Tuesday, January 20, 2015

Will GST cause property prices to increase?

In less than 3 months time, GST will be introduced. The government is trying to make us think residential property prices will not increase because of this. In fact, they said the supply and demand of residential properties will have more effect on the price rather than GST. That is, developers and sellers will not increase prices, or even reduce prices in order to attract buyers. The government is not wrong about this... except that they are only telling you what you want to hear.

Take for example, this FAQ section in the Ministry of Finance's website.   

A frequently asked question:

Residential house is an exempt supply. The price will increase when GST is implemented as input tax cannot be claimed by property developer. How is it possible to convince the rakyat that the price will not be increased substatially because of GST

And if you read the reply from the MOF, you'd probably feel they think you are stupid - because they are not answering the question. 

The treatment to exempt residential house is to reduce the burden of rakyat because house is a basic necessity to the rakyat. The treatment also complements the Government’s initiatives to build more affordable houses for those who qualify especially the lower income group. This will give a minimum effect  compared to a situation where GST is charged at a standard rate on the residential house. The price of the residential house especially in big cities is very high where among the reasons is due to limited supply. As such, GST should not be used as an excuse for the price increase.

1st of all, a 6% GST is now imposed on all construction materials and services. While in the case of commercial properties where GST is imposed and developers can claim back the 6% tax, this is not the case for residential properties. Developers will naturally pass on this cost to the end victim - the buyers. 

But the government wants us to think that developers will instead absorb this cost because if they don't they won't sell anything. If this is indeed true, what about supply and demand? Post GST, investors will naturally turn to residential properties since they are "GST free". This will cause demand to turn towards residential properties. Investors will refrain from commercial properties such as offices, shops or serviced apartments (commercial titled residential strata) and buy residential properties. So residential-titled properties, if supply is low will definitely increase. Especially those in high demand areas like Subang Jaya, PJ, Cheras etc.

In a normal demand & supply scenario, properties in good locations will always increase. GST will drive even more demand towards residential. So residential properties in good locations will see a steep climb. 

I know post-GST, the government will show examples of property prices stagnate or drop but these will probably be in low demand areas like Bukit Beruntung, Malay reserved land in Hulu Langat or Sungai Merab and so on. 

This blog is not interested in bad properties or low demand locations.

Sunday, January 11, 2015

Unlocked the Secrets of Advertising Our Properties

December was looking like a challenging month for me. Suddenly, I received notices from 4 tenants in early November they were moving on. I started advertising everywhere but the initial response was really slow.  Up to now, the best results I ever got was from the newspaper classified ads. Those who called me are always property agents. I always wondered how they actually found the tenants.  

I have also tried online. These are the few websites I used:

expatriates.com and expat-blog - expats tend to troll these websites. I used to find tenants here but always the low quality ones. I had a Canadian guy who stayed less than 3 months when he was supposed to be on a 12 month contract and when he moved out, my apartment was worse than a pig-sty. He even left rotting meat in the sink. But lately, these sites are now flooded with advertisments from property agents who posted "blank-ads". What I mean by "blank-ads" is they do not really represent any properties. The property descriptions are imaginary and the photographs are of other units. I think their strategy is to attract potential clients to call them and then the clients will be told the advertised units are already taken so they can propose something else to them. 

I know property agents need to make a living. And it is always a chicken and egg situation for them. Without the clients, they got nothing to offer the owners for an inventory, and without any inventory, they got nothing to offer the clients and so on... but I think the "blank-ads" are flooding or rather spamming these 2 websites. As a result, genuine ads often drown in them and become non-visible.

lowyat forum, mudah.my and iBilik - these are popular local websites. While I've been successful finding tenants for my student rooms, there are no expats here. They are local sites, so expect local tenants and most of my properties target the expat market and budget. I have advertised some of my properties here but the response I got are from property agents and also local people asking for rediculously low rental.

airbnb - works for short term stays only and beware! most people who use airbnb want to pay cheap prices but they expect 5 star service. So don't touch it unless you are willing to kow-tow to them.

If you are happy to deal through property agents, do use the newspaper classifieds. While I found many property agents don't really add much value to the transaction, I have found a few good ones. And those properties I rent out through them are always to good quality tenants.

This time, I have tried something new and the success rate is fantastic. I just put up my banners on trees and lamp posts in the area of my properties. Within hours, I have calls from direct tenants. I managed to directly rent out all my 4 vacant properties within days. I think typically people who want to live around the area will look around the area. It is less troublesome to try and convince people why they should be renting in Bukit Ceylon or Bangsar or wherever. So it makes sense to advertise through banners in the area of the property. The only problem is the mess this creates to the environment. It is also not so legal... the city hall or utility company may trace my number and issue me a fine. But I still find this is the most successful way and my only regret is, I put up too many ads and can't remember where I put them so it is actually quite tedious to find and take them down now. 

Wednesday, January 7, 2015

Proposed : A Landlord - Tenant Directory

As I have been both a landlord and tenant, since I sub-let a lot, I have my fair share of tenants and landlords antics.

Generally I find there are a lot of investors out there who don't really look after their properties. They are the arms-length investor. When you rent their apartments, there are many teething problems which you have to solve yourself. And those who do look after their properties can be very petty. I rented 2 apartments from this guy and paid him tens of thousands. At the end of it, he was calculating how much to deduct from me for burnt light bulbs. He said they were brand new so should not be covered by wear and tear. When I asked him for the receipts, since they were less than 1 year old, I'd claim warranty from the shop he bought them from, he kept quiet.

I have one landlord who until today, after one year, has not refunded my deposit. He kept on delaying with all sorts of excuses like being overseas etc. I sent a debt collector to his office and his secretary keeps telling the collector to come back every week.

There are many more horror stories, too many to list. There is one who hangs up when he hears me complaining that his air-cond is leaking or washing machine not working.

What we need is a Landlord and Tenant Directory. Similar to the hotel booking sites where Tenants can give feedback about the property and the owner. Sites such as Airbnb also allows the Landlords to comment about the tenants. This will force everyone to behave if they want to continue to rent or let apartments.