My journey to the new flat

Image by JP Canada via Flickr It seems that my occupation of the new flat is not an easy case after all. I’m now in a transitory abode, a flat which we are renting, so I’m spending a monthly rental, for 2 months at most (or so for what we estimated).

Anyway, there are issues that would make it seem harder every time. Now owner wants to vacate by end of October, when initially it was said to be 3rd week of October.

Anyway, I know that these problems would simply make the occupation and takeover a more cherished event.

So till then.

Adieu!

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How about property liberalisation?

BUSINESS COMMENT

CHUA TEE YONG


Low property sales and construction
slowdown have caused some developers
to brace for hard times.
BLOOMBERG

RECENTLY, the Malaysian government announced a few major decisions that have been positive and I hope that there are more to come.

On the economic front, the decision to scrap the 30-per-cent bumiputera equity requirement for the 27 services subs-sectors and also to allow a higher foreign equity participation for insurers and investment banks would augur well to attract more investment.

Even though some may argue that these are only "baby steps", they are steps in the right direction to raise Malaysia's competitiveness in the global business front.

In view of the gloomy economic climate, the government should also consider liberalising or relaxing the property sector. Given its link to the other 160 industry subsectors, the property industry plays a pivotal role to breathe more life and activities in the local economy with its multiplier effect.

This is evident from the government's allocation of funds in the first stimulus package to build more low-cost houses through Syarikat Perumahan Negara Berhad.

With lower property sales, construction slowdown and deferment of new launches and huge inventory built up, some developers are facing difficulties and bracing for more hard times.

The few major areas relating to the national housing policy that may require some amendments or improvement are the applicability of the bumiputera discount, varying range of quota needed to be reserved and the mechanism for automatic release from bumiputera to non-bumiputera.

In Parliament, I have raised the need to review and abolish the discount for the purchase of luxury properties by bumiputera.

Typically the bumiputera discount for property ranges from 5 to 15 per cent. The discount is intended to make property affordable to bumiputeras. However, discounts provided for luxury property is not equitable to the rest of the buyers as it may result in non-bumiputera buyers having to purchase property at inflated price.

Example, for a RM1 million ($419,743) condominium in Klang Valley, a 5-percent discount would cost the developer RM50,000, equivalent to a low cost house. If there are 1,000 units being launched and 30 per cent are reserved for the bumiputera quota, thus the discounts on 300 units cost the developer RM15 million. The cost would be higher if it is a massive township development or if the discount is 15 per cent.

Providing discounts to some buyers would decrease the margin of the developer and hence the developer would think of other ways to compensate for the margin loss or pass the cost to the other customers. This results in inflated purchase price.

On Nov 25 last year, the Minister of the Housing and Local Government announced that they are in discussion on a proposal to scrap discounts for bumiputera who buy luxury property valued at RM500,000 and above. Hopefully the discussion is still in process and any amendments would be announced in due course.

FOREIGN INVESTORS
There are also contradictions between the federal government's initiatives to attract foreign investors and state rules.

The abolition of Foreign Investment committee approval for foreigners purchasing properties costing more than RM250,000 and the exemption of property gain tax would create foreigner interest in the local property market.

However, state governments still impose their own rules on foreign property sales and purchase, resulting in conflicting signals to investors.

Even though opening the property market to foreigners would spur the growth of the Malaysian property market, the minimum price for eligibility should be raised to at least RM1million, depending on the state.

This is to ensure that we attract quality investors and avoid forcing Malaysians to compete with foreigners to buy a house for themselves as the amount of RM250,000 is too low for certain areas like the Klang Valley.

In summary, a bumiputera discount for property at a certain value should be maintained to ensure affordability of home ownership but a better policy is to not confine the discount to one race or religion.

This is an edited excerpt of an opinion piece that appeared in The Malaysian Insider on May 4. The writer, Mr Chua Tee Yong, is an MCA MP for Labis.

From TODAY, Property – Thursday, 07-May-2009

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First dip in resale flat prices since 2006

BUSINESS ANALYSIS

Prices of HDB resale flats fell 0.8 per cent in the first quarter compared with the previous quarter, marking the first decline since 2006.

This was slightly worse than the 0.6 -per-cent fall estimated by HDB earlier this month.

Price increases in resale flats have been moderating since the third quarter of last year. The median Cash-Over-Valuation amount for resale transactions dropped to $4,000 in the first quarter, a plunge of 73 per cent from the fourth quarter of last year.

The number of resale applications rose by 4 per cent to around 6,400. 938LIVE

From TODAY, Business – Weekend, 25/56-April-2009

2007 homebuyers at risk

BUSINESS ANALYSIS

Tay Huey Ying

THE islandwide property price index registered a decline of 14.1 per cent in the first quarter, slightly steeper than the flash estimate of 13.8 per cent.

This is the worst quarterly decline to date. It's also worse than the 13.1 per cent quarter-on-quarter drop recorded in the third quarter of 1998 when the residential market was adversely affected by the Asian financial crisis.

Private home prices have now fallen for the third consecutive quarter, with a total decline of 21.2 per cent since peaking in 2Q 2008.

Based on the URA's statistics, the private home property index is now almost back to 1Q 2007's level. Hence, purchasers who bought their properties after 1Q 2007 are at risk of having the valuation of their properties fall below their purchase price. For those who bought their properties on the deferred payment scheme and have yet to secure a loan, this would limit the loan-to-purchase price ratio that they can secure from financing institutions.

Nevertheless, anecdotal evidence has thus far shown that a majority of such buyers are able to cough up the amount of purchase price not supported by valuation in cash. This has helped to keep the number of distressed sales at a controllable level.

Moving forward, although private home prices are expected to remain depressed, the rate of decline is forecast to moderate from the high of 1Q 2009, as developers have already marked down prices substantially in the quarter. Mass-market homes could see more gradual price corrections averaging in the region of 8 to 12 per cent over the next three quarters, as more sellers in the secondary market and developers of unsold units from earlier launches could be expected to adjust their prices to near-current levels.

The mid-tier and high-end segments could witness larger average price declines ranging from 10 to 15 per cent over the same period.

The writer is director for research and advisory at Colliers International.

From TODAY, Business – Weekend, 25/56-April-2009

A freeze on rent will be unfair: Fu

THE Housing and Development Board will not freeze industrial and commercial rental increases made before the recession took root, but tenants who have renewed their leases since January have had their rent reduced by 5 per cent.

This approach, Senior Minister of State (National Development) Grace Fu said, ensures HDB rents are not “disconnected” from market realities.

In both instances, rents were adjusted to the market conditions at the time. Freezing earlier rental increases, as suggested by MP Lee Bee Wah (Ang Mo Kio), would then result in unfair outcomes for tenants, whose rents are fixed and reviewed every three years, said Ms Fu. “A freeze on rent increases is not equitable as it will result in different rental subsidies for different tenants who may have renewed their tenancies over different periods of time.”

Instead, the 15-per-cent rental rebate announced during the Budget was a better way of helping industrial and commercial tenants, she added. “For the small number of tenants who face substantial rental increases in spite of these measures, HDB will stagger the rent increases over the tenancy term.”

But HDB, which conducts regular reviews of market rents, will monitor the situation closely.

Meanwhile, the Government will also not step in to guarantee loans to property developers, National Development Minister Mah Bow Tan said in reply to another question by Ms Lee. Total loans to the building and construction sector, mostly to developers, grew by 22 per cent in the 12 months to February, and while loan growth to the sector has tapered recently, it is still at the relatively high level of $50 billion, said Mr Mah.

“Besides bank loans, a number of developers have also managed to raise capital through other means, such as rights issues or private placements,” he said.

938LIVE, CHANNEL NEWSASIA

From TODAY, News - Tuesday, 14-April-2009

Cash-over-valuation for your HDB flat? Think again

You may still be thinking of selling your flat, and becoming rich from the proceeds. Well, think again, because the forecast doesn't look like that. HDB flat price has peaked, and is now going the other direction... down.

Read on...

-----

Cheow Xin Yi
cheowxinyi@mediacorp.com.sg

THE public housing market, which is known for its resilience, has finally peaked, according to flash estimates.

In its first decline in three years, the Housing and Development Board’s (HDB) Resale Price Index fell 0.6 per cent in the first quarter of the year, after rising 1.4 per cent in the previous quarter.

Most analysts Today spoke to said they saw this as a reflection of the general deterioration in the economic and employment climate. “We have seen private property prices coming down and this has had a spillover effect on HDB. Once cash-over-valuations (COV) come down, transacted prices also become lower,” said Mr Chris Koh, Dennis Wee Group’s vice-president.

Another reason, suggested Mr Colin Tan, research director at property consultant Chesterton Suntec International, could be HDB’s pushing out more supply, making new flats more “reasonably priced” and driving down the demand for resale flats.

ERA’s Asia Pacific associate director Eugene Lim said larger flats, such as five-room units or those above $500,000, are taking longer to sell and coming in below valuation. “For larger flats, the days of transactions with COV are over,” he said.

The downtrend is good news for buyers, especially newly-weds, although ERA’s Mr Lim said resale prices are not likely to plunge. He expects HDB resale prices to come down by 5 to 10 per cent for the whole year, while PropNex chief executive Mohamed Ismail had a more optimistic estimate of 2 per cent.

Mr Lim added: “It has taken some time for (HDB prices) to move to a new peak. Similarly, the downtrend is reflective of the environment, but it will happen in trickles.”

Would a declining public market exacerbate the already shaky private sector, especially when recent transactions in the latter has depended on HDB upgraders?

“Theoretically, when people are getting less after selling their HBD flats, they’ll have less to splurge on private developments,” said Chesterton’s Mr Tan.

But Mr Koh from Dennis Wee Group feels that an HDB flat owner “would want to upgrade now in absolute terms”, as the savings from the purchase of a private property would be higher than the loss he would incur from selling his HDB flat, given the bigger drop in prices in the private market.

From TODAY, News
Thursday, 02-April-2009