Closer Look At 11 MP (Malaysia Plan)

Malaysia’s housing market has been rather quiet in Q1 2014 as transaction volume fell by 6.2% to 88,600 transactions compared to the 94,500 in Q4 2014. Transaction value fell by RM 100 million from RM 38.6 billion during the same period. Compared to Q1 2014, the transaction value fell by some 3.8%.

The above figures should come as no surprise with the tightening bank lending and the implementation of the GST which have both dampened buying interest.

Many investors were hoping that the 11 th Malaysia Plan would have some good news to boost the dismal market conditions. However, the unveiled plan is focused more on developing the transport infrastructure, close the gap between urban and rural divide, and accelerate the country’s economic development.

Location is one of the most important considerations for many people when choosing a property and ease of access is the hallmark of good location. The MRT system outlined in the Greater KL plan under the 10th Malaysia Plan is coming along nicely and has already led to development in previously neglected locales around the Klang Valley.

That being said, the corresponding increase in land prices is something few developers would want to see but have to deal with nevertheless, and this is why developers have to adopt a more long-term position to edge out ahead in this landscape.

In addition, the government also planned to build some 606,000 units of affordable housing and 95% of residential areas will have broadband access. There are also plans to develop four key cities and five economic corridors across the country.

Despite the government’s plan for building more affordable housing to address the issue of young Malaysians struggling to own a roof over their heads, the issue is not one that private developers enjoy tackling. There is a very real balancing act between cost of construction, construction location and selling prices mandated by the government, and more dialogues are needed to sort out these issues.

Finally, while the fear that Iskandar Johor Bahru Malaysia is facing an oversupply issue might have taken some luster off the southern gateway; there is little doubt that the outlook is still generally positive. Despite general impression that the Iskandar region is dominated only by investors from Singapore and China, the fact is that the region has attracted investors from other western countries such as Italy and Germany.

All in all, although there are no policies focused directly on the real estate market, the market generally agrees that improvements in the transportation system and overall economic growth are going to indirectly contribute positively to the real estate sector. O

Urban Green Growth For Iskandar Malaysia

A green economy is an innovative and creative economy with a central role for investment in sustainable development and green technology.

The Iskandar Malaysia economic corridor in the southern Malaysian state of Johor is undergoing a rapid industrialization process and have huge investments in manufacturing and infrastructure development and therefore have high demand for energy consumption.

Although Johor State has been blessed with relatively large tracts of natural tropical forests (almost 60% of its total land area), some of the forest areas may be converted into agriculture and other urban uses to generate job opportunities for the growing population. This would potentially reduce the State’s carbon sink while increasing its Greenhouse Gas (GHG) emission.

The Table below represents the scenarios on energy demand, GHG emission and intensity in year 2005 and 2025:

Low Carbon Iskandar

Having analysed this emission increase through research collaboration between Universiti Teknologi Malaysia (UTM) and Japanese universities/institutions, the Iskandar Regional Development Authority (IRDA) has put in place a comprehensive and holistic approach to the development of Iskandar Malaysia so as to ensure that growth is maintained in a sensible, timely and sustainable manner.

As such, setting targets for a low carbon future, enabling positive support and promotion of a green economy through increased investments in environmental assets as well as green technology and production must all be properly planned and managed.

IRDA has made a commitment to take a balanced green economy-green community-green environment growth path in developing Iskandar Malaysia. Through strong policies, IRDA has planned and will manage and develop the economic region through close collaboration with all stakeholders, especially the local communities.

Towards fulfilling Malaysia’s voluntary commitment in reducing the country’s carbon intensity by 40% come 2020 (based on 2005 level), IRDA has projected to reduce its GHG emissions by 50% by 2025. IRDA hopes that the industry will play a significant role in helping achieve this emission reduction.

Part of IRDA’s economic growth strategy is wealth-sharing and inclusiveness which ensure that the wealth generated from economic development is equitably shared besides providing solutions to human capital issues, income and housing disparity. Iskandar Malaysia is currently in its eighth year of development; from a modest mainly manufacturing sector in 2007 into strong value-added developments focusing on E & E, education and creative industries, financial services and tourism.

LOW CARBON

Low Carbon Society Blueprint for Iskandar Malaysia 2025 is a written document that represents comprehensive climate change mitigation policies and detail strategies to guide the development of Iskandar Malaysia towards becoming “Strong and Sustainable Metropolis of International Standing”. Basically, a low carbon society aims to minimise carbon emission in all sectors, thus the shift to a simpler and quality life or co-existence with nature.

This is aimed to guide the implementation of 12 low carbon society policy actions in Iskandar Malaysia. There are 281 programmes that would bring a reduction of 50% of GHG emission intensity and 40% emission reduction from 2025 Ball (business as usual) compared with 2005 as base year. This achievement is higher than the national commitment of up to 40% voluntary carbon intensity reduction by 2020.

As part of the implementation of the 281 programmes, IRDA has produced a booklet entitled Iskandar Malaysia Actions for a Low Carbon Future in 2013. Launched during the 19th Conference of the Parties of the United Nations Framework Convention on Climate Change (COP19) in Warsaw, Poland, this is the first of a series of bookets showing 10 of the 281 programmes to be implemented.

Such implementations are expected to lead Iskandar Malaysia towards becoming a low carbon, green growth region. The implementation of the various programmes is well underway and expected to be completed by end of 2015.

One of the major Low Carbon Society programmes that IRDA has completed thus far is the preparation of a comprehensive document called Green Economy Guidelines (GEG). The GEG is a paradigm shift from a model based on depleting resources and material accumulation to that of renewable sources centred on the development of individuals, social development of communities and the restoration of all living systems.

A green economy is an innovative and creative economy with a central role for investments in sustainable development and green technology. IRDA’s GEG is expected to re-vitalise and diversify economies, create employment opportunities, promote sustainable trade, reduce poverty, and improve equity and income distribution.

The green economy approach adopts a more sustainable path by increasing the share of its GDP (Gross Domestic Product) to renewable energies, clean transportation, clean technologies, green buildings, waste management, water services, sustainable agriculture and forestry.

INDUSTRIAL SYMBIOSIS

An important approach that IRDA is considering is industrial symbiosis, which has never been tried in Malaysia yet. Conceptually, industrial symbiosis is the active use of waste material of one industry which becomes precious raw resource to another, thus minimising waste generation and achieves higher resource efficiency.

Industrial symbiosis can reduce waste to landfill, carbon footprint and commercial risk, conserve resource, improves revenue, profitability, business expansion and employment and hence delivers sustainable green growth.

Successful symbiosis can be found in cities in Japan and Denmark. In the Iskandar Malaysia economic region, potential symbiosis can be applied on predominantly industrial towns such as Pasir Gudang.

The Industrial Symbiosis concept is expected to make a significant contribution to reducing the economic region’s GHG emissions and could potentially be a template for other symbiosis approaches in Malaysia in the future.

As it is, the Low Carbon Society research project is now in its fourth year of a five-year project funded by the Japan International Cooperation Agency (JICA) and the Japan Science and Technology Agency (JST).

The Blueprint is also now well underway in terms of implementation and envisioned to considerably assist not only in achieving high economic growth for Iskandar Malaysia but also at the same time expected to achieve reductions in GHG emissions by 2025.

For Iskandar Property Johor Bahru Investment , please visit our website .

This article is contributed by the Iskandar Regional Development Authority, a Malaysian Federal Government statutory body tasked with the objective of regulating and driving various stakeholders in both public and private sector towards realizing the vision of developing Iskandar Malaysia into a strong and sustainable metropolis of international standing.

2015 Malaysia Property Market

In an uneven property market, how will Malaysian real estate sector perform this year?

It is important to remember that the property market is all about supply and demand. On the supply side, the government is continuing to boost house building across the country especially with affordable housing, and recent output figures from the construction sector reflect this. Just to recap, of the 126,000 units proposed in 2013, only about 10,000 commenced construction in 2014. To reach the earlier set goal, commencement of affordable homes construction in 2015 will need to be stepped up to 120,000, failing which, the actual number of affordable homes constructed may fall far below target.

Affordability is a key discussion in 2014 and years to come. For me personally, properties are only affordable to some people but not to others and the gaps are widening. For first time home buyers, houses are always not affordable. I remember paying RM90.000 for my first property with 30 years loan and totally have no idea how I am going to pay my monthly instalment.

As we all know, house prices tend to rise when stock is low. With more houses being built, particularly in the lower end of the housing market, this could also have an effect on our house prices. The main driver for price market price growth in recent years has indeed been the consistent shortage of good quality housing product in highly sought-after locations.

2015 will see a price growth especially in 1 suburban area. Even though Malaysia property has not gone through the roof, some of the suburban area or fringe suburbs in Klang Valley has experienced 307o appreciation in less than two years. In my opinion, properties in prime area are not the best investment. They used to be – before they became prime. A property in an area that is prime will come at a premium price, have low relative rental yields (mostly negative cash flow for three to five years) and will likely have its best period of growth behind it! Yes, it will continue to grow, but as an investor your goal should be to buy property in an area that has the capacity to become a future prime area, and to buy it before it takes off. Then, its greatest period of growth will occur while you own it.

Generally, the sentiment or drive for real estate investment is still strong in Malaysia. This is evident in our annual PRISM event where we registered more than 3,000 participants. Loan growth for banks in Malaysia was at 10.6% in 2013, and for 2014 we should be recording 9.8% growth with residential mortgage taking the lead.

Relatively low interest rates are driving a lot of property investor activities, and the prediction for 2015 is that there won’t be a lot of fluctuation in our Base Rate. Suburbs together with growing infrastructure, pleasant amenities  and easier transport access with average prices around RM500.000 to RM600.000 are generally more prone to experience price appreciation than suburbs together with medians value round the RM1.2 million cap.

2015 will be a very fragmented market. Nevertheless, with Malaysia stable economy, growing population and relatively low interest, how bad could our property market be? I always believe property investment is medium to long term investment. However, for speculators who always go after ‘The Flavor of The Month’ where fundamentals exceeded, some cautions must be exercised.

For more Malaysia property news, please visit www.malaysiapropertyiskandar.com .

Buy Property Now Or Later – Which is Riskier

 When I bought my first property 12 years ago, it was the toughest – both financially and mentally. Financially because both my wife and I had only worked for five years and our savings were not high, plus both of us had never read a lot about properties before and thus had never prepared for it financially. Mentally stressed too because we felt buying a property was very risky. What if we lose our jobs? What if the apartment that we bought loses its value? There were many unanswered questions. Majority of friends our age then did not own property, so we had nowhere to ask.

Between buying early or buying later, which is riskier? How about if we rent? Would there be less risk? What can we do to manage some of these risks? Let’s explore a few today.

CAN YOU AFFORD?

Save more before we buy, some would advise. True? The truth is, our salaries are growing slower than property prices. Since the majority of us are working people, there is no way that our salaries would rise faster than the rise in property prices.

The reason is because whatever the quantum of increase that may happen, it will be based on the base.

We may have a 10% increment but this number is likely to be smaller than a 5% increase in price of the condo that we intend to buy. That’s because the 107o based on a RM5.000 salary can give us an additional RM6,000 per year. The condo that we are aiming might be RM600.000 but 57o meant it has increased in price by a whopping RM30.000.

The solution is to buy one when we can afford it. If we could not afford a RM600.000 unit, how about RM400.000? If not RM400.000, what about RM200.000? Never stretch our financial limit too thin – that is the highest risk of all! We may lose everything!

A good property is a hedge against future price increase and of course once we have bought, the price increase is now an advantage to us. Time awaits no men’ is applicable in many situations including the purchase of our first home.

OPPORTUNITIES LOST

Property bubble is bursting soon, some say. First, do we believe a bubble is bursting soon? If we believe in one, the next question would be when is ‘soon’? 6 months? 12 months? 18 months? What’s our strategy today and after the bubble bursts? If we believe, then have we saved as much money as we can for the past many months? Did we refrain from any unnecessary spending? If we have saved none but continue to cry ‘the bubble is bursting soon,’ it is not a risk but it is a huge loss of opportunity if the bubble really did burst as per our expectation. When we always miss all these great opportunities, in the long run it becomes a huge loss.

To those who believe that they must wait until the bubble bursts before buying, think really carefully: if we did not dare to buy before the bubble burst, would we suddenly be so brave to buy when everyone we know tells us not to buy during bad times?

The younger generation can no longer afford anyway. It’s better to just rent. Renting forever is never a risk. Flowever, if we’ve been renting for 10 years and suddenly we feel like it’s time to buy our first property, that is a risk. Can we afford one at that time?

Do note that the difference between paying rental and paying for a mortgage may be very little. The major difference would just be the first 107o before we get a loan for the remaining. In other words, the rental money could have been your mortgage payment.

Assuming the property price rises only 57o per year, after 10 years, that is a compounded 637o. A RM500.000 home today would be RM815,000 by then. That’s not too bad right? The only issue is that house prices for the locations we like has been rising faster than 57o while areas which have hardly moved may not be something that we like. So, the younger we are, the better it is to buy because we can stretch the repayment period longer and when we are more capable, we can choose to shorten or pay faster LATER. Do not kill ourselves right from the beginning.

Understand the risks when we are not using our wealth to continue creating new wealth. My friend told me proudly that she aims to finish paying for her RM700,000 property within 10 years. She wants to be debt-free.

A good goal, but to be honest, there is very little difference in having RM700.000 and doing nothing with it versus finished paying for our first home and staying in it. In both cases, the RM700.000 is not doing anything.

Yes, the house price is increasing but we are not doing anything with it unless we refinance. If we want to do a refinance, then why pay so much in the first place? If we do have some money, use it to create wealth. Please remember that overstretching financially is far riskier than paying off the home loan early and doing nothing with it.

The rich are becoming richer. We the middle class are becoming poorer. Take out our smartphones, google for ‘income disparity’ and look at all the countries shown. Except for countries we have never heard of, income disparity is happening in every country in the world today, even in our neighbour down south. Rich people are becoming richer because of how they manage their wealth creation process. The middle class thinks they are poor and believe there’s nothing that can be done. Without any doubt, this would become true after a while. One reason for some of these richer ones is because they create more wealth with the wealth they have. Most of the time, it includes property investment. The question is, do we want to think like the rich people or the middle class? The choice is actually for us to make.

However, if we think that we should now rush out and buy a property, that is a big risk. The reason why we should buy a property when we can afford one is so that we do not need to struggle even harder a few years down the road when our savings are even lower versus the property prices. The reason why we should not think of property as a ‘sure rich’ formula is because it is not.

If there are sure rich’ formulas, why are majority still in the middle class?

Personally, how many friends have told us about their failed property investments? I have quite a number. One told me that he bought a huge semi-detached in a very new area.

He thought staying there would be awesome. When it was completed, he did not like the location enough and today, he could not sell that property and yet he has to pay for another one for which he is staying today.

Think clearly. If we do not like the location, never believe someone would like that location. Majority of us actually think alike. That’s why middle class is the largest pool in all countries including developed ones.

In conclusion, I ask: have we invested in ourselves? For those who are reading this now, I think you are on the right track because you are reading a property magazine. Sufficient knowledge allows us to make a better decision. It does not mean there are zero risks. However, with the right mindset and a good understanding about ourselves and the property market, we are able to manage the risks much better. Under normal circumstances, it may be better to buy earlier than later. However, the highest risk of all is to pretend like nothing is going to happen and do nothing. Happy investing or waiting for the right opportunity.

For more information on property , check our out Iskandar Johor Bahru Property Website .

BR / BLR – Its all about that Base (Rate)

Effective from 2nd January, 2015, the Base Lending Rate (BLR) system was replaced by Base Rate (BR) framework. BR will be used as the main reference rate for new retail floating rate loan such as mortgage, overdraft, unit trust loans, personal financing, share margin financing, which are applied for individual customers.

So what is BR? Why is there a need for change? How about the existing loans on BLR? What should we do as a borrower’? All these will be answered in this article.

WHAT IS BR?

BR is a new interest framework where the interest rate charged by banks on a loan comprised of BR and the desired spread. The BR will be determined by the banks’ benchmark cost of funds (COF) and the statutory reserve requirement (SRR). Other components such as borrow credit risk, liquidity risk premium, operating cost and profit margins will be reflected in a spread that charged on top of the BR.

This increases the visibility of factors underlying changes to the Base Rate. The greater transparency in turn will enable more informed decision making by consumers. Under this cost-plus structure, spreads will always be positive as it would not be possible for financial institutions to offer lending rates below the reference rate.

Financial institutions will be given the flexibility to determine their respective benchmark rates. The expected strong link between the Base Rate, market interest rates and the Overnight Policy Rate (OPR) will facilitate more complete adjustments to retail loan repayments when market interest rates adjust to an increase or decrease in the OPR.

WHY THE CHANGE?

“The BLR has become less meaningful as a basis for the pricing of loans, as the retail lending rates on new loans being offered by the industry are at a substantial discount to the BLR,” argued Governor of Bank Negara Malaysia (BNM) Tan Sri Dato’ Sri Dr Zeti Akhtar Aziz.

The BLR framework, which has been introduced since 1983, served as the main reference rate on consumer’s loans in Malaysia. Since then, the determination and implementation of BLR has evolved with the development of the financial sector. In the recent period, however, BLR has become less relevant as a reference rate for loan pricing, as lending rates on new retail loans are being offered at substantial discounts to BLR. On top of that,

BLR lacks transparency, which makes it difficult for consumers to make an informed decision.

The BR framework aims to gives a better and more transparent reference rate to provide better decision by consumers in making choices among the many loans products that are offered by banks. The BR system will be better in reflecting the changes in cost arising from monetary policy and market funding conditions, while encouraging greater discipline and efficiency among financial institutions in the pricing of retail financing products.

WHICH EXISTING LOANS ARE ON BLR?

The BR is used for new loans and refinancing of existing loans extended from 2 January, 2015, and onwards. After the effective date, BLR-based loans prior to 2015 will continue to be referenced against the BLR. All banks are still required to demonstrate the differences between BLR and BR for consumers.

Figure 1 illustrated how BLR and BR work. If the bank previously offered ELR of 4.857o on the loan amount, the same ELR should be offered under BR. All banks are advised to offer the same effective lending rate with the implementation of BR in 012015 by BNM.

WHAT IS EFFECTIVE LENDING RATE (ERL)?

ELR, in other words, means what is the interest rate we will have to pay for the mortgage. Each individual bank has its own way of deriving the BR and hence create situation where BR differs from bank to bank, unlike the old BLR where all the banks are the same. However, all the different rates can be compared with the ELR to know the ultimate rate changed by banks. The formula is as below:

BR + SPREAD = ELR

The major banks’ BR and indicative ELR reported to BNM are indicated in Figure 2.

WHAT SHOULD WE DO AS A BORROWER?

  1. Compare the ELR quoted by different banks before raking out a new loan.
  2. Ask for a Product Disclosure Sheet (PDS) providing you with the ELR and total repayment amounts for the loan/ financing facilities plan to take out.
  3. Ask the bank to explain the factors which may lead to a change in the BR.
  4. The monthly repayment amount will increase or decrease when there is a change in the BR.
  5. Assess whether you can continue to afford the Joan repayments if the ELR increases in future

figure11

figure 2

 

 10 INTERESTING FACTS THAT YOU NEED TO KNOW ABOUT BR!

  1. All revolving loans such as overdraft will need to be replaced to BR from BLR upon annual review or renewal of the loan.
  2. There should be no price hike with the implementation of BR at least in 012015 as advised by BNM.
  3. If you refinance your existing loan which is on BLR, your new loan will be priced on the new BR framework.
  4. However, for any top-up loans offered under an existing housing loan reference against BLR, your existing bank may continue to use the BLR.
  5. The new BR framework is only applicable to loans applied by individual customers. For the pricing of other loans such as corporate or SME loans, banks have the flexibility to determine the choice of adopting the BR or continue to use the BLR.
  6. Banks are allowed to adjust the BR to reflect changes in market rates even though the OPR has not been advised in the future on your loans that is referenced to BR. This is the same like BLR framework today.
  7. On the other hand, banks are not allowed to make changes on the spread during the financing tenure unless you do not service your monthly repayments promptly. This means the spread rate on your mortgage will remain constant throughout your mortgage tenure.
  8. When banks adjust the BR in the future, the same corresponding adjustment will need to be made on the BLR by the same magnitude. Nevertheless, exception is given for the year of implementation.
  9. For any upwards or downwards adjustment to the BR and the BLR, banks will need to revise the monthly installment of your loans to reflect on the changes (not to revise the mortgage tenure) unless the differences in the installment amount is less than RM50 per month or by a small percentage as predetermined by the bank, whichever is lower.
  10. The mode of notification by banks to you on the revised repayment amount could be in writing or via electronic means (including emails and SMS) but banks are required to notify you at least seven days ahead of the change in monthly installment.

For more Malaysia Property news and update , please visit http://www.malaysiapropertyiskandar.com/

Top Property Investment Hotspots In Malaysia

Often we regard Greater Kuala Lumpur as the property area where most people would invest in or even work and stay in, but there are other the top hotspots throughout Malaysia for investors to venture in.

First, let’s see what is in store for us in Lembah Klang:

1. KAJANG/SEMENYIH

The southern Klang Valley is getting quite popular nowadays, especially the Kajang/Semenyih area due to the MRT Line currently in construction, which helps in terms accessibility towards Kajang, according to Herbert Leong. To date, media reports indicate that more than 40% of the MRT construction has been completed.

Kajang/Semenyih connectivity is also enhanced by highways such as Kajang Dispersal Link Expressway (SILK), Kajang-Seremban Highway (LEKAS) and Sungai Besi Expressway (SBE).

Another reason behind Kajang being popular is its availability of landed houses, the most sought after type of residential properties. Kajang is also boosted by its short distance to Cyberjaya.

 “Because of the close proximity, people are going into the south since the house price is still lower. It goes without saying that when the price around Cyberjaya increases, people choose to live nearby, if not inside,” Stanley Toh adds.

2. CYBERJAYA

Cyberjaya basically have the infrastructure ready. It has good connectivity and is nearby a major town,” Toh explains. It is connected to Putrajaya and Shah Alam by major highways such as Damansara- Puchong Expressway (DPE) and South Klang Valley Expressway (SKVE). “Also, MRT 2 Line will have its station in Cyberjaya,” he adds. As for completed station, Cyberjaya and Putrajaya shares an Express Rail Link (ERL) provided by KLIA Express. Another factor that attracts investors is the completion of retail outlets in Cyberjaya such as Shaftbury Square. Currently also under construction is the 101 City Mall. Toh believes that with the completion of 101 City Mall and its opening in 2015, although not directly located in Cyberjaya, will help attract even more population into the area. Cyberjaya is also nearby Puchong, so whoever is late to enter the market in Puchong will eventually venture to Cyberjaya as a place to live.

3. Sungai Buloh

Again, MRT Line takes its place in booming the growth of an area. With its construction of MRT Sungai Buloh-Kajang Line, Sungai Buloh has made it into the list of top hotspots. Also, its connectivity with Kota Damansara plays an important role, for Kota Damansara is where commercial retails such as Giant, Carrefour, Sunway Giza are located, along with international school such as Sri KDU International School, and for medical needs, the Tropicana Medical Centre.

Sungai Buloh is also within close proximity to Subang Airport. Jalan Sungai Buloh is a busy road with vehicles constantly cruising through between the Subang Airport and Guthrie Corridor to Sungai Buloh town and the North-South highway.

4. Shah Alam

In Shah Alam, highway plays an important role of its development, specifically Damansara-Shah Alam Elevated Expressway (DASH).

“DASH will improve congestion and enhance connectivity which will support developments in the vicinity,” Toh explains. The expressway will exist as an alternative route for Persiaran Surian at Kota Damansara which has capped its road capacity. It will become an alternative and easier route to the airport when Subang Airport becomes the main low cost carrier terminal in 2015.

 Also not to forget that RRIM’s development in the area is expected to increase population by 300,000, this will cause congestions to the existing routes and DASH is going to be one of the solution.

5. TANJUNG BUNGAH/BATU FERRINGHI

Let’s go up and visit the land of Penang. Explaining for the north sector is the Knight Frank Malaysia’s Resident Director of Penang Branch Tay Tam. Who provides us with another four hotspots to look at.

Tam’s explanation about the Tanjung Bungah/ Batu Ferringhi is simple: “It is traditionally a much sought after area,” he says. The reason why people like the area is due to the coastline view of Tanjung Tokong-Tanjung Bungah-Batu Ferringhi coastal line.

Toh adds that this area is seen more as a retirement spot or holiday homes. The price is quite high for the area that is about half an hour drive from the city, for RM1,000-plus per sqft.

“People living in Penang are quite different from people living in KL. For us, we can absorb the idea of driving for 30 minutes to get to work but for them, it’s a long drive already. So local market will not be going into Tanjung Bungah much since they don’t prefer that,” he mentions.

6. GEORGETOWN

George Town is in itself a unique blend of the old and the new that is acclaimed by ECA International as the most liveable city in Asia, on par with Kuala Lumpur. In addition, the city, which has received World Heritage status from UNESCO, is praised of being one of the ‘10 Islands to Explore Before You Die’ by Yahoo! Travel.

For Tam, Georgetown is a popular area for investors interested in hotels and conservation properties. Also, after the inscription of the George Town UNESCO World Heritage Site, heritage enthusiasts and foreigners are snapping up properties within the heritage zone, particularly within the buffer zone, where the laws on renovating properties is not as strict as within the core zone. With such accolades, George Town, the capital of Penang has put the state on the world map.

7. Batu Kawan

Batu Kawan is an area which is only starting to boom, mainly because of Penang Second Bridge. The area was not brought up before and is quite a remote area since it is like an island of its own, separated by a river. Now that the connectivity to the island is improved, Batu Kawan has started to attract the attention of developers and investors altogether.

The sentiment is echoed by Toh. He also adds that not only Batu Kawan, the surrounding area will also see boom happening as when the land gets scarce, investors and developers will start to go into nearby area. “Penang Second Bridge really helps in boosting the accessibility and visibility of Batu Kawan. It was just a remote area before, but since the bridge is launched, the area started to boom. That goes to show how important accessibility is as to play the role of making an area into a hotspot,” he adds. Toh also says that serious property players are coming in hard; for instance, a project by Ikano will bring the only other IKEA Malaysia besides the one currently in Damansara.

8. BAYAN LEPAS/RELAU/SG. ARA/BATU NIAUNG

“These areas are popular with those working in multi-national companies in the Free Trade Zone bolstered by the close proximity to the second bridge,” Toh says. Penang Second Bridge helps much in boosting the connectivity from the mainland to island to Batu Kawan and these areas.

“These are the areas that got the spillover effect from Batu Kawan,” Toh explains. Ever since Penang Second Bridge was opened, what once took about one hour to reach to the bridge is now reduced to only about 15 minutes of travel. Much like Batu Kawan, these areas are the areas where their accessibility is improved drastically, making it into a sought after area.

9. MEDINI@ISKANDAR, JOHOR

Medini@lskandar being part of ‘Flagship B: Nusajaya’ is a well-planned integrated township development spanning 2,230 acres, occupying slightly less than 10% of Nusajaya’s total land area. “It offers special incentives to approved developers, approved development managers, IDR- status companies, investors and foreign knowledge workers, which include tax exemptions up to year 2020, flexibility on employment and administration of foreign workers and exemption of EPU property acquisition guideline,” explains Ricky Lee.

Positioned as the Central Business District (CBD) of Nusajaya, the outstanding development in Medini is dominated by numerous key players/developers from both the local and international scene. These include WCT Group, Mah Sing, Sunway, Zhuoyuan, Distincti, MCT Group, BCB, Metrolink, IOI Medini, UMLand, Link Group, Sunsuria Group, Kimlun Corp Bhd, Singapore’s Tang Group and more recently, the presence of China developers. “But, since the presence of Chinese developers who develop in bulks with thousands of units offered, the developers are now in safe zone where they are a bit cautious as to develop in Iskandar,” Toh adds.

The proposed construction of Coastal highway southern link, connecting Medini to second link expressway, is expected to benefit properties within the locality in terms of capital value and marketability, while at the same time sending a strong message to investors on the Malaysian government’s determination to transform Iskandar Malaysia into a liveable city and a thriving investment destination. “The high speed rail will be a major game changer for Iskandar. I hope to see this rail be used for people who lived far from KL, but will still work in KL in the future,” says Stanley Toh. For Iskandar Property Inquiry , you can check our website for latest Iskandar Johor Bahru project and news .

10. KOTA KINABALU, SABAH

Last but not least, we go across the sea into Sabah and Sarawak where Ginn Lai and Alexander Lee share with us what is in store for Kota Kinabalu, Sabah.

“The fundamentals boosting development in the Sabah property market haven’t been stronger,¡± Lai explains. During the last couple of years, Sabah even more so its capital Kota Kinabalu has knowledgeable fast change throughout several major economic areas. Tourism in Sabah has enjoyed double digit growth rates and means the very best visitors spend worldwide. Raw palm oil manufacturing continues to be largest in Malaysia, while aquaculture and agriculture  industries always strengthen the state’s GDP. In the oil and gas sector, Sabah represents the highest crude oil reserves in Malaysia and with new deepwater discoveries, will increase the country’s reserves of crude oil and natural gas.

Performances across these industries have been a catalyst for urban and rural property development, both for domestic demand and the increasing number of expatriate relocations to Sabah. “What was once a destination only loved by locals and eco-tourists, Sabah today is well on its way to becoming Jesselton Quay, an international hotspot for travellers and savvy investors, blessed with an equatorial climate of year long summer days, amazing sunsets and virgin beaches, the world’s oldest rainforests and cool mountain ranges. It’s hard for Sabah not to be on the radar of neighbouring Asian cities, most of which are within a five hour direct flight of the state’s gateway Kota Kinabalu,” says Lai.

Starting from a lower capital value base, availability of financing, low interest rate environment, and a transparent legal and title system, Sabah is quickly gaining regional interest from major real estate developers and investors. As the rest of developed Asia struggles with heated property markets, Sabah is at tipping point with a confluence of Borneo’s unique offerings and strong property drivers.

Lee, who is handles the territory of Sabah for LaurelCap, explains that Kota Kinabalu is like a smaller KL. Residents brought in their experience of city living from KL into Kota Kinabalu and they are now trying to emulate the city living style of KL, which is why we see more of strata development. “The population is increasing due to the development and people from small towns choose to migrate into Kota Kinabalu,” he concludes.

Placing a safe bet in Iskandar Johor Bahru Malaysia

Over the past few years, investors have watched the southern region of Malaysia like hungry hawks. Quite possibly the country’s biggest undertaking in recent times, Iskandar Malaysia’s final silhouette is finally gaining more visibility, drawing investors from within the • country and beyond.

Despite cooling measures and the overall concern of household income in the country, Iskandar Malaysia has seen an influx of both developments and investors.

What are some of the benefits of investing in Iskandar Malaysia?

Iskandar Malaysia (Iskandar Johor Bahru Malaysia) is a growth region which offers a strategic location and great accessibility via multiple entry points, namely the Coastal Highway and the • Eastern Dispersal Link. These highways are also flanked by Changi International Airport in Singapore and Senai International Airport near Johor Bahru. Comparatively speaking, Malaysia is still a very attractive destination regionally in terms of its lower overall costs and excellent infrastructure.

The substantial foreign investment in IM, valued at RM129.42 billion in 2013 according to the Iskandar Regional Development Authority (IRDA), will assist with the generation of more economic ventures such as manufacturing activities.by multinational corporations. The mushrooming of international schools and colleges in EduCity, Nusajaya is also poised to solidify the educational offerings in the area.

Additionally, IM has been experiencing a rapid population growth due to the large number of people migrating there, recording migration rates of 5.2% and 7.5% in 2011 and 2012 respectively. Developments within the region such as the upcoming Mass Rapid Transit and High Speed Rail link also, bode well for its long-term growth prospects in terms of migration. Pair this with IM’s investment-friendly policies, strong legal framework and stability and you have enough benefits to instil confidence in investors.

How did the Budget 2014’s cooling measures affect Iskandar Malaysia?

The measures introduced over the last year have, to an extent, dampened take-up rates in certain segments of the market. Despite that; underlying fundamental demand for good properties remains strong. As such, I believe that most developers will adjust their projects mix to launch products which meet the needs of genuine homebuyers. Over time, this should improve the take-up rates for the market.

What are some of the challenges that Property developer should aware?

Some of the issues that we are hoping to address are the rising costs of land, labour and materials which have resulted in a hike in construction costs. Developers have to be careful and launch products which are both commercially viable and affordable to their targeted customer base.

On the positive side, however, infrastructure throughout the region has improved tremendously over the past few years. Travelling by car is a breeze now and this has opened up many new development corridors, although the enhancement of public transport is still immensely necessary. A reliable public transport provision will definitely benefit the public, especially those living in the newer housing estates.

What is the best kind of property to buy in Iskandar Malaysia? Is residential the best choice or would a retail outlet or SoHo be a better option?

Looking at it from a purely investment-based outlook, property types may not be the sole aspect to consider when making this sort of decision. Location, surrounding amenities, accessibility and the developer’s reputation are equally crucial as these would generate sustainable demand for the properties. This of course applies to primary purchasing, secondary purchasing and rental as well. For how to choosing the right property , you can visit here for property buying guide .

Wealthy But Earthy – Mahsing Group Tan Sri Leong Koy Hum

On a fine Wednesday morning, I arrived at Wisma Mah Sing in Jalan Sungai Besi, Kuala Lumpur. I have passed this road many times but I didnt realise that the building is there all these while. But that is no big deal. What’s more important is for me to calm myself down. My heart is pounding and my palms are sweaty. There is a sense of restlessness in me as I am tasked to interview one of the country’s wealthiest men Mah Sing Group Bhds chief executive officer Tan Sri Leong Koy Hum.

I am not sure what to expect. He could be fierce and strict, I think to myself. And as I wait for the man of the hour, many possibilities came to mind. Seconds later, Leong clad in a dark suit heads towards my way.

Then he started talking and all my assumptions flew out the door. I find him to be so friendly and down-to-earth so much so, it feels as if I am talking to a long-lost distant uncle. There is a special kind of warmth he exudes and as we started chatting, Leong shares his success secrets in life and what is the key for longevity as a developer.

EARLY ACHIEVER

When Leong was in his 20s, he had a big dream. At that age, Leong was a plastic manufacturer. From just one factory, he managed to start another three. “In my 20s, I had this strong feeling to fight for what I want. Every morning, when I opened my eyes, I thought of a better future and a better tomorrow,” says Leong about his younger days. Then at only 35 years old, thanks to his hard work, Leongs plastic company was listed -something he had dreamed of for many years. “I’ve always wanted to achieve that because from there, I can grow my company to be bigger,” he tells.

Leong came from a normal, average family. As a young man, Leong was determined and fully driven to achieve more in life and be a big success. He credits his unwavering tenacity from values like punctuality, cleanliness, courteous and hardworking all of which he had learnt from dealing with his Japanese customers.

“The Japanese portray a lot of good values that even our former Prime Minister Tun Dr Mahathir Mohammad introduced the Look-East policy. Till today, I still adhere to all the good values of the Japanese,” says Leong adding that as one matures he or she will have more good values to carry to help elevate themselves.

As a plastic manufacturer, Leong remembers the long hours he had to put in. But he was able to cope since he was a young blood at that time. “I was a fighter all the way… even though I consider my manufacturing days as a very tough period for me, I eventually learned to adapt to the long hours. There are a lot of things you have to control while in manufacturing and at the same time you have to ensure that there’s a reasonable profit margin of no less than 10 per cent,” he explains.

Despite his dedication to the plastic factories, Leong realized that he had to look for a venture that can provide him a better profit margin but at the same time allows him the space to enjoy a balanced lifestyle. This was what that brought him to the property world. “Actually, the property business is quite similar to manufacturing. There are product development, quality control, marketing, research and development as well as customer service to focus on,” says Leong.

Plus, at that time, Leongs plastic manufacturing business was facing thinning margins and in a bid to protect the shareholders’ value Leong knew he had to forge a new path for Mah Sing. “I felt that this vibrant sector could provide the next impetus of growth for Mah Sing. The rest as they say is history,” Leong says adding that properties have always been viewed as the best hedge against inflation and are one of the most preferred asset classes in Malaysia. Mah Sings plastic manufacturing is still up and running till today. It produces property proprietary products like pallets and furniture.

DRIVE TOWARDS EXCELLENCE

In life, making sacrifices is inevitable. Often, the bigger the sacrifices are, the greater the rewards. For Leong, in the vision for a better future, he had to forgo some important elements, one of which is spending quality time with his family.

“During my manufacturing days, I started working early in the morning and by the time I came back, my children were already asleep. Thinking about it, my only regret is not being able to spend a lot of time with my family when I was younger. And family time is one thing money cannot buy,” Leong shares.

When asked on how he keeps himself motivated, Leong says he is a very determined person. If he plans to achieve something, he will put his mind into it and be positive that he will achieve it.

“Don’t say (this is difficult’. The moment you say this, chances are you will never get around to doing it” he advises.

But his sacrifices seem to pay off well. Today, at 56 year-old, Leong sees Mah Sing as the second largest listed property developer in Malaysia by sales value and the company is also named by market analysts as an emerging proxy to the property development industry. Under his leadership, the property giant has become one of the few fully integrated property developers with high-rise and landed residential, integrated commercial centres and niche industrial parks. Apart from being one of the most sought-after developers, Mah Sing has also been recognised with over 100 local and international awards from various industry groups, media and the public.

Leong credits his love for the job for his success. To him, this love is what drives the desire to excel in the job. “I love creating things. Whenever I see what I plan takes shape, it is like seeing the birth of your baby. It is exhilarating and makes me very happy,” he says.

As the interview progresses, I notices that Leong has quite a bubbly persona. He laughs a lot and once in a while throws in some jokes to light up the conversation. “You have to be humble and mingle with everyone, regardless of their background. By doing so, you can learn from others and this will improve yourself in so many ways,” Leong believes.

TALENT POOL

So, what makes a company ‘THE,company? To Leong there’s a lot of reasons for that. One of which is having the right talent pool. Leong holds on the idea that with right talents, a developer can passage through any possible paradigm shift.

“Over the years, my focus has not only been on developing the business but on building people too. Right now, there is a need to attract more Gen Y because we are getting older thus succession planning program is vital to ensure a company can sustain and grow. The hardware (building properties) is easy but the software (people running the business) is a completely different story because people are very complex,” says Leong.

Stressing on getting and keeping the right talent pool, Leong believes that a company has to create a strong sense of loyalty. “We want the type of trust where people will keep on coming no matter what. This is an indication that a company has succeeded in treating its employee well,” he cites.

Reflecting on Mah Sings people-management capability, the company has been recognised as one of the best companies to work for by HR Asia Award and recently they have been awarded the Best Company for Leadership Award by IAIR Awards and the Best Managed Company in Malaysia by Euromoney Awards.

THE EVER CHANGING INDUSTRY

After three decades in the property industry, Leong had witnessed many changes in the industry. “Six years ago, higher range properties were all the rage as the supply for higher end (semi-detached and bungalows) made up only 10 per cent of the total residential supply. To meet the market demand from upgraders, many developers launched higher range properties.

“Now, and for the next two years, we believe that the property cycle is pointed at mass market housing. It is a mark of the increasing rise of the middle income class and we are all prepared to meet the demand of this target market,” Leong thinks.

Touching on residential properties, he explains that despite the constant demand for spacious landed properties, there is a segment of the population who do not mind a smaller unit for the sake of living in city centres. Mah Sing has identified such need in the market hence their introduction of M City in Jalan Ampang (that has a thematic hanging garden) and D,Sara Sentral in Sungai Buloh, which is located diagonally opposite an upcoming MRT station.

Another key element in the industry product branding. Leong believes that for a property developer to remain relevant and sustain in the market, it has to find a niche in a crowded market place and this is where the power of product branding and differentiation come into place. Leong explains further, “For example, Gen Y prefers living in the city but property prices in the city are relatively high. So, we develop what they can afford in the city where they get to enjoy the hype of living in city centres. Instead of calling the development of affordable homes, we name it ‘Executive Suites,.”

Leong adds that he often exchanges views with his children who represent Gen Y in an effort to understand what Gen Y wants. To him, understanding how Gen Y thinks is a must and he has no problem adapting to them. What’s more, Gen Y will turn as upgraders as they grow older.

“You have got to adapt and be flexible. Only then, you get to cope with the changes,” says the doting father.

This flexibility is what manoeuvres him in dealing with various challenges in the industry such as the soon-to-be-imposed Goods and Services Tax (GST). Instead of delving on the negative outcome, Leong thinks tt^ buyers will take advantage of the current accommodative interest rate regime. He says that based on experience from other countries, buyers tend to purchase properties in anticipation of the future cost.

“There are several research houses that indicate property demand in the primary market may increase due to this. In fact, CIMB has noted that the overall impact of GST on property sector could be net positive as it may result in inflationary fears and property is seen as an asset to bolster inflation.

“Kenanga Investment Bank viewed that there will be a rush to buy property especially towards mid-late 2014,” Leong tells.

PRESENT DAY AND FUTURE FRONTIER

Leong forecasts that landed residential units in well-planned townships will be snapped up easily, provided that they offer good security, easy accessibility and have a communal focal point. For commercial segment, Leong realises that there is a strong move away from KL City center to suburbs like Petaling Jaya. He reckons that customers in general want integrated spaces because they know that it is no longer enough to have just a row of shops or a block of offices.

“They want projects where the components complement each other, for example, having serviced residences, office towers, hotel or retail mall with each adds vibrancy to the whole project,” he explains.

With emphasis on mass market, he still thinks that demand for luxury residences will remain steady since there is a set of upgraders which comprise of big families who are keen on multi-generational living. And to accommodate the mass market, Mah Sing has made a conscious decision to focus more on medium upper to high-end properties. “With the right product and the right price, we can carve a niche in a crowded market,” says Leong.

A good example is Mah Sings Meridin Suites and Meridin Sovo (Small Office Versatile Office) in Meridin @Medini in Iskandar Malaysia. Meridin Suites offers units with a built-up size of 318sq ft or 885sq ft at a price range of between RM309,000 to RM919,000. Meridin Sovo offers studios and SOVO of one to four room configurations with built-up areas of 341sq ft to l,053sq ft, each priced between RM282,000 to RM924,000.

For the future, Mah Sing aims to continue developing townships and its strategic commercial development. This year, 87 per cent of the company’s target residential launches encompass mainly for mass to mid-segment products and are priced from RMlmillion and below. As for its high-end product, Mah Sing will be directing this segment towards the foreign market. These are the ways Mah Sing adopts to adapt to the current property cycle and it also embodies the developers nature of being market-driven.

LAND BANKS AND POWER OF ACCESSIBILITY

Currently, Mah Sings main focus on land banks continues to be in a few hotspots – Greater Kuala Lumpur (KL) and Klang Valley (KV), Iskandar Malaysia and Johor Bahru as well as Penang and Sabah (Kota Kinabalu particularly) with a remaining Gross Development Value of RM26.82 billion and unbilled sales of RM4.44billion for 2,818 acres.

According to Leong, the government has identified Greater KL and KV as the National Key Economic Area under the Economic Transformation Programme (ETP) where the government aims to grow the population from six million to 10 million people with an emphasis on foreign talent (to grow from 9 per cent to 20 per cent) and creating 553,000 jobs.

“These areas are where the demand is. Other than that, location, products and timing are major factors too. Some of the lands we acquire are in locations that are not traditionally viewed as prime areas, but we have done extensive market studies and found out that with infrastructure improvements we can transform an area greatly,” Leong says.

Usually, Mah Sing will reserve smaller pieces of land for niche products while the bigger parcels are for township development. “Over the past two years, our land banking strategy has been more focused on locking in larger tracks of township lands for the affordable range of mid-end products,” Leong says.

He opines that land is scarce in the city and it is challenging for developers to offer products in the mass market in city centres, which is why more developers are looking for land that caters the middle income market, in suburban locations or building high-rise buildings in the city at expected price point.

Adding to that, Leong feels that with ETP progressing well, suburban locations are becoming more accessible. There is better infrastructure and with public transportation mega projects like the MRT and feeder bus system going on. More well-connected projects will be created. Properties in these projects will gain a lot of popularity because they meet the strong demand for mass market housing.

HOPES AND ASPIRATIONS

Looking forwsrcf, Leong stiff feels that there’s a lot for him to achieve. He is not content just yet. “There’s always room for improvement and I dont see myself slowing down anytime soon. Throughout the years, I learn to keep a lean and mean operation and to always be ready to ride on good opportunities that may come my way,” says Leong.

He is thankful for his diverse team and considers his staff like his own family members. “I cant do everything myself and I greatly value the experience of my people. They have given their all in achieving our dreams,” Leong shares his sentiment.

The business mogul draws his inspiration from people like Dr Li Ka Shing, a Hong Kong-based business magnate who ironically started as a plastic manufacturer too. For him, learning from other people is an ongoing process. “Other than that, it is also important to help others and be kind to one another. Money is not everything… plus when you call it a day, you cant bring your money with you,” Leong says on helping others.

So, what’s next for Leong? For one, he hopes to contribute to the company and the country till he reached 100 years old. In achieving the goal, he takes good care of his health and exercises regularly. “I do almost all types of exercise. Next to my room, I have a gym equipped with all sorts of equipment. This made working out easy for me.

“I still have about 50 years to accomplish more things and I,m excited to see whats next,” Leong says before wrapping up the interview.

CURRENT PROJECTS:

ISKANDAR MALAYSIA
• Meridin@Medini
• Bandar Meridin East

GREATER KL & KLANG VALLEY
• Southville City@KL South
• Star Residence in Subang
• Lakeville Residence in Kepong
• M Residence 3 in Rawang
• D,Sara Sentral in Sungai Buloh

PENANG
• Ferringhi Residence
• Southbay City

SABAH
• KK Convention City

How Will GST Impact The Malaysia Property Market

How Will GST Impact The Malaysia Property Market

The introduction of the Goods and Service Tax (GST) is a delicate issue. It is often a subject that bring about debates as it affects almost everyone from the business community to the general public. This is a broad based consumption tax covering all sectors of the economy for all goods and services made in Malaysia including imports with some exceptions determined by the Government.

According to the Government, the introduction of GST is part of the reformed tax system to enhance the efficiency and effectiveness of the existing taxation system and to generate a more stable source of revenue to the nation which should bring more benefits to everyone.

As we write this article, the screen on the Royal Malaysian Customer website interestingly showed a countdown timeline that moves by the second. Probably all this while we have been previously informed by the Government about GST implementation for the last few years but it has been delayed. Thus, this time round the Government has shown its seriousness by displaying the timeline . From the countdown screen, we have only 11 more months of Goods and Services Tax (GST) “free time”. Since 15th, April 2015,a 6% GST is imposed on most goods and services supplied. That means we only have less than a year to get prepared.

GST’S GENERAL CONCEPT

GST is a broad-based consumption tax (input tax) applied at each stage of supply chain where GST registered business can offset the GST incurred when making supplies against GST charged (output tax) to supplies made. Under the standard rated supplies, the burden of the GST falls onto the final consumers. In other words, it can be a neutral effect for business on their tax payment as the input tax can be offset with output tax.

However, not all goods and services are imposed with GST without some exceptions. Some supplies are zero rated which means the GST incurred on the supply can be recovered and consumers will not be charged of any GST. Certain agricultural products, foodstuff, water to domestic consumers, electricity supply (with limits) to domestic users, export of goods and international services fall under this zero rated category.

Lastly some supplies are considered exempt supplies which it is not subject to GST and businesses are not eligible to claim input tax credit. Some of the items falls under this category are private medical services and residential properties. We take a case of how GST works for property development business, firstly all suppliers (goods and service providers) will charge GST onto supplies to the developers and eventually this will be passed on to the purchasers. For all the businesses or suppliers of goods and services, they entitled to offset the GST incurred onto them against the GST that they have charged their clients when goods and services are sold. Thus, GST is only incurred onto the consumers which in this case are the purchasers. The diagram below illustrates how the flow of GST on a standard rated basis.

WHAT WILL HAPPEN WHEN GST IS IMPOSED?

Business that fall under the general business turnover threshold of more than RM500,000 in 12 months period will need to account for GST on their business activities.

Generally everyone who consumes the goods and services will be charged an additional 6 per cent GST which means additional, RM60 for a RM 1,000, RM600 for a RM10,000, RM6,000 for RM 100,000 and RM60,000 for RM1 million purchase.
Specifically for the real estate industry, GST will directly affect the market as the supply of land and building used for commercial, administrative and industrial purpose as shop lots, office, retail business, (SOFO)small office virtual office, (SOHO)small office home office, , small office flexible , motel, hostel , inn, hotel, warehouse and factories is subject to GST.
However, the supply of land used for agricultural, residential (residential house such as semi-detached house , link house, detached house, apartment including condominium and serviced apartment) is exempt from GST. Thus, general consumers of residential properties will not see an obvious impact of GST, as least not on their bill when it comes to purchase or rental of residential property as it is tax exempt.

Tax exempt means GST is not charged on the supply but doesn’t mean it is GST-free. For businesses such as property developers, it means there is no entitlement to recover GST incurred which translate to cost to their business.

This means the developers will need to pay for GST for all supply of materials and services from contractors, building materials, professional service, thus residential properties are not free from GST after all. In fact, developers have voiced concern of upward cost pressure on residential property prices.

While residential property is considered an exempt supply, sales and rental of residential properties such as condominiums, apartments, houses are not subjected to GST tax. However, all commercial properties such as shops, offices, factories will be subjected to GST. For example, a sale of a RM3,000,000 shop office will be subject to GST of RM 180,000 GST to be borne by purchasers. When the same property is rented out, an additional 6 per cent GST will be imposed on the tenant. For example, a RM 10,000 rental will have an additional RM600 GST tax on the rent payable.

THE EFFECTS

1)REDUCED PROFIT MARGIN OR INCREASE OF SELLING PRICE.
Residential property developers might expect a reduced margin of profit or push to increase the selling price to make up for the GST incurred that is tax exempt which is not recoverable. As GST will drive their cost up, the developers will have to make a choice of either absorbing the increase cost or reduce their profit margin to remain competitive in the market. We believe this very much depends on the market condition at that point of time when GST is being implemented. If the market is favourable and robust, the cost will be passed onto the property buyers while they may absorb it if the market condition toughens. Chances are the developers will adjust according to the market condition and will try to maximize profit by shifting the burden of cost of the property buyers.

2) PROPERTY OWNERS MIGHT EXPECT TO HAVE COMPRESSED YIELD.
As the cost of purchasing commercial and industrial property expected to increase with imposition of GST that adds into the cost of acquisition, yield will be slightly compressed unless the rental rate can be absorbed by the market.

3) MINOR SURGE OF COMMERCIAL PROPERTY TRANSACTIONS BEFORE GST IMPLEMENTATION.
There will possibly be a minor surge of commercial and industrial property transactions when coming to near dateline of April 15th, 2015 as some business will pull forward their purchase decision. Six per cent GST is a rather big amount when it comes to property prices. However, the market may react much earlier with expectation of vendors asking for higher price anticipating the price surge after GST implementation. After the date of implementation of the GST, which will be an additional 6 per cent GST imposed onto the goods or services, it makes sense to make the purchase before the date. For example if one would like to purchase a commercial property, it is better to purchase before it GST is being implemented. Six per cent may seem small in percentage but substantial in value. Such percentage out of a RM2 million shop-office is equivalent to RM120,000 which needs to be paid in cash.

4) ADMINISTRATIVE COST AND ADDITIONAL CASH FLOW REQUIREMENT.
For investors that hold commercial & industrial properties, they will need to set up an administrative process to collect GST when selling and renting their properties. So, it is important that they monitor their cash flow as GST is payable when billed or incurred but not when collected. In a scenario where a tenant pays up late, the landlord is still subjected to the GST payment. For investment holding entities that deal mainly with rental or leasing of properties, it should be GST- ready to impose GST onto client as rent/lease of property is considered as supply of goods that is subject to GST tax. They should also evaluate whether they should register their business as if the sales turnover exceeding RM500,000 and they can also choose to register under voluntary registration scheme. Even before the implementation of GST, they should review terms to include relevant GST clause into the tenancy agreement as the GST 6 per cent may be a deal breaker in negotiating a tenancy term.

5) ADDITIONAL CASH FOR TRANSITIONAL CONTRACT.
For commercial and industrial property purchased off the plan or under construction from developers before the GST implementation, the buyers will be subject to additional 6 per cent GST when it is implemented. As properties under construction is billed according to stages of progress, the GST will be imposed onto the billing when the completion by stages of the construction of the buildings.

6) PREFERENCE OF RESIDENTIAL PROPERTY.
Since commercial and industrial properties will be subjected to GST with additional capital required when acquiring the property, investors may be tempted to move to the option of residential properties especially the secondary market, since acquisition cost will be slightly lower and therefore ease the cash flow for purchaser.

All above possible scenarios will very much depends on the market condition when we move closer to the implementation date of GST and also the dynamic of the market forces inclusive of the supply and demand of the properties, interest rate, supply of money and other key economic factors. The GST implementation seems to be a significant event for Malaysia, however, the market will find its level of comfort once things get settled down just like any other policies that come into force in the market, we just need to be prepared and adjust accordingly.

Flipping and Holding Property

Between flipping property, buying and holding property, which one is better? Before we can answer that question, we need to get an overview of the significant difference between the two.

Property flipping is the practice of buying a property normally under construction from a developer at a discounted price, foreclosure property or under- market-value property due to the property condition and then disposing of it at a profit. Sometimes, for foreclosure or under-market-value property, some cosmetic enhancement is required before it can be successfully flipped for profit.

House flippers do their best to not hold onto a house for a long period of time. Instead, they flip them quickly. To gain maximum profit, this is preferably done within the shortest period of time possible. The time frame is normally less than three years.

Buying and holding an investment on the other hand, involves buying a house, possibly making some improvements, but then keeping the property for a longer period of time. The investors will pay for the monthly costs of financing, taxes, utilities and other maintenance, the property will be rented out to a tenant. In some cases, the real estate investor might buy the property with the purpose of selling it at some point in time, but normally for up to five years or more.
The Pros and Cons

The two types of real estate investing have their largest differences in the fact that one produces quick profit in a shorter period of time (not more than 3 years) while the other creates monthly positive cash flow perpetually (best case).

Now lets study some of the biggest pros and cons for both.

The Pros of Flipping

Less Risky: Unlike the stock market, which at times can fluctuate quite extensively even in a single trading day, real estate markets are more easily predicted.
With this, flipping properties could be considered a less risky investment strategy because it is intended to keep low capital risk for a minimal amount of time and because it lacks the management and leasing risks inherent in holding real estate. Because you are holding the real estate for a short period of time, drastic local market fluctuations, if any, are less likely to affect your profitability.

High ROI: The property flipper can make a higher return on investment (ROI) if he/she can manage to flip the house in as short of a time as possible. This is in contrast to buy-and-hold real estate investing where the investor has to wait for longer periods of time before they can cash it out for a profit when selling.

Tenants Free: Perhaps best of all, property flippers dont have to deal with landlord and tenant headaches. Generally, in Malaysia, the law protects tenant more than the landlord. Some of the issues that flippers dont have to face: eviction, repair and maintenance of properties, and chasing tenants for rent collection.

The Cons of Flipping:

It Takes Actual Practice To Be Experienced: You don t get really good at property flipping by just reading some books or attending a seminar on property flipping and then claiming that you’re an expert. It takes time, to study and to gain first-hand experience to get really good at it.

Unforeseen Circumstances/ Conditions: Even when you do get really good at it, you’ll still encounter situations where its not in your control. For example, the completion is delayed, the failure to get Certificate Of Completion and Compliance (CCC), failure of your contractor to deliver on time if you are doing some property enhancements, upward revision of interest rates, introduction of new ruling e.g. loan margin, net income borrowing etc. As a house flipper, you have to anticipate these curveballs -even expect them. Its all a part of the business.

High Costs: Flipping houses does come with transactional costs on both sides of the equation. When you buy and when you sell, there are costs. When you sell, if you are taking a loan, the bank will impose early settlement penalty, apart from that, the legal fees and agency fees. Not forgetting the interest as well as stamp duty that has already been paid when acquiring the property. These transactional and holding costs can directly affect profits. But if managed well, you can still make a healthy profit.

Taxes: When flipping houses, the newly revised Real Property Gains Tax at 30% on the profit for property acquired less than three years. So to accurately predict your net profit, you will need to factor these costs into your projections as well.

The Pros of Holding

Owning multiple properties which are all producing positive cash flow and steady rental income is a very appealing way to build a reliable stream of income. Although you can get this kind of steady income with house flipping, you’ll need a steadier stream of house flipping deals. Usually, one right after the other.

Wealth Creation: There’s no question that great wealth has been amassed through buy -and -hold real estate. Its well-documented that real estate values increase over the long term. All things being equal, the longer you hold the piece of real estate, the greater your potential for appreciation. Most “old money” in Malaysia and abroad was accumulated through real estate ownership. Some of the wealthiest individuals in the world like Li Ka-Shing, Donalad Trump amassed their great fortunes through buy-and-hold real estate investing.

No Urgency to Sell: A big advantage to buy and hold real estate is that if the real estate investor does not need to sell immediately, that he doesn’t have to. Unless it s an emergency, the buy-and-hold real estate investor can wait out market downturns until market conditions improve.

Pride of Ownership: When I first started buying rental properties, I would just drive by them at least 3 times a week. Also, it felt pretty good to be helping people in need of a good home to find a nice, clean and attractive place to live. If you have good tenants who pay on time and a house that requires little, if any maintenance and you’re also realizing a tidy monthly profit with healthy cash reserves, then buy and hold real estate investing is pretty great indeed.

The Cons of Holding

Market Fluctuations: Of course, if hard financial times hits the buy and hold property investor will need a quick injection of cash, they can only sell their property at prevailing market values. They cant hope for the market to recover at that point in time, they are stuck with selling at the current market prevailing price even if its lower than the acquisition price.

Legal Tenant Issues: Buy and hold real estate investing comes with its own inherent management and legal issues with regards to tenants. There are a number of management related issues you need to deal with on a regular basis for instance eviction, repair and maintenance of properties, and chasing tenants for rent collection. All these if not handled well, will have serious repercussions financially as well as emotionally.

Tenants Management:
Finding quality tenants, servicing those tenants, handling repairs, upkeep of accounts, managing rental collection, all can be incredibly stressful and time consuming if they are not managed well. The process of finding and managing good tenants requires time, energy, and lots of patience.

Flipping properties is considered more of a tactical strategy whereas holding properties is long-term investment strategy. In order to decide whether flipping properties or holding them long-term is the more appropriate strategy, one needs to answer a few critical questions. An investor must decide whether the capital allocation is long term or short term and whether it is a core part of an overall property portfolio or a means to enhance returns. Also, one needs to determine what risk and return is appropriate for this portion of their property portfolios.

Although the choice between the two strategies in question depends on ones particular financial situation and investment goals, the long-term holding strategy is generally more appropriate for those using real estate as a core portion of their overall property investment portfolios; flipping properties is more appropriate for investors wishing to realize short-term capital gains for as long as the present market will allow.