Signs of distress in the market

HOW can you tell when the property market is softening?

There are several telltale signs like developers taking a longer time to sell their properties, delaying new launches and giving away more freebies and incentives. A weakening market will also see a decrease in rental and capital values.

There are also more subtle signs like the developer keeping a low profile, the project slowing down, the development changing hands or the developer maintaining the original selling price but reducing the built-up area.

There are also instances where the developer continues to build the houses despite very slow sales but this situation is masked as “build then sell”. Some developers might earlier claim they have sold most of their units but later said they have taken back the units and selling en bloc as prices have escalated.

These ominous “signs” have mostly surfaced.

Of late the property development industry is feeling the jitters as crude oil prices continue to soar. The industry is grappling with increased cost of doing business, rising price of building materials, inflationary trends in cost of living, global economic uncertainties, rigid policies for developers and a softening market.

Property developers are also faced with eroded profit margins, higher construction costs, intense competition, and fear that rising inflation was affecting buyers' sentiment and affordability.

To make things worse, they are burdened with what Real Estate and Housing Developers' Association (Rehda) president Datuk Ng Seing Liong described as “onerous contributions and social obligations”.

Although he did not elaborate when speaking at the official opening of Mapex 2008 in Kuala Lumpur last week, it is clear what he meant: developers having to provide all sorts of amenities from building police stations, community halls to flyovers.

Many developers have argued that even in the best of times, these “social obligations” were “eating” into their profits, what more in the current tough market condition.

If the inflationary pressures continue, Ng warned that another “recession is very near!”

The Government has proposed various measures in the 2008 Budget to sustain economic growth and provide such incentives as 50% waiver of stamp duty for purchase of one house costing not more than RM250,000 from Sept 8, 2007 until Dec 31, 2010; exemption of real property gains tax; allowing monthly withdrawal of EPF contributions for housing purposes and a RM50mil fund to guarantee housing loans for buyers who do not have fixed income.

However, Rehda feels this is not enough and wants policy changes.

A “thorn” in their flesh is the bumiputra quota in which Rehda wants the release procedures to be standardised to reflect a more transparent and structured release mechanism.

“Bumiputra quota should not exceed 30%, based on sales regardless of the units being sold to bumiputras were the identified lots or not. Bumiputra discount should be capped at 5% and only applicable for houses priced at RM250,000 and below, excluding low-cost and low-medium cost houses,” said Ng.

Ng said it was unfair for someone who could afford a multi-million ringgit property to enjoy a bumiputra discount that differed from state to state (7% discount for Selangor, 15% for Johor and 10% for other states).

Rehda, he said, also wanted the Government to take over the provision of low-cost public housing, thus freeing the private sector developers to focus more on market driven products.
The Government should also review the price of low-cost housing from the current RM42,000 to RM60,000 to mitigate increased costs.

Rehda hopes the Government would abolish its decision to charge 10% import duty on cement importers immediately. “Instead we hope the Government will impose 10% to 20% export duty on all cement and steel materials to ensure adequate supply,” he added.

Rehda vice-president Datuk FD Iskandar said it was inevitable that house prices would go up soon as construction costs had shot up by 30%.

“Prices of raw materials from steel to cement have all gone up. It will be very challenging for the property development industry. Contractors are crying out for a revision of their contract prices and they will walk off if their demands are not met. Projects will stall,” he said, adding there was also a shortage of steel and cement whose prices have risen to RM4,000 per ton and RM18 per bag respectively.

Iskandar who is also the Rehda Selangor chairman said there were construction firms who would be too glad to get out of a contract now that prices of everything had soared. They would stand to lose, as there was no price fluctuation clause to allow for an upward revision of prices. “Some of them prefer to wait until prices have stabilised,” he said.

Unless oil prices drop drastically (which many industry players do not see it likely to happen) and the inflationary trend is checked, the economy in particular the housing and construction industry will be heading for a downturn.

New Malaysia My Second Home (MM2H) information desk launched at the KLRPC and on propertrack.com

One of Malaysia’s leading Malaysia My Second Home (MM2H) agency firms has teamed up with propertrack.com to make information about the MM2H programme available to a wider international audience at the Kuala Lumpur Retail Property Centre (KLRPC).

YBhg Dato’ Kamarudin bin Abu, Chairman of MALVISA (MM2H) Sdn Bhd and the former Malaysian High Commissioner to London, explains why MALVISA chose the KLRPC and propertrack.com.

“With the current economic and political turmoil in many developed countries, Malaysia is still the safer bet with her relatively low cost of living as compared to many of her neighbouring countries. By working together, propertrack.com has incorporated a Malaysia My Second Home (MM2H) information desk into their prime location property centre and property portal, to provide both a physical and virtual gateway for international property investors, tourists as well as families wishing to retire and live in Malaysia”.

“In essence, propertrack.com is Malaysia’s first independent one-stop property and related services information hub which will now include an MM2H information desk”. He said in describing this initiative, gathered from the many constructive feedbacks from international visitors to the centre about the lack of a much needed independent one-stop MM2H information desk.

He stated that MM2H is essentially a long-stay visa programme for foreigners in which successful participants would be issued multiple-entry social visit passes for 10 years with an option for renewal. With this joint-effort, we are now in a better position to assist international walk-in visitors and tourists to the centre about the programme.

Dato’ Kamarudin Abu further added that Malaysia is fast gaining prominence in the long-stay market with recognition from the media as well as long-stay associations such as International living.com magazine which has ranked Malaysia as the 7th global retirement destination in its 2007 survey, the first Asian country to have been ranked as such.

Sivaprakash Arumugam, Malvisa’s Business Development Director, said since the Malaysian government abolished Real Property Gains Tax (RPGT) in April 2007, there has been a marked growing interest in Malaysia’s real estate. To add to this, new applicants who have purchased and owned residential property, which were bought at RM1 million and above in Malaysia are eligible to apply for exemption from placing the full fixed deposit (FD) amount required by MM2H participants. They only have to comply with the basic financial requirement of FD of Ringgit Malaysia RM60,000 instead of the usual RM150,000 or RM300,000.

Prakash explained that many foreigners choose Malaysia as their second home, amongst many other reasons, for the warm and pleasant weather, a good quality of life, affordability, a safe and peaceful environment, friendly people with English widely spoken, as well as the availability of comfortable accommodation.

Prakash added, we look forward to hearing from and welcome MM2H applicants from all over the world by simply logging into propertrack.com or visiting the KLRPC and completing the Malaysia My Second Home (MM2H) information enquiries form, and a member of our MM2H client services team will contact applicants as soon as possible.

Stephen Hodgson, propertrack.com’s Team Principal added, “we at propertrack.com envisage this consumer-driven outreach will provide ease of accessibility to MM2H information and will bring greater exposure of Malaysian property as well as foreign investment in-to Malaysia.”

Signs of distress in the market

HOW can you tell when the property market is softening?

There are several telltale signs like developers taking a longer time to sell their properties, delaying new launches and giving away more freebies and incentives. A weakening market will also see a decrease in rental and capital values.

There are also more subtle signs like the developer keeping a low profile, the project slowing down, the development changing hands or the developer maintaining the original selling price but reducing the built-up area.

There are also instances where the developer continues to build the houses despite very slow sales but this situation is masked as “build then sell”. Some developers might earlier claim they have sold most of their units but later said they have taken back the units and selling en bloc as prices have escalated.

These ominous “signs” have mostly surfaced.

Of late the property development industry is feeling the jitters as crude oil prices continue to soar. The industry is grappling with increased cost of doing business, rising price of building materials, inflationary trends in cost of living, global economic uncertainties, rigid policies for developers and a softening market.

Property developers are also faced with eroded profit margins, higher construction costs, intense competition, and fear that rising inflation was affecting buyers' sentiment and affordability.

To make things worse, they are burdened with onerous contributions and social obligations. Developers having to provide all sorts of amenities from building police stations, community halls to flyovers.

Many developers have argued that even in the best of times, these “social obligations” were “eating” into their profits, what more in the current tough market condition.

If the inflationary pressures continue, another recession is very near!

The Government has proposed various measures in the 2008 Budget to sustain economic growth and provide such incentives as 50% waiver of stamp duty for purchase of one house costing not more than RM250,000 from Sept 8, 2007 until Dec 31, 2010; exemption of real property gains tax; allowing monthly withdrawal of EPF contributions for housing purposes and a RM50mil fund to guarantee housing loans for buyers who do not have fixed income.

However, Rehda feels this is not enough and wants policy changes.

A “thorn” in their flesh is the bumiputra quota in which Rehda wants the release procedures to be standardised to reflect a more transparent and structured release mechanism.

Bumiputra quota should not exceed 30%, based on sales regardless of the units being sold to bumiputras were the identified lots or not. Bumiputra discount should be capped at 5% and only applicable for houses priced at RM250,000 and below, excluding low-cost and low-medium cost houses.

It was unfair for someone who could afford a multi-million ringgit property to enjoy a bumiputra discount that differed from state to state (7% discount for Selangor, 15% for Johor and 10% for other states).

Rehda also wanted the Government to take over the provision of low-cost public housing, thus freeing the private sector developers to focus more on market driven products.

The Government should also review the price of low-cost housing from the current RM42,000 to RM60,000 to mitigate increased costs.

Rehda hopes the Government would abolish its decision to charge 10% import duty on cement importers immediately. Instead we hope the Government will impose 10% to 20% export duty on all cement and steel materials to ensure adequate supply.

Rehda vice-president Datuk FD Iskandar said it was inevitable that house prices would go up soon as construction costs had shot up by 30%.

“Prices of raw materials from steel to cement have all gone up. It will be very challenging for the property development industry. Contractors are crying out for a revision of their contract prices and they will walk off if their demands are not met. Projects will stall,” he said, adding there was also a shortage of steel and cement whose prices have risen to RM4,000 per ton and RM18 per bag respectively.

Iskandar who is also the Rehda Selangor chairman said there were construction firms who would be too glad to get out of a contract now that prices of everything had soared. They would stand to lose, as there was no price fluctuation clause to allow for an upward revision of prices. “Some of them prefer to wait until prices have stabilised,” he said.

Unless oil prices drop drastically (which many industry players do not see it likely to happen) and the inflationary trend is checked, the economy in particular the housing and construction industry will be heading for a downturn.

Happy 51st National Day

Selamat Hari Merdeka, and have a good weekend. For our muslim readers, selamat berpuasa too.

New office buildings unlikely on Penang island due to glut

THERE is unlikely to be new purpose-built office building projects on the island in the near future in view of the glut of office space and high construction cost.

On the island, there is an overhang of 2.8 million sq ft of office space with occupancy rate of 74%, compared with about 72% in 2005.

The total available purpose-built office space in George Town as at end last year was about 11 million sq ft, a large portion of which is in purpose-built office buildings developed 10 to 15 years ago.

These properties are not in demand because they lack information technology (IT) infrastructure and facilities and are not well maintained.

Developers were also unwilling to launch more of such buildings due to the high construction cost.

The construction cost and land value for per square foot of commercial space is about RM210, while the selling price per sq ft of the commercial space is RM250 to RM300, which is less than the 30% profit margins generally looked for by developer.

Current rentals of conventional purpose-built office space on the island ranged between RM1.50 and RM2.50 per sq ft while the modern purpose-built office buildings with IT features command a rental of above RM3 per sq ft.

The modern purpose-built office building projects being developed on the island were now in Bayan Baru. They include the recently completed SunTech and the IJM headquarters in Metro-East.

The 23-storey RM100mil SunTech by Emerald Capital Group is almost 100% sold. “The building has the latest IT-MSC infrastructure and facilities. The rental is RM2.60 to RM4.20 per sq ft,” he said.

Demand for pre-war properties was slightly stronger as there was limited supply of such properties for commercial use.

Many of these houses are also highly sought after because they are strategically located on main roads.

The present value of a pre-war property in George Town is around RM600 per sq ft. A 3,200 sq ft pre-war property on Campbell Street was recently sold for about RM2mil.

On the retail sector that also faces a glut (occupancy rate is 70% compared with 72% in 2005), there was 13.9 million sq ft of retail space, of which 70% was occupied while new supply stood at 1.2 million sq ft.

The new retail space include such projects as Jusco in Bandar Perda, Penang Times Square, D'Piazza, Wikiworld, Mutiara Parade, Farlim Megamall, Gurney Plaza Phase 2, and Gurney Paragon.

The oversupply situation has not improved since 2005 as the market is still tough.

The rising cost of living and declining purchasing power have worsened the situation. Many Penangites will visit shopping centres during weekends, but their expenditures are expected to drop in the next few months.

Ground floor rentals ranged between RM9.50 per sq ft and RM30 per sq ft for malls in prime locations such as the Queensbay Mall and Gurney Plaza. Meanwhile, those in the heart of George Town ranged between RM4 per sq ft and RM28 per sq ft.

The average rental rate has remained more or less the same over the last few years.

The state government should work with the private sector to revive George Town by having new business themes for different precincts in the inner city.

The state government could offer incentives for businesses like traditional medicine, souvenir or local produce and designating certain streets in George Town for them.

This type of planning would help absorb the existing commercial properties in the inner city and enhance George Town’s appeal as a tourist hub.

Sustainable development, in the form of environmentally friendly policies, is key towards unlocking the value of commercial properties in George Town.

There was also a need for more parking facilities, improved drainage system to overcome flash flood, and quality public transport.

Mixed Messages About Investment Property in Malaysia

Malaysia is a hard one to call – on the one hand you have undeniable evidence that the mid-high end in the residential sector is doing very well, and on the other hand you have inflationary pressures impacting local affordability and demand. On top of this, analysts and experts on the real estate market in this Asian nation are all delivering mixed messages about investment property in Malaysia.

I thought I'll try and bring you a bit of clarity – although I am quite confused too! I am certain of Malaysia’s immediate appeal, I am certain of Malaysia’s strong tourism sector and I am also certain that the nation’s government is committed to keeping the foreign investment environment as healthy as possible. But is this enough to ensure a healthy landscape for property investors in Malaysia over the medium to longer term?

It is simply not true that the whole of the rest of the world is being negatively impacted by the dire state of the US economy – by the way, is it just me or has anyone else noticed just how quiet George W has been of late? The fact of the matter is, not every nation in the world is as dependent on the US economy as we are in the United Kingdom and Europe. Sure, Malaysia has a certain degree of exposure to the United States and indeed to other international markets which are also feeling the fiscal pinch, but it also has a strong economy that the government has worked hard to make relatively shock proof to external factors.

Having said that, the Malaysian economy is starting to stress from the impact of internal inflationary factors that are squeezing profit margins in the property sector for example. The fact that construction costs are rising as material and labour costs climb mean developers are reluctant to cut prices and do deals with buyers, and they are also reluctant to start new projects. On the one hand this is bad for those who want to buy in and drive a bargain…on the other hand it’s positive as a market with fewer starts can be a market where demand outstrips supply quite quickly, putting upside pressure on prices – excellent for those with investment property in Malaysia already then!

If you look at the tourism market in Malaysia – arrivals are up, spending is increasing. This is fantastic news for the nation’s economy, it has a strong impact on the property sector as well, and it suggests confidence in the country and gives investors further confidence that Malaysia is a market you can bank on for the longer term. Russian arrivals are up 50% year on year, British arrivals are up 24.5% and there are strong levels of interest in the ‘Malaysia: My Second Home Program.’ But at the same time, Aseambankers and other research houses and brokerages in the region have a neutral call on the real estate market in Malaysia – at least until after Umno’s party elections in December which are thought to be a reason for developers putting off new starts and also deterring some new investors entering the marketplace.

So, whilst there are inflation concerns and a short-term hold on expansion and development until after elections in Malaysia, it could be said that the outlook is shaky. But what about the fact that mortgage approvals hit a high in March and the higher end of the residential sector saw a 50% year on year increase in sales in the first quarter? See, it’s a confusing picture in Malaysia! My own opinion is that the market has fantastic fundamentals driving the long-term success of the mid to high end residential sector, that there are certain opportunities in the tourism sector and that Malaysia is one to watch. But that’s just my opinion – I could be wrong!

Residential Investments

Property-Bangsar Property
Bangsar has grown rapidly in recent years and is one of the best places to invest in Kuala Lumpur. House prices and rents are constantly increasing with the growth and popularity of Bangsar, making it a good property investment. There are only a few condominiums under construction to cater to the housing needs of the growing number people who wish to stay in there.

High capital growth, solid rental yields, strong demand and limited supply make this part of Kuala Lumpur a must for any serious property investor.

A note of caution on housing loans

Buying a home can lead to bankruptcy if you are not prepared

25% of the defaulters are said to be on car and housing loans. At an average of 14,000 new cases per year, 3,500 will be losing their cars or houses. If you have noticed, the number of properties advertised for auction in the local papers is rising as well.

According to the Glossary provided in the Bank Negara’s website, non-performing loans refer to the outstanding amount of loans (principle and interest) classified as non-performing when principle or interest is six months or more in arrears.

A rough estimate on the number of purchasers according to the property type and the non-performing loans amount in the Mar 2007 is 114,500.

Can you even afford a house right now?

Assuming you can afford a house, how much can you afford? These are important questions that many people do not research, focusing on what their mortgage payments will be, ignoring other monthly payments. This oversight puts many people down the wrong path to bad debt.

For example, your monthly expenditures will be more than just the housing loan, there will also be all kinds of insurance, utilities & phone bills, contributions to maintenance fund, medical bill, groceries, unexpected household/auto repairs, lunch money, and many other obligations. They must all be accounted for in your budget spreadsheet. For many of us the purchase of our house or investment property is the largest financial commitment we will ever make. This makes arranging the most suitable housing loan just as important.

Make sure you know all the costs of entering into the loan and purchasing the property. These costs include conveyancing costs, application fees, valuation and legal fees, mortgage insurance (if necessary) and sometimes extra life insurance premiums.

Some lenders will tell you the advantages of whatever housing loans they are trying to squeeze you into, but rarely will they tell you the disadvantages. Be ready when it happens and things will go your way.

According to an article in a business magazine, the banking system is flushed with RM140 billion liquidity. This explains the increasingly aggressive sales promotions undertaken by financial institutions for the housing industry. Even credit card holders’ recruitment has taken to the shopping malls, hypermarket concourses and popular food stalls.

Whilst we will leave it to our economic gurus to analyse as to whether these are good indicators or not, one thing is for sure; the securing of a housing loan is now a less intimidating effort.

Always look at the total deal, not some dangling carrots in front of your face. Compare the entire housing loan cost of several different lenders to determine which type is best for you.

We would like to discuss some of the lenders’ offers that may not be as attractive as they appear. We will start with the special low interest offered for the first year. Such an offer is usually given during a sales campaign and it usually carries a fixed calendar period with a run-out date.

‘Honeymoon’ start

Thus, even if a house buyer commenced his application process immediately upon the launching of the campaign, by the time the loan is approved and disbursements commenced, the period remaining to enjoy this special low interest rate will certainly be much less than one year.

If he were to start the application process a few months after the start of the campaign, it is likely that he will enjoy the special low rate for only a very short period.

Another point for thought is that due to our unique system of progressive payments to the developers, the mean average of the amount disbursed by the banks during the “first year low interest offer,” is really lower than the loan amount.

Thus any saving on interests is really much less than it seems. And these have all been figured out already by those marketing experts in the banks. A more sincere approach would be to offer the special low interest rate to apply during the progressive payment period and to continue to run for one year after the date when the loan is fully disbursed. Only then can such offers bear some element of sincerity. We believe that anything short of that makes the offer a sales gimmick.

There are other clauses that put house buyers in disadvantaged situations. Some lenders include clauses in the Loan Agreements that give them the absolute rights to alter both the Base Lending Rates and/or the margin of interests.

Doesn’t this in effect nullify their typical attractive sales brochures offer of “BLR plus X % for following years”?

One cannot make a special low interest offer in the sales campaign and then contractually (through the Loan Agreement) creates a clause to allow that special offer interest rate to be invalidated. That would make the special offer a sales gimmick.

Make sure you know all the costs of early discharge of the loan.

One other clause to look out for is on the redemption of the loan. A house buyer may wish to sell the house or perhaps have made enough money and wishes to fully settle the loan for whatever reasons.

This is where the conditions for full settlement differ from one institution to another. Think long term. Do not be in a disadvantaged position when the day comes and you wish to redeem the loan.

When one takes a loan, one spends a much longer period servicing the loan beyond the first year or even the second and the third year. So do not be taken in by the very attractive offers during the honeymoon year/s of the tenure of your loan.

Remember, the remaining of the 25 years is more important. Do not go for short-term gains only to lose out heavily on the long remaining years.

We would advise house buyers to look beyond the first year of so-called low interest when shopping for housing loans. With the stiff competition going on among the various lenders today, one should seriously take some trouble to shop around and to scrutinise each and every offer before commencing the application process. Talk to your banker, lawyer friends or seek advice at National House Buyers Association.

We wish to stress that once the application process starts, it is unlikely that one will have time for any change of mind. By the time the formal letter of offer is received and if one does not agree with any of the conditions within, there is usually no more time to reapply to another financier without incurring the late payment penalty to the developer.

One really has to scrutinise the fine prints before making a decision as to which financial institution to apply to for a loan. Housing developers usually start charging interests as soon as the date for payment is reached (with perhaps a 2 weeks’ grace at best). Hence if by then one still has not secured a loan and the banks are not ready to start disbursement, one starts to incur interests for nothing.

So scout around and study each and every scheme carefully before you even apply. There are subtle but material difference between the various schemes and offers among the lenders.

Talk to the lenders concerned. Seek your banker, accountant, financial planners and lawyer friends’ opinions. Do not be taken in by the short term attractions. Think long term. Look beyond the first 3 years.

Think about the clauses and the interest rates during the remaining long 25 years that you will be grappling with that loan.

Where to go for help

If you have a problem managing your finances and wants badly to keep your home, the Bank Negara provides counseling and advice on financial management as well as a Debt Management Programme and Financial Education through the Credit Counseling and Debt Management Agency.

Credit Counseling and Debt Management Agency

Kuala Lumpur Headquarters

Level 8, Maju Junction Mall

1001, Jalan Sultan Ismail

50250 Kuala Lumpur

Toll Free Number : 1800 88 2575

General Line : 03-2698 8575

Fax Number : 03-2698 1575

Email to : enquiry @ akpk.org.my

Website: http://www.akpk.org.my/

Most of the complaints receives from house buyers are on late payment interest, due to end-financiers disbursing loans late or banks slow in approving loans and communication problems. For disputes with banks who are members of the Financial Mediation Bureau, which is an independent body, contact them at this address:

The Financial Mediation Bureau

Level 25 Dataran Kewangan Darul Takaful

No. 4, Jalan Sultan Sulaiman

50000 Kuala Lumpur.

Telephone : 03-22722811

Fax : 03-22745752

Website: http://www.fmb.org.my/

5 Tips On Selecting The Right Developer

I don't know about your country, but in mine, Malaysia, when you're looking to buy property of any type, one of the important criteria you would want to look into is - the developer.

The project is important, but you would agree that the developer plays even a bigger role; in ensuring that you're getting the best property deal in Malaysia.
So, you might want to read on to find out, who would be your ideal developer...

Well, basically, these are the criteria to look for:

1. Reputation and Reliability

Need I say more? You know this already, don't you? But...

The most important thing is: How do you find out reputation and reliability of a developer, right?

Simple, just ask around residences or owners of previous property projects by your targeted developer! You should be able to get some hints from these neighborhoods.

While you're there, open you eyes; BIG and WIDE! Observe their workmanship. Would you be happy with the quality of work that you see right before your eyes?

You can also check who their financiers are. Do they owe their contractors, vendors and suppliers? You wouldn't want to be involve with a bad pay master, would you?

One more thing...

Find out if this is their first project? If they are not from a developer background, you should think again...

2. They should be registered under REHDA

REHDA, or the Real Estate and Housing Developer Association, is the association that keep track of a developer's records.

Reputable property developers in Malaysia are members of REHDA... and if it is not registered... well, you know what to do, right?

3. Timeliness in Delivery and Quality

While checking out the previous projects by the developer, find out about their timeliness. Are they delaying project consistently? What is their compensation for the delay? Is the compensation fair and following the legal requirements?

4. Credibility, Management Effectiveness, After Sales Services.

These are the normal things to check. A MUST!

When you’re uncovering the background of the developer of property projects in Malaysia, find out about their credibility, their management teams and effectiveness, and what is the quality level of their services?

And now... the most outrageous criteria!

5. License!

Huh? Property developers in Malaysia MUST have a license, don't they?

Alright, before I go about embarrassing my lovely state... let me explain:

You see, there are certain licensing requirements for properties in Malaysia. And not all property projects are necessarily regulated. Thus, there's no pre-requisite to have a valid license for certain project types.

Property projects that requires a valid license in Malaysia are any buildings that are intended for human habitation, partly or wholly. Examples, low and medium cost apartments, condominiums, terrace houses etc.

But then again, The Minister may by notification published in the Gazette, exempt any housing developer from any or all of the provisions of the Housing Development (Control & Licensing) Act, 1966.

So, these 'exempted' developers may not need any license as well!

Now, you probably would be asking: What else does not require a valid license?

Here's the loopholes...

If the developer is building less than four units; or the units are only sold after full Certificate of Fitness for Occupation has been issued. No license is required.
Besides that, any approved commercial development, no valid license are required.

Examples, service apartments, commercial buildings, shop lots, shop offices, bungalow plots and/or land, orchard land and/or agricultural land, industrial and/or factory lots, and other types of properties not specified as ‘Housing Accommodation’ under the Housing Act.

The Changing Landscape Of Penang

Penang is on the verge of a property boom that will drive the state's growth into a vibrant regional hub for north Peninsular Malaysia.

Coupled with the entrance of major Klang Valley-based developers like SP Setia Bhd, E&O Property Development Bhd, Mah Sing Group Bhd, IJM Properties Sdn Bhd and Sunway City Bhd, it will further spur and change Penang's property landscape where the locals will enjoy better designs and concepts.

Although the state's economy is largely driven by the electronics and hospitality industries, the property sector is emerging as an important activity with many new projects underway or are on the drawing board.

The impending roll out of infrastructure projects under the Ninth Malaysia Plan (9MP) will be a boon to the real estate sector as new areas are open up for development.

The state has been allocated a RM6.6bil development budget for various projects, including the second Penang Bridge, Penang Outer Ring Road (PORR) and monorail project.

If the projects are conceived and implemented as a holistic infrastructure master plan to upgrade the state's road and transportation connectivity will be a big spin off to the state's economy.

The improved transportation network from various infrastructure projects would open up new frontiers of development that were formerly inaccessible, such as Batu Kawan and Balik Pulau.

Places near the site of the second Penang Bridge are also coming alive with renewed interest from developers. More developed areas in the southern part such as Sungai Ara and Bayan Lepas will continue to attract keen interest due to its proximity to the airport and free trade industrial zones.

The 9MP projects would benchmark Penang to be on par with some of the world's more modern cities.

A number of factors have contributed to Penang's “hot” property status - strong property demand and prices, high urbanisation rate and a household income that is above national average.

Of the population of 1.6 million people, nearly a third are between 25 to 44 years old - a good catchment market for property.

Penang's “nostalgic charm” had endeared it to the people, including foreigners and Penangites who resided outside the state.

Its island state appeal makes Penang a natural tourist attraction and it is no wonder that the state tops the list in attracting participants of Malaysia, My Second Home (MM2H) programme.

The exemption from real property gains tax and relaxation of Foreign Investment Committee guidelines for foreign buyers have promoted greater foreign buying interest for properties in the state.

Despite the many pluses, Penang is still a relatively untapped market with room for more innovative and better design projects as products offered have not caught up with changing market trends.

There are immense opportunities in both the residential and commercial property sectors with an acute need for better design products that will promote a better quality of life among the people.

Until a few years ago, most of the housing projects are the usual barrack-style houses or high-rise apartments with basic amenities.

Except for some new project launches, there is a lack of creative lifestyle products such as gated communities and resort-style developments.

In the commercial sector, there is also a need for better-planned office buildings, shopping complexes and food and beverage facilities.

Reflecting their growing affluence and changing lifestyle, Penang folks are now keen to upgrade to better planned and designed projects that offer them good security, amenities and environment.

Having the right address has become a measure of one's status and achievement in life and so good projects in the right location will do well for developers.

Penang Land Prices Not Likely To Dip

The Penang island's land prices are unlikely to drop, even if another economic slowdown happens.

For the past 10 years, Penang’s land value has been increasing.

It was a misconception to say that there was not much land left in the state.

With NCER, Penang can be a microelectronic hub of excellence, logistics hub in the northern region and has potential for an oil industry spin-off.

Penang’s strengths were its friendly locals, strong engineering workforce and vibrant nightlife.

However, the state’s weaknesses were its over dependence on the electronics and manufacturing sector, limited direct flight destinations, lack of top jobs for other sectors and slow pace in property development.

But the state’s declining population growth due to intra-state migration would hamper its development rate.

Penang Island Draws Luxury Home Builders

THE most expensive landed residential properties on the Penang island today are located in Tanjung Bungah, Tanjung Tokong and Batu Ferringhi in the North-East district, and Sungai Ara in the South-West district.

These properties are three-storey terraced, three-storey semi-detached and three-storey bungalows, which are priced between RM800,000 and RM3mil.

The builders are reputable developers from Kuala Lumpur and Penang.

Generally, the value of landed residential properties in these areas have appreciated by about 10% yearly since the dawn of the new millenium.

Due to high land cost and rising building material prices, it was no longer profitable for developers to build double-storey houses.

About two years ago, developers here started to build three-storey homes with larger built-up areas and higher selling prices.

Presently in the market, the selling price for a three-storey terraced starts from about RM800,000, while for a three-storey semi-detached house ranges from RM1.3mil to RM1.8mil, depending on the size.

The three-storey bungalow unit is priced between RM1.8mil and RM3mil.

In Tanjung Bungah, Chong Co Group, a reputable developer with good track record, is developing the Hill View Garden, comprising about 200 units of three-storey terraced and three-storey semi-detached houses on a 20-acre site.

These properties, priced between RM800,000 and RM1.8mil, are over 80% sold.

They are selling well because of their large built-up areas that can cater to the needs of families living with their grandparents.

The Hill View Garden three-storey homes have built-up areas ranging from 3,300 to 5,000 sq ft, depending on the type that come with four to five bedrooms, and porches large enough to accommodate three cars.

In Batu Ferringhi, similar types of three-storey landed residential properties were being developed.

Blossom Time Sdn Bhd is launching in mid-2008 some 129 units of three-storey landed residential properties comprising semi-detached and bungalow homes, which are part of a RM400mil development called Ferringhi Park.

Again, the emphasis is on the large built-up areas of the units, which come with five to seven rooms, depending on whether it is a semi-detached or a bungalow unit.

The semi-detached units are priced at RM1.2mil, and the bungalows at RM1.8mil.

The semi-detached units have built-up areas of 3,995sq ft, while the bungalows 4,300sq ft.

The first batch of 57 three-storey semi-detached and bungalow houses, launched last year, were over 80% sold.

Purchasing Property With No Money Down

Have you ever seen those infomercials about buying houses with “No Money Down?” They are really well done. They have all kinds of people offering great testimonials about how they have gotten rich, buying rental properties, with absolutely no money out of their pocket. You see this guy, standing on a street corner, talking to someone, and he says, “I own that one,” pointing to a beautiful colonial. “I also own that one next to it, and the one two doors down, and I’ll be closing on the one directly across the street from it, next week.” He then assures us that he has purchased 17 homes in the last eight or ten months, with zero money down on the properties. Plus, in many cases he’s also paid no closing costs.

And, let’s not forget, this same guy is grossing tens of thousands of dollars monthly, and his net worth is nearly one million dollars. So, he says.

Now, all of this looks wonderful, so when the person selling the course that will teach you how to do this, at a nifty price of just $297.00, speaks, you are glued to his every word. “Real estate is the safest and fastest way to make money, today,” the expert will tell you.

So, can this really be done? Can you purchase houses with no money down? Can you become a landlord in as little as one month’s time and start raking in the cash from those rent payments? The answer is an absolute “Yes.” It can be done, and I am proof positive, because I’ve done it. The question you should be asking yourself is not can I buy real estate with no money down, but should I?

You see, this is a question that the guy selling the No Money Down course, with all of his people and their great testimonials hopes you never ask. His advertising and marketing strategy would collapse, if he gave anyone a chance to ask this question, because he would be forced to lie if he answered it.

Rarely is the whole truth anywhere to be found in infomercials, especially when the advertising is about No Money Down real estate programs. The infomercial makes the idea and the program look so easy that any child could handle it. It makes it seem like every American should be doing it, and we’d all be millionaires. But every American is not doing it, and many of the ones who are doing it not only are not getting rich, they are actually going broke. The infomercial won’t tell you this. That’s why I’m here.

The Truth

Now, let’s get started with the truth about buying real estate with no money down and the truth about being a landlord. The first thing you need to know is that they are both very bad ideas. Let me illustrate by using my own experience in these areas. I started buying rental property nearly 10 years ago. The first property I bought was a deal orchestrated by some real estate con artist, who told me I needed just $2,000 to take ownership of this home and, in the process, help out a woman who was about to be foreclosed upon.

In two years, she would clean up her credit, refinance the loan on the house, and I would make $10,000. Sounded good to someone who was quick to buy into anything that returned big dollars in a short time.

This worked for the first year, as the woman paid on time, and I pocketed an extra $100 monthly. Later, though, things began to collapse, as the house began to need repairs, all of which the woman couldn’t afford, so I had to pay for them. I put nearly $5,000 into the house in a four-year period. When I was finally able to sell it, I didn’t quite make back what I had put into it.

Meanwhile, I was eager to overcome this problem by adding many more. A slick mortgage broker got hooked up with an even slicker real estate prospector, and the two of them convinced me that they had a way I could buy houses rapidly, with absolutely no money out of my pocket. Although my experience will probably be enough to enlighten you to the pitfalls of this model and of being a landlord, let me say that I can’t emphasize enough how dangerous buying property with no money down is.

In six months time, I had purchased eight houses – many with loans from the same wholesale lender. These lenders should have been concerned with all of the debt I was building, but they kept approving loans, based on my good credit and rents covering the mortgage payments. One of the biggest problems, which I was not experienced enough to detect, was that most of the rents were just $50 to $100 above the mortgage payment.

“Don’t worry,” the investor/ hustler would say. “You’ll make all your money on volume. We’ll get you into 30 or 40 houses, and you’ll be pocketing $4,000 to $5,000 every month.”

As you might imagine, my mind raced. I was making the huge deposits at that very moment. My bank account was fattening up at breakneck speed.

The Illusion

This is what people who buy houses, using the No Money Down plan envision happening. After all, if you can buy one house with no money down, why not five or ten or fifty? For some reason – the vision of the dollar sign, most likely – I failed to seriously consider the maintenance of these houses, the possibility of missed rent payments, and the chance that renters might actually stop paying, altogether, forcing me to evict them – a time-consuming and extremely costly undertaking.

As you may have already guessed, all of these things happened to me, after I had amassed 26 rental properties. In fact, oftentimes, all of these problems happened in the same month. Now, for awhile (when I had about 10 houses), if one person failed to pay rent, I could cover it with the nine other payments. But when two, three and sometimes even five tenants didn’t pay in the same month, it was devastating to my business. I had to go to my business account and pay up to $3,000 at a time in mortgage payments, with no income to cover it. Plus, I had to pay a property management company to get my tenants to pay or to evict them.

Soon, this became the norm, not the exception. There were constant problems at my houses. Unhappy tenants led to poor upkeep of the property and even more maintenance problems. About one year, after I had amassed 26 houses, I was having problems with roughly 10-15 houses and/or tenants each week. I was evicting at least two tenants each month, and approximately four to seven tenants were either behind on rent or not paying at all. Promises were made, payment plans arranged and few, if any, ever followed through.

It didn’t take long for me to realize that this was no way to make money in real estate. Consequently, I got rid of these houses as fast as I possibly could. There were plenty of buyers, willing to take over my headaches, because they had the ability to make it work, they believed.

In 10 years of being a landlord, I lost thousands of dollars and likely took some years away from my life with all the stress I had endured. So, whatever you do, avoid the No Money Down Trap. There are much better, still inexpensive ways to make money in real estate.

Sell Your House Fast

There is nothing worse than putting house up for sale and watching it sit on the market. Here are a few tips to sell your house fast.

The following tips will help you sell your house fast, but we need to cover something first. If you have some type of defect with your house, it is going to have to be repaired. There is a difference between making small mistakes that prevent a sale versus having a major problem like a sliding foundation. These tips will only help if your home is in reasonably good shape when compared to those houses selling in your neighborhood.

The number one thing involved in selling your house fast is the price.

The price of your home should not be what you personally think it is worth. Buyers simply don’t care about such things. To sell your house fast, you have to find a price that is attractive to buyers. The best way to do this is to look for comparable houses in your neighborhood that sold fast.

Find out how much they sold for and compare your price to the prices the other houses went for. If you are above those prices, you need to take a deep breath and lower your price. When it comes to pricing your house for a fast sale, do not try to recreate the wheel. Just follow the lead set by neighbors in your area.

The second thing you can do is deal with clutter.

I can’t tell you how many times I’ve taken a buyer to a home only to be shocked by the amount of junk stuffed in garage, basement and rooms of the home.

Whether you like it or not, you are selling a product. Clear out the clutter and make it look as nice as possible. Buyers will be much more interested in buying a sharp looking property.

Another tip is to let go of your emotional attachments in the home.

A friend of mine recently sold a home and nearly had the sale fall through over four high quality bar stools. They were hand made and one of a kind.

The buyer wanted them thrown into the sale and my friend refused. The deal eventually went through without the bar stools included. When my friend moved into his new home, he realized there was no room for the bar stools and ended up putting them on consignment! Don’t fall into this trap!

To sell your house fast, the number one issue is always price. Nail down the proper price and you should be able to move the property as quickly as your neighbors did.

Houses For Sale By Owner - Negotiating Tips

Houses for sale by owner, also known as "FSBOs," are a unique case in real estate investment. Buying from an uninformed seller who thought he knew enough to handle everything by himself can be frustrating. It can also be very profitable if you are prepared.

Why do people try to sell a house on their own? Only one primary reason comes to mind: To save the sales commission. Of course they usually underestimate the cost and complexity of going it alone.

They end up frustrated and tired of the process, ready to drop the price and be done with it. Help them solve their problems, and your reward can be a good price on a good investment. Keep the following in mind:

1. An owner isn't an agent. Don't ask possibly offensive questions. Don't make negative comments about the house. Whether you like it or not, the truth is that it's difficult to get a good deal if the seller doesn't like you.

2. Houses for sale by owner have often been on the market a long time. The seller is usually tired of the process, and wants it to be done. In other words, you'll get a better price if you are willing to close quickly and easily.

3. FSBO sellers usually think they're being smart. Encourage that belief and they'll be more open to your offer. When they have a good idea, tell them so. It is not unethical to make people feel good about themselves when negotiating.

4. They usually don't have a plan for where to close, where to buy a title policy, where to keep a good faith deposit, etc. Be ready with simple solutions to all these problems. Walk them through the process while letting them feel in control, and you'll both be happier.

5. They have often spent more than they anticipated. Advertising and other costs have already eaten into their imagined extra FSBO profit. Be generous in negotiating any pre-close expenses - as long as you get your price and/or terms.

6. Pass over problems and return to them later. Once a seller has invested more time in a negotiation, he'll be more inclined to give you what you want.

Professionals will tell you that most houses "for sale by owner" net less than those sold by an agent. It's too late for the seller to recover his money and time spent, however, so he usually just wants to get the thing sold as easily and quickly as possible. Help him with that, and you can get a good real estate investment at a good price.

Location, location, location

What’s the first thing you look at when searching for an attractive residential investment property?

Do you look at the exteriors of the house since it’s the first thing potential buyers ever see, with a keen eye on impressive landscaping, manicured lawns, a fancy gazebo and an impressive outside fireplace?

Or do you look for the house with the most impressive interiors, particularly the one with the best living room, kitchen, bathrooms and master bedroom?

Or do you fancy yourself to be a cost-effective investor who searches for a potential dream house but one that is sold at the most affordable price?

It doesn’t matter if you’re looking for a piece of property for your own personal use or for investment purposes. Location is where you begin. The following is a checklist of basic questions when searching for the ideal location.

1. How is the local community, town or city? Is it safe? Are there nearby places that can meet your basic requirements such as a supermarket, schools, gas stations, hospitals or clinics, church, dry cleaners? Do the schools have a high standard of education? Are they overcrowded? Would you feel secure having your kids playing in front of the house? How is access to local highways, major traffic routes, and mass transit services?

2. Is it economically stable? Are the businesses in the area flourishing? Is there a good mix of commercial and business districts? Are there enough business endeavors to provide ample job opportunities?

3. How are the local government services? Are the roads all paved and well-maintained? Is there a capable police force and a dependable fire station in the vicinity? How do local crime statistics compare to national levels? Are there regular community events such as an annual parade and activities for children, teenagers and the elderly?

4. How are property taxes in the area compared to nearby towns and cities?

5. How is the property's resale value? Is the area a "hot" location for real estate where demand for houses is stronger than available supply? Are there more people moving into the neighborhood than moving out of it?

Attention First Time Homebuyers

In many real estate markets, especially along the East and West coasts, first time homebuyers are finding it harder and harder to purchase a home. The frustration of many buyers who couldn't find the "home of their dreams" at a price they could afford.

The key to their frustration is in the phrase, "home of their dreams." Most first time buyers today want, at a minimum, a new or near new, single-family, 3-bedroom, 2-bath home in move-in condition on a large lot in a good area of town. They want what their parents have, what their parents worked years to acquire. Sorry, kids, this type of home isn't and never was a first time buyer home. This is a move-up home for those who bought small 2-bedrooms, 1-bath bungalows or attached housing when it was affordable. Unfortunately, even smaller homes are unaffordable to many first time buyers today, especially if they have additional debt such as car payments, student loans and credit card debt.

So what's a person to do to get into their first home?

1. Think older; think smaller. In the 1950's, hundreds of thousands of vets returning from World War II purchased their first homes -- small, 2- and 3-bedroom, 1-bath homes that families of 4 and 5 lived in for many years before moving to a larger home, a 3-bedroom, 2-bath home. These small homes are still around and ideal for first time buyers to get their foot in the real estate door.

2. Think fixers. There are plenty of homes out there that can be purchased for below-market prices just because they need updating. They're perfectly livable and can be fixed up over time as the money permits.

3. Think shared housing. Compatible individuals who want to own a home can start out as co-owners of a home. Two incomes may allow both to get their foot in the door of home ownership that their individual incomes would not. Since this would be, more or less, a business arrangement, an agreement would have to be reached prior to purchase outlining each person’s responsibilities and obligations as well as the disposition of the property under certain described circumstances.

4. Think multi-family. A duplex or tri-plex allows you to live in one unit and rent out the other(s) to cover a greater part of the mortgage making owning more affordable.

5. Think manufactured homes. These aren't homes on wheels. Modern manufactured homes on their own land are spacious, well-built with all the desirable amenities, and affordable. FHA financing lets you get into these with as little as 3% down.

There's more than one way to open the front door to home ownership if you stop dreaming and come down to earth. Everyone has to start somewhere, and that usually isn't at the top. Your first home is just that -- A FIRST HOME. Statistics say you will own 5 homes in your lifetime. Some will own less; some will own more. However, if you wait to find the "home of your dreams," you may never be able to afford a home of your own.

Malaysia Property Investment Potential

The Malaysian property market offers a good mid range investment opportunity to international investors seeking reasonably priced real estate with sustainable growth potential in both the residential and tourism sectors.

The stability of the property market in Malaysia is based upon the stability of the country’s economy which is currently expanding at a sustainable rate and benefiting from closer export ties with China as well as strong levels of foreign direct investment from the US, China and Japan.

Furthermore the attraction and appeal of the country means that it has a robust tourism sector that has spawned a secondary holiday home market which further boosts the long term strength of the property market and broadens the investment opportunities available to an investor.

International real estate investor interest in Malaysia is roughly divided into those who target the professional, executive rental market particularly in Kuala Lumpur and those who seek to profit from the tourism market either through residential short term lets, commercial accommodation units or through the development of properties for sale to second home and holiday home hunters.

The large expatriate population employed in Kuala Lumpur has pushed up demand for serviced apartments, well located property and real estate in general to rent which means that rental rates chargeable in Kuala Lumpur are on a par with any major city worldwide and new off plan properties are being sold to international property developers with impressive guaranteed rental yields of between six and ten percent.

An alternative to purchasing off plan in Kuala Lumpur is to buy apartments to renovate and then let out perhaps on a corporate let basis, or an investor could buy off plan or buy to renovate and then flip the property on to another investor or home seeker and reap profits from short term growth in Kuala Lumpur’s property market.

Real estate investors in Malaysia looking outside Kuala Lumpur for property investment opportunities are mainly attracted to the North Western island resorts and the tourism sector where strong short term rental rates are chargeable and annual returns from letting to the tourism market are impressive. There’s also potential to target second homers seeking an exotic overseas home in the sun.

The benefits of Malaysia as a destination for a property investor are manifold and stem primarily from the strength of the country’s economy. GDP growth was in excess of 7% in 2004, inflation in Malaysia is low, unemployment is low, exports and reserves are strong and strengthening and Malaysia has very supportive governmental policies for the attraction of foreign investment which include tax incentives and pro-business policies. Therefore an international real estate investor looking for a well priced, strong economy to target for sustainable growth and yields over the medium to long term should consider Malaysia.

Malaysia Property Buying Process

In Malaysia the property buying process is well documented and regulated but that doesn’t prevent the purchase process from differing from person to person!
As is often the case when buying in an overseas emerging market it’s more a case of who you know rather than what you know when it comes to speeding up and easing the entire property buying process; and the more property transactions you engage in the simpler the process gets.

Foreign investors interested in the Malaysian property market are subject to certain restrictions on the type of real estate they can purchase and a great deal of care and attention to detail has to be paid to the whole buying process, therefore it is imperative that a good and recommended local lawyer is used to assist with the transaction.

If a buyer uses an estate agent to help them find property for sale in Malaysia they may be liable to pay agency fees of up to 3% of the property’s underlying purchase price. Some agents will require this fee be paid when an offer to purchase has been accepted but it is not actually wise to pay the agent until the whole property purchase transaction has been completed.

In terms of the restrictions placed on non-resident purchasers, firstly permission to buy has to be granted by the Foreign Investment Committee of the Economic Planning Unit of the Prime Minister's Department. Secondly property on Malay reserved land cannot be owned by overseas foreign investors. Other than these restrictions foreign owners of property are treated in the same way as Malaysian owners and both are protected by the same real estate laws.

When looking for property for sale in Malaysia it’s wise to have a structural survey carried out on any property that meets the investor’s objectives because many homes are known to have structural problems and they may not be apparent at first glance. Once an investor is satisfied that his chosen real estate is sound and meets his requirements he will sign an offer letter that will be submitted to the vendor for acceptance.

Once the offer letter has been accepted an option to purchase contract will be signed by the vendor and purchaser and the investor will pay a 10% deposit which is non-refundable if they withdraw from the sale. It’s important to make sure that there is a clause added to this standard document stating that if the vendor pulls out they have to pay back the deposit and an amount equal to that to the investor for the inconvenience.

Once this option to purchase has been signed the investor is given three months to find finance, get the title deeds checked and move towards signing the S & P agreement (Sale and Purchase Agreement). Because getting a mortgage in Malaysia is such an incredibly slow, time consuming and frustrating affair this three month period often needs to be extended by another month. If the period to signing the S & P is extended the purchaser has to pay interest on the outstanding amount he has left to pay at a rate of 10% per annum that is calculated on a daily basis for the month.

Overseas investors who require a mortgage to purchase property in Malaysia might like to consider raising the finance outside of the country as this will speed up the whole Malaysia property buying process.

When the completion date comes the Sale and Purchase Agreement is signed and the balance of the property’s selling price is transferred to the vendor. The S & P is then sent to the land registry along with the memorandum of transfer form 14A of the National Land Code to transfer the title deeds into the name of the property investor.

Other than the estate agent’s fees a buyer should be aware that they will be liable to pay stamp duty and lawyer’s fees.

Malaysia scraped property gains tax from April 1, 2007

Malaysia will scrap capital gains tax on property deals from April 1, the prime minister said Thursday as he announced a slew of pro-investment programmes and incentives in a bid to boost the economy.

Prime Minister Abdullah Ahmad Badawi said he hoped the decision would "inject more excitement and dynamism in both the property and financial sectors.''

"Potential that has gone unrealized or under-optimized will be turned into new industries and businesses, new value creation and new jobs,'' he said in a speech at a conference of local and foreign fund managers, and heads of some of Malaysia's biggest companies.

The Malaysian property market is currently believed to be stagnating, and considered undervalued compared to other countries in the region, especially Singapore.

Abolishing the property gains tax would encourage investment and deals and bring more liquidity into the market.

"Going forward to further improve the national property sector, the government has decided not to impose real property gains tax throughout the country commencing 1st April, 2007,'' Abdullah said.

He also said the government will continue to reduce its stakes in government-linked companies in which it has a high ownership level in order to increase liquidity in the equity market.

"To avoid exaggerated market disruptions and to allow for strategic tie-ups, the process will be undertaken in an orderly manner,'' he said.

Abdullah announced a new package of incentives for the Iskandar Development Region, a special economic zone in the southern state of Johor, in six targeted sectors: creative industry, education, financial advisory and consulting, health care, logistics and tourism.

Those starting businesses in these six sectors will be exempt from corporate income tax for activities within the zone and outside Malaysia for 10 years, provided they commence operations before 2015.

They are also exempted from foreign investment committee rules, have the freedom to source for capital globally, and would be allowed unrestricted employment of foreigners.

In a statement, the Iskandar Regional Development Authority said Malaysians are still expected to make up the large majority of the work force.

Abdullah also announced the creation of four more economic regions besides the Iskandar Development Region.

They are the Northern Corridor Economic Region, East Coast Corridor, the Sabah Corridor and the Sarawak Corridor.

The last two are on the Borneo island in the states of Sabah and Sarawak.

"The opening up of these new economic regions, in a concerted and systematic manner, will literally change the face of the country,'' Abdullah said.

The announcements, aimed at attracting foreign investments, come at a time when the country is facing stiff competition from China and India. Still, Malaysia's economy hasn't fared too badly.

It expanded 5.7 percent in the fourth quarter or 2006 from a year earlier, bringing full-year growth to 5.9 percent.

This was slightly better than the government's earlier 5.8 percent forecast, and higher than the 5.2 percent expansion in 2005.

The expansion was attributed mainly to the sturdy growth of services and manufacturing sectors.

In its economic outlook, Malaysia's central bank on Wednesday projected that private sector investment will expand by 10.4 percent this year compared to 9.7 percent in 2006.

Public spending would expand by 11.4 percent, up from 6.5 percent last year, it said. Manufacturing output was expected to grow 6.6 percent in 2007.

Aution Caution

Looking at the advertisements in the daily newspapers, it would appear that a large number of properties are being auctioned off every weekend. The indicated prices appear to be way below the market price, making it appear like an attractive purchase.

Is it safe to buy a property at an auction, and is the buyer adequately protected by the law? Can properties be auctioned off without a court order?

Well, court approval is only required if there is a precondition in the loan agreement requiring approval of the court before it can be sold. Otherwise the court is only involved if the land has a charge registered under the National Land Code.

Right to sell
Buyer beware: Before buying a house at an auction, the buyer needs to be aware of the issues and complexities involved.

Almost all the auctions in the advertisements include a reference to a bank, a financial institution or a borrower. This would suggest a loan default scenario. The words “assignee” and “assignor” in the advertisements suggest that the property in question does not have separate individual titles to enable a charge to be registered.

Where there is no individual title and the loan is granted on the basis of a loan agreement and a Deed of Assignment, the lender is entitled to dispose of the property on the strength of a Power of Attorney, unless there is a restriction.

In fact, most such documents allow the lender to dispose of the property without any prior court approval. The agreement may not mention an auction but the auction mechanism is utilised to make the intended disposal known to a wider audience to get the best price and show transparency.

Before buying a house at an auction, the buyer needs to be aware of the issues and complexities involved. The offer price may appear to be cheap but there could be other aspects that could increase the cost of the transaction.

Contractual relationship
To start with, the property may not necessarily be available at the indicated price. This is merely the reserve price at which the bidding will start. Depending on the property and the buyers it has attracted, the price could end up much more than the reserve price.

An auction creates a setting to put in place a contractual relationship between the parties involved. The process starts with the publication of an advertisement.

Following the advertisement, the auctioneer invites bids for a particular item for sale and starts the ball rolling. This is referred to as an invitation to a treat. If a bid is made pursuant to such invitation, that in law constitutes an offer, the auctioneer is free to accept or reject. However, the sale by an auctioneer is concluded when he announces its completion by the fall of the hammer or in any other customary manner.

The next question that arises is: what are the terms and conditions on which the property is purchased? When property is purchased from a developer, there is the standard Sale and Purchase Agreement, if it is a housing accommodation. When a property is acquired through a sub-sale, the terms are set out in the Sale and Purchase Agreement, which is the result of negotiations between the parties.

Conditions of sale
However, the scenario in an auction sale is different. This is because the property is sold based on the Conditions of Sale, which become the terms on which the property is transacted.

These Conditions of Sale are always available before the auction takes place. An individual bidder at the auction ought to obtain and familiarise himself with these terms and conditions before the bid. This is because if the bid is successful, he will be deemed to have entered into a contract on those terms.

An example of a clause in a Condition of Sale which illustrates the risks a bidder must assume when he purchases a property, reads as follows:

“The property is sold on an ‘as is where is’ basis without vacant possession subject to (a) all express and/or implied conditions, restriction-in-interest affecting the Master Land and that which may be imposed/endorsed on the document of individual strata title to the property upon the issuance thereof, (b) all easements, covenants, charges, caveats, liabilities, (including but not limited to liabilities to the local authorities incurred but not ascertained and any rates made but not demanded) and any adverse claims in respect of the Property; and (c) all tenancies, lease, occupiers and rights (if any) of any tenant or occupier, subsisting thereon or therefore without any obligations arising to define the same respectively.”

It is a common and acceptable practice to purchase a property subject to express and implied restrictions endorsed on the document of title. But if there are tenants on the land, the bidder has to take the responsibility of evicting them and bear the costs incurred with the added risk that compensation may not be recoverable. The same would apply in the case of a need to have a caveat removed.

This is different from purchasing a property from a developer or an ordinary individual where the vendor has an undertaking that the property is free from encumbrances which could include caveats, and that the seller will hand over the property to the buyer with vacant possession as part of his obligation.

To reinforce the rights of the seller or rather the seller’s lack of obligations, such Conditions of Sale often provide a condition binding the purchaser to admit that he has inspected the property and is buying it in the condition that it is in. An example of a Condition of Sale which exonerates the seller from handing over the property with vacant possession has a clause which reads as follows:

“The successful purchaser shall at his own costs and expense take possession of the property after the payment of the balance purchase price. The assignee/lender or its agents have no obligation to deliver vacant possession of the property and the successful purchaser is prohibited from entering the property before the payment of the balance of purchase price and/or late payment interest.”

Need for caution
It would be in the interest of the bidder to visit the property and inspect it to familiarise himself with the condition of the property. The photographs in the newspaper or leaflet may not convey the real state of the property which the bidder expects to acquire.

These are just some of the conditions of sale. A detailed examination of the Conditions of Sale in auctions could disclose a host of responsibilities which the seller may exclude himself from.

In conclusion it must be said that a valuable property may well be acquired at an auction. However, there is a need to make adequate inquiries and investigations, and consider all the factors in order to end up with a good bargain.

Rising cost of materials

US dollar heading downwards, to certain extend I believe it is on purpose by the Federal Reserve and their governmental policies due to the strong challenge of China and Asian booming economies that cause continuous trade deficit in US. When dollar is heading down, all commodities trade with the benchmark using US dollar has been rising steadily. Example: Crude oil, steel, gold, iron and even food.

Couple with the intensifying demand from high growth countries like China, India, Indonesia and potentially African countries in the coming years. This is no more inflation, but is rather as asset revaluation stage. Most government has measured their CPI (Consumer Price Index) with core components that always excluded many necessity components that is vague in telling the clues related to actual inflation.

Globalization Effect

It is not just limiting to business or MNC (Multi National Corporation). It is by far even to tell all that the world is gradually becomes one. No matter where you stay and what country are you living in. Everyone can move from country to country due to business, education, cultural exchanges, sports and more.

The economics' factors that drive prices sky high in Singapore, Thailand, Indonesia, Hong Kong, Shanghai, Korea, Japan, Australia and Europe. There will not be any cheap property anymore in any corners of the world depending on the urbanization rate of those cities. It is a matter of time but given those fundamentals in Malaysia economy, it will be also a pressure to boost the property price locally. We should not compare within ourselves between the current price and the historical prices. We have to look globally and compare with our peers.

Even today, if you compare to US property market that has been impacted by the sub-prime loan crisis. I believe apple to apple comparison between a bungalow in New York and in Kuala Lumpur, it has still a far difference between two. Well of course, some may argue that because of our GDP income is lower. But if you believe this figure will revise up in the coming year, It gives strong support that property prices in Malaysia will rise further.

Population growth and its age group

Population is also the demand factor in the property market. Local population is the citizens of Malaysia and the foreign population is those who come in with 2nd Home campaign or as expatriate that temporally working in Malaysia.

It will not be a surprise why there are many hospitals establishing in everywhere of the country no matter they are government funded or private funded. This is due to the age group of Malaysia that almost 65% above of the whole nation population is at 35 years old and below. From 35 years old to 45 years old probably got another 10% are getting more buying power to invest in their 2nd or 3rd property. It means there will be a lot of buyers are flooding into the market in the next 5 to 10 years. Need not to count the foreigner investors and pensioners that always view Malaysia as one of the most cost effective country in the world.

Healthy growth of GDP in Malaysia

Since the early of 90s, Malaysia has been enjoying a robust GDP growth between an average of 7-9%. Until recently, the growth rate is stabling between 5% to 6%. From export oriented economy and moving into services oriented. The milestones are changing to further stimulate internal growth as the government is pouring bullets into building the local infrastructures and creating special economic zones in its yearly fiscal policy and master growth plan. Even the growth of our neighbor's countries like Singapore, Thailand, Indonesia, Vietnam and Philippines are enjoying a splendid growth. It is not becoming a competition in overall cause all countries have their own unique niche to certain extend. This combination is creating a unique ASEAN's economy like the European Union. For the next 5 years, we forecast a growth rate between 4.5% to 5.5% due to the slow down in US economy and also sky high commodities prices that will need time of everyone to adjust.

Govenrment's Policy on Property

Malaysian government sometimes is very good indeed. At the beginning of 2007, Deputy Prime Minister has even openly expressed his view that Malaysia property market will do well. Being an important factor that will contribute property prices stability and upside, government policy is always playing a major role in this segment.
But what is the reason that a need to boost the property prices? From my personal view, government has been helping the lower income group by putting many policies like every project must has a low cost apartment in every township; putting taxes and pressures to avoid unnecessary speculation on property prices. All these policies are waived in 2007 like now there is zero tax on property gain transaction in Malaysia. Furthermore, the ministry of housing has set up better procedures to make the process of build, buy and sell more efficient; allowing EPF contributors to apply for monthly withdrawal to reduce their installment pressures or to buy a house; reduce stamp duty on RM 250,000 houses and below; lack the rules for foreign ownership and even provide incentives for foreigners with the recent 2nd Home Campaign to own a their second property as a home in Malaysia.

I believe the reason is the pressure of the government to increase the GDP income per head. It has been a long time that we have a GDP income around USD 4,000 to USD 5,000 per head in Malaysia. When we are moving into a high income, high margin and high tech service oriented economy. We cannot continue to have low cost strategy and we need quality human capital development in the country to compete in the global scale. Thus, boosting asset values is a wise strategy to boost local GDP income and also strong property price will have an effect in assisting the currency rate and also the local stock market- KLSE. We see this is a good move by the government and we also agreed that this will benefit the whole nation.