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Showing posts with label Properties. Show all posts
Showing posts with label Properties. Show all posts

Friday, October 15, 2021

Budget 2022 likely to be friendly to house buyers

 

https://youtu.be/YsuhuxDTjIA

Rerating of property sector justified


“We do not anticipate any new dramatic tightening policies, as this would derail the recovery of the property sector.” TA Securities Research

PETALING JAYA: Budget 2022 will likely contain elements that make home ownership and financing more accessible, according to TA Securities Research.

“Following the full reopening of all economic sectors this month, we expect that better market sentiment along with stronger recovery in economic and business activity to contribute to better developers’ sales prospects ahead, which will eventually translate into stronger earnings going forward,” said the research unit.

TA Securities Research maintained its “overweight” rating on the property sector, and said a rerating is justified, considering developers’ encouraging sales growth and attractive valuations.

“We do not anticipate any new dramatic tightening policies, as this would derail the recovery of the property sector,” it said.

Taking a cue from the recently announced 12th Malaysia Plan (12MP), it also opined that Budget 2022 would primarily focus on ensuring adequate, quality, and affordable housing, improving the living standard of poor households and monitoring and evaluating efforts as well as achieving urban sustainability.

It is anticipated that the focus of Budget 2022 would be to ease the burden of the B40 and M40 as their livelihood was largely affected by the Covid-19 pandemic.

Also, Budget 2022 should be primarily helpful to low-to-middle-income earners as well as to first-time home owners.

TA Securities Research is also hopeful for more measures to ease the burden of property owners by extending the real property gains tax (RPGT) exemptions along with lower RPGT rates.

Based on its channel checks, it said property developers’ wish lists and expectations for Budget 2022 include promoting homeownership among the low-to-middle income group, reiterating and broadening existing public housing schemes, making home ownership and financing easier, extending the Home Ownership Campaign to 2022, and a tax relief for mortgage interest.

Property developers are hoped for incentives such as a relaxation of requirements for the Malaysia My Second Home (MM2H) programme.

Despite the fact that the MM2H programme only accounts for a fraction of the overall number of homebuyers in Malaysia, it can nonetheless contribute to reducing the overhang of unsold properties.

“We note the recent adjustments to the MM2H programme criteria for new applicants could be extremely stringent, discouraging foreigners from settling and working in Malaysia,” said TA Securities Research.

Additional incentives are needed to promote green development in Malaysia and to encourage developers to adopt accredited green certification tools during the construction and operation phases of development projects.

The government should grant additional tax incentives to developers of green-certified buildings, allowing them to claim income tax deductions equal to the additional capital expenditure required to obtain green certification.

On top of that, the government may consider offering stamp duty exemptions to purchasers who acquire properties that have been certified as environmentally friendly in order to stimulate demand.

“This is primarily to address the higher cost of green building construction in comparison to conventional buildings, which may deter potential buyers from making the investment,” said TA Securities Research.

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Government Budget in Malaysia increased to -3.20 percent of GDP in 2020 from -3.40 percent of GDP in 2019. source: Ministry of Finance Malaysia

Malaysia Government Budget

Malaysia Government Budget
 
Government Budget is an itemized accounting of the payments received by government (taxes and other fees) and the payments made by government (purchases and transfer payments). A budget deficit occurs when an government spends more money than it takes in. The opposite of a budget deficit is a budget surplus.
 

Malaysia Last Unit Reference Previous Highest Lowest
Government Budget -3.20 percent of GDP Dec/20 -3.40 2.40 -6.70


Sunday, August 2, 2020

It’s the right time to invest’


We found that data availability and transparency in the real estate sector is less than what we were used to when we were working in the financial industry and we are set to change that, ” says Red Angpow co-founder Erhan Azrai.


PETALING JAYA: Even as many consumers are cautious in purchasing high-ticket items in light of the Covid-19 pandemic, industry experts say sale of properties and cars have been rising since June.
Real Estate and Housing Developers Association (Rehda) Malaysia national council member Tony Khoo Boon Chuan said property sales had picked up since June, thanks to lower interest rates and the extension of the government’s Home Ownership Campaign (HOC) until 2021.

“No doubt buyers are guarded when buying high-priced products.

“But others who are not affected financially also realise the time is here to buy or invest in a new property, ” he said in an interview.

Apart from the HOC’s 10% discount on the selling price, Khoo said buyers also enjoy incentives such as stamp duty exemption, free legal fees and freebies such as home security and alarm systems, additional cabling, fittings and fixtures.

“There are so many choices with perks and benefits in the market now for buyers.

“This is indeed the right time to invest, ” he said.

HOC is a government initiative in 2019 aimed at supporting homebuyers, and it has been reintroduced in June under the Penjana economic revival plan.

Khoo noted that the government’s exemption of real property gains tax for Malaysians for disposal of up to three properties had made it easy for property sales in the secondary market.

“This will certainly encourage a lot of investors and buyers who are looking to upgrade, ” he said.

In the automotive industry, both new and used cars have seen brisk sales in recent months, with foot traffic at showrooms having increased tremendously.

Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said new car sales improved to 42,000 in June, compared with 22,000 in May, following the government’s announcement to remove the sales tax for certain categories of vehicles.

“Many car companies are offering lots of discounts and attractive hire purchase rates to entice customers, ” she said.

Although many car buyers are still cautious, she said premium cars purchases did not see much problem.

In fact, Aishah said MAA had readjusted the forecast of Malaysia’s total industry volume to 470,000 for this year, versus the earlier forecast of 400,000.

Federation of Motor and Credit Companies Association of Malaysia president Datuk Tony Khor Chong Boon agreed, adding that the used car market had also experienced tremendous growth in July.

“June sales were on par with full recovery following the recovery movement control order.

“July was very encouraging with 37,880 units sold, which is 25% higher than the same month last year, ” he said, adding that it was the highest monthly sales achieved in the last five years.

In contrast, he said used car sales only chalked up 303 units in April, when the usual monthly figure was between 30,000 and 35,000 units.

Khor said several factors contributed to the recent good vibes in the automotive industry, with measures introduced in the government’s economic revival plan shown to work.

“The moratorium has allowed some to have more money to spend, while the sales tax exemption has stimulated sales.

“Some buyers choose to get a car due to concerns about physical distancing and hygiene in public transport, ” he said, adding that used cars costing around RM30,000 were popular.

He noted that brisk sales of used cars resulted in a long waiting time for inspection at Puspakom, with a minimum wait time of at least five to seven days, and even 10 days or more at some locations.

When asked, Khor said it was hard to predict how long the good vibes would last because the real challenge would come when many borrowers are required to pay when the moratorium is lifted beginning October.

“To keep the market and economy stimulated, the government has to periodically come out with relevant measures and policies, ” he said.

Human resource executive CW Lim, who has been househunting for a few months, said he would make use of the discount and offers to buy a house in the Klang Valley.

“With the HOC, I’ll be able to save tens of thousand in downpayment, stamp duty fees and legal fees that could take me years to save up.

“Since my job and industry is not affected much, I hope I will soon own a house through these offers, ” said the 30-year-old from Klang.

Clinic nurse Farisha Azman, 29, who has been commuting to work from Subang Jaya to Shah Alam daily using the train, said she was in the process of buying a new car.

“Not having to worry about distancing on the train gives me peace of mind, ” she said.


Serving property investors’ needs

WITH the property market expected to remain soft over the next few months, tech startup RED ANGPOW Analytics is hopeful that property owners will be knocking on its doors for help to better manage their asset portfolios.

The company does online map-based real estate due diligence, feasibility study and price analytics.

“We foresee asset holders requiring good information to manage their portfolios. Data on past transactions that have been useful will no longer be enough.

“We found that data availability and transparency in the real estate sector is less than what we were used to when we were working in the financial industry and we are set to change that, ” says Red Angpow co-founder Erhan Azrai.

The startup generally has two groups of target clients, which are development-based organisations and individuals who use research to make decisions such as property investors, analysts, researchers, valuers and banks. Red Angpow’s services are not only useful for developers, but also related industries that are supporting real estate.

Erhan notes that clients are becoming savvier and are looking for more opportunities in the soft property market and they will need more relevant data to make their investment decisions.

“After the 1997-1998 financial crisis, the National Property Information Centre (NAPIC) was created to provide accurate and timely information on the property market.

“In the current environment, we believe the timing is right for an enhanced service.

“In the longer term, there is a need to increase the efficiency of the real estate market with a lot more data transparency.

“From the work that we have done so far, we saw that a lot of data is actually available, but it is unstructured and comes from multiple sources.

“Before we can compile all this data via an artificial intelligence means, we are doing the very basic first, which is getting the data cleaned, tagged and harmonised in a form that can be used easily by researchers, ” he says.

He adds that ensuring property investors have timely and accurate data has become even more important now as real estate loans make up a sizeable portion of total loans.

As of February 2020, Erhan notes that real estate loans in the banking system stood at RM836bil or 47% of total loans.

“This staggering amount needs better data to manage the portfolio, especially when industries are cutting jobs. A 10% downward correction will affect up to 5% of the total loan portfolio, depending on the age of the loan asset. That’s a huge amount.”

While the movement control order (MCO) has hindered some of its plans, Red Angpow has been fortunate to have raised enough capital to weather the course for the next two years.

“So, we are going to stay the course. The MCO allows us to hunker down and complete our work. We planned to launch a subscription for property analytics dashboard by July. But we are confident that we will hit the ground running once again after the MCO is lifted, ” he says.



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Sunday, March 10, 2019

The single worst financial decision


Buying a new car is regarded as a waste of money

  WHEN I discussed whether to buy a car or a house first in my last article, I received a lot of feedback from friends and readers. Someone even sent me an interesting article entitled “Buying a New Car Is the Single Worst Financial Decision”.

The remark was made by Davis Bach, a self-made millionaire who is also one of the American best-selling financial authors, a motivational speaker and an entrepreneur.

That was a bold statement but not without basis. In the article published by CNBC Make It, David Bach said, “Nothing you will do in your lifetime, realistically, will waste more money than buying a new car.”

He pointed out that a car's value drops 20% to 30% by the end of the first year. In five years, it can lose 60% or more of its initial value. And, most people actually borrow money to buy a car.

“Why would you borrow money to buy an asset that immediately goes down in value by 30%?” says Bach.

His views concurred with the idea I have been sharing in this column over the years.

In my last article, I mentioned the value of my friend’s car dropped 70% from RM140,000 to RM40,000 over eight years. On the other hand, another friend who bought an affordable apartment during the same time, enjoyed a huge capital appreciation as the apartment increased from RM100,000 to more than RM200,000 during the same period.

Both borrowed money to buy their house and car respectively. However, there is a clear contrast between the two items by looking at their long-term values. A house is an appreciating asset, and a loan on such an asset I like to call a “Good Debt”; while a car losses money, and is therefore deemed as “Bad Debt”.

Not only does a car depreciate in value, but owning a car also comes with expenses such as petrol, maintenance, licence, toll, insurance and parking costs. A person who owns a normal sedan car and travels about 1,000 km per month, can easily spend about RM1,500 per month for car loan repayment and other relevant expenses.

With ride-sharing services (such as GrabCar in Malaysia, and Uber & Lyft in other countries) becoming so convenient, and with the LRT and MRT networks being more developed, we can now choose to be car-loan free. Imagine having your own “driver” and able to use your time productively to read a book or relax when being caught in traffic jam. We are now able to enjoy this with ride-sharing services on call.

For a more economical approach, you can even opt for a "hybrid" transportation mode by combining ride-sharing and public transport services.

Chua, a reader from Muar wrote me an email last month. He shared his experience of not having purchased a property when he was young and only bought one when he was in his mid-30s due to some misperceptions.

“Looking back, how wrong I was! But today, there are just as many graduates who think just like myself when I was in my 20s and 30s. Therefore, your constant reminder to Malaysians is valid and practical. Instead of a new car, get a used car. Buy a medical insurance policy, pay EPF and try to buy a small property. These should be the priority of any young Malaysian,” Chua wrote in his email.

Bach, the self-made millionaire said, “If you’re spending US$500 (RM2,000) a month for that car, well, that’s US$6,000 (RM24,000) a year, not including the car insurance or the gas (petrol). That could be two months or three months of your income. Run the numbers and then ask yourself: Do you really need a car that's nice or could you buy a car that’s less expensive – maybe a little older – but still looks good and runs?”

That’s the sentiment that I had when I wrote about buying a house first before a car.

Buying a car may not be the single worst financial decision for everyone. There are different financial priorities at different stages of life. However, it may be the case if you buy a brand new expensive nice car prior to owning any long-run appreciating asset or investment, like a house!

Food for thought by Alan Tong

Datuk Alan Tong has over 50 years of experience in property development. He was the World president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email bkp@bukitkiara.com

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Saturday, August 4, 2018

Coming recession in 2020? Possibly earlier

Negative rates: Pedestrians walking past the Bank of Japan (BoJ) headquarters in Tokyo. BoJ’s goal remains at keeping real interest rates as negative as possible, as long as the economy performs. — Bloomberg
IT’S mid-term review time as the US yield curve begins to flatten.

This curve tracks the relationship between interest rates of US government debt obligations. Normally the yield curve is rising, with long-term bonds having yields higher than short-term obligations.

But occasionally the curve inverts, with long bonds yielding less than short Treasury bills – a historical predictor of future recessions and bear markets in stocks. Recently, the curve has become noticeably flatter, with short rates rising and longer yields remaining stagnant. This has led many analysts to think that the yield curve will soon invert.

But that does not mean a recession is imminent. Just returned from an extended visit back to Harvard. Touched base with my mentors and professors at both extremes of the economic spectrum. They are all split on what this flattening really means. In the event it does invert (the gap today being below 0.3%), recession has almost always (over the past 50 years) followed within a year or so. But few see a recession soon on the horizon.

The first half has come and gone. The ongoing transition to more normal conditions continue in the context of a robust US economy; continued progress in the orderly normalisation of US monetary policy; and re-awakened sensitivities to geopolitical and protectionist risks.

There will be higher interest rates, some inflation concerns and trade tariffs coming-on in the context of markets more readily accepting two to three more rate hikes by the Fed in 2018. The prospect of a global trade war makes everyone very cautious.

Once we start down the road of tariff increases and threats of more to come, the dangers of retaliatory miscalculations are real and very scary. Still even an inverted yield curve should not be on top of our worry list under today’s accommodative monetary conditions.

Synchronised pick-up

The world economy benefitted from four drivers of higher growth: the healing process in Europe, re-bound from slowdowns in Brazil, India and Russia; soft landing in China; and pro-growth measures in US.

To persist, Europe needs to do much more. Also, there is hope that recent tariff tensions would eventually lead to fairer and still-free trade which recognises the inter-dependent nature of global supply chains, and show greater willingness to protect intellectual property rights, modernize trade arrangements and reduce non-tariff barriers. Yes, more rate hikes from the Fed are still on the cards. But the same by the European Central Bank (ECB) and Bank of Japan (BOJ) demand trickier manoeuvring.

This is an area that warrants close monitoring since volatility will likely persist. At least for now, fears of Japan-like deflation in US and Europe are effectively gone. But OECD is worried global growth is not yet self-sustaining. It’s strength in 2018 is largely due to monetary and fiscal policy support – and lacking in rising productivity gains and sweeping structural reforms. In Europe, the “clock is ticking”; without reforms, more populist uprisings will appear as the upswing ages and then fades. US inflation is not only returning to the Fed’s 2% target, but also likely to exceed it. In Europe, consumer prices were last still lower than a year ago – below the ECB’s target of just below 2%. Fear of the spectre of deflation has led BOJ to remain cautious about tapering its monetary easing program. Will just have to wait and see.

IMF warns that the world’s US$164 trillion debt pile (at 225% of GDP) is bigger than at the height of the financial crisis a decade ago. One-half was accounted for by US, Japan and China. What’s needed is for US fiscal policy to be recalibrated to bring down the government debt to GDP ratio (80%) and for China to deleverage its US$ 2.6 trillion private debt. There is no sign either is being done which runs the risk of triggering yet another financial crisis.

Growth will falter

Growth in US can slow considerably when the boosts from last year’s tax-cuts in US fades in 2019 and 2020. IMF now warns that US will grow at about one-half the 3% annual pace forecast by the White House over the next 5 years, reflecting the effects of growing massive fiscal deficit and continuing trade imbalance. For US, sluggish productivity remains a key determinant. In 2Q18, GDP picked-up to rise 4.1% (2.2% in 1Q18) the fastest pace in nearly four years, reflecting broad-based momentum.

But worker productivity advanced 1.3% from a year earlier, consistent with the sluggish 1.2% average annual rate in 2007-2017, well below the better than 2% annual average since WWII. Spending by consumers, businesses and government as well as surging exports all appeared solid in 2Q18. The expansion enters its 10th year this month, building on what is already the second longest expansion on record. Faster growth which has helped to drive the unemployment rate to its lowest level in 18 years, fueled quick corporate profit growth.

Median estimates place GDP growth at 2.8% in 2018, 2.4% in 2019 and 1.8% over the long run. But everyone has growth slowing next year because of falling business and consumer sentiment, reflecting trade disputes with China and many US allies, and uncertainty whether rising business investment is sustainable.

The big concern is the economy overheating – already, it is bumping up against capacity constraints as labour markets tighten. Still, the consensus is that the next downturn will not arrive until 2020. Most economists expect 3% inflation over the next year. What worries me most is the deteriorating global political and strategic environment.

Not so much the economic outlook directly. The world is changing too much, too fast.

So much so, the geopolitical situation is getting worse – open warfare between Israel and Iran, the disgraceful state of Palestine, and uncertainties surrounding Donald Trump and Vladimir Putin, and lack of leadership in Europe. Trade barriers are causing much anxiety. It is as though what’s put in place since WWII isn’t worth a damn anymore.

Europe and Japan

Latest indications from the Brookings-FT Index for Global Economic Recovery (Tiger) show global growth has peaked and momentum has started to fade. Indeed, financial markets are already reflecting mounting vulnerabilities. With weak economic data in 1H’18, Europe and Japan have since cooled. In late 2017, eurozone was still growing at 3.5%: Germany at 4%, France 3%, Italy 2% and Spain 3.5%. But activity slackened to only 1.2% in early April; even Germany recorded a sharp dip – down to only 1%, reflecting waning monetary easing effects and supply-side constraints. The outlook is for a strong above trend upswing for the rest of the year. OECD now expects GDP growth in 2018 to be 2.2% (2.6% in 2017) and in 2019, 2.1%.

For eurozone, the window for reforms is closing – ranging from the implementation of dual currencies for its members to putting European Parliament in charge of economic policy, including the euro-budget. Japanese GDP shrank 0.1% in 1Q18 despite a rise in capital investment. Household spending unexpectedly fell. Still, recovery is expected to be driven by a weak yen brought about by monetary stimulus (BoJ has been buying assets at US$740 billion a year to drive down long-term interest rates). But underlying inflation is stuck at 0.5%. BoJ’s goal remains at keeping real interest rates (after inflation) as negative as possible, as long as the economy performs. OECD forecasts growth in Japan to be 1.2% in 2018 (1.7% in 2017); the same in 2019.

China and BRICS

Many emerging markets (EMs) are still enjoying momentum from 2017, but there is growing concern about rising debt and vulnerabilities to capital flight as interest rates in US rise. For those recently emerged from recession, viz. Russia, Brazil and South Africa, their urge to return to strong levels of activity remains sluggish.

China and India have fewer concerns for their immediate outlook. Still, they need to reform their economies to help raise living standards to catch up. The main challenges will be to execute particular reforms – not just to the financial system but also to SOEs and local governments, including getting rid of corruption.

China’s GDP rose 6.7% in 2Q’18, the slowest pace since 2016. Retail sales held up rather well as did exports. Still, measures to curb rampant borrowing are biting – investments in infrastructure and manufacturing by SOEs and local governments have since slackened. These efforts, in the midst of headwinds from abroad (especially protectionist tariffs), have led to downgrades in growth for the rest of the year. IMF now forecasts GDP growth in China to average 6.5% in 2018 (6.8% in 2017) and about the same in 2019.

Recent depreciation of China’s currency, the yuan, exposes crucial vulnerabilities within the world’s second-largest economy as it faces escalating trade tensions with the US. The currency posted its biggest ever monthly fall against US$ in June (3.4%) and has since lost more ground. This slide marks a departure for the currency often regarded as an anchor of stability for Asia and other EMs.

As Beijing assesses the options, it finds itself between a rock and a hard place because (i) People’s Bank of China (PBoC) intervention means selling its US dollar stash of reserves – which stood at US$3.11 trillion in June; (ii) it could instead raise domestic interest rates, thereby making the currency more attractive which might help to shore up the yuan. But it also risks weakening an already slowing Chinese economy just as the trans-Pacific trade war starts to bite; and (iii) it could impose stricter controls on China’s capital account which will likely spook overseas funds that have rushed into China’s domestic bond and equity markets this year at an unprecedented rate.

However, to internationalise the yuan, China has to keep fund flows relatively unencumbered. The PBoC has sensibly pledged to keep the RMB “generally stable.” In July, China implemented a mix of tax cuts and greater infrastructure spending citing growing uncertainties, as it ramps up efforts to stimulate demand to counteract a weakening economy.

As for India, I wrote extensively on what’s happening there (my July 2018 column: “India: Chugging Along but Needs More Firepower” refers).

What then are we to do

As I see it, China and China-India centred Asia is now the heart of the world economy. Their steady growth has been a source of stability in an otherwise unsteady world.

Of late, developments in China received more scrutiny than usual because of the context: Chinese stock market has since fallen into bear territory, and a growing trade dispute with the world’s largest economy, US. Despite China’s astonishingly sustained expansion, the economy is widely considered vulnerable because growth in output has been underwritten by an even faster increase in debt.

The nation’s gross debt – both public and private – is now estimated at over 250% of GDP. The worry is not just the volume of debt but its quality. China’s domestic policies encourage high savings.

Those savings, held in banks, have been funneled to companies, especially SOEs. The credit quality of the loans is hard to assess but is likely to be uneven. China has since begun to slowly tighten the credit taps, with even tighter rules on shadow banking and more scrutiny for both local government financing and public-private investment projects.

At the same time, a sharp increase in the number of defaults by corporate issuers has revived anxieties about Chinese debt. In my view, it is the tighter credit conditions and defaults, rather than worries about a trade war, that best explain the recent 22% decline in the Shanghai Composite index from its January highs.

Tightening credit policy is also a compelling explanation for the weak macro-economics. Credit growth fell, and growth in fixed investment followed. This appears to be having some effect on consumer sentiment as well.

No doubt, Trump’s tariffs on US$50bil of Chinese imports (and threatens US$200bil more) will have a direct (but unlikely to be catastrophic) impact on growth. But China is now an investment-led rather than an export-led economy.

Still, it is the knock-on effects that are most feared. If the escalation of hostilities leads to a reduction in foreign direct investment in China, the long-term impact could be significant. True, China may be facing a delicate moment economically.

But given China’s deepening role in the world economy, any pain that the US manages to inflict on it would be quickly shared with the US and the broader world – at a moment when Europe’s economy is slowing, and many EMs looking unstable.

On the whole, China’s economy will remain strong and resilient. Whatever happens, I think this won’t change the Chinese situation much.


By Lin See-yan - what are we to do?

Former banker Tan Sri Lin See-Yan is the author of The Global Economy in Turbulent Times (Wiley, 2015) and Turbulence in Trying Times (Pearson, 2017). Feedback is most welcome.

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Friday, February 24, 2017

Investing in property to let may not be a good idea



Buying to rent may not be a good idea


RENTING out a house or apartment used to be a source of income that would help to pay back the loan instalment or increase one’s available income.

Today, this is no longer a good idea, particularly for those whose income is just enough to meet their needs in the near- or short-term. This is because many people have become less honest.

Those who buy a property with the idea of renting it out may find themselves dealing with a delinquent tenant. To illustrate the situation, I reproduce part of a letter from a reader who is having sleepless nights.

“I have rented an apartment to a Bangladeshi family for a monthly rent of RM900 for several years without a written tenancy agreement. The rental payment went on smoothly until roughly nine months ago, when the tenant started delaying payment of both rental and water.

The rental and water payment was owed several months. Every time he said he would pay, but ended up not paying. He now owes me more than three months rent and more than six months water and has refused to move out, saying he needs time to find a place.

What can I do to get him out, if he continues staying without payment? People have advised me to lodge a police report and get the Rela to forcibly move him out. Is it legal to cut off the water and/or force the tenant out?”

To start with, it is legally wrong to disconnect the electricity or water. Once rented out, the tenant acquires a special kind of right to be on the premises.

A breach by him allows the landlord to terminate the tenancy. Thereafter the tenant becomes liable to pay double rent. The landlord should get a court order to evict him. I don’t think making a police report or approaching Rela will help.

This does not go very far in hel­ping the reader, but what I have to say could help readers who are renting out their property of the type referred to, or who are planning to do so.

Such a person should consider carefully whether he has sufficient spare funds if he is taking a loan. If he is a cash buyer or has resources to pay the instalments then it is fine.

This is because rent will not roll in immediately once the property is ready. There will be a need to spend time and money on putting in some basic fixtures. Time may be required to find a tenant.

In the meantime, the loan instalments will become payable and if he is unable to pay, these will add up and attract penalty interest, increasing the amount of the loan. There will be an added problem if the tenant is only able to pay rent which is less than the instalment.

So what could a landlord do to safeguard himself? The landlord should have a written agreement, and should require at least three months’ deposit at the outset and one month’s rental in advance, with the rental to be paid on or before the seventh day of each month, if not earlier.

Breach of these requirements would entitle the landlord to terminate the tenancy forthwith and require vacant possession.

Once the landlord has put himself in this position, he must monitor the payment of the rent. The tenant may pay late, but the landlord must not keep quiet. When there is a delay in payment but he pays within the month, you must give him a warning that the late payment is a breach.

The need to do this every month is important, because if the landlord allows the tenant to do this repeatedly, the law may regard this as acquiescence and a waiver by the landlord of the obligation to pay on the stipulated date.

If the tenant has not paid for two months the landlord should, by the middle of the second month, terminate tenancy and ask him to vacate the premises. At this stage the landlord has one and half month’s deposit, which allows him to have time to take meaningful action against the Tenant.

Chances are that if the landlord proceeds with such promptness, the tenant will come forward and resolve the matter.

As a term for allowing the tenant to stay on, the landlord could require the tenant to pay the legal costs. In such an event, the tenant would in future pay the rent regularly or he would leave, allowing the landlord to let the premises to another tenant.

Going to court can be costly, but the landlord should not just give up. He should approach a lawyer who can help him with the problem. Not all lawyers are out to make big profits from every client. Some lawyers will even do it for a very low fee, just to help the tenant.

Going to court will look harsh and is something that the owner may not like to do. This is because, at the point of renting, tenants project themselves as very decent and nice people who have every intention of paying the rent promptly. The issue here is: does the owner want his rent to be paid?

If the owner wants to be kind, then the tenant is likely to take advantage of him and drag on the non-payment. Of course, if the landlord is so inclined, he must be prepared to pay the price for being nice.

Law For Everyone By Bhag Singh The star

Any comments or suggestions for points of discussion can be sent to mavico7@yahoo.com. The views expressed here are entirely the writer’s own.

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Sunday, April 3, 2016

The allure of Penang heritage properties

Prized property: The Chimes Heritage building at Jalan Bawasah, Penang. The value of heritage properties has increased by 37 to 157 per sq ft since 2008 due to the investments made by Penangites staying overseas and by Singaporeans.

Value of such assets has jumped by as much as 157% psf


THE heritage property segment is still attracting strong interest from investors despite the softening of the overall property market in Penang.

The value of heritage properties has increased by about 37% to 157% per sq ft (psf) since 2008 due to investments made by Penangites staying overseas and by Singaporeans.

Depending on the location, size, and condition of the heritage properties, the present pricing on a psf basis ranges from RM550 per sq ft (psf) to RM1,800 psf, compared to between RM400 psf and RM700 psf in 2008.

According to the National Property Information Centre (Napic), a locally registered company, World Class Land Sdn Bhd, snapped up over 60 pre-war houses in George Town’s heritage areas for about RM122mil.

Raine & Horne Malaysia senior partner Michael Geh says the properties were sold between late 2013 and August 2015.

“The most expensive pre-war property, with a 1,363q ft land area and located in Chulia Street, was sold for over RM2,000 psf,” he says.

It is learnt that about RM30mil would be spent for restoring the properties, as the cost of restoration is about RM500,000 per unit.

The company also acquired a 30,000 sq ft of land in Magazine Road for about RM36.9mil. “This was the highest transaction for a vacant land in 2015, as the sale was transacted at RM1,250 psf,” Geh adds.

Geh says locals tend not to pay attention to the capital appreciation of heritage properties, although the value had risen substantially since 2008.

“They should invest because the supply of heritage properties is limited.

“There only some 3,853 units of such properties in George Town’s heritage core and buffer areas, according to George Town World Heritage Inc.

“Because the supply is limited, it is safe to invest, as the value would tend to rise than fall.

“I urged Penangites to acquire heritage properties for own use and enjoy the capital appreciation that would occur incrementally,” he says.

Because of the strong appreciation in the value of pre-war houses, the rental yield of such properties has remained unattractive.

In 2008, the rental of heritage properties, depending on the location, size, and condition of the heritage properties, ranged between RM1,000 and RM3,000, compared to the rental today which is between RM3,000 and RM8,000.

“Calculated on a yearly basis, the rental yield is not attractive.

“Today the yield is about 4.8%, compared to about 4.5% in 2008

“This shows that the value has appreciated faster than the rentals, as there is very little demand to rent properties in the state,” he says.

According to Geh, local investors should pay attention in particular to the heritage properties in the Prangin Market or Sia Boey area, as it has been earmarked for the location of the central LRT station on the island, which would boost the value of the properties in the area.

Meanwhile, the Malaysian Institute of Architects (PAM, Northern Chapter) chairman Datuk Lawrence Lim says the cost of restoring heritage properties has increased by about 40% since 2008.

“Today the cost to restore such houses ranged between RM150,000 and RM500,000 per unit.

“A simple restoration for a heritage property with a 2,000 sq ft built-up area can cost about RM150,000.

“It cost just RM50,000 to restore the roof of a heritage house,” he says.

Despite the increased in the cost of restoration, there are local investors who are still investing in heritage properties.

Lim, who is also East Design managing director, says the company was now undertaking restoration projects for heritage houses in Hong Kong Street and Magazine Road.

“We will be restoring the Koon Kee office building at Hong Kong Street, the manufacturer of Penang’s famous white coffee.

“The other project involves the restoration of 10 pre-war units in Magazine Road for commercial usage,” Lim says.

Datuk Ooi Sian Hian, who is also Ghee Hiang group executive chairman, says he will be restoring the heritage property of his family’s maternal grandparents at 123 Macalister Road.

The property, measuring 3,600 sq ft in built-up area, sitting on a 30,000 sq ft site, was built in the 19th century, and came under the ownership of Ooi’s maternal grandparents in the 1950s.

“We are getting local architects and architectural students through the assistance of PAM to come up with a suitable design concept to restore the property.

“It will be up to the architectural fraternity to decide on the appropriate design concept for the property.

“Whether it will be restored for commercial or residential usage will depend on their design.

“We plan to kick off the project in two year’s time,” Ooi says.

Ooi’s family has 10 properties at Prangin Lane, nine of which he will restore at a later date for commercial re-use.

“The properties have been passed down from the maternal grandparents.

“We want to wait and see what the market for restored heritage properties is like first, as there are already in the market many such restored heritage projects.

“We also want to wait for the state government’s Sia Boey project to be completed first, as the site has been earmarked for a LRT project hub,” he adds.

Ooi says he is submitting a plan to restore the tenth heritage terraced property located in Prangin Lane, which has a built-up area of 1,620q ft.

“We are naming it Jumpa@41PranginLane, which will be restored as a event centre for pop-up markets, seminars, stage plays, and culinary events,” he says.

Under Ghee Hiang, the group is now restoring its heritage property at 61 Beach Street, which has over 3,000q ft in built-up area.

“It is the Ghee Hiang Group’s Concept Lifestyle In-Store, which will be designed to accommodate a living heritage museum showcasing the history of the group’s history and tau sar pneah products and a lifestyle themed cafe,” he says.

Khoo Kongsi trustee Datuk Khoo Kay Hock says the clan association has restored 16 pre-war properties and had leased them to a hotel operator.

“The properties are undergoing interior refurbishment now, and scheduled for opening in the second half of 2016.

“About RM4mil was invested to restore the properties, which were completely restored two years,” he says.

According to George Town World Heritage Inc general manager Dr Ang Ming Chee, there are 3771 heritage properties in George Town belonging to category II.

“Category II properties are those residences and business premises that have existed for generations.

“They were built to support the traditional beliefs of the inhabitants and users.

“In the George Town’s World Heritage Site (WHS), there are 82 buildings, gateways, cemeteries, and sites categorised as Category 1.

“Category 1 buildings and monuments are important because they reflect the authenticity of the cultural landscape and therefore the outstanding universal values of the world heritage site (WHS),” she adds.

By David Tan The Star

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Monday, March 21, 2016

Foreign funds comeback, rising interests in Malaysian properties and equities

Foreign interest in Malaysian real estate picks up: Knight Frank


KUALA LUMPUR: Foreign investors' interest in Malaysian real estate, particularly commercial property, is picking up due to the weakened ringgit, said Knight Frank Malaysia Sdn Bhd.


"What we are noticing is that given the ringgit is currently at one of its lowest (levels) in the last many years, interest in Malaysian real estate is actually now coming back because people feel there is upside not only in terms of capital value appreciation but also the fact that the ringgit will move back possibly to better levels. We are certainly seeing this," its managing director Sarkunan Subramaniam told reporters at a briefing on Knight Frank's The Wealth Report 2016 yesterday.

Executive director James Buckley said it has been seeing interest from the Middle East and the US who are typically opportunistic investors attracted by the currency play here which, combined with the slightly subdued property market fundamentals, makes it a good time for them to enter the market.

"I've got two significant groups coming this week ... one from the US, one from Japan. It's a regular basis now and has been picking up from last year. A lot of them are doing initial trips to understand the market a bit better. They are really focused on commercial investments so the office market, retail market and some are interested in hospitality assets as well," he said.

Buckley said in the past, foreign investors investing in Malaysia were typically from Japan and the growing interest from the US is surprising as the Malaysian market is small compared with the US market.

He said these investors are attracted by the currency and the slight oversupply of office space in Kuala Lumpur.

"It is a good time for them to negotiate some good deals here," Buckley said, adding that most of the foreign interest in Malaysia come from Korea, Japan, Singapore and the Middle East.

Meanwhile, the trend among local property investors is also changing, with interest moving from office space and agricultural land to office, retail and hospitality assets. However, residential property remains the core real estate investment for Malaysians.

"In the global context, interest in commercial property is growing quite strongly. What came out of The Wealth Report is that 47% of UHNWIs (ultra high net worth individuals) are expecting to increase their allocation in commercial property. In the Malaysian perspective, we do see a gradual rise in the interest in commercial property. Particular popular choices for Malaysians are office and retail investments, and they are looking to increase their exposure to these assets over the next 10 years," said Buckley.

He said there is a misconception that investing in commercial property is more complicated while some feel they lack experience investing in this sector but interest is picking up as investors are becoming more familiar with the market and understand better the benefits of investing in commercial property.

The report showed that Malaysian high net worth individuals (65% of survey respondents) have increased their asset allocation to residential property.

Moving forward, 65% of Malaysian survey respondents said they will increase asset allocation to residential property in the next 10 years.

In terms of property purchases this year, 39% of Malaysian UHNWIs said they are considering residential purchases. This is more than 29% of global UHNWIs who intend to buy residential property this year.

On average, Malaysian UHNWIs own more properties (4.7) compared with the global and regional average of 3.7 and 3.92 respectively. As for overseas investments, the top three locations for Malaysian investors are Australia (Melbourne), the UK (London) and Singapore.

Bulls making a comeback


Foreign funds are putting money in emerging markets


HUMAN beings have a natural tendency to fear heights – it’s a natural survival instinct which worked well in the wilderness and in the outback, but one which severely plays against us when it comes to the stock market.

Seven years ago, back in early 2009, these were some of the top financial headlines in the US:

> Georgo Soros says US banks ‘basically insolvent’

No one knew it then, but the Dow Jones was about to embark on a seven-year bull run and would gain some 92% over that period. Riding along was the FBM KLCI, which gained 85% over the same period.

For sure the ride has been bumpy and riddled with sharp corrections. But for investors who held on to their stocks, they would have been rewarded with handsome returns.

For any investor invested in the market – volatility will always be there. But as long as they are able to endure the frailty and fluctuations of the market, the long-term rewards historically outweigh the short-term fickleness.

We have heard it many times before – the best time to own stocks is when sentiment is at its worst,

This was especially apparent in early 2009 when the US economy was on the brink of a banking collapse, In those dark days, there were more forecasts of Black Mondays than predictions of light at the end of the tunnel.

Eng: ‘The market has had a good run since January.’
Eng: ‘The market has had a good run since January.’

The stock market, as always, had a mind of its own. Despite the proclaimation of dooms and the fall of many American banks, the Dow was heading almost on a straight upward trajectory by mid-March 2009. 

Sir John Templeton said: “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”

That was true seven years ago, 50 years ago, and definitely just as true today.

Logically speaking, what comes down must go up.

Earnings can still be nasty, but doesn’t the market always behave a year forward. At the heart of it all, the market is made up of buyers and sellers. All it takes are a few buyers during a down period to sniff out an opportunity, and suddenly, the market is edging upwards.

It’s the same story with oil prices. Do not expect the coast to be completely clear – for example no more excess inventories, oil demand significantly outpacing supply or the Organisation of the Petroleum Exporting Countries (Opec) deciding to cut production by 50% – before we see oil prices moving up.

By the time these signs are crystal clear, oil prices have made new highs months ago.

In any case, last week the International Energy Agency (IEA) said that oil prices had bottomed out due to US and other output cuts outside the Middle East-dominated Opec.

The US rig count fell for a 12th straight week last week to a total of 386, its lowest since December 2009 as drillers continue to slash capital expenditure.

Zulkifli: ‘These are still early days of a recovery. People are still sceptical ...’
Zulkifli: ‘These are still early days of a recovery. People are still sceptical ...’

The problem now is that after a seven-year run, investors are getting nervous. Investors have mostly been in a flux wondering where the market is heading. Most investors are waiting for the crash to come. They talk about a sluggish economic outlook, falling earnings, recessions in commodity-heavy nations, slowing growth in China, negative interest rates, the end of quantitative easing in the US, the UK (potential Brexit) and flatter yield curves. 

Has the market stalled and lost some of its stamina? With the expectation only of mediocre growth and low yields, is it time to sell stocks?

Behind the scenes, some under-appreciated indicators are starting to show some light.

First of all, the ringgit has been strengthening – a reflection of foreign money coming back to Malaysia. It strengthened 0.6% this week to RM4.09 against the greenback.

Last week, foreigners bought listed equities amounting to RM1.04bil on Bursa Malaysia, higher than the RM972.2mil acquired in the preceding week. To date, there are some 12 consecutive weeks of total net inflows and brings cumulative year-to-date foreign purchases to RM1.6bil.

For the entire 2015, there was a net outflow of RM19.5bil.

Meanwhile the FBM KLCI closed at 1,703.19 on Thursday, which is also its six-month month high. The seven-month high is 1,744.19 recorded on Aug 3, 2015.

From a charting perspective, a recovery in the FBM KLCI appears to be playing out.

“We reiterate our view that KLCI must close above 1700 levels convincingly to sustain the ongoing rally from 1600, with key upside target at 1710 (March 7 high), 1727 (Oct 19 high) and 1740 (200-day simple moving average) levels. Failure to close above 1700 will see the index continue its short-term congested range-bound consolidation within the 1660-1700 territory,” says Hong Leong analyst Nick Foo.

Etiqa Insurance & Takaful head of research Chris Eng, on the other hand, feels that the market is toppish for now.

“The market has had a good run since January. It may have a few more legs to run, but come April, it will be earnings results in the US, and in May, it will be earnings result in Malaysia. We aren’t expecting very positive earnings coming out, so market may start falling again by April,” says Eng.


From a trading perspective, he would ask clients to sell into strength.

On a fundamental perspective, however, he isn’t expecting a recession, well at least not this year. He would still advice investors to stay invested in equities.

“We are expecting some weakness in the market come middle of the year. That would be a better time to buy. We would identify that weakness and look for opportunities then,” says Eng.

MIDF Research has been recommending its clients to start buying since the start of the fourth quarter last year.

“These are still early days of a recovery. People are still sceptical, especially retail investors. But we have been tracking the money flows, and foreigners have been net buyers every single day of the 14 trading days so far this month, which is a phenomenon not seen in more than two years” said Zulkifli Hamzah, head of MIDF Research.

According to Zulkifli, the Malaysian equity market is benefiting from a tide of global liquidity flowing into Asia. Some of the money is actually global funds in China, being reallocated to other Asian markets as the outlook in Asia’s biggest economy is challenging.

“In the bond market, Malaysia started to look attractive to the foreigners as early as September last year. The low global interest rate environment, with negative rates in some countries, has made local yields very attractive indeed. That is reinforced by the depressed Ringgit,” said Zulkifli.

“Overall, we are positive on the market. Sceptism of the market has been partly due to the relatively restrained climb in the index. But this has been due to selling by local funds, which are understandably taking the opportunity of the market’s upward march to realize their profits. We also do not expect to see such a steep incline in the indices because of rotational forces at work,”

“Global investors are not going to come in and buy blindly across the board although the Ringgit is seen as undervalued. They will be selective and buy only those stocks that they see value. We believe the current uptrend has legs. However, there are potential potholes which may cause temporary retracement, at which point it would be opportune to enter the market,” said Zulkifli.

He added that the changing of guard in Bank Negara and the Sarawak state election would be closely watched by foreigners.

No rate hike is good for Malaysia

On Wednesday, Federal Reserve officials lowered their view of the economy and said they likely won’t raise interest rates as swiftly as they had previously anticipated as there are lingering risks posed by soft global growth and financial-market volatility.

Policy makers left short-term interest rates steady and said they would raise their benchmark rate just twice this year, after an initial increase in December 2015, down from the four they previously predicted.

Last week European Central Bank (ECB) chief Mario Draghi announced a much bigger and wider-ranging stimulus package than anyone had expected

He increased his purchases of financial assets by a hefty 20 billion euros per month (from 60 billion-80 billion euros), pushed interest rates lower into negative territory (by 10 basis points), improved financing for the banks and announced his intention to buy investment grade corporate bonds.

In other words, the ECB will pay banks 0.4% to lend. This puts the eurozone in a negative interest-rate situation.

This move inevitably makes Malaysia more attractive.

Recessionary pressures and low interest rates in the US are a boon for emerging markets like Malaysia. This is further helped by economies like Japan and China which are continuing to cut interest rates to kickstart their economies.

With US and eurozone interest rates having stayed in negative territory for so long, and doubts on future rate hikes, investors are getting desperate for yields.

So they come to Malaysia, where the average yield on a 10-year dollar bond is higher by some 140 basis points than a similar US Treasury 10-year note.

Also, after a torrent of bad news, some confidence is returning to Malaysia.

Last month, Fitch Ratings affirmed Malaysia’s long-term foreign and local-currency issuer default ratings (IDRs) at A- and A respectively, with stable outlook.

Malaysia’s senior unsecured local-currency bonds were also affirmed at A while the country ceiling was affirmed at A and the short-term foreign-currency IDR at F2.

The three rating agencies – Moodys, S&P and Fitch Ratings – have given the same credit rating of between A3 and A- with stable outlook for Malaysia.

Bank Negara also announced that Malaysia’s economy grew by 4.5% in the final quarter of last year, which was better than expected. This brings the full-year gross domestic product growth to 5% from 6% in 2014.

The recent stability in the ringgit was also a positive factor for foreign investors, and this has taken away some of the foreign exchange risk of investing here.

The ringgit is the best-performing emerging-market Asian currency over the past three months, having been one of the worst performers last year. Year-to-date, the ringgit has gained 2.05% against the US dollar.

The economy is on a better footing now that the Government has revised its budget based on oil prices between US$30 and US$35, and the country is on track to achieve its targeted budget deficit of 3.1%.

by Tee Lin Say The Star

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