Monday, September 30, 2013

Looking At the Homeless Generation

Interesting article from the Malay Mail.

Looking At the Homeless Generation

by Boo Su-Lyn

KUALA LUMPUR, Sept 30 — Liow Mei Fong is 31 but is resigned to the fact that she will be living with her parents for a while longer as she simply cannot afford to own her own home in the Klang Valley.
An account executive, she earns about RM5,500 a month and has been looking at condominiums in the city and neighbouring Petaling Jaya (PJ), but noted that new units cost about RM450,000 for 1,000 sq ft which is beyond her budget of RM400,000.
”I am quite resigned to the idea of never owning a house,” Liow told The Malay Mail Online in a recent email interview.

”I think we are heading to just renting for life... would be nice if I can afford one without a 30- year loan or to have my next generation pay it off,” she added.

Liow’s problem is typical of her generation’s, as people in their 20s and 30s are forced to continue staying with their parents instead of paying expensive rent.
They are simply trading their independence and privacy in order to save up for a deposit when they want to buy their own home in the future.

Chang Kim Loong, honorary secretary-general of the National House Buyers Association (HBA), said that the average price of a condominium unit in the Klang Valley is RM500,000, noting that one needed to have a five-figure monthly household income of between RM10,417 and RM13,889 to afford such properties.

”Affordable” and “moderately unaffordable” homes are defined as costing below three times, and between 3.1 and 4.0 times one’s annual household income respectively, according to the housing affordability rating recommended by the World Bank and the United Nations.

”In an ideal world, we should be buying at properties deemed as ‘affordable’, which is up to 3.0 times the annual household income. However, that could be challenging and HBA would recommend that aspiring house buyers buy something that is higher than ‘moderately unaffordable’,” Chang said in a recent email interview.

He also pointed out that based on the average monthly household income in Kuala Lumpur (KL) and Selangor—which are RM8,586 and RM7,023 respectively, according to the Department of Statistics—people can only afford to buy homes costing between RM309,096 and RM412,128 in KL; and between RM252,828 and RM337,104 in Selangor.

”When was the last time you saw a new property with a KL address...(or a) Selangor address launched at the above prices?” questioned Chang.

Chang also noted that the average monthly household income in KL and Selangor is calculated based on earnings from two working spouses.

”That would mean that single people would never be able to afford to buy their own properties, thus compounding the risk of a homeless generation,” he said.

However, even with a combined income, some married couples cannot afford to move out and start their new life together.

Juliana Ahmad (not her real name), 28, got married two years ago and has a daughter aged below two years, but the senior media planner and her husband and child are still living with her parents and her sister in Taman Melawati, KL, in a single-storey house.
Juliana and her husband, who works as a journalist, have a gross household income of about RM10,000 a month, but are unable to find landed property in the city or in Petaling Jaya costing below half a million ringgit.
Juliana admitted that there are affordable houses in the outskirts of the Klang Valley, such as Klang, Cyberjaya and Nilai, but pointed out that living in such locations—far away from their work places in Damansara Uptown and Bangsar—would increase the cost of transport, which has already gotten more expensive with the recent fuel price hike.
“Yes, I can get a cheap house but have to spend more on traveling. So, no point,” said Juliana, who did not want to reveal her name due to strict company policy on talking to the media.
“We considered renting a house, but it costs as much as your repaying a housing loan. That’s how we ended up staying with my parents,” she told The Malay Mail Online.
Juliana pointed out that a house which is almost three decades old in her neighborhood costs at least RM800,000, due to its proximity to the Middle Ring Road 2 (MRR2) and the light rail transit (LRT) station.
A 900-sq ft condominium unit in Ampang, on the other hand, costs a whopping RM350,000, she said.
“If it’s a condo that’s RM300,000 for 1,200 sq ft, I don’t mind. But if it’s RM300,000 for a studio apartment, what’s the point?” Juliana questioned.
Juliana, who owns a smartphone and drives a Japanese car, sighed when asked when she could foresee herself owning a home.
“I don’t know. If I put in a five-year plan... I don’t know,” she said.
Calvin Lim (not his real name), 25, also drives a foreign car that costs RM83,000 and has to pay RM800 a month for his car loan, compared to a monthly loan repayment of RM500 if he were to purchase a local car.
“I don’t regret buying my car, but I would have bought a Myvi if I could go back in time,” the PR manager, who wanted to remain anonymous, told The Malay Mail Online.
Lim noted that RM300 a month would make a difference in the long run, even as he is hoping to move out from his family home in Damansara Jaya and have a place of his own by age 29.
Lim, who earns a monthly gross salary of RM7,000, said that new condominiums in desirable locations in the Klang Valley like Damansara Perdana, Puchong and Aman Suria cost at least RM700,000 for 1,200-sq ft units. Units as tiny as 700 sq ft are going for RM400,000.
“Half a million for a regular condo—it’s ridiculous,” he said.
The PR manager pointed out that affordable condominiums costing below RM400,000 are either “crap”—as they are inhabited by foreigners or blue collar workers and have high crime rates—or are located in distant places like Putrajaya and Cyberjaya, far away from his workplace in the city centre and from his friends in PJ.
“Technically speaking, I can own a home, but I can’t own a home in the place I want,” said Lim.
“If it’s cheap, it’s not decent—mostly flats. If it’s in PJ, it’s decent, but it’s not cheap,” he added, stressing that by “decent”, he meant a regular condominium with “not too many dodgy people around”, not a “swanky” place.
Lim described owning a home as a “personal achievement”, the “highlight of your life”, the next natural step after working for three years and buying a foreign car.
“The places that I want to stay in, I can’t afford right now... you can buy outside the Klang Valley and rent it out, but deal with the headaches of tenants,” he said.
Lim related horror stories about some of his friends who had bought condominium and flat units in Setapak and Kajang, and rented them out to tenants who either ran away, or turned out to be a triad member in the underworld.
“He cut the water because (the tenant) didn’t pay rent for two months, and he got death threats—calls and SMSes. Five months, he didn’t pay rent... and then only after three months, the police took action,” Lim said about the Kajang incident.
In the Setapak case, Lim said his friend’s tenant was three months’ behind on rent, forcing the friend to cut off water and electricity supply.
“So they painted the walls red, broke the toilet seats, stole small shit from the house, like pipes, shower heads,” Lim recalled. “The fellow just left.”
He added that though plenty of his friends are still living with their parents because they can’t afford their own home, the ones who bought property did so either after getting married, or by getting their parents to chip in.
Chew Kian Sang is one such parent.
The 63-year-old, who set up an engineering company in 1995 that produces machines to process palm oil waste, gave RM300,000 each to his 29-year-old son and 33-year-old daughter to help them purchase a home each.
“We, as parents, have to prepare from day one to save this amount of money for this purpose,” Chew said.
“The most important thing is that these young people have to start from somewhere. Being bogged down by installments and cars, it might take them a few years to do something on their own,” he added.
Chew’s son, who got married a few months ago, had to take a 35-year housing loan to pay for the remaining RM380,000 for a double-storey house in Section 17, PJ, that is more than 20 years old.
Chew said that his daughter, on the other hand, is a permanent resident in Singapore who bought a condominium unit in the island republic after getting married there.
“My parents made me start at zero. Now, I made them start at 30 or 50... finally, they’ll reach 100,” he said. “It’s very tough, but I’m happy I’m able to do it.”
When asked if property was currently unaffordable for young people, compared to three decades ago, Chew disagreed, noting that salaries back then were lower.
Chew bought a semi-detached house in Section 6, PJ, in 1986 for RM200,000 at the age of 36 after getting married.
“It’s just that, the young generation today—their mindset is they want everything to be convenient,” he said.

”Then they realise, to stay in this area, this is the price you have to pay. So, it’s not true to say that property is not affordable for the young,” added Chew. “When you talk about property not affordable, yes, for PJ and KL. But if you go to Semenyih, Kajang, I believe those properties are affordable.”
When asked why he did not let his son buy a cheaper home on his own elsewhere, Chew stressed that he wanted to give his children a leg up in life.
Chew also noted that young adults might be influenced by peer pressure to live in more upscale locations, instead of “old areas” like PJ Old Town.
“It’s lifestyle that you’re looking at,” Chew said.
A view of condominiums near Sunway, near Sunway University. A condo costs RM500,000 on average in the Klang Valley.A view of condominiums near Sunway, near Sunway University. A condo costs RM500,000 on average in the Klang Valley.Chew’s observation appears to hold true. For Liow, Lim and Juliana, living in the outskirts of the Klang Valley - -far from their places of work and circle of friends—is unimaginable.

They say that property prices nowadays are “crazily inflated” and “absolutely ridiculous”, stressing that purchasing a home in distant locations will only raise transport costs and isolate them from friends and family.

Living in KL or PJ should not be a luxury, the young adults maintain, as it is not prestigious addresses that they are looking at, merely “decent” homes. Their desire to stay close to the city centre, however, appears to be influenced by other lifestyle choices, such as sipping an RM10 latte at an indie cafe in Bangsar over the weekend, owning a smartphone, or driving a foreign car.
A social outing once or twice a week costs about RM50 each time, Liow and Lim say. A fortnightly family dinner for two at a Western restaurant in a shopping mall costs between RM150 and RM200, according to Juliana. Liow also sets aside RM300 every month to go on vacation or dive trips.
But Lim, who sells insurance on the side, is optimistic about buying his first home before he turns 29.
“Different business opportunities may open. So, there’s not only one source of income,” he said.

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Saturday, September 28, 2013

Speculation blamed for price hike of houses

Alyaa Azhar
 | September 28, 2013
PETALING JAYA: Speculation is the main cause in the price hike of houses, while other causes such as buying of property by foreigners have also contributed to the ever expanding dilemma.
National House Buyers Association (HBA) secretary-general Chang Kim Loong said that if it is not due to speculation, more people would afford to buy houses.
“Speculators have taken advantage of the low stamp duties to accumulate multiple properties,” he said, explaining that speculators manipulate property prices with developers.
Chang also said that a low Real Property Gains Tax (RPGT) has been a reason which has fuelled false demand and excessive speculation.
PAS research centre executive director Dzulkefly Ahmad also admitted that speculation is indeed the main cause of price hike and must be tackled using appropriate measures.
“The announcement made by Bank Negara Malaysia (BNM) governor [Zeti Akhtar Aziz] weeks ago that it would not be introducing any more cooling measures to handle speculation and price hike was met with mixed feelings.
“However, many would believe that measures would ultimately be put in place albeit cautiously so as not to stifle growth because growth is also construction-driven and the construction industry is closely related to the property market.
“Regardless, prices of housing are high and are increasing, so measures are needed to solve the problem,” he said.
Parti Sosialis Malaysia (PSM) national treasurer A Sivarajan also agreed that speculation has been going for far too long.
“The RPGT should be increased to reduce speculation,” he said.
Internal migration
However, a property expert who declined to be named said that an increased RPGT would not affect the demand of houses.
“If they increase it a further 5%, its impact won’t be much. Also, speculation does not happen everywhere as it depends on the location,” he said.
The RPGT was re-introduced in 2010, and the government has been increasing it gradually. In Budget 2013, the government revised the RPGT to 15% from 10% for properties sold within two years and for properties sold between two and five years, the rate was revised to 10% from 5%.
Professor at the Universiti Tun Abdul Razak Graduate School of Business, Barjoyai Bardai meanwhile said that many consumers have taken advantage in buying property, only to sell it back.
“And this in turn might trap low income buyers who have been advised to buy property at the last minute, only to find out that the price then does not go up,” he said.
Although speculation remains a major factor in the increasing price of houses, other factors have contributed in the national problem, too.
The property expert claimed that a higher demand for houses especially in the Klang Valley has contributed to the price hike of houses.
“The price hike is due to internal migration, people from small towns move to the Klang Valley and every year that happens as we have fresh graduates who migrate here, which has led to the higher demand of houses.
“Price of houses also increase because construction costs have likewise increased,” he said.
He also said that buying of properties by foreigners is not the main factor in the increase of property prices.
“We do not have many foreign property buyers. Even in Iskandar (Johor Baru), Singaporeans do not buy the properties there much,” he said.
No comprehensive planning
Sivarajan however disagreed and said that the many foreigners and expatriates buying properties here have led to the cost of the overall market price of houses to increase, citing the Iskandar project.
He also lamented that there is a huge gap between what the working class who struggle with minimum wage can afford and the price of houses.
“The rule of thumb for anyone buying a house is that the repayment cannot be more than a third of what they earn.
“A vast majority of people, those from the bottom 40% who earn between RM1000 to RM1500 can only afford houses around the range of RM40,000. But, there is no decent housing that is below RM100,000,” said Sivarajan who added that the working class lack affordable housing schemes.
“Public housing schemes like the People’s Housing Programme (PPR) are supposed to be transit homes, but we find that people have been staying for more than five years.
“This is because they can only pay rental, there is no way they can afford to buy a house,” he said.
He also opined that there has been no comprehensive planning made by the government from the start.
“Yes, for example, they build low-cost housing at Bukit Beruntung. However, travelling there is near to impossible as there is no public transportation.
“And if the government builds houses below RM100,000, it is out of the reach of the urban poor. This is all the consequence of ill-planning by the government,” he said.
Barjoyai however quipped that the rising price of properties is a natural phenomena in the economic cycle and happens every 10 years, ending when the property market peaks.
Commenting on foreigners buying property here, he admitted that it is more rampant in Johor.
“By allowing them to buy properties here, it will improve our economy as it will broaden the scope of the country’s property market, making it more competitive,” he said.
He also said that as the country is moving towards developed nation status, the migration rate will increase.
“By 2020, 70% of Malaysia’s population will be living in urban areas. Lodging would be a critical problem as the rental would be expensive,” he said.
Commenting on Federal Territories Minister Tengku Adnan Tengku Mansor who said that people should not be buying houses if they cannot afford it, he said: “That’s the right statement, now is not the right time to buy properties.
“People should not be buying beyond their means,” he said.

Monday, September 9, 2013

Good Advice for the Kids - take a bold, concrete step

Open Season
Published: Monday September 9, 2013 MYT 12:00:00 AM
Updated: Monday September 9, 2013 MYT 2:27:37 PM

Take a bold, concrete step

It is time to capitalise on the rapid appreciation of property prices, rather than just making a hue and cry about never being able to own one.
WAIT. The bubble’s about to burst.” How many times have we heard this advice being dished out to prospective housebuyers?
I’ve heard such words of wisdom countless times since I joined the workforce, and I’m pretty sure these famous words have been circulating for much longer.
And after almost a decade in The Star’s newsroom, I would like to report that the speculated property bubble has remained intact.
I am not qualified to say that there is no bubble. Nor am I denying that property prices are ridiculously high.
But the fact remains that residential properties, particularly in the Klang Valley and Penang, have doubled in value every three to five years.
If you have played the waiting game, you might consider screaming at whoever advised you against investing in a stack of bricks.
Rather than whine about matters beyond our control, what do we do?
Should we just wait for the government to impose more pricing controls on real estate?
Should we blame the developers for profiteering, or property speculators for inflating the prices of homes?
Will all the complaining make prices of homes more reasonable? Prices were relatively high when our grandparents and parents joined the working world too.
Yes, they probably voiced their grouses at the local kopitiam (although the Gen Y do seem louder with the help of social media).
But the Baby Boomers and Gen X took an extra step.
They knuckled down in the face of adversity, worked harder, spent prudently and bought that family home we grew up in.
Today, it has become second nature to put all blame on the government.
“The government is not doing enough. The housing policy is wrong, etc.”
In his inaugural address, American president John F. Kennedy’s famous quote was: “Ask not what your country can do for you, ask what you can do for your country”.
Let’s meet him halfway and ponder: “What can we do for ourselves?”
Real Estate and Housing Developers’ Association’s (Rehda) immediate past president Datuk Ng Seing Liong was spot-on when he advised youngsters to begin buying property early in their careers, especially for those located in hotspot areas.
“I understand that a car is a necessity for the younger generation but bear in mind that property prices will always go up,” he said in a recent news report.
Sacrifices have to be made. Fancy dinners, nice wheels, branded clothes and new gadgets have to make way.
If you’re a smoker, do your lungs a favour and give up smoking. And cutting down on a few jugs of beer helps too.
That means more mixed rice at the hawker centre instead of expensive steaks.
Imagine your first car being a used Proton Saga. Do you need new clothes and shoes every year? If your iPhone 3 is still running, must you really upgrade to the iPhone 5?
It is important to be able to distinguish between needs and wants.
A common financial advice is to save 10 to 20% of our monthly salary. Given the rate of appreciation for properties, that advice is no longer relevant.
Let’s approach the situation the other way round.
Decide how much you need for food, transportation, rental and other necessary expenses. And save every extra sen.
A fresh graduate today would be earning close to RM3,000 monthly. If he lives very prudently, he can save about half his salary.
And the money saved can be placed in unit trusts or invested in the share market for faster growth. Even by parking the money passively in fixed deposits, he would be able to cough up enough for a downpayment for a RM500,000 apartment in three years.
If you can’t save half, you probably can save 30%, which would be enough for the downpayment in five years.
And that’s without factoring any increment in your salary.
And almost no one buys their ideal home in their first transaction. It should be comfortable enough to call home, and decently located to work and amenities.
I started with a 900 square feet medium-cost apartment five years ago, and although it wasn’t my dream home, I am happy to disclose that it has appreciated by more than 100%.
The only way to keep up with the rapid appreciation rate is to lock down your first property and watch your investment grow.
The first few years will be tough on your lifestyle, but it gets better from then on.
I suffered in the early years too, when I chose to work overtime rather than join the happy hour crowd. My social life was affected.
Not to mention my love life. It doesn’t matter now, though. A girl who won’t date me during lean times was definitely not wife material, and I’m happier having found someone who would be with me through thick and thin.
I am in the process of upgrading to a bigger, and hopefully nicer, apartment (which was half the price four years ago!).
And I doubt it would be my final move. For my dream house is a mansion with a swimming pool and I have another 30 years prior to retirement to chase that dream.

> Tycoon-wannabe Teh Eng Hock wishes to acquire properties in real life as he did when playing the boardgame Monopoly, which is to buy at every roll of the dice. The views expressed are entirely the writer’s own.

Launching soon - The Establishment at Bangsar, Kuala Lumpur

A little known developer is going to launch the Establishment any time soon. This is a 46-storey building with over 600 units of apartments and you guessed it, they are mostly going to be those tiny studios. Since there are no clues to their sales office or showroom, I managed to pinch some pictures from the architech's website.

It is quite a nice design. Kudos to the young team of architects. The design is very much similar to the PJ Trade Center at Damansara Perdana designed by another local Malaysian talent, Seksan.  Seksan is a genius, he is my idol. He puts together inexpensive, common and natural building materials with nature into a very clever design. There is no need for luxurious marble and grand columns which tend to decay in their looks over time. So I am rather pleased the team at architeknic has taken on this cue.

Design apart, the location is somewhat superb although the access might be a question mark. The site is located beside the Bangsar LRT station. However, it has no direct access to Jalan Bangsar which runs alongside the LRT track as it is separated by the KTM railway tracks. Instead, I suspect the access will be via Brickfields which is congested and may wind through the rows of old flats and apartment blocks. So, it is extremely convenient if you don't drive as there is going to be a bridge connecting the building to the LRT station. But if you drive, it is not so good...
Another kink is, the land is currently occupied by a Muslim graveyard. There will be some level of exhumation involved before construction can start. For the faint hearted, this might be an issue... although it has become quite common in many land hungry cities.  One such example is the Ritz-Carlton Residences by Mahanakhon project at the busy Sathorn-Narathiwat Ratchanakarin junction in Bangkok. This site adjacent to the Chong Nonsi BTS station used to be a Chinese graveyard. Today, it is one of the most expensive piece of real estate in Thailand at over RM3,000psf.
But for me, the 4 high principles of property - no high tension wires, no sewer, no highways and no graveyards. So, still no graveyards for me please....

Sunday, September 8, 2013

Bangsar Southview Show Units

As promised, I have uploaded some pics of Bangsar Southview for your enjoyment despite a huge signboard outside their showroom indicating no photography is allowed. That day, I purposely arrived by LRT getting off at the Universiti LRT station. From here, we have a commanding view of the Horizon offices in the background and in front of it is the KL Gateway construction site. Southview Residences is located adjacent to this site.

There are 2 units on display, the 1000sf 3-bedroom units and the smaller 800sf 2-bedroom units. I particularly like the 3-bedroom units which has a nice layout and despite being only 1000sf, they managed to pack 3 spacious looking rooms in. The living room however is a bit cramped due to the wall behind that sofa. If that is not a load bearing wall, I would like to see it demolished.

Many high end apartments in KL also seems to be downsizing the balconies.

Despite the cramped living area, view from the balcony into the apartment shows a spacious dining area and kitchen.

However, the wet-kitchen is only good enough to house a washing machine. There isn't any space for a stove ala Asian cooking.

Below you see the wasted space caused by the wall I mentioned earlier.

Corridor below runs into the 2nd bathroom, with the Master Bedroom and 2nd bedroom on the right and the 3rd bedroom on the left.

The 2nd bedroom appears to be quite spacious even if we increase that single bed size to a queen bed, we still have a lot of space for a bedroom.

Master bedroom below has an attached bathroom. However, there is no long baths. Both bathrooms only sport glassed shower cubicles, a sink and WC.

The single bed in the 3rd bedroom below can also be expanded to a queen and remains spacious.

The 2-bedroom unit however is more suited for a single or couple living. Although the kitchen size appears similar, the most apparent difference is the lack of a wet kitchen.

The dining area is also rather cramped, suitable for a small table only as it comes in between the living/bedrooms and the entrance.

Below is the tiny balcony similar to the one in the 3-bedroom unit.

Here below is the view from the living area into the entrance/kitchen. As you can see if the dining table is any bigger it would be quite disruptive. Notice the dining chairs are quite close together?
Master bedroom below comes with attached bathroom which perhaps is not so good as you enter the room, the 1st thing you see is the bathroom door.

For this unit, the 2nd bedroom is rather small. Just big enough for a single bed, a bit of wardrobe and writing table...

So, in conclusion, if yo are going for the Bangsar Southview Residences, choose the smallest unit or the largest unit, the 3-bedroom units. Anything else in between isn't really worth it.

Thursday, September 5, 2013

UOA's Southview's Finally Launched

After much hype, the Bangsar South Southview Residences is finally launched. As mentioned, this is a Freehold project adjacent to the Lease-hold KL Gateway site which was launched earlier this year. Therefore, it has come to my surprise that the price is slightly similar as we all expected it to be higher.

There are 14 units per floor and it goes up to 46 storey. There are 2 such towers so you can imagine how dense it is. Only the tower further away from the Federal Highway has been launched.

Typically, the cheapest intermediate unit is about RM600k. The developer is offering a complicated 5% + 2% + 10% discount scheme which works like this:

Price-book price: RM600,000
5% discount: less RM30,000 (6% if you are an existing UOA customer)
S&P Price is RM600,000 - RM30,000 = RM570,000

If you sign the S&P and pay the balance of the 10% downpayment within 1 week notice, you will get an additional 2% discount which is RM11,400

Price you pay upfront for this investment is RM57,000 - RM11,400 = RM45,600

Then you wait 3 years for it to be built and nothing to pay since you got DIBs. Upon completion and your bank settles the balance of the purchase price from your loan, UOA will give you a cheque for RM57,000 (10%).

So, your buying price falls down to RM570,000 - RM11,400 - RM57,000 = RM501,600 (for the 640sf unit, this is approximately RM780psf). For a freehold property in Bangsar South, this is not bad for an investment. Suppose at the back of a bad economy under Najib, punters should have no problems to flip it under duress upon completion at the selling price of RM600k which gives them a cool RM90k profit (after costs) - from the initial downpayment invested, this is a 50% margin.

Actually the smallest unit are the 500sf studios. There were only 6 such units launched. And typical of any suppliers, they have reserved these for their "own people". However, I am not a fan of studio units. I particularly like corners and these are 3-bedroom units with a comfortable size of 933sf. After all the discounts calculated, the price came to just over RM700k i.e. RM750psf. This is in contrast to KL Gateway's corner units which were peddled up to RM900psf.

The drawback is the location. Southview is sandwiched between KL Gateway and YNH's land which they will launch slightly later than this. While KL Gateway is adjacent to the Universiti LRT station, YNH's is closer to Kerinchi LRT. The facade is also rather poor. UOA, probably due to the valuable  freehold plot tried to pack as much as they can resulting in the 2 blocks looking like low cost flats. This will have an effect on tenant catching as they might probably look for more trendy accommodation.

In the next post, I'll upload some pics.... watch this space