Should you buy an abandoned house?

BUYING property and then selling (or renting) it is often viewed as a good form of investment by many. This is especially the case for strategically-located homes that are either new or have been well maintained by a previous owner.

However, sometimes, an abandoned house or even an old, dilapidated one, could be worth investing in. Admittedly, reviving an abandoned house can be a daunting task. But with a little bit of patience, effort and money, the home you're looking to revive could just end up being a diamond in the rough.

Abandoned house

According to reports, there are 177 private housing projects that have been abandoned as at May 31.

Finding abandoned houses is actually not that difficult, as they tend to stick out like a sore thumb! The main issue, however, comes after you've found one, and then need to locate its owner.

“One simple way is to ask the neighbours,” says James Wong, director of international property consultants, valuers and estate agents, VPC Alliance (M) Sdn Bhd.

Wong: ‘One simple way (to find out about the owner of an abandoned house) is to ask the neighbours’.

However, a house could be abandoned for so long that even the neighbours might not know of the owner's whereabouts.

“The official way is if the house is within the jurisdiction of the municipality, local council or district council, and to go to the assessment section to check the owner and address,” says Wong.

“If the house is outside the jurisdiction of the municipality, local council or district council, then you need to go to the land office to do a title search on the property, which will reveal the ownership of the title. Then, you have to check the owner's contact details and contact,” he adds.

But what if the owner is deceased?

“In a situation where the owner is deceased, one can appoint a lawyer to make checks at the central probate registry at the High Courts to verify whether the family members of the deceased have filed for a petition for a grant of probate (where the deceased died leaving a will) or for letters of administration (where the deceased died intestate),” says National House Buyers Association (HBA) secretary-general Chang Kim Loong.

He says checks could also be made at the related land office to ascertain whether an application has been filed (at the land office).

Chang: ‘Checks about an abandoned property could be made at the related land office’.

“They could also make enquiries at the Amanah Raya office for confirmation. Having established the identities of the beneficiaries to the deceased estate, one can approach them and negotiate the offer to purchase.”

Cheaper price

Elvin Fernandez, managing director of property consultancy firm Khong & Jaafar Sdn Bhd, points out that abandoned houses, or homes that have deteriorated over the years, tend to be cheaper.

“When you buy a home, you are buying it for the land and the building. The value of a property is what the building and the land are collectively worth.”

He says that the value of a property is affected when the condition of the building has deteriorated.

“If the house has been left unattended for a long time or has depreciated quite substantially, then usually the land value remains the same but not the building value.

“The greater the depreciation, the lesser the value. In fact, there might actually come a time when the building will have no value at all,” Elvin says.

He says in rare instances, the building's deterioration level could be so bad that it could create a spillover effect on the land and affect the land's value as well.

“It's not a rule that's set in stone, but usually it's the building value that drops,” Elvin says, adding that even the location of the property could play a role in the property's value.

“It depends. A house in Damansara Heights that's been abandoned for a while could still have its value intact, while a house in a poorer (rural) neighbourhood that has been left unattended for just six months could already see a substantial depreciation in its value.”

A good buy

Elvin believes that buying an abandoned house is definitely worth the investment, seeing as these homes generally retail for a much cheaper price (compared with new properties or lived-in ones in the secondary market).

“Abandoned properties could be worth a good buy and definitely a must to look at,” he says.

Malaysian Institute of Estate Agents (MIEA) deputy president Siva Shanker also feels that purchasing an abandoned house is a “great investment opportunity.”

Elvin: ‘The value of a property is affected when the condition of the building has deteriorated’.

“You have a lot of this going on nowadays, especially within Petaling Jaya. There are a lot of old houses in that area and many people are buying them either to move in or to flip it (resell) for a profit.

“It's a great investment opportunity. People buy the home for between RM600,000 and RM700,000, then spend RM500,000 on refurbishing it and then selling it for about RM1.3mil. You can easily make a profit of between RM200,000 or RM300,000 right there!”

Siva believes that refurbishing an old or abandoned house is much more cost effective than buying a brand new one (or a lived-in one in the secondary market).

“The Malaysian property buyer is such that once he's bought a house, whether straight from a developer or an existing buyer, he's going to tear it down and make renovations of his own.

“And this is not at all cost effective, because the developer (or previous owner) has probably already given the buyer everything he needs. But after buying the house for say, RM1mil, he's then going to spend another RM500,000 on renovations. Better to buy an old house, which is cheaper, and then install whatever you need.”

MIEA president Nixon Paul, meanwhile, feels that it's “safer” to buy a house from the primary or secondary market.

“Buying an abandoned house will be cheaper, but think of the refurbishment that you're going to have to do, which could cost a lot more than what you would normally do for a new one.”

Siva: ‘Purchasing an abandoned house is a great investment opportunity. You have a lot of this going on nowadays.’

“You're going to need to spend a lot of money on a lot of things that have either deteriorated or are totally gone.”

Siva asserts that although buying an abandoned house and refurbishing it is a good investment opportunity, he does add that it's not for everyone.

“If you have the money, the holding power and the property know-how, then it's a good way to generate income.”

On a personal note, he does wish that it would be possible for buyers to “pre-customise” their homes when they buy it from a developer, and not purchase a “finished” product that will not necessarily appeal to everyone.

“Wouldn't it be nice if the buyer had a choice on the level of fixtures that go into a home, so that the price could be reduced accordingly? Because most people are going to move in and make changes that will end up being a waste of money.

“We need to slowly move into a more mature market where there can be more flexibility in the property that we buy,” he says. - The Star

How affordable housing can succeed

IMAGINE a cook without his pots, pans and utensils, can he still perform his duties of cooking a delicious meal for his clients?

We need essential tools and resources to accomplish our tasks even if we are skilful in our own profession. Same goes to the property industry.

With the market demanding more low and medium-cost housing, all stakeholders should look for the most effective ways in maximising the usage of our resources to build affordable housing and to meet the ever increasing housing demand.

In my article last month, we identified the root causes that influence the pricing mechanism of a housing project. These include the rising land acquisition cost, lengthy approval period, holding cost of unreleased bumiputra units and cost of building utility infrastructure.The next questions are:

What are the remedies available?

Which parties have the ability, expertise and resources to implement the remedies?

First of all, to address the issue of high land cost, the Government could tap onto the expertise of the private sector to develop government land as the land acquisition cost is much lower. Land can be fairly distributed to property developers through open tenders. This way, more homes can be built on a more affordable and effective manner for the people.

To increase the supply of affordable housing, the Government should also conduct a study to accelerate the development's approval process by reducing the number of steps and the time involved (sometimes two to three years) in the approval process, have an automatic release mechanism for unsold bumiputra units, and remove the burden of utility infrastructure costs on developments, which should be borne by privatised utility companies themselves instead.

In the recent budget announcement, it is encouraging to see that the Government has proposed several measures to tackle the issue of affordable housing in Malaysia. The efforts include the allocation of RM1.9bil to build 123,000 affordable housing units nationwide and a RM500mil fund to build 80,000 houses priced between RM100,000 and RM400,000.

People and organisations that work on their areas of expertise are most likely to deliver outstanding results. Government agencies that have been working on affordable housing can build these housing effectively as they have both the expertise and resources.

On the other hand, though private developers have the expertise, the challenge of high land and material cost are the main hurdles in meeting the demand, just like the cook without his pots and pans. To meet the desired outcome, it is important for the Government to fund more government agencies with expertise and resources to embark on this initiative. I still recall in 1974, when I joined the Selangor State Development Corp (PKNS) as a director, the main objective of PKNS was to build mass housing for the people and to eliminate the shortage of affordable housing.

However, according to a recent article in The Star, PKNS today has also ended up venturing into high-end developments to subsidise its low-cost housing projects and infrastructure, as it no longer receives grants from the Government. This has inevitably distracted the corporation from delivering more affordable housing projects to the public.

Therefore, it is important for the Government to constantly revisit the original objectives of corporations such as PKNS and other SEDCs (State Economic Development Corporations), Syarikat Perumahan Negara Bhd, and 1Malaysia People's Housing Scheme (Prima) that have relevant expertise, and continue funding them to build low and medium-cost housing.

Generally, people and organisations perform best in their areas of expertise. However, this must be backed with essential resources. If both the Government and private developers can leverage on each other's expertise and resources, I believe we can work towards a more sustainable and affordable housing policy, and realise the rakyat'sdream of having their own homes.

In that way, the cooks can equip the kitchen with the right utensils to cook up a delicious meal. - The Star

FIABCI Asia Pacific chairman, Datuk Alan Tong, has over 50 years of experience in property development. He was FIABCI world president in 2005/06 and was named Property Man of The Year 2010. He is also the group chairman of Bukit Kiara Properties.

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Penang property prices soar

PETALING JAYA: Property prices have shot up by about three-fold in Penang because of an increase in surcharges imposed by the Pakatan Rakyat-led government, claimed a former council official.

According to former Penang Municipal Council's Town Planning Department acting director Khoo Boo Soon, the additional cost imposed on developers were eventually passed on to buyers, hence the drastic increase in property prices.

They include the increases in infrastructure contribution and re-zoning fees, and contribution of RM120,000 per unit in lieu of building low-cost homes.

The infrastructure contribution charge has been increased from RM5 per sq ft to RM15 each for housing projects exceeding 15 units per acre.

For commercial projects, the infrastructure contribution is increased from RM7 to RM21 per sq ft for every unit.

The re-zoning fee had been increased from 25% to 50% on the difference based on the current value, he said.

“The fee is imposed by the council. But the state government also charges the developer 50% on conversion of state-owned land.

“All these additional costs incurred by the developers are passed on to the house buyers,” he told The Star.

Khoo said the lack of affordable homes had adversely affected the low and middle-income groups which made up more than 80% of the population.

“It is also difficult for the younger generation to own homes as the price range in Penang is beyond their means.

“What is the point of building more high-end homes when the majority of Penangites could not afford them?” he said.

“During the era of (former chief minister) Tan Sri Dr Koh Tsu Koon, the Government compelled the developers to build low and medium-cost homes.

“But the current government under (DAP's) Lim Guan Eng seems to be more interested in filling up the state coffers rather than meeting the needs of the people,” said Khoo.

The Property Stock Report for the first quarter of this year showed that the house prices in Penang had far exceeded the 2014 price projected by Penang Institute's City, Urbanisation and Environment head Stuart MacDonald.

Valuation and Property Services Department data shows a drastic increase in residential property prices between the first quarter of last year and this year (see graphic).

In an immediate response, Penang Housing Committee chairman Chow Kon Yeow said he had forwarded the queries on surcharges to the Penang Municipal Council.

“The State Planning Committee can make such decisions, but ultimately it is the council that implements them,” he said. - The Star

Housing starts surge in positive sign for US economy

WASHINGTON: Groundbreaking on new homes surged in September to its fastest pace in more than four years, a sign the housing sector's budding recovery is gaining traction and supporting the wider economic recovery.

Housing starts increased 15 percent last month to a seasonally adjusted annual rate of 872,000 units, beating even the most optimistic forecasts on Wall Street, Commerce Department data showed on Wednesday.

It was the quickest pace of groundbreaking since July 2008, though data on starts is volatile and subject to substantial revisions.

America's economy has shown signs of faster growth in recent months as the jobless rate has fallen and retail sales data has pointed to stronger consumer spending.

Wednesday's data showed that housing, which was battered by the 2007-09 recession, is increasingly one of the brighter spots in the economy.

"One of the big headwinds for the economy has been the weak housing market and this indicates that headwind has dissipated," said Gary Thayer, an economic strategist at Wells Fargo Advisors in St. Louis, Missouri.

Home building could add to growth this year for the first time since 2005 and the brighter economic signal is likely to be welcomed at the White House, where a sluggish economy is weighing on President Barack Obama's chances of re-election next month.

Economists estimate that for every new house built, at least three new jobs are created.

Groundbreaking on new homes rose across much of the country, and was up 20.1 percent in western states. It fell 5.1 percent in the Northeast, however.

Yields on U.S. government debt rose as investors bet the data pointed to a stronger economy.

On the U.S. stock market, the PHLX Housing Index of leading home builders climbed 4 percent as D.R. Horton advanced 5 percent. Home improvement retailers Home Depot and Lowe's were also higher.

NOT YET NORMAL

Housing remains hampered by a glut of unsold homes, and the housing starts rate is still about 60 percent below its January 2006 peak.

Home building now makes up just over 2 percent of the economy, so it is unlikely to fuel a big acceleration in the recovery anytime soon. The European debt crisis looms heavily over the economic outlook, as does the possibility Washington could hike taxes and cut spending next year.

But every little bit helps, and more home building could partially compensate for recent weakness in factory output, which has been hit by sluggish export demand and cooling investment in capital goods.

"Things are lining up for housing," said John Canally, an economist at LPL Financial in Boston. "It's another step in the right direction, but you still have a long, long way to get back to 'normal' in housing."

September groundbreaking for single-family homes, the largest segment of the market, rose 11 percent to a 603,000-unit pace - the highest level since August 2008. Starts for multi-family homes climbed 25.1 percent.

Building permits grew 11.6 percent to a 894,000-unit pace in September, beating economists' forecasts.

U.S. home sales have been creeping up and the steep decline in prices since 2006 appears to have bottomed. That has helped home-builder sentiment, which this month rose to a fresh six-year high.

In a bid to help the economy by encouraging people to buy homes, the Fed said last month it would buy $40 billion in mortgage-backed securities every month until the jobs outlook improves substantially.

The Fed's efforts to lower borrowing costs have pushed interest rates on 30-year mortgages to all-time lows. Last week, fixed 30-year mortgage rates rose 1 basis point to average 3.57 percent, the Mortgage Bankers Association said.

Applications for U.S. home mortgages fell last week, but demand for purchase loans, a leading indicator of home sales, reached the highest level since June, the association said.

"It seems as though low interest rates and stable prices are starting to stir the interest of potential buyers," said Michael Moran, an economist at Daiwa Securities America in New York. - Reuters

Society proposes that council building be turned into Jawi-Peranakan Museum

GEORGE TOWN: The state government will ask the Penang Municipal Council (MPPP) to review its decision to sell a Jawi-Peranakan heritage house in Hutton Lane.

State Local Government and Traffic Management Committee chairman Chow Kon Yeow said a request would be forwarded to the council to review the sale of the house.

The home belongs to the council, but there are legal implications and an appeal surrounding the sale of the pre-war unit here, Chow said.

He said this after chairing a closed-door meeting with several non- governmental organisations who called for a review of the sale.

Penang Jawi-Peranakan Heritage Society president Datuk Dr Wazir Jahan Karim said she was hopeful that the sale would eventually be rescinded.

“We are hoping that the property can be surrendered to the George Town World Heritage Incorporation. We will work together with them to convert the house into a Jawi-Peranakan Museum,” she said.

She said the proposed museum would be the first of its kind in the country.

“Students and visitors can view documented Jawi-Peranakan history comprising the merchants, leaders and philanthropists who helped build our heritage city.”

The house is for the public to appreciate the rich heritage of the Jawi-Peranakan, she said.

The Jawi-Peranakan community is part of a Malay-speaking Muslims of mixed Malay, Indian, Pakistani and Afghan ancestries.

The community was based mostly in Singapore and Penang during the colonial period.

According to Wazir, the building used to be the home of a patriarch and matriarch of a prominent Jawi-Peranakan family here.

It was subsequently left abandoned by the family before it was sealed off by the council as its structure was deemed to be unsafe for occupation. - The Star

New panel to study master plan

A COMMITTEE will be set up early next year to study the implementation of the Penang Transport Master Plan (PTMP).

Penang Local Government and Traffic Management Committee chairman Chow Kon Yeow said now that the PTMP has been finalised, the committee would be set up with the relevant authorities to come up with recommendations for the PTMP.

“The committee will also prioritise the suggestions for the benefit of the state. The implementation of the PTMP will cost an estimated RM25bil.

“If the PTMP is not implemented, the traffic situation will get worse in the future,” he told reporters in Komtar where he announced the finalised PTMP would be tabled at the state executive council meeting on Friday.

Halcrow Consultants and Singapore Cruise Centre are part of AJC Planning Consultants which was hired by the state government for the master plan study last May.

The PTMP, which took about a year and a half to complete, consists of measures to help improve the traffic flow in the state. - The Star

经营古迹酒店 安全NO.1

（槟城16日讯）要取得古迹酒店的营业执照，就先要解决消拯局要求的“安全通道”这一关！

随着槟州乔治市获得入遗后，古迹酒店如雨后春笋的建立起来，然而，要申请为一间古迹酒店营业执照的同时，业者有如“过关斩将”必须经过许多部门的许可下才能获得执照，其中，消拯局这一关的执照是最难过的一关。

消拯局安全部主任：架构与防火标准冲突

槟岛霹雳路消拯局防火安全部主任再里尔助理总监接受《光华日报》访问时说，古迹建筑的架构确实与消拯局的标准产生冲突，因为古建筑以砖木架构为主，难以长久保存，加上木质较易燃烧，要达到保存古迹和符合当局的标准，技术和难度都很高。

“古迹建筑的架构往往难以符合消拯安全标准，其中最主要的关键在于酒店的楼梯处隐藏火患危机，因此消拯局无法让业者过关是出于无奈。” - 光华

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