Project to Refurbish an Old Single Storey House

Lately I've been scouting for any reasonable condos which are close to the LRT for own stay or investment. They have to be within walking distance and must have at least 3 bedrooms. Freehold is preferred. Typically, what I found were in the price range between RM500k to RM700k depending on the luxury and condition of the place. Take Asia Jaya in Section 14 Petaling Jaya for example - Millenium condo and Menara Jaya in the picture below and Istara condo are in this range. Millenium is plastered with ads to rent or sell, but nothing below RM500k. They are all within a 5 minute walk of Asia Jaya LRT station and ranges in size from 800sf to 1600sf.



Then it occured to me that I should widen my search to include these charming single storey houses which are just inside the 500m radius of the station. Other places include Taman Paramount, SEA Park, Taman Mayang and Section 4 Petaling Jaya. They are also 3 to 4 bedrooms and most of them having 2 bathrooms. Sizes range between 1400sf to 1600sf, quite similar to the condos and best of all, they are landed which in Petaling Jaya, is a rarity today.

Note: Picture above is not the actual house

Price? Between RM330k to RM500k.... But work is needed... From a typical layout of an intermediate unit below, one can spend about RM100k to convert the interior into a very luxurious and beautiful house..much like the lofts in old TRIBECA New York.

Most of these houses, since they are intermediate lots, need to light up the middle part of the house. So, they have air-wells or roof windows like below. The Petaling Jaya City Council actually can give approval for these airwells to be converted into a loft - an additional half a floor or mezzanine. But this will add an extra RM50k to RM60k to the cost and affect time to market as well.

So, the half floor conversion is not important. We already have 3 or even 4 bedrooms. What's essential are obviously the following:

1. The bathrooms need to be "modernized"

2. Designer kitchen

3. Rewiring to 3-phase

4. Change the plumbing system and pipes

5. new Floor and fresh coat of paint

The damage? Just over RM100k and with all the acquisition costs, can still be cheaper than a condo with questionable quality. Here in this layout below, I have proposed to convert the bathroom to a designer open kitchen while installing a shower and WC in every room. Since this is personalized en-suite facilities, the showers and WC need not be "walled-in" - how about glass? Sexy and chic ;)

The Bill of Works:

1.Demolish wall & extend Room1 RM4000
2.Build Bath 1 with glass walls, sink, shower & WC RM10,000
3.Build Bath 2 with glass walls, sink, shower & WC RM10,000
4.Demolish half wall & extend Room3 RM2000
5.Build Bath 3 with glass walls, sink, shower & WC RM10,000
6.Change roof of Dining to sky-light tempered glass RM6,000
7.Demolish Bathroom and raise floor RM3,000
8.Build modern open kitchen with granite top and cabinets RM20,000
9.Refurbish Toilet and build shower RM7,500 (for Room 4)
10.Build Room4 RM2,500
11.Change roof tiles RM25,000
12.Hardwood flooring RM10,000

13. Plumbing RM10,000

14. Rewiring RM20,000

TOTAL RM140,000

COST OF HOUSE RM340,000

LEGAL FEES, SPA, LOAN ETC ETC RM30,000

GRAND TOTAL RM510,000

RESULT = LANDED HOUSE WITH LOADS OF POTENTIAL

Kampung Warisan Refurbishment

When I bought a unit in Kampung Warisan, the maintenance fee was only RM0.26psf, which is one of the lowest in Kuala Lumpur for this standard of facility. Last year, the management corporation called for a meeting among others to discuss about increasing the maintenance fee to RM0.36psf. This seems fair considering inflation, higher wages and wear and tear of the huge compound. Many people who attended the meeting agreed with the proposal which was tabled as the last agenda. As the meeting dragged on, most people decided to leave early. By the time the meeting arrived at the agenda, the decision was to raise the fees to RM0.50psf instead of RM0.36. Many of us were stunned. I found it incredible. 1st of all, since I read the agenda to increase the fees to a fair amount, I decided I did not have to attend the meeting because I agree with it. Had I known it would be this high, I would make sure I'd attend to ask questions and if not satisfied, I'd like to vote the proposal down. Many owners felt the same way.

Kampung Warisan is almost 20 years old and many things are falling apart. It is also an extremely challenging environment, damp in some areas and heavily wooded in some. The meeting made the decision to raise the fees to RM0.50psf to pay for the refurbishments for a period of 3 years. Beyond that, we understand the fees would be reverted to the earlier proposed RM0.36psf.

It has been a year. And the refurbishments are underway, roads paved, lawns regrown and roof tiles replaced. I must say I am satisfied with the quality fo work. So now I feel I don't mind paying the extra fees or levy. For sure Kampung Warisan will look much more beautiful and the value will certainly increase.

Renewing the Lease of Lease-hold Properties

One might remember that back a few years ago, many aged property owners in Petaling Jaya were thrown kicking and screaming out of their homes as the 99-year leased has expired and the government wants the land back. These poor old folks inherited the houses from their parents who in turn inherited them from their parents... So, the saying about not being able to out-live your 99-year leased hold property does not hold water after all.

So, some of these old chaps who have no money nor family to take them in, retired from their jobs and too old to get a bank loan to buy a new house eventually ended up in welfare homes. Sad, but true.

Actually the lease for a leased-hold property can actually be renewed by a simple application and payment of fees. There is a method to compute the fees by considering the land size, the property valuation and the number of years the lease is due. However, the fees can come up to well over RM10,000 and even as high as RM50,000 or RM60,000. Many of course don't have this kind of money.

I've just learnt that the new Pakatan Rakyat state government of Selangor has introduced a scheme whereby owners only need to pay RM1,000 to renew the lease up to 99 years. To deter profiteers and speculators, terms and conditions apply... one of them is, if the owner wants to sell the house, he has to top up to the original fees before he can do sell it.

For more details, visit your District Land Office...

Property Speculation

Before I continue my tirade against greedy property developers, I'd like to for a moment train my guns on some speculators. This picture above is a single storey corner house at Petaling Jaya Section 14, about 300m to the Asia Jaya LRT station and the Tun Hussein Onn National Eye Hospital. At the back of the house, you can see the mixed commercial and residential project by Malton. Obviously, the location is very good despite being leasehold and about 40 years into the 99 year-lease.

Last year, this charming little basic house was in the market. The owner who bought it 1st hand paid under RM90,000 for it. Back then RM90,000 is a lot of money. Initially the owner wanted to let it go in 2010 for only RM280,000. Eventually, he managed to get RM385,000 for it. Which is fair price, considering the interests he has paid and the appreciation over the years. The new owner who bought it has no interest to either live in it or rent it out. Instead, he has put it back in the market immediately for RM650,000.

Without going as far as condemning this, I'd just leave it to all your own opinions. Some say fair enough, everyone just wants to make some money. But my very own opinion is:

1. People seeking to buy properties for their own stay will end up not affording it or have to look further from the city or at the very least, have to bear more interests from the bank - not to mention having to shell out a huge upfront as the valuation is much lower than the asking price

2. Investors who bought it for the location will need to charge a much higher rent in order to cover the capital costs and interests payment

Only one winner here as far as I can see...

Always Blame Owners, What About Developers?

Yesterday, BERNAMA reported that property prices will see a slowdown next year. In the report, I decided to highlight in big red letters, a comment by the CEO of one real estate company who mentioned that, "“Prices will remain stable, with asking prices, not values, becoming more reasonable as owners check their values to real pricing".

No doubt, the property speculators among us have been buying and flipping properties to make profits. This has contributed to property prices going up to the all time high today. These very few speculators are obviously causing many genuine and needy home-seekers finding owning a home becoming unbearably unaffordable.

Although I acknowledge that property speculators and owners looking at liquidating their properties are responsible for this, it is not as bad as the developers launching their new projects at record prices each and every time. Just look at all the new KLCC area launches. Nothing below RM1000psf now. And even Petaling Jaya and as far as Shah Alam, new condominium launches are going at RM800psf. In comparison, a 15 year old condominium in Pantai Panorama for example is RM420psf and in the KLCC area, you can still buy a unit at Menara Bukit Ceylon 1,600sf at RM600psf.

Yes, blame! But be fair and blame the developers who bought their land years ago cheap and cashing in on the property boom today. Then they throw in DIBS and all sorts of incentives to encourage even more speculation. And at the end of the day, at least the property speculators pay tax every time they flip their properties!

Property market to see a gradual slowdown next year

(Bernama) 22 December 2011 - The Malaysian property market is likely to see a gradual slowdown next year, taking into consideration the uncertainty in the global economic situation.

President of Fiabci Malaysia, Yeow Thit Sang, said the high-end residential units were already seeing a slowdown both in pricing and the take-up rate.

“There are fewer expatriates from multinational companies (MNCs) coming here and rentals with a yield of between six and eight per cent are no longer achievable.

“Investors in these units will have to wait longer to realise their investment. The slowdown in global economy is definitely affecting the high-end property market,” he told Bernama in an interview recently.

He also saw a fallout for office space next year, saying the category was already overbuilt and the overhang felt in the market with rental falling and a slow take-up rate.

However, there is a huge demand for low medium and medium-cost residential units below RM300,000 with most developers building high-end units to cash in on the good time.

“The government’s effort in building such units in joint venture with developers will help the low income earners to own affordable homes.

“Building such units will not be fast enough to relieve the pent-up demand over the last five years,” he added.

Meanwhile, Zerin Properties’ chief executive officer, Previndran Singhe, said the slowdown in the property market would only last in the first quarter next year and the industry will be stable afterwards.

“Prices will remain stable, with asking prices, not values, becoming more reasonable as owners check their values to real pricing.

“At present, sentiment is down due to the eurozone financial crisis and the US double dip fears, which has been faring for a long time, but I think we are more Asia focused,” he told Bernama.

If and when China goes on reverse gear, then there would have to be concerns in the market, otherwise, barring external shocks, the industry should have a stable year next year, he said.

Contrary to common belief and expectations, the property market has registered 214,764 transactions worth RM64.75 billion within the first half of 2011.

Against the first half of 2010, the volume and value of transactions recorded double digit growth of 18.1% and 29.7% respectively.

PJ SS22.... Paramount View Condo

This is one of those niche condos with about 200 odd units nestled right in the middle of Old Petaling Jaya. It is located in Jalan SS22/44, and 600m walk from the Paramount LRT station on the Kelana Jaya line. This condo, which was only recently completed has been quite controversial. It was built on this narrow patch between some 1970s bungalows and the LRT tracks. The owners of the bungalows protested the construction from the start. As usual, rich people complain the most but apparently some guy's house sank due to the excessive piling and earth works. To top it, when the condo was completed, it was issued with a Temporary CF despite not having any access road. So, the owners of neighbouring bungalows got a huge shock when contractors came about to cut down age old rain trees to build the access road. A court case ensued. However, it was made known that the project, access road included was approved in 2005 by the council (MBPJ) which was then under the control of a different state government... the corrupt kind...

So, nothing can be done now, therefore the project is now the completed Paramount View Condominium, complete with access road.

Beside Paramount View, there is a low cost apartment called Sri Aman which has direct access to the LRT station. Despite sitting beside Sri Aman, Paramount View dwellers need to walk a big loop around Sri Aman to get to the LRT. Sri Aman is pretty popular, rent here for a 600sf flat fetches RM900. However, being a low cost apartment, there are purchase restrictions i.e. only those who earn less than RM2500/month among other conditions apply. Therefore, one who qualifies can buy a unit here for less than RM100k, if one can find a seller. There is an auction unit starting at RM90k.

Sri Aman is dense and rather scary.... Paramount View with an almost similar star location and condo facilities obviously costs much more. 1st hand buyers got their 99 years leasehold units for less than RM300k. There are 2bedrooms and 3 bedroom units. They now costs well over RM300k and fetching RM1200 rental for the 2br units and up to RM1800/month for the 3 bedroom units.

As usual, the corner units are most desirable as well as the units facing the pool. The intermediate units are all built with an airwell at the back which I throughly dislike as they always end up as smelly, damp and noisy.

The facilities are on the 3rd floor. They've got a pretty basic gym, sauna, a small-ish swimming pool, tuck shop, laundrette and a cafe. There are also some units on the 3rd floor with almost 16feet tall ceiling. Although high ceiling is desirable, I won't know how to handle this height. They've also posted list of maintenance fees defaulters on the management notice board. It seems like there are over RM100k of arrears from various owners. This is kinda worrying...

But in my opinion, it isn't the defaulting owners or the controversial construction which worries me about this place. The electrical high tension wires are located literally less than 30m away from the condo. Problem is, future buyers will think the same way as me and shy away from investing here.

so close, you can hang your clothes to dry...

Jalan Raja Chulan Serviced Apartment

Few months ago this plot of land fronting Jalan Raja Chulan, opposite the Weld was put up for sale. I thought it would be a really good idea to build a hotel or serviced apartment here. And true enough, a developer bought it and is planning a 29 storey building, 20 floors serviced apartments with 7 floors of parking and 2 facilities floors.

The location is indeed superb. There is no hotel or serviced apartment on Jalan Raja Chulan despite being slap bang in the middle of the KL CBD. And this stretch of Jalan Raja Chulan is a dual flow traffic road unlike St Mary, which is directly opposite but access is via one-way Jalan Tengah. The Pavilion mall and KLCC are all within minutes of walking.

However, the plot is rather small and the developer is putting up about 10 units per floor. This is not too bad after all, with such low density, competition will not be too tough if the project is carried out well enough to compete with the apartments in KLCC and Bukit Ceylon.

Let's keep a look out on this one and hopefully it won't be another over-priced over-confident project.

My Day In Court

A few months ago, I placed a booking fee for a sub-sale property in KL through an agent. Prior to signing the S&P and paying the balance 10% downpayment, my ever vigilant lawyer asked to see the Deed of Assignment from the seller since the property has yet to gain a strata title. The owner was unable to produce one for weeks. He claimed he never had one despite having taken a loan out from EON Bank to purchase the unit. The agent advised me, in his "years of experience", such a document is not needed to conclude a transaction. That is bad advice. How then would my bank be able to confirm that the seller is indeed the rightful owner of the property without the existence of a title.

So, after ding dong for almost 3 months, I decided to call off the sale. According to the terms of any transaction, I should then be compensated with the same amount of the booking fee since it is the seller's default. But all the agent could do was to refund my booking fee and I am left to take the necessary actions against the seller. So, as far as the agent is concerned, his responsibility ends after returning the booking fee. Before that, he demanded a letter from me stating no liability on his part. I had to give him this letter.

After that, I called the owner and asked him what is the problem. He said he has family issues to deal with, therefore he could not sell the property. I therefore gave him a few more months to settle this and on top of that offered him an even higher price. He said he would get back to me.

After months, and silence, I decided to sue him.

Fortunately, the amount was less than RM5000, so I could take it up in a small claims court. The process is much faster and cheaper. Within a month of lodging the case, we all received a letter from the court. In the 1st sitting, the seller didn't turn up. So, the court set another date 2 weeks later.

After 2 weeks, the seller turned up and decided to settle the case out of court. Basically, if the court case was to be followed and if I received a judgement in my favour, the defendant would have to pay me. If the defendant fails to pay up, I have to fork out an additional RM1500 to "exercise the judgement". This is where the court will do whatever necessary means within the law to get the defendant to pay. So basically, I gave him the RM1500 discount and settled it out of court. He paid in cash and we informed the judge.

So, what have we learnt here?

1. There are too many property agents in Malaysia - they are all competing for business to the extent they fail to place proper checks if the owners or sellers are ready to sell their properties or not

2. Property agents in Malaysia don't really do much but in my case, if I had dealt with the owner directly, I'd probably have lost my booking fee totally. However, I would have used a lawyer to hold the booking fee in trust

3. Don't rush and succumb to pressure - make sure the seller has all the documents to enable the transaction and transfer to be completed within the time set within the S&P

4. Always limit the booking fee to RM5000 or less - if it is more than RM5000, the seller would be pretty confident you won't pursue it because the process outside a Small Claims Court takes much longer and costs more expensive

5. Get a good lawyer, NOT a property agent

Villa Scott at Brickfields

Earlier we talked about Brickfields and the KL Sentral area which is seeing quite a lot of development lately. The government seems to think that Brickfields represents the Indian community in Malaysia and with the recent fall-out in the last general elections where droves of Indian votes desserted the governing party, the government decided to spend some money to spruce up "Little India" in Brickfields to appease the community.

With this good intention comes the gravy train and the haphazard implementation such as this pedestrian bridge complete with lifts on both sides. Nothing wrong with this except that the pedestrian bridge is one of the shortest we've ever seen.... The lifts are of course necessary as Brickfields is also the home of a blind community. This will really come a long way to help them cross this busy road.

Except that, on a slightly longer stretch, the same contractor has constructed a pedestrian bridge with a lift only on one side. Such a compassionate design...

Nevertheless, Brickfields has been seeing some kind of boom with new condos touching on RM800++psf. Over at KL Sentral, the new launches are all well above RM1000psf. But so it seems... the older ones are still struggling to hit the all time high prices of the newer or newly launched projects.

Villa Scott is situated over at the other end of Brickfields. It's one of the older condos and many years ago, I actually considered buying a 2 bedroom unit here for about RM250k. Well, those days are gone, and prices have since gone up beyond RM450k for a unit here. The larger 3 bedroom units, owners are asking for RM690k. Whether they sell it or not, I am not sure.

But one thing for sure, rental hasn't really gone up a great deal. There are 2 newer condos adjacent to Villa Scott now, Scott Sentral and 633 Residency. With competition... and a glut, and the ageing hardware inside the condos, Villa Scott can barely fetch RM3000/month for a fully furnished 2 bedroom unit.

If you buy a unit here for investment or own-stay, you'll need to at least gut and replace the bathrooms with more modern fittings and tiles in order to compete with the neighbours. That will set you back at least RM30k for the 2 bathrooms.

The floor is marble tiles for the living and dining area, including the corridors, cheap tiles for the kitchen and carpets in the bedrooms. The kitchen and bedrooms need to change at least, that'll be RM10k for some cheap laminated wood floors and modern tiles for the kitchen.

This large 1500sf 3 bedroom unit has a maid room and bathroom... not much need to change here. But definitely the cabinets have to go... RM2k to pay someone to remove it and another RM50k to get a new one with nice Teka wares.

And the rest of the furniture have to go too... so, that's another RM15k to spend on new stuffs but I won't record these as one would need new furnitures too if purchasing a brand new modern unit.

So, the total cost of acquisition and refurbishing is still well below RM800k, the cost one would have to pay to acquire a similar sized brand new unit at Mutiara Residency or 633 Residency... That's your control but what you cannot control is the common areas....

While the pictures seems spectacular from afar... and the list of facilities seems standard, the condition is not so standard...

A closer look at the details reveal blocked toilets...

rotting doors...

smelly gym...

but things are certainly functioning... like this in-house barber

There appears to be effort to spruce up the place. The walls seems like they're recently painted so there might be some hope... but I think it will be tough at this price....

2 condos at One Menerung can fetch RM70,000 rental per month!!

Few days ago, I almost fell out of my chair reading about how confident some investors have in our property market. Actually, our property market is not doing too badly compared to other countries in the region but this can be a bit far fetched.

The National FeedLot Corp (NFC) chairman who is in the middle of a scandal right now has defended his company's decision to use money intended for cow rearing projects to be invested instead in 2 condos (not 1) at the One Menerung in Bangsar. Apparently, both condos are being rented out for RM70,000 per month returning 12.9% per annum!

Before punters start falling over each other to grab a unit at One Menerung, property experts issued a caution. The experts say that the highest rental that can be expected for even the penthouse at Bangsar’s One Menerung condominium is about RM24,000 per month.

I think this is more a case of criminal breach of trust and corruption rather than an extraordinary success at property investments....

Who have been buying all these multi-million Ringgit Condos?

Well, we almost got our answers this month... First, the opposition alleged that the family of a Minister who owns a company which received millions in loans from the government have been using the loan money to purchase a condo.

"Continuing its attack on the National Feedlot Centre (NFC), PKR today alleged that taxpayers’ money allocated for the company was used to buy a luxury condominium worth RM9.8 million in upmarket Bangsar.

The money for the condo unit at One Menerung, Bangsar, was supposedly taken from the RM81 million given by NFC as a loan to the National Livestock and Meats Corporation (NLMC), a subsidiary contracted as its marketing development agent, PKR said."

Then, an apparently highly educated government backbencher came forward to confirm that indeed, money from the loan has been used to purchase the condo...

"The RM81.2 million was allocated to NLMC to cover the cost of operating the NFC project. But the project encountered operational delays.

Khairy said that because of the delays, NLMC decided to use some of the money (RM10 million) to purchase the apartment as it would receive some returns.

“According to my research, it is indeed true that NLMC had bought an apartment in One Menerung, Bangsar. This investment was made with money channelled to NFC from the special loan account (SLA), which is regulated by the Finance Ministry as well as the Agriculture and Agro-based Industries Ministry,” he said.

Khairy, the Rembau MP, said that it was also true that NFC had transferred RM81.2 million to NLMC."

He went on to slam the opposition for being short-sighted. But for sure, this backbencher has confirmed 2 more important things:-

1. Property is a very safe investment

“The management (of NLMC) decided that property asset was the safest investment, which gives the best returns, and which can be sold at any time when cash is required for operations,” he said.

It is easy to sell off your RM10million condo any time to reap a huge profit whenever the cash is needed. All those people who complain about the gloomy high end property market don't know what they are talking about.

2. Soft loans given by the government for a national agriculture project can be used to fund property speculation - nothing wrong with that at all.

And maybe 3 things.... cows can fly!

Casa Kiara Unit for Sale

Mont Kiara is a popular area for expats as there are 2 international schools and various nice pubs and eateries catering to this community. Casa Kiara is located right beside one of these schools, the Garden International. It is a favourite among many of the expat teachers working next door.

There is this 2 bedroom unit, about 1200sf up in the market now. Although this unit faces another block, it is on the 3rd floor directly above the swimming pool.

The unit comes with quality furnishing, including built-in cabinets - it is to be sold lock, stock and barrel. Unlike many furnished condos in the subsale market which I constantly have to calculate how much it would cost me to throw out the old furnitures, this one is quite tastefully and simple furnished.

The kitchen is indeed very nice, with nice black granite top.

It was previously rented out at RM2,700/month, with the tenant just moving out. I am not an expert of Mont Kiara and not a favourite too as I feel Mont Kiara is over-built. However, Casa Kiara is located beside a popular school which makes it hard to go wrong. The location edges the rest.

Despite that, Casa Kiara too, as I understand is priced below the Mont Kiara average in terms of sales as well as rental and on top of that this is probably a better time to buy it as there is a construction next door. Therefore, the noisy part of the construction will be over by the time you take vacant possession. You'll be dealing directly with the owner, with transaction done straight through a lawyer. With the agency commission out of the picture, you'll get the best value out of this investment.

If you are interested, drop me an email @ sinleongng@yahoo.com

Property sales slip on economy worries, polls talk

From the Malaysian Insider

By Lee Wei Lian

October 24, 2011

KUALA LUMPUR, Oct 24 — Property sales have fallen off their 2010 peak while investors and home buyers move to the sidelines as worries of a global economic slowdown, government cooling measures and uncertainty due to the upcoming general election start to bite.

The consensus among analysts and industry veterans appears to be that sales have slowed as the market enters a cooling phase and will continue to slow as buyers take a “wait-and-see” approach, although a hard crash landing of the property market is not expected unless the economy plunges first.

File picture of high-end houses in Kuala Lumpur. The housing slowdown is most severe in the luxury high-end segment.

The slowdown is most severe in the luxury high-end segment which has seen prices drop by as much as 25 per cent due to oversupply and unattractive rental yields, prompting more developers to start paying attention to the more affordable mid-market segment which is expected to be less affected by a softening of demand.

Real estate agents SavillsRahim & Co’s James Goh, who is handling a tender of 61 luxury homes here, said however that he does not foresee prices in the high-end segment to go lower after falling by as much as 20-25 per cent since 2008.

“Interest in the tender has been quite strong with a mix of locals and foreigners even, though the luxury apartment segment has been quite slow at the moment,” he told The Malaysian Insider.

OSK Research said in a report last week that Sunway, one of the nation’s biggest developers, expects the property market to soften over the next six months while Paramount Property Development managing director Datuk Ricque Liew told The Malaysian Insider that there has been a “marked change” in terms of sales from last year to this year especially in the high-end segment.

Property analysts contacted by The Malaysian Insider meanwhile expect sales to slow from a high of 21 per cent growth last year to between zero and five per cent growth next year or even contract if the economy takes a turn for the worse.

‘We’re entering a cooling phase but no hard landing is expected,” said RAM Ratings chief economist Yeah Kim Leng. “The housing correction will not be that sharp unless here is a downturn with a lot of layoffs and business failures.”

The Malaysian economy is not expected to enter a recession however with most research houses predicting a growth of between 3-5 per cent for 2012.

Patrick Chay, founder of PropertyTalk & Lifestyle Malaysia, a social media platform for property investors with 448 members, said the mood among members has turned conservative with gloomy economic news and the looming general election, which must be held by the first half of 2013, weighing on decisions on whether to buy.

“There is uncertainty over the next general election as if there is a change of government, there could be new property investment regulations to deal with,” he noted.

Paramount’s Liew said developments in the high-end segment in areas like KLCC and Mont Kiara were the most affected by rulings such as the 70 per cent cap on loan-to-value mortgages for third properties and the inability to attract tenants for rental yield as some properties sit empty for as long as 15 months or more.

“The 70 per cent loan-to-value ratio for third houses has hit the high-end market as people who buy those units tend to have more than two properties already,” he said.

Liew added that a slowdown would potentially be good for the market as it would stabilise land prices.

“For those who do not build speculative properties, we’re not worried,” he said. “We build based on real selling prices not inflated prices.”

Property consultant and valuer Elvin Fernandez of the Khong & Jaafar group of companies said properties had historically been priced at 4-5 times household income but had shot up to as much as 10 times income, while rental yields for the benchmark double-storey terrace houses, especially at hot spots, had slumped below the three per cent threshold.

“The mood and sentiment has changed,” he said. “A lot of sales have slowed down and developers are not selling as briskly as before.”

He noted however that while property prices should return to their normal value of 4-5 times household income over the long term, they seldom drop drastically during a correction but instead stay flat.

The Valuation and Property Services Department (JPPH) of the Ministry of Finance, in its first half report for 2011, said that against the first half of last year, the volume and value of transactions recorded double-digit growth of 18.1 per cent and 29.7 per cent respectively but grew at a lower rate of 10.2 per cent and 12.6 per cent respectively when compared against the second half of last year.

Former JPPH deputy director-general Datuk Mani Usilappan said however that there is generally a lag in terms of data collected in the first-half report which is more reflective of transactions done toward the end of last year.

“I am not confident that there will be a correction,” he said. “What will probably happen is a slowing down of the take-up rate.”

Mani, who is now a real estate consultant, added that if the government wants to curb inflation, it should have raised the real property gains tax (RPGT) to at least 15-20 per cent instead of the 10 per cent as announced in the recent budget.

KL faces property glut as economy bites

From the Malaysian Insider

UPDATED @ 07:21:16 PM 31-10-2011

By Lee Wei Lian

October 31, 2011

KUALA LUMPUR, Oct 31 — Kuala Lumpur is facing an impending surge of new office and retail space that could further depress rental yields already under pressure from the current oversupply, said CB Richard Ellis (CBRE) Malaysia today.

The international real estate service firm said the residential market is also beginning to ease as capital appreciation has reached its peak, and rent in some high-end areas of the city have come down by almost 50 per cent.

A combination of a squeeze on rental yields and stagnant capital values could put pressure on over-leveraged investors.

Christoper Boyd, executive chairman of CBRE, said rent for some luxury condominiums in oversupplied markets such as KLCC and Mont Kiara have almost halved, while the office space sector is also looking at an oversupply situation over the next 18 months with the rental market becoming more competitive.

CBRE managing director Allan Soo said KL is set to overtake Singapore in terms of retail space per capita as new malls near completion.

He noted that the Klang Valley currently has 7.1 sq ft of retail space per person, which is equivalent to Singapore, but is set to overtake the city state when approximately 10 million sq ft of planned retail space comes online by 2014.

Soo pointed out, however, that while Singapore’s retail market was strong, KL was a tenant’s market with some malls resorting to paying clients to take up space.

“Here we have to beg tenants,” said Soo.

Figures provided by Soo show that KL’s total retail space is set to grow from 43.7 million sq ft currently spread out among 149 malls and hypermarkets to 53 million sq ft by 2014.

“Our analysis shows that only 43 or one third of the retail centres and hypermarkets are performing,” he said. “You must build grade A, building grade B me too malls won’t work.”

Boyd said that over four million sq ft of office space had come online this year which was far in excess of normal demand.

He said that more than six million sq ft of office space meanwhile is expected next year while 25 million is expected by 2015 excluding the mega-projects of KL Metropolis, PNB’s 100 storey Warisan Merdeka and the Kuala Lumpur International Financial District.

“We’re looking at the supply outstripping demand with a likely impact on rental values,” said Boyd.

The CBRE executive chairman also said that the residential market could see some potential buyers drop out due to issues of affordability.

The Malaysian Insider had earlier reported that investors and home buyers have moved to the sidelines as worries of a global economic slowdown, government cooling measures and uncertainty due to the upcoming general election start to bite.

The consensus among analysts and industry veterans appears to be that sales have slowed as the market enters a cooling phase and will continue to slow as buyers take a “wait-and-see” approach, although a hard crash landing of the property market is not expected unless the economy plunges first.

Property analysts contacted by The Malaysian Insider expect sales to slow from a high of 21 per cent growth last year to between zero and five per cent growth next year or even contract if the economy takes a turn for the worse.K