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Long term view when investing in uncertain times

KUALA LUMPUR (April 28, 2012): “Investment gurus all say that in uncertain times, invest for the long term,” Zerin Properties CEO Previndran Singhe said at The Edge Investment Forum on Real Estate 2012 on Saturday, April 28 at Sime Darby Convention Centre in Kuala Lumpur. Presenting his talk on the Malaysian property market overview and outlook at the forum themed Investing in uncertain times, Previn foresees moderate growth in the property market in the coming months. “For our outlook for next year, there may be a 15-20% drop in transactions but property prices will hold. We do anticipate a small mini boom in 2013.” “Where to put your money? The key for investments for the next few years would be long term. I do not think there will be short term play," he said. “Long term investments, would be between 3-5 years average post completion. Properties below RM1.5 million will be hot picks. Look at locations such as Nusajaya and Iskandar in Johor and Penang. In the Klang Valley, stick to the usual hot spots, but I am also very bullish about properties in Kajang, Jalan Ipoh and Selayang. Landed properties seem to be the flavour of the day but he does not discount commercial and industrial properties. In 2011, volume of transacted properties recorded an increase of about 14.26% more than 2010, with an emphasis on residential properties. “We saw a lot of activities in urban areas – not necessarily within the city centres but around it. Generally, all sectors did well, but on the ground, we saw a phenomenal pick up for residential landed properties priced below RM2 million in the suburbs of Kuala Lumpur, Penang and Johor Baru,” he said. Penang and Johor experienced the highest growth in property prices while Klang Valley saw a marginally lower growth, as its base price is already high. “Sabah, Sarawak and Melaka also showed growth. Kota Kinabalu is a very vibrant market and still under-served in terms of product offerings while there is also demand from in-migration in Penang,” he explained. Average price of agriculture properties in 2011 saw a growth of 56%, which is in line with the commodity growth globally, followed by 10% growth in industrial, which reflects the foreign direct investment for Malaysia, and 5.5% for commercial. Overall, residential properties saw an average price growth of 2.6%. For longer term real estate investments, Previn picked four locations to look at – Melaka, Penang, Kota Kinabalu and Johor Baru. These locations, he said, hold a lot of promise in term of real estate potential. Commenting on Bank Negara’s move to tighten measures to curb speculative buying and household debt, he said, “I agree with the approach but it would be done in a more gradual manner. We should encourage investment but punish upon exit, even up to 50% or 70% via real property gains tax, for example.” The forum entitled is held annually for readers of The Edge Malaysia. The presenting sponsor is Malaysia Building Society Bhd while the supporting sponsor was Sunway Property. For full coverage of The Edge Investment Forum on Real Estate 2012, read the May 7 issue of City & Country, the property pullout of The Edge weekly.

 

More investment opportunities surrounding major infrastructure projects

KUALA LUMPUR (April 28, 2012): The new major infrastructure projects in Penang, Greater Kuala Lumpur and Iskandar Malaysia, Johor, has presented several investment hotspots for prospective real estate investors, said renowned cartographer Ho Chin Soon.
These infrastructure projects include new highways  in Penang and Iskandar Malaysia, Johor, as well as the mass rapid transit (MRT) project coming up in Greater Kuala Lumpur, the founder and director of Ho Chin Soon Research Sdn Bhd said at The Edge Investment Forum on Real Estate 2012 themedThe Edge Investment Forum on Real Estate this year was themed “Investing in uncertain times”.
In Greater Kuala Lumpur, he pointed out that the MRT green line will go through Pasar Rakyat station in the Imbi area, which is an interchange that is also part of the Kajang-Sungai Buloh line.
“The green line comes from Bandar Baru Selayang, punching through Kampung Baru, then it goes to the interchange here to the Pandan area and then it goes to Putrajaya’s electric rail line station,” he said.
He added that the MRT circle line will go through Sentul, the KL Metropolis project along Jalan Duta, Mont’Kiara, the vicinity of Bukit Kiara Equestrian and Country Resort, Universiti Malaya, Mid Valley City, the Bandar Malaysia township at the old Sungei Besi airport, before connecting with the existing LRT lines to Ampang Point before returning to Sentul.
Ho also pointed out four new highways coming up within Greater KL, namely the Damansara-Shah Alam Highway (Dash), the Kinrara-Damansara Expressway (Kidex), the Serdang-Kinrara-Putrajaya Expressway (Skip), and the Sungei Besi-Ulu Klang Expressway (Suke). Properties in areas served by these new highways would benefit from the better accessibility and connectivity.
In Johor, he named Nusajaya, Danga Bay and their respective vicinities as new hot spots thanks to the new Coastal Highway.
Meanwhile, the newly-opened Eastern Dispersal Link which helps to alleviate congestion is also good news for the eastern corridor’s hospitality projects. In addition, he predicted better prospects for Desaru’s tourism projects due to the Senai-Desaru Expressway due to enhanced connectivity.
Meanwhile for Penang, he said, “In Penang, focus on the island. Maybe, you’d want to look at Seberang Perai and Batu Kawan’s affordable housing.  My dream is to one day go back to Penang, own a beachfront property [because it is growing scarcer] somewhere in Teluk Bahang, Batu Ferringhi.”
The forum was held at Sime Darby Convention Centre and saw 600 attendees turning up to gain insights into the real-estate market. The presenting sponsor was Malaysia Building Society Bhd while the supporting sponsor Sunway Property.
For the full coverage on the forum, read the May 7 issue of City & Country, the property pullout of The Edge Malaysia.

Make purchases based on fundamentals

KUALA LUMPUR (April 28,2012): Now is a good time as any to make selective purchases in the landed homes market, said CB Richard Ellis executive chairman, Christopher Boyd.
Boyd was sharing his views in a panel discussion etitled "Buy now or wait?” at The Edge Investment Forum on Real Estate 2012 themed “Investing in uncertain times”. Landed homes is ideal for investment as the Malaysian economy has experienced good growth, he said.
"If you look at the property market in a more level headed view, landed home prices in the Klang Valley have generally doubled in value within the last 10 years or so," he said. "We have good economic growth as well as the commitment of the federal government to increase the nation's household income."
He cited a typical 2-storey link house in Bandar Utama where between 2004 to 2011, the price has  appreciated over 80% or 10% per annum. Growth over the past three years between 2008 to 2011 has been 63% while growth over the preceding three years  between 2005 to 2008 was 11%. The average annual growth between 2004 to 2008 was just 2.8%.
Boyd explained that there is a way to spot areas that have the potential to experience a growth in its property prices.
"If you can find an area that has not seen an average of 10% per annum growth for the last 10 years, then the indications are that the neighbourhood is ready for a growth spurt and you might try to jump in and catch it."
Boyd also named Gombak and other areas between Melawati and Setapak as choice areas for investment. Data showed that 2-storey terraced home prices in Melawati shot up during 2011, after recording limited price growth during 2004 to 2011. The average annual growth between 2004 to 2010 was 2.9% while growth in 2011 jumped to 39%. The total growth of 2-storey terraced houses in the area over a ten year period between 2001 to 2011 is 66%.
"The growth in Melawati last year could partly be the result of the opening of the DUKE Highway," he said.
Another panelist Datuk Ahmad Zaini Othman, chief executive officer of Malaysia Building Society Bhd (MBSB) said property investors should no longer buy or sell based on perceptions but on the fundamentals in uncertain times,
“Buying and selling on fundamentals means you must observe not only our  economy but also in other parts of the world like Europe, the US and China, and study the trends such as unemployment and production. We are no longer living in a fishbowl economy,” said Ahmad Zaini.
The uncertain global economy and Bank Negara’s guidelines on responsible financing, which dictates banks to assess loan applications based on net disposable  income, can affect the country’s economy in the long-term.
The immediate impact, said Ahmad Zaini, is creating a cautious market where investors may take a wait-and-see approach, which will dampen the market. This in turn will cause developers to be very selective with new launches and projects.
“But the more serious issue is the possible ripple effect. In the long-term, it can affect supporting companies in the property sector and eventually the economy. The property sector is an important sector in the growth of the country’s economy. We have to monitor the ripple effect very closely,” said Ahmad Zaini.
However, he believed the guidelines on responsible financing will also help greatly in the long run by reducing speculation in the market and controlling household debts.
Ahmad Zaini noted that right time for investors to buy is when the market stabilises after the initial market reaction. He advised buyers to buy from established and financially sound developers to avoid being left in a lurch by developers.
“In this environment, only the strong developers will survive. You have to be careful as project failures  can happen,” said Ahmad Zaini.
“If you are buying to invest, you really need to study and know the market. If you’re buying for own use, anytime is a good time,” commented Ahmad Zaini.
Meanwhile, the third panelist Sunway Group COO property development division Daniel Lim said property prices will continue to increase due to lack of availability of land in prime locations, a steady increase in land prices in the recent years and high prices of building materials.
He also cited rising cost of labour, cross-subsidy for low/medium cost housing and strong demand due to the young population as reasons for rising property prices.
In times of uncertainty, he advised investors  to “buy from reliable developers with good record and strong financial standings. Buy properties in growth areas, which are well connected, suburban areas with expressways or public amenities such as light rail transit (LRT) /mass rapid transit (MRT) /bus rapid transit (BRT). Areas such as Puchong South, Cyberjaya, Putrajaya and Seri Kembangan have potential too.
“Look at urban redevelopment areas in the Klang Valley such as the Rubber Research Institute (RRIM) land in Sungai Buloh, former military airport in Sungai Besi, the Kuala Lumpur International Financial District (KLFID) in Jalan Tun Razak, former Pudu jail, as well as Jalan Cochrane and Jalan Peel,” he explained.
Lim does not see a property bubble in the property market. “The property supply is quite constant, about 500,000 units every year, and there is a gap based on demand by the growing population. The next few years, we expect to continue seeing demand exceeding supply of properties so there is no use asking if there’s a bubble or not,” he added.
For the full coverage of the forum, read the May 7, 2012 issue of City & Country, the property pullout of The Edge Malaysia.