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Buying costs are very low in Malaysia

How high are realtors’ and lawyers’ fees in Malaysia? What about other property purchase costs?

How difficult is the property purchase process in Malaysia?

With affect of 1st January 2014, all foreigners, will be subject to a minimum price of MYR1 million per property for all states in Malaysia. The decision of increase of MYR1million has been deferred to 1st May 2014. For MM2H participants, your property purchase remains at MYR500,000 per unit.They are allowed to purchase up to two residential properties – two condominiums (max. 50% foreign ownership within a block) OR one condominium and one of the following:

  • Terrace or linked houses above two storeys, but limited to 10% of the total number of units built of this type
  • Lands/bungalows and semi-detached houses, but limited to 10% of units built of these types

The first step to purchasing property in Malaysia is to hire a real estate lawyer to assist in the transaction. Once property is selected, a Letter of Offer/Acceptance is signed, and a 3% deposit is expected from the buyer. Within 14 days, the Sale and Purchase Agreement is signed. The buyer must pay another 7% deposit. From the date of the signing, the buyer has a maximum of three months to accomplish full payment. The Sale and Purchase Agreement must be stamped at the Stamp Office. After the examination on the property of the valuation department, Stamp Duty is paid to the Stamp Office. The transfer must be registered at the Land Office Registry. Be cautious when buying new property in unfinished condominium projects. Buyers may not be fully protected against default, an issue vigorously raised by the Malaysian House Buyers’ Association, which has pointed to flaws in The Housing Development (Control & Licensing) Act 2002, and the Strata Titles Act. Those buying unfinished property from developers should ensure that the developer has a valid Developer’s License and a valid Sales & Advertising permit.

TRANSACTION COSTS

Who Pays?
Stamp Duty 1% – 3% buyer
Lawyer/Solicitor´s Fees 0.4% – 1% buyer
Other Fees MYR180 (US$55) buyer
Real Estate Agent´s Fees 2% – 2.75% seller
Costs paid by buyer 1.40% – 4.00%
Costs paid by seller 2.00% – 2.75%
ROUNDTRIP TRANSACTION COSTS 3.40% – 6.75%


Footnotes to Transaction Costs Table

The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.

STAMP DUTY

PROPERRTY VALUE, MYR (US$) RATE
Up to 100,000 (US$30,581) 1%
100,000 – 500,000 (US$152,905) 2%
Over 500,000 (US$152,905) 3%

Legal Fee Legal fee is based on the property value.

LEGAL FEE

VALUE OF PROPERTY, MYR RATE
Up to 150,000 (US$45,872) 1%
150,000 – 1 million (US$305,810) 0.70%
1 million – 3 million (US$917,431) 0.60%
3 million – 5 million (US$1,529,052) 0.50%
5 million – 7,500,000 (US$2,293,578) 0.40%
Over 7,500,000 (US$2,293,578) negotiable on property value exceeding threshold but shall not exceed 0.40%

Other Fees:

OTHER FEES

FEES MYR
Stamping fee (per document) 10
Adjudication fee 10
Search fee 60
Registration fee 100
Total 180

Other Fees Other fees are around MYR180 (US$58). Other fees include stamping fee (MYR10 or US$3per document), adjudication fee (MYR10 or US$3), search fee (MYR60 or US$18), and registration fee (MYR100 or US$31). Real Estate Agent´s Fee: Real estate agent’s fees are regulated by the Board of Valuers, Appraisers and Estate Agents Malaysia (LLPEH). Commission is paid either by buyer or seller, subject to a maximum discount of 30% but a minimum fee of MYR1,000(US$306) per case. The scale is not applicable to sale of foreign properties in Malaysia.

AGENT´S FEE

VALUE OF PROPERTY, MYR RATE
Up to 500,000 (US$152,905) 2.75%
Over 500,000 (US$152,905) 2%

How property is priced by the market

The new condos in Mont’kiara were priced based on the price range of existing two-storey terrace houses in Sri Hartamas/Desa Hartamas which were no longer being built due to land shortage.

The new condos in Mont’kiara were priced based on the price range of existing two-storey terrace houses in Sri Hartamas/Desa Hartamas which were no longer being built due to land shortage.

 

IN a system where income levels, savings, costs, population density, demand, supply, rents, property sizes, property condition, property usage and preferences are so different, how does a property acquire “a” price that is acceptable to a buyer and subsequently acceptable to the market?

Why does a property sell at RM1.6mil when almost everyone living there can at best afford only RM800,000 or sell at RM800-RM1,000 per sq ft when up to a short while ago the maximum was only RM350 per sq ft?

Can 350 new properties in a scheme sell at the same price as one single latest transaction of an existing property in the vicinity? Can 10 developers sell 350 new properties each based on the abovesaid one single latest transaction?

Let’s take a look over the last 30 years at how properties had been priced in the market. Subang Jaya would make a good starting point.

In 1980 when I first started working, I noted that the latest phase of the new single and double-storey terrace houses in Subang Jaya were priced at between RM90,000 and RM140,000 per unit respectively, up from their previous pricing of between RM60,000 and RM90,000 in 1979. The 1980 pricing echoed the newly revised housing loan amounts of Division 2 and Division 1 government officers. All the launched units were quickly sold with the new and huge demand. In the subsequent phases, the pricing followed the momentum of the earlier fully sold sale prices with additional premiums for time, newer design and specifications and variations in the floor and land areas.

Then in the 1990s in the condominium city of Mont’Kiara, I noted the new condominiums were priced based on the price range of the existing two-storey terrace houses in Sri Hartamas/Desa Hartamas which were no longer being built due to land shortage and high land prices. The new condominiums provided an ideal alternative for the affluent younger Malaysians who were seeking a lifestyle change. The prices were also influenced by foreign buyers who preferred a new property with security and property management services at prices and rents which they could afford.

When the number and type of foreign buyers and tenants increased, the developer started to build larger units which were priced based on the price range of semi-detached and detached houses in the neighbourhood. This was well accepted by the market as it was based on actual demand for new, secure and well managed properties by foreigners especially since there were two international schools in the vicinity.

I also noted that in pricing the newly-launched terrace houses in the mid-1990s in Bandar Utama, the prices were 10% to 20% lower than the last transacted prices of existing comparable houses in the same neighbourhood such as TTDI, Damansara Jaya and Damansara Utama. Here the rationale was that the price of the newly-launched house should reflect a discount compared to an existing property, to take into consideration the 2-year waiting period during which interest has to be paid to the bank and rents have to be paid to stay in the current accommodation. It is interesting to note that this rationale is no longer followed by developers and their marketing gurus who now price the newly-launched schemes at higher prices than the highest sale price of an equivalent existing house. The basis being, “why not” when everybody wants to invest in properties and loans are easy and cheap.

Pricing trend

Another pricing trend noted was the continuous rise in the prices of shopoffices in Bangsar and Desa Hartamas, etc. Here the price rise was directly influenced by the rentals paid for the ground floor retail units which were in high demand by food and beverage outlets. This trend continues in all the new smaller shopping complexes as well, where the food and brewerage (F&B) outlets form the largest composition of tenants. The reason they can pay higher rents is because there are a large number of people/small entrepreneurs who find this sector the easiest to enter or invest in, as the payback period is only a short 3 years and there are no barriers to entry.

The other occupiers of the shopoffices and small shopping complexes have no choice but to cough up the same rent as the F&B outlets, as they set the “tone” for the rent in that particular row of shops. As the rents rise, so will the prices as they are directly related.

Similarly, properties in areas which can be converted to a different use where new demand is being created such as showrooms, bridal studios, etc can afford a higher rent. Prices rise due to the higher rents paid. Then by way of the much misused comparison method of valuation, other properties in the vicinity also rise in price, irrespective of their current use, rent and turnover.

I note that in highly popular areas where supply of a particular type of preferred property is limited, like in Damansara Heights/Bangsar etc, the number of transactions per year is very limited as no one really wants to sell since there are no other similar alternatives to move into. Then when out of the blue, a unit here is advertised for sale (usually because the owner is migrating or just wants to test the market) a “special purchaser” will come along and easily pay 20% to 30% above the last transacted price to secure the unit. This is repeated in the next sale when the second “special purchaser” pays another 20% to 30% above the last special purchaser price.

After two such transactions, the price paid by the “special purchaser” becomes the market price and extends to all other properties which are considered comparable, such that the price is now beyond the capacity of the people who have always lived or traded in that vicinity.

The price here is based more on the price which someone living or trading elsewhere is prepared to pay. This is what is happening in Singapore, London, etc. where foreign purchasers set the price. In Malaysia this is happening in Iskandar, KLCC and Penang.

Prices are also directly influenced in the following manner. Say a typical terrace house in a locality measuring 20’ by 60’ and 20 to 30 years old, is fetching prices in the range of RM350,000 per unit. A new scheme comes up in the area where the new unit measures 24’ x 80” and is of modern quality. Here the two properties are not comparable in terms of size and quality. The new unit is priced at say twice the price of the older smaller unit (based on cost, floor area and land area) and sets a new price benchmark for that locality. Then in a matter of time, all the existing properties in the vicinity (particularly all those that have been renovated) try to adopt a similar selling price per sq ft as the new property, using the location, location, location theory, never mind that upon purchasing the older property, the new buyer has to spend a hefty sum to make it livable to modern standards.

Then there is the effect of the policies of the lending institutions on the price. The policies of the lending institution in respect of loan tenure, interest rates and the loan to value ratio directly influence the pricing of a property. During a period of high confidence, sellers can quote high prices just to test the market, but as long as the purchase of the property can be financed, the buyer is prepared to pay the higher asking price as the loan is spread over 20 to 35 years and almost 90% to 100% of the purchase price can be financed.

And all it takes is for one property to be sold and financed at the newly tested price and the new price level will then be tested even higher with the next lending institution. This is particularly true for new types of properties which the buyer and lending institution cannot compare with an existing property.

The above real examples clearly indicate how properties have been priced by the market. It is noted that despite property being a long-term investment and outlay, the market’s pricing mechanism is very short term and dynamic particularly when moving upwards. The prices being set by the market in the short term may not always equate with sustainable market values. It is a strong probability that if one blindly follows the pricing set by the market during a very short-term dynamic cycle, life can become one of endless and needless debt.

Consumer groups call for transparent house buyer selection

MyHome

PETALING JAYA: There must be transparency in the selection of qualified buyers and the final balloting under the MyHome Scheme, said consumer groups.

“We must hold true to the principle that whoever deserves a house (under the scheme) should get it regardless of race,” said National House Buyers Association honourary secretary-general Chang Kim Loong said.

“The Housing and Local Government Ministry should also ensure that buyers meet all the eligibility criteria for the loan before they grant the incentive,” he added.

Fomca secretary-general Datuk Paul Selvaraj stressed the importance of transparency in the selection process.

“We must ensure that those who qualify would be entitled to a house. The process must be transparent so that those who do not get the incentive or house will still feel the selection process was carried out fairly,” he said.

Paul added that the scheme would help more Malaysians, especially the younger generation, to realise their dream of owning their first home.

Chang commended the inclusion of a 10-year moratorium, which prohibits a buyer from re-selling or transferring ownership of the home unless it was transferred to immediate family members.

“This will make sure there will be no flipping of properties,” he said.

Property developer Mah Sing Group Bhd also lauded the scheme.

“We are keen to find out if we meet the conditions (to file an application for the scheme),” said its corporate communications general manager Lyanna Tew.

Developers are turning to area for its growth potential

These days Kajang in Selangor is all abuzz with talk of the coming by-election for the constituency’s state assembly seat.

In recent weeks, the town has been visited by various political personalities eager to make a good impression on the local folks.

But Kajang has been on property developers’ radar for years.

Developers have not only flocked to Kajang for its strategic location on the outskirts of the city, but also because of the potential they see in the porperty market there.

Kajang, developers point out, is primed for higher-end products. More and more gated-and-guarded projects are being developed in the area and property prices have doubled over the past three years or so.

“There has been an increase in demand for high-end properties in Kajang. This is clearly demonstrated through the good response received from buyers as our high-end products launched in recent years are almost fully sold,” said Chong Yan Han, director of property developer.

Some of these projects, said Chong, include Sentosa Heights, where prices of the semi-detached houses and bungalows range from RM1.3mil to RM2mil or about RM350psf, Kajang 2, where its semi-Ds start from RM1.2mil, and Kajang East, where prices of a two-storey terrace house start from RM650,000.

Strong demand for private schools such as Rafflesia School, which was built by MKH Bhd, is an indication that Kajang has a market for high-end products.

Strong demand for private schools such as Rafflesia School, which was built by MKH Bhd, is an indication that Kajang has a market for high-end products.

Tropicana Corp Bhd executive marketing and sales director Pam Loh concurred that while Kajang was an old market, “this is where the potential is”.

She added that property prices were going up due to the rising cost of land, materials and labour.

“Costs are going up and the surrounding area is also coming up. So prices won’t come down,” Loh said.

One of the hotspots for high-end developments in Kajang is within the vicinity of Jalan Reko, which is the location of one of three Kajang MRT stations planned along the Sungai Buloh-Kajang MRT line. The other two stations are Saujana Impian and Bandar Kajang.

A better lifestyle

Nadayu Properties Bhd can be considered a pioneer in the gated-and-guarded concept in this area.

Amid plantations and undeveloped land, Nadayu launched its exclusive project, Nadayu 92, in mid-2010.

The development comprises linked homes, semi-Ds and bungalows with facilities such as a clubhouse and a central park.

Houses in Nadayu 92 were priced between RM433,000 and RM1.02mil, then considered a benchmark for Kajang. But Nadayu chief executive officer Mohd Farid Nawawi noted that the gamble paid off handsomely for the developer.

“Surprisingly, 50% was sold off in two months of the launch. This gave the group the confidence to move more in that direction. What is interesting is that the gated-and- guarded concept was relatively new there. But it was a good catalyst for developers,” Farid said, adding that transaction prices for its properties had risen significantly.

Farid expects the landscape in Kajang to be changed tremendously by 2016.

Adjacent to Nadayu 92 is MKH’s Kajang 2, a 270 acre freehold township fronting Jalan Reko. Kajang 2, designed as a live, work and play development, is expected to draw a population of 25,000 to 30,000 people. The project has a gross development value of RM2.8bil and will take some seven years to complete.

A rendering of the 16-acre Central Park in Tropicana Heights, Kajang, which will feature a 750-metre linear lake.

A rendering of the 16-acre Central Park in Tropicana Heights, Kajang, which will feature a 750-metre linear lake.

Tropicana has also joined the fray with its integrated development, Tropicana Heights Kajang. The project, with an estimated GDV of RM2.3bil, sits on 199 acres of freehold land, which was previously the Kajang Hill Golf Club.

Prior to the launch of its first phase last month, Loh said more than 10,000 enquiries had poured in for the gated-and-guarded residential area.

“People are increasingly looking at the environment they are living in. They want a better and more modern lifestyle, which demands quality, not just a box with four walls and a roof. They are also looking at the potential for value appreciation,” said Loh.

She added that the challenge for new developers in the area was to develop products that were market driven.

“The area is surrounded by old houses, with a lot of second- and third-generation occupants.

“Most of them want to move out but want to remain close to their families. We need to understand our target market’s lifestyle and come up with designs that meet that demand. We are offering what old areas don’t have,” she said.

Another high-end development in the area is Naza TTDI’s 113 acre TTDI Grove.

Meeting a need

Although prices have risen quickly in Kajang, developers think that they are still affordable compared to other locations around the Klang Valley.

In the past, landed homes below RM350,000 were considered affordable. But today, Chong said, anything ranging from RM650,000 to RM1mil is considered affordable in Kajang depending on its exact location.

“Houses in Kajang are generally much more affordable compared to other areas of the Klang Valley. In Kajang, you only pay RM700,000 to RM1mil to own a landed home in a gated-and-guarded development with club house facilities.

An artist's impression of the Nadayu 92 development. Nadayu Properties CEO Mohd Farid Nawawi says the project is paying off handsomely.

An artist’s impression of the Nadayu 92 development. Nadayu Properties CEO Mohd Farid Nawawi says the project is paying off handsomely.

“Housebuyers may have to pay almost double that price for the same concept and size in other areas,” he said.

Additionally, Chong noted that there is a ready market for high-end properties in Kajang and expects more buying interest there due to the affordability and good infrastructure available.

He observes that the majority of MKH’s customers for its Kajang properties are genuine homebuyers who wish to upgrade their current homes as well as young people migrating from other parts of Klang Valley as property prices in those areas have risen beyond their reach.

Notably, there is also a sizeable portion of buyers who are long-term investors from Petaling Jaya, Damansara, Kuala Lumpur and Cheras.

“We may think Kajang is not a high-end area, but there are international and private schools here, which really shows you that there is a high-income population there and there is a ready market. We are meeting a need for such products,” Loh said.

Consumers can expect more activity in the area as developers position themselves to take advantage of the growing demand for high-end properties there.

MKH is already embarking on the redevelopment of the old Kajang town and will continue to expand in the Kajang area, creating what Chong describes as a more vibrant business district.

“With our commercial developments coming up, skyscrapers will create a new skyline for Kajang town. This will not only bring people to live here, but to work and play in the new vibrant commercial business district,” Chong said.

Penang — the good and the bad

Unidentified substance: The black discharge contaminating the public beach behind Bayview Beach Resort at Batu Ferringhi.

PETALING JAYA: Penang has been ranked number one in a list of places for foodies to go to that will appear in a book to be published this Valen­tine’s Day by Lonely Planet.

The article by Robin Barton says Malaysian hawker food had spread worldwide via food trucks and pop-ups but nothing compared to hitting the northern island for a food journey.

“Its food reflects the intermingling of the many cultures that arrived after it was set up as a trading port in 1786, from Malays to Indians, Acehnese to Chinese, Burmese to Thais.

“State capital George Town is its culinary epicentre,” Barton wrote.

Other destinations listed were Victoria in Australia, north-west of Spain, deep south of the United States, Lake District in Britain, Puglia in Italy and Georgia and Oaxaca in Mexico.

The eight countries listed were edited extracts taken from The Food Book. It appeared on Sunday on www.independent.co.uk (a British news website) under the headline “Where are the foodies going in 2014?”.

Barton suggested readers “make sure” they try char kway teow, hokkien mee and asam laksa.

The list also compiled food that readers “should think twice” before consuming and Barton “warned” readers of sago grubs (locally known as ulat mulung), the 4cm-long larvae of a South-East Asian beetle.

Esplanade Food Centre was recommended for hawker favourites with a seafront location as well as pasar malam (night markets) such as in Jelutong on Fridays and Macallum Street Market on Mondays.

“The highlight (of the pasar malam) is always the food: at 2am a different world of stalls serves peppery pork-rib soups, skewered fish balls and sweets such as chendol (cold coconut-milk dessert),” Barton wrote.

The writer highlighted the cooling air bandung and praised it as “a great accompaniment to Malay food”.

The Food Book is priced at £14.99 (RM81.80) and will be published on Feb 14.

 

… and there’s a stink by the beach but IWK says it’s not responsible

 

GEORGE TOWN: Indah Water Konsortium (IWK) has denied accusations that it is responsible for the black discharge flowing from Sungai Batu Ferringhi into the sea.

“IWK sewerage pipe networks are in good condition and no leakages have been found,” the national sewerage company said in a press statement yesterday.

“Sampling results of the water also meet the parameters set by regulators. There could be other sources causing the pollution.”

IWK treats the waste water in the Sungai Batu Ferringhi vicinity and the statement said the sewerage pipes serving the 30,000 users in the area were in good condition.

Separately, the Penang Municipal Council (MPPP) said Drainage and Irrigation Depart­ment (DID) and council officers visited the affected area on Monday.

“Water samples have been obtained by the Department of Environment (DOE) and DID and the result will be known after two weeks,” said an MPPP statement.

The media yesterday reported that the black discharge flowing from Sungai Batu Ferringhi into the sea behind a hotel in the tourism belt was believed to contain E. coli bacteria.

Hoteliers have disagreed that the public beach affected by the black discharge be closed.

“We have advised guests not to swim in the sea,” said Bayview Beach Resort general manager Edwin Yap.

State Health, Welfare, Caring Society and Environment Committee chairman Phee Boon Poh said MPPP, DOE, DID, IWK and other related agencies met yesterday to discuss the matter, which was being investigated.

Penang Chief Minister Lim Guan Eng said MPPP president Datuk Patahiyah Ismail informed him that the incident was an “IWK issue” and declined to comment further.

DOE officials declined comment when contacted.

Year of change for property

The outlook for 2014 points to an evolving landscape of possibilities, tempered by current local sentiment.

DIFFERENT rules of engagement seem to be leading the winds of change in the property market this year. Some may be tempted to think that the elements of a perfect storm are brewing with the new measures outlined by Budget 2014, i.e. revised RPGT (Real Property Gains Tax) and the barring of DIBS (Developer Interest Bearing Scheme), etc.

There is also stricter Loan-to-Value (LTV) ratio calculations, electricity tariff hikes and the increase in assessment rates to contend with. Still, others opine that the property market will continue to climb upwards in the second quarter – albeit taking off on a more sluggish pace during the first quarter of 2014. This is due to the current sentiment of the market, with most adopting a wait-and-see approach.

In view of people tightening their belts and the rising need for affordable housing, a few savvy developers are already tapering down their high-end offerings to roll-out more affordable housing projects for the people. In the past few years, the property market has been riding on an upward trend. In some cases, prices of residential properties surging upwards by 30% to 35% have been nothing out of the ordinary. Fuelled by what seemed to be like an unending game, uncontrolled speculative buying and a lack of supply meeting demand have caused prices to rise, of which property prices have been especially robust.

In fact, an upward spiralling trend – that witnessed property prices surging way past the perceived boom cycle to reach unprecedented highs, has proven that the property market has been especially resilient. So much so, that purchasing a property may seem like an impossibility for the average wage earner – even in his lifetime.

Another restriction spells that the days of easy financing too is fast fading – with Bank Negara Malaysia (BNM) stepping in to exercise stricter control with regards to also imposing tighter lending criteria for developers and property buyers alike. Additionally, with the Goods and Services Tax (GST) coming into force on April 1, 2015, some argue that the prices of properties will only increase in the future, given the fact that rising material and construction costs inevitably contribute to the domino effect. Industry experts share their views below.

 REI Group of Companies CEO and co-founder Dr Daniele Gambero

2014 is going to see a change in the rules of property investment. The Government, BNM and all the bank systems are following the direction by BNM which has changed the rules of the game. RPGT and DIBS are minor changes. The big change is the imposed transparency developers will face on selling values. This brings back the basic value of the brick.

Developers were selling bricks wrapped up with the financial package – air-conditioners, water heaters, kitchen cabinets and what I call “free-but not- so-free” items like free loan agreements and MOT(Memorandum of Transfer). Some developers even became “travel agents” – even offering trips to China. Others offered lucky draws for cars but all these items are not part of the value of the house. These additional values that developers are including in their sales are against the regulations as the purchaser is at the losing end. With the new rules, the purchaser will buy “a-brick-for-a-brick” and get finance on the brick for the real value.

I am happy there is a slow readjustment to a healthier market, provided investors will start looking at property as a long-term investment. Everything is mapped out in the property price. It will take six months for my forecast to readjust. The next 10 to 15 years or so, I think, will be positive.

Iskandar Malaysia in Johor, Klang Valley, Penang, Ipoh and Kuantan are present and future hotspots as they offer a strategically sustainable location for investors. Malaysia has been legislated, so there is no reason for a property bubble. Speculations and prices are pushed up because the number of properties offered are low, as compared to the current actual demand.

In this kind of situation, developers start building houses to the point where the offer is much higher than the demand. At that point, the bubble will burst, but if you were to look at the current prices in Malaysia and the house index value, we cannot find any huge jump in prices. The demand for property units is so much higher compared to what’s on offer, so the outlook is definitely very positive.

 Axis REIT Managers Bhd chief executive officer (CEO) and executive director Datuk Stewart Labrooy

We have to reboot how we think about everything and how we develop the housing market in the country. I think there are going to be a lot of changes. No one has really digested the effects. I believe that everyone is trying to do some sort of simulation of how things are going to work out.

I see a lot of very positive signs in the sector I am in and I wish to focus on that rather than the market in general. The industrial property sector, to me, is showing tremendous resurgence and we are trying to work hard to create products to boost the demand for industrial properties.

The problem is, it has been a very much ignored sector for many years. We see this as a real opportunity for developers to refocus on rolling out more industrial products. However, they should make them a part of their overall mixed development townships. I think the industrial property sector is definitely positive because the demand drivers are there and a lot of opportunities await the industrial sector moving forward.

I think the big challenge in the residential sector is the affordable housing sector, which is huge. With the rising prices, many houses are beyond the reach of a lot of serious buyers. I personally do not see how people can afford to purchase properties. Everyone now looks at property as a property play rather than a long-term investment. And, this is what is driving up prices. So the outlook will be focused on developers who are already switching to producing affordable housing now because they see that the high end market is saturated and they will be able to actually continue their growth by switching over to the affordable sector.

I think that growth will not be hampered but the products being offered in the market will be increasingly different than what it was before. This means that luxury residences will be tapered down and be replaced by more affordable housing projects.

Malaysia Property Incorporated general manager Veena Loh

I think the market outlook will be soft in the first half of this year as investors take stock of the new Budget 2014 ruling and the tighter BNM measures that have been implemented in the second half of last year which will make it less conducive for buyers in 2014.

Other factors include the removal of DIBS effective Oct 2013, further tightening of the LTV ratio for property purchases issued in Nov 2013, the shortening of personal financing to a maximum of 10 years and the capping of the maximum tenure for residential and non-residential property financing at 35 years that was announced in July 2013.

On top of this, the uncertainty of when exactly the ruling limit on the threshold of the minimum purchase price of RM1 mil for residential properties will apply to foreign buyers from the previous RM500,000 limit.

Foreigners constitute less than 10% of the buyers in Malaysia, but the big bulk of luxury properties in Iskandar, Johor are targeted at Singaporeans. I think that luxury condominiums there are likely to be hit. Within Johor, the constitution of foreigners who are buying quite a large portion are currently purchasing units priced at less than RM1mil.

This percentage is larger in the three popular states – Penang, KL and Johor. I think that although all will be hit, Johor will be the worst. Penang has been hit since they raised the minimum property purchase price for foreigners to RM2mil on the island last July.

According to the newest tax ruling for foreigners, there will be a 3% levy on foreigners who buy properties in Penang. The same is true for Johor with its levy of RM10,000 for foreign buyers. Now, they are raising it to 2%. When exactly this will be imposed is uncertain as the finer details are yet unknown. This is causing a wait-and-see attitude. In the second half, there is concern of the likelihood of rising interest rates on property affected by external measures as the United States tapers its quantitative easing measures. Although the short-term situation may not be so good, in the long-term – the property market in Malaysia will still be sustainable.

 

Andaman Property Management Sdn Bhd managing director Datuk Seri Dr Vincent Tiew

2014 will be extremely challenging because the biggest obstacle that the developers face are the bankers. The first challenge is when developers want to buy land and try to get the loan for land purchase as well as the bridging loan. The second challenge that will be faced by 99% of the developers is the difficulties buyers will have in securing loans.

So, I feel that what will determine the success of developers in 2014 is actually their ability to manage the two points mentioned above. My outlook is that there will be slightly fewer property launches in 2014. However, the volume of transactions should remain the same and will pick up in the second half of 2014. The first half will be a confusing transition period for developers and buyers because of the new measures of Budget 2014.

This is coupled by the BNM measures with more restrictions on the lending ratio and loan policies. I anticipate that the first half of 2014 will be very much a slow period whereas the second half should pick up very steeply and competitively. This is the time when buyers and investors will return to the market with their investment and wealth creation strategies.

In 2014, one of the key things I would like to see is how successfully the concept of affordable housing will be implemented. This is because it will directly affect the developers’ strategies across the various states as each of the respective states will have different policies. Additionally, there are many states that may choose to develop their own affordable housing programme instead of linking up with the Federal Government’s 1Malaysia People’s Housing Scheme (PR1MA) project.

Development in Klang Valley’s southern growth corridor

The development will feature a clubhouse and swimming pool, among other amenities.

Home buyers looking for resort themed condo-styled apartment in the Klang Valley now have another option to consider.

Bangi Heights Development Sdn Bhd, a subsidiary of United Malayan Land Bhd, says its Putra 1 project, spread over an 8.9 acres will be launched soon.

The Putra 1 project is located in the heart of Bandar Seri Putra, already an established township in the Klang Valley’s southern growth corridor close to Kuala Lumpur, Cyberjaya and Putrajaya.

The developer says the project with 505 units offers seven distinct designs to choose from with a built-up areas ranging from 854sq ft to 1,224sq ft.

Prices for units start from RM321,000 onwards and the developer says it expects to see interest from young couples with families, professionals, government servants, university lecturers and executives working in the nearby industrial areas of Nilai and Bangi.

The developer says it hopes to provide a new experience in low-, medium- and high-rise living set in a green sanctuary equipped with the good number of amenities and facilities, including a grand 3-acre courtyard where residents can interact with each other and enjoy the greenery within the area.

Putra 1 comes with many condo-styled facilities such as multi-tier security system, swimming and wading pools, gymnasium, playgrounds, landscaped garden, sauna, badminton and basketball courts, reflexology pond, alfresco dining and BBQ areas, nursery and multi-purpose hall.

The surrounding Bandar Seri Putra township contributes to the convenience, comfort and peace of mind of Putra 1 residents because of the amenities that are already there. These include surau, schools, police station, post office, bank, eateries, shops, petrol kiosk, clinics, mini markets and green open space for recreation.

In term of accessibility, Putra 1 is strategically located with easy and direct links from the KL-Seremban Highway via the dedicated Putra Mahkota Interchange. It is only 37km to the Kuala Lumpur City Centre, 12km to Bandar Baru Bangi, 30km to Putrajaya, 35km to KLIA/LCCT and about 5km to Nilai.

The developer says purchasers seeking value for their money will find Putra 1 a exclusive place to live, work and rest, with the courtyard and its surrounding landscaped parks being a gateway to a soothing escape from the rigours of modern life.

Why invest in Malaysia Real Estate?

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Direct Foreign Ownership with No Capital Controls 

Non-residents are free to purchase residential and commercial properties in Malaysia. All purchasers are subject to restrictions on Malay Reserve Lands and properties allocated for Bumiputras. There is a minimum investment value of RM500,000 (approx. USD $150,000) for property purchase according to the jurisdiction of different states in Malaysia.

 

Across both residential and commercial sectors, an increasing number of existing and new developments are CONQUAS compliant and fast adopting the Green Building Index (GBI) certification.

 

Transparent Torrens Land Administration System 

Malaysian land law is based on the Australian Torrens System. The rights of foreign investors to own and possess property and to seek legal redress in the courts are guaranteed under these laws.

 

Real Estate Investor-friendly Tax Environment

From 1 January 2010, the effective tax rate on disposal of real property is 5%, subject to the provisions of the Real Property Gains Tax Act 1976. No tax is imposed on profits gained if the property is disposed of after 5 years of ownership. There is no withholding tax on property disposal and no inheritance tax. Investors may have to pay tax on earnings depending on their income tax band.

 

Repatriation of Income is Allowed 

Bank Negara Malaysia does not impose any restriction on the repatriation of profits, rental or proceeds from divestment of investments in Malaysia by a non-resident.

Budget 2014: Impact on the Property Market

With three major policies detailed in the 2014 Budget set to be put into effect between January 2014 and April 2015, the property market is set to deal with an array of changes. The biggest and arguably most discussed, policy is the increase of the Real Property Gainers Tax (RPGT) from 15% for two years to a whopping 30% for a period of three years. The banning of the Developer Interest Bearing Scheme (DIBS) and Goods & Services Tax (GST) are also set in place. We take a look at both sides of the coin before its looming implementation.

Doubling the RPGT

At a glance it may seem that the RPGT will hit first-time home buyers the most, but a closer look will reveal that property ‘flippers’ will be the ones who feel the pinch most. Increasing the rate of 15% for two years to 30% for three years effectively removes the convenience of buying and selling properties for a quick profit. Disposals after four years and five years will be increased to 20% and 15% respectively. This increase – one of two policies by the government to curb property speculation – has been received with mixed reactions.

President of the Real Estate & Housing Developers Association (REHDA), Datuk Seri Michael Yam, predicts that the potential delay in the disposal of properties will take a toll on supplies in the market, which in turn will increase its costs.

Dato’ Abdul Rahim Rahman, Founder and Executive Chairman of Rahim & Co, international property consultants, however said that the increase in RPGT may reduce speculative element in the market and will slow down the property market but it would not have a profound effect to the extent of ‘heavily dampening the market’.

The GST

The Sales & Service Tax (SST), come 15th April 2015, will be replaced by the 6% GST. The Royal Malaysian Customs Department’s website states that the difference between the SST and GST are:

i) The SST is imposed only when goods are manufactured or imported, meaning that tax is only imposed at those levels.

ii) The GST is imposed on goods and services at every production and distribution stage in the supply chain, including importation of goods and services. This tax applies when services are provided to the consumer.

In a press conference after the tabling of the budget, Prime Minister Datuk Seri Najib Razak said, “The government believes that this is the best time to implement GST as the inflation rate is low and contained.”