I&T Penang Properties Blogs

One of the measures to curb real estate speculative activities in the property sector as announced by the Malaysian Government in its budget 2012 on 7^th October 2011 is the revision of RPGT rate. For properties held and disposed within 2 years, the RPGT rate is 10%. For properties held and disposed within a period exceeding 2 years and up to 5 years, the rate is 5%. Properties held and disposed after 5 years are not subject to RPGT. (refer picture below)

(source picture : btimes )

RPGT has been introduced in Malaysia at multi-tier rates since year 1995 up to 2007. It was suspended from 1st April 2007 to 31st December 2009 in a move to shore up the sluggish Malaysia property sector affected by the world financial crisis.  In January 1, 2010, RPGT was reinstated at a single rate of 5% for all taxable gains (for all disposal within five years). 

Effective  January 1, 2012, property owners and investors who dispose off their property in Malaysia within five years will be subject to the revised RPGT rate on taxable capital gains for sale and purchase agreements signed on or after that date. For disposal of property whereby state consent is required, the date of disposal shall be the date when such conditions have been complied with but not the date of SPA. However, genuine property owner who disposes their property can apply for exemption of RPGT under the following circumstances ie. a) one-in-a-lifetime exemption for malaysian individuals, b) disposal by way of gift ie between parent and child, husband and wife etc.     

Briefly, the computation of RPGT in Malaysia is as follows:-

A)     Disposal  Price ( LESS allowable expenditure ie. upgrading and improvement costs to maintain or enhance the value of the property  and incidental expenditure such as legal fees and stamp duty, agent fees, administration charges etc)   

B)      Acquisition Price ( ADD incidental costs legal fees, agent fees, administration charges etc)

Taxable capital gains = A-B less RM10,000.00 exemption or 10% of the net gains, whichever is higher for an individual. 

 If there is capital gains arising from the disposal of a property after deducting allowance for capital gains exemption up to RM10,000.00 or 10% of the net gains, whichever is higher for an individual, the RPGT rate  shall be 10% on taxable capital gains for disposal within two years and 5% on taxable capital gains for disposal exceeding second years but within fifth years.

In standard practice, A 2% retention sum of the disposal price will be retained by acquirer’s solicitor for RPGT purpose and filing of notification of disposal to Board of Inland Revenue of Malaysia  is required within 60 days. Picture below shows a sample format of the RPGT also known as CKHT form issued by Board of Inland Revenue of Malaysia for your easy reference.

The revision of RPGT rate under the Budget  2012 is considered moderate and  expected to have gradual impact on the property market in key urban areas in KL/Klang Valley, Penang Island and JB where bulk of the property investments and market activities are actively taking place. More  here .

The residential subsector for the state of Penang in the second half of 2010 remains vibrant and continue to be the dominant sector in terms of number of transactions of the Penang Property Market. It is inevitable that home prices are on the rising trend in recent quarters brought about by improving economic conditions nationwide and continued bullish outlook of the Malaysian economic performance. It is also a widely known fact that landed house prices such as single and double storey terraced houses, in particular, Penang Island are amongst the highest in the country which have gone beyond the affordable levels of the medium income groups and new home seekers.

However, first time home buyers can still look for affordable Penang Apartments in the secondary market of Penang Island as there are many choices of medium range apartments priced from RM130,000 to RM220,000 per unit.

Incentive for first time home buyers under Budget 2011

Following the recent budget announcement on 15th October 2010, the government will introduce the “Skim Rumah Pertamaku” or “My First Home Scheme” through Cagamas Berhad to assist the newly-employed younger group earning less than RM3,000 per month to buy a house costing less than RM220,000.00.

First time home buyers will be eligible for 100% FINANCING. First-time house buyers will also be given stamp duty exemption of 50 per cent on instruments of transfer on a house price not exceeding RM350,000 as well as stamp duty waiver of up to 50 per cent on loan agreement instruments to finance such first-time purchase of houses. With the exemption in stamp duty, first time home buyers stand to SAVE UP TO RM2,250.00.

Read more :-Full loan for first-time house buyers and Pinjaman rumah 100 % untuk golongan muda.

Perks for first-time house buyers

a)Savings on 50% waiver of stamp duty on transfer instrument:-
House Price say RM220,000.00
1% on first RM100,000.00 – RM1,000.00
2% on balance RM120,000.00 – RM2,400.00
Total RM3,400.00
50% waiver RM 1,700.00

b)Savings on 50% waiver of stamp duty on loan instrument :-
0.5% on full loan say RM220,000.00- RM1,100.00
50% waiver RM 550.00

First time purchaser needs to pay RM2,250.00 only instead of RM4,500.00. Hence, effective savings is RM1,700.00 + RM550.00 = RM2,250.00.

Where to find Penang Apartments ?
Below is our compilation of apartment schemes in selected areas of Penang Island which are within the affordable pricing bracket for first time home seekers where we can help you to locate and own a Penang Apartment at affordable repayments from as low as RM500.00- RM1,000.00 a month. Our company, Izrin & Tan Properties Sdn Bhd is ever ready to assist you to own a Penang Apartment in a hassle-free (no headache to find where to buy), easy and convenience way.

Penang Island Apartment Information
Tanjung Tokong/Tanjung Bungah/Batu Feringgi – Aquarius , Azuria, Bayu Emas, Delima Condo, Ferringhi Delima, Ferringhi Mutiara, Permai Ria, Taman Krsytal, Taman Tegoh
Jelutong – Simphony Park, Mutiara Heights, Mutiara Idaman, Serina Bay, Desa Selatan, Menara Riverview, Taman Jelutong, Taman Cemerlang
Bukit Dumbar – Sinar Bukit Dumbar
Bandar Baru Air Itam – Seri Semarak, Desa Intan, Desa Baiduri, Fortune Court, Sri Impian, Sri Ivory, Sri Krystal, Tanjung Court, Asia Height, BL Garden, Treasure Ville
Padang Tembak - Boundary Court
Paya Terubong – Desa Permata, GL Garden
Perak Road – Casa Impian, Tmn Sri Perak, Tmn Kheng Tian, Kota Emas, Suteramas, Seruan Emas
Gelugor/Bukit Gambier – U Garden, Jade View, Gambier Heights, N-Park, Taman Batu Uban, Villa Sri Kenaga
Bukit Jambul – Taman Bukit Jambul, BJ Court, Desa Daya, Jambul View, Sri Nibong Apt
Batu Lancang/Greenlane – Mewah Court, Desa Green, Kota Emas, Desa Penaga, Eastern Court, Greenlane Heights, Medan Penaga, Taman Sri Damai
Georgetown –Taman Pelangi, Macallum St Ghaut flat, Sri Kota, Medan Samak, Desa Singora
Relau/Sungai Ara – Marina Tower, Taman Desa Relau, Acres Villa, Ara Mas, Desa Alor Vista, Desa Bayan, Relau Vista, Sri Abadi, Sunshine Garden, Villa Kejora, Vista Condo
Sungai Dua- Taman Pekaka, Taman Jubilee, Nipah Emas, Taman Lip Sin
Sungai Nibong/ Bayan Baru – Century Park, Desa Bistari, Gedung Hts, Halaman Cendana, Mahsuri Apartments, Nibong Indah, Taman Jubilee
Bayan Lepas – Saujana Damai, Bayan Permai

Mainland Penang- Seberang Perai Apartment Information
Butterworth – Park View, SeaView (studio unit), Pangsapuri Cantik, Pangsapuri Ria, Vista Perdana, Pantai Apartments, Pangsapuri Sena
Bagan Lallang/ Raja Uda area- Seri Cemerlang, Taman Mesra Indah, Taman Pandan, Pangsapuri Mawar, Pangsapuri Seri Mekar
Bukit Mertajam- Kondo Mutiara, Pangsapuri Seri Pelangi
Prai–Pangsapuri Aman(Prima Prai), Pangsapuri Pesona

Contact us now at +604-6588333 or SMS to 0124072329 to find out how we can assist you to own an affordable Penang Apartment for less than RM1,000.00 a month.

Acres Villa in Sungai Ara, Penang

Asia Height Apartments in Air Item

N-Park in Batu Uban

Jade View Apartments in Gelugor

Park View Tower @Harbour Place in Butterworth

Cassia Resort Condo@ Raja Uda, Butterworth

Property investors now have the opportunity to acquire assets at fire sale prices from Danaharta. There are two striking landmark commercial buildings located in the heart of Bukit Mertajam town in Central Province Wellesley of Penang being put up for sale again at fire sale prices by Prokhas in its 2nd tender exercise starting from 5th July to 4th August 2010.

Brief info on Plaza Utama

Brief info on City Parade

These two assets are possibly the last tranche of residual recovery asset of Danaharta. www.intproperties.com conducted a research on the background of these two assets and its indicative values ..

a) PLAZA UTAMA, BUKIT MERTAJAM, PENANG

Plaza Utama development commenced in Nov 1995 and completed in 1997. The 5-storey departmental store of Plaza Utama was opened for business in early 1997 together with many other smaller retail lots (sold to individual buyers). The Hotel block of Plaza Utama commenced business on January 23, 2008 and the development value of the entire Plaza Utama is RM230 Million according to an article published by The Sun as follows:-

Owing to the onslaught of the 1997-1998 financial crisis, Plaza Utama ceased business operation after a short stint of about 1-2 years and subsequently, the bad loan of Plaza Utama was acquired by Danaharta. More related info at my earlier blog - Impacts of Global Financial Crisis vis-a-vis Asian Financial Crisis on Penang property sector.

This completed skyscraper formed by a nine-level retail podium and 14-level office cum hotel tower capped off by a helipad sits on 2.88 acres of freehold land. Within Plaza Utama are 661 car-parking bays; 286,000sq ft of retail space made up of 23 shoplots, three areas previously designated for supermarket use and three whole floors; 112,500sq ft of office space consisting of 19 suites and nine whole floors; and 188 business-class hotel rooms at the top-most floors of the tower.

It was reported that when Plaza Utama first put up for sale in year 2000, the indicative value was more than RM50 Million. In year 2004, its indicative value was revised to RM42.1 Million. There is no taker despite being put up for sale in the market (By Danaharta until 31/12/2005) and Prokhas for a period of about 10 years. And to-date, Prokhas Sdn Bhd, in its quest to dispose off the asset, has make substantial hair cut and fixed the minimum price at only RM15,913,800.00.( Analysed to RM39.90 per square foot).

b) CITY PARADE, BUKIT MERTAJAM, PENANG

City Parade is another completed commercial building which is similarly affected by the 1997-1998 financial crisis and ceased operation after opened for business for a short period and have remain vacant until the present time. It has a total of 135 retail lots with a combined floor area of 224,773 sq ft.

The reported indicative value of City Parade was RM28.3 Million in Danaharta’s 5th Property Tender document from 5th June 2001 till 4th July 2001. In 2003, the indicative value was revised to RM19.546 Million as per Danaharta’s 8th Property Tender Advertisement below.

Similarly, there is no taker despite being put up for sale in the market for more than a decade. And to-date, Prokhas has also make substantial hair cut and fixed a minimum price at RM5,488,100.00.( Analysed to RM24.40 per square foot).

With such attractive fire sale prices at deep discount from its indicative values, it is now opportunity at the right entry level for investors to explore the investment viability as well as its restoration or refurbishing costs of turnaround it into viable and usable building.  Act now and contact us at Izrin & Tan Properties Sdn Bhd ( A panel real estate agent of Prokhas Sdn Bhd) for further information and FREE investment advisory and factors that investors should look into before making investment decisions. Email me at tan@intproperties.com, or SMS/CALL  +6012 4285453.

UPDATE (4/9/2010) - According to the tender results and information provided by Prokhas, Plaza UTAMA has been SOLD …

UPDATE (19/10/2010) - City Parade is currently put up for sale again by public auction scheduled on 26th October 2010. The reserve price is further revised to RM4,939,000.00 (RM22 per square foot) compared to last reserve price’s at RM5,488,100.00.( RM24.40 per square foot).

Many consider property, be it a landed home or stratified condominium unit, is a big ticket item which involves high capital and long term commitment, so the question of whether is it better to buy or rent is very much depends on one’s financial affordability and needs. www.intproperties.com looks into the advantages of owning a home versus renting.

Advantages of home ownership

i) Provide stability and certainty of stay for your family;
ii) Benefit of security and pride of home ownership;
iii) Freedom on choices of usage ie. for self-occupation or weekend second home or rent out;
iv) Built equity of your own home. Instead of paying rental monthly, you make repayments to the banks and gradually building up your home equity and ultimately owning the property after you redeem the property.
v) Hedge against inflation. Owing to the scarcity of landbank earmarked for new developments and growing population, demand for quality and affordable housing in established areas in Penang remains high which leads to higher home prices. In addition, the cost to build new housing stock continues to rise due to inflationary factor.
vi) Tax relief. Malaysians are eligible for tax relief of up to RM10,000.00 a year on loan interest payment to finance the purchase of property for three consecutive years subject to conditions that it is limited to one residential home for own occupation( not for rental) and the sale and purchase agreement is signed between March 10 2009 and December 31 2010. Besides, the government has further relaxed the EPF housing withdrawal guidelines beginning of January this year to encourage more Malaysians home seekers to own houses.

Advantages of renting

i)a cheaper and affordable way (less upfront costs) as you only need to come out with deposit payments equivalent to 3 months rental of which the security and utility deposits are refundable;
ii) Faster move in time unlike property purchase which takes 3-4 months to complete the deal and hand over the property.
iii) option of choosing length of stay according to tenant’s need ie. monthly or yearly tenancy ;
iv) No need to bear documentation costs such as legal fees for preparation of sale and purchase agreement and loan documents and stamping charges in connection with home ownership transfer and yearly taxes like assessment rates and quit rent.
v) No need to bear maintenance charges and structural repair costs either as these costs are also to be borne by the landlord.
vi) flexible of being relocated without having to worry about the empty home!

Recommended blogs on the advantages and disadvantages of Buying versus Renting, go to Renting vs Buying a home or Buying vs. Renting.

Whether renting is better than buying depends on many factors, including how fast prices rise and how long you will stay in your home. And now there is a new method rent-buy interactive calculator to compare the costs of buying and renting equivalent homes.

The methodology of the calculator keeps a running tally of the most common expenses of owning and renting. It also takes into account something known as lost opportunity costs — for example, the return you could have earned by investing your money instead of spending it on a down payment. The calculator assumes that the profit you would have made in your investments would be taxed as long-term capital gains and adjusts the bottom line accordingly. The calculator tabulates lost opportunity costs for all parts of the buying and renting scenarios.

This rent-buy interactive calculator allows home seekers to do their own comparisons on renting versus buying whereby you can i)  adjust the annual home price change and annual rental rates according to local market conditions  and ii) change inputs or variables such as your rate of return on investments, condo/common fees and your tax bracket to find out whether the buying is better than renting or otherwise!

Whilst no one can accurately predict the future pricing/rental trend of the houses in a particular area, however, analysis to find out average house price index or its trends based on the past historical housing data of say past 10 years or 15 years or 20 years of a similar class of property in a specific housing area can be quantified.

In Malaysia, information on property pricing trends and rental movements, current and future supply and take up rates of various sub-sector of Malaysia property market can be obtained from the annual publication of Malaysia Property Market Report published by Department of Valuation and Property Services (JPPH) and NAPIC quarterly reports. Find out more at 6 websites that property investors need to know in Malaysia. It would be good that a similar calculator can be generated in Malaysia using our very own housing data.

Views of new completed housing schemes in mainland Penang

Villa Cendana 2 ( Cendana Permai) at Juru

Dedaun - another housing scheme by PDC at Batu Kawan

In property investments, there are two main determinants ie capital growth and rental income. Capital growth is the increase in the value of a property over time whilst rental income refers to the amount of monthly rents that can be collected from the tenancy of a property. A good property investment has two key elements ie. a) one that have the potential of high capital growth, which appreciates in value over time and b) secure rental, which generates cash flow or steady incomes to the property owner.

When making investment decisions, property investors need to know what is the expected rental yields from a property investment and how its yield would fare in comparison with similar class of properties as well as other alternative investments available in the market such as REIT, stocks, unit trusts etc.

A rental yield provides indication about the performance of a investment and its relative attractiveness against other types of investment. For example, if a residential property can produce a rental yield of 5% pa, it is considered a better investment than the fixed deposits offered by the local banks at prevailing rates of 2.0- 2.5% pa. On the contrary, the 5% yield is considered less attractive if compared to other higher yields but riskier investment options like stocks, equity-based unit trusts etc.

Besides, the yield can be used as a yardstick to measure and evaluate similar class of competing investments for decision making. For example, condominium investors would be keen to know which class of condominium in Penang can offer higher rental yields ?

a) beach / holiday resort condominium within the tourist belt of Batu Ferringgi or
b) city condominium in the inner city of Georgetown or
c) Suburb condominium at new growth areas along the reclaimed coastal area of Jelutong- Gelugor- Bayan Baru

Ways to determine property investment yields

The rental yield for a property investment can be determined by using the following calculation, commonly known as investment method:-

Estimated Rental per annum
______________________ X 100 = Gross Yield (%)
Property Acquisition Cost

Property Acquisition costs = Purchase Price + incidental costs ie legal fees, stamp duties, agent fees etc

Example :

Monthly rental RM1,000.00. Estimated annual rental income = RM12,000.00
Property acquisition cost= RM185,000.00

RM12,000.00
——————- X 100 = 6.5% gross yield
RM185,000.00

For computation of net yield, which is more reflective of the actual return, the following expenses ought to be deducted :- maintenance charges, sinking fund, management fees, insurance, quit rent, assessment, and other expenses.

Indicative gross yields of several property class in Penang

Landed houses- terraced, semi-detached and bungalow: 2 – 3%
Townhouse/Apartment/Condominium : 4-7%
Commercial shops/light industrial : 6- 9%

Generally, landed homes in land-scarce Penang offer lower rental yields as compared to high rise stratified and commercial units. Lower yield signifies that it is a safer or lower risk investment and hence  investor is willing to accept longer payback period for his investment. Property investors would expect higher yields for commercial/industrial property investments due to higher holding costs and risks.

Property investor need to set out his/ her investment objectives whether to invest for rental returns or long term capital growth or combination of both as each investor has his own investment requirements and rental yield expectations and hence difference strategies and choices of properties as their investments.

• Landed houses vs condominiums/apartments
• High price single property vs low price multiple properties
• Off-the-plan housing unit vs secondary market unit

A retiree might seek higher rental as passive income from his property investment whilst a young working professional would be more interested in wealth creation and achieve long term capital growth.For more related information on investment strategies, go to 6 strategies to succeed in Penang Property Investment.

In addition to the above investment method, other sophisticated approaches that can be used to aid property investors in decision making are:-

The Discounted Cash flow (DCF) model can be applied to determine the Internal Rate of Return (IRR) or Net Present Value(NPV) of an investment property. The DCF method is one of the valuation methods being used by property valuers particularly in evaluating income-producing properties and potential   development lands.

The Monte Carlo Analysis is another decision-making tool using multivariate modelling technique that allows investors to forecast various investment outcomes. The risk/return profile of any investment can be calculated and compared to investor’s risk tolerances.

View of the coastal area along Tanjung Bungah- Batu Feringghi

Despite the onslaught of the global financial downturn, the Penang property sector in general has been resilient and relatively stable with no drastic movement in housing prices. The local housing developers have been better prepared this round to ride through the downturn with the exception of handful housing developers which are forced to slow down their construction activities or delay their project launchings during the height of the crisis. Though there are signs of market softening in 2H 2008 and 1H 2009, market sentiment for Penang property sector in the 2H 2009 has improved remarkably with more buyers/investors flocking back into the market whilst housing developers are beginning to make a come back and roll out more new planned projects in anticipation of improving economy outlook. Transaction activities in both primary as well secondary market are poised to pick up again buoyed by the continued support and lending by Malaysia’s banks with attractive financing packages at low interest rates of 3-4%.

Unlike the previous 1997/98 Asian Financial crisis, the Penang property sector at that time was badly hit due to the credit crunch of the Malaysia banking system and the sudden surge in lending rates to as high as 13%.  As a result, many housing projects were stalled and abandoned, with many developers were either facing cash flow and debt servicing problems and eventually collapsed and wiped off from the marketplace such as Adorna, Penas and Cayman etc. The aftermath of the crisis has crippled the Malaysia housing and construction sector with major property sectors suffered sharp price declines as much as 30-40% from their peak levels whilst the banking system saddled with huge bad loans and high NPLs.

Some notable projects in Penang/Kedah region which have been badly affected since the times of 1997/98 Asian Financial Crisis are mostly retail/commercial and several mega projects, some of which are still in abandoned stage and awaiting revival or resuscitation:-

Penang Island

Bayan Central – An uncompleted commercial complex located at Bayan Bayu which commenced construction in 1997 and subsequently stalled.

Bayan Bay Marina and Leisure Resort by Eternal Resources (joint venture between Anson Perdana and PDC) which was originally scheduled for completed by year 2000 but stalled for several years. This multi-million Bayan Mall (now Queensbay Mall) was successfully revived by CP Group and commenced business in 2005.

Mainland Penang (Seberang Perai)

Plaza utama- A commercial complex comprising 6 storey shopping mall, 213 room-hotel and one office block at Bukit Mertajam town. Plaza Utama development commenced in Nov 1995 and completed in 1997. The commercial complex was opened for business after completion but ceased business after a short stint.

View of Plaza Utama in Bukit Mertajam

City Parade at Jalan Megat Harun, Bukit Mertajam – Another completed commercial building which is similarly affected like Plaza Utama and ceased operation after opened for business for a short period.

Both buildings have long been put up for sale by former Danaharta now Prokhas and still looking for potential “white knight” to revive it.

Fasda Heights (Taman Bidara)- a mixed housing project in Macang Bubok, Bukit Mertajam with about 1,000 units which was not fully completed and handover to the purchasers.

Taman Perindustrian Macang Indah- an abandoned SMI industrial park at Sungai Lembu, Bukit Mertajam.

Leisure Tower- A 11-storey integrated commercial complex at Jalan Kampung Gajah, Butterworth by HCC Group originally schedule for completion end of 1999 but only partially completed and abandoned.

Kristal Golf Resort (Suasa Kristal) - a golf resort located at Sungai Bakap, Southern Seberang Perai, ceased operation several years ago and taken over by Danaharta. The site was reportly sold to a private housing developer.

Others approved commercial complexes which have been launched but failed to take off and subsequently shelved are “Plaza Everise” – a planned 2.3 acre commercial complex at Sungai Rambai Commercial Centre and  “Aseania Mall” at Bandar Perda. Both are located within bukit mertajam area. “Plaza Cayman”, another planned commercial project located adjacent to old MPSP building at the heart of Butterworth town.

Kedah

Padang Meha Parklands by MBF Country Homes and Resort (Alamanda) near Kulim– a proposed RM3 billion housing/resort development near Kulim covering 5,200 hectares launched prior to 1997/98 Asian Financial Crisis which has since abandoned. Latest report disclosed that the developer has been liquidated in year 2005. More related info here: Developer liquidated, 300 land buyers in the lurch. Others include the 160 hectare  residential resort scheme (Diamond Santuary) in Mukim Padang Meha near Kulim Hi Tech Park and the proposed RM1 billion Diamond Creeks Retreats with 800 hectares of land in Ulu Behrang, Perak near the proposed Proton City.

In a nutshell, the magnitude and severity brought about by the impact of the 2008/09 Global Financial Crisis on the Penang property sector is comparatively shorter and much lesser compared to 1997/98 Asian Financial Crisis. A healthier and resilient Malaysian banking system, on-going implementation of Malaysia economic stimulus package, Malaysia’s central bank prudent interest rate policy, relaxation of EPF housing withdrawals and other economic liberalization measures, have helped to cushion the impact of the recent economic downturn on the property sector. Malaysia economy is on track for a full recovery next year.

Many house owners have the tendency to renovate their new homes exceeding their original budget. It is common to see that house purchasers of newly completed schemes in Penang are “competing” each others in home renovations. Some common renovations visible in Penang’s new residential areas are demolition of front car porch and replaced with a bigger car porch to accommodate two or more cars, hacking down the entire front terrace and facade (without balcony) and replaced with a much bigger car porch incorporating a balcony, extending the rear portion of the house to accommodate a larger kitchen etc.

We have seen house owners carried out major renovations to their houses to the extent that the renovation costs exceeding the purchase price of the house.

Renovations do not always translate to an increase in the value of your home. However, if you’re planning to sell sometime in the future and want to ensure you get the most ROI (Rate of Return), it is important to assess the value renovation. Below are several ways to optimise the cost-value ratio and achieve maximum ROI for your renovations;

a) Avoid renovations with too much customization of personal liking and taste.

If the major renovations and home improvements are customized design to suit to personal liking and lifestyle which is not commonly acceptable in the marketplace sometime in the future, you may not get much of a return when you sell as potential buyers may find these renovations are not value-added renovations but rather owner’s own personal indulgence and lifestyle. Potential buyers may also view it as a liability because he may have to spend more money to change or renovate again.

When choosing tiles, countertops, paint, cabinet doors, kitchen appliances and awnings, go with colors that will stand the test of time even as fashions come and go. Conventional or classic home designs are still the ideal for home renovations because such designs never go out of style and will always attract buyers when you are ready to sell your home.

b) Retain the essence of the original design ambience

Avoid excessive renovations such as changing the structure of house from the original two storey house to become a three storey house or demolition of a front porch and facade and replaced with a totally new design super large car porch with a balcony. Such major renovations could have materially changed the external facade of the house and may render the house no longer blend in with the design ambience of the neighbourhood and this may affect the saleability of the house.

c) Summit proper building plan for new extensions

Check with the building department of the local council MPPP or MPSP and obtain a copy of building  approval guidelines. Engage a licensed draftsman or architect to ensure that the extensions are in compliance with the building guidelines by the local authorities.

A property valuer, when assessing the market value of a house, will give due consideration and only accord full value computation for properly constructed extensions with valid approvals.

d) Value-neutral or value-added renovations

Ascertain whether the renovations to be carried are value-neutral or value-added renovations. Upgrading cement floor with homogenous floor tiles, modernizing a kitchen or upgrading the kitchen into wet and dry cooking area, improving home security system are regarded as value-added renovations whilst demolition of front terrace and house facade and rebuilt it with a large balcony, adding a swimming pool or building a sauna or long bath,  reducing the number of bedrooms to less than three are considered value-neutral renovations.

List down your options before embarking on home renovations. For house buyer who prefers house design with large car porch and balcony, it is wise to compare and weight the option which is more worthwhile and cost effective ? to buy a landed house without a balcony and later renovate it or to look for house design that comes with large car porch and balcony ?.

House Design : 2-storey terraced houses without balcony

Another House Design : 2-storey terraced houses with large car porch and balcony

For more tips on home renovations, go to Renovation quotation.

Very often when house owner decides to sell off his house, they tend to overprice their properties as they calculate their asking price by factor in all the costs incurred during and after acquisition of the house ie. purchase price plus all incidental costs such as payment of legal fees and stamping charges plus  renovations costs, bank interest charges incurred plus exit fees or penalty charges for termination of loan agreement within the lock-in period (if any).

The true fact is that total cost spent on the particular house is NOT necessarily equate to the market price of the house. In an active and uptrend market, house prices tend to go up higher than the total acquisition costs. Conversely, in a weak or depressed market, house prices may go down and fall below the total acquisition costs of the house. The market price of the house is very much influenced by the prevailing economy conditions and market sentiments and more specifically relates to the demand and supply of similar houses in the local area.

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.

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

1.Fewer new project launchings - Unlike first quarter last year whereby a slew of new housing projects were launched feverishly, this quarter will likely see a subdue market with fewer housing project launchings judging from the promotional activities and advertisements in the local dailies during the period of year-end holiday seasons and new year festivities. Recent housing advertisements and promotional activities are mostly geared towards “stock clearance sales”, indicating that developers/contractors are attempting to reduce their overhang units or clear their inventory.

2.Softening property prices - Whilst some of the housing developers are still holding on to their selling prices, few have started reverting to their old selling prices after price increment ranging from RM10,000 to RM50,000 per unit 5-6 months ago due to escalating costs of fuel and building materials.

Previously, it is common to see developers offering “free legal fees for SPA” only. Now, developers are more “generous” in dishing out perks which include free legal fees for all documentations and absorb all stamping duties on transfer and loan and progressive interest payments during construction period and freebies like LCD TV, air-conditioners, home alarm system, no maintenance charges for first two years etc. Under such packages, If one is to purchase a house costing RM500,000.00 with 95% loan (RM475,000.00), the estimated “savings” can total up to RM35,000.00 - RM45,000.00 per unit or approximately 3-4% of the sales price. The primary market of  Penang Property Sector is likely to see more such offerings and new pro-consumer financial packages such as 5/95 Home Loan Package.

3.Higher overhang units were reported in 3Q08 in the latest NAPIC’s report of which 86% of the overhang units is from Seberang Perai (mainland Penang), which still has abundant of usable lands and is facing stiffer competitions as compared to Penang Island.

In a softening demand environment, developers are shifting strategies to shore up sales and focus more on cash flow management to sustain their projects rather than holding on to their overhang units whilst some may review their project plans to either cater for niche product segment or more affordable products range.  A clearer picture on the take-up rates of the ongoing housing projects which indicating the demand trend will emerge over the next few months when NAPIC releases its 4Q08 and 1Q09 reports.

4. Slower construction activities-Construction activities of some ongoing housing projects have also noticeably slowing down or scaled down in recent months. Several property developers in Penang have already announced plans to defer their projects in the state;here and here.

5. Lower housing supply -Given the global economic downturn and weak domestic market outlook,  the number of new housing supply coming on stream this year may be lower compared to previous good years. It is a challenging times for housing developers to launch new planned projects.

According to Malaysia’s NAPIC Report - Residential Property Stock Report 3Q08(Page 31-33), the Penang State housing stock totals 322,426 units including 1,687 newly completed units in 3Q08. The incoming supply (under construction and works started) is estimated at 51,612 units whilst another 34,648 units planned supply units from housing projects which have been approved as well as those submitted but pending approvals.

On the national front, Malaysia’s housing ministry has projected a lower number of supply of newly completed houses at 80,000 units for year 2009 as compared to annual average of 100,000 units. More at Ministry hopes for 80,000 homes in 2009.

As the property market in Malaysia is taking a breather, the current property downturn has opened up good opportunities for property investors with a long term prospective as Malaysia properties are still comparatively attractive as compared to other regions. 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 schemes in Bayan Lepas near Penang International Airport

View of  the newly completed housing scheme in Butterworth town.