It’s time to have consistent bumiputra housing quota policy nationwide.
The Government’s decision to scrap the 30% bumiputra equity requirement for 27 services sub-sectors is a step in the right direction to raise Malaysia’s competitiveness in the global business front.
But in order to bring back the spotlight on the country as the place to do business and to attract more foreign direct investment (FDI), there should be proper follow through to unshackle the mantle of protectionism in the other economic sectors and create a more level playing field. One area is the property industry.
The world is certainly going through very troubled times and we have to gather all our resolve and resources to ensure the country is favourably positioned for a comeback when the global economy finally recovers.
Despite some signs of economic stability due to stimulus measures undertaken by the authorities, the International Monetary Fund sees long months of economic distress before the world economy recovers in the first half of next year.
Having lost much wealth and resources to the global financial crisis, countries worldwide will be desperately seeking to rebuild their strengths and sharpen their competitiveness to make a quick comeback when the world economy shows any signs of a recovery.
In order not to be left behind, Malaysia has much to catch up with the rest of the countries, including those in the region such as Vietnam, Thailand and Indonesia, which are making big strides in their competitive rankings.
To ensure a more competitive playing field for our local businesses and foreign investors, all the stifling rules and guidelines that affect the efficiency and competitive edge of businesses and industry groups should be removed eventually.
Given its link to the other 160 industry sub-sectors, the property industry has a huge role to play to breathe more life and activities in the local economy. But it also one of the most regulated industries and is made to fulfil various socio-economic objectives.
The local property industry is one of the most impacted by the global financial crisis as the people’s confidence in the state of the economy and their well-being nosedived since the middle of last year.
With plunging property sales and having to slow down or defer their projects, developers are bracing for tougher days ahead and do not want to be further burdened by some of these practices.
While the national housing policy should help all needy Malaysians to own their own homes, and if the bumiputra housing quota has to be continued, it should be streamlined so that there will be a consistent one across all the states in Malaysia.
Both the Federal and state governments should work together to streamline and have a consistent policy and implementation across the country.
Without clearer and more consistent implementation of the bumiputra quota policy, it will be hard for developers to continue their projects successfully and offer their best to buyers.
At present, the quota for bumiputra buyers ranges between 30% and 70% of the number of houses built, while price discounts for bumiputra buyers vary between 5% and 15%.
Although most states adhere to a 30% quota, it is 40% in Johor, while in some suburbs in Selangor such as Shah Alam, it is between 50% and 70%.
Industry players want the quota to be standardised at 30% while discounts for bumiputra buyers should be capped at 5% and should only be applicable for houses priced at RM250,000 and below. Buyers of houses that are priced higher than that are more financially secure and do not need such discounts.
An automatic bumiputra quota release mechanism that is standardised and transparent should also be in place. There should be an automatic release of the quota units after six months of a project’s launch or when a project has reached 50% of construction.
As property remains one of the most viable investment instruments around, there is huge potential to be tapped from raising Malaysia’s profile and competitiveness as a property investment hub.
To attract more foreigners to invest in Malaysian real estate, more consistent policies to attract FDIs should be implemented.
Developers lament that the policies in the various states contradict the Federal Government’s initiatives to attract foreign investors.
The abolishment of Foreign Investment Committee approval for foreigners purchasing properties priced at more than RM250,000 and the exemption of property gain tax on sale by foreigners reflect the Government’s initiative to promote FDI in real estate.
However, state governments still impose their own rules on foreign property sales and purchase. Such foreign quota restrictions make it hard for developers to sell properties to foreign buyers.
While more enabling and liberalising measures by the Federal Government are expected to be announced soon, the success of such measures, especially those pertaining to land matters that come under the purview of the state governments, is dependent on the willingness and efficient implementation by all involved.
Monday, April 27, 2009
Wednesday, February 18, 2009
How to invest in properties
Is property a good investment? Of course, but I know that while the answer is correct, it is not complete. Of course properties make good investments. But then, the same thing can be said about stocks, unit trusts and a couple of others as well. While they are all good investments does not mean anyone can make money from them. Buying the first house you see or the stock that takes your fancy is a sure recipe for disaster. It is a guaranteed formula for exchanging your hard earned money for a long-term headache.
So this will mean that you will still need to do your homework when investing in properties. This will include reading books, magazines, articles, observing and yes, learning from the experts. Of course, this will require time, effort and yes, even money. But all that effort is peanuts compared to the reward that awaits you. And yes, even the price is miniscule compared to the problems that can happen if you bought wrongly. (Just ask the unfortunate people who bought houses in flood prone areas. Worse, they have to bear the brunt of listening to jokes about water proof furniture and getting free boats from the developer.)
The median price of a house in Malaysia is RM160,000. That figure jumps to RM334,000 for properties in Kuala Lumpur. I don't know about you but that is a lot of money. Not too many of us can afford to invest this kind of money around. (And even if you could, you have to admit that it is not so nice to lose that money!)
Further, the house is the most expensive purchase we will make in our lifetime (for most of us anyway). And it also forms the highest amount of debt we will incur and for the longest time - often lasting 20 years or more.
That being the case, doesn't it make sense for us to do a little bit (or better, a lot) of homework before parting with our money? Doesn't it make sense to tread very carefully before buying a property? Obviously, the answer is "yes".
As an example of treading carefully, a friend of mine viewed the plot that he wanted to buy three times: one in the morning, one in the afternoon and one at night - all on different days. Mind you, it was only a plot of land at that time as the house was not up yet. Now some people may think that may be overkill, but his answer was spot on: `Before paying RM850,000 for anything, I want to be sure that everything is right and in order first,' he remarked. I totally agree.
And oh yes, he sold the house when it was completed 3 years later for RM1.1 million. Even taking into account that he had to pay Real Property Gains Tax (that was still applicable then), real estate agent's commission, legal fees and all, he still pocketed a tidy sum of money. I'd say the three trips were certainly worth the RM200,000 plus - don't you agree?
But I have seen people buying houses on the spur of the moment. I have seen people rushing to buy properties as if they were buying groceries. For their sake, I sure hope that they have done the homework beforehand though my heart tells me something else. And these are the ones that I have witnessed personally. What happens behind closed doors is anybody's guess.
Why buy properties in places no one heard of? While they may be cheap, who's going to buy them from you later on? (There's a very good reason why such properties are cheap - not too many people are buying them!) Of course, after reading that last statement, some people will rise and claim otherwise: `This is going to be the next Subang Jaya/Bangsar/ Damansara.' (The magic word in properties is "Damansara". Any property having Damansara as their address will cost a minimum of RM20,000 extra!)
While that can happen, it can just as easily wind up as the next Lembah Beringin. Anyone who is willing to risk the highest amount of money he will raise in his lifetime is welcome to jump in. If others are willing to risk their money, please go ahead. But I will not be the developers' test pilot! I want to see rows of houses (with people in them), completed roads (and not just "proposed") and shops with at least two banks in the area before I even consider the area.
Buying a property is easy. All you need is a little bit of money and just sign some papers. The question is "can you sell the property for a profit later on (hopefully not too later on)?" Or in other words, can you make money from the property in the near future? As you can see, the answer is not so easy. Furthermore, what you want is a formula to make money on a consistent basis. Making money once is no big deal; anyone can do it. But only an expert can make money consistently. Day in, day out; week in, week out. And like everything else, you need to do a lot of work to become an expert in properties. Winging it, guessing, listening to rumours, referring to friends and throwing darts in the sky will obviously not work here.
So this will mean that you will still need to do your homework when investing in properties. This will include reading books, magazines, articles, observing and yes, learning from the experts. Of course, this will require time, effort and yes, even money. But all that effort is peanuts compared to the reward that awaits you. And yes, even the price is miniscule compared to the problems that can happen if you bought wrongly. (Just ask the unfortunate people who bought houses in flood prone areas. Worse, they have to bear the brunt of listening to jokes about water proof furniture and getting free boats from the developer.)
The median price of a house in Malaysia is RM160,000. That figure jumps to RM334,000 for properties in Kuala Lumpur. I don't know about you but that is a lot of money. Not too many of us can afford to invest this kind of money around. (And even if you could, you have to admit that it is not so nice to lose that money!)
Further, the house is the most expensive purchase we will make in our lifetime (for most of us anyway). And it also forms the highest amount of debt we will incur and for the longest time - often lasting 20 years or more.
That being the case, doesn't it make sense for us to do a little bit (or better, a lot) of homework before parting with our money? Doesn't it make sense to tread very carefully before buying a property? Obviously, the answer is "yes".
As an example of treading carefully, a friend of mine viewed the plot that he wanted to buy three times: one in the morning, one in the afternoon and one at night - all on different days. Mind you, it was only a plot of land at that time as the house was not up yet. Now some people may think that may be overkill, but his answer was spot on: `Before paying RM850,000 for anything, I want to be sure that everything is right and in order first,' he remarked. I totally agree.
And oh yes, he sold the house when it was completed 3 years later for RM1.1 million. Even taking into account that he had to pay Real Property Gains Tax (that was still applicable then), real estate agent's commission, legal fees and all, he still pocketed a tidy sum of money. I'd say the three trips were certainly worth the RM200,000 plus - don't you agree?
But I have seen people buying houses on the spur of the moment. I have seen people rushing to buy properties as if they were buying groceries. For their sake, I sure hope that they have done the homework beforehand though my heart tells me something else. And these are the ones that I have witnessed personally. What happens behind closed doors is anybody's guess.
Why buy properties in places no one heard of? While they may be cheap, who's going to buy them from you later on? (There's a very good reason why such properties are cheap - not too many people are buying them!) Of course, after reading that last statement, some people will rise and claim otherwise: `This is going to be the next Subang Jaya/Bangsar/ Damansara.' (The magic word in properties is "Damansara". Any property having Damansara as their address will cost a minimum of RM20,000 extra!)
While that can happen, it can just as easily wind up as the next Lembah Beringin. Anyone who is willing to risk the highest amount of money he will raise in his lifetime is welcome to jump in. If others are willing to risk their money, please go ahead. But I will not be the developers' test pilot! I want to see rows of houses (with people in them), completed roads (and not just "proposed") and shops with at least two banks in the area before I even consider the area.
Buying a property is easy. All you need is a little bit of money and just sign some papers. The question is "can you sell the property for a profit later on (hopefully not too later on)?" Or in other words, can you make money from the property in the near future? As you can see, the answer is not so easy. Furthermore, what you want is a formula to make money on a consistent basis. Making money once is no big deal; anyone can do it. But only an expert can make money consistently. Day in, day out; week in, week out. And like everything else, you need to do a lot of work to become an expert in properties. Winging it, guessing, listening to rumours, referring to friends and throwing darts in the sky will obviously not work here.
Monday, December 1, 2008
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.
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