Kuching property market facing a slowdown ahead?

Kuching has always been a favourite city of mine for many years. This is one of the few cities which I always tell my wife that we should come at least yearly. Its clean, the food’s great and everything could be accessed with Kuching city as the base. The only issue would be that my visits are often short and thus I did not have too much time to view properties. Perhaps one of the future trips I should do just that. My Sarawakian friends however told me that I better be very rich because if I do buy, the rental yield may be low or negative. Well, what’s up with Kuching propetty market recently?

As per one article in theborneopost.comtwo main issues are plaguing the Sarawak property market. They are weaker household incomes and higher-than-expected property prices. According to Sarawak Housing and Real Estate Developers Association (Sheda) president Joseph Wong, the new developments being launched are already smaller and more selective because of market sentiment. He shared that, “A research by Institute Rakyat has shown that price of an average home in Sarawak is over nine times more than the annual income of a typical Sarawakian family. This ranks Sarawak under the severly unaffordable category in the Malaysian housing affordability index – even beating metropolitan Kuala Lumpur.”

Wong reiterated that it is important for the state to consider Sheda’s proposal on affordable homes. He said, “Under the scheme, it is proposed that houses with a minimum area of 850 square feet could be built and sold at a maximum selling price of RM250,000.” The scheme however would need some help from the state government. For example, removal of density control for landed properties, adoption of plot ratio density for strata development and removal of mandatory criteria to build low cost homes or SPEKTRA.

kuching-propertySometimes, I do wonder who would benefit with the developers and the state government at disagreements into what should be done to make the properties affordable. Perhaps the market could decide? Some landed property listings from the main property site in East Malaysia, propertyhunter.com.my (Image) Regardless, I am still dropping by Kuching towards end of the year. It’s time for lots of good food and that sweet Pineapple fruit juice. Cheers.

written on 26 Sept 2016

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More investments, more jobs and more property demand?

In order to have higher transaction numbers, besides just improving the sentiment, we need to also focus on the economic fundamentals; new investments to create new businesses and thus more new jobs. Without more people earning a fixed salary, the demand for property cannot continue to go up. Thus, I think the below news is a medium term positive news for the Malaysian property market. Too bad,I did not see anyone sharing this in their Facebook at all. Well, positive news are always forgotten anyway. Haha.

Within H1 2016, Malaysia attracted RM88.4 billion in investments. This information was given by the Malaysian Investment Development Authority (MIDA). From this, an estimated total of 76,000 jobs would be created. These new approved investments are in the services, manufacturing and primary sectors. Where Foreign Direct Investments (FDI) are concerned,  a total of RM28.2 billion was approved during the same period. Oil and gas industry may not be attractive but they continue to be big. Two big petrochemical projects have been approved, one for Pengerang project in Johor and LNG9 project in Sarawak.

demographicsAs per my sharing in my talk just a few days ago, I remain positive with the longer term fundamental for property investing. Besides just the economy, we also have the demographics which is still on the younger side. Take look at the image to understand. Today, the transactions would mostly be due to the people within the age brackets highlighted in a blue box. In the future, demand would be healthy because we still have a huge chunk of Malaysians within the red box. Happy believing.

written on 25 Sept 2016

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Household Debt Malaysia vs Assets, as per Allianz Global Wealth Report

Remember just days ago, Bank Negara Malaysia revealed that 75 percent of borrowers for home loans are for one property? Well, since they have just one property, it should be quite safe to assume that they will be able to pay for it, versus if they have a few. There’s another piece of news. I would not say it’s all bad or good. The article was in Starbiz that everyone should read, for both the good and the bad sides. Here. Do read it for a better understanding of where the household debts Malaysia is today.

In the article, Allianz Global Wealth Report revealed that in 2015, the loans to the households grew 7.2 percent and this is higher than the GDP growth of 4.6 percent and the financial assets grew 4.9 percent. In brief it shared, “Household debt climbed to 89.1% of GDP, while the financial assets to GDP ratio edged up only marginally to 182.9% from 182.4% in 2014.” In terms of debt per Malaysian, it is now at an average of RM33,500 versus the average financial assets at RM68,810. More importantly, the region Asia (excluding Japan) nearly trebled in financial assets growth since the year 2000 and is now ahead of even the eurozone. Out of total global financial assets of Euros 155 trillion, Asia (excluding Japan) accounted for 18.5 percent in 2015 versus eurozone at 14.2 percent.

Where household debts are concerned, are we on the tipping point of falling over or at this moment still comfortable? In brief, the fundamentals are weakening slightly though we are nowhere near crisis because assets remain above debts. 2 times more to be exact. Be reminded, these are average numbers. Some Malaysians may have a stronger foundation than others. It tells us also that ASIA will now be the centre of growth. Just looking at the typical GDP growth in Asia versus Eurozone would reveal that Asia is not leading only currently. It should continue to lead Eurozone. Yes, I am a proud Asian too. Happy investing and believing.

written on 22 Sept 2016

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Interest remains high, but buying still doubtful

wp-1474684893497.jpgQ4 2016 is about to start. How’s Malaysia property market thus far? Specifically how’s KL property market? One word? Subdued. Not much actions they say even though transactions wise I think the numbers are holding up. We will have to wait for the final numbers for 2016 next year to know for sure. What’s real? A few of my friends who has more than one property were still buying. Yes, within 2016 I did sign another SPA for a small apartment. As for many of my younger friends including colleagues, inaction would be an appropriate description. My friend Miichael Yeoh then invited me to speak in My First Home 3.0 seminar and I agreed because I also wanted to gauge the market,especially for first-time buyers.

img-20160923-wa0017.jpgToday was the seminar. It’s from 9am till 5pm consisting of following speakers. Image. Since these attendees  were willing to wake up early Saturday morning to listen to a few peoplespeak on buying that first home, I am quite sure they are interested. However, when I asked who will be buying this year, only three put up their hands. Haha. I think the rest were shy or still not confident about the state of the property market. More importantly however was the fact that many are interested in buying their first home. In fact many have their own ideas about property investment which shows diversity in the market.

During the break, one participant asked me about potential for agriculture land. On Thursday evening, a friend was telling me about a piece of land for resort in Taiping. Just two days ago, another colleague was also asking me about orchard land. Hey, is this the craze currently? I really have no idea and does not have enough experience to comment. My only real encounter with this was when a few friends and I went up a small hill in Balik Pulau, Penang to view an 11-acre durian farm land. We did not buy and I learnt recently that the price of that piece of land was already three times the price we were offered. Well, life’s like that.

Another participant told me she believes landed will always be scarce and is worth investing in. I told her that I do agree but the prices today would be quite prohibitive for buying and renting and the type of potential returns we are looking at will never be like the few years before. Prices have appreciated so much that one has to be really rich to buy. My friend staying in PJ summed it up best. He said, ‘If I were to sell my current place, there’s no way I can buy back anywhere nearby for lesser.’ The only choice would only for him to sell and move further away. Else, he would not be enjoying the capital appreciation at all.

Today, I learnt that even if interest level is high, it does not necessarily translate to purchases. When I asked if there are anyone looking to buy within 2016, only three put up their hands. Haha. The rest must be too shy. It is also very good to note that many people have their own way of looking at real estate investment and this is definitely healthy. So, what’s your thought on this? Happy following.

written on 24 Sept 2016

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Penang’s secondary property market? Positive.

michaelgehThese days, when we are looking for a place to stay and wants it fast as well as the potential to negotiate for a good price, secondary property comes to mind. Let’s get to know some latest happenings in the Penang secondary property market, shall we? My friend, Raine & Horne International Zaki + Partners senior partner Michael Geh was speaking at the Malaysia Secondary Property Exhibition (Maspex) in Penang. Following would be some important points that he shared which I think everyone thinking about the Penang property market should also take note of.

In 2015, a total of 15,291 residential property transactions valued at RM6.17 billion was recorded in Penang last year. 77 percent of all the transactions were for properties priced below RM500,000. 16 percent are for properties priced above RM500,000 and 7 percent for properties priced above RM1 million. This shows that Penang still do have properties transacted at below RM500,000. Michael also pointed out that the secondary market has remained bullish despite the dip in overall property transactions.

In Penang, the residential property market for the first half of this year has dipped by about 14 percent from 7,743 transactions valued at RM3.14 billion in the first half of 2015 to 6,698 transactions valued at RM2.65 billion in the same period this year.  The secondary market remains strong this year despite the dip in the overall transactions. In the first six months of this year, the secondary market recorded 5,658 transactions valued at RM2.17 billion.

In comparison, only 1,040 units valued at RM478 million were transacted in the primary market. This means the secondary market makes up 84 per cent of the total transacted units for the first half of this year. When compared to the same period last year, the secondary market saw a drop of about 13 percent in transactions and 15% drop in value transacted.

Last year, in the same period, the secondary market recorded 6,325 transactions valued at RM2.55 billion. The primary market recorded 1,418 transactions valued at RM590 million in the first half of 2015, meaning it also saw a 20% drop in transactions and value transacted. The strong secondary market, which is also known as the sub-sale market, in Penang is the reason why we continue to organise the annual Maspex Penang.

Let us look at the national statistics in comparison.  Nationally, the total number of residential property transactions had dipped by about 15% from 119,446 transactions valued a total RM36.47 billion in the first half of 2015 as compared to 102,096 transactions valued a total RM32.7 billion in the first half of this year.

Out of the 102,096 transactions in the first half of this year, almost 82% were from the secondary market which stands at 83,647 transactions as compared to 18,449 transactions in the primary market. The secondary market only saw a 15% dip in transactions while the primary market saw a 14% dip when compared to the first half of last year.

In the first half of last year, the secondary market saw 98,067 transactions valued at RM28.26 billion, when compared to the primary market’s 21,379 transactions valued at RM8.2 billion. This shows that nationally, the secondary market is still thriving despite the overall outlook of a weakening property market.

In fact, the number of transactions in the secondary market is almost five times that of the primary market. It also goes to show that a major portion of the property transactions in Malaysia are in the secondary market, taking up almost 80 per cent of the total market share. This leads us to Maspex Penang, where sub-sale properties are showcased.

This year, over 5,000 units of properties will be featured by real estate agents throughout this four-day event that started on September 22 and will end on September 25. We have also lined up a series of talks over the next few days to cover topics such as opportunities in the penang sub-sale market, the legal aspects of purchasing properties, the direction of the property market in 2017 and also a look at feng shui.

This is the best opportunity for home buyers to visit the exhibition and find out more about secondary property dealings such as sales, rent and purchases.

I think it’s good to drop by and look at all the options available. It’s no longer just about the Penang island but these days, mainland is also getting popular. As many would have noted, Batu Kawan is one such potential area too even if there are not a lot of happenings yet. Happy browsing and listening to all the talks in MASPEX Penang. It’s in Queensbay Mall.

edited on 23 Sept 2016

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Property KL: Best value, highest yields and least volatility.

propertyinsightMRTEvery time I go out for meals with friends who does not yet own a property but has newer phones and bigger cars than me, they would ask this question. ‘Can still buy ah? My friends said Malaysia property market about to collapse. So many negative news and scandal.’ My standard answer? Well, I am still investing because I think despite the fact that there are many overpriced properties, there are always opportunities within the Malaysian property market. Their usual reply? ‘Ai ya, you bought earlier when prices low, so you sure okay lah.’ Haha. Actually, for these debates, it will never end and I treasure my friendship more than winning the arguments with them. Every individual is different.

Well, today I read something encouraging in NST today, 22 Sept 2016. Full article here. Briefly, according to the a global real estate consultancy Knight Frank, the Malaysian property market offers the best value for money for real estate investors in the world, and the highest yields and least volatility in the market across the Asia-Pacific region. Knight Frank Malaysia managing director Sarkunan Subramaniam added, “Coupled with the step-up on transport infrastructure development, which increases mobility and connectivity throughout Greater Kuala Lumpur, this transformation gives the city the edge, and represents the best value propositions for any multinational corporations (MNCs) or investors in the Asia-Pacific region.”

I wrote earlier about the MRT lines changing many area dynamics. Read here: MRT stations will change the area dynamics. Just look at areas close to LRTs today. They are definitely higher priced than places far away. Yes, there are even some ‘awesome’ articles online which tells about how walking distance from these stations affect the property prices. Nope, it is definitely not written by me. It’s also important for us to focus on the attractiveness of a certain area by asking the right question. It’s less about WHERE but it should be about WHY. Looking ahead, Malaysia’s GDP will most probably grow 4 percent in 2016. (As per most of all predictions). Google and understand that 4 percent should place us within the top tiers in the world today.

A check online showed that the number of jobs being advertised in JobStreet.com.my remains healthy. Remember, the job numbers would be an early indicator of the property market. We do not stop paying the mortgages first. We would lose our jobs first. Even the car sales numbers would come later and not before we lose our jobs. That’s why we should always look at the job market for the earliest signs. The unemployment rate in the US is one of the key metrics before the Federal Reserve makes any decisions at all. Last but not least, here are some quotes for us to enjoy, from around the world. Cheers.

written on 22 Sept 2016

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Not easy to allow developers to ‘lend money’

A close friend and I was talking about this issue just yesterday. My earlier article here:  No loan? No worry. I (developer) lend you. She is someone senior with an economics PHD from the banking fraternity. We agreed that the suggestion to allow developers to become money lenders is not a good one. Her point of view is simple. When one developer is approved, then other developers should also get approval. This will then be followed by ever more developers and the loans being ‘approved’ by these developers would be huge within a few years. Assuming we suffer another external economic shock and these developers have a hard time selling their properties and worse still, their buyers defaulted. May I know who will handle the mess? Really macro-economic view, yeah?

For me, my main worry would always be for the buyers. Assuming the bank would only approve 80 percent today, the buyers would need to either get the remaining amount somewhere or they would have to abort the purchase. However, if they can still get approval from the developers would they believe they can afford something more expensive? Would this then create more people with loans they couldn’t afford in the first place? Remember as a country we have this issue? Households Malaysia and Debts. It’s easy to get into debts but it’s very hard to get out. Let’s always be savvy about this. Bankruptcy and Properties

Of course there are also others who said that this may create a property bubble. I think this would be a remote idea because the loans that the developers can give out would be extremely small in comparison to the whole  industry. There are comments that property prices will be higher due to this, I also think this is developer specific. Without understanding objectively and buying rationally, those few hotspots would remain to be hotspots and prices would rise faster than the secondary ones. I think this would remain the major cause for property prices to keep increasing; demand vs limited supply. In conclusion, my friend and I are not supportive of the idea developers becoming money lenders. This is the same opinion, regardless of whether the rate is 6 percent or 18 percent.

written on 22 Sept 2016

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