MRCB: Revised Budget 2016 benefits housing sector

KUALA LUMPUR, Jan 28 — The provisions in the revised Budget 2016 for affordable homes will boost the housing sector, property company Malaysian Resources Corporation Berhad (MRCB) said today.

Tan Sri Mohamad Salim Fateh Din, group managing director of the government-linked corporation (GLC), also welcomed the RM2,000 tax relief for those earning below RM8,000 a month, saying it would increase private consumption and stimulate investment in the property market.

“The revised budget has addressed the needs of businesses, employees and the rakyat through various incentives for growth,” Mohamad Salim said in a statement.

“As a property and construction company, MRCB welcomes the stimulus for affordable homes which will help to steer the housing sector to be more robust and vibrant.

“Additionally, the implementation and continued commitment for major projects such as the LRT and MRT projects will further enhance public mobility and ease road congestion,” he added.

Prime Minister Datuk Seri Najib Razak announced earlier today in the Budget 2016 revision that the sale of houses priced below RM300,000 will be limited to first-time house buyers.

For the public housing project involving houses that cost RM35,000, the government will offer, through Bank Simpanan Negara and Bank Rakyat, a financing package at a rate of 4 per cent for more than 10,000 homeowners starting March 1.

The prime minister also said more than 100,000 housing units will be offered in the government’s integrated house ownership programme.

Source: The Malay Mail Online

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2016 is said to be a gloomy year for the property market: Is there light at the end of the tunnel?

Article by Kaygarn Tan

Wishing you a happy new year 2016! How is your propery investment journey coming along? My wish for you is for your portfolio to grow year on year. As usual, at beginning of the year, my friends and fellow investors will come and ask me about my thoughts on the property outlook for this year? And their question is “Should I buy or should I sell?”

The year 2015 was a challenging year with the implementation of GST, gloomy economic outlook and political instability. Now, let’s crunch the numbers and statistics and ask the next big question – what is the property market outlook for 2016, particularly in Penang?

In overall, Penang’s performance was fair as compared to the other major property market i.e. Klang Valley and Johor Bahru according to Property Indicator by WTW Research (Figure 1). The Penang’s residential property prices is still on the uptrend while the residential property prices in Klang Valley and Johor Bahru remain flat. Point to note is that the declining prices for high rise residential in Johor Bahru is due to the over supply in the Iskandar region. 

Figure 1: Property Indicator

Now let’s focus on the performance of residential properties in Penang. Due to the various cooling measures implemented, challenging economic outlook and weakening sentiment, the Penang property market is not spared. This is demonstrated by the consecutive quarter-on-quarter decline in the residential property transactions since 2013 (Figure 2).

 

 Figure 2: Average transacted price vs volume

It was observed that the property transaction volume declined from Q3 2014 to Q3 2015 especially on the Penang Island. However, on the contrary, the value of properties have some how maintained or increase marginally, which means that the property prices on the island is still on the uptrend.

Adding to the current property market woes is the tight credit control environment. This has resulted in a high loan rejection rates from the bank, which forced many home buyers and investors at bay. According to a Savills Research (Figure 3), approximately 50% of loan application is rejected since year 2010.

 

Figure 3: Residential loan applications and loan approved

Moving forward in 2016, the market sentiments will be no different from 2015. As long as the cooling measures remains and economic outlook is less than promising, the residential market will remain sluggish. And distressed.

As a property investor, how do we strategize for the year 2016? Notwithstanding the above, is the property market going to rebound and pick up again by 2016? Or even 3 years later by 2019?

For me, now is the good time to buy. Why?

In the current distressed market, there is opportunities to grab good deals. As a smart investor, look for bargains and below market value (BMV) properties now in the market. Individuals I am currently coaching found properties that is 20% – 30% lower than the market value. Essentially, these group of people will make money when they buy.

The market condition we are experiencing now is almost similar to that is the year 2008-2009 sub-prime crisis where the market is quiet and opportunities abound. Even property developers are more willing to offer better packages. I was reminded of the quote by Warren Buffet “Be greedy when others are fearful and be fearful when they are greedy”. But then, something is stopping you. What? Do you fear the uncertainty?

Then, what better way to counter that than to learn more and research more. Learn and research about the property market, do the math on the rental return and bang! You are ready to take on your next property.

I’m now a better investor than I was four years ago, all because I was ready to unlearn and relearn. I re-learned the fundamentals of property investment and used the no money down strategy.

I will be sharing about my property investment journey and the 5, 2, 1 of property investment on the 23 Jan, 2016. At the end of the talk, you will take home with you your personal Property Investment Roadmap. If you would like to meet me in person and take home your Roadmap, book your seat here. 

I look forward to seeing you. 

Kaygarn

 

 

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Is A Tenancy Agreement Really Necessary?

Having a tenancy or rental in place can incur cost and possibly reduce profit margins. However, the rationale to enter in a tenancy agreement is similar to having any other contract; to have clear terms in black and white to avoid ambiguity. In this article we will discuss about the importance of having a rental agreement for both parties.

1. Fixed Rental Rate And Duration For Tenant

Having a tenancy agreement can prevent the house owner from raising rental fee discriminately within the rental period. The tenant is protected from any rental fluctuation within the duration stated in the agreement.

With no clear agreement about the rental rate and period, owners can increase rental rate at whim and force tenants to comply or leave. With a valid tenancy agreement, the tenant is protected within the stipulated parameters of the agreement.

2. Protecting Tenant’s Deposits

A rental agreement is essential as a proof that tenants has placed a sum of money to the owner as a refundable deposit. Without the agreement, the owner can simply deny any transaction that has happened in the past. The owner can also refuse to refund the deposit if he or she decides to do so.

In addition, the tenancy agreement also clearly outlines the responsibilities of the owner and tenant during the whole duration of tenancy. If these terms are not met by the owner, the default in payments can cause the tenants to suffer the repercussions.

3. Higher leverage for owner

One major criteria banks look for when accessing one’s credit score is the applicant’s income. A house owner can submit a valid tenancy agreement to the banks as a proof of additional income source. With rental income, applicants will have better eligibility and higher chance of loan approval.

4.Protection for Owners

In the case of unforeseen events, the tenancy agreement has clauses that protects house owners. For example, if the house owner wants to recover his/her premise claiming defaulted rental payments by the tenant, the house owner can file a simple eviction summons in court using the tenancy agreement as a proof. Any dispute between the owner and tenant will be referenced to the tenancy contract

Having a tenancy agreement also grants the right for the owner to forfeit the deposit in the event of property damage. The right for deposit forfeit also ensures the tenant obeys the tenure duration, for if the tenant moves out in a sudden without notice the deposit will be revoked.

5. Are There Any Reasons For Not Having A Tenancy Contract?

There are a few reasons for not having a tenancy contract.

If the tenancy period is 3-6 months, a tenancy contract will be kind of a hassle to draft. Furthermore, tenants who prefer short term rentals while waiting for their own home renovation might prefer a more flexible duration.

Also, there are some house owners who want to save on stamp duty cost which can add up to a few hundreds. Some simply want to do away with the hassle.

Conclusion

The reasons for not wanting a tenancy agreement can be very trivial. The benefits of having one far outweighs the reasons for not so we strongly advice to get one done.

Source: Property Insight

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Making the Right Choice – Car First or Property First?

By : Enoch Khoo.

A real estate negotiator bought a new sports car and had the engine revamped so that it would go even faster. I asked him why he needed a car that goes 150 m.p.h.? He chuckled and replied, “I advertise this one house as being 5 minutes from city centre and I don’t want to lie!”

How do you decide between a car or property first? As I was preparing for this article, I came across a few one–liners that was quite funny yet true.

1. The dream of the older generation was to pay off a mortgage. The dream of today’s young families is to get one.

2. There is no longer a need for the neutron bomb. We already have something that destroys people and leaves buildings intact. It’s called a mortgage.3. If you think no one cares you’re alive, miss a couple of house payments.As I engage with many Y generation who just embarked on their career they seem to face this dilemma. Being at the same position previously I can relate immediately to them and share my pitfalls & observation:

1. Cars
It is common knowledge we do not have the best transport system as compare to most countries and malaysians hardly take any public transport due to limited connectivity. In this case, most of us are “forced” to purchase a car in order for us to “Survive”. However I would like to highlight that it is not compulsory that you must buy “New” cars for your survival.
To make a point of my own mistake, me and my best friend (clement) came to the workforce at the same time. We both bought a proton satria as our first car at the age of 22 yrs old. I bought mine at RM48K (Brand New) while clement bought his second hand at RM25K. I took a loan for 9 years while he took a loan of 5 years. Needless to say who lose more money due to depreciation and who is more prudent with money. Clement manage to invest in more properties then me during the early stages of our lives because he has more disposable income & was able to capitalize on more opportunities then myself.

2. Property
Without prejudice, I notice many of my peers & friends who purchased their first property would spend incredible amount of money to renovate & decorate it. While I am happy for them in owning a home, I subscribe to the idea from Robert Kiyosaki which states that a property can only be deemed as an asset if it puts money into your bank account. In this case, your home is not an asset. Most people who have spend heavily in their home renovation would be paying hefty monthly installments which would limit their ability to invest in a 2nd home for investment / passive income purposes. The idea of renting first before buying is something many in Klang Valley is subscribing to. It makes no sense to own a property that forces you to pay RM3500 monthly installment when you can rent it at RM2000. The savings from renting would allow you to build up a cash pile for you to invest in a passive generating property while you actively increase your current income.

3. Delayed Gratification
He can’t be a millionaire! Peter looks so ordinary! He only owns a nice but second-hand Nissan and lives in a modest place. How do you define a millionaire? Someone who has a big car and house? Being one simply means that if you had to pay off ALL your debts, you would still have RM1mil in assets (savings, fixed deposits, managed funds, stocks or properties).
Some characteristics we can learn from self made millionaires:
1. He is only mildly impressed when you show off your Ferrari or your penthouse. He does not care what you think of him for buying a second hand car and living away from the city.
2. He knows that if you keep spending less than what you earn, you are going to be able to spend more when you no longer earn.
3. He puts that savings to work in an investment which gives him a decent rate of return. His investments are in simple portfolio in assets which he understands.
4. He knows his financial standing or looks at it once in six months. Growing his net worth is his aim.
5. He pays his credit card in full every month. He knows that if he can’t afford to pay in full every month, he simply can’t afford it.

Property investment is one way to achieve financial freedom. It is not a quick fix as it takes discipline and a long term approach. Driving a Ferrari at 30 years old do not make you successful. Still able to drive one when you are 70 years old does. 

Enoch is Head of Research for IQI Group, a leading property and investment company operating and advising in Malaysia, Singapore, Hong Kong, UK, US and Dubai.

Source : Propertyhunter.com. my

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Expressway to be completed before undersea tunnel is ready

GEORGE TOWN: Three expressways to ease traffic flow in the state will be completed before the 6.5km undersea tunnel is ready.

This was revealed by Chief Minister Lim Guan Eng after the signing of a preliminary agreement for the construction of a few major traffic-related projects yesterday.

Under the state’s comprehensive package of traffic management projects totalling RM6.3bil, the 12km Tanjung Bungah-Teluk Bahang paired road is scheduled to be ready by 2018, followed by the 4.6km bypass connecting the Tun Dr Lim Chong Eu expressway with Bandar Baru Air Itam by 2019, and the 4.2km bypass connecting Gurney Drive to Tun Dr Lim Chong Eu Expressway in 2022.

 

 

The tunnel connecting Gurney Drive and Butterworth’s Bagan Ajam will be completed by 2025.

Lim said these projects would not only improve Penang’s economy, but also benefit all Malaysians.

“Apart from the multiple job opportunities, the contractors are committed in awarding contracts to Malaysians, especially Pe­­nangites,” he said after inking the agreement with Consortium Zenith BUCG Sdn Bhd, China Railway Construction Corporation Inter­national (CRCC), and Beijing Urban Con­struction Group.

During the ceremony, Zenith also separately signed two agreements with CRCC related to detailed project design, engineering, materials procurement and construction of the tunnel and the three toll-free expressways.

Lim emphasised that although the agreement has been signed, these projects must comply with the recommendations for construction im­pact mitigation following detailed environmental impact assessments (DEIA).

For this, Penang would appoint an independent company to conduct the DEIA on the four projects.

Meanwhile, Lim added that Barisan Nasional must accept Pakatan Rakyat’s offer to set up a three-person committee to implement reforms that will stop the abuses highlighted in the annual Auditor-General’s Report.

According to him, only a high-powered committee, with the Deputy Prime Minister as chair, as well as the Opposition leader and the Auditor-General, would be able to “put fear into the hearts of those who betray the public trust given to those acting as a custodian of public funds”.

Source: The Star

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Do you know how much you are worth to the banks?

How many of you know how much you are worth, in terms of loan value, to the banks?

Did you know that you have a value to the banks?

We recently completed a workshop to share with newbie’s and investors alike, how to design their financial portfolio to receive millions from the bank. Students, young working adults and even retirees worked out methods and strategies to take down properties worth RM1.8 Million, up to RM6.5Million into their portfolio!

I would like to take this time to share a little bit from the course, to help some of you design your investment portfolio better.

Let’s talk about your DEBT SERVICE RATIO (DSR). Many people don’t know about this simple ratio that the banks use to determine a person capability to borrow.

A DEBT SERVICE RATIO is a tool that the banks uses to determine your capacity to take loans versus the amount of money that you make, on a monthly basis. The DSR may differ from bank to bank, but the following is probably the most common way many banks calculate these days.

DEBT SERVICE RATIO is as follows:

DEBT / INCOME £ 0.7

Where,

DEBT is the amount of loans calculated on a monthly basis.

INCOME is the nett monthly income (minus EPF, SOSCO & TAX).

And the total DEBT (including new loan installments) divided by the total nett monthly INCOME must not be more than 0.7 (or 70%).

Lemme give you an example;

Ahmad works as a IT manager, and draws a fix salary of RM5,300 (nett after deducting EPF, SOCSO and Tax). He just got married and now plans to buy house worth RM400,000. He is currently pays RM1,300 for a car loan and his credit card bills are averaging RM3,000 per month.

Can he afford to buy this property and how much home loans can he take?

Using DSR, Ahmad current ratio is as follows:

Current DEBTs is as follows:

Car Loan = RM1,300 per month.

Outstanding Credit Card amount = RM3,000.

Banks take a 5% of outstanding credit card amounts, to be minimum monthly payments, therefore,

Credit Card (minimum) installments    = RM3,000 X 0.05       = RM150

Therefore, his total monthly DEBT       = RM1,300 + RM150    = RM1,450

Ahmad’s current DSR = 1,450/ 5,300 = 0.27, which is less than 0.7. Ahmad is more than qualified to take a home loan.

Now, if you would like to know how much the maximum housing loan Ahmad can afford, then you just have to do the following.

DEBT + (Max New Loan Installments) / INCOME  = 0.7

Max New Loan Installments            = 0.7 X INCOME – DEBT

                                                              = 0.7 X 5,300 – 1,450

                                                              = RM2,260 per month.

Assuming Ahmad can take a 30 year loan at 6% interest rate, an installment of RM2,260 can allow Ahmad to take a loan of RM376,950. (You can use free home loan calculators online to determine the value yourself)

Therefore, if this is Ahmad’s first residential property, he can afford to buy a house worth RM400,000 with a 10% down payment and a loan of RM360,000.

I hope this illustration gives you a better view of how to calculate your DSR. My following article, I will share how you can design and maximize your investment portfolio using the DSR ratio.

Till then, happy investing!

Michael

Note from Editor: Michael will be in Penang this Saturday, 23 Mar to speak on the topic Property Outlook 2013 in Eastin Hotel, Penang. To register your seat, CLICK HERE NOW.

 

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