Entitled Deal Or No Deal In 2016: A Property Market Forum by PTLM, the casual event covered an extensive range of topics that are most important for homebuyers and property investors.
The event was held on Saturday, 28 November 2015, at the newly-opened RM12 million SkyWorld Property Gallery showcasing its SkyArena development in Setapak. Built by ambitious property developer SkyWorld Development Sdn Bhd, the show gallery complex is said to be the largest in Kuala Lumpur.
The panelist members were Ms Khin Lee, SkyWorld's General Manager of Sales & Marketing and PTLM co-founders Mr Patrick Chay, a property researcher and representing Generation-Y; Mr Nick Tan, a savvy property investor focusing on small unit sizes; and Mr Jerro Loh, a licensed and experienced real estate agent.
The discussion was hosted by Mr Hwang Wei Young, another co-founder of PTLM.
The objective of the forum is to provide an unbias views about the economy and the property market. The panelists also provided a variety of educational insights to homebuyers during the slowing property market.
We summarised the forum discussions as below.
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The forum started with the moderator asking about the panelists' personal thoughts about the property market as we move into 2016.
They all agreed that the property market has slowed down and may remain status quo next year if the economic climate remained uncertain. The current economic climate is weak and property buyers are being very cautious, with some savvy investors staying away from property fairs and property launching events in recent times.
"If you are buying for own stay, any time is good time. If you are a property investor, the best time to buy a property is when the demand for properties is weak. This is because developers have to be generous... extra generous in providing additional incentives to purchasers.
"Due to the slowdown, some new launches are now sold at reasonable price in per square foot terms. At entry, the prices should not exceed 20% of subsale prices in surrounding vicinity unless the product is unique," said Patrick Chay.
Khin Lee shared that as a developer they have to be mindful to the needs and affordability of homebuyers. SkyWorld is a lifestyle builder and hence its products are designed to give a sense of belonging and to serve the needs of the increasing number of working adults in strategic areas.
SkyWorld is strongly focused in all districts within the jurisdiction of Federal Territory of Kuala Lumpur due to the expected rise in household population and urban migration.
The moderator asked if there would be an overhang or oversupply situation in the property market.
"I am a property agent in Mont'Kiara. When it comes to the term 'oversupply', this is something that have been said since many years ago, especially in Mont'Kiara. Now, other locations might be going the same way.
"My opinion is that there is a large mismatch between the supply and the buyer's demand. There are some condos doing very well in Mont'Kiara while many others are not convincing enough to the buyer," said Jerro Loh.
The panelists agreed that overhang and oversupply situation will happen, and in fact, it has been an occurence since many years ago. This will remain largely a general perception by property investors moving forward.
"The best thing is to be positive. Have a positive mind in whatever you do including investing in property. Malaysia is a growing country. The need for homes will always be there," said Nick Tan.
"It all comes down to whether your property are able to convince renters or buyers. Every location would have the goods and bads in property," added Jerro Loh.
"Every prime location today would have high density developments, but if your property is convincing and acceptable to the needs of the people at that location at that time, then it would be a matter of time before it gets snapped up," said Nick Tan.
"Location specific. Product specific. In the event of any oversupply situation, there will still be properties that outperform the rest in the same location. Understanding the product specification and understanding the needs of the demographics, i.e. the local population, are two important factors.
"It is not just solely the location factor. It is a combination of factors," said Patrick Chay.
The moderator quoted a recent article about unsold stocks as reported by the Real Estate And Housing Developers' Association (REHDA).
"The unsold stocks appeared to be largely Bumi quota units which are being held back for sale or have not been converted or released by the developer. This is the main reason for causing such stocks to be difficult to move.
Another reason for unsold stocks is the affordability reason. This could be either the property unit size is large hence the price would be high. Not many people could afford large-sized property today.
"Or simply the property is overpriced if the unsold stocks are uncleared until completion," added Nick Tan with Patrick Chay concurring.
Jerro Loh said that property investors have to be savvy in making investment decisions and be prudent in their financial planning.
"You may be asking for a certain price, but the bank may value the property slightly lower. Worst still, there might not be many transactions that happened around your property. So do your due diligence when buying a property in an area that you are not familiar," said Jerro Loh.
The moderator then asked about the impact of the Goods and Services Act (GST) on property developers, property investors and first homebuyer.
"I agree that the GST has affected property developers. But things will stabilise and we are now heading towards normalisation. People have started accepting it as a matter of fact.
Now 8 months into implementation, the confusion over GST has subsided. Developers have pushed their commercial products with incentives such as covering the buyer's GST portion.
Ultimately, Malaysians are known to be 'survivors' and we will together ride out from any price impact caused by inflation and GST," said Khin Lee drawing nod gestures from the attendees.
According to Patrick Chay, commercial players should take advantage on commercial products that have their GST portion covered by the developers. As people adapt, the developers will take down this incentive.
Alternatively, some developers are also offering schemes such as Guaranteed Rental Return (GRR) on shop offices which provide an additional level of comfort in the first few years upon completion.
"In my opinion, shops with immediate catchment of large population in the vicinity, or shops with direct residential properties above who are mainly own-stayers are most viable. Investors have to do extra homework on studying the demographics, traffic flow and the exposure of business in that area.
"The realistic yield for new properties has dropped below 4% so shop owners should be flexible in their asking rentals. If the rental price are not desirable, some retail tenants may even ask for discounts and rebates from time to time or otherwise they will delay rental payments," added Patrick Chay.
The moderator says that many first homebuyers would want to know if the government would re-introduce the scheme known as Developer Interest Bearing Scheme (DIBS).
The DIBS was stopped since 1 January 2014 and many properties with such scheme are now completing and handing over to the purchasers.
Nick Tan agrees that DIBS should be re-implemented but only for first homebuyers so that they have an equal chance to own a property like many of the Generation Ys who have invested in their first property during the 2010-2013 golden years.
He said banks have to be lenient in approving such financing as long as commitments and repayment patterns in CCRIS are met but at the same time there should not be any shortcuts for obtaining their mortgages.
Besides DIBS for first homebuyers, there are currently several 'boosters' for first homebuyers to buy affordable homes such as 100% loan financing under government-initiated programs.
On the issue of affordable homes, there are now 10 known RUMAWIP schemes in Kuala Lumpur and the first two PR1MA schemes have called for a few rounds of balloting exercise.
As part of SkyWorld's corporate social responsibility programs, the developer launched its first affordable homes under the RUMAWIP scheme earlier this year. The development is the most 'luxurious' in its category with 16 full-condo facilities. Since then, Sky Awani Residence on Jalan Sentul Pasar has been sold out.
With such overwhelming demand, SkyWorld will be embarking next year on its subsequent RUMAWIP schemes called Sky Awani 2 and another project near Jalan Ipoh.
The moderator wanted to know how does a politically-tensed situation impact our property market next year.
Patrick Chay calls for the resolvement of the 1MDB saga to improve Malaysia's reputation in global financial markets. He shared about the current economic situation which drew close attention from the attendees.
"The secondary market is slow but not the worst. Any uncertainty will have to be diminished, but even before that, there are actually many good deals that can be found in the secondary market," explains Jerro Loh.
The moderator asked the panelists for suggestions on what to do if a property investor is not able to rent out his/her apartment unit within 6 to 10 months.
"There are always rental enquiries ...or upgraders' enquiries for subsale during the first 6 months period for every newly-completed property.
"The question is whether do you want to catch them and how to do it? There are many property owners who delayed their collection of keys and this is causing them to miss-out on rental deals.
"If they are asking for high rentals (higher yield) then they would have to wait for more than 6 months in today's market. If they have the holding power to wait, then it is fine, otherwise good luck," said Patrick Chay.
Khin Lee shared about the urgent need of doing up defect works upon obtaining you property keys in order to speed up your unit availability for rent.
She shared that every developer will have alot to do upon vacant possession especially when the number of units are alot, but sometimes it is the human relations element that could speed things up for you.
"(You may) get hold of the person's contact who does inspection with you."
"I recently collected keys for a property, spent a short time for defect works since it was very minor and quickly managed to rent out at a reasonable time of less than 3 months," quips Nick Tan.
"I offered a higher commission, i.e. 1.5 months, to the agent dealing with my property tenancy. At least this can motivate the agent to quickly push my property rather than wasting several months empty."
Property investors are adviced not to spend too much time on defect works and typically, minor ones can be omitted and cleaned up when you are doing your renovation.
Nick Tan: "The rule of thumb is that you should not spend more than 10% of the property cost in your renovation or interior design cost. Fully furnished is good but bear in mind tenants may not appreciate your choice of furnishings.
"The best is to buy a new highrise property with at least partial furnishes. I would spend less than 5% of the property cost to add on the necessities, unless needed to put more things as negotiated by the would-be tenant."
Innovations on interior designs is a new trend for enhancing one's property. Creating a "wow" concept can be very costly which may improve your asking rental price but not necessary actual rental yield.
Innovative interior designs may attract attention from visitorship from potential tenants. However, due to the competitive nature of rentals, then one would have to differentiate itself.
Nick Tan: "I always on the look-out for home furnishing deals. For example, I bought a whole set of furnitures for as low as RM6,000 from a sale that was on its last day."
With the popularity of mixed development on commercial land these days, the moderator query the panelists whether such developments would be a better bet.
PTLM co-founders Patrick Chay, Nick Tan and Jerro Loh believe that mixed development projects provide the attraction factor to those looking for investment play.
Khin Lee: "Typically in any mixed developments, there will be several phases of developments and several blocks of properties which are launched in stages over several years.
"And each time a developer launches a block, the price gets higher and higher and this actually will assist investors in price appreciation.
"This is the advantage to property investors especially if you are buying into the early phases of a holistic mixed development project."
"SkyWorld is very selective in the landbanks that we do, as we would conduct a market study to find out if the intended end product will be marketable at a right price," added Khin Lee.
Speaking on innovative ideas, the moderator asked if dual-key apartment units are practical, purposeful and rentable.
"If you have a small family, a decent family size apartment will be good. But there might be excess space that you may not use. This is where dual-key unit comes in useful as you may consider letting out the second unit and monetise the extra space. Similarly, if you are not living-in, then you may rent out separately to two tenants whenever possible," said Patrick Chay.
"Dual-key units are very popular as far as we are concerned," said Khin Lee referring to the sales of Bennington Residences in SkyArena, which has a take-up rate of 70% for the first tower (Block B).
"Parents with teenagers. Teenagers especially. They would want a dual-key unit for their own use. It's like their own bachelor pad. Privacy so to speak or away from the parents watch," stressed Khin Lee as a mother of two children while attendees listened attentively.
"Besides that, a dual-key unit is very useful if you have a mother-in-law living with you," said Khin Lee drawing laughters from the attendees.
Property experts always say that one should invest in places with upcoming infrastructure projects. The moderator asked if projects with MRT/LRT integration are still a good buy today considering that they are already sold with a large premium.
"For me, again it has to be the location, demographic-profile and product specific that overrides the MRT point. Though, there is nothing wrong if you are buying a property with a large premium over your nearest competitors because of the MRT factor.
"The MRT factor is supposed to be a catalyst for property appreciation but I felt that several developments may have priced in some appreciation to some extent.
"It has to be MRT-integrated project which means a property connected to the station, not connected to the running tracks.
"There will be lesser demand during its construction period. You should asked yourself whether could your MRT property transact at the desired price upon completion. Asking prices that are too high is unrealistic because there are no ready buyers, with or without MRT/LRT.
"Thereafter completion, a MRT Line takes at least 5 years to mature to its projected ridership. Will you be able to hold for the Line to mature?" said Patrick Chay.
"If you see the past LRT projects, the properties around LRT have appreciated almost equally with other properties in areas without LRT. In my opinion, it all comes back to what kind of rental rates could MRT properties fetch.
"As we know, rentability supports the property value. I do not deny that MRT properties will have the advantage in rental demand due to the convenience factor and the rising transportation costs would put more people onto trains.
"But this does not necessary improve the rental price and yield as MRT properties are highly-densed and competitive... and will have more and more competing projects, just like your property, integrated within the Line(s) too.
"It then depends on the right pricing for such properties," said Jerro Loh.
The moderator concluded the forum discussion by asking the panelists about their opinions on 'Hotspots for investment' for the year 2016.
Patrick Chay: "We at PTLM no longer uses the term 'Hotspots'. This term is too outdated. Instead, I think investors should look into 'Hot Properties' as opposed to hotspot areas because hotspots are just talked-about locations based on temporary sentiments and news. Most of us already know areas that are covered by infrastructure such as MRT.
Contrary, there are many 'Hot Properties', which are product-specific, across many strategic locations."
The moderator opened the floor to several questions and the forum discussion ended with a short teaser preview of SkyLuxe Luxury Suites, an upcoming development by SkyWorld located adjacent to the Bukit Jalil Recreational Park, the Bukit Jalil Golf & Country Resort and the large-scale Pavilion Bukit Jalil shopping mall.
The casual forum lasted for one and a half hour and finally ended with a buffet lunch and a mingling session.
As always, PTLM is committed to sharing with its members an unbias view about the property market and previewing upcoming 'Hot Properties' coming into the market.