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Airbnb Claims That A Ban On Homestays In Penang Is Harmful To People’s Livelihoods.

Airbnb has requested the state government of Penang to reconsider its plan to prohibit short-term rental homes or homestays in landed and highrise properties.

According to Mich Goh, Airbnb’s head of public policy for Southeast Asia, India, Hong Kong, and Taiwan, the plan might impede economic recovery efforts, harm Penangites’ livelihoods, and jeopardise jobs “at an exceedingly vital point.”

He noted that the strategy will make it more difficult for the state to remain competitive and recruit tourists.

According to Airbnb’s own survey, 60% of Penangites believe that STRA (Short-term rental accommodations) boosts visitor revenue.

According to the survey, 80% of Penangites believe that utilising surplus unoccupied units for short-term rentals helps to reduce the property overhang.

Individual Joint Management Bodies (JMBs) and Management Corporations (MCs) should be allowed to decide whether or not to impose further STRA by-laws or regulations, according to Goh.

“This gives tenants the power to decide whether and how STRA should be implemented in their buildings,” he explained.

The homestay ban would take the shape of a “guideline,” which will be transferred to local councils for implementation, according to state executive councillor Jagdeep Singh Deo, who also chairs the housing committee.

Despite the fact that the ban’s start date has yet to be determined, he noted that the state administration has agreed to the idea after receiving numerous objections from residents’ groups in apartments, condominiums, and residential neighbourhoods.


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PETALING JAYA: Airbnb has urged the Penang state government to reconsider its plan to ban short-term rental homes or homestays in landed and highrise properties.

The plan would risk derailing economic recovery efforts, damage Penangites’ livelihood and put jobs at risk “at an incredibly critical juncture”, said Mich Goh, who is the Airbnb head of public policy, Southeast Asia, India, Hong Kong, and Taiwan.

“With tourism playing such a crucial role in Penang’s economy, imposing such ill-considered restrictions on short-term rental accommodation (STRA) in highrise residential buildings would negatively impact the state’s recovery momentum and long-term tourism growth,” Goh said.

The plan would make it harder for the state to remain competitive and attract tourists, he added.

In its own survey, Airbnb claimed that 60% of Penangites believe that STRA increases tourism revenue.

The survey also found that 80% of Penangites agree that using surplus vacant apartments for short-term rentals helps combat the property overhang.

Goh suggested that the government let individual Joint Management Bodies (JMBs) and Management Corporations (MCs) decide on whether to enact additional STRA by-laws or restrictions.

“This empowers residents to decide if and how STRA should be run in their buildings,” he said.

Yesterday, state executive councillor Jagdeep Singh Deo, who is the housing committee chairman, said the homestay ban would manifest in the form of a “guideline”, which will be passed to local councils for enforcement.

He added that though the starting date for the ban had not been decided, the state government has agreed with the plan, based on the numerous complaints from residents’ groups at apartments, condominiums and residential neighbourhoods.

Source: Free Malaysia Today

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Penang Property Market Is Expected To Remain Resilient

Even while facing the effects of the Covid-19 pandemic, the Penang property sector is expected to remain resilient. Raine & Horne International Zaki + Partners Sdn Bhd, a property consultancy company, expects the industry outlook for 2021 to do better.

This is due to tighter physical-distancing practices that would enable companies to make progress on their digital applications and improve online property transactions beyond the level of 2020.

Its senior partner, Michael Geh Thuan Peng, said that, along with transport hubs, residential properties in hotspots are likely to retain their value. Geh urged the emerging investors not to be discouraged by negativity, which is caused by weak market sentiments because of the virus-hit economy.

The number of residential property transactions in Malaysia decreased by 30 percent in the first half of 2020. The number of transactions fell to 115,476 units in the first half of 2020 – the lowest in a half-year between 2014 and 2020, from RM72,88 billion of 168,482 units in 2019 to RM46,94 billion.

With 14,789 transactions valued at RM5.59 billion, the number of transactions in the primary market was at an all-time low in the first half of 2020, compared with 20,300 transactions valued at RM8.07 billion in the second half of 2019.

Meanwhile, for the first half of 2020, the number of commercial sector transactions fell to just 8,118 units valued at RM8.51 billion, about 35 percent of the transactions in the second half of 2019.

In the first half of 2020, only 1,980 transactions valued at RM5.41 billion were reported for industrial properties, a 40 percent decrease compared to 3,123 transactions valued at RM7.83 billion in the second half of 2019.

Although, it isn’t all bad, as Geh expects the third and fourth quarter figures (Q3 and Q4) of last year to be on an upward trend. The migration of investors and real estate brokers to online platforms to perform their transactions and to view new, creative start-ups has led to this speculative outlook.

Geh noted that the importance of developing a long-term economic recovery plan to ensure sustainable growth and improve investors’ trust are among the lessons learned from the pandemic.

He also claimed that the number of transactions depended not only on the primary property market but also on the secondary market, which usually has a ratio of about 80:20 to the primary market.

“In view of its importance to the general economy, the property market would recover and consolidate, adding that a thriving property sector would contribute to domestic consumption”, said Geh.


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GEORGE TOWN – The Penang property market is expected to remain resilient despite the crippling effects of the Covid-19 pandemic.

Property consultant firm Raine & Horne International Zaki + Partners Sdn Bhd foresees the 2021 market outlook to fare better.

This is due to stricter physical-distancing practices, which will entice businesses to progress on their digital applications and boost online property transactions above 2020 levels.

Its senior partner, Michael Geh Thuan Peng, said that residential properties in hotspots, along with transport hubs, will likely maintain their value.

“We do not foresee the widespread auction of homes despite the downtrends,” he said.

Geh urged budding investors not to be put off by negativity, made worse by poor market sentiments due to the virus-hit economy.

The first half of 2020 saw a 30% decline in the number of residential property transactions in Malaysia.

The number of transactions dropped from 168,482 units worth RM72.88 billion in the second half of 2019 to 115,476 units worth RM46.94 billion in the first half of 2020 – the lowest number recorded in a half-year between 2014 and 2020.

The number of transactions in the primary market was at an all-time low in the first half of 2020, with 14,789 transactions valued at RM5.59 billion compared with 20,300 transactions valued at RM8.07 billion in the second half of 2019.

Meanwhile, the number of transactions in the commercial sector for the first half of 2020 dropped to only 8,118 units valued at RM8.51 billion, almost 35% of the transactions in the second half of 2019.

Only 1,980 transactions valued at RM5.41 billion were recorded for industrial properties in the first half of 2020, a decline of 40% compared with 3,123 transactions valued at RM7.83 billion in the second half of 2019.

But not all’s gloomy, as Geh expects last year’s third and fourth quarter figures (Q3 and Q4) to be on an upward trend.

What contributed to this bullish outlook was the migration of investors and real estate agents onto online platforms in order to conduct their transactions and viewing of new innovative start-ups.

“There is a change in preference from high to low-density living; thus, suburban and semi-rural settings are trendy among investors and homebuyers in the current climate,” he said.

Geh pointed out that among the lessons learnt from the pandemic include the importance of having a long-term economic recovery plan to ensure sustainable growth and increase investor confidence.

He also said that transaction numbers did not depend only on the primary property market, but also the secondary market, where its ratio to the primary market is typically around 80:20.

“In other words, most property transactions are all from the secondary market. This is why when we want to look at the property market, we cannot just rely on overhang numbers – because overhang numbers are for completed properties which are still unsold and not classified as part of the secondary market.

“If we look at the latest numbers from 2018 and 2019, we see a pattern. Q3 an Q4 transactions usually rise, while the Q1 and Q2 transactions are usually on a downtrend.”

Hence, Geh said that the property market would recover and consolidate in view of its importance to the general economy, adding that a thriving property sector would contribute to domestic consumption. – The Vibes, February 11, 2021.


Source: The Vibes

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Not Sure If Short-Term Rental Or Long-Term Lease Will Make You Money?

The time for buying houses now is better than ever with waivers for stamp duty and a guaranteed 10 % discount on residential properties under the Home Ownership Program. It is smart to rent it out to gain some revenues while waiting for the value you would enjoy.

According to CEO of Homestay brand Victoria Home (VH) Premier Group, Yong Yik Cai, the final returns for both rental options are not far off after taking into account running costs, currently. He also emphasised that STR is an effective option for property investors in the over-fuelled real estate market instead of focusing on leasing income. Average STR yields are likely 10%-20% higher than LTR yields. Depending on the place and amenities, some houses can get higher rates.

A good place is still the number one concern for many. Preferably, places close to local attractions and public transport. VH’s Yong added that recreational facilities attract visitors and the STR customers enjoy leisure facilities such as swimming pool, fitness centre, barbecues pits and more.

In the eye of the law, it is lawful to operate STR in Malaysia in most circumstances. The owners of the property may seek clarification of management rules from the Joint Management Board of the building (JMB). The Malaysian Productivity Council (MPC), with the approval of the Malaysian Tourism Board, held a public consultation on October 9th 2019.

“When applying for a bank loan, the MPC has submitted a set of guidelines on short-term residential facilities covering issues such as licence, safety and protection, maximum occupancy, noiseless inspection and taxation. Airbnb earnings can also be recognised as income, depending on the situation”, said Yong.

In 2019, Airbnb’s users invested more than 4.4 billion ringgit in Malaysia, which produced over 50,000 local employees with a contribution of 3.98 billion ringgit to the gross domestic product. Nearly 40% of local Malaysian hosts had Airbnb hosting, and over 25% said it helped prevent eviction in the same year.


For further reading, please refer to the article below:

With the exemptions on stamp duty and minimum 10% discounts for residential properties under the Home Ownership Campaign, now is a better time than ever to purchase a house.

But for those planning to purchase a house for investment purposes, there is a dilemma. While waiting for the value to appreciate, it would be wise to rent it out to earn some returns.

Long-term rental (LTR) can get messy in terms of collecting the rent every month. So, is short-term rental (STR), such as via Airbnb, a better option?

Yong Yik Cai, CEO of VH Premier Group that owns homestay brand Victoria Home, told Property Advisor that comparing STR and LTR is like comparing apples and oranges, especially if the properties are in varying states of repair.

Another common mistake is to compare gross revenue from STR to normal rental.

In fact, after factoring in operating costs (for example, housekeeping, laundry, cost of utilities and labour cost), the final returns will not be too far off for both rental options for properties that are in a similar condition.

“Instead of concentrating on rental returns, we wish to highlight that STR is a strong alternative to property investors in this oversupplied property market.

“First, LTR relies primarily on the working adults and student markets. STR (and mid-term rental [MTR]) taps local and foreign tourists as well as business travellers.

“Generally, STR offers more flexibility to property owners. With LTR, owners tend to spend more time securing a replacement tenant. Meanwhile, with STR and MTR, the turnover of guests/tenants is faster, hence, the returns are better overall,” said Yong.

He said the average returns from STR are potentially 10% to 20% higher than LTR returns. Some buildings can fetch even higher rates depending on locality and facilities.

An Airbnb owner, Lam, said his income from Airbnb depends on the season. “To a certain extent, STR can provide better profit, provided you get enough guests.

“For example, during peak season, rooms are fully booked and I can earn RM2,000 to RM3,000, which is quite promising since I provide only four rooms in my homestay. But during off-peak season, I sometimes record zero guests for a couple of weeks.”

An Airbnb spokesman told Property Advisor that last year alone, Airbnb guests spent more than RM4.4 billion in Malaysia, which contributed as much as RM3.98 billion to gross domestic product and supported over 50,000 local jobs.

“We know many Malaysian families depend on Airbnb to earn extra income and grow their small businesses.

“In 2019, close to 40% of local Malaysian hosts said hosting on Airbnb helped them remain in their homes and more than 25% said it helped them avoid eviction or foreclosure.”


Is it legal?

Under most circumstances, it is legal to operate STR in Malaysia. However, property owners are advised to seek confirmation from the building’s joint management body (JMB) on the management’s rules before they decide to operate STR in an apartment or condominium, whether on their own or through a property management company (STR operator).

“Based on our management experience, a substantial number of building managements in Malaysia allow STR in the building.

“In fact, many JMBs are friendly and cooperative towards accommodating STR operators’ requests in terms of unit and guest management,” said Yong.

“A public consultation was held on Oct 9 last year by the Malaysian Productivity Council (MPC) under the authorisation of the Malaysian Tourism Board.

“MPC presented a set of guidelines on short-term residential accommodations covering such issues as licensing, safety, maximum occupancy, nuisance control and taxes. The legalisation process is underway in Malaysia and we are expecting clearer frameworks and rules in the near future,” said Yong.

As it is, earnings from Airbnb can already be recognised as income when applying for a bank loan, depending on the circumstances.

“If your property is operated by a property management company/STR operator, the monthly statement provided by the operator can serve as proof of income in applying for a bank loan. If property owners operate the STR themselves, they can treat it as an income for loan purposes too.

“However, proof of income might be complicated by the number of transactions shown in their accounts, which are usually unconsolidated, depending on the number of units they manage and the scale of management. Very often, the income amount shown is gross revenue (including all operating costs); hence it might not reflect the accurate income that the owners would have received,” said Yong.


Choosing a good property for STR

Lam suggested several points to consider when investing in a house for STR purposes.

“A good location (preferably near local attractions and public transport) is still the number one concern. Other than that, the operator must always be there to communicate with the guests though it is not necessary to stay there.

“The operator also needs to maintain cleanliness and hygiene, which cannot be compromised on. And selecting a special theme for the homestay will leave a lasting impression on guests.”

VH’s Yong added that building facilities play a role in attracting guests. “STR guests value good facilities such as an infinity pool, a gym with good equipment, barbecue facilities and so on.”


Source: Free Malaysia Today

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NPL growth may overtake loan growth

PETALING JAYA: Non-performing loan (NPL) growth for banks in Malaysia could be higher than their loan growth this year as the industry deals with the economic fallout from the coronavirus (Covid-19) outbreak.

S&P Global Ratings projects the NPL ratio could peak to between 1.7% and 1.8% of outstanding loans this year compared with 1.5% as of Dec 31,2019.

The ratings house also revised down its credit growth forecast for Malaysian banks, from the previous 3%-5% to 1%-3% in 2020.

S&P Global Ratings credit analyst Nancy Duan said: “The global outbreak of Covid-19 and renewed domestic political uncertainty add obstacles for Malaysian banks, which are already grappling with the effects of a slowing economy and dampened investor and consumer sentiments over the past year.”

In particular, the global health emergency and domestic political upheaval are affecting oil prices, consumer confidence and the broader economy in Malaysia.

S&P Global Ratings’ forecasts are based on the assumption that the Covid-19 outbreak will subside and the domestic political stability can be restored over the coming months.

Should these risks prolong beyond the second quarter of 2020, the forecast figures would need to be revisited.

A banking analyst disagrees with the assumptions of the foreign credit agency and expects loan growth in 2020 to be about 4%, in line with gross domestic product (GDP) growth.

“Looking at the 1.6% NPL ratio recorded in January 2020, there could be a slight uptick going forward.

“This will depend on the depth of external factors apart from Covid-19, such as the US-China trade tensions, which is still ongoing, ” he said.

When asked if the overnight policy rate (OPR) cuts can help boost loan demand, the analyst opined that this would be dependent on market sentiments, as further rate cuts may not translate to improved consumer purchasing power.

Kenanga Research, in a sector report, said accommodative interest rates will continue to support a resilient household loan segment, alleviating the moderation in business loans.

Given the banks’ modest target for 2020 after the recent results season, the research house forecasts loan growth at 4% to 4.5% for the year, driven by resilient household and business loans, with a fiscal push expected in the second half of the year.

“The soft interest rate regime is expected to support loan growth coupled with ease of application.

“While the uptick in impaired loans is a concern, it is still below its five-year peak of 1.67% in February 2015, ” said Kenanga Research.

Meanwhile, S&P Global Ratings also expects more potential easing from Bank Negara to support the economy, leading to a further five to 10 basis point compression of banks’ net interest margin in 2020.

“Our base case assumes stable capital adequacy ratios.

“However, risks are now tilted to the downside, given added drains on profitability and the rising dividend payouts announced by some banks last week, ” it said.

On the government’s RM20bil stimulus package, S&P Global Ratings expects it to have a neutral impact on local banks.

“Supportive policies in the package could strengthen lifelines to banks’ affected clients.

“However, we feel the special credit facility of RM2bil is more symbolic than material, and that credit demand will weaken visibly, especially over the first half of 2020.

“Transitory asset-quality problems could become permanent if the severity and duration of the disruptions were prolonged.

“This in turn would eventually push up banks’ credit costs – meaning the allocation of provisions for impaired and potentially impaired loans, ” the credit risk research house noted, projecting sector-wide credit costs to be 20 to 25 basis points of total loans in 2020.

It is interesting to note that Malaysian banks’ direct exposure to the most disrupted sectors by Covid-19, such as hotels, restaurants and airlines, is small, at only a single-digit percentage of loan books on average.

Duan added that Malaysian banks are fundamentally strong, backed by low NPL ratios, light credit costs, and large capital buffers.

“The banks’ credit profiles have remained solid despite muted profitability in recent years. Conditions in 2020 will put the banks to a much bigger test to their resilience, ” she said.

Source: TheStar


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Affordability, overhang and foreclosures

JOHN is interested to buy a RM1.2mil property. Together with rebates and all, the real value of the house is RM1mil and John is aware of that.

John goes to the bank, and based on the sales and purchase agreement, applies for a bank loan of RM1.08mil, or 90%.

But the bank gives him an 80% loan amounting to RM960,000. John walks away from the purchase.

The developer blames “stringent financing rules” for the aborted purchase. To the bank, it has approved the loan.

For the past couple of years, developers and banks have their own definition of loan rejection. Developers say the loan rejection rate is as high as 70%. According to Bank Negara statistics, loan rejection is 25.4%.

At a media briefing on “Household debt and house financing in Malaysia” on Oct 24, Bank Negara’s Financial Surveillance Department director Qaiser Iskandar Anwarudin said 54.4% of household debt is for housing as at June 2019.

If non-residential properties were to be included, this rises to 60.9%. This is the debt carried by Malaysian households, or families, for the purchase of properties.

Qaiser says 84% of housing loans are extended by banks, while 16% are by other lending, but non-bank, institutions.

“About 70% of a bank’s income is generated by its lending activities. It is in their best interest to lend and housing loan is a significant portion, ” Qaiser says.

The Real Estate & Housing Developers’ Assocation Malaysia (Rehda) has a different definition of loan rejection/approval.

Rehda (Selangor branch) chairman Zulkifly Gharib says a developer has a register of potential buyers who apply for financing, and a register of those who make successful purchases.

“If there are 100 prospective buyers, but 70% walk away from a purchase, to us, that is a 70% rejection, ” says Zulkifly, who is GLOMAC BHD’s chief operating officer.

Zulkifly says “technically” the loan may be approved, but it did not result in a sale. As long as a sale is not concluded, that is considered as a rejection.

A source says Rehda has “never disputed” Bank Negara’s approval rates of more than 70%.

“But we are concerned about the high number of potential buyers who do not carry on with the purchase because they do not have sufficient downpayment, ” the source says.

The source says most buyers want a 90% loan margin.

In order to ensure a sale goes through, the source says a minimum 10% rebate is given during the current Home Ownership Campaign but the real price is not stated in the sales and purchase (S&P) agreement.

The source says although John’s real price is RM1mil, the developer has listed it in the S&P agreement as RM1.2mil “to help the buyer cover the downpayment.”

“Some buyers cannot even afford a RM50,000 downpayment, ” the source says.

“Let us look at the situation from the perspective of the potential buyer, from the bank’s perspective. And from the developer’s.

“As a developer, we ask ourselves… what can we do to help out. We understand the risk from the bank’s perspective, but look at the industry and its linkages to other industry, ” the source says.

Strict financing versus high house prices

While developers blame “stringent” lending/financing rules for the slow sales, Bank Negara’s surveillance department says it is the high price of housing that remains a “major hurdle”.

Qaiser says the main issue is housing affordability. Based on Bank Negara estimates, most Malaysians are able to buy up to RM280,000. But the average price of new properties launched nationwide is significantly higher, at RM420,000. The level is higher at individual state level.

This affordability issue is supported by the median multiple ratio, says Qaiser.

“A house is considered affordable if it is not more than three times the household income. In 2012, it was 3.9 times and in 2016, it was 4.8 times.

“This indicates that houses in Malaysia are seriously unaffordable, even by international standards, ” Qaiser says.

He says debt levels have moderated from the 2015 peak of 86.9% of GDP and recent growth in debt has been more aligned with income growth. However, the aggregate level of indebtedness among Malaysian households remains high relative to regional and rating peers, and high-income countries like Hong Kong, Japan, South Korea, Britain, New Zealand, Australia and the United States.

Widespread affordability issues

He adds that the affordability issue is widespread. It is not “contained” in certain areas but is most obvious in Selangor, Kuala Lumpur, Johor and Penang. This has contributed to the elevated levels of unsold properties in Malaysia, Qaiser says.

Qaiser says 73% of unsold properties are considered as not affordable, according to the different states, based on data from the National Property Information Centre (Napic).

According to Napic’s latest figures in Property Overhang 2Q19, the ringgit value of unsold completed housing, including serviced apartments and small offices home offices is RM35.1bil.

Qaiser says the main reasons why Malaysians cannot afford a house are:

> Properties not aligned to what people can afford; and

> A mismatch between income growth and property prices.

He says although there is a downtrend seen in the Malaysian House Price Index, and more units priced below RM300,000 are making their way into the market, “this rebalancing will take some time”.

Giving his perspective on the financial system, Qaiser says there are pockets of risk in the financial system.

There are those earning less than RM3,000 a month who only have 0.6 times assets to their debt.

This group is particularly vulnerable, although at aggregate level, it looks all right.

Qaiser says housing loans impairment remains low at 1.3%. Bank Negara is seeing a slight pick-up in default among properties valued at more than RM500,000 and among those with variable income.

“There is an uptick. We started seeing this last year and we continue to see it this year, ” he says.

Rising foreclosures

Analysing the foreclosure property market, executive director Gary Chia said in its 3Q19 report that overall foreclosure cases have expanded further to 9,294 cases versus 8,760 a year ago, representing a 6% rise. This includes commercial, residential properties and land parcels.

In ringgit value, it is an increase of 31.6%, RM5.19bil (3Q19) versus RM3.9bil (3Q18).

On a nine-month basis to September 2019, the total number of foreclosure cases rose to 26,563 versus 23,658 a year ago, a 12% increase.

In value terms, the total aggregate foreclosure reserved value stood at RM14.38bil, a rise of 32% compared to a year ago. This supports Bank Negara’s findings that the central bank is seeing an uptick in foreclosure cases involving properties priced RM500,000 and above since last year.

Residential comprises the largest volume of foreclosure cases, at 22,196 out of the total 26,563 cases, or 83.56%, for the period ended Sept 30,2019.

Chia said the growth in the foreclosure property market appeared to be “relentless”, as evidenced by the double-digit growth recorded across the various property segments.

He expects “a strong and robust” foreclosure market going forward in the foreseeable near term amid headwinds in the domestic and external macro economy outlook, coupled with the overhang situation facing the primary property market.

The proactive measures taken by the government to reduce the property value ceiling to RM600,000 for foreign property buyers may provide relief by reducing the excess property stock in the primary market, Chia says.

Source: The Star

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RM800,000 proposed as Penang property price threshold for foreign buyers

GEORGE TOWN (Oct 21): The Penang government has proposed that the price threshold for foreigners to purchase urban high-end properties in the state to be set at RM800,000, compared to RM600,000 announced by Finance Minister Lim Guan Eng during the 2020 Budget.

Penang’s Housing, Local Government, Town and Country Planning Committee chairman Jagdeep Singh Deo said the reduction in price threshold for foreign property buyers should only apply for a period of six months instead of one year as tabled during the budget.

“Finance Minister Lim Guan Eng’s purpose in reducing the threshold for foreigners (purchasing built condominiums) from RM1 million to RM600,000 was to tackle the property overhang issue in the country, but in Penang, the (property overhang) issue is manageable,” he told a media conference here today.

He said the unsold property in Penang had been decreasing from 3,916 units in 2017 to 3,502 units in 2018, whereas it was increasing in other states such as Johor (4,376 to 6,066 units between the year 2017-2018) and Selangor (3,713 to 4,623 units).

“The suggestion was discussed with the state Chief Minister (Chow Kon Yeow) and will be further discussed and confirmed later during the next state exco meeting,” he said.

Meanwhile, Jagdeep also commented on the Rent to Own (RTO) financing scheme that was also tabled by Lim during the 2020 Budget.

The RTO scheme according to him, should prioritise first-time homebuyers to buy low cost and low-medium cost units valued at RM42,000 and RM72,500 respectively, as well as the affordable housing at RM150,000.

“However, according to the Budget 2020 announcement, the RTO scheme applied to properties valued of up to RM500,000, (which) to me, those who can afford that much do not really need to be helped,” he added.

Source: Edge Prop

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Flat rate for all in mixed-use property

PETALING JAYA: Residents at high-rise buildings without strata titles, where there are also offices and retail lots, will now pay service or maintenance charges according to a fixed formula following a landmark court decision.

The Court of Appeal held that the Joint Management Body (JMB) committees of high-rise buildings are not allowed to charge different rates on owners in any mixed development projects.

It overturned a High Court decision that JMB had power under the Strata Management Act to determine or fix different rates of service or maintenance charges for

different parcels in a mixed development.

Commenting on the Oct 4 ruling by the Court of Appeal, Strata Property Owners Association Selangor (SPOAS) legal advisor Datuk Joy Appukuttan explained that the ruling would affect properties without strata titles and managed through the JMB.

“Mixed development projects usually comprised residential and office units, retail lots and carparks.

“There had been a grave disparity in the maintenance or service charges imposed by the JMB on property owners.

“With this decision, each property owner will pay a single maintenance or service charge rate in proportion with their share of the unit in the property.

“The JMB can only determine and fix one consistent rate of service or maintenance charges for all properties within the strata development, ” he told The Star.

This court judgment, he said, was a welcome decision for those owning properties in mixed development projects, where they are subjected to different rates of maintenance or service charges.

“Dwellers are often at the mercy of those with a larger share of the units. Unreasonable maintenance or service charge rates are imposed on the minority share unit holders, ” he said.

By virtue of their greater share of the units held by retail and carpark owners, Joy said these owners could control the election and decisions of the JMB at the expense of the minority.

He noted that all JMB should now observe charging a flat rate effective immediately provided for under the Strata Management Act and the ruling or risk breaching the law.

JMB that do not comply can be referred to the Commissioner of Buildings (CoB) under the local councils, he added.

Joy said the judgment stemmed from a case between an individual parcel owner and the Menara Rajawali JMB as well as Denflow Sdn Bhd, the carpark owner of Menara Rajawali in Subang Jaya.

“The owner was dissatisfied with the JMB and the company’s decision in allowing lower maintenance charges imposed on owners with a substantial share of the units.

“On Jan 26 last year, we initiated a case against the JMB and the company, ” said Joy, who was one of the counsels representing the owner.

The case was brought to the Court of Appeal in October last year after the High Court dismissed the case in September.

The Court of Appeal unanimously held that the Act does not confer any power to the JMB or joint management committee to fix different rates of service or maintenance charges for different parcels in a mixed development.

It also held that Section 21 of the Act only accords the JMB the power to determine, impose and collect the charges from parcel owners in proportion to the allocated share units of their respective parcels.

When asked if high-rise property owners will pay less maintenance or service fees following the ruling, Joy said it would depend on the cost of maintenance of the common property of the high rise building.

“Property owner will now contribute in proportion to their share of units.

“In other words, the formula should be – the total cost of maintenance of the common property of the high rise property divided by the total amount of share units, multiply the number of share units for each property, ” he said.

Citing the Menara Rajawali case, where condo and retail owners before this paid RM2.80 per share unit while the carpark owner paid only half, Joy said all the property owners would now pay the same rate of RM2.80.

When contacted, SPOAS chairman Law Hock Hua said a majority of high-rise properties in Malaysia were without strata titles.

“Even after the owners of a property have obtained strata titles, less than 25% of them have the titles. So the property is still bound by the Court of Appeal’s ruling.

“This landmark ruling will likely benefit individual residential owners in a mixed development who are paying higher maintenance charges than owners of offices and retail outlets, ” he said.

Source: The Star

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Property wish list for Budget 2020

PETALING JAYA: Relaxed lending guidelines, continued incentives under the Home Ownership Campaign (HOC), reduced compliance cost and the termination of the real property gains tax (RPGT) are on the budget wish list of property developers and consultants, who hope that such measures will help stimulate the industry and reduce the property overhang.

MAH SING GROUP BHD founder and group managing director Tan Sri Leong Hoy Kum said housing loan eligibility has been one of the main challenges in the property market over the past few years.

“Difficulties in securing maximum loan margins continue to plague potential home buyers, causing a high rate of withdrawals, ” he said in a statement yesterday.

Leong is proposing a higher debt service ratio from 70% to 80%, compared to only 60% currently for the lower-income group.

“A higher margin of financing of up to 110% for the first property, 90% for the second and 70% for the third, ” he said, adding that financial institutions should also take into account an individual’s part-time income during the loan application process.

Mah Sing is also proposing a longer loan tenure of up to 45 years, lower interest rates for first-time buyers and the allowance of the developer interest bearing scheme, so that buyers do not need to service loan interests and rentals at the same time during the construction period.

Budget 2020 will be tabled on Oct 11.

With the rising interest from foreigners to purchase property in Malaysia, S P Setia Bhd president and chief executive officer Datuk Khor Chap Jen is hopeful that the threshold price for purchase by foreigners would be reduced, believing that the investments can help to reduce the current overhang and stimulate the soft property market currently.

“We would also like to see a further reduction in the cost of doing business, especially the compliance cost, where the removal or reduction of such a cost could be translated into cost savings for the property buyers.

“Last but not least, we hope the government can consider assuming the role of providing affordable housing for the B40 group, perhaps under a rental scheme, with some contribution from property developers so that private developers can concentrate on free-market housing.”

Separately, Leong is hopeful that the incentives under the HOC can be continued, as it can help lessen the financial burden of first-time home buyers.

“This (the HOC) was a successful stimulator of property transactions in the past and would be an effective short-term catalyst to stimulate the property industry, ” he said.

The six-month HOC, which was kicked off in January, has been extended a further six months to December 2019.

In line with the government’s continuous effort to lower housing prices to benefit the market, Mah Sing is urging the government to review and reduce the compliance cost.

“Apart from land conversion premiums and development charges, the capital outlay for private utility companies is very high and covers the surrender of the land, construction of the infrastructure, and contributions to the utility companies such as Tenaga Nasional Bhd, Syabas, TELEKOM MALAYSIA BHD and Indah Water, ” said Leong.

He also said the imposition of the RPGT on properties sold after five years was affecting the higher-priced residential property segment.

“We hope the government can consider terminating the RPGT as an impetus to boost the secondary market, as perpetual RPGT is currently affecting those who are considering to upgrade their homes.”

PPC International managing director Datuk Siders Sittampalam echoed Leong’s sentiment on the RPGT.

“The RPGT was imposed to curb speculation, not provide additional revenue to the government, especially now when the property market is already dampened.”

On the current property market overhang, Siders said this was due to buildings being constructed in wrong places, or developments being green-lit without a preliminary study being conducted.

“A market and feasibility study needs to be conducted first before a development can proceed, ” he said.

Total overhang of residential property remains high, rising 30.7% to a new record of 32,936 units valued at RM20bil as at the first quarter of 2019 (1Q19) as opposed to 25,193 units or RM15.7bil in 1Q18.

Knight Frank Malaysia managing director Sarkunan Subramaniam said more funding and incentives should be provided to encourage both domestic and foreign investments.

“The government should relook into the regional economic corridors policy, namely, the Northern Corridor Economic Region, the East Coast Economic Region, Iskandar Malaysia, the Sabah Development Corridor and the Sarawak Corridor of Renewable Energy.”

Sarkunan is also urging the government to consider removing the sales and service tax (SST) on building maintenance service charges.

“Selected items that make up the building maintenance service charges are SST-exempt, while others are not.

“For example, while utilities are SST-exempt, security services are not. Thus, there may be double taxation although SST is supposed to be a single-tier tax.

“We would also like to see the government being more lenient on the release mechanism pertaining to bumiputra units, or also a reduction in the allocation for bumiputra units (lower quota policy), depending on the location and type of property, ” he said.

Source: The Star

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Budget wish list from a property investor

With the budget 2020 around the corner, what are your wish lists as a property investor?

It has been a challenging year since the Pakatan Harapan’s 1st budget tabled by Finance Minister Tuan Lim Guan Eng last year. MALAYSIA’S Budget 2020 will be tabled in Parliament on Oct 11. As announced, the theme for this year’s budget is “Shared Prosperity: Engendering High-Quality Inclusive Growth Towards High Income Economy”.

The property market has been sluggish and the property overhang as well as home ownership remain the key concerns. Property consultants and stake holders of property sector has called for the abolition of the Real Property Gains Tax (RPGT) imposed on properties held for more than five years. Other common suggestions are the revision of the price threshold for foreign buyers, reduction of compliance cost borne by developers and better access to financing for homebuyers.

As a property investor myself, I have listed my top 5 wish list for Budget 2020 for property investors, home owners as well as would-be property investor and home owner.

Here’s my wish list:

1. Remove Real Property Gain Tax (RPGT) after the 5th year

In view of the slow market and oversupply situation, I agree with the call from players in the real estate sector who urges to the government to remove the real property gains tax (RPGT) after the fifth year of purchase to 5% (instead of the current 10%) for non-citizens and companies; and zero tax for Malaysians and PRs.

As a result, I believe it will indirectly stimulate the property market and encourage more buyers and investors to re-enter the property market. In addition, this will help to reduce the property overhang and the supply of unsold units in the secondary market.

The last RPGT revision impacted the market negatively. RPGT is a tax on capital gains and was meant to curb speculation, however the current property market is ‘stagnant’ and moving side way. Do you agree that holding a property from the sixth year onwards should no longer view as speculation and should be 0% RPGT for 6th year onwards?

2. Extend loan tenure to maximum of 40 Years

Currently, the proposal of 40-year loan tenure is only for first time home buyer. Previously, it is available for everyone. And it would greatly improve the property market if this proposal were to be extended to include everyone and for those who buys property from the secondary market as well. The advantage of longer loan tenure is that the monthly repayment is lower. This will then reduce the monthly commitment for property owner and a plus point for property investors. A reduced monthly commitment translates to more rental income to the property investors.

3. Increase the loan margin for 3rd property onwards

In overall, we need more catalyst and goodies to spur the property market. Currently, the loan margin for third property onwards is capped at 70% and it’s called LTV70. Therefore, to encourage more property investor to get back into the market, the LTV70 guideline by Bank Negara Malaysia (BNM) should be removed or revised to higher margin i.e. at least 80% margin of finance.

4. Extend House Ownership Campaign (HOC) to include property bought from the secondary (sub-sale) market

House Ownership Campaign (HOC) has been successful thus far to increase home ownership and reduce property overhang. However, HOC campaign is limited to only developer’s new/unsold units. As a majority of property transaction comes from the secondary market, HOC should also be extended to properties purchased from the secondary market to further spur the property market.

5. Increase EPF 2 allocation from 30% to 40%

We are allowed to withdraw money from EPF account 2 to pay for our property purchase. In view of the increased property prices, there is a suggestion to increase the funds allocation from the current 30% to 40%. This will be a good move to reduce the burden of the property buyer to pay for all the cost involved in buying a property.

As a property investor myself, I always encourage investors to leverage on OPM to minimise capital outflow so that profit can be maximized. I specialises in structuring property deals in the sub-sale market so that you are to buy your property with just under RM1000 and make RM20,000 to RM60,000 a year (Read it here >> Discover How To Buy Your Property With Just Under RM1,000 And Make RM20,000 to RM60,000 A Year).

If you have any question or comment, feel free to drop me a message or comment on the box below.

See you soon!

Reference: The Star

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When do I get the keys to my property?

This is one of the questions I get asked at my public talks.

Getting keys to your property is also known as delivery of vacant possession.

Buying sub-sale properties

If you are buying properties from the sub-sale market, delivery of vacant possession takes place once the bank has disbursed the money to the seller and is usually between 3 months to 6 months.

Why 3 to 6 months? Once the SPA is signed and the balance 10% is paid, legal procedures will be initiated by our lawyers to start the title transfer process. This depends on whether –

1. it’s a leasehold property or a freehold property
2. the property is with strata title or without title

Buying from developer

A developer is required to deliver vacant possession (VP) within 24 or 36 months. If VP is delivered after the prescribe period, developer needs to compensate purchaser DAILY, unless extension of time is granted under the HDR 1989 (Read: When does time for delivery of vacant possession of property start?)

And the jury is still our when does the 24-month or 36-month period start. Is it from the date of booking fee paid? Or from the date of the S&P? (Read: When does time for delivery of vacant possession of property start?)

Of late I’ve been hearing delay in VP from my friends. There is one particular project that I am personally familiar with, was launched in January 2011, but has yet to deliver VP even today (October 2019)! And I’m still unsure when VP can be delivered as I write …

But for some of my friends who have, at last, get their keys ended up very happy. This is because, not only do they receive keys to their property, but also a big checked (in the region of 5 figures) from the developer.

As a property investor, I’ve always preferred buying from the subsale market as compared to from developer.

Not only do I get my property faster, I also get to receive my rental faster and this enable me to continue buying my properties and create more passive income.

If you have any questions or comment, feel free to drop me a personal reply or in the comment box below.

Talk soon!

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