Sunday February 17, 2013

Making the right investment

By LIM CHIA YING
chiaying@thestar.com.my

Property experts share their thoughts on what to expect in this sector this year and beyond.

WHAT'S ahead for the Malaysian property sector in the Year of the Snake? For property guru Milan Doshi, those who have yet to own property should make no further excuses, like holding out until after the general election, to invest.

Milan, who has written two books on property investment, says that while he would advise aggressive property investors to exercise caution this year, he would encourage first-time buyers looking to invest to do so.

“The elections should not be used as a measure to put off any investment intention. A lot of people I know have fear of making their first (investment). But if you don't take the important baby step and start small, you will always be catching up,” he says.

A speaker at the Property Outlook Conference 2013 organised by Wealth Mastery Academy, Doshi says first-time investors can always buy a completed property in the secondary or resale market. They need not necessarily have to buy from a developer.

“Once people start looking, they will start seeing opportunities and things from a different light. By waiting, they see nothing.”

Doshi says the real challenge lies in finding good deals the right product, right price and right location.

“I think for this year, prices in the more mature areas in Kuala Lumpur would be maintained while those located a little outside and where there's an oversupply might experience some price correction,” he opines.

Property prices, he believes, need to take a “breather” for several years before they can resume their climb upwards, as indicated by past trends.

“This is why I recommend that aggressive investors slow down for now; many not-so-savvy ones who made money in the last few years still think prices will continue to go up sharply.”

On whether there is a property glut in the market, he says some locations may be affected, citing as example the southern part of Klang Valley. He claims it is already saturated with apartments and that about 90% of the purchasers are investors.

Distance also has to be taken into consideration, he says, referring to some projects apparently built “in the middle of nowhere”.

Over the years, Doshi has amassed over 20 properties in the country, starting out slow initially but later snapping up three or four in a year.

“Everyone who comes to me for advice or recommendations naturally wants to make money as fast and as much as possible. But with property, one has to understand that the returns are not immediate but require a three- to five-year commitment, at the very least.

“Also, many people invest emotionally when they should be doing it unemotionally. By going in with a clear head and not following your heart, you make informed decisions and not emotional ones,” he stresses.

On the possibility of a property bubble, he says that would have happened two years ago when prices were continuously rising.

“The fear of a bubble was there but it never happened because policies and measures by Bank Negara were in place and greatly helped to cool down the market.”

He forecasts, however, that a major slowdown might occur in 2017 based on the 10-year cycle (the last economic slowdown was in 1997, with the previous one in 1987) and it is thus imperative for buyers to think wisely about investing in projects that complete around that time.

“More government policies will be put in place that would affect the property market. Investors would find it tougher to secure bank loans,” says Doshi. “The question is will developers be more creative in packaging their projects?”

Andaman Group sales and marketing director Datuk Dr Vincent Tiew concurs, predicting that 2016 to 2017 may see price stagnating for properties in Klang Valley due to an oversupply of vacant and untenanted units.

“Some people may be able to sustain without rental income but many owners will desperately want to let go at cheaper prices. For buyers, it's a time when they would be able to purchase properties at cheap prices,” says Tiew.

He adds that investors should look at their limited credit capability, capital outlay as well as elements of risk before deciding on the type of properties they can get, not just in Klang Valley but elsewhere too.

“I believe that investors need not focus their investment in Klang Valley alone. Secondly, the purchase price should not be determined by the absolute value but price per square foot, where the percentage of return (on investment) is more important,” he explains, adding that properties in Malaysia are still relatively affordable in South-East Asia.

“Buyers often invest without checking the value per square foot. A bungalow may cost RM2mil but the area could be huge compared to a RM500,000 apartment with a built-up area of just 500sq ft.”

Contrary to popular perception that properties are all about location, Tiew says it is just one of three essential factors, the others being price and project concept/design.

He notes that making bulk investment or group purchase could be a smart move, just as taking advantage of early bird offers.

“With bulk purchase, it is viable and less risky. We previously had a bulk purchase group made up of audit firm partners who bought six shophouses in Ipoh. Within two years, the property price appreciated by 100%.

“It shows that as long as buyers are willing to open their minds beyond Klang Valley, they can be financially rewarded with fairly good deals.

“Also, investors can buy (units) during pre-launch sales where prices are lower.”

Does it seem that more people are retreating to smaller towns to retire or to save costs? Tiew doesn't think so, but observes that with easy connectivity through available infrastructure these days, people have naturally become more mobile. He highlights that tourism-centric towns are a hit for such property investments.

On this year's property outlook, he foresees a slowdown in the first half, as developers become more cautious with launches, before picking up towards the second half.

“Last year, many developers had to work twice as hard at selling properties than the previous year, as 20% to 30% of buyers couldn't secure a bank loan. People need to continue investing to generate wealth and banks need to continue giving out loans. The question is who will the banks give loans out to?

“This is where one's credit standing and portfolio record come into place,” he adds.

Zerin Properties chief executive officer Previndran Singhe, however, feels there is no strong evidence of a glut of properties in Klang Valley.

“In the residential market, certain locations are experiencing scarce supply, although some locations like Mont Kiara may be facing short-term excess supply. But I still think the oversupply (problem) would be resolved in view of its location.”

He says occupancy in the KL city centre is around 60% and he believes many purchasers buy units to occupy even if they do not live there full-time.

A glut, he says, is usually associated with a situation where developers are unable to sell and are stuck with excess supply. But in the case of KL, many units have been sold to individuals who qualify and can afford the loans.

His view of 2013's property outlook is that the market will remain stable with price increases in locations where supply is scarce.

“Transactions will increase and prices will hold as I view it, with slight increases throughout the year. It is hard to forecast what will happen come 2017, but I do not see a case of over-saturation,” says Previndran.

For him, the Golden Triangle is still considered the best location in KL with more development and infrastructure projects coming into place.

Prices in KL, he adds, are still relatively cheaper compared to other capital cities in the region.

“Our GDP per capita is twice that of Thailand and Indonesia but their luxury residential (prices) are higher than ours,” he says.

“There's also a lot of Entry Point Projects of Greater Klang Valley already taking shape, which would contribute to making KL a more liveable city.”

He opines that while there will be people moving further out of the city to save costs, more people are moving into Klang Valley due to economic opportunities.

News

Sunday February 17, 2013

Making the right investment

By LIM CHIA YING chiaying@thestar.com.my

By LIM CHIA YING
chiaying@thestar.com.my