Malaysia: Expect Price Escalation in 2010

For those intending to buy houses in 2010, this is a good indicative article from Lee Wei Lian,writing for the Malaysian Insider.

She reports on the possible housing scenario in 2010 basing on the expert comments of REHDA and also the outcome of a property price survey among its members.

Let's read her article for whatever it is worth.

"House hunters will likely face higher prices next year as pent up demand and gains from the stock market boost the property sector.

Houses on the secondary market could also be hit by an additional five per cent increase in prices as owners looking to sell try to cover the real property gains tax (RPGT) which comes into effect in January.

According to the Real Estate and Housing Developer’s Association (Rehda), slightly over half the respondents in a survey of its members expect property prices to increase up to 20 per cent over the next six months.

About 30 per cent of the respondents expect prices to remain stable, while less than five per cent expect prices to decrease.

The stock market has made substantial gains this year and investors who benefitted will likely be looking to put their money in property.

“Six to nine months after the stock market increases, it goes into brick and mortar,” said Rehda deputy president Datuk Michael Yam at a briefing today on the property outlook for next year.

On the positive side, interest rates remain low and banks continue to be flush with extra funds, therefore making the arrangement of home financing easier.

Yam, however, stressed that there was still a relatively low barrier to home ownership in Malaysia and ticked off a list of factors in the home-buyer’s favour, including interest rates as low as BLR (base lending rate) minus 2.3 per cent; margins of financing up to 100 per cent; zero lock in period; stamp duty exemptions; and repayment periods extended to thirty years or up to the age of 75.

“Even I can qualify for a (30 year) loan now,” he quipped.

According to REHDA officials at the press conference, the average value of homes transacted in 2009 is estimated to be between RM200,000 and RM250,000 when excluding low cost homes, and about RM168,000 when taking into account low cost houses.

Fresh graduates, however, could face difficulty buying properties in the city where prices are much higher.

Yam said that there were no official figures available for the average price of link homes in the Klang Valley but said that there were terrace houses in some suburbs available for about RM400,000, as compared with RM200,000 in smaller towns and cities like Kluang and Kuantan.

“Graduates may have a problem without help from their parents,” he said.

“They earn maybe RM3,000 to RM4,000 a month, which means they can borrow only RM150,000 to RM200,000. It is not possible to buy a terrace house [with that level of income] but maybe an apartment.”

He added that developers might have to consider building smaller units for the fresh graduate market segment, in the region of 600 sq ft apartments that sell for RM300 per sq ft.

A long term boom is also expected for the housing industry that could put upward pressure on prices as Yam said that slightly over half of the population is below 24 years of age and would later enter the home-buyers market.

“These people will be pushing to enter the property market,” said Yam.

Housing prices in some parts of the world such as China, Singapore, Hong Kong and Australia have risen dramatically over the two years, prompting a public outcry.

Prices of private homes in Singapore reportedly rose by 16 per cent in the third quarter and there are concerns of a speculative asset bubble building in Hong Kong.

According to Ratings Agency Malaysia economist Kristina Fong, asset bubbles were not evident in Malaysia and an over-supply of units on the Malaysian property market is likely to cap price escalation.

Picking winners: Unit Trusts funds

Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting. He has written an article on choosing unit trusts to buy. I attached his article unabridged.

"UNIT trust funds offer an attractive alternative to retail investors, especially those looking for the benefit of diversification with a small pool of capital while enjoying the possibility of earning higher returns compared with conventional savings.

However, a lot of people have the misconception that the diversification nature of these funds means that the risk of investing in unit trust is low and they can just close their eyes and simply pick any of the funds that come along.

This misconception has led to many paying high prices in learning that as in any type of investments, investing in unit trust funds requires some basic understanding and research before we commit our hard earned money to it.

In general, we can classify the unit trust funds in the market into two major categories: income funds and growth funds.

·Income funds usually are characterized as providing consistent income to the investors. These funds invest in income-producing stocks or bonds or a combination of both. Bond funds, equity income funds and money market funds are included in this category.

·Growth funds generally are more aggressive than income funds but have the possibility of earning higher returns by focusing on the objective of long-term capital appreciation rather than income producing or short-term gain. Examples of growth funds are small-cap funds, commodity funds, index funds and gold funds.

Before we start evaluating the funds to invest in, there are two main considerations which are our investment objectives and risk tolerance level.

Every investor invests for his own purpose. If you are investing for your retirement and are already close to retirement age, you should look for income funds that are more predictable.

However, if you are still young and want to save for your children’s higher education, which will be 10 or 15 more years, you may want to look for growth funds that generate higher return but with higher level of risk.

Once we are clear on what we are looking for in the investment, we can narrow down our selection to either income or growth category and move to the next step of identifying the most suitable funds within the selected category.

Here are a few key factors to look into when evaluating unit trust funds:

·Investment strategy, policy and holdings: Every fund has its own investment profile. Investors should have a clear understanding of the investment strategy taken in each fund that they are considering to ensure it is consistent with their personal investment objective and risk tolerance level.

Even the funds within the same category may have significant differences in risk exposure due to the difference in the investment holdings.

For example, the risk exposure in large-cap growth companies is definitely much lower than for penny stock funds.

·Past performance: Investors may look into the past performance trend of the fund to gauge its future performance.

However, do bear in mind that good past performance may not be repeated in the future and we should not be overly excited to see one year of good results if the fund is only newly established.

A good fund should be the one that has been consistently out-performing its peers, be it during good or bad times.

·Cost: Investors must be aware that when they buy or sell the funds, there are fees and expenses embedded in every transaction.

For example, the expense ratio of a small fund tends to be higher than a large fund while a regional or global fund usually will carry higher costs compared with a domestic fund.

·Fund management: The fund management is very important to ensure continuity and consistent performance.

If a fund changes management too frequently, it will be very difficult for us to gauge the performance of the fund as different managers will have different styles which may affect the performance of the fund.

For example, if the manager tends to have higher portfolio turnover, then the expense ratio of the fund may increase even though the nature of the fund holdings remains the same.

By having good understanding of the above factors, we may be able to make meaningful comparisons among funds that we are interested in to identify the ones that suit us most."

I have ventured into some unit trust funds. So far, not very good, more misses than hits!

Again, there is this peculiar feature called capital protected or 'guaranteed capital return" in some funds. Sadly on hind sight, this protection do not appear to be so. Most unsuspecting investors were sold a 'pup' and had to pay dearly because of marketing misrepresentation'.

Malaysia: Dell Axed Another 700

In spite of what the government is trying to do to maintain employment,revenue and profits still continue to rule the way.

And so some 700 Dell Malaysia workers in Penang will be let off in a voluntary separation scheme (VSS) exercise soon.

The 700 include those in the operator, supervisory and managerial positions at its Bukit Minyak plant here.

Dell corporate communication senior manager Jasmine Begum said the VSS scheme was being implemented because Dell was transferring the division that manufactured notebooks for Latin America, Canada and US markets to the group’s global manufacturing network.

“This means that the Bukit Minyak plant will only manufacture notebooks, desktops and servers for the South Asian and Australian markets,” she said.

The move would enable Dell Malaysia to be more cost-effective in its operations, reduce delivery time and enhance the quality of the products manufactured, Begum said.

“Dell Malaysia will continue to hire for the procuring, financing, and supply chain planning departments,” she said.

Jasmine said the affected workers would leave the company via VSS packages from January to June.

“They will be given competitive VSS packages. We will also provide them with career counselling and outplacement services,” she added.

Dell Malaysia, which has been operating here since 1995, currently has some 4,500 workers, most of them employed at the Bukit Minyak plant, and the rest at the Dell Cyberjaya Centre.

After the VSS implementation, the workforce in Malaysia will be scaled down to about 3,800. In March, Dell Malaysia offered VSS packages to about 5% of its employees.

I do not with the improving world economic situation,VSS will be reduced.

Alex Ooi: First Anniversary

Today is the first anniversary of the passing of my good buddy,the late Alex Ooi Eng Chor.

Alex passed on after suffering a heart attack during dinner after a dance competition in Ipoh.

I went for the wake the following day to pay my last respects.

Looking at the viewing glass plate in the coffin, I could see for the first time a clean shaven Alex lying in peace.

Alex has always been a person that is friendly and gifted with the serving spirit.

According to his mother, he had omens that he would not last 2008.As such, he told her that he would not cook the Chinese New Year dishes in 2009.

We remember him in memory this day and pray the Almighty Lord will be kind to his soul.

Amen.

The Electric Train: Faster Ipoh-KL travel

Yes, beginning April 2010, get ready for a 140 km/h speed train to shorten the journeying time from Ipoh to Kuala Lumpur.

The first of five sets of the six-car electric train had arrived on Dec 3 from South Korea. When deployed on the tracks, this comfortable electric train will take you from Ipoh to Seremban in less than 2 hours (1 hour 55 minutes estimated time). It takes about 3 hours now. The day of drudgery on trains will be gone from this stretch from then on.

The five sets of train cost RM240 million and each train has a capacity of 350 seats.

I am looking forward for this to happen. If the schedule works for me, it means an option is now open for me to perhaps relocate to Ipoh or Seremban when rents are cheaper and cost of living lower so that I can stretch further the ever shrinking ringgit, no thanks to the government.

Gentings is Now in Cairo!

2009 is one real eventful year for Genting Berhad and its subsidiaries.

Sentosa Island Resorts in Singapore is days away from its opening. Development is on-going in Manila and Gentings Hong Kong has been incorporated.

Genting Casinos is now the new operator of casino in Cairo.

Genting Casinos Limited, an indirect wholly-owned subsidiary of Genting UK Plc, is the new operator of the casino at The Nile Ritz Carlton Hotel, Cairo.

Genting Singapore Plc said Genting UK, an indirect wholly-owned subsidiary of the company, has been awarded the casino concession for an initial period of 10 years.

According to the press release,Genting UK plans to open the new operation under the brand,"Crockfords on the Nile".

It said this step is being taken, as part of the group's strategy to expand its casino resort network as well as strengthen and develop, Genting UK's leading position in the premium market through its key high-end London casino clubs, Crockfords, Coloby and Maxims.

Genting Singapore said the Nile Hotel is owned by Misr Hotels Company, a leading, government-controlled hotel owner and operator in Egypt.

Misr Hotels will shortly be undertaking a major refurbishment of the renowned Cairo hotel on the banks of the Nile.

The hotel, considered an icon in the Egyptian capital, has contributed to the country's travel industry for the past 50 years.It first opened in 1958.

It will be re-opened as The Nile Ritz Carlton Hotel, Cairo, following an extensive renovation and refurbishment plan, expected to be completed in early 2012.

So, what do you know? Isn't Genting real busy in 2009?

2010: RPGT Kicks In

This article in the Malaysian Insider was written by Lee Wei Lian

I will abridged and highlight the salient issues.

The real property gains tax (RPGT), which takes effect in 2010, is likely to hit long-standing homeowners and foreign investors the most.

The five per cent tax, which was announced in October, is normally imposed to curb speculation but due to its flat structure does not differentiate between homeowners who have been holding a property for 20 years or those who are flipping properties within one or two years for a profit.

The property sector was also taken by surprise by the announcement and worries that it will send a message to potential investors that the government has not been consistent in its policy-making.

An exemption on the RPGT was given in 2007 and its removal two years later with little warning could heighten the feeling of uncertainty among investors.

Real Estate and Housing Developers Association of Malaysia (REHDA) president Datuk Ng Seing Liong said the RPGT should be structured so that it curbs short-term speculation and take into account interest paid on the property as well as inflation.[Such a logical proposal]

"The RPGT will hit those who hold property for more than 10 years the most," Ng told The Malaysian Insider. "It also does not ensure that the interest that was paid is tax deductible like in Australia. If you pay a housing loan over 20 years, the interest you pay is substantial and it should be deductible."

Ng said the RPGT has also introduced an element of uncertainty for foreigners looking to invest in property in Malaysia, noting that the exemption was introduced fairly recently.

"They will now feel that government policy is not consistent and the five per cent tax can be increased anytime in the future," says Ng.

One leading property developer told The Malaysian Insider that the impact will not be as bad as it originally seemed right after the announcement.

"The government has clarified some things since then," he said. "However, it would be good if they can keep their policies consistent."

This perception of "flip flopping" in policy-making could pose a challenge for the Najib administration which is trying to chart a new growth path for the country with an emphasis on private investment.

Property website thinkproperty.my says that investor confidence has fallen as a result of the RPGT.

Its Property Outlook Index dropped to 29 per cent at the end of November 2009, down from its all-time high of 68 per cent on the day before the re-introduction of RPGT was announced.

"The level of RPGT at 5 per cent is de minimis. However, people are concerned that this will make Malaysian real estate less attractive relative to other options for both local buyers and foreign investors, the latter of whom have plenty of other countries where they can invest their money. In addition many are worried that this is the first step towards further increases in RPGT, something that the government has not ruled out," said thinkproperty CEO Asim Qureshi.

It will indeed be a sad day for many potential property sellers when January 2nd dawns on the eastern horizon.