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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, AuctionGuru.com.my 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.

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When does time for delivery of vacant possession of property start?

WHEN one buys housing accommodation from a developer in Malaysia, the terms of the sale and purchase agreement with the developer are prescribed by law (S&P), specifically the Housing Development (Control and Licensing) Regulations 1989 (HDR 1989).

Depending on the type of development, a developer is required to deliver vacant possession of the property (commonly referred to as VP) within 24 months or 36 months from the date of the S&P. If the VP is delivered after the prescribed period, the developer needs to compensate the purchaser for every day of the delay, unless extension of time is granted under the HDR 1989.

So, when does the 24-month or 36-month period start? From the date the booking fee is paid? Or from the date of the S&P?

This seemingly straightforward question has caused dispute between developers and home buyers. Past cases have held that for purposes of ascertaining the date of delivery of VP, time starts to run when the purchaser paid the booking fee.

These are the cases of Hoo See Sen & Anor v PUBLIC BANK BHD & Anor, 1988 (Hoo See Sen) and Faber Union Sdn Bhd v Chew Nyat Shong & Anor, 1995 (Chew Nyat Shong). The question then seemed settled.This position is beneficial to purchasers since the booking fee is usually paid before signing of the S&P. However, to be clear, the S&P prescribed under the current HDR 1989 in fact states that time starts from the date of the S&P.

So, when does time for delivery of VP actually start to run? The Court of Appeal has, in two recent cases, added some confusion to the seemingly settled question.

GJH Avenue case

In the recent judgement of GJH Avenue Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Ors (GJH Avenue case), the Court of Appeal clarified the words “from the date of this agreement” should be interpreted as the date of the S&P. In other words, the period for delivery VP commences from the date of the S&P. Therefore, the sooner one signs the S&P, the earlier one can expect to get VP.

Case background

In the GJH Avenue case, the purchasers bought a bungalow from the developer and paid the booking fee to the developer on Nov 24,2011. The statutorily prescribed S&P for the bungalow was signed on Feb 13,2012. The S&P requires VP to be delivered within 24 months “from the date of the agreement” and VP was delivered on Feb 14,2014. As the S&P was dated Feb 13,2012, the developer compensated the purchaser for the two-day delay.

The purchasers subsequently initiated a claim with the Tribunal for Homebuyer Claims (Tribunal) for a higher sum and the Tribunal granted the award. Dissatisfied with Tribunal’s decision, the developer filed a claim (by way of judicial review) to the High Court to set aside the Tribunal’s award.

High Court findings

The High Court did not find any illegality in the Tribunal’s decision and had instead decided that the Tribunal had applied the law to the facts correctly. This was on the basis that the Tribunal had taken into account two previous decisions of the High Court, which in turn relied on the decision of the Supreme Court (as it then was) in Hoo See Sen and Chew Nyat Shong. The High Court believed that the Tribunal is bound by the Supreme Court in those cases. Following this outcome, the developer filed an appeal to the Court of Appeal.

Decision of the Court of Appeal

On appeal, the Court of Appeal decided that the Tribunal had acted beyond the scope of the Tribunal’s powers under the HDR 1989 in making the award. This resulted in the award being tainted with illegality. The Court was of the opinion that the Tribunal had made an error of law when making the decision as the relevant clause in the S&P was very clear and unambiguous. The Tribunal should have just applied the law by giving plain meaning to the words in deciding the purchasers’ claim, without sieving through various authorities to justify the findings.

This also follows the Court’s earlier decision in Kompobina Holding Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Ors & Anor (Kompobina case), where the Court upheld the decision of the Tribunal that the timeline for delivery of VP is 24 months from the date of the S&P although the deposit was paid more than one year after the S&P was signed.

PJD Regency case

In the second decision of PJD Regency Sdn Bhd v Tribunal Tuntutan Pembeli Rumah & Ors (PJD Regency case), delivered just two days after the GJH Avenue case, a separate panel of the Court of Appeal decided that the time for delivery of VP actually starts to run from the date the purchaser paid the booking fee and, not the date of the S&P.

Case background

In this case, the purchaser paid a booking fee to the developer on Jan 16,2013. The time for signing of the S&P lapsed but the parties proceeded to sign the S&P on March 21,2013. The developer delivered vacant possession on Jan 23,2017, which was later than the 42 months contracted under the S&P. The Tribunal calculated the time for delivery of VP from the date of payment of the booking fee and awarded the purchaser damages for late delivery accordingly. The developer applied by way of judicial review to the High Court to set aside the Tribunal’s award.

High Court’s decision

The High Court applied the case of Chew Nyat Shong and, agreeing with the decision of the Tribunal, dismissed the developer’s application. The developer appealed to the Court of Appeal.

Decision of the Court of Appeal

The Court of Appeal agreed with the decision of the High Court and dismissed the appeal. The Court of Appeal affirmed that the case of Chew Nyat Shong was binding. This decision meant that the time for delivery of VP actually starts to run from the date the purchaser paid the booking fee and, not the date of the S&P.

Conclusion

The result of both the GJH Avenue and PJD Regency cases is that it is now uncertain as to when the period for delivering VP starts from. With these conflicting decisions, we will have to wait for the Federal Court to resolve the question.

In the writer’s opinion, the decision in the GJH Avenue case is preferred. It is a move in the right direction, and reflects the original intention of Parliament when enacting this piece of social legislation in the Housing Development (Control And Licensing) Act, 1966 which outlawed the collection of any monies by a housing developer from a purchaser other than at or upon the signing of the S&P, which was then prevalent to the detriment of house buyers.

May Chua, a lawyer practising at Messrs Wong & Partners, is a member of the Conveyancing Practice Committee, Bar Council, Malaysia. This column does not constitute legal advice and the views expressed are solely that of the writer.

Source: The Star

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PEPS: Remove 5% RPGT for property disposal from 6th year

PETALING JAYA (Oct 4): The Association of Valuers, Property Managers, Estate Agents and  Property Consultants in the Private Sector Malaysia (PEPS) is urging the government to review the current Real Estate Property Gains Tax (RPGT) so it can have a positive impact in stimulating  the country’s  housing market.

Stating its Budget 2020 wish list in a press release today, the association said property ownership from the 6th year onwards should no longer be deemed as speculative investment hence, the 5% RPGT on such property ownership among individual Malaysians or permanent residents should be withdrawn.

As for foreign individual owners and companies, the current RPGT of 10% for the property disposal from the sixth year onwards, should be reduced to 5%, the group said.

“The removal and reduction of the RPGT after the fifth year will indirectly stimulate the property market and encourage more buyers and investors to re-enter the property market and this will also assist to reduce the property overhang and help developers to reduce the supply of unsold units in the secondary market,” it said.

The association also hoped that Putrajaya will consider reducing the stamp duty rate for property transactions worth RM1 million and above to 3.5%, from the current rate of 4%.

To help more people own homes and to stimulate the market further, PEPS suggested that first time homebuyers of properties below RM500,000 be given 100% loan while the margin for the third  property onwards be increased to 80%. To ease lending eligibility, the government should allow more funds from the borrower’s EPF Account 2 to be withdrawn for the purchase of affordable homes.

The association also  proposed that the government set up a National Centralized Corporation on Affordable Housing to plan, coordinate and implement the government’s  blueprint and plans on affordable housing nationwide while working with state governments and developers on affordable housing matters.

The business model could be based on Singapore’s Housing Development Board.

“Existing agencies involved in affordable housing such as PR1MA could be absorbed under this new corporation,” it added.

To reduce the property overhang in the market, the association suggested a fast release mechanism of Bumiputera units to make the unsold units available in the open market.

PEPS also felt that there is a need to attract foreign buyers to ease the overhang. Hence it proposed that the government reduce the financial criteria required for foreigners to apply for the Malaysia My Second Home (MM2H) Visa Permit by lowering the liquid assets amount required.

State governments should also consider lowering the minimum threshold for foreigners to own properties in Malaysia, such as from RM1 million to RM800,000 in Kuala Lumpur and from RM2 million to RM1 million in Selangor.

PEPS also hoped to see the upcoming Budget 2020 offer more tax incentives and allowances to property developers or contractors who adopt the Industrialised Building System (IBS).

“At the moment only new IBS manufacturers or companies with pioneer status are given tax exemption and tax allowance,” it noted.

Source: The Edgeprop

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Investing In Penang Property

In this article I will be sharing about the Penang’s property market and how I look at the island and its potential for growth.

If you don’t already know, I’m not originally from Penang. My hometown is Malacca. I moved to Penang in 2001 and started investing in Penang’s property since 2005.

I now share with my student how to invest in property in Malaysia and especially so in Penang.

One of my graduates (who is also a blogger) Elvin has asked me the following questions, which I’ve make a video and shared it here:

Penang's Area of Growth

Do you want to know how I look at Penang's property market?Watch this video to know moreThis is a short overview about the area of growth for properties in Penang#kaygarntan #empoweringyourdreams #propertyinvestment #propertyinvestor #propertyinvestmentcoach #themasterkeymethod #penang #propertymarket #overview #area #of #growth

Posted by Kaygarn Tan – Property Investment Coach, Speaker and Author on Tuesday, 4 September 2018

 

If you prefer to read instead of watching the video, the transcript of the video (with additional points) is as below:

How long have you been studying the property market in Penang? And where are the top 5 areas in Penang that you see the most significant growth?

I started investing in Penang’s property since 10 years ago. And since I turned full time investing in properties, I started in depth analyzing and researching Penang properties 5 years ago. And I have compiled these data into several reports for e.g. Property Hotspots in Penang. I continuously study and update the data and have produced several ebooks related to property investment.

Kaygarn Tan Property Investment hotspots report

 

In doing my research and study, I use a lot of check list and tools. One of the tools I use is the Penang Map. Now, let us look at the Penang Map and let’s focus on Penang Island. I would “divide” Penang Island into 4 parts, North, South, East and East. West Penang is Balik Pulau and East Penang is really where it’s most happening and where both “growth” and “development” is.

 

We can further divide East Penang to North East and South East; using the first Penang bridge as the guide.

Kaygarn Tan invest in penang property

So, North East will encompass Glugor, Batu Ferringhi, Tanjung Tokong and Tanjung Bungah. All these are places are what I call “mature” areas. The main economic activities in North East are tourism and this includes Medical Tourism and Hospitality Tourism.

Kaygarn Tan invest in penang property

Another area in North East is Georgetown, which is well known as a UNESCO Heritage site. There are areas within Georgetown that is delineated as Core zone, buffer zone and pre-war houses. The activities in all these places are tourism, whereby there are a lot of street art, heritage walk and heritage tour, where people explore about heritage houses in Georgetown.

georgetown unesco heritage site

Moving to the South East, we will reach the growing area of Bayan Baru, which is one of the satellite city here. Moving further to the South, is the Bayan Lepas Industrial Area, Batu Maung, Teluk Kumbar and Gertak Sanggul.

Kaygarn Tan penang free trade industrial zone

These are the growing areas. The reason these are growing areas is because of the 2nd link bridge that linked Batu Maung and Batu Kawan. This link will bring population to come into the island gradually, towards the southern area.

This is, in a snapshot, the growing area and mature area of Penang Island

Now, let’s cross the bridge and go into the mainland.

Kaygarn Tan Property Investment penang bridge

Penang Mainland is divided into 3 major areas – Seberang Perai Utara, Seberang Perai Tengah, and Seberang Perai Selatan. Looking at the Seberang Perai Utara, there’s the Bertam township, which is a growing area; all the way to Seberang Jaya (in Seberang Perai Tengah) which is a mature area. Moving further south, there’s the satellite township of Batu Kawan, which is a well-planned township, and it’s a growing area.

Kaygarn Tan batu kawan property investment

As a summary, if you want to invest in Penang property, you will need to understand which area are growing and which is mature. Additionally, by understanding the economic activities in the different areas, you will know who your future tenant/ potential buyer will be.

If you have any questions, feel free to comment on the box below.

Happy Investing!

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