Wednesday, November 21, 2012

Hong Kong property investors find new avenue to park their money

This is something big in Western cities. And many developers are now taking car parks out of the sales. A car park lot in the KL CBD is worth about RM80k to RM100k now.... Rental of reserved car park lots in KL Sentral is RM400/month... here we go...

A man checks his mobile phone as he rests on a footbridge in front of private apartment blocks in Hong Kong in this file photo. Property speculators in Hong Kong are now going for car parking spaces after government moves to cool soaring property prices. – Reuters pic
HONG KONG, Nov 21 – Hong Kong investors are snapping up car parking spaces, raising fears of a bubble after government moves to cool soaring property prices last month drove speculators to seek new options.
One investor had put a total price tag of HK$100 million (RM39.51 million) on 34 parking spaces in a commercial building near Western, said Sean Tsoi, a dealer at property development and investment agency AGW Holdings Ltd, referring to an area just five minutes by car from the heart of Hong Kong’s financial district.
The average price for each space in the building was about HK$3 million, higher than the cost of a small apartment in some areas of Hong Kong, which is home to the world’s most expensive residential and retail property.
“Car parks have become a new hot item,” said Hanson Lam, senior property consultant at Midland Realty. “They’re overpriced and I worry that there might be a bubble.”
Lam said prices of parking spaces had jumped 20 to 30 per cent since the government’s latest property curbs in October.
Developers such as Sun Hung Kai Properties Ltd, Hong Kong’s largest property developer, and Cheung Kong (Holdings) Ltd, controlled by the city’s richest man Li Ka-shing, had sold more than 2,000 new parking spaces over the past two weeks, said Wong Leung Sing, research associate director at Centaline Property Agency.
Wong said sales of new parking spaces had surged about 50 per cent so far this month although he was not alarmed.
“It’s a simple logic for investors: if you don’t allow me to buy residential properties, then I will turn to parking spaces, and it’s still more profitable than putting money in the bank,” he said.
Hong Kong leader Leung Chun-ying, who took over on July 1, earlier this month expressed concern over the impact of hot money flows into the city after the US launched a third round of quantitative easing in September.
“Capital is flowing into Hong Kong, into its property market. Some people buy luxury properties, we’ve seen soaring prices there ... money is also flowing into shops, commercial premises and car parks,” Leung said.
An inflow of hot money forced the city’s central bank to intervene last month to protect its currency band for the first time since the global financial crisis.
The government imposed property cooling measures on Oct 26 to rein in residential prices, which jumped 20 per cent in the first nine months of this year. – Reuters

Tuesday, November 20, 2012

Tun Razak Exchange will not affect property prices, Najib says

By Ida Lim

November 20, 2012
KUALA LUMPUR, Nov 20 — The Tun Razak Exchange project will not affect property prices, the Prime Minister Datuk Seri Najib Razak has told Parliament.
“The Tun Razak Exchange (TRX) will not affect property prices because the TRX will be built according to different phases in a long period, that is 10 to 20 years. All construction will take into account the condition of demand and the current market offer,” Najib wrote in a parliamentary reply yesterday that was released today.
Najib attempted to alleviate fears of oversupply of office space in the country’s capital, saying that TRX’s office space is “world-class” and therefore, would have a higher occupancy rate.
“Besides that, TRX cannot be compared with the level of market offers in general for office space in Kuala Lumpur City.
“TRX is a world-class Grade A construction, and for Grade A office spaces in Kuala Lumpur City, the ‘occupancy’ level is much higher.
“Furthermore, office space that is truly world-class is still lacking in Kuala Lumpur,” Najib said.
Najib (picture) was replying to Nurul Izzah Anwar (Lembah Pantai — PKR)’s verbal question yesterday.
Nurul Izzah had asked what steps the government planned to take to avoid the Kuala Lumpur International Financial District (KLFID) from affecting property prices and creating an oversupply of property that cannot be sold.
TRX, which was formerly known as the KLFID, was launched this year by Najib.
Nurul Izzah had also pointed out that 17 per cent of the office space at the Kuala Lumpur City Centre (KLCC) was still vacant.

Thursday, November 8, 2012

Episode 2 : Renovating Your Landed Property

Continuing on from Episode 1....

I am only going to talk about getting approvals from the local authority, in this case MPSJ (Majlis Perbandaran Subang Jaya) because the said property is in USJ which comes under MPSJ. I think other local councils in Selangor and DBKL (KL City Hall) all have roughly the same conditions.

Many home owners don't bother with getting approvals. They prefer to proceed with the renovation and then pay a fine when they get caught. But I don't think I want to take this risk because:

1. If you're in the middle of renovating and people complain about the noise, the mess or generally about how your house is going to contravene the local by-laws, they can ask you to stop work

2. After the job is completed, the local council can order you to demolish the renovations

So, as a prudent investor.... follow the law...

Most contractors will do all this for you without hassle and they will charge you about RM5,000 for a double storey link house but you can typically get it done for half that cost. The 1st thing to do is to visit the MPSJ and get the forms. You can start to submit the forms before the property is handed over or transferred to your name and normally it takes some time to compile all the documents needed. If you are messy like me, several weeks is needed... Typically, one will need to submit the following:

1. The renovation form - obtained free of charge from MPSJ

2. Approval from both sides neighbours - this took me over a month to obtain as I had a very difficult neighbour (you might need to support this with a land search to prove that the signatories are indeed your neighbours)

3. Latest receipt for MPSJ Assessment rates or local council rates paid

4. Land title in your name or if not yet your property, the signed and stamped SPA

5. Architectural drawings - you will need to engage an architect or a draughtsman for this and if there are structural changes to the house, an Engineer's endorsement is required (normally the architect can arrange this)

6. The original or latest Certificate of Fitness (CF) or now known as CCC

The architect normally charge about RM2,000 to RM2,500 for the drawings, depending on the extent of the renovations and obtaining engineer's endorsement. I actually spoke to a few people and tried to negotiate but it seems they have a cartel... everyone seems to be charging this same price and refused to budge.

Then there are other fees... and a RM1,000 deposit from Alam Flora for rubbish and debris disposal (RM500 for each floor you want to renovate). It is best to get your contractor to dispose the debris so that you will only incur a one time RM270 rubbish dump cost. If not, that will be RM270 for each time Alam Flora collects a full dump. This will be deducted from the deposit. Then there are the "renovation plan processing fees" which include for example:

Ground floor RM70
1st floor RM60
Storage of construction material at your site RM180
Sanitary fittings RM5 for each bath/toilet
A sticket to put on your gate RM10
"Government fees", whatever this is RM375

and bla bla bla.... the details are all in the MPSJ forms.

Upon submission, it takes typically a week to get an approval provided there is no query or rejection of your plans. In my case, I wanted to do a few things that won't comply with the local by-laws. The architect suggested that I submit a compliant plan but just go off and do something else.... apparently, as long as there is no huge variance from the approved plans, I won't get any hassles from MPSJ. However, the draw back is, I won't get a CCC so this will be complicated when I want to sell the house in the future. So, I decided I should just follow the plan....

Tuesday, November 6, 2012

Making EPF Withdrawals to Pay for Your Properties

In Malaysia, ordinary wage earners like me can take out a withdrawal from the Employee Provident Fund (EPF) to partially pay for property purchases. This withdrawal comes from Account 2, which is about 30% of the fund i.e. if you have RM90,000 in your EPF, you can withdraw up to RM30,000. 

There are 2 types of withdrawals:

1. One time withdrawal to pay for the downpayment or reduce the loan amount - one can make further withdrawals again if there are sufficient funds in one's Account 2

2. Monthly withdrawals to pay for installments to the housing loan

The one time withdrawal is only allowed for one property at a time. That means if you have made a 1st withdrawal to purchase a house, you can only make further withdrawals in the future when you have sufficient savings in your EPF for the same house. If you want to withdraw for another property, you have to sell that house. 

So this is what I tried to do and due to a lack of understanding of the processes in the beginning, I regretably sold my 1st house. If one has sold the 1st house that one made the 1st EPF withdrawal for, one has to provide evidence that the house is now owned by someone else. A search document from the land office is required for this - the S&P agreement is insufficient and not acceptable.  

In fact, you can make this withdrawal as soon as the S&P agreement is signed. You do not need to wait till the property is transferred to your name. Upon submission of the correct documents, the EPF will pay the money directly into your account within 1 week. So, technically you can use this money to pay for the downpayment of the property. If the withdrawal is made 3 years after the date of the S&P agreement, the money will be paid into the bank providing you the loan. 

I procrastinated and found myself submitting the documents to my local EPF office just over a month after the expiry of this 3 years. And then, I found myself without the evidence required by the EPF that my "1st withdrawal property" is now owned by someone else. I had to travel overseas the next day and it was already close to 5pm, I did not have sufficient time to get the document from the KL land office in Jalan Raja Laut. 

Then as I was about leave the EPF Office looking extremely frustrated and dejected, the ever so friendly EPF officer suggested that I make the monthly withdrawal instead. The 2nd option which is monthly withdrawals to pay for installments to the housing loan, one does not need to sell the "1st withdrawal property". This monthly withdrawal can be made for any of your properties provided that there is an outstanding loan amount and the monthly withdrawal does not exceed the bank installments. The total number of months one can make such withdrawals is limited by the funds available in one's Account 2

i.e. if you have RM24,000 in Account 2, and your monthly installment is RM2,000/month, you can make 12 x RM2,000 monthly withdrawals which is paid into your bank account on the dates of your choice and the EPF will send you an SMS to notify you once the money has been paid - fantastic?

The downside of this 2nd option is of course, it serves nothing to reduce the amount of interests charged by the bank. But in hind sight, my bank loan only charges a 4.5% interest while EPF gives us about 6% returns every year. While it would be more prudent to keep the funds in EPF, taking out a monthly amount to pay for my loan actually gives me valuable relief to my cash flow for the next  couple of years.

However, the biggest hind sight or downside is, had I known I need not sell my 1st withdrawal property to make this monthly withdrawal, I would have seen that property increase by a further RM100k in value and collected a further 2 years of RM1,800/month rental from a very good Japanese tenant. 

Sigh... life is so full of regrets, isn't it?  

In this experience, I must say the most important document, besides the 1-page EPF form is the "official statement from the loan bank in EPF's format". My loan was from UOB Bank and they needed a full 10 days to produce such a simple statement. On the other hand, the EPF office at Changkat Bukit Bintang was extremely efficient and friendly. That office is only manned by 2 gentlemen who smile all the time. The money was paid into my account exactly 5 working days after I submitted the form. So, the most painful part of the process was actually getting things done by a corporate UOB bank but it was the government agency EPF that made my day! 

Episode 1 : The Hassles Around Renovating Your Landed Property

Earlier I posted that, with the KL MRT and extension of the LRT projects, there are a lot of potentials suddenly in landed properties in the vicinities of the stations. One such location is USJ and I chose USJ13 because of the affordability, distance to the Taipan commercial center and obviously the mega potential of the place. 

Typically in USJ and Subang Jaya, there are 3 sizes of link or terrace houses, the most common being 22ft x 75ft. These are valued at around RM600k upwards now. Then there are the 24 x 80 larger units but I can't find any significant difference between this size and the 22 x 75. However, the 22 x 75 is a heaven and earth difference if compared against the 20ft x 60ft.... You'll also find smaller ones such as the 18ft wide homes but avoid these no matter how cheap they are.

It is most common practice in Malaysia, I think, before we move into any landed houses, especially these link or terrace houses to renovate them. And normally, people tend to extend and make the houses larger. The local council actually have guidelines for such renovations and people don't tend to follow them so it is also quite common to find houses here without a valid CF (Certificate of Fitness or now know as CCC). 

So this is where you'll find this significant difference between the 22 x 75 and the 20 x 60 houses. 

The thing about developers in Malaysia, especially those housing projects in the 80s and 90s, they expect you to renovate as soon as you take possession of your homes. So, I believe there is this sinister plot by developers to design the worst layout and also provide the lousiest material especially in the kitchen, bathrooms and backyards - because these are where home owners usually renovate. The local council by-law allows extension all the way to the back border of the land. This is provided that there is a back lane with width no less than 10 feet. However, there must be at least 5 feet from the wall of the upper floor to the border. Therefore, the 20 x 60 houses which normally only have 5 feet of land at the backyard, one can only extend the ground floor.

As for the front yard, no significant change to the facade of the house is allowed. But taking a drive around most residential areas reveal many home owners do not heed this requirement. If there is an extension to the front part of the house, there must be at least 20 feet from the wall of the facade to the gate of the house.

Hence, there isn't much you can do to a 20x60 house, unlike the 22x75 where you can normally extend the backyard by 10feet and the front by a further 5-6 feet. These extensions add significantly to the size of a 22x75 house.

In the next Episode, I'll talk about the process and procedures around getting approval for the renovations.