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Consultants say intervention in property prices should be done gradually

April 27th, 2013 3 comments

WITH residential prices continuing to rise and and currently standing at 61%, 52% and 108% above the post Lehman troughs in China, Singapore and Hong Kong respectively, do interventions really help? And what are their effects on Malaysia?

In the April issue of Asia Pacific Residential Review, Knight Frank brought into focus how these markets have tried to cool property prices.

Singapore instituted seven rounds of cooling measures, ranging from increasing downpayment, rising stamp duty to property tax. The recent budget has also set out an increase in property tax for high-end residential real estate, set to be phased in over 2014-2015.

Cooling measures were also introduced to the non-residential sphere for the first time, with an exit stamp duty introduced on industrial property sold within four years from the date of purchase.

In Hong Kong, the stamp duty for property over HK$2mil was doubled to 8.5%, putting the brakes on volumes transacted in the local market. China, too, sent out strong signals, which include a capital gains tax of 20%. Buyers are looking to exit before these measures are enforced, most notably in Shanghai, which saw an increase in volumes transacted in March.

Bloomberg reported on April 24 that Beijing and Shenzhen have submitted tax plans to their central government.

The aims of the interventions are broadly the same across all of the key markets; control price inflation, reduce the role of speculators and help support first time buyers. The tools vary. It could be a mixture of fiscal policy, supply side intervention, home buyers regulations and financing restrictions, the Knight Frank report says.

Government intervention in the property markets is not a sudden new phenomenon. Policy-makers, to varying extents, have always found it necessary to intervene by exercising some element of control over market participants, along with two key factors of production; land and finance.

They do so because they desire “stable and sustainable growth”. Property consultants contacted say they prefer a gradual increase in prices rather than a steep hike.

While the recent increase in prices are fueled by high liquidity, urban migration, and economic growth, especially in China, questions on sustainability have arisen.

Their conclusion is that, interest rates – at their lowest today – coupled with speculative activities are fuelling prices beyond this “sustainable” barrier.

The various measures taken so far were a result of significant price rises that have brought into focus issues of affordability and the risk of potential asset bubbles.

Effects of cooling measures

The Knight Frank report says as a result of these measures, Singapore saw a reduction in annual price growth, but not perhaps the reduction policy makers expected. China saw prices drop in 2011, but they rebounded in 2012.

Hong Kong continues to see very strong price inflation, buoyed by low interest rates (the HK dollar is pegged to the US dollar) and tight supply.

Knight Frank is of the view that prices will soften in Singapore by an average of 5% and Hong Kong by 10% over the next 12 months. In China, prices will likely continue to appreciate in Tier-1 cities, while there may be drops in some of the Tier-2 and 3 cities.

The protectionist measures introduced into Singapore and Hong Kong have led to a reduction of purchases by foreign buyers. Singapore saw a drop of 23.5% in 2012 from 2011 (for permanent residents and non-permanent residents). Hong Kong also saw the proportion of mainland Chinese buyers drop from around 30% in October 2012 to only 9.4% in January 2013 (in the Hong Kong luxury market).

What is the impact of these various measures on Malaysia?

Knight Frank Malaysia’s head of project marketing Herbert Leong expects the additional cooling measures in competing Asian markets to lead to further interest in the Kuala Lumpur, Penang and Iskandar Malaysia property markets.

Leong also says that overseas investors have viewed Malaysia as an attractive alternative investment destination for some time and expects further activity in 2013, particularly post-election.

While prices in Hong Kong, China and Singapore have risen considerably, annual price growth in the major markets in Malaysia has flattened considerably over the last 12 months. Perhaps, this may be due to the “wait and see” attitude in light of the general election (GE). Malaysia is likely to see a rebound in activity following the GE.

Says Leong in an email: “Malaysia has always been favoured by investors from Singapore, HK/China, Indonesia and Middle East, though not as much as the countries (Singapore, Hong Kong and China) mentioned. The cooling measures will encourage investors from these countries to buy Malaysian properties as our prices are much cheaper and the returns (capital appreciation/rental returns) are reasonable.”

Source: StarProperty.my

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The perfect property is gated and guarded, near work, and has good neighbours

April 23rd, 2013 10 comments

A gated and guarded neighbourhood is important when defining the perfect property.

Least important factors were identity of developer and availability of broadband internet

According to a UK survey, the perfect property is two miles from a supermarket, ten miles from the coast and within walking distance of a pub where the landlord knows your name. How about for Malaysians? StarProperty.my recently conducted a survey to find out their top criteria when it came to choosing a property.

We gave respondents 16 criteria to rank in terms of importance. These included proximity to food and beverage options, parks, markets, good schools, family, institutions, leisure facilities, work, public transport and malls, being gated and guarded, as well as having a garden, at least two parking spaces and good neighbours.

Criterion 1: Gated and guarded

Top on the list for our Malaysian respondents was being in a gated and guarded community. Nearly half the respondents voted this as the most important feature in their dream property.

This can understandably be traced to the number of break-ins and robberies which has been increasing in certain areas, so much so that many homeowners have now installed alarm and security systems.

Somewhat reflecting these findings, the gated and guarded feature has increasingly been seen as a key selling point for many projects. Round-the-clock security patrols, single entry and exit points, closed-circuit televisions (CCTV) throughout the development, perimeter fencing around the development and access cards give homeowners peace of mind.

Criterion 2: Proximity to work

The factor voted as second most important, meanwhile, was a location that was near the workplace with “not much traffic jams in between”.

After all, most Malaysians spend more than two hours a day being stuck in traffic jams, one research paper has reported. And choosing a home near the work place not only saves time but also money and energy, while helping maintain the balance of work and social life.

The amount of time wasted on the road may after all be spent taking your children to the park, catching up with friends over dinner or working out at the gym.

Criterion 3: Friendly, good and trustworthy neighbours

The third most important factor that surprisingly ranked high among most respondents was having friendly and trustworthy neighbours.

Even though it is often said that many urban Malaysians today are not familiar with their neighbours, especially in condominiums, this criterion turned out to be very high in most Malaysian property hunters’ minds.

Of course, knowing your neighbours allows us to look out for one another in times of need. For example, if you know that Jason lives in house number 60, you would know if someone other than Jason and his family were loitering in front of his house.

Criterion 4: At least two parking spaces

The respondents also agreed that having at least two parking spaces was important. The issue of parking is commonly faced by many homeowners, especially when many households these days own more than one car.

Other important factors included living within 10 minutes’ walking distance to amenities such as banks and the post office, as well as to mini markets and convenience stores.

Two respondents Soong and Wong shared that they would prefer a property with wider roads. Another respondent, Hee said a well-maintained neighbourhood is important.

“Another factor that wasn’t in the list is to have clinics and hospitals nearby your house. This is quite important for me,” said Gayathri, 30.

Least important factors

Surprisingly, two factors that hardly scored with our respondents were the company that developed the property, and having a broadband internet connection within your development. Only 2% of the respondents selected these factors as one of the criteria to define their perfect property.

Source: StarProperty.my

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6 Things You Should Consider When Taking Up a Home Loan

April 16th, 2013 No comments

To the common folks, choosing a home loan is almost as hard as choosing the property itself. If you’re currently in the midst of shopping for a home loan to buy the house of your dream, here are 6 things you should consider before making what would arguably be the biggest financial decision of your life.

1. Type of Home Loan

First and foremost, consider what works best for you: a Traditional Term Loan or a Flexible Home Loan (“Flexi-Loan”). A Traditional Term Loan requires you to pay a fixed amount each month for the entire tenure of your home loan (e.g. 30 years), whilst a Flexi-Loan gives you the option of reducing your interest whenever you wish (i.e. by saving your extra money into a linked current account. The more you save, the less interest you pay).

If you have a strict and predictable cash-flow pattern, a Traditional Term Loan may be best. If you prefer flexibility in paying off your loan, a Flexi-Loan is recommended.

2. Interest Rate

As of all loans, your priority should probably go to the bank that offers you the lowest interest rate. Citing an example we’ve used before: for a home loan of RM500,000 over a period of 30 years, the difference in interest between an interest rate of 4.2% and 4.15% (i.e. a mere 0.05%) could be well over RM5,000! To find out which bank offers the best home loan interest rate, check out our handy home loan comparison table.

3. Margin of Financing (How Much You Can Loan)

Depending on various factors which include the value of the property as well as your standing with the bank, different banks may offer you different Margins of Financing. As you’ll be required to pay any amount not covered by the home loan upfront, this becomes very important especially if you’re short on cash.

As an example: for a RM500,000 house, you’ll need to pay RM100,000 upfront if your Margin of Financing is 80%; but you’ll only need to pay RM50,000 upfront if your Margin of Financing is 90%.

4. Lock-In Period

Lock-In Period is the period you’ll incur a penalty (usually 2-3% of the principle loan amount) if you choose to pay off your home loan in full before it reaches the end of its tenure. When it comes to choosing a home loan, it pays to have the Lock-In Period as short as possible and the penalty as low as possible. Also, some banks do not charge a penalty at all if sufficient notice is given. For a start, you may wish to compare the Lock-In Periods of all Malaysian banks on iMoney.

5. Fees & Charges

A home loan application involves professional and government-regulated processes such as preparation and disbursement of loan agreement, payment of stamp duty and processing by the bank, just to name a few. All these processes usually come with fees & charges that will be borne by you, the buyer. In certain cases, it may also be wholly or partly borne by the banks as part of your loan packages. Hence, is it best to sit down with the loan officers (for all the banks you are considering taking your home loan from) and have them run through the fees and charges with you. The task may be repetitive and time-consuming… but it’ll be time well spent.

6. The Bank

Lastly, understand that you’ll be dealing with the bank on a very frequent basis for as long as your home loan is in effect (which may be 20 to 30 years). With that in mind, you should probably choose a bank you are very comfortable with. Some of the things you may wish to think about include:

  • Do you have an existing savings or current account with the bank (for ease of inter-account transfer)?
  • Are you satisfied with their standard of service?
  • Is a local branch available near your home or office?
  • Do you consider the bank to be trustworthy or reliable?
  • Does the bank offer value-added services that will make your life easier for the long haul?
  • How is the bank’s reputation as a whole?

Ready to choose your home loan now? Why not proceed to our home loan comparison table and see what your available options are!

This article comes courtesy of www.imoney.my which compares between the various loans, savings and insurance schemes available in Malaysia.

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Penang residential market to remain active though less buzz compared to last year

April 11th, 2013 5 comments

Hot spots include Batu Maung, Bayan Lepas, George Town, Tanjung Bungah, Teluk Bahang, as well as areas around five new proposed highways.

“Despite uncertainties in both external  global economy and internal political risks that have caused some investors to slow down in the short term, market analysts believe that the cautiously optimistic trend will continue in 2013 with a stable and positive outlook (in medium to long term) for Penang’s property market, sustained by healthy core demand, manageable mortgage rates, and positive economic growth,” says Henry Butcher Malaysia (Penang) director Jason Teoh, interviewed in conjuction with the upcomingMalaysian Secondary Property Exhibition (Maspex) 2013.

“An active residential sub-sector will continue to spearhead the market, though it might experience less buzz compared to the previous year.”

“On the island, the hot spot or corridor of opportunities would be in Batu Maung, Bayan Lepas, George Town, Tanjung Bungah and Teluk Bahang areas.  On the mainland, the investors would be able to get residential properties that are relatively cheap with low density at strategic locations.  A new enabler – the second Penang Bridge, will appear in the landscape of Penang soon in the third quarter of this year.  The opportunities may arise not only on the island but on the mainland as well.  Investors perhaps could look into and analyse the future potential opportunities of the land banks around the intersection of the North-South Highway and the second Penang Bridge,” Teoh advised.

He continued, “Areas around the five new proposed highways under the “Recommended Penang Transport Master Plan Strategy, 2013”, namely, George Town Outer Bypass, The North Coast Pair Road, The Air Itam – Relau Pair Road, The North-South Expressway Link Road, Third Sea Crossing, could be the potential hot locations for the property market in the near future.”

Penang has been one of the most dynamic real estate markets in Malaysia, as most property watchers are aware of.  “The volume and value of property transactions grew at a cumulative average growth rate of 8.4% and 13.2% respectively, from 1999-2011.  These were even higher from 2009-2011, reaching 20.1% and 26.0% respectively.”

Chart 1: Penang – House Price Index by Type, 1999 – 2012 Q3 (P). Source: Ministry of Finance, Malaysia / Henry Butcher Research

Of all property types, terraced houses have increased in price the most over the last few years. Its price index from 1999 to Q3 2012 (P) can be seen in the graph above to have hiked higher than other type of properties.

Another type of property that is in hot demand, with potential capital appreciation, is pre-war heritage shophouses.  The price index of pre-war properties in George Town started to soar after 1999 (chart below).

Chart 2: Penang – Price Index of Pre-war Heritage Property, 1980 – 2012. Source: HB Research

Teoh believes that the demand for properties in both the new and secondary market will continue to grow and appeal to a wider segment of local and international buyers.

He added, “Furthermore, slightly more than one-third of the total 1.61 million population in Penang are from the age of 25 to 44, indicating that we are still in need of a fairly large number of houses or residential properties each year. Nevertheless, the developers have to be more versatile and build according to the changing trends and needs of the market.”

Henry Butcher Malaysia (Penang) has been providing real estate solutions to government, commerce and industry in Malaysia for more than 20 years, says Teoh. It calls itself a “one-stop” provider, offering a comprehensive range of services.

Maspex 2013 will be held over the weekend of April 12 to 14, at the concourse of Tropicana City Mall, PJ. Organised by the Malaysian Institute of Estate Agents (MIEA), it will feature booths by 32 real estate agencies with photos and presentations of previously owned properties for sale.

Other participating agencies include Reapfield Shah Alam which talks to StarProperty.my about Shah Alam hot spots, as well as Property Hub Sdn Bhd which talks to us about how many buyers are anticipating a price correction.

Source: StarProperty.my

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Secondary property market transaction value to go up

April 10th, 2013 No comments

PETALING JAYA: The Malaysian Institute of Estate Agents (MIEA) is targeting the transaction value of the secondary property market to increase by between 5% and 8% this year.

MIEA president Nixon Paul says: “Historically, the transaction value would increase at about that range every year.”

Speaking at a press conference on theMalaysian Secondary Property Exhibition (Maspex) 2013, Paul said for this year, the market would see a dramatic increase in residential properties priced from RM300,000 to RM700,000.

MIEA will be organising the inauguralMaspex 2013, featuring 32 real estate agencies from April 12 to April 14 at the Tropicana City Mall here.

“We are targeting at least 3,000 visitors per day. Property exhibitions are always a big draw,” said Paul.

“On average, the secondary market offers more than a 30% discount when compared with new properties,” he added, noting that the secondary property market guaranteed a mature location, with all conveniences thrown in such as public transportation.

Paul also said the exhibition provided a platform to better serve the public and further assist MIEA members to enhance their business activities.

Also present was MIEA deputy president Siva Shanker, who said that in terms of the volume of residential property transactions in Malaysia, the secondary market accounted for almost 87% of the total transaction in the first half of 2012.

“The primary market seems to be over-represented, in terms of advertisements, exposure as well as exhibitions,” he observed.

He expected residential terrace houses and semi-Ds to continue to be best-sellers in 2013. Meanwhile, the condominium market is expected to play catch-up, courtesy of government initiatives.

Source: StarProperty.my

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