Rehda's wishlist for upcoming Budget

PETALING JAYA (Sept 4): The Real Estate & Housing Developers' Association Malaysia's (Rehda) wish list for the upcoming budget include a firmer stand on policy and incentives for foreign and first time buyers, according to president Datuk Seri Michael KC Yam. 

"Among the things we are hoping for in the budget include leaving the real gains property tax (RGPT) rate as is. And following on from the report that foreign buyers do not increase property prices, we are hoping for a reduction in stamp duty for foreign purchasers and first time home owners," said Yam.

He was speaking to reporters at the Rehda media briefing for the property industry survey for the first half of 2012.

Yam also remarked on the government's plan to make all the properties from 2015 onwards to be purchased on the "build-then-sell" model, stating that it would cut the supply of properties by about 50%.

"We are suggesting that it not be the only method that properties are sold by, and [we should] simply let the buyer decide how they would choose to buy. In the end, it would have an impact on 140 industries," said Yam.

Yam also commented on the perception that foreign buyers would drive up housing on prices, stating that only around 2% of homeowners nationwide are foreigners.

"In addition, foreigners are only interested in high-end properties, which would not be as much of interest to the man on the street," said Yam. - The Edgeproperty

High Court rules in favour of developer

GEORGE TOWN: A resident of Kampung Boundary 5 in Air Itam has to move out as the High Court has upheld a Sessions Court’s ruling that developer Bersatu Stabil Sdn Bhd is the registered proprietor of the village land.

Judicial Commissioner Mohd Amin Firdaus Abdullah yesterday dismissed the appeal by Surjan Singh against the lower court’s summary judgment on vacant possession.

On June 7, Sessions judge Zainol Rashid Hussain ruled that Bersatu Stabil is the registered land pro- prietor and entitled to the vacant possession as the company purchased the 1.6ha land at a cost of RM5mil.

Zainol Rashid had also dismissed Surjan’s application to obtain a stay of execution pending court proceedings.

Surjan then filed appeals against the two rulings on June 14.

Amin Firdaus dismissed both appeals and ordered him to pay costs amounting to RM6,000.

Counsel Karin Lim and Tan Wei Ceat represented Bersatu Stabil while Surjan, who was not present at the court yesterday, was represented by Hardeep Singh Jessy and Harcharan Singh.

Outside the courtroom, Tan said 90% of the 44 house owners at the village had since accepted compensation from the developer and moved out while the rest wanted to stay there.

It was reported that the residents who refused to vacate the village had filed suits separately, claiming that the ownership of their land was unlawfully transferred.

They had claimed that the land, which had been physically divided into 46 separate plots, was rented out to them since the 1960s until the respective plots were separately sold to them at different times. - The Star

London luxury home market risks price crash

LONDON: Developers rushing to build top-quality London homes to cash in on strong overseas demand are in danger of being stung by a price crash as they flood the market, property consultancy EC Harris said.

Over 15,000 homes in developments worth more than 38 billion pounds ($60 billion) are due for completion in London's most expensive neighbourhoods in the next ten years, a 70 percent jump on last year, an EC Harris report said on Monday.

The total floor area covers almost 20 million square feet - equivalent to the size of the London Olympic park - and includes properties in upmarket Mayfair, the City of London financial district and the south bank of the river Thames.

"Developers are racing to get first to site because they don't want to miss out on the boom that's happening," said Mark Farmer, head of residential at EC Harris. "There is a danger that if all these schemes happen that you'll have a massive oversupply."

Prices for luxury homes have surged in recent years after economic turmoil in Europe and political uprisings across North Africa drove investors to the relative safety of central London property. Signs of a slowdown appeared after the UK government said in March it would clamp down on tax avoidance by overseas buyers of homes costing more than 2 million pounds.

Prices for the best central London homes rose 1.8 percent in the three months to August, the weakest quarterly growth since November 2010, property consultant Knight Frank said on Monday.

About 4,000 high-end homes are scheduled to be built in 2016 alone, an eight-fold increase on the average number built in London each year. The risk of over-building may be tempered by a tight supply in development finance, Farmer said.

Recent entrants to the market include offices and shops developer British Land, which said in July it would redevelop a block in Mayfair into luxury flats, and Malaysian developers SP Setia and Sime Darby, who plan to build over 3,000 homes at Battersea Power Station.

Such developers have been described as "late to the party" by some residential players. A May report from Development Securities warned that London luxury home prices could halve if the euro zone broke up.

Other risks include further devaluation of the euro, which would make London property look more expensive, and changes to the UK planning system that make it easier to convert offices to homes and add to the pipeline, EC Harris said.

"The reality is that no one knows what the conditions will be in five or ten years," he said. - Reuters

Upbeat views on Malaysian property

Substantial inflows and outflows of investments expected for this year

GEORGE TOWN: Despite the global economic crisis, property investments coming into the country and going to overseas this year are expected to increase substantially.

The recently introduced 10% stamp duty for foreigners buying properties in Singapore has increased the attraction of Malaysia as a property investment destination.

Property investments flowing to Melbourne, Australia, are expected to increase between 15% to 18% this year from RM125mil in 2011, thanks to new housing loans for the Australian market recently introduced byMalayan Banking Bhd (Maybank).

Property Talk International Sdn Bhd managing director Steven Cheahsaid that foreigners showing interest in Malaysian properties had increased significantly this year, compared with the last three years, due to the recent 10% stamp duty introduced in Singapore for foreigners buying homes.

Tang: ‘Investors from China are big time property purchasers in Singapore.’

“The other reason is that Kuala Lumpur still remain as one of the few South-East Asian cities with attractive property prices.

“Compared to Jakarta, the price for a prime residential in Kuala Lumpur is about 15% lower.

“The buyers are from Indonesia and China and they show preference for Iskandar, Johor Baru and Kuala Lumpur.

“Indonesians prefer Iskandar because it is close to Singapore,” he said.

The Indonesians and China buyers generally go for properties priced between RM600,000 to RM1.5mil in Iskandar and Kuala Lumpur, while in Penang they go for RM1mil above homes, according to Cheah.

The additional direct flights from Jakarta to Penang by Air Asia had also fueled the interest from Indonesia for Malaysian properties, Cheah added.

This year, Property Talk expects to sell about RM55mil worth of properties located in Johor, Kuala Lumpur, and Penang, compared with over RM20mil achieved for 2011.

“Over the past three months, we have sold over RM25mil worth of properties, comprising 35 residential homes located in Kuala Lumpur and Iskandar, Johor Baru.

“We expect to sell another RM30mil worth of properties, comprising 30 to 40 homes, from Iskandar, Kuala Lumpur, and Penang via three more property exhibitions in Jakarta jointly organised by Malaysia Property Incand private developers before the year ends,” he said.

An aerial view of Melbourne. Property investments flowing to the Australia’s city are expected to increase between 15% to 18% this year.

On investments from Malaysia to Australia, Cheah said the loan interest from Maybank was between 4% to 5% per annum compared with 5.7% to 6% per annum by Australian banks.

“This is why we can expect more Malaysians to take up the loan to invest in Melbourne, Australia this year,” Cheah said, adding that the Maybank housing loan was for Melbourne only.

According to Cheah, Melbourne is the top investment destination for Malaysian property investment funds.

“This is because many Malaysians have relatives who have migrated to Melbourne, where you can find a variety of Malaysian food restaurants.

“According to the latest research from Australian Property Monitors (APM), over the last five years, Melbourne has been the standout performer among the major capital cities for house price growth, with prices increasing almost 30% in just 15 months,” he added.

Meanwhile, Henry Butcher Marketing Sdn Bhd chief operating officer Tang Chee Meng said Henry Butcher had recently set up a property show gallery in Beijing, following the imposition of the 10% stamp duty by the Singapore government for foreigners buying properties in Singapore.

“The gallery, set up two to three months ago, showcases residential properties from Klang Valley, Malacca, and Penang.

“Investors from China are big time property purchasers in Singapore.

“With the 10% stamp duty introduced, Malaysian developers are now trying to attract them over.

“We still need to do a lot of education work in China to promote Malaysia as a property destination, as the awareness is still lacking,” he said.

Tang added there were many enquiries from China investors to buy vacant land to develop residential projects in Malaysia.

“We hope they will undertake development in Malaysia and promote the properties in China.

“This will help to increase more awareness for Malaysian properties in China,” he said.

According to Tang, the global financial crisis which erupted in 2008 and 2009 saw foreign interest for local properties dropped significantly. ”In 2010, we see a return of foreign interest, but the volume and value of property transactions involving foreigners still have not not recovered to anywhere near its peak prior to 2008.

“We believe the pace of investment from overseas will remain flat against last year.

“Besides tapping into traditional sources like Singapore, Hong Kong and Indonesia, Malaysian developers are moving into markets such as South Korea and China.

“China is a vast market and if Malaysian developers are able to educate the investors on the attraction of Malaysian real estate, we may see a surge in foreign interest,” Tang added.

Henry Butcher Marketing director for international marketing Jazmine Goh meanwhile said the global economic crisis had created favourable conditions and opportunities for Malaysians to invest in overseas real estate.

“The economic slowdown in Britain has caused property prices to plunge and coupled with the drop in the value of the pound sterling against the ringgit, properties in the United Kingdom have become more affordable and within reach of middle income Malaysians.

“The mortgage defaults in the United States have also resulted in a lot of opportunities to pick up properties foreclosed by the banks at a fraction of the original price.

“Of course, the fear of the prolonged debt woes in Europe has at the same time resulted in a more cautious attitude being adopted by investors,” Goh said.

The popular investment destinations for Malaysians are Australia, mainly Melbourne and to a lesser extent, Sydney, Perth, Brisbane and Gold Coast as well as London, and Singapore, and more recently, the United States, according to Goh. - The Star

Zhongshan and state govt sign MoU

THE Penang state government has signed a memorandum of understanding with Zhongshan in China to establish a friendly-city relationship.

Chief Minister Lim Guan Eng said both parties conducted an in-depth exchange of views during his friendly visit to Zhongshan last year.

“With the signing of this memorandum, I hope that both parties will maintain this relationship as a platform to gain new achievements in trade, cultural links and tourism.”

CPPCC Zhongshan Municipal Committee chairman Qiu Shuhong, who was accompanied by a delegation of 10 people, signed the memorandum with Lim. - The Star

Two roads to become one-way street

TWO roads on Penang island will be turned into a one-way street soon to alleviate traffic congestion in the areas.

Penang Municipal Council councillor Muhammad Sabri Md Osman said the service road off Jalan Paya Terubong (next to Taman Bendera Apartments) and part of Jalan Irrawadi (between Service Road and Chow Thye Road) would be converted into one-way streets as part of an initiative to ease worsening daily traffic congestions on the island.

“We are giving it a three-month trial.

“We hope the system will help ease traffic congestion, as vehicles usually parked on both sides of the road are causing a jam.”

Muhammad Sabri said the council had also approved the installation of a pedestrian light in Lintang Macallum 1 for the safety of the pedestrians there.

“SJK (C) Li Tek’s pupils will be able to cross the road safely once the pedestrian light is installed,” he said after the full council meeting at the City Hall in the Esplanade, Penang.

“We expect to call for open tender within the three months.

“The project covers the laying of electric cables, setting up of the pedestrian light and the installation of electricity and road signs,” he said, adding that the estimated cost of the project would be RM70,000. - The Star

Slated for redevelopment

RESIDENTS living in the century-old settlement in Gat Lebuh Sandilands off Jalan C.Y. Choy can look forward to better living conditions as a redevelopment proposal for the area has been put in place.

Housewife Loh Bee Luan, 67, said the place was always infested with mosquitoes which breed in stagnant water.

“There is no proper drainage system here and rubbish would clog up the drains too.

“We also encounter snakes and monitor lizards,” she said when met at her home during a visit by Penang Chief Minister Lim Guan Eng recently.

Loh added that the place was smelly as it had no proper sewerage system as well.

“We are happy to know that the state government is planning to redevelop this place,” she said.

State Local Government and Traffic Management Committee chairman Chow Kon Yeow, who also visited the place, said the state is planning to redevelop the 1.85ha of land which has 60 residential houses, 14 small factories and three Chinese temples.

“We are here to listen to the residents’ views. This settlement, which has been around for close to 100 years, has been without proper roads as well as drainage and sewerage systems.

“It is located on the fringe of the city. If the state government does not develop such areas, it will continue to be like this for the next 50 years.

“The land office will be doing a detailed survey to know the needs of the occupants, made up of 60 families and their extended families,” he said.

He added that there was a proposal to build a flat for the residents.

“It is under the affordable housing programme,” he said.

Lim said the redevelopment project for public housing was to build better living facilities for the people and improve their quality of life.

“Since the majority of the residents here want redevelopment for public housing, we, as a people-centric government, have decided to visit them to gather more feedback,” he said, adding that the Penang Development Corporation would do the planning for the public housing project. - The Star

Heritage at crossroads

Over 800 heritage buildings have been sold since George Town was inscribed on Unesco's World Heritage List. But are they being properly restored?

AFTER living and working abroad for 15 years, Wei Fen returned to Penang two years ago to spend more time with her parents.

While her contemporaries invested in modern condominiums in the suburbs with spectacular sea or hill views, the heritage lover decided to put her money in a century-old building in inner George Town.

“I've always liked the idea of owning an old shophouse for its unique architecture. It also makes more financial sense to buy one as it costs almost the same as a house in the suburbs,” says the 43-year-old writer who has resided in the United States, England and Singapore.

Since George Town received World Heritage Site (WHS) status in 2008, interest in pre-war houses has spiked, not just among locals but also the Malaysian diaspora and foreigners. In just four years, more than 800 old buildings in the World Heritage Site (WHS) of George Town have exchanged hands.

Citing statistics from the Valuation Department, state Local Government and Traffic Management Committee chairman Chow Kon Yeow says that between 2008 and May this year, 882 transactions were recorded in the George Town WHS, which has 3,643 heritage buildings. During this period, the Penang Municipal Council approved applications to restore 428 such buildings.

Wei Fen admits it has not been easy getting a heritage property that suits her budget and desired location.

“It's not like old houses are a dime a dozen. Most are owned by the kongsi which do not sell their properties anyway. It took me nine months before I found an old three-storey shophouse in Dato Koyah Road with a willing seller. At RM600,000, it was still cheaper than a terrace house in Island Glades or Tanjung Bungah, at that time,” she shares.

With the sale and purchase agreement inked, Wei Fen was all set to restore the building based on the council's heritage guidelines. But she soon realised that it can be a long, tedious process. This, she believes, is one reason why many building owners carry out renovations without getting clearance from the authorities.

Therein lies the problem, one that conservationists fear may jeopardise George Town's Unesco listing.

According to Penang Heritage Trust (PHT)president Khoo Salma Nasution, the main threat within the WHS today is illegal and unsympathetic renovations.

“We do not have statistics, but a lot of illegal renovations are taking place,” she says.

A walking tour around the George Town WHS reveals a different picture from four years ago a large number of crumbling pre-war buildings have been restored or are under renovation. Several architectural gems have emerged but there are also dozens of buildings that stand out like sore thumbs, the result of bad makeovers.

The PHT is concerned that many owners renovate their properties without seeking advice from George Town World Heritage Incorporated (GTWHI), whose main role is to manage, monitor and promote the city's heritage. GTWHI works with the Penang Municipal Council (MPPP), which sends its enforcement officers out to check when there are complaints.

Salma feels there is a need to expand the capacity for enforcement, adding that monitoring should be done around the clock .

“When contractors want to do things illegally, they will work after (office) hours and on weekends and public holidays,” Salma laments.

“We at PHT are helping to monitor. Members of the public report to us whenever they see any renovations without the proper signage, and we will alert the GTWHI. In the last few cases, response has been quick and the illegal work stopped.”

Chow stresses that action to monitor non-compliance is ongoing, adding that stop-work orders have been issued to errant building owners. Under the Town and Country Planning Act and Street, Building and Drainage Act, the local council is empowered to enforce control over building and rebuilding works.

GTWHI, he adds, is instrumental in ensuring stakeholders are aware of the heritage guidelines and has conducted several workshops to educate building contractors.

“The education programme has been useful. We feel it is better for owners to work on the compliance issue with the respective government agencies before going ahead with restoration work. They stand to lose out on time if a stop-work order is issued,” he adds.

GTWI consultative panel member Tan Yeow Wooi says there have been many cases of non-complying renovation works such as owners altering the roof height of old buildings, laying inappropriate roofs or floor tiles, installing windows with fixed shutters and illegal extension of buildings. The conservation architect is particularly irked by the garish colours painted over some old shop fronts.

Admitting that there is a lack conservation architects in Penang, Tan says that in numerous cases, building owners just engage contractors to renovate their properties without submitting plans.

“Some contractors try to modernise old buildings and in the process, damage their historical features,” he points out.

Non-compliance, Tan believes, could be due to ignorance and red tape.

“In the WHS, applications for renovations or restorations can take between four and six months to be approved,” he observes.

Tan himself has been involved in restoring several historical buildings such as the Hock Teik Cheng Sin Temple in Armenian Street, the gateway of Yeng Kheng Boutique Hotel in Chulia Street and the famous Carpenters' Guild in Muntri Street.

Salma advises owners to seek advice from GTWHI before submitting their plans.

In Wei Fen's case, renovation has been ongoing for seven months.

“It should be completed in another month, fingers crossed,” she says, somewhat optimistically.

While Tan thinks the council guidelines are not strict enough, Wei Fen believes otherwise.

“I wrote to the council to complain about the lack of choice in their flooring specifications and I'm convinced that cost me another three months of waiting for approval,” she gripes. “After that, I didn't write back in protest any more. In all, I had to wait nine months for approval!”

Part of the challenge in renovating an old house, she says, is getting the right contractor.

“I found two contractors who wanted to charge over RM200,000, and one who quoted me RM100,000. I chose the latter as I intended to do only the basics and make the building liveable.”

Despite the obstacles and long restoration process, Wei Fen has no regrets buying an inner city home.

“All George Town shophouses have appreciated in prices, some tremendously. In Muntri Street, for instance, prices have doubled. A dilapidated house there used to be priced at RM1mil, now it's over RM2mil. And one newly restored house has just been put up in the market for RM3.8mil!”

It is interesting to note that many old kopi tiamand budget hotels in the inner city are slowly being replaced by fashionable cafes and boutique hotels. One reason is soaring rentals.

A retired town planner notes that except for a few, locals may not enjoy the new heritage site.

“Penangites are basically stingy,” he remarks wryly. But he believes the new upmarket businesses may be sustainable due to the influx of visitors to the George Town WHS.

Chow acknowledges that George Town is changing but says that heritage tourism has rejuvenated the area, with many buildings being restored and put into new usage. New boutique hotels and cafes have opened to cater to the demand of a new breed of tourists.

“There are also new art galleries, bicycle rental outlets and tourism-related business opportunities. Now, you can see longer queues at the Penang Road cendol stall and the Line Clear nasi kandar. This is the dynamics of change,” he adds.

The PHT, meanwhile, is concerned over dwindling population in the WHS.

Since the repeal of the Rent Control Act in 2000, more than 10,000 inner city dwellers, mostly poor tenants of pre-war buildings, have had to move out to low and low-medium cost flats in the outskirts.

Salma says more properties should be used for affordable housing and there should be some policy research and recommendations on this matter. “We need more people to live in the city.”

As for the mushrooming of upmarket cafes and hotels, Salma points out that if it keeps expanding at this rate, it may not be sustainable.

“If we are going to have more eating places, we need to upgrade the drainage and infrastructure, but without damaging the historic elements of the public infrastructure.”

The Trust, she says, advocates sustainable and responsible tourism.

“What is our carrying capacity (for WHS) and how is tourism benefiting the local community? Are there any negative impacts to community, heritage and environment?

“Improved public transport is essential if we want more tourism but not more cars and tourist buses, as this will impact negatively on the WHS environment.”

Outside the WHS, there is also another serious problem as many old buildings are being demolished, says Salma.

“Many Malaysians will be surprised to hear this, but 35 years after the Town and Country Planning Act (1976) was approved, we still do not have a Local Plan for the Penang island municipality. Many original Malay settlements like Tanjong Tokong, Batu Uban and Balik Pulau are threatened with redevelopment.

“We need to understand the fragile ecology of the island, work out the carrying capacity and impose constraints.” - The Star

Are you ready to follow Robert Kiyosaki’s advice?

I am thrilled that my last article, What Robert Kiyosaki Didn't Tell You, garnered positive feedback. It shows that many people are thinking about the impact Kiyosaki's work can have on their finances. As such, I would like to continue the discussion about investors taking on and managing risks (or investors being unable to manage such risks).

Kiyosaki is right to say that we must take an active interest in how we manage our wealth and assets. Rising inflation and the high costs of living are proof that we can no longer afford to be lackadaisical with our personal finances.

That said, in a book he co-authored with Donald Trump, Why We Want You to Be Rich: Two Men, One Message, Kiyosaki said this: “If you do not decide to become rich, the chances are you will become poor.” I feel that this is simply untrue: I don't think that if you decide not to become rich, you'll be poor.

The problem is that Kiyosaki's statement evokes fear in many people, especially the middle class. Petrified that they are going to be poor, many take a leap of faith by either investing aggressively in property or starting their own business. Many people do this in the belief that they are conforming to another of Kiyosaki's fundamental points and that is to take on a good debt.

According to Kiyosaki, there are two types of debts: bad debts and good debts. Bad debts are those taken to finance your lifestyle and enjoyment. Good debts are ones taken to fund your investments that will grow your wealth. Naturally, Kiyosaki advocates you taking on more good debts. However, remember that when you take on good debts, you are also exposing yourself to financial risks. In addition, there's no such thing as good risk or bad risk. So, when you take on good debts, how much risk are you being exposed to? Also, are you ready to manage such risks?

It is the failure to consider these questions that have led people to follow Kiyosaki's advice with disastrous consequences. Those who invest in properties are usually excited by the high possibility of becoming wealthy. However, those who fail are often the ones who rush to take out loans from banks without giving their actions careful thought. Unable to rent or sell these properties, many can't service their loans and suffer financially. In some cases, their suffering includes their mental and physical health.

I personally benefitted from Kiyosaki's advice as it gave me the assurance and encouragement to start my own business more than 10 years ago. I thought it would be smooth sailing all the way and business would pour in. After all, I had created a workable business plan, saved enough money and believed that people wanted to know the services offered by independent financial advisors. In no time, I realised that starting and managing a business wasn't going to be easy, especially when independent financial advisory services were relatively new and unknown. However, I was lucky because I had the necessary support, knowledge and experience to manage my business risks by virtue of being involved in a business that emphasises risk management. I was able to avoid some of the traps that people fall into when they don't manage their risks properly.

Let me give you a real-life example: a 28-year-old engineer is frustrated in his job. He sees his bosses driving fancy cars and going on annual holidays to exotic places and wonders if he'll ever be in the same financial position. He decides that the only way to become rich is to become his own boss. So, he quits his job and opens a restaurant. Only, he has not prepared a written business plan, has little capital, no idea how to manage cash flow or his staff and knows nothing about the food and beverage industry. After three years, he is still struggling and now borrows money from relatives and friends to keep the restaurant afloat. Two years later, his business has completely failed and he's declared a bankrupt. When he falls back on the only thing he knows, which is engineering, he's already 33-years-old and has been out of the job market for five years. He'll be hard-pressed to find an employer willing to employ him.

If this same 28-year-old engineer were to approach me, I would tell him to optimise what he has now to achieve financial freedom first. In the process, he will learn about managing and minimising the financial risks he may be exposed to. In particular, I would tell him to continue working, but not give up on his dream to become wealthy and start his own business. Then, when he's comfortable, he can take on more risks.

Planning process

The rationale behind the advice I give this 28-year-old engineer is this: the process of planning and preparing for a successful business might take a few years. What is important is that throughout this process, he continues to have a steady source of income, thereby, reducing his mental stress and any strain on his finances. He will also be able to invest his savings and accumulate his wealth. When the time comes for him to assume the risk of running a business, at the very least, he will be financially secure. It may appear to be a slower and more conservative approach than Kiyosaki's, but it is, by far, a safer way to achieve wealth.

So, are you ready to follow Kiyosaki's advice? In a nutshell, you're ready if you feel comfortable taking various business and investment risks. This will mean being in a position to manage and minimise possible stress that can come with such a move.

Naturally, it is an added advantage if you know how to adapt Kiyosaki's money-making ideas within a Malaysian context. You must also be equipped with sufficient knowledge and experience about your investments. Most important of all is to have a back-up plan in place to support you and your family financially in the event such money-making ventures fail.

No doubt, this is a lot for the average Malaysian to consider if he wants to start on the journey to becoming wealthy. It is possible for him to become lost along this journey. Bear in mind that every journey begins with a single step and you should take that wisely. In my new book, Set Yourself Free, I emphasise how important it is for you to have clarity about your present financial position. Then, by using a new tool I've created called “The Money Matrix”, I show you how to successfully plot a safe path to wealth, with minimum effort and risk. - The Star

Yap Ming Hui has no hesitation admitting that he is kiasu and prefers a safer and more certain approach to becoming wealthy. He can be contacted at yap@yapminghui.com.

Addressing the rising home price conundrum

THE rising cost of housing has become a phenomenon in many countries, causing enormous social concerns particularly for the lower and middle income groups.

Indeed, from the more than 4,000 suggestions and comments our Prime Minister received online in his preparation for Budget 2013, the price of housing was one of the two hottest topics raised. What can we do to alleviate this conundrum?

Increase supply of affordable houses

State and federal governments should remain the prime providers and managers of affordable housing. With the improved road infrastructure, suburban land owned by them are now more accessible and can be alienated for affordable housing schemes. Contractors with an excellent track record should be selected to build the houses at the lowest price so that houses can be sold to eligible buyers at affordable prices. The Government can also auction and sell land at the highest bid price and use the proceeds to fund the schemes.

Private developers which buy land at a high cost would invariably seek to optimise the usage of land by building high-end houses and commercial properties. The authorities have to set a stringent development quota for affordable housing. As government intervention should be kept to a minimum for the market forces to function, developers should be allowed to pay cash compensation should they decide not to build in accordance with the quota set. Such compensation may also be used for affordable housing schemes.

Curb speculation

Several countries have introduced tougher measures to curb speculation, a major factor to escalating home prices. Singapore, for instance, changed its stamp duty rules on Dec 8, 2011 and imposed a 10% duty on top of the normal rate on foreigners and non-individuals. Stamp duty chargeable on vendors of up to 3% was introduced on Aug 30, 2010 and revised to 16% on Jan 13, 2011.

The slew of stern measures have been fairly effective. From Jan 28, 2011, two major cities in China, Shanghai and Chongqing pioneered the collection of real estate taxes on certain categories of house purchases, including second homes and luxury properties at rates ranging from 0.4%-0.6% and 0.5%-1.2% respectively.

Malaysia can do likewise by reinstating the Real Property Gains Tax on gains from residential property disposed of within two years at 30%, replacing the current mild rate of 10%.

Concurrently, the stamp duty of up to 3% can be increased and be levied on both the buyer and seller in respect of any properties transacted by foreigners and high end properties purchased by the locals who already own one.

The recent Bank Negara rules introduced to restrict the borrowings on buyers who own more than two houses have dampened the sales of developers considerably. To keep the business going, many developers are undertaking promotional activities abroad to lure foreign investors, particularly those from China, Japan and Singapore who often find Malaysian properties unbelievably cheap.

Some investors, especially those who enlist in the My Malaysia Second Home (MM2H) programme, snap up property almost instantaneously without much consideration. It does not make economic sense to shut our doors to foreign investors completely but we can set a higher price threshold for foreigners and take advantage of the inflows to collect more tax revenue. The additional revenue collected can be gainfully used to help more people to own a house.

Provide fiscal assistance

The Government can extend the interest deduction scheme introduced in 2009 under which eligible individuals are given three years' tax deduction in respect of interest incurred of up to RM10,000 per year.

Hong Kong in its 2012/2013 budget extended the annual home loan interest deduction of up to HK$100,000 from 10 years to 15 years.

Our government has thus far been considerate by providing a 50% stamp duty exemption on purchases of residential property not exceeding RM350,000 from Jan 1, 2011 to Dec 31, 2012 and a 100% exemption for property priced up to RM300,000 purchased under the Skim Perumahan Rakyat 1 Malaysia (PR1MA) from 2012 to 2016.

In view of the high home prices, the Government should consider giving full stamp duty exemption on purchase of residential property not exceeding RM500,000 by first time house buyers.

In China, the real estate tax revenue collected is to be used to subsidise the construction of affordable houses and the Chinese government has targeted to build 10 million units of affordable houses in 2011. Singapore, on the other hand, offers Central Provident Fund (CPF) housing grants to various eligible groups. Applicants living near parents are given a princely grant of S$15,000 to S$40,000.

Presently, there is a housing loan scheme allowing a maximum loan of RM45,000 offered by our Housing and Local Government Ministry to the households which earn between RM750 to RM2,500 per month.

More funds can be channelled to this scheme to increase the qualifying household income to RM8,000 a month.

Developers can certainly play a part in boosting the home ownership by introducing flexi-schemes such as lease with an option to buy and allowing the conversion of lease rental paid to settlement of purchase consideration if the option is exercised.

Malaysian developers may consider adopting an interesting shared ownership scheme practiced in the United Kingdom where a buyer can co-own residential property ranging from 25% to 75% of the overall property value with another party which can be either the housing developer or housing association and pays a rent in respect of the share he does not own.

The buyer is allowed to increase his ownership as his disposable income increases over time.

The lower capital outlay assists the aspiring young own a house at the early phase of his career, encourages him to work harder and save more to eventually acquire absolute ownership of the property.

Strict financial discipline is imperative if one who starts from scratch harbours a hope of owning a house early.

Undoubtedly, the authorities, the developers and the people concerned collectively play pivotal roles in realising the home ownership dream of the lower and middle income groups. - The Star

Yee Wing Peng is the Country Tax Leader of Deloitte Malaysia. He considers himself fortunate as he was able to purchase, with a mortgage loan, a 20X70 link house costing RM220,000 after 6 years of work. He now has concerns for his three children.