On the recovery path

 

Penang property market to rebound amid lingering challenges

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THE Penang property market, which had actually started seeing a rebound in transactions since last year, is expected to resume its recovery path into 2022.
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CBRE|WTW director Peh Seng Yee says the Penang property market can expect a “rebound amid lingering challenges” this year.
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“We do expect a recovery in market activity for 2022. Prices of landed properties will continue to remain resilient.
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“For the high-rise sub-sector, it will continue to be a buyers market,” he says at the launch of CBRE|WTW’s 2022 Market Outlook Report, recently.
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Peh adds that future launches will generally comprise self-sustained developments that will be on a smaller scale, while at the same time fulfilling the demand for affordable units.
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Knight Frank Penang executive director Mark Saw also says the residential sub-sector in Penang has improved, posting higher volume and value of property transactions as of the third quarter of 2021.

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Prop chtProp cht
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“The Penang state government’s commitment to increase home ownership with plans for a range of affordable homes in various strategic locations, extension of the Penang Home Ownership Campaign until June 2022 and enforcement of mandatory installation of fibre optic telecommunication infrastructure for all new developments, will spur the state’s residential property market.”
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In terms of challenges, Peh says scarcity of sizeable land in Penang will still continue to pose development constraints.
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“Additionally, the prolonging effects of the pandemic, especially with the new Omicron variant, could result in cautious spending and a wait-and-see approach.
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“Stringent lending guidelines and concerns over job security could also potentially derail the market,” says Peh.
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On the outlook of the Penang office market, Peh says the segment is expected to remain healthy this year, with stable rentals and occupancy rates.
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“The prospects of co-working spaces still remain encouraging,” he says.
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As for Penang’s retail sub-sector, Peh says the removal of movement restrictions since last year has been a boost to this sector.
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“We see normalisation amid ‘freedom euphoria’. However, we expect rentals to be flattish and a widening gap between the newer and older shopper complexes.”
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As for Penang’s hotel sub-sector, Peh says this segment is set for a steady recovery if the pandemic is significantly contained.
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“The segment can be spurred further by travel bubbles and other government initiatives.
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“We also see pent-up demand for medical tourism and intensifying market competition for the hotel sub-sector.”
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Meanwhile, Knight Frank Malaysia in its real Estate Highlights for the second half of 2021, says the Penang residential market is expected to pick up this year, supported by a series of measures announced under various stimulus packages and Budget 2022.
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“This will encourage people from various income levels to purchase their dream homes. The overhang of high-rise residential properties, especially in the category of condominiums and apartments, has also been growing.”
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With limited new supply of purpose-built offices in the state (existing and future), Knight Frank says the occupancies and rental rates for better grade purpose-built office buildings are expected to hold steady.
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“Meanwhile, with the growing work-from-home trend, some business premises have been converted into co-working space.”
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Knight Frank noted that the country’s vaccination rate has continued to improve and with further easing of restrictions, the retail segment is expected to slowly recover.
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“Selected retailers are expected to embrace the rise of eCommerce as they head down the path of recovery.”
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It adds that Penang’s industrial segment has continued to remain strong and steady throughout the pandemic.
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“This is especially with the Penang state government’s commitment to expand another two industrial parks in Batu Kawan, with focus on the logistics industry and the remaining phases for mixed industries.
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“This industrial park is set to continue its history of the successful Bayan Lepas Industrial Park.”
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Meanwhile, CBRE|WTW in its 2022 Market Outlook Report says property transaction activities in Penang increased for the period of January to September 2021.

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“A total of 11,981 properties valued at RM7.23bil were transacted, reflecting 13.9% and 33.9% increase in volume and value, respectively, year-on-year.
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“As more businesses are allowed to operate, the Penang property market has generally rebounded.”
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CBRE|WTW is optimistic that the rebound will extend into this year.
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“However, the rebound would be gradual as the pandemic lingers on, along with a sluggish economy and higher cost of living.”
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CBRE|WTW also expects to see more bargain hunting for residential units this year.
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“The overhang remains a concern. Prospective purchasers can negotiate for more discounts in addition to the incentives offered,” it says.
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According to the National Property Information Centre (Napic), there were 30,290 unsold completed residential units (overhang) worth RM19.75bil as at September 2021, compared with 30,926 units worth RM19.99bil in the previous corresponding period.
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Of the 30,290 overhang units, 18,829 units (or 62.2%) comprised high-rise units, while 6,803 units (22.5%) consisted of terrace houses.
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The bulk of the overhang units were focused mainly in Johor (6,441 units), Penang (4,638 units), Kuala Lumpur (3,863 units) and Selangor (3,376 units).
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Napic says 33.7% of the overhang properties consisted of units ranging between RM500,000 and RM1mil, while 28.4% comprised units ranging between RM300,000 and RM500,000.
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Units below RM300,000 comprised 25.5% of the total overhang, while units above RM1mil (12.4%) consisted of the remaining unsold units during the period under review.
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Knight Frank concurs that the overall property overhang status continues to remain elevated, especially in the high-rise residential segment.
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“The performance of the residential sub-sector is improving gradually, registering higher volume and value of property transactions as of the third quarter of 2021,” it says.

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Money lost under the shadow banking: loan sharks Ah Long

IN my previous article, I shared the impact of high credit card interest rate that many have overlooked and hence, overspent. Interestingly, there are loans outside the confines of financial institutions that affect the mass. These loans are largely unregulated and therefore, more painful in terms of financial burden and emotional stress when the loan and interest cannot be repaid on time.

Every now and then, I will receive text messages from unknown contacts offering loans at “attractive” rates. A check with my close associates indicates that I am not alone in receiving such messages. These messages and those stickers offering loans on the streets share the same traits, i.e. easy loan with no pre-qualification required. Example – “Borrow RM1,000, and return RM200 monthly for six months”.

At first glance, it seems like the interest rate for the loan is 20%. However, as the repayment period is only six months, it is actually 40% per annum! This rate is 11 times higher compared with the average fixed deposit rate of 3.5% per annum in the market.

These loans are offered mostly by unlicensed moneylenders, otherwise commonly known as “loan sharks”. According to a news article published in The Star recently, the interest they charged are mostly counted based on monthly or even daily rest basis.

It is learnt from the article that people usually borrow between RM1,000 and RM10,000 at an interest rate of 0.5% to 1% per day. This works up to about 15% to 30% monthly. When the loan is defaulted, another 5% is added as a late repayment penalty.

It therefore becomes evident that the borrowers of such loans face immense problem repaying their loans. They will generally end up borrowing from other moneylender to cover their existing loan which will lead them to more debts. Imagine the emotional stress from harassment when they are unable to serve the interest.

Sadly, this loan with its easy application process and low requirement attracts people who are financially desperate, regardless of professional or income group.

Bank Negara has announced that Malaysia’s household debt-to-gross domestic product (GDP) ratio has increased from 86.8% to 89.1% as of 2015. We have one of the highest household debts in the region without including the unregulated loans from these “moneylenders”. I wonder how this “shadow banking” or “off balance sheet transaction” impact our people and economy.

To protect the rakyat, the government should look at strengthening the enforcement of eliminating illegal money lending.

As the saying goes “where there is demand, there is supply”. Hence the key is to first understand why people resort to borrowing from these “moneylenders”. It is important to strengthen financial education and awareness of public through various channels.

People, especially children, should be taught to borrow for the right things from young, and understand the difference between good debt and bad debt. More importantly, people should learn to ask themselves if there is a real need to borrow. Borrowing money to buy assets that depreciate over a short period of time, such as cars and luxury items is deemed as “bad debt”. This is in stark contrast to “good debt”, such as buying a home or asset that has the possibility of appreciating in the long term, and at the same time, paying a much lower interest rate compared with bad debts.

For people with a genuine need for financing, there are many other options such as borrowing from the banks and legal money lenders, or even to the explore “fintech”, a financial technology which offers more efficient and cheaper financial services through the use of technology. Again, it is important to ensure these channels are legal and well regulated.

Borrowing from unregulated moneylenders is like jumping from the frying pan into the fire. It is important to have wise financial planning in the first place and always seek advice before doing anything financially. One may get advice from government agencies, such as Agensi Kaunseling dan Pengurusan Kredit, when faced with financial challenges.


By Datuk Alan Tong, who 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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Cars are more expensive than houses? A house can buy how many cars?

IN about 3 weeks' time, we will be celebrating the New Year.

Each New Year comes with new resolutions and new goals. Some would plan to own big ticket items such as a house or a car as part of their resolution. If your plan is to own a new car, finish reading this article before nailing down that resolution.

Owning a car in Malaysia is expensive. In one of my previous articles, I highlighted that Malaysia was ranked second in the world where owning a car is expensive.

But what many do not know is by how much, relative to homes. Yes, homes in Malaysia are expensive too, but relative to Australian homes and cars, our cars are 10 times more expensive than those sold in Australia compared to homes. Let's do some simple math together.

Khazanah Research Institute (KRI) reported that the median house price in Malaysia is about RM250,000. This is the cost of two Honda Civics (priced at RM110,000 per car).

In Australia, the median house price is A$660,000, while a Honda Civic costs about A$30,000. This means, a median-priced Australian house of A$660,000 can buy 22 Honda Civics, versus a median-priced Malaysian house of RM250,000 which can only buy two cars of the same model. Yes, our homes may not be cheap but our cars are more expensive in comparison.

I further compared Malaysia against the United States and United Kingdom. A median-priced house in US and UK can buy 12 and 16 Honda Civics respectively, which is still more affordable compared to the two which can be bought with a median-priced Malaysian house.

The story does not end here. In addition to the cost of purchasing a car, there are many other financial commitments that comes along with owning a car. These include petrol, parking, toll charges, maintenance, and repair costs. Then, there is the cost of depreciation which ranges from 10 per cent to 20 per cent per year. It does not help that most of these supplementary expenses are frequently being increased. Our cars are indeed costing us a lot.

It is undeniable that a car is a necessity to those who have limited access to public transportation. Until our public transportation system is good enough, people will still need private vehicles to move from one place to another.

Unfortunately our cars are so expensive that the rakyat, especially the younger generation, are forced to put off buying a home until they can afford it. In the meantime, that "wait" causes house prices to appreciate, thus making it even more unaffordable for these people to own a home. This vicious cycle will continue until the government has a permanent solution to address both public transportation and affordable housing.

Perhaps, it is also timely to revisit the rationale behind our National Car Project which was introduced in 1982 to bring a higher level of industrialisation in Malaysia. Since its inception, the price of national and non-national cars have progressively increased through increase in car taxes and excise duties.

The price of non-national cars in Malaysia generally cost 50 per cent to 100 per cent more than the price of the similar make of car in other countries. On the other hand, one of my managers came back from his Aussie trip and shared that a Proton Preve in Australia is RM11,000 cheaper than one that is acquired in Malaysia.

Originally, the National Car Project was a form of protectionism for the national car industry. After more than 30 years since its inception, it has now become a burden to the rakyat, by eating more and more into our disposable income. The National Car Project has served its original purpose, and it is time that we review it.

So now, instead of jotting down my resolution, my wish list for 2016 is for the Government to rationalise and reduce the taxes imposed on cars. This will put more money back into the rakyat's pockets to start their home ownership journey much earlier. Concurrently, the Government can continue to channel and reinvest some of these funds to build a comprehensive and effective public transportation system in Malaysia which will greatly reduce the rakyat's dependency on private vehicles.

And for those who still wish to buy a car, think twice as owning a car is too expensive and unaffordable - it may also cost you your home.

By Datuk Alan Tong Food for Thought

Food for thought  By DATUK ALAN TONG

> FIABCI Asia Pacific chairman Datuk Alan Tong has over 50 years of experience in property development. He was FIABCI World president in 2005/06 and was named Property Man of The Year 2010. He is also the group chairman of Bukit Kiara Properties. (email atfeedback@bukitkiara.com) 


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