to a lesser extent India. A great course of concern here is China's overheated stock market and next in line could be Hong Kong due to large inflow of money from mainland China.

Certainly, the above events may not happen as yet but there is always a possibility it may happen one day. So the big question is can something be done to regulate Hedge Funds so that further speculative damages can be prevented? Else, investors will just have to enjoy the party while it lasts!

Keeping Your Rental Property In Good Shape

Have you had the experience of not able to rent out your rental property despite getting a number of prospective tenants to view your property? An you think hey, that can't be right, because you heard from your friend earlier, who managed to rent out his or her property without much of a problem. What went wrong? One of the problem, might be, your rental property IS NOT IN GOOD SHAPE!

Quite often, i hear complaints from property owners that they were not able to secure a tenant for many months, only to find out that their rental property is in such a lousy shape! I mean, things like a well-kept and clean place, properly organized furniture, keep the place nice and tidy especially visually inviting areas such as living room and kitchen, functioning and proper lighting, etc....these are essentials in order to greet your "guests" the positive way! It's like meeting your partner's parents for the first time...you need to dress up "appropriately"! Many people have mistaken that as soon as they put up the ads (of their property for rent), prospective tenants who walk in would just fall in "love" with their place or so much so that they will simply find it "irresistible". In fact, one of the simplest way to testing that "irresistible" theory is by putting yourself in the shoe of the prospective tenant, i.e., ask yourself how you feel when you walk into the house? If the feeling is negative, very likely the prospective tenant would feel the same too!

Up until now, I always have very little difficulty in renting out my properties and that is because, i understand this concept of "putting yourself in his shoe" very well. With vast competition and tenants simply spoiled for choice, it is important to "package" your property so that it becomes more rentable than others. Just think about it this way, how would you market your product effectively against your competition? Just imagine a can of coke with just a basic label and without packaging, would anyone buy it? Answer is simple, packaging is obviously a critical element. However, a word of caution is that you should avoid packaging your property overzealously until you put up the most advance design and overspend your budget. After all, "beauty" is in the eye of beholder. The right "taste" can be quite personal, really. So, to me, just make it SIMPLE, PRESENTABLE AND NICE will do. How i define this is really by thinking through how I would like to see and have if I were a tenant myself. Obviously, some level of comfort and convenience are essential ingredients to consider.

These are my top 10 must-do list to make your property appealing:

1. Put on a fresh coat of paint. Repaint the dead old or worn-off spot at the very least
2. Spring clean the house (so that you won't see any dead ants or cockroaches lying on the floor!)
3. If your unit comes with wooden pargue or marble flooring, give it a "polish" state in order to return some gloss over the surface.
4. Fix any problems you may have encountered, such as water leakage, door rust, squeeky sound, broken furniture or lighting, etc.
   
5. Service all the air-conditioners (and regularly do so every 6 to 12 months)
6. Organize all the furniture and fittings...turning your place into "move-in" condition
7. Fix some nice decorative items such as picture or painting hanging on the walls. However they should blend with the overall theme of the property and they may not need to be expensive
   
8. Get ready some basic utilities such as toilet roll and hand wash detergent. These things make your place extra homely!
9. Check all electrical items should be in working condition. If not, send them for repair or replace them.
   
10. Extend welcome gestures and smile, when meeting your prospective tenants for the first time!
    

I also like the idea of making your rental property a fully-furnished unit, because that creates a real DIFFERENTIATOR! Semi-furnished at the very least, if you cannot afford to fully-furnish the unit. Bear in mind that added furnishing can also bring you higher premium in your rental rates most of the time. Just bear in mind of course you do not need to overdo it!

By keeping your property in GOOD SHAPE, you should be able to achieve a higher success rate of securing new tenants and retaining them!

Penang the Next Global Mega City?

Penang is a popular island state situated at the northern part of Malaysia. Commonly known as the Pearl of the Orient, Penang is vastly popular for its food (eg., Prawn mee, Assam Laksa, Lo Bak, etc) and a popular tourist destination offering nice beaches and holiday resorts. Penang is also home to many high tech multinational and local manufacturing companies. Its property prices is also one of the most expensive in the country due to scarcity of land. For many years, Penang development has been rather stuck in a stagnant image, due to some major relocation of high tech manufacturers from here to other lower cost destination partcularly China, and the perception that Kuala Lumpur is the better place to job opportunity and making money.

For the next foreseeable years ahead, I believe Penang's image is set to change dramatically given that there is now increasing influx of foreigners into Penang (it's nice to live, good infrastructure, friendly people, etc) and the real estate properties in the state are also increasingly gaining popularity and attractions from property developers and foreign investors. The major area fronting Gurney Drive ( a popular sea-side tourist spot) is also bursting with new commercial activities with the upcoming launching of up-market shopping mall, Gurney Paragon. Its neighbour, Gurney Plaza, was just acquired by Capitaland of Singapore a couple of months ago at around RM1,000 psf!

The latest unveiled is the launch of Penang Global City Center (PGCC), reminiscent of Kuala Lumpur City Center (KLCC) where the twin Petronas Tower is located. This is indeed the latest mega property project unveiled in Penang by the Prime Minister of Malaysia himself. The project spans over 257 acres of land located at the old Penang Turf Club. Ring any bell? For those who are familiar with the present KLCC site, it was also formerly the KL Turf Club! The project entails top-class hotel, retail, residential, international school, arts, medical tourism and exhibition centers, connecting with monorail service and designed by French and New York architects! Moreover, the zone will also be classified Multimedia Super Corridor which carries the MSC status, a benefit comes with tax and business incentives specially dedicated to ICT companies.

Judging by the great success and world class recognition enjoyed by KLCC and the positive spillover to the surrounding real estate property valuations where prices have skyrocketed, it is worthy to take note of this latest special property development. If all goes according to plan, i have no doubt that property and land prices surrounding PGCC will also escalate over the years ahead! This is also indeed a great opportunity to position Penang as the next potential global mega city of the world!

More Real Estate Incentives To Come?

The recent relaxation of residential ownership rules for foreigners and the real property gains tax (RPGT) waiver, high-end residential properties in Malaysia have attracted a fair amount of interest from abroad. Surveys have also shown that interests and transactions on high-end properties have picked up considerably. However, there remains to be issue of over hang at the medium and low-end properties. The result is an increasing price gap between high-end and mass market real estate properties. This trend has also extended to land pricing, where the highest transacted to date is somewhere between RM1,300 and 1,400 per square feet. The piece of land is located near Kuala Lumpur City Center (KLCC), presently occupied by a Chinese (Hakka) restaurant.

So what about the mass property market? There are certainly hope for the better going forward as the Government is considering to inject further stimulus into this sector of the market. Some potential stimulus include:

1. restructuring of EPF (Employee Provident Fund) holder's account allocation to tip towards greater balance (possible 50:50) and thus higher amount for housing withdrawal. Also, one may not have to wait until the first house is fully settled before withdrawal;
   
2. temporary waiver or reduction in housing stamp duty. The current stamp duty are: 1st RM100K : 1%
   next RM100K – 500K: 2%
   Next RM500K – 2.5 m : 3%
   Excess over RM2.5 m : 4%
   

The above if happens will definitely benefit the mass property market and also significantly remove some of the major over supply in this particular sector.

Besides, there could also be further added incentives for Malaysia's Real Estate Investment Trusts (REIT) and relaxation of policies on foreigner purchase of commercial properties. Malaysia REITs market is currently lagging other major countries REITs market such as Hong Kong and Singapore due to inferior tax incentives.

When will we know if this happens? Well, wait for September's 2008 Budget announcement. For those who want to buy or sell properties, you may want to hold on your decision until then.

Rising Foreign Interest in Malaysia Real Estate

The latest property research released by Credit Suisse has indeed given a great dose of positive injection and reinforces my view that Malaysia property market is on the rise. According to Credit Suisse Research, Malaysia property will experience property asset inflation due to the wealth effect of the stock market, government pump-priming and foreigners snapping up high-end property as a result of perception that it is relatively undervalued compared with other major regional countries such as Hong Kong and Singapore, coupled with an undervalued currency. Credit Suisse also noted that the rise in the stock market would have generated tremendous wealth and should act as a stimulus for domestic consumption. Credit Suisse predicted that Kuala Lumpur could be the next property play after Hong Kong and Singapore. They also observed that visiting fund managers have been deviating from the normal routine of company visits to view property developments in Kuala Lumpur, Penang and Johor.

The rise in property interest is attributed to the Malaysian Government's recent relaxation of policies and plan to speed up public sector service delivery and reduce red tape. These new policies include:
- Foreigners are allowed to buy residential properties priced above RM250,000 (USD71,429) per unit without the approval from the Foreign Investment Committee, and no limits on the number of units;
- Foreigners are entitled up to 70% financing based on the property valuation (freehold property);
- waiver of Property Gains Tax

However, the research also pointed out that Malaysians have yet to become positive on the Malaysian property market. Not surprising, given the typical scepticisms of local community. The trend in Singapore is reminiscent of this as it also took a major move before the average Singaporeans became convinced.

On the other hand, there has been rising interest in properties in Pulau Langkawi (a popular resort island located at the north of Peninsular Malaysia). It was reported that purchasers from Hong Kong and Singapore made up the largest number of foreigners taking up residential properties here in Langkawi.

There is also strong interest in the commercial segment. According to Regroup Associates executive chairman, Christopher Boyd, the freeze on office buildings in Kuala Lumpur since the Asian financial crisis had led to pent-up demand in the downtown area and growth of more decentralised business precincts in the outer areas of the city as well as the suburbs where good accessibility and public transportation could be found. This is evident judging by the strong growth of office and retail market in the following Klang Valley areas such as Damansara Heights, Mutiara Damansara, Bandar Utama and Damansara Perdana.

A Quick Update on Malaysia Property

Following the strings of Malaysian Government effort announced earlier in the year in stimulating Malaysia property market, ever wonder how effective have these initiatives been? Let's take a look at a recent survey conducted by the Real Estate and Housing Developers' Association Malaysia (Rehda) and you could see that the outcome seems highly encouraging. The survey was conducted between April 21st and May 8th 2007.

According to the survey, enquiries from foreigners had increased by 10% while those from locals 35%. Sales of property to foreigners and locals increased by 8% and 32% respectively.

In another event, A South Korean company has bought an entire condominium block for RM64mil (USD19m)! The property is located at Bukit Jalil, Kuala Lumpur. The entire deal was sealed on May 8 2007. The condominium would be redesigned to suit the taste of the Koreans. It appears that they are on the lookout to purchase another block of condominium.

State of Beijing Property

Beijing’s property prices jumped 40% in 2001 when the city won the bid to hold the 29th Olympic Games. In the past 6 years, the compound growth rate has exceeded 50%! In 2006, Beijing’s property prices saw double-digit growth for seven months in a row, making it the hottest real estate market among all major Chinese cities.

This has naturally raised concerns about a potential real estate bubble, just like what has happened in US. Is the Olympics driving up the prices? Will the bubble burst after the Games? Should someone wait a little longer to buy a property? These are the questions Beijingers and investors are increasingly asking these days.

Some property investment experts opine that although the Olympics are fueling Beijing’s property market, it is not the primary factor. Some said the real driving force is the strong demand not only generated by Beijing residents themselves but also by others planning to settle down in the capital. Others think that only 10% of the property price rise can be attributed to the coming Olympics. Afterall, it’s only natural for real estate prices to rise if the economy grows. Recall that China's GDP has maintained a minimum 10% growth over the past four years, and Beijing's growth was 12% last year!

Certain experts think that the end of the Games won’t mean the end of this booming economy, so it’s unlikely that the property market will crash after the Games. "In fact, the boost that the city has received in terms of infrastructure, transportation and facilities will begin to show only after the Games", quoted Capitaland (China) Investment's General Manager Mao Daqing.

Nevertheless, in every optimist there is a pessimist. The pessimists believe that property price rise will slow down after the Games, some experts even forecast a drop afterward.
According to Beijing Statistics Bureau, investment in the city’s real estate sector totalled 171.9 billion yuan by the end of last year, up 12.8% year-on-year. But the growth rate dropped 28.3% compared with early 2006, and that of the residential sector fell from 86% early last year to 15.9% by the end of December. The average sales of property last year also dropped to a record eight-year low, a recent report from the economic research institute of National Development and Reform Commission showed. The report further states that they are expecting a sluggish property market after 2008 or 2009.

Whatever the opinion is, history tends to remind people that most things that go up too quickly will not be sustainable over time. Just remember the current US property market slump and the Hong Kong property market crash in the late 90s.

The Next Shenzhen in the Making?

China has in the 80s and 90s successfully created and transformed several special economic zones. The booming of cities such as Zhuhai, Shenzhen, Shantao and Xiamen were the results of that transformation and the Government's dedication and commitment. Citing the economic and tourism boom in Singapore over the next few years, the Government of Malaysia recently launched a new development region, called Iskandar Development Region (IDR), which is located south of Peninsular Malaysia and is situated just next to Singapore. An ambitious project, indeed, and as always, the plan attracted plenty of sceptics and to be fair, this is not surprising, given the perceived "failure" of past mega projects such as Cyberjaya and Putrajaya. The big question remains, will this be another mega project flop or is it going to raise the bar for Malaysia as a foreign investment destination?

Based on early indications, Malaysian Government appears to be fully committed to the success of this project. A slew of incentives were declared, including:
- 100% foreign ownership
- freedom to source for capital overseas
- freedom to source for 100% foreign human capital
- tax incentives and exemption
- removal of property gains tax

The above were further supported by the Government's effort to improve efficiency of public service delivery.

In recognition of Singapore's involvement being one of the key success factor, the Prime Minister of Malaysia even resembles the position of Singapore vis a vis the IDR like that of Hong Kong to Shenzhen, and pledged to make it a win-win proposition for both countries. Yesterday, for the first time, the Prime Minister of Singapore has also pledged to support IDR as he sees the success of IDR being fundamentally important to Singapore's growth. In pledging the support, both countries agree that they will each deploy a minister to be part of the IDR special committee to discuss areas of co-orperation.

While the sceptics are still sharpening their knives, I am one who believes that the Malaysian Government is fully committed to its success, and is making the right steps forward in making its business more liberalised and forging a closer collaboration with its close neighbours (which has not been as such previously) in ensuring nothing other than success is achieved.

This is just to say there are more opportunities to be tapped for the like-hearted investors of the world!

Are Malaysia High-End Property Prices Rising?

Based on recent statistics, prices of high-end properties in Kuala Lumpur have definitely risen! Not too long ago, people were grousing about how "ridiculous" it was that high-end residential properties around the vicinity of Kuala Lumpur City Center (KLCC Twin Tower) being sold at RM1,000 per sq feet! Guess what....a recent "low profile" launch of another high-end residential condominium near KLCC was priced at average RM1,600 per sq feet! At say 3,000 sq feet, each unit will cost around RM4.8 million!! This project was owned by a prominent Malaysian investor, Chua Ma Yu. Apparently 92% of the buyers are local, and only 8% owned by foreigners. This is contrary to the common believes that only foreigners were buying these high-end properties! Best of all the sales were done without advertising but merely through word-of-mouth! It was also reported that units were 100% sold!

Another project (Sunway Palazzio condominium) recently launched in Sri Hartamas was priced at RM846 per sq feet. This sets a benchmark for the area. The smallest unit would sell for RM2.5 million!

In Bangsar (an expatriate favourite area), one recent project (One Menerung condominium) was priced at RM700 per sq feet, which was also a record for the area!

The bad news....Malaysia is still considered a laggard in valuation compared to the regional peers such as Bangkok and Singapore!

Are Malaysia Real Estate Properties Expensive?

If you ask the local Malaysians, most of them will definitely reply to you that they think Malaysia properties are expensive and becoming less affordable. This is certainly what my friends have often told me when I asked them this question. Following the abolishment of Real Property Gains Tax (RPGT), what do you think the likely scenario will be? Prices will likely rise further (due to speculation) and property becoming less and less affordable! So depending on which perspective you are coming from, the reaction is certainly mixed. If you are a home buyer, you will probably end up more debt or can't afford one. If you are an investor, it is certainly money to be made if only you act swiftly.

As I mentioned in my earlier post, it is likely that the benefits will be across the board for all property segments. Nevertheless, it is likely that the high-end property segment will be the biggest beneficiary as in the eye of foreign investors, Malaysia has been a laggard to other major Asian cities in terms of valuation. Indeed, I have been told that many foreign investors are looking for high-end residential properties as well as shop-offices that offer good investment value, and this trend will definitely make the Malaysian property more vibrant! In most countries, such as Malaysia's neighbouring country Singapore, high-end property transactions were primarily foreign driven. I believe the same trend will happen in Malaysia too.

As per record, certain high-end residential condominiums surrounding Kuala Lumpur City Center (Twin Tower) have already priced beyond RM1,000 per square feet. If you think this price is crazy, wait until you hear this! A Singapore based property developer is understood to be close to launching another high-end property at possibly RM2,000 per square feet!!

Although many local Malaysians may not have the financial muscle to purchase such high-end properties, don't be dispirited! I believe there are still ample opportunities out there in the other property segments. The key is to act first before it happens! Good properties are always there to be hunted, so get ready for the action!

Malaysia To Abolish Real Property Gains Tax!

It is confirmed! Prime Minister of Malaysia, Datuk Seri Abdullah Badawi made the official announcement today at the Invest Malaysia 2007 Conference. This will spur growth of property market across all segments. Earlier in the year, the Government had also announced foreign purchasers will be allowed to buy residential properties priced above RM250,000 (USD71,429) per unit without the approval from the Foreign Investment Committee, and without limits on the number of units. The State Government has also been instructed likewise to adhere to this new policy and extend the co-orperation to foreigners.

This is indeed a welcoming news for Malaysia, where the property market has remained sluggish for the past 2 years. Let's hope that the Government's new policy is a permanent move instead of a temporary gesture. Investors certainly do not like fickle-minded policies! Nevertheless, such policy may also potentially attract excessive property speculation, driving prices to an unsustainable level (if that happens, of course). I would prefer to see a long-term sustainable growth rather than a short-term bubble! What happens in US property market is certainly undesirable!

Malaysia To Abolish Real Property Gains Tax?

The past few days there were a spate of rumours in Malayaia on speculation that the Government may abolish Malaysia's Real Property Gains Tax (RPGT) in order to strengthen Malaysia's present soft property market and the situation of property supply overhang. My unconfirmed sources indeed revealed that the Prime Minister of Malaysia, Datuk Seri Abdullah Badawi, has agreed to abolish Real Property Gains Tax effective 1st April this year! If this source of information is true, this will be a major boost for property markets in Malaysia, long seen as a laggard in property prices in the Asia region. Indeed, Malaysia's capital, Kuala Lumpur offers one of the cheapest properties in terms of valuation among the major cities in Asia, including Bangkok and Singapore. In addition, Malaysia is also heavily promoting a new economic zone (named as Iskandar Development Region) located in the southern part of Malaysia, i.e., the state of Johor, which is located just above Singapore, as the next center of economic and property growth, very much like the Shenzhen of China.

Which segment of the property market stands to benefit the most? I believe this will be the mid to high-end property segment. So for those who are on the lookout for good investment, watch out this segment of the market or alternatively (especially for those who do not have so much capital on hand), you may invest in fundamentally sound property stocks in the Kuala Lumpur Stock Exchange or invest in Real Estates Invest Trust (REIT). The trading nature of REIT behaves the same way as stocks and best of all, it allows you the chance to own not just one property but a portfolio of high investment yield properties without having to break your Bank Account or subject yourself heavily in debt! In another post, I shall discuss more about the benefits of REITs. Stay tuned!