Property Malaysia

Hah! I knew it! I was right!

The Edge website just released the Top 10 Best Developers Awards 2005. They will publish it in their weekend paper sometime in August.

You can read the newsfeed here. The 10 winners are:

1. Bandar Raya Developments Bhd
2. Boustead Properties Bhd
3. IGB Corporation Bhd
4. IOI Properties Bhd
5. Island & Peninsular Bhd
6. MK Land Bhd
7. Sime UEP Properties Bhd
8. SP Setia Bhd
9. Sunrise Bhd
10. Sunway City Bhd.

And you know what? I was right! There was no change to the top ten from last year! If you can recall, I wrote an article regarding last year’s winners two weeks ago, in anticipation for the announcement for the 2005 winners. The post can be read here.

Anyway, to paraphrase that entry:

And so the big question remains – who will make it this year? And following that, who will be bumped off the list?
I doubt there will be many changes to the status quo, but some smaller hotshots waiting for recognition could sneak in, like IJM Properties, Negara Properties and UMLand. But still unlikely.

However, I have to say that it doesn’t take a genius to come to that conclusion, most industry watchers would concur. I suppose this is a clear reflection of the property development scene in Malaysia.

I would say the ten winners are still a cut above the mid-carders and the pretenders. After all, no one expects Mayland or Talam to make it, right?

There will be an expo called International HomeBuyer 2005 @ KLCC on August 12-14, 2005. According to the organizers, “This is a niche up-market property exhibition showcase by renowned property developers in Malaysia and the region catering for both local and foreign buyers” and will be held at the spanking new KL Convention Centre.

Details can be obtained at their website here.

This event is also supported by Tourism Malaysia and The Edge. Some of the big developers are participating are Bandar Raya Development Bhd, Sunrise, Putrajaya Homes, Gamuda Land, Capital Land Sdn Bhd and IJM Properties. There are also a few foreign based companies and bankers.

Looking at their programme (you can view it here), they have some very interesting talks lined up, in addition to the exhibition. Some of the topics by relevant industry leaders are:

• Introduction to Financial Planning.
• Offshore Opportunities in Property Investment
• Tips on investing in the property market
• An overview of the Penang Island property market
• An overview of the property market in the Klang Valley
• Core covering and analying banking & property sectors

Entry is FREE. What’s more, if you pre-register online here, you stand to win some prizes.

I hope I can go.

In Malaysia, the two most common way to buy residential property is from the developer (during launch of housing development of condo) or via private sale. Private sales can be a direct sale between 2 parties or through a real-estate agent.

Here we give description of more ways to buy homes. And all of them are available in Malaysia. So if you’re looking to enter or sell in the market, these options may be able to get that 10% or 20% better price. (For further reading, check out Sarah Beeny’s Property Ladder)

For this post, let’s assume you’re looking to buy a house.

From the developer– this is as mentioned above, buying from the developer. For tips on sieving for good companies, read my earlier post. Generally, ask around with your friends, colleagues and industry personnel about your intended property, remember knowledge is power.

Via agents – First you contact several real estate agents specializing in the area you want. Explain clearly to them what you want (price, location, type of property) and check with periodically to ensure they don’t forget about you. Build a good rapport with your agent, their expertise and contacts is essential in getting you the right deal. When you are shown a property you really want, don’t dilliy dally! Put in your offer as soon as possible (after thinking it through) or the property may be sold by the time you decide.

Auction – This process is fast and furious and there can be pitfalls. Be sure to go with someone experienced and you can trust if you are unsure. A lot of it is dependent to luck, but you need to do the tiring legwork and paperwork before that you can land that good deal. The golden rule is to set your top limit and STICK TO IT. Another thing to remember is that vendors may well put up a property for say if there are complications. Therefore, know the background before you commit anything.

Do-It-Yourself – This may be a good way of finding property although you risk wasting a lot of time as vendors then to colour their description of the property they are selling and describe it in a totally unrealistic way over the phone. The best way is to frequently drive around areas you are targeting and seek out those private ‘for sale’ signs. This way you save on agent’s fees. But again, this is time-consuming and frustrating.

Newspapers – This is a good a way to have a feel of the market pricing of a particular area. Papers will carry details of private sales and auctions. But try to study the property section of the papers for few months before buying – that way you can be relatively confident of not only catching the right property of when it comes up but also that the sale price you are hoping for is not too far way off the mark.

The Internet – This media of property transaction is beginning to take-off here. There are a few good local sites, some focusing on second-hand market, some are agents for new launches, some specialize in auctions. Also, the internet is also a good place to find out more about developers, and to learn more about properties and the industry. A good place to start is this blog! (Yes, please bookmark this site and tell all your friends…!)

Anyway, I welcome any feedback or suggestions from my readers.

Recently one of my readers asked about withdrawing EPF savings to buy an apartment. So after some searching, here are some easy pointers for everyone planning that same path.

Basically there are 3 accounts in our EPF savings - Account 1 - Savings for Retirement (60%) Account 2 - Savings for Housing (30%) Account 3 - Savings for Medical (10%). Account two can be withdrawn entirely for buying houses – both privately built houses or for government housing.

Anyone with an EPF can withdraw. However, only those who have worked many years would have a substantial amount to be withdrawn. Also bear in mind, this sum is only for down-payment of your house, NOT for interim installments.

Below is a very useful Frequently Asked Questions (FAQ) taken from the EPF official site:

If I have bought a house using my EPF savings, can I withdraw my savings again to purchase a new house?
You are eligible to apply under Housing Withdrawal Scheme to purchase a second house on condition that you have sold the house that you have bought earlier with your EPF savings.

Can I withdraw my EPF savings to purchase a house paid in cash?
Yes, you can. You are required to submit the payment receipt made to the developer/vendor of not less than 20% from the purchase price of the house. The amount that you can withdraw is the purchase price of the house plus 10% of the purchase price or all your savings in Account II, whichever is lower.

Do I need to wait until 5 years as an EPF member before I can apply for withdrawal to purchase a house?
No, there is no waiting period for this scheme. You can apply for the withdrawal if you have savings in Account II.

I purchased a house jointly with several persons. Can we withdraw our EPF savings?
Yes, on condition that all the persons names are stated in the Sales and Purchase Agreement, which will then be included in the Deed Of Title. This is solely to protect the members’ interest.

Can I withdraw my EPF savings to purchase a piece of land?
You cannot withdraw your EPF savings to purchase a piece of land. However, you can withdraw your savings to purchase a land and build a house on it simultaneously.

If I build a house on a land owned by my spouse, can I make withdrawal to reduce/settle the housing loan balance?
Yes, subject to the condition that you are the borrower of the loan taken from the financial institution to finance the house.

Can I withdraw my savings to build a house on a land that is not in my name?
No, except to build a house on a land owned by your spouse.

(If you have any questions or viewpoints, feel free to leave them in the ‘comments’. All are welcome!)

YTL have just announced that they plan to sell shares in Starhill REIT in October this year, as announced in their official website.

The full text of the press release is also published by Business Times.

Excerpted below are some of the highlights:

YTL Corp, the country’s biggest builder, plans to sell shares in its Starhill Real Estate Investment Trust (REIT) in October, aiming to take advantage of a relaxation in rules for property trusts in the country.

YTL is selling its JW Marriott, Starhill Shopping Centre and part of Lot 10 Shopping Centre in Kuala Lumpur’s main shopping belt to the REIT for RM1.2 billion, the company said earlier.

The Securities Commission (SC) has approved as many as four trusts to be listed this year, and as many as five, valued at RM2 billion, may start trading next year, said Kris Azman Abdullah, director of issues and investment at the SC.

The assets that YTL is injecting into the REIT are of very good quality and are prime, grade-A buildings right in the heart of the shopping district of Kuala Lumpur,” said Gan Kim Khoon, head of research at AmSecurities Sdn Bhd.

Starhill REIT will have a fund size of 1.04 billion units and offer a yield of 6.19 per cent, YTL said on July 7.

The property generated RM21.2 million in rental income in the year ended June 2004 and is 98 per cent occupied.

“All the REITs in Malaysia will do very well because it’s a new asset class for many investors and yields can be quite attractive relative to the returns you get from other types of cash assets or fixed deposits and money market deposits,” said Gan.

According to the report, Landmarks Bhd, a local property and hotel group, will be the next to issue REITs.

Ever wonder why in your apartment you can hear your neighbour’s TV and hi-fi through the walls? Or at night, you can clearly hear them talking loudly or carrying redecoration (like hammering nails) even though your balcony sliding door is closed? And ever wonder why this never happens in other people’s houses or apartment, just yours?

The answer lies in how the wall between two apartments or houses is constructed. The dividing wall is called the party wall. It is derived from the word partition, and has nothing to do with birthday parties or UMNO.

There are many types of party walls, I have listed down below the most common types found in Malaysia. The general rule here is the better the higher in the list, the better the quality, the better the sound insulation and of course the higher the costs. So starting from the best to the lowest quality:

Double skin wall – this is made by two layers of brickwalls, separated by a gap of about 6 inches. The layer of void in between serves as insulation for heat and noise. Only the outside faces of the two walls are plastered and painted. Understandably, this is very common in cold countries like England. In Malaysia, it can still be seen in some pre-war buildings. The only drawback is that the void serves as a refuge for vermin and other undesirable residents.

Shear wall – basically it’s a solid reinforced concrete wall of about 4-6 inches, found only in certain high-rise apartments (where they have a column-free ballroom or swimming pool on the lower floors). This luxury is not given intentionally, it is a necessity of the structural design. So the apartment owner gets solid wall that gives peace and quite. One disadvantage, though, you’ll find difficulty in hammering a nail in the wall to hang your painting.

Clay brick wall – this red colour fired brick used to be the standard for homes in Malaysia, sadly now it is only used for premium bungalows only due to the cost factor. Local regulations require all party walls to be a minimum of 225mm thick (to prevent fires from spreading), so they lay the bricks in such a way that the width = 2 bricks thick. The main benefit of clay bricks over normal cement sand bricks is that it makes the house cooler (although I doubt this ‘construction fact’).

Cement sand bricks – the problem with this is material is that the quality can range from ‘acceptable’ to ‘crap’ (and I have seen some that disintegrate when scratched). This is the most common type of wall material here, although in advanced countries, they only use this for drains and temporary toilets.

Drywall partition – there are two types of this, either it uses lightweight concrete (to save costs) or it uses lightweight bricks. Either way, with this type of wall, you can hear your neighbour flush his toilet while you are eating dinner. Some local councils do not allow this type of material to be used for party walls, but as you know, some developers can get away with murder. Not only are they faster to erect, they cost far less cheaper than conventional bricks.

Gypsum board – the worst kind. Actually, I’m just joking. Thankfully they only use this as your office cubicle partition.

So now our currency the ringgit has been de-peg. Most Malaysians should be buoyant about the rising value, somewhat akin to the pre-financial crisis days of the early 90’s.

Some observers had immediately mentioned the obvious benefits – cheaper imported vehicles, less to pay of overseas education, more frequent holidays abroad and savings for local importers.

The downside – the exporters and plantation sector will be hit by this turn of events.

But what tidings for the property and construction sector?

Most market analysts have yet to released an in-depth study of the long term implications. But in a nutshell, a few negative consequences can be foreseen.

Foreigners have to pay more – The government has been promoting ‘Malaysia My Second Home’ recently. But due to the de-peg, foreigners now pay more, thus making property investing in Malaysia less attractive. Although the FIC has relaxed some of the rulings of late, I believe Malaysia may lose some of its competitive edge in this sector. Many high-end condominium projects are heavily marketed to Singaporeans, Hong Kong residents and Australians.

Cost of construction might increase – The property and construction industries are strongly intertwined. It is also a known fact that the Malaysian construction industry relies heavily of imported materials from overseas, like steel coil, heavy machineries, lift equipment, construction plant, extruded metals, etc. Higher construction costs means higher property prices. At the current situation, if the ringgit gets stronger, construction costs will decrease. However if the ringgit gets weaker in the future due to the de-peg (nobody can say that won’t happen), then the cost will be increased. Even with the peg previously, the price of steel in Japan spiralled uncontrollably 2 years ago, causing a huge crisis in Malaysia. (Thanks earth, for the comment)

Malaysian companies overseas – the Malaysian economy is well supported by a number of construction companies operating in countries like India, Vietnam, China and Indonesia. The de-peg has in actual fact reduce the value of the contract agreed upon, and thereby making it harder for our companies to maintain profits. As always in construction tender, profit margins are known to be paper thin. And these projects are very susceptible to huge overhead of operating outside the country.

However, most industry players say that it’s not all bad news. The overall knock on effect of the improving currency value will bound to improve the property market. How much, however, remains to be seen.

Further to my post last week, I’ve found another interesting section from the book Property Ladder by Sarah Beeny.

Buying in a Rising Market – A Word of Warning

‘Trading or speculating on the property market is not the same thing as property developing. It simply means buying properties and either waiting for the market to change in some way or selling the property to someone who will pay more for it than you did in the state when you bought it.

This is effectively the same as if you were a broker trading in the stock market – brokers are not doing anything to add value to the shares, they are gambling on outside forces that are driving the prices up or down. While a rising market may seem an exciting way of gaining lottery-type amount of money for doing almost nothing, it is important to be realistic about what is happening.

A slow and steady growth in property prices undoubtedly benefits everyone but a very buoyant market where property prices rise dramatically over a short period carries with it the danger of unsustainable growth and the knock-on effect of the market becoming overheated and either leveling off or actually dropping (as happened in the 1980s).

Either way there is little you can do to affect the market (unless you have the buying power of an oil tycoon). If you are making a profit on the property due to the rising market rather than actually adding value by changes you make to the property yourself, then you might as well buy a newly-modernized home that someone else had sweated blood over and enjoy living there until it is time to sell.

Your profit should always be calculated on the basis of the value of the property on the day you purchased it. This way if the market rises, so well and good, but if it does drop it will still have a long way to go before you make no profit at all. Don’t forget that as prices go up, unless you are planning on jacking it all in and spending your capital backpacking around the world (quite tempting sometimes) you will have to spend more on the next property you buy so you don’t actually gain that much in the grand scheme of things.

The only one to really gain from a rising market is the Chancellor of the Exchequer (The British Finance Minister), as the more properties cost the more stamp duty is due.’

Some sound advice there, I must say.

The other day I borrowed this book from the library called Property Ladder by Sarah Beeny. The tagline said “How to Make $$$ from Property” (they actually used the pound symbol, it was a British publication).

Actually it wasn’t what I expected it to be. The book was actually talking about how to choose property, renovate it, fit-out with interior decoration and furnishing, and then sell it or rent it out for revenue.

The book was quite informative, but it was totally skewered to the British market, with some pretty neat examples of housing areas near London.

Nonetheless, the book also contained a lot of useful tips for Malaysians, although I doubt many of us will get the opportunity to read this book. So I’ve chosen to highlight a few important portions here over the next few days.

I’ll start with this summary of the section called ‘Deciding on Your Market’:

‘The market for buying or renting properties can generally be split into the following categories. Their relative important will vary depending on the area. To work out which sector of the market you should be targeting your property towards study the market descriptions below. You should also check out the local amenities to see who the shops and services are gearedto and bear this in mind to help you identify the market.’

The Market (summarized)

Students – ideal rental market, near college/university, don’t expect top quality
Young professionals – first-time buyers or professional rental sharers, comfortable surroundings, decent-sized rooms, good transport links.

Older professionals – second-time buyers, expect high quality finishes and an eye for design

Young couples – house buyers, kitchen and garden important, near schools and amenities.

Growing families – house buyers, plenty of separated living space, large garden, established residential area

Downsizing households – smaller home, bungalows popular, comfortable surroundings, low-maintenance.

‘The key is to appeal to as many of these market categories as possible. The greater the number of these different groups interested the more likely you’ll be to get the sale at the price you want. The ideal situation is to have two or more interested buyers – you have a greater chance of achieving your asking price and getting a speedy sale.’

Yesterday while browsing the PPS, I found this ping by Bobjots regarding the Draft Structural Plan for Selangor.

It is very interesting, everyone resident of Selangor who is concerned with development and land use of the state up until the year 2020 should make and effort to inspect this document. In a nutshell, Bobjots notes that:

A Structural Plan is basically a statutory land-use planning document that sets out detailed development policies for a certain geographical locality (ie, a city, municipality, district, etc). This is mandated under the Town & Country Planning Act 1976 (Act 172). The Act also requires that such plans be made available to the public in draft form for inspection and feedback for no less than 30 days prior to it being adopted.

He is also organizing a petition to request the state government to extend the public viewing period (which currently ends on 1st August). Details can be found at his page, along with some interesting further reading.