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Thursday, May 18, 2023

Money in housing, cautious optimism in industry

PETALING JAYA: The property market is expected to remain cautiously optimistic in 2023, with the gradual increase in the Overnight Policy Rate (OPR) since last year likely to affect market activity, particularly on residential demand, says the Valuation and Property Services Department.

The outlook of the workforce in the construction sector and the increase in the price of building materials will also affect supply.

Department director-general Abdul Razak Yusak said internal and external factors, such as economic and financial developments both globally and in the country, would also have an impact on the real estate sector and the sentiment of industry players.

“Looking at the national economy which is projected to grow by 4% to 5% in 2023, supported by continued resilient domestic growth prospects, the property market is expected to remain cautiously optimistic in 2023,” he said.The first quarter of this year alone saw over 89,000 transactions worth RM42.31bil, which was higher than those recorded in pre-pandemic years, he said.

“The seasonal factor in house purchases, which is usually low at the beginning of the year, the increase in OPR and the decline in Consumer Sentiment Index (CSI) are among the factors that contributed to a decline in residential market activity in particular,” he said.

New residential launches, said Abdul Razak, were also indicating a cautious sentiment among developers, with the number recorded at nearly 4,700 units, which was less than those in previous years, while sales performance was moderate at 25.7%.

The decrease in new launches was in line with the decrease in the number of developers’ licences and advertising and sales permits of new housing sales and renewals approved by the Local Government Development Ministry from 5,641 in January and February last year to 2,911 during the same period this year, he added.

Johor recorded the highest number of new launches at 2,077 units or about 45% of the nationwide total with a sales performance of 24.9% while Selangor had the second highest at 791 units or 17% share with a sales performance of 37%.

Abdul Razak said in line with the cautious sentiment among developers, construction activity had slowed down in the first quarter of 2023.

“This is seen as a positive development to balance the unsold supply in the market,” he said, adding that the residential and serviced apartment overhang status continued to be positive.

“The number of overhang units has decreased to 26,872 units worth RM18.31bil in the first quarter of 2023 as a result of market absorption in all states, except Selangor. The volume and value of residential overhang decreased by 3.2% and 0.5% respectively compared with the fourth quarter of 2022,” he said.

Selangor recorded the highest number and value of overhang units, with 4,995 units worth RM4.47bil, followed by Johor at 4,759 units worth RM3.94bil, Kuala Lumpur with 3,423 units worth RM3.13bil, and Penang with 3,138 units worth RM2.48bil.

The purpose-built office (private) and shopping complex segment in Kuala Lumpur and Selangor, said Abdul Razak, should be given attention as there was a surplus of space, which was also expected to be severely affected by the inflow of new supply this year.This is as Kuala Lumpur recorded the highest available private purpose-built office space at 2.53 million square metres involving 290 buildings, followed by Selangor with 1.40 million square metres involving 192 buildings.

For the shopping complex segment, Selangor recorded the highest available retail space nationwide at 0.79 million square metres with 146 buildings followed by Kuala Lumpur at 0.56 million square metres with 97 buildings.

“Developers need to be more thorough and cautious before planning any new development and local authorities need to evaluate in detail before approving each new project,” said Abdul Razak.

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Brighter outlook for the housing sector

Sunday, March 31, 2019

Five challenges young Malaysians face with home ownership

For many young Malaysians, the road to owning a home is riddled with speed bumps. — Pexels

PETALING JAYA, Feb 26 — Most would agree that you truly reach adulthood the moment you own your own property.

Just like any other major milestone in life, getting there comes with its own set of challenges that many young Malaysians have to overcome before they can successfully purchase a home.

Here are five hurdles Malaysian millennials might encounter on the path towards home ownership:

1. Worrying about making the wrong choice, when is the ‘right’ time to buy?

Purchasing a home can be a major decision that many Malaysian youths feel overwhelmed by. — Pexels pic

Making the decision to buy a piece of property is a huge step that young locals aren’t quite brave enough to take yet.

Social news website SAYS’ 2019 Malaysian Home Survey among 8,568 Malaysians reports that one in five respondents had “(worries) about making the wrong decision”, especially since home ownership requires a hefty financial investment.

2. Unsure about loan application and loan rejections.

Pexels pic Do you have enough saved up for a home in the future? — Pexels pic

A difficult loan approval process is a huge factor that dampens many Malaysians’ prospects of owning a home.

PropertyGuru’s Consumer Sentiment Survey in 2017 states that 33 per cent of Malaysians reported a tough approval process for bank loan applications which presents a major roadblock on the path to home ownership.

3. Starter salaries, not enough money saved for a downpayment.

The average Malaysian needs to plan carefully if they want to own a house with their current salary. — Reuters pic

The thought of dealing with a mortgage on the salary of a fresh graduate is making many millenials think twice about owning a house.

The Employee's Provident Fund statement in 2016 had said that 89 per cent of the working population in Malaysia earn less than RM5,000 monthly, making home ownership especially challenging.

Most millenials wouldn’t believe that they could own a house with that salary.

4. Renting or owning?

It’s not easy maintaining a modern lifestyle when you’ve got a mortgage weighing on your shoulders. — Unsplash pic

The hefty financial commitment to owning a home means young Malaysians will have to make some lifestyle changes if they want to stay afloat while having a house to their name.

This might mean foregoing luxuries such as weekend brunches and holidays overseas which have become staples for the modern generation.

Hence, a monthly instalment replacing these pleasures is the reason 33% of Malaysians in SAYS’ survey are saying ‘no’ to home ownership.

5. Lack of awareness on housing deals and promotions.

Housing deals and offers don’t seem to be showing up on the radars of young Malaysians. — Unsplash pic

While initiatives are in place to help young potential homeowners, many do not even know about the resources available to them that can ease the burden of property ownership.

A shocking 65 per cent of Malaysians in SAYS’ survey said that they had no clue about current housing offers and promotions.

This means that many young adults are currently unequipped with knowledge about navigating the property market.

In light of this, property developers EcoWorld have launched HOPE (Home Ownership Programme with EcoWorld), a comprehensive solution that promises to aid young Malaysians in their journey towards owning their dream home.

HOPE aims to make the dream of home ownership a full-fledged reality for millennials with the STAY2OWN (S2O) and HELP2OWN (H2O) programmes.

S2O will allow those wanting to stay in an EcoWorld project to rent their ideal home first with the confidence that they can become homeowners in the future.

A low monthly payment similar to the market rental rate also makes it particularly attractive for first-time homebuyers.

The option to rent first before buying also gives customers ample time to get their finances in order before committing to a new mortgage.

To top it all off, the rental savings will be used to offset part of the purchase price of the home, making it even more affordable for young Malaysians.

The H2O had successfully helped approximately 1,800 young homeowners and upgraders own their choice EcoWorld home last year and you can be one of them too! For more information on owning your dream home, visit EcoWorld’s website (https://ecoworld.my/hope/) or Facebook (https://www.facebook.com/EcoWorldGroup/).

By Tan Mei Zi The Malay Mail

* This article is brought to you by EcoWorld.

A NEW HOPE FOR YOUR DREAM HOME https://ecoworld.my/hope/

Five challenges young Malaysians face with home ownership

For many young Malaysians, the road to owning a home is riddled with speed bumps. — Pexels

Do you have enough saved up for a home in the future? — Pexels pic

A difficult loan approval process is a huge factor that dampens many Malaysians’ prospects of owning a home.

PropertyGuru’s Consumer Sentiment Survey in 2017 states that 33 per cent of Malaysians reported a tough approval process for bank loan applications which presents a major roadblock on the path to home ownership.

3. Starter salaries, not enough money saved for a downpayment.

It’s not easy maintaining a modern lifestyle when you’ve got a mortgage weighing on your shoulders. — Unsplash pic

The hefty financial commitment to owning a home means young Malaysians will have to make some lifestyle changes if they want to stay afloat while having a house to their name.

This might mean foregoing luxuries such as weekend brunches and holidays overseas which have become staples for the modern generation.

Hence, a monthly instalment replacing these pleasures is the reason 33% of Malaysians in SAYS’ survey are saying ‘no’ to home ownership.

5. Lack of awareness on housing deals and promotions.

A NEW HOPE FOR YOUR DREAM HOME

Monday, February 12, 2018

Restructuring our household debt

NEW Year always come with new resolutions. Finance is an important aspect of most people’s checklists when it comes to planning new goals.

While it is good to set new financial targets, it is also vital to re-look at our debt portfolio to ascertain if it is at a healthy state.

At a national level, our country also has its financial targets matched against its debt portfolio.

According to the latest Risk Developments and Assessment of Financial Stability 2016 Report by Bank Negara, the country’s household debt was at RM1.086 trillion or 88.4% of gross domestic product (GDP) as at end 2016.

Residential housing loan accounted for 50.3% (RM546.3bil) of total household debts, motor vehicles at 14.6%, personal financing at 14.9%, non-residential loan was 7.4%, securities at 5.7%, followed by credit cards at 3.5% and other items at 3.6%.

Evidently, residential housing loan is the highest among all types of household debt. However, a McKinsey Global Institute Report on “Debt and (Not Much) Deleveraging” in 2015 highlighted that in advanced countries, mortgage or housing loan comprises 74% of total household debt on average.

As a country that aspires to be a developed nation, a housing loan ratio of 50.3% to total household debt would be considered low, compared to 74% for the advanced countries. In other words, we are spending too much on items that depreciate in value immediately – such as car loans, credit card loans and personal loans – compared to assets that appreciate in value in the long run, such as houses.

Advanced economies, which are usually consumer nations, have only 26% debts on non-housing loan as compared to ours at 49.7%.

In order to adopt the household debt ratio of advanced economies, our housing loan of RM546.3bil should be at 74% of total household debt. This means that if we were to keep our housing loan of RM546.3bil constant, our total household debt should be reduced from the current RM1.086 trillion to a more manageable RM738bil. This would require other non-housing loans (car loans, credit card loans and personal loans etc) to reduce from 49.7% of total household debt to only 26%. To achieve this ratio, the non-housing loan debt must collapse from the current RM539.7bil to only RM192bil.

Reducing total household debt from the current RM1.086 trillion to a more manageable RM738bil would also have the added benefit of reducing our total household debt-to-GDP ratio from the high 88.4% to only 60%, making us one of the top countries globally for financial health.

Malaysia’s household debt at present ranked as one of the highest in Asia. Based on the same 2015 McKinsey Report, our household debt-to-income ratio was 146% in 2014 (the ratio of other developing countries was about 42%) compared to the average of 110% in advanced economies.

Adjusting the debt ratio by reducing car loans, personal loans and credit card loans will make our nation stay financially healthy.

Car values depreciate at about 10% to 20% per year based on insurance calculations, accounting standards and actual market prices. Assets financed by personal and credit card loans typically depreciate immediately and aggressively.

The easy access to credit cards and personal loan facilities tend to encourage people to spend excessively, especially when there is no maximum credit limit imposed on credit cards for those earning more than RM36,000 per year.

If we maximised the credit limit given without considering our financial ability, we will need a long time to repay due to the high interest rates, which ranged from 15% to 18% per annum.

Based on a report in The Star recently, Malaysia’s youth are seeing a worrying trend with those aged between 25 and 44 forming the biggest group classified as bankrupt.

The top four reasons for bankruptcy were car loans (26.63%), personal loans (25.48%), housing loans (16.87%) and business loans (10.24%).

It is time for the Government to introduce more drastic cooling-off measures for non-housing loans in order to curb debt that is not backed by assets. This will protect the rakyat from further impoverishment that they are voicing and feeling today.

As we kick start the new year, it is good to relook into our debt portfolio. When we are able to identify where we make up most of our debts, and start to reallocate our financial resources more effectively, we will be heading towards a sound and healthier financial status as a nation.

By Alan Tong - Food for thought

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

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Restructuring our household debt

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Saturday, January 13, 2018

Moving forward with affordable housing

One way to solve housing shortage problem is to build more houses.

"If we take a look at countries with commendable housing policies such as Singapore and Hong Kong, we notice that the government plays a very important role in building and ensuring a sufficient supply of housing for their people."

THE issue of affordable housing has been a hot potato for many countries, especially for a nation with a growing population and urbanisation like ours.

In my previous article, I mentioned that there was a growing shortage of affordable housing in our country according to Bank Negara governor Tan Sri Muhammad Ibrahim. The shortage is expected to reach one million units by 2020.

According to Bank of England governor Mark Carney, one of the most effective ways to address the issue is to build more houses. There are good examples in countries like United Kingdom, Australia and Singapore, which have 2.4, 2.6 and 3.35 persons per household respectively.

In comparison, the average persons per household in our country is 4.06 person, a ratio which Australia had already achieved in 1933! To improve the current ratio, we need to put more effort into building houses to bring prices down.

If we take a look at countries with commendable housing policies such as Singapore and Hong Kong, we notice that the government plays a very important role in building and ensuring a sufficient supply of housing for their people.

For example in Singapore, their Housing and Development Board (HDB) has built over one million flats and houses since 1960, to house 90% of Singaporeans in their properties. In Hong Kong, the government provides affordable housing for lower-income residents, with nearly half of the population residing in some form of public housing nowadays. The rents and prices of public housing are subsidised by the government and are significantly lower than for private housing.

To be on par with Australia (2.6 persons per household), our country needs a total of 8.6 million homes to house our urban population of 22.4 million people. In other words, we need an additional 3.3 million houses on top of our existing 5.3 million residential houses.

However, with our current total national housing production of about 80,000 units a year, it will take us more than 40 years to build 3.3 million houses! With household formation growing at a faster rate than housing production, we will still be faced with a housing shortage 40 years from now.

Therefore, even if the private sector dedicated all its current output to build affordable housing, it will still be a long journey ahead to produce sufficient houses for the nation. It is of course impossible for the private sector to do so as it will be running at a loss due to rising costs of land and construction.

In view of the above, the government has to shoulder the responsibility of building more houses for the rakyat due to the availability of resources owned by the government. Land, for example, is the most crucial element in housing development. As a lot of land resources are owned by government, they must offer these lands to relevant agencies or authorities to develop affordable housing.

I recall when I was one of the founding directors of the Selangor State Development Corp in 1970s, its main objectives was to build public housing for the rakyat.

However, today the corporation has also ventured into high end developments in order to subsidise its affordable housing initiatives. This will somehow distract them from focusing on the affordable housing sector.

Although government has rolled out various initiatives in encouraging affordable houses, it is also important for the authorities to constantly review the original objectives of the relevant housing agencies, such as the various State Economic Development Corporations, Syarikat Perumahan Negara Bhd, and 1 Malaysia People’s Housing Scheme, to ensure they have ample resources especially land and funding to continue their mission in building affordable housing.

A successful housing policy and easy access to affordable housing have a huge impact on the rakyat. It is hoped that our government escalates its effort in building affordable housing, which will enhance the happiness and well-being of the people, and the advancement of our nation.

Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

By Alan Tong

Moving forward with affordable housing

Saturday, February 11, 2017

Leaving a legacy by buying a house first before a luxury car ...

DURING big festive celebrations such as Hari Raya Aidilfitri, Deepavali and the recently celebrated Chinese New Year, it is common to see families with a few generations gathered together.

Our grandparents, parents, uncles and aunties would talk about the legacies left by our ancestors, and the stories often attract a lot of attention whether from the young or old.

Perhaps, the topic of leaving a legacy is something worth sharing as we embark on a brand new year.

For years, I have been touched by the catchy tagline of a renowned Swiss watch advertisement, “You never actually own a (the watch brand), you merely look after it for the next generation”.

While most of us can relate to the thought, not all of us can indulge in such luxurious watches or be interested in buying one. However, at some point in time, we may be looking at buying a property to pass down to our younger generations.

Whenever the topic of leaving a legacy is brought up, I would recall the lesson that I learnt from my late father. My father embarked on a long journey from China to Malaysia at the age of 16. With years of hard work and frugality at his peak, he managed to own a bus company, the Kuala Selangor Omnibus Co.

Other than his bus transport business, he only invested in his children’s education and real estate. He financed seven of his eight sons to have an overseas university education, and when he passed away, he also left four small plots of land in Klang and a company which had 34 buses.

As I look back now, what my late father invested in unintentionally was very beneficial to me when I came back from my studies as an architect. With the land he handed down and the knowledge he equipped me with, I intuitionally got myself involved in small real estate development, and later founded my property development company, Sunrise, in 1968.

Many people have thought of leaving a legacy. The crucial questions often asked are, when should we start planning for it, and how should we go about it?

For financial planning and investment, I always believe that the earlier we start, the better off we are. The same goes to leaving a legacy.

If you plan to buy a property, it is advisable to start earlier as it is more affordable to buy it now as compared to 10 or 20 years down the line especially with rising costs and inflation in mind. You can start with what you can afford first and focus on long-term investment.

It is proven that property prices appreciate over a period of time, especially when we plan to hand over assets to the next generation that easily involves a 20- to 30-year timeline.

As a developing nation which enjoys high growth rate, Malaysia’s property values will also appreciate in tandem with the economic growth in the long run.

Nowadays, we often hear youngsters comment on the challenges of owning a house due to the rising cost of living. I believe that besides starting with what you can afford, it is also important to plan your financial position wisely and to differentiate between investment and spending.

Investing in properties, commodities, shares, etc. is also a form of savings which can help to grow your wealth and to leave a legacy. On the other hand, money spent on luxury items may depreciate over time from the day you buy them. If we can prioritise investment over expenditure, it is easier and faster to achieve our financial goals.

So, if you haven’t already started to plan, do consider leaving a legacy by buying a house first before a luxury car, branded bags or expensive gadgets, as the latter are considered ‘luxury’, not necessity.

Even if you may not have a spouse or children at this point in time, it’s better to start now than later, as our financial commitments tend to grow bigger as we progress into the next stages of our lives.

Most of us hope our lives matter in some way that can make an impact on our loved ones. The idea of leaving a legacy can take many forms, such as equipping the younger generations with knowledge and values, or leaving them fond memories.

Those are all important to work on and they leave a footprint to those lives you touch. If you are also planning to hand over physical gifts, always remember to start earlier with what you can afford, and focus on long term investment.

By Food for Thought Alan Tong

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

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A NEW HOPE FOR YOUR DREAM HOME https://ecoworld.my/hope/

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