Published in Property Insight Magazine – July 2014.
Property Insight and property website PropCafe.Net join forces for a roundtable session where the two talk about the market’s issues and prospects.
With a common interest in property, Malaysia’s top property magazine Property Insight organises a roundtable, graced by members of an emerging property website, PropCafe.Net. This first ever roundtable session is aimed at gaining a better insight on today’s perplexing but yet exciting market. PropCafe.Net is a website that functions based on an information-sharing and was formed by a group of property enthusiasts with a common interest they tagged as “Passion and Love of property investment”. PropCafe’s founders (seven of them) came from various backgrounds, from an accountant, engineer, banker to retiree and a PhD candidate. PropCafe.Net sets itself apart by producing detailed and impartial reviews on various property developments in Malaysia, Singapore and Australia.
Due to some circumstances, members of PropCafe.Net will be identified via their initials (S.Y, H.C, G.Y, K.S, Y.K, and J.J) in this feature.
Should we wait till the price of property to come down before we start investing?
G.Y: There are two perspectives, one for investment purpose and another one is for own stay. If we talk about your own stay, then anytime is the best time. The question is, if you’re going for your own stay, are you willing to purchase a high priced property? Let’s say you can afford a property of between RM200,000 to RM300,000, are you bold enough to go for the RM500,000 unit? If not, what is the other strategy? For young people, just stick to your affordability, you can always upgrade when the time comes. Most importantly, you must have one to start with. I would recommend to upgrade “partially” and leave the remaining bullets for investment purpose. Two properties are always better than one, don’t always count the profit that sits in your own stay property because you cannot monetise it until you sell it. And still, you need another home after that. For me, I prefer to have another ideal property, at least one, sitting in my investment portfolio that can fit my own stay criteria with the purchase price lower than my current own home’s market value.
K.S: For me it’s easy, anytime is a good time to buy, as long as it is within one’s capability to buy. If you find something that you feel comfortable with in a preferred location, and then you should go ahead and buy it, don’t time your market. But for investment purposes, it will be a different story as it is depends on your investment acumen.
Y.K: I share the same sentiment. If you buy within your comfort level and if the class of the property is what you always wanted, so anytime is the best time, as long as you can afford it and you’ve done your research about it.
S.Y: I think if it’s for your own stay, anytime is a good time to buy, based on your personal preferences. If you’re looking for a property in Kuala Lumpur, don’t complain about the high prices. If you want a house nearby good amenities then of course you would have to pay the price for it. Like what K.S said, we can’t time the market. For investment, I’d say anytime is a good time, as long as you do your research and as long as the math makes sense then I’d say it’s good. If you’re buying for investment, it is advisable to be more cautious, and you have to do your own background check of the property, even if the agent tells you the numbers for your investment returns.
H.C: I have friends that are waiting to buy since 2005, because they wanted to wait for the price to come down but this never happened. So, if they continue to procrastinate, then there’s no way they can own a house. So for own stay, like the others said any time is a good time. For investment, I found better deal in the sub sales market than in the primary market, i.e. new launch from the developer. For the last two years I am actually looking for sub-sale property, which is much safer. But for investment, I’d rather look for gems that are undervalued or are in a matured area so I can be certain of the price, rental and investment returns.
J.J: I don’t think we should wait, whether for own stay or investment, the price will hardly go down especially those most sought after location and even if it does go down, it is rather hard to know when will it hit the bottom. I rather spend more time to study and identify potential area rather than just wait to time the market. For your own stay it involves a need and this is why anytime a good time is. But, for me, if I’m going for my own stay, I’d look for subsale properties at this point of time. Most often than not, the price for new launches is high. Of course we can’t just wait, if we just wait without doing anything, the price will keep going up in long run and then we can no longer afford it. If you choose to wait , you better wait with some wise plan and strategy, you may looked like you are losing nothing but actually you are losing opportunity every single tick of single second but and again waiting with even the best strategy without any execution is a good as nothing. But do be wary of the surrounding area. If the property is far from amenities or CBD then the price might be lower. I’d suggest to go for prime areas, because even if it crashes, there will be safety net. It won’t go down that far.
What would be your criteria of buying under construction property?
J.J: Price. I would actually look at the submarket for price of below RM500,000 because demands for these properties will still be present. And then I look at the location. For me, a good location is one with qualities you can’t find anywhere else and has good accessibility. For example, if it faces a major highway then I would definitely consider it.
H.C: My view is more or less the same as J.J’s, but to add to that, homebuyers need to do some homework about the developer beforehand to be sure whether they are trustable or not to deliver their projects as promised. For those who buy from new and small developers, it is necessary to study the company financial reports to understand the developers’ cash flow, financial health, as under construction property investment comes with completion risk.
G.Y: Making sure the developer is reliable has never been more important in current economy and property cycle. The chance of getting property abandoned is higher nowadays because some unknown or new developers have relatively less experience of managing cost or cash flow in property sector. I foresee the economy to slow down and then property market will fix itself within 3 years’ time. So, those inexperienced developers will be under tremendous stress soon. One can research on the abandonment risk in previous economy slowdown to validate this. Those who have low risk appetite and low holding power, should make this a key criteria to think about before putting money in any property investment or for their own-stay property.
K.S: For me, it would probably be in a different order. First, I’ll look at the location, and then evaluate the product, followed by the price. Finally is to ensure the reputation of the developers.
What’s your take on residential property outlook (until end of 2015)? Are you expecting a gloom or boom?
H.C: With regard to Goods and Services Tax (GST), there are two schools-of-thoughts for it. The first is; when GST is imposed, we will have less money to spend and to invest, so the demand for property will drop. Secondly, when GST is imposed on building materials, labour and so on, the price will climb up so this is why maybe we should start buying now. I believe the first school-of-thought is inclined to apply on the lower income group.
G.Y: To me, I think Gen-Y segment (small sized apartment within RM300,000 to RM400,000) will be severely affected by the GST because of their lifestyle. If Gen-Y is affected, then we would have oversupply of apartments in both new launches and subsales. Material prices will have an additional six per cent price tag on it, which is likely to affect the overall price of property. So how could the demand sustain after the second or third feedback loop of GST impact in 2015/16? Does Gen Y still have the momentum to follow all the new launches on so-called affordable priced property (but actually playing on its size to equate the affordability and how small can this goes? During pre-GST, there will always be a “buy, buy, buy” pattern or trend. But after GST, what will happen? The last push of property launches pre GST will bring the property prices into a new high, and then we would see the sluggish demand on property launches and subsales. The new launch or subsale price will be challenged based on proper demand-supply equilibrium together with affordability factor. I think the price will still go up but please forget about the minimum of 30 or 50 per cent returns or quick sell-off. Less appealing location with the price tag of good location will be hit the hardest. So, if you are buying at less appealing location now, make sure it is not sold at future price. Going forward, my personal preference for mid to long term holding is to buy prime location property with good value (new or subsales) even though it is not near the MRT/LRT.
S.Y: I think GST is a bit overrated, in terms of its impact and expectation. I think the market will keep increasing as usual even after GST. I think there won’t be any market collapse after April 2015. It’s like pre-election where people assume something would happen but the future is still unknown, the same goes to GST.
Y.K: Even though residential property is not subjected to GST, the mechanics developer will have to absorb the GST and priced it properly. If you’re selling products that are not affected by GST (GST exempt), you can’t claim the 6 per cent tax from buying the materials. From accounting point of view, I think GST will definitely have an impact on the price (increment in price).
K.S: It’s the buying anticipation hype that affects the price. The developers are also creating this hype over GST, creating fear and sentiment in buyers from the impact of GST. For me, GST will not have much impact on my investment. It’s not my main criteria for investment; there are other factors that matter more than just GST.
J.J: I agree, it’s a tad overrated. GST has never been an issue for investment because we never really looked onto it as a one of the main key factor in decision making when coming to investment or own stay purpose. Maybe we should look at the location, price, amenities like the current and future LRT-MRT that plays a bigger factor in deciding the Return of Investment of a property you purchased.
Where do you think the hotspots for property investment?
Y.K: Kajang and Cyberjaya. Both of them are relatively near to town, and connected by major highways. I think a lot of developers are coming into Kajang with exciting developments. As for Cyberjaya, the location is adjacent to Puchong and Kajang too, so it is very strategic.
S.Y: I like Ara Damansara, but I don’t limit my investment areas.
J.J: For me it’s Cheras, and the areas within 5km radius of it. As you can see the MRT line is aggressively progressing to this southern part of Klang Valley and more over Cheras is a well connected location with great accessibility. The only lacking component is the greater public transport network to solve current heavy traffic issue which will be ready in near future. I foresee Cheras will booms and there will be golden opportunity there if one done their home work enough to identify those highly potential project. Kajang is good too. It’s easier to go to the south and it is near Cyberjaya and Putrajaya. The land price in Cyberjaya and Putrajaya is so high compared to Kajang. So people who have any desire of moving into Cyberjaya and Putrajaya might be considering Kajang too. Other than that I also like more commercially matured and established area like Bukit Bintang and KLCC too but just a matter finding the right price for it.
H.C: For me, I’ve always looked at matured area, such as Petaling Jaya and Damansara. 70 per cent of my portfolio consists of these areas. You can get higher rental at these matured areas as a result of limited supplies. There are not many new launches in these areas compared to other “new areas”.
G.Y: Cyberjaya and Cheras. Soon, properties in Cheras, with the completion of MRT project and its proximity to with KL city centre, will increase in price. Though people always complain about traffic in Cheras, they never complain about the amenities, especially with the multiple LRT and future MRT stops in the vicinity. As for Cyberjaya, if it’s three years ago, I wouldn’t have made any investment there. But now, we can see the change of single master developer township to a “privatised township” with large number big and small developers there.To say Cyberjaya failed after 15 years is an unfair statement. The policy changed a couple years ago and this change showed the start of a proper township development unlike the earlier years. Cyberjaya already has great infrastructures in place, with more commercial developments scheduled to be ready in 2014 onwards, population is expected to grow too. Why? Because we know Malaysians need mall and commercial properties and it is a key factor before you buy your own-stay property. Cyberjaya, being an IT hub, comes with a large pool of working professionals there. This means the area already has a right demographic to start with and has an upper hand than other new township. Now, it is just a matter of how to make them stay. Then we can talk about how it can attract residents from other townships.
K.S: KLCC. The value there is always very high. A lot of developers are putting money to refurbish old buildings within the area in effort to make it a better city and therefore adding value in the city. You need to buy right products in KLCC.