Too good to be true? Think twice

HAVE you ever grabbed an offer without any hesitation, simply because the price is too cheap to resist?

Many of us have this experience especially during sales or promotional campaigns. We tend to spend more at the end or buy things which we are uncertain of their quality when the deal seems too good to say no.

It may be harmless if the amount involved is insignificant. However, when we apply the same approach to big ticket items, it can cause vast implications.

Recently, I heard a case which reinforces this belief.

A friend shared that a property project which was selling for RM300,000 a few years ago is now stuck. Although the whole project was sold out, the developer has problem delivering the units on time.

The developer is calling all purchasers to renegotiate the liquidated and ascertained damages (LAD), a compensation for late delivery.

One of the homeowners said he is owed RM50,000 of LAD, which means the project is 1½ years late. When we chatted, we found that he purchased the unit solely due to its cheap pricing without doing much research in the first place.

The incident is a real-life example of paying too low for an item which can leave us as losers, especially when it involves huge sum of investment, such as property.

To many, buying a house maybe a once-in-a-lifetime experience, a decision made can make or break the happiness of a family.

A good decision ensures a roof over the head and a great living environment, while an imprudent move may incur long-term financial woes if the house is left uncompleted.

Nowadays, it is common to see people do research when they plan to buy a phone, household item, or other smaller ticket items.

Looking at the amount involved and implication of buying a house, we should apply the same discretion if not more.

It is always important for house buyers to study the background of a developer and project, consult experienced homeowners regarding the good and bad of a project before committing.

I have seen many people buy a house merely based on price consideration.

In fact, there are more to be deliberated when we commit for a roof over our heads. The location, project type, reputation of a developer, the workmanship, the future maintenance of the property etc, are all important factors for a good decision as they would affect the future value of a project.

Beware when a discount or a rebate sounds too good to be true, it may be just too good to be true and never materialised. If the collection or revenue of a housing project is not sufficient to fund the building cost, the developer may not be able to complete the project or deliver the house as per promised terms. At the end of the day, the “price” paid by homeowners would be far more expensive.

In general, the same principle applies elsewhere. It is a known fact that when we pay a premium for a quality product from a reliable producer, we have a peace of mind that the product could last longer and end up saving us money. Some lucky ones will end up gaining much more.

For instance, when we purchase a car, we should consider its resale value as some cars hold up well, while others collapse after a short period. Other determining factors include the specifications of the car, the after sales service, and the availability of spare parts.

Quality products always come with a higher price tag due to the research, effort, materials and services involved.

In addition to buying a house or big ticket items, other incidents that can tantamount to losing huge sums are like money games, get-rich-quick scheme, or the purchase of stolen cars or houses with caveats.

When an offer or a rebate sounds dodgy, the “good deal” can be a scam.

Years of experience tells me that when what is too good to be true, we should think twice. I always remind myself with a quote from John Ruskin (1819-1900) who was an art critic, an artist, an architect and a philosopher. “It’s unwise to pay too much, but it’s worse to pay too little. When you pay too much, you lose a little money – that’s all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do.

“The common law of business balance prohibits paying a little and getting a lot – it can’t be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better.”

Food for thought by Alan Tong

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.

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Hang on to the roof over your head

Purchasing a property while the prices and mortgage rates are within reach becomes a secure way of protecting your finances against the battering of rising inflation - Both primary and secondary markets are worth considering

The ever changing economic condition and unpredictable spending behaviours make it even more challenging to find the real equilibrium in interest rate.

Bank Negara’s recent move to raise the benchmark overnight policy rate (OPR) from 3% to 3.25% was expected since the last OPR adjustment was three years ago in May 2011.

An OPR increase is always associated with an increase in interest rate.

Bank Negara has taken a bold step to address the economic challenge and became the first country in South-East Asia to increase the benchmark rate in an improved economic environment.

It is a prudent move by the authority in view of the upward pressure on inflation rate and the high household debt at 86.8% of gross domestic product in 2013.

So, how does this increase in interest rate affect us, the public?

Most people generally only relate an interest rate hike to financing cost which includes mortgage and personal loan rates.

In effect, it has a far more profound impact.

Changes in OPR directly affect the overall Base Lending Rate (BLR) which in turn, affects the spending behaviours of businesses and consumers as well as the dynamics of the overall economy.

On one hand, it is used to curb rising household debt and control spending.

On the other, higher interest rate would help to generate a neutral real rate of return for normal savings which is comparatively higher than fixed deposit rate.

However, what does this mean to us in the long run when interest rate is on the rising trend?

This is an interesting question in terms of personal spending and investment planning as it relates to interest rate movement.

Prof Dr Jeremy Siegel, of the Wharton School of Business and best selling author of Stocks for the Long Run, used to say when inflation kicked in, stock prices would go down in the short-term, due to concerns of reduced profits.

Eventually, however, stock prices would rise again in the medium and longer term, when investors realised that stocks could be used as a tool to hedge against inflation, as businesses would past higher costs through to their customers.

It is also interesting to see people sell and buy stocks for the same reason at different times with different considerations.

Similar movements may be observed in other types of investments when people take a longer term view of better ways to navigate through the challenges of inflation.

Prudent spending is always encouraged regardless of good and bad times.

With it, comes prudent planning and investment.

When inflation rate is on an upward trend and value of currencies continues to drop due to the massive quantitative easing (printing of money) measures around the world, using investments to hedge against inflation is one of the strategies to secure our financial future.

One of the investment assets that warrants deeper consideration and provides longer term investment protection is property.

Real estate works well as a hedging tool for a couple of reasons.

Investing early in real estate protects investors against rising land prices, and increasing construction costs during inflation.

Properties purchased before the onset of inflation will still have the protection of the continuous demand to meet the housing needs of a growing population in Malaysia.

An advice that I have continuously heard since my schools days till today is “Hang on to the roof over your head. It will help to keep you financially strong.”

This advice has remained valid over the years. It is not enough to just keep enough cash for rainy days.

Purchasing a property while the prices and mortgage rates are within reach becomes a secure way of protecting your finances against the battering of rising inflation.

This is especially true for those who have yet to own one.

Both primary and secondary markets are worth looking at, as there is surely be something out there that will meet your financial requirement.

“Hang on to the roof over your head” is a time-tested wisdom that will protect you in more ways than one for the future.

FIABCI Asia-Pacific regional secretariat chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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No asset bubble, said Malaysian Central Bank governor

Malaysia has addressed many issues, risks 

Zeti:‘There is confidence in the financialsystem.’- EPA  

KUALA LUMPUR: There is no reason to believe that Malaysia has seen the formation of an asset bubble that is about to burst, as the country has addressed many of the issues and risks related to it, says Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz.

She said three series of macro prudential measures had been introduced this year to avoid the very risk of the formation of such a bubble asset.

She was responding to a question on whether Malaysia was experiencing an asset bubble that would burst if China’s economy tumbled and as global interest rates rose, as reported recently by the foreign media.

“Conditions between now and in 1997/1998 are different. We are now on a growth path,” she told a press conference in conjunction with the South East Asian Central Banks (Seacen) 30th Anniversary Conference on Greater Financial Integration and Financial Stability and launch of the Seacen Financial Stability Journal.

Zeti said domestic demand was driving Malaysia’s economic growth and the country was not at the epicentre of the recent global financial crisis.

“Our financial intermediaries remain resilient and the supply of credit was never disrupted,” she added.

She said financial intermediation was continuing and financial markets continued to function.

“There is confidence in the financial system. This is the result of the focus over the last decade on financial reforms that have strengthened the foundation of our financial system.

“We believe that credit growth has moderated to a sustainable pace that supports the growth of the economy. In this regard, we continue to monitor conditions,” Zeti added.

Meanwhile, in her opening address at the conference, Zeti said the modernisation of the Asian financial system had been accompanied by a significant strengthening of the regulatory and supervisory frameworks.

She said it had also been accompanied by improved financial safety nets, a more effective surveillance of financial stability risks and stronger legal underpinnings.

“These reforms supported the transition towards more market-oriented financial systems that are anchored in stronger institutions, risk management capacity and governance,” she added.

“Our financial institutions are supported by stronger financial buffers to withstand adverse developments and shocks.

“Significant strides also continue to be made in strengthening consumer protection frameworks, promoting financial inclusion, and enhancing market discipline,” she said.

She also said these developments continued to support the region through the recent episodes of turbulence in the global financial markets.

“The region has also made important strides in enhancing monetary and financial cooperation arrangements to address regional financial stability issues and global policy spillovers.

“Much has been accomplished in the areas of surveillance arrangements, financial safety nets and crisis prevention, management and resolution,” she added.

On the Asian financial integration model for the ten Asean economies, Zeti said it was focused on strengthening pre-conditions through collective capacity building to promote more open market access.

“It also focuses on progressively reducing barriers to facilitate cross-border trade, developing the market infrastructure and an enabling environment to promote the efficient and effective intermediation of cross-border financial flows.

“It also focuses on establishing appropriate safeguards for the stability of the financial system,” she added.

Meanwhile, Bank Negara and the Bank of Korea jointly announced the establishment of a bilateral local currency swap arrangement. It is designed to promote the use of local currencies for bilateral trade and strengthen financial cooperation between Malaysia and South Korea, Bank Negara said in a statement.

This arrangement allows for the exchange of local currencies between the two central banks of up to five trillion Korean won or RM15bil.

The effective period of the arrangement is three years, and could be extended by mutual agreement between the central banks. - Bernama

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Singapore private residential property market encouraging

Yeoh with a model of the Village At Pasir Panjang.

 

SELANGOR Dredging Bhd (SDB) sees Singapore’s private residential property market as still encouraging despite a cut in the republic’s growth forecast.

Its communications and corporate affairs manager, Yeoh Guan Jin, says private residential properties are still being sought after in the city state by Singaporeans and foreign buyers.

He says although the republic might be experiencing a slowdown due to the economic uncertainties in the eurozone and the United States, Singapore will be able to weather the situation.

“Mind you, there are still many wealthy Singaporeans and foreigners with Singapore permanent residents status looking for private residential properties here,” says Yeoh at a sales gallery showcasing SDB’s latest freehold residential project in Singapore, Village At Pasir Panjang.

Yeoh says the company is optimistic that the new project will receive positive response, similar to its completed and on-going project in the republic.

He says as Singapore continues to welcome and attract affluent people and expatriates from all over the world, demand for private residential properties here will remain good.

Yeoh adds Singapore’s close proximity with Malaysia is an added advantage for the company to attract Malaysians looking to invest in properties overseas.

“Our proven track record in the Klang Valley area and Singapore’s high transparency level will attract affluent Malaysians as well as foreigners to our project,” he says.

Yeoh says the company is attracted to launch a project in the western district of Singapore due to the availability of the land for redevelopment purposes.

He says SDB will continue to look for new sites from time to time for future development in other parts of Singapore as there are many land parcels available for redevelopment in the republic.

Village At Pasir Panjang, located at Pasir Panjang Road on 0.99ha, comprises nine five-storey blocks with attic and a basement car park.

The U-shaped development consists of 148 units of two, three and four-bedroom apartments with built-up area of 818 sq ft-2,303 sq ft and the price starts from S$1.4mil or S$1,650-S$1,660 per sq ft.

Works on the project with gross development value (GDV) of S$260mil will start next year with expected completion in the fourth quarter of 2016.

“We want to bring back the kampung atmosphere in our latest project; hence the name Village and also to reflect Pasir Panjang’s past which was once a kampung area,” says Yeoh.

He explains the architectural façade of the residences and the clubhouse draw references from the abstracted and interpreted “black and white” houses of the 1950s.

Yeoh says that apart from catering for owners-occupiers looking for properties in the western district of Singapore, those buying as an investment could expect to fetch good rental.

He says a two-bedroom apartment in the Pasir Panjang area fetches between S$3,000 and S$4,500 per month, while the monthly rental for a three-bedroom ranges from S$5,500 to S$6,500.

“The rental for a four-bedroom unit starts from S$7,000 and above, and I personally feel it is good investment for Malaysians,” says Yeoh.

SDB’s project in Singapore, the 22 units of low-rise condominiums called Jia at Wilkie Road with GDV of S$55mil was completed in December 2010.

It is currently developing the high-rise condominium project – Gilstead Two at Gilstead Road – consisting of 110 units with GDV of S$200mil.

The project is expected to be completed in the last quarter of 2014.

Other projects are Residences at Balestier Road in district 12 – the 18-storey apartment block consists of 104 apartment units and 10 retail shops and offices with GDV of S$102mil and is slotted for completion in the fourth quarter of 2015.

Hijauan On Cavenagh, located on Cavenagh Road in Singapore’s prestigious District 9, is expected to be completed in the third quarter of 2015.

Hijauan is within walking distance from Orchard Road and a tree-lined passageway behind the Istana and adjacent to 25,000 sq ft of lush state land.

The Istana is the official residence and working office for both the president and prime minister.

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Malaysian PR1MA to bring affordable homes to the working class

IT is an initiative that has been long waited for. It's been reported that from today households, that earn between RM2,500 and RM7,500 a month, can register to buy affordable homes under the Perumahan Rakayat 1Malaysia (PR1MA) scheme.

Some 80,000 homes will be built and based on the number of cities PR1MA homes will be constructed, it should be well spread out in the country.

The need for affordable housing shows that having the means to buy a house is no longer the concern of the poor. Young and middle income families are increasingly being squeezed in their ability to buy a home.

A survey conducted in 2009 showed that 850,000 people or 35% of people surveyed within that income bracket were not home-owners. The scary thought is home prices have escalated since 2009 and if the survey was conducted now, the percentage could be higher.

With prices now being fixed at between RM100,000 and RM400,000 for each home, the band gives home buyers some certainty in knowing that the price of homes will be fixed.

The 80,000 homes that are going to be built by PR1MA would cater for less than 10% of the people within the income bracket who do not yet own a house. The number of homes being built I presume will only be the start of a more comprehensive programme that should see PR1MA, other governmant agencies and state agencies take on the role of the supplier of affordable homes.

Based on a previously published question and answer, PR1MA will not provide financing to applicants to buy a home. They will need to arrange for their own financing but there will be a list of panel bankers where a housing loan can be obtained from.

Its important that the interest rate being charged for loans to buy affordable homes be capped at a decent level. Mortgage calculators show that should successful balloters for homes priced at RM400,000 receive a full loan based on the price of the house, and are charged a fixed interest of 4% per annum, then it will cost them about a quarter of their monthly household income if the collective wage of the household is RM7,500 per month.

The monthly repayment for a RM100,000 house for those earning RM2,500 a month and charged the same interest on a full loan will be 19% of the monthly pay packet.

Given that the intrinsic value of the PR1MA homes should be higher if they are built on prime Government land, then the collateral value of the homes should be more than the value of the loan, hence reducing the need for such homebuyers to cough out a 10% downpayment to buy such homes.

In fact, both PR1MA and the state governments should work together to identify further land for future projects as providing a roof over the heads for Malaysians should never be made a political issue. Plus, its important for the PR1MA homes to be more than concrete public housing. There should be amenities and green spaces to make the environment more appealing to future home owners.

Acting business features editor Jagdev Singh Sidhu wonders what the price of those PR1MA homes will be after the moratorium period to sell them has ended.

MAKING A POINT By JAGDEV SINGH SIDHU
The Star

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Good property management, maintenance add value

Stratified developments becoming a way of life

As stratified developments become a way a life, good maintenance and management have become an issue.

 

EARLIER this year, a new set of property managers replaced the previous one in the condominium that Siti lives. Not having a current account, she paid her quarterly management fees in cash. She was told that the receipt would be put in her postbox. It never came and she soon discovered that the property management company had absconded with the money.

As stratified developments which include condominiums, service apartments and gated and guarded projects become a way of life, good maintenance and management have become an issue.

Good management and maintenance will improve the value of the asset. This applies to all segments of the property market, be it residential, commercial or industrial.

Hence, the third reading of the Strata Management Bill 2012 on Monday is crucial, says Assoc-Prof Ting Kien Hwa, head of Centre for Real Estate Research at Universiti Teknologi Mara.

“Currently, property management is part of a service provided by valuers, who are regulated by the Board of Valuers, Appraisers and Estate Agents.

The work of valuers can be broadly divided into three areas property management, valuation work and real estate agency work.

This means that property management is a regulated profession and delinquents risk having their licence suspended.

For the last five to six years, managing stratified properties has become an issue, he says. As more of us live in gated and guarded developments, and high rise condominium and serviced apartments, property management is evolving to become a lucrative industry.

Ting says the Board of Valuers is in the process of creating a third register to accommodate property managers. Valuers and real estate agents are governed by two registers and the Board of Valuers are working on creating a third one for property managers.

Says Ting: “This is a similar situation as in the early 1980s when there were many illegal real estate agents. They were given a one-year period to register with the board.”

Ting says the duty and responsibilities of property managers go beyond just collecting money and managing a property. The word “managing” covers a whole gamut of expertise and responsibilities. These include insurance valuation, the appropriate rate of service charges to levy on owners, managing service providers like security guards and cleaners, gardeners and managing tenants and rental rates among other duties.

Depending on whether it is a residential or commercial property, some issues may overlap.

To claim that valuers want to monopolise the property management industry is incorrect, Ting says.

“Some parties say they want to liberalise' the profession. Just as engineers and architects are regulated by the Institute of Engineers and Pertubuhan Akitek Malaysia respectively, so property managers are regulated by the Board of Valuers because property management is part of the work of valuers. This is the situation in the United States, Britain and Australia. Shall we then liberalise' the achitecture and engineering profession by allowing more people who are untrained to practise as architects and engineers because architects and engineers are monopolising' the industry?” Ting asks.

Ting says this argument to liberalise the profession and cut out the monopoly does not hold water at all.

He says there are currently 8,000 trained property managers in the country and every year, 450 more graduates enter the job market.

The local public universities provided courses in property management in the late 1960s because they knew there would be a need for this.

Malaysian Institute of Professional Property Managers president Ishak Ismail says: “The Government was visionary enough to foresee a time when stratified housing will become part of the Malaysian property landscape. The first condominium was Desa Kuda Lari in the KLCC area.

“Today about four million people live in stratified projects. About 80% of all the stratified projects are managed by joint management bodies and management committees. About 20% are outsourced and of this about 58% are managed by illegal property managers.”

Ishak said over and above the various issues that fall under property management, two sets of skills are needed the hard skills in managing the property and the soft skills in people management.

He says there is a need to put in the proper regulations to regulate property managers in order to improve the value of our property assets. There must be no conflict of interest because it involves public money, be it house owners or tenants of commercial properties, he says.

By THEAN LEE CHENG The Star

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