When we speak about property investments today, the general assumption is that it is a GET RICH QUICK SCHEME. The true essence of investing in properties has been blurred with many seeking to make quick profits where properties are treated like commodities rather than an appreciating asset. In good times, properties are traded or resold in short periods of time. This is usually referred to as FLIPPING.


Over the last 15 years or so there have been many investors who have actually made money in the short term. This started in early 2001, after the Asian Financial Crisis. Property prices were flat and many were unable to repay mortgage payments. Effective 1st January 2001, the government waived the Real Property Gains Tax (RPGT). This was used as a stimulus for property transactions and to encourage property development.

Over the next few years, the property market picked up steam and prices of properties started to climb. This then spurred on the developers as well and it was all honky dory with many new projects launched over the next few years. However, this eventually ran out of control. Property prices started to escalate furiously and the MANTRA was:  If You Don’t Buy Now, You Will Not Be Able To Buy In The Future.


Property investments became the hottest topic at all social functions and the media paid a huge amount of attention to this. Many made handsome profits in short periods of time and that prompted others to follow suit as it was deemed to be the road to riches.  With that in mind monies profited from the early sales were reinvested in other properties which further accelerated investing activities.

Soon after, there were many Self- Acclaimed Gurus who were hosting seminars on striking gold via property investments. The market was a buzz and thousands of people invested heavily in new property developments merely to resell upon completion of the project. At this point the basic fundamentals on property investments were ignored or should I say grossly misunderstood. It was all about buying in and cashing out upon completion. It was about making quick profits.


Initially the investors were happy to purchase one or two properties. Then greed set in, investors began pooling their resources together to qualify for loans. There were all kinds of offers and deals being offered by developers. Discounts on the purchases, No Money Down Schemes, Guaranteed Returns and so on. The buying frenzy carried on.

To further escalate the buying frenzy, developers introduced the Differed Interest Bearing Scheme (DIBS). This scheme allowed investors to pay a minimal down payment and thereafter only start servicing their loans upon completion of the project. This scheme made purchasing a property very easy and further enhanced speculation. The response to DIBS was over whelming as from a cash flow perspective, it was perfect.

In the midst of this frenzy, Bank Negara became concerned as many of these investors were over gearing themselves and property prices were escalating at a feverish pace.

Then came the cooling measures imposed by Bank Negara in January 2012. The new buzz word was Responsible Lending Guidelines. The implementation of the new guidelines had an impact on the volume of sales and suddenly, property investments seemed like something from the past, a forgotten misadventure. Today, many who had purchased to cash out upon completion of the developments they had invested in are caught.


Property Investments in Malaysia, is generally safe and secure. Historically, since our independence, property prices have gradually increased in value. While the property market did experience downturns in 1986, 1997 and 2008, prices very quickly recovered and surpassed previous levels. This is largely due to our Asian culture, where a great amount of importance is placed on property ownership.

What all investors must realize, is that property investments work well when a long term approach is taken. Rental incomes grow over the years and with inflation creeping in every year, values also tend to appreciate.


Today, there are numerous opportunities to invest in, office spaces and shop offices offer investors good long term tenants with escalating rental reviews. Factories tenanted by multi- national companies are also available for sale with long term tenancies locked in.

The problem today is that the returns on investment (ROI) average at about 4 to 5% annually, this does not meet the criteria set by most institutional investors and the individual investors are not particularly excited with these kind returns as well. This is because, with a 7% ROI, the rental returns covers the monthly mortgage payments. This is the ideal investment scenario.

It is my humble opinion that, not only in Malaysia but even globally, margins on safe and traditional investments are becoming thinner as the demand for safe and secure investments are highly sought after. Pension Funds, Insurance Companies, Investment Houses etc are constantly looking for opportunities with such returns. The more volatile investments definitely offer better returns and are readily available. So if you are a little more adventurous there are many investments out there that will give you returns in excess of 10%. However be prepared for the unexpected.


For the individual investor, my advice is simple, buy in now with 4 to 5% returns and hold on to your investment for 5 to 7 years at least. Rental values will be reviewed and in the longer term achieving a return of 7 to 8% will become a reality. Additionally, your properties would have appreciated in value should you decide to liquidate.

In conclusion, property investments generally are safe and secure, but to ensure a profitable exit strategy, do not over gear on your borrowings and ensure that you are willing to hold on to your property for a minimum of 5 years. Property Investments call for careful planning and patience.

By Nixon Paul.


Lesson learned from monopoly board game

Lesson learned from monopoly board game (for property investment):-


Lesson One – Always Keep Cash on Hand
Lesson Two – Be Patient
Lesson Three – Focus on Cash Flow
Lesson Four – the Most Expensive Asset Is Not Always the BEST
Lesson Five – Don’t Put All Your Eggs in One Basket (diversify)
Lesson Six – Buy more properties as early as possible, you can’t stay on or racing for cash only
Lesson Seven – Build a strong asset to earn passive income
Lesson Eight – You need emergency fund
Lesson Nine – Take a time out, refocus (when you are in jail)
Lesson Ten – Your advice?


2016 will be the worst year for Malaysian property, says expert


Investment guru Datuk Gavin Tee expects 2016 to be the worst year for Malaysian property on the back of weaker economic growth, loss of pricing power and subdued financing, reported The Malaysian Reserve.

2015 was bad, and 2016 will be worse, said Tee, founder and President of SwhengTee International Real Estate Investors Club, at a recent briefing in Kuala Lumpur.

Ive travelled all over the region, speaking to ministers, developers, investors and the media. The feedback (on Malaysia) is something you dont want to hear.

Notably, property prices within the secondary market fell 15 percent this year due to weaker demand and the absence of speculators.

As such, Tee expects prices to drop even further compared to the past few years as buyers do not foresee significant positive changes in the first half of 2016.

And while property prices may not go back to the levels seen in 2009 and 2010, they will be at their lowest for the next eight years, he noted.

Lower prices, however, will not translate to more sales for developers given the slowing demand for property.

Demand is low in the sense that there is lower foreign investment and job creation, lower purchasing ability from Malaysians, as well as the poor economic and political situations, shared Tee.

A bigger dilemma is the high loan rejection rates, which stands at over 50 percent for KL-based properties and 80 percent for Iskandar-based properties.

Tee said that the Malaysian government should relax the cooling measures and take more steps to make it easier for investors to acquire property.

He added that if financing policies do not change, the government would not be killing the Malaysian property sector but the Malaysian pockets.

If you make it difficult for local investors, the wealth will transfer to foreign hands, he said.

Mangalesri Chandrasekaran, Editor at PropertyGuru Malaysia, edited this story. To contact her about this or other stories emailmangales@propertyguru.com.my

bizdx_anr_1010_ Back to Bread and Butter

Back to bread and butter

bizdx_anr_1010_ Back to Bread and Butter

JUST a few months back, a social media post on food price comparison between United Kingdom and Malaysia went viral and attracted plenty of attention.

This interesting post offered a peep into the average cost of living and purchasing power of Malaysians nowadays.

A Malaysian, Rysherz Rayn, posted on his Facebook that with about £5 (around RM33.50), he could purchase bananas, a box of grapes, 10 apples, an ice lettuce and five packets of his favourite chocolate in London. In Malaysia, the same items would add up to about RM44.

He went on to share that £5 is an hourly pay for a part-timer in UK. While in Malaysia, the average hourly pay for a part-timer is at about RM4. In other words, to afford the same items that a British buys with an hour pay, it may cost an average Malaysian 11 hours of work.

The post created a lot of discussions, some expressed shock and disappointment, others thought UK is too far away for comparison. To make it more relevant and familiar for Malaysians, I did a quick price check on Australian food.

Based on online information and personal experience, buying essential items such as a dozen eggs, 1kg of apples, a lettuce, and a loaf of sliced bread cost about A$9 (RM28) in Australia; on the other hand the same items come up to about RM20 in Malaysia.

In Australia, the minimum wage per hour is A$17.29 (RM53.50), while ours is only RM4.30 based on the minimum monthly wage of RM900.

Though this situation doesn’t paint the overall picture of the living standard in Malaysia, it does illustrate our average cost of living and purchasing power.

If we take a bigger picture, our issue of bread and butter relates closely to brick and mortar, which is the roof over our heads. When our wages are stretched in purchasing daily items compared to other countries, there is no surprise that our housing affordability level is also low.

According to the “Making Housing Affordable” report released by Khazanah Research Institute (KRI) in August, Malaysia’s median house prices were 4.4 times median annual household income in 2014. This signifies a “seriously unaffordable” housing market because an “affordable” market should have a “median multiple” (median house prices as a multiple of median annual household income) of 3.0 times based on global standards.

If we only take Kuala Lumpur into the computation, the median house prices is even higher at 5.4 times (based on annual median income of RM91,440, and the median for all house prices in Kuala Lumpur at RM490,000). Housing for Kuala Lumpur is categorised as “severely unaffordable”.

It is good that KRI reported the issue and highlighted that our country should gear towards improving the elasticity of housing supply and respond to the needs of all segments. However, other than supply, we should also look into the fundamental issue of our income level.

I remember when I first started working in 1961, my salary was RM628 and my first car was a Peugeot 404 which cost RM7,724. A single-storey house in Klang during that time was RM13,000. It cost me only one year of my salary to buy a car, and less than 2 years’ salary to afford a house.

Young graduate

However, a similar car today costs around RM100,000, and a landed house in Klang easily costs RM350,000. Looking at the salary of a young graduate which ranges from RM2,000 to RM3,000 nowadays, it takes 3 to 4 years of their salary to buy a similar Peugeot or equivalent car, and 10 to 15 years to purchase a house.

A recent news article pointed out that, only one out of two PR1MA housing loan applications are approved. It is ironic that even with affordable housing, the rakyat can’t afford a home.

The scenario and comparison above show the challenges of our young generation in securing a house today. It is unfortunate that when our car and house prices grow as a result of inflation and demand, our income doesn’t grow in tandem.

I also remembered in the 1970s, Malaysia and South Korea were started on the same level playing field in terms of gross domestic product (GDP).

According to data from International Monetary Fund (IMF), our estimated nominal GDP per capita in 1977 was US$1,084 (RM4,791), while South Korea was US$1,042 (RM4,605). During that time, when I travelled overseas with our strong currency, people in those countries looked up to me.

However, the IMF data shows the estimated GDP per capita in South Korea today is US$28,338 (RM125,256), while Malaysia is only US$10,654 (RM47,091). Other regional countries such as Taiwan and Singapore are also progressing at a fast pace, in which their estimated GDP per capita now are US$22,464 (RM99,293) and US$53,604 (RM236,935) respectively.

Back to the fundamental issue of our housing affordability, other than providing more affordable housing, the Government needs to move the rakyat up the value chain and increase the nation’s income level.

We know that the authority has been aspiring to do so under the 11th Economic Development Plan. One of them being to attain a per capita income of US$15,000 (RM66,000) by year 2020.

To expedite this, the Government and relevant authorities have to improve the competitiveness and productivity of the nation, so as to catch up with the other countries in the region.

When we talk about the affordability of our brick and mortar, the most fundamental way is to address the underlying problem of our bread and butter, i.e. our income. Until and unless our wages buy us more eggs and rice, it will be a challenge to afford a house.

Datuk Alan Tong has over 50 years of experience in property development. He was the world president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.


Hong Kong apartment sells for record $76.7 mn


HONG KONG (AFP) – A luxury apartment in Hong Kong sold for a record HK$594.7 million ($76.7 million), days before Christmas, making it the most expensive flat in the city and possibly in Asia, reports said Friday.

An unidentified buyer paid more than HK$103,700 per-square-foot for the 5,732 square-foot (532 square-metre) unit at the luxury 39 Conduit Road apartment tower in the southern Chinese city’s upmarket Mid-Levels residential area, The Apple Daily and The Standard reported.

The condominium, on the 46th floor with a view of the iconic Victoria Harbour and a 1,754 square-feet rooftop, had a list price of HK$646.48 million on developer Henderson Land Properties’ website.

The price beats the previous record HK$470 million paid for a luxury unit which takes up the entire eighth floor of the Opus Hong Kong, a 12-storey residential building designed by Pritzker Prize-winning architect Frank Gehry, in 2012.

Henderson Land was not available for comment Friday, a public holiday.

This comes as analysts said a US interest rate hike could put an end to the housing boom in the Chinese city which maintains a decades old peg with the US dollar.

Hong Kong-based brokerage CLSA warned the residential market was at a “turning point”, with prices possibly dropping 17 percent by 2017, while other firms have tipped falls of up to 30 percent.

Hong Kong’s de facto central bank last Thursday raised its base interest rate by 25 points to 0.75 percent after the US Federal Reserve announced its first rate increase in more than nine years.

But chief analyst for Midland Realty Buggle Lau said the record-breaking purchase does not reflect the bigger picture of the overall property market in the city.

“The super-rich, I don’t think the small increase in the interest rates have any impact on their purchasing power,” Lau said.

“This is exceptional, it can’t reflect the whole market,” which he described overall as “sluggish”.

Property prices in Hong Kong, famous for its sky-high rent and super-rich tycoons, have more than doubled in six years due to record low interest rates and a flood of wealthy buyers from mainland China.

Many residents complain they can no longer afford decent accommodation in the city of seven million people, and analysts say property ownership is out of reach even for the upper middle class.


Loan Rejections…Affordable Housing

Many newspapers and magazines have reported that getting a loan is getting more difficult today.Well, it is very true. Every 10 cases submitted to the banks, more that 5 got rejected. Many first home buyers especially in affordable category are facing rejections after rejections. There are many reasons why their loan can be rejected. Some the rejections in not due to the borrowers fault . I have gathered the information below through my years of processing mortgage cases. It’s time to share with everyone.

Let’s blame the banks…..

  1. Some banks have their own policy where there is a minimum loan amount. Some is RM100k, some 150k.If the borrower’s loan fall below the amount, the bank will not process the loan.
  2. Borrowers did not meet the minimum salary criteria although they are good credit customers.
  3. No CCRIS record at all. Many banks will request a co-borrower to join in. I recommend the borrower to have at least a credit card. To the banks, if you do not have any record I don not know who you are,
  4. Some bankers or bank branch do not want to process small loan especially less than RM50k. Why…The amount of work for a small loan and a big loan is the same. Most bankers have a target of RM1 million to RM 2 million every month. Just for your information when I started in Standard Chartered in 1997 my target is RM4.5 million. We are not paid commission.
  5. Banks officer experience in processing the loan.

In addition, the interest rate might also be different. The higher the loan amount, the lower the interest rate.

Do not forget, the borrowers also to be blame for the rejections…

  1. Do you expect the banks to approve if the debts are high. Credit Cards are one of the main culprits.
  2. Salary did not met the banks’ minimum criteria. In other words, their Debt Service Ratio is high.
  3. Submitted to many or to few documents.
  4. Doing risky jobs or the business is not in the choice of financing.

In order to make sure your loan is approve, start doing your mortgage planning now.

From the Desk of

Miichael Yeoh