I&T Penang Properties Blogs

Khazanah Nasional Berhad organized its 6th Khazanah Penang Lecture entitled “The Global Economic Crisis: Implications for Malaysia” at Wawasan Open University last week. More than 300 guests of mostly businessmen attended the talk by Penang-born Professor KS Jomo, a prominent Malaysian economist who is currently serving as the United Nations Assistant Secretary-General for Economic Development in the United Nations Department of Economic and Social Affairs (DESA) whilst Mr Andrew Sheng,  another prominent Malaysian economist/chartered accountant chaired the panel discussion after the talk. Many were there at Wawasan Open University to seek their latest views and insights into this complex financial meltdown from global and Asia prospectives ! Related article : Global Financial Crisis and Malaysia Property Outlook.

Wawasan Open University along Jalan Sultan Ahmah Shah
(Northam Road), Penang

Here is Mr Andrew Sheng’s An Asian View Of The Global Financial Crisis. Though economists are of the views that the worst is over and confident level on the global economy outlook is improving, the lingering concerns remain whether the world economy recovery is V-shaped or W-shaped recovery? Nobel prize-winning economist Paul Krugman’s view ; World may witness W-shaped recovery whilst a local Fund Manager has a bullish view; V-shaped recovery has begun.

Malaysian Economy - at which stage of economic clock; 7 or 8 or 9 O’clock ?

Izrin & Tan Properties Sdn Bhd compiles a list of Malaysia’s official portals providing property information and guidelines that property buyers and foreign property investors need to know in Malaysia.

1. Relaxation of FIC guidelines- The Prime Minister of Malaysia has announced that, effective 30/6/2009, all property transactions, including those between foreigners and non-bumiputeras, will no longer require Foreign Investment Committee (FIC) approval. The NEW FIC guidelines on acquisition of properties can be downloaded from the website of Economic Planning Unit of the Prime Minister’s Department.

However, foreign investors cannot acquire properties below specified threshold limits, with the threshold amount for commercial properties at RM500,000. For the purchase of residential properties, the present threshold of RM250,000 is maintained until the end of 2009, with the threshold increased to RM500,000 effective of Jan 1, 2010. More latest related information on deregulation of FIC guidelines at here and here.

2. Pemudah– A special taskforce set up by the government of Malaysia in 2007 to facilitate easier business dealings and improving public services delivery system. Pemudah has come out with a guidebook on land registration in Malaysia. The guidebook provides a brief information on land ownership registration in Malaysia. It also provides the stages and processes involved in land administration and complete with relevant forms required when transferring ownership for both local and foreign investors as well as list of registration fees for ownership transfer of each states.

The guidebook can be downloaded free from Pemudah’s website-here;

3.JPPH–Valuation and property services department, ministry of finance Malaysia. The JPPH’s website has shown much improvements over the years. The website not only posted the department’s up-to-date information but incorporates various NAPIC (National Property Information Centre)’s publications as well which was previously available on printed copy at a fee.

It is commendable that JPPH has posted NAPIC’s publication online on regular basis providing free quarterly property information such as Property Stock Report, Property Market Status Report, Property Sales Data etc. In addition, the portal now comes with new added online services such as stamp duties calculator for ownership transfer of real estate and MySMS services for property purchasers on stamp duty valuation cases. Though JPPH has uploaded the property information online, layman and property beginners somehow find that these quarterly reports are not easily comprehensible as there is little explanation or commentary and comparative findings on these tabulated statistics and data. The information is catered more for macro analysis on the suppy and demand of the various sub-sectors of the property market.

4. Department of Director General of Land and mines – this website posted general information (in Malaysian Language only) and a list of Malaysia Laws and application guidelines of various land dealings such as application for state alienated lands, subdivision and amalgamation, land conversion and guidelines on the approval process of land ownership (residential units) by foreign interests. Under Malaysia’s Federal Constitution, Land is under the jurisdiction of the respective state administration and each state has its own set of land enactments. Related link : Penang’s new policy on land conversion.

The website has also posted a paper written by Mohd Shukri Bin Ismail providing some insights into the latest amendments of the National Land Code 1965. The National Land Code is the primary land law of the states of Malaysia.

5.MM2H – Malaysia, My Second Home Programme, an international residency scheme being promoted by the Ministry of Tourism Malaysia to allow foreigners to live in the country on a long-stay visa of up to 10 years. The portal, MM2H, has been enhanced several times and is now accessible in various languages and provided with all the one-stop information including guidelines on purchase of residential homes by foreigners/expatriates.

6. Guidelines for house buyers issued by Ministry of Housing and Local Government Malaysia- The guidelines has been posted on the ministry’s website for many years which are still relevant and provides  helpful tips to FIRST-TIME house buyers who wish to purchase new housing units (off-the-plan or under construction units) from primary market ie from housing developers.

The website also provides information of housing legal clinic and tribunal for homebuyer claims set up by the ministry to provide advice and help solve the problems faced by home buyers against housing developers.

For advisory on property investments in Penang and Kuala Lumpur, email to us at Izrin & Tan Properties Sdn. Bhd or call us at +604 6588333 (Penang Office) or +603 92839782 (Kuala Lumpur Office) and we would be pleased to assist.

Evening Scene of Butterworth-Penang Skyline

KLCC skyline

The current downturn in Malaysia property market provides good buying opportunities for property investors. Here are several strategies for property investors who are keen to invest in Penang Properties.

1) Determine your strategy

Before you venture into property investment, you should determine your purchasing strategy and evaluate whether it meets your income and growth expectations. For example, if you want a steady passive rental return, consider apartments and condominiums in areas close to major industrial parks, commercial centers, university, hospitals, where there is sure to be a constant supply of renters.

Conversely, if your investment strategy is to buy and hold a property so you can build equity for a capital gain, landed homes at Penang Island may offer steady capital growth and sustainability in the long term due to limited supply of land bank or escalating land cost for landed homes.

2) Avoid investment pitfalls

Like any other investments, property investment is often associated with risks and pitfalls that prudent investor would want to avoid. Learn more on 10 Most common mistakes made by first time investors.

3) Select the right location

According to the old real estate saying, “The only three things that matter in real estate are “location, location and location”. The property needs to be in a good location close to schools, shops, transportation centre and recreational facilities. The fact that a posh bungalow that is sitting next to a garbage dump has very low desirability factor and fetch poor value. Conversely, a sea-front condominium unit within the heart of the city or along the Gurney Drive promenade will have high desirability factor and therefore constantly attracting potential tenants and investors.

4) Buy property with positive equity

Buy property from motivated sellers, buy auction property at public auctions or buy bargain property that can bring you positive equity. Due to the imperfection of the property market, there are times when sellers are motivated or must sell at all costs urgently at below market price. In a slowdown market, property sellers are more realistic in their asking prices and receptive to offers by interested buyers.

5) Look for a catalyst

One sign that an area is up-and-coming and has potential to be a new vibrant growth center in the future is the development of new critical infrastructure projects such as construction of Second Penang Bridge and the expansion of Penang International Airport and other NCER projects which when completed, would spur more investments and developments to the Batu Maung/Bayan Baharu areas of Southern Penang Island as well as Batu Kawan of Southern mainland Penang. The completion of Jelutong Coastal Highway and Buterworth Outer Ring Road (BORR) have indeed transformed its corridor areas into new property hotspots with many new housing schemes mushrooming along these highways.

When you see new highways, roads, schools, hotels and major shopping centers being built, it’s a sign that the community is set for a vibrant growth.

6) Capitalise on tax relief / incentives provided by SSP

Residential purchasers can take advantage of the tax relief on interest paid on housing loans up to RM10,000 a year for 3 years between March 10, 2009, and Dec 31, 2010 under the recently announced Second Stimulus Package (SPP) Mini Budget 2009.

Whilst for business owners, it is a good time to renovate and refurbish your commercial premises as expenditure incurred on renovation and refurbishment between 10 March 2009 and 31 December 2010 will be given Accelerated Capital Allowance, which can be claimed within 2 years. The Allowance is capped at RM100,000.

There is also no capital gains tax when you dispose off your investment property as the Malaysian Government has abolished Real Property Gains Tax (RPGT) since 1/4/2007.

For more related articles on strategies in property investments, I like the following FREE web blogs of Milan Doshi and Bill Zheng, learn more :- Do properties Make the “Prefect” Investment? ; Part I and Part II By Milan Doshi and A straightforward guide to property investment strategies By Bill Zheng.

View of high rise buildings near Gurney Drive as seen from the playground of CRC.

For advisory on property investments in Penang and Kuala Lumpur, email to us at Izrin & Tan Properties Sdn. Bhd or call us at +604 6588333 (Penang Office) or +603 92839782 (Kuala Lumpur Office) and we would be pleased to assist.

As competition is heating up amongst the commercial banks for banking on home loans, more new home loan promotions and competitive refinancing packages are available in the market to entice homeowners to refinance their existing loans. Following the latest cut of interest rates by Malaysia’s central bank, most commercial banks have already revised their base lending rates (BLR) from 6.75% to 5.75-6.0%. Update : The Malaysia’s central bank has cut interest rate again on 24th Feb 2009, BLRs of commercial banks have further revised lower to 5.55% - 5.60%. With interest rates trending lower, it is a good time to review, restructure and refinance your existing loans. There are several good reasons that home owners would benefit from switching their loans to a new loan with lower interest rates;

1. Lower your monthly installment payment
2. Debt Consolidation
3. Using the Existing Equity in the Home
4. Shorten the term of your home loan
5. Combine a first and second mortgage
6. Reduce the interest you pay over the life of the loan
7. Switch from conventional housing loan with variable rate to a fixed rate loan or Islamic loan (or vice versa)
8. Eliminate MRTA mortgage insurance

Before opting to refinance, it is important for home owners and property investors to consider the savings or benefits of refinancing vis-a –vis the costs of refinancing. Do your own break-even analysis between long term savings and refinancing costs to determine whether the savings really outweigh the costs of  refinancing or otherwise. More at Making sense of mortgage refinancing and Should I refinance now ?.

However, there are circumstances whereby refinancing might not give you the maximum savings such as when you have short remaining years to retire your loan etc Refer why say no to refinancing.

For Malaysia home owner as well as property investors who are uncertain of holding the property for long term or you have plans to sell off the property in the near term, not all refinancing packages will provide you the best refinancing benefits. Refinancing packages with features of “Zero-Entry Cost” or “Zero-Moving Cost” may not necessarily the best option, depending on your financial needs. Under such packages, although you are not required to pay any processing fee, legal fees, stamp duty, valuation fees upfront, the loans are subject to higher interest rates and imposition of exit fees or early redemption penalty up to 5% of the loan amount (vary from bank to bank) in the event that you choose to redeem your loan within the lock-in period of 5 years. Example if a house owner has to redeem his loan of RM200,000.00 within the lock-in period, he has to pay 5% of exit fees ie RM10,000.00!!!

We have come across property sellers who were stuck with loans with lock-in period and only realised that if they decide to take up a good deal offered by interested buyer, they have to pay the exit fees for redeeming the loan prematurely. On the other hand, if they choose to wait until the expiry of lock-in years ie after 5 years to avoid payment of exit fees, they might lose the opportunity of capitalising gains or losing the sale due to changing market conditions. For investment properties, the better alternative is to look for refinancing packages with no exit fees or shorter lock-in period which give you more flexibility in terms of selling / renting,  though initially you may have to pay slightly higher interest rates and documentation costs, it is still better than paying exit fees which could end up diluting your capital gains.

Below is a simple checklist to guide you on home loan refinancing :-

1 Get information on the current mortgage

For the current mortgage, you should be able to get the following information from the bank:

- the outstanding balance or ringgit amount left on the mortgage;

- the remaining number of years on the mortgage; and

- the interest rate on the loan.

2 Get information on the new loan

For the new loan, you should get information on the following:

- the terms or the number of years of the new loan; and

- the interest rate on the new loan.( the latest interest rate can be as low as BLR - 2.4% )

3 Get the costs of refinancing

The costs you are likely to encounter when refinancing include:

- processing fee or application fee;

- credit check fee;

- legal fees;

- stamp duty;

- disbursements fee;

- valuation fees; and

- redemption fees (if applicable)

4. Shop for best refinancing loan packages that suit you.

- Find out the latest home loan promotions by various lenders in Malaysia :-

-Malaysia Home Loans - What’s New (January 2009)

-Conventional home loan packages

-Islamic Home Financing Packages

-other home loan packages offered by non-bank lenders; AIA, ING

For advisory on property investments in Kuala Lumpur and Penang, email to us at Izrin & Tan Properties Sdn. Bhd or call us at +604 6588333 (Penang Office) or +603 92839782 (Kuala Lumpur Office) and we would be pleased to assist.

New housing scheme by SP Setia in Penang Island

New housing area in Prai

Buying a house is more than just a financial investment as a house is often costs tens or hundreds of thousands. The money that a purchaser put down to buy a house is often the result of years of savings. So before you commit to purchase a property, you have to be clear about your objectives whether is it for your own occupation or investment or both? Although the house provides safety, shelter and comfort to your family, the decision to purchase or invest in a particular property today is a major one, the investment can become a solid asset or wealth in the future or turn out to be a financial disaster if the housing project is abandoned. www.intproperties.com compiles this updated blog with more up-to-date information, tips and guides.

Basically, you have the choice to buy residential properties of the following categories with its advantages and disadvantages as belows:-:

1.Buying a new/off-the-plan house from primary market;

This usually refer to buying property off the plan from housing developers which are yet to be built or under construction.The advantage of buying from the developer is that it is new and has never been occupied before. There are usually cheaper than completed properties. There is also the 18 months defect liability period available, if it is a residential property.However, the disadvantages are one cannot inspect it before purchase, and there is no certainty of quality or workmanship or completion or delivery date, which prompts some buyers to opt for a reputable developer.

Beware that most show units are beautifully constructed and decorated with impressive interior fittings and furniture to woo buyers whereas the units that you are going to purchase may just be a standard vacant unit without those additional things. There are progressive interests to be serviced by purchaser/borrower for loan amount disburse to developer during construction period. You will also have no idea who are your immediate neighbours or the address number of the property before buying.

In times of market slowdown and economic uncertainties, there is a greater risk of under construction housing projects being delayed or stalled or abandoned as most of the Malaysia housing developers are still building houses on Sell Than Built (STB) concept. If you wish to purchase a new house from housing developers, then check out the developer’s background and its track record, choose only to deal with housing developers with proven track record with on time delivery and reliable maintenance management team. Ask for feedback on their previous projects from third independent source! Walk away from errant housing developers. Get more information and guidelines at the website of Malaysia Housing and Local Government Ministry. Related link: Purchasing a new property.

2.Buying a completed house from secondary market;

The advantage of buying completed property is that you can inspect the house and its neighbourhood and you will get exactly the unit that you have seen. There is no risk of the project being abandoned; some buyers would rather pay the extra premium.

The disadvantage is that such properties have been lived in before, and may have some undesirable history. The other option is to buy a completed new property which is pending or has issued its certificate of fitness. Related link :Pros and cons of buying property from primary market or secondary market.

3.Buying auction property;

The advantage of buying an auction property is that it is usually below the market price. An auction is a good market place for those who wants to acquire properties fast and potential buyers could choose their preferred properties in terms of location, size and pricing at the auction and also for those who wish to acquire second property for investment as it could be rented out almost immediately.

There are factors and pitfalls that a property buyer needs to know when buying action property. Learn more at my latest blog – 8 things to consider when buying auction property.

As property is a specialized sector involving comparatively high capital, low liquidity investment, it is wise to consider one’s financial budget and needs before making a decision to rent or to buy a house.

Renting versus Buying

If you do not have much savings for the down payment to purchase the house, a cheaper alternative would be renting. As tenant, besides the normal rental and utility deposits required by the landlord, you do not need to bear documentation costs such as legal fees for preparation of sale and purchase agreement and loan documents and stamping charges for ownership transfer and yearly taxes like assessment rates and quit rent. No maintenance charges and structural repair costs either as these costs are also to be borne by the landlord. One disadvantage is that you may have to move out if the landlord decides to sell off the house or take back the place for his own use by just giving written notice to you or even increase the rentals upon expiry of tenancy. And each time you move, relocation or moving costs will be incurred.

It is certainly a better alternative to rent rather than buying if your stay is intended for short term period or you are subject to transfer to other workplace by your employer. However, buying would be a better option if and when you are going to remain in one place for long time. As new buyer of the house, you acquire the interest of the property which means you have the benefit of security and ownership of the house and it provides stability for your family. Recommended blog - Buying vs. Renting.

What are the most important factors to consider before you decide to buy your choice property? Studies have shown that two important factors influencing a person’s decision to buy a property are Location and Price.

Location versus Pricing

Completed houses in established well-populated areas are usually fetched relatively higher price than their equivalent types in new areas. These completed houses are situated in a prime locality whereby ample facilities, public transport and all essential services are easily available and are close to the heart of the main employment centres. In contrast, newly built houses in new growth areas are usually located further away from the city whereby amenities and services are usually lacking or partially available. Prices of residential properties in prime localities will usually move up where job opportunities area readily available whilst supply of houses and land availability is limited. So it would be prudent to compare the weightage of location versus pricing factors in each individual’s budget.

If a person is currently working in Bayan Lepas Industrial Area, one would have to consider whether to pay the price of say RM550,000 to RM700,000 to buy a standard double-storey terraced house nearby his workplace somewhere in Bayan Baru/Sungai Nibong/Sungai Ara area of Penang Island or pay only less than half of the price for a similar double-storey terraced house in Bukit Tengah/Bukit Mertajam area on the mainland but further away from workplace which requires longer travelling time as well as the hassle of traffic congestion at Penang Bridge.

However, for those who are looking for affordable landed houses costing RM150,000.00 and below,  your choice is rather limited and you have to widen your search to new growth areas in mainland Penang or Kedah areas which is far away from major workplace.

The future housing trend of housing in land-scarce Penang ; more supply of high rise flatted housing units whilst new stock of affordable landed homes are likely to come from new growth areas in Southern district or Northern district of mainland Penang..

Once you make up your mind to purchase a house, the next question is about sourcing for a right housing loan?

Financing a house

There are many loan packages available in the market that a buyer can choose from ie commercial banks and finance companies, building societies and insurance companies and government loans for eligible government servants.

For first-time house buyers, a recommended must read resource website would be Banking Info, a consumer educational programme by Central Bank of Malaysia which provides complete guidelines and invaluable tips on financing a house, type of loan packages, legal fees and stamp duties incurred when acquiring a property.

How much lawyer fees and stamp duty when purchase a property?

When a buyer has decided the property that he/she wishes to purchase, you are advised to engage your own solicitor to act on your behalf and are required to pay the legal fees for sales and purchase agreement and loan agreements as well as stamp duties for both documents.

To know more about charges on legal fees for the purchase of a property go to : How much should you pay a lawyer in a property transaction?.

Cash or financing when buying property?

If you are buying a property for cash instead of bank financing, there are factors to consider too, its benefits and downside, more at Cash or financing when buying property and Buying properties for cash.

For more tips and guides on house buying, go to recommended links:Ten tips for buying property and Tips of buying a home for the first time by Amy Fontinelle.

Now, ready to go for house hunting ! Get a FREE printout on Property Buying Checklist-Download here!

For advisory on individual property needs, email to your property consultants at Izrin & Tan Properties Sdn. Bhd. or call us at +604-6588333 (Penang Office) or +603 92839782 (Kuala Lumpur Office) and we would be pleased to assist.