Shopping around – places to go if you want to invest in property

IF you were looking to invest in property somewhere outside Malaysia, where would you go? First, let us set some parameters. We are not looking for something in the mega rich category but it must be located in a decent neighbourhood and within the city limits. Taking into consideration all these conditions, how much would it cost you? How much can you rent it out for, and what would be the rate of return?

For the benefit of our discussion, let us look at cities closer to home our Asean neighbours. Singapore would spring to mind as the most expensive city in South-East Asia, followed perhaps by Bangkok and Jakarta, even Kuala Lumpur.

But are our assumptions accurate?

They are, but only to a point. A quick look at the Global Property Guide, which is available on the Internet, has yielded some interesting numbers. For the sake of consistency, the prices and rentals quoted are for an apartment of 120 square metres located within the city limits. However, they are not likely to be premium properties.

According to the guide, the most expensive place in South-East Asia to invest in is Singapore. The city state also makes the No. 5 spot on the world's most expensive property list, ahead of Tokyo that only makes the No. 7 spot.

Going by the numbers contained in the Global Property Guide, the average market price of property in the city state is US$16,727 (RM52,555) per sq m. For an apartment of 120 sq m, you will have to fork out just over US$2mil (RM6.28mil).

From here on, our original assumption proves inaccurate. Phnom Penh, the capital of Cambodia, it turns out, is more expensive than Jakarta or Manila. It makes the No. 2 spot in the South-East Asia list of the most expensive cities.

In Phnom Penh, real estate can cost as much as US$3,750 (RM11,782) per sq m. That means our apartment could cost about US$450,000 (RM1.4mil). Phnom Penh makes the global list of most expensive cities at No. 44, just ahead of Auckland, New Zealand.

The third most expensive city in South-East Asia, among the six covered by the Global Property Guide, is Bangkok, a city of 11 million people currently threatened by widespread floods in the north, northeast and central plains of Thailand.

Property in this city goes for an average of US$3,300 (RM10,362) per sq m, so a 120 sq m apartment will set us back US$396,000 (RM1.24mil). Bangkok is at No. 48 on the global list, just behind Cape Town in South Africa.

Metro Manila makes the South-East Asia list at No. 4. The average price of real estate in the Philippine capital is US$2,407 (RM7,558) per sq m. So our apartment there will cost us US$288,840 (RM906,973). Manila is at No. 64 on the global list.

Jakarta, the Indonesian capital, and the most populous city in the archipelago, is the fifth most expensive city in South-East Asia. Property in this city goes for an average of US$1,781 (RM5,592) per sq m. That means a 120 sq m apartment will cost US$213,720 (RM671,092). Jakarta is No. 77 on the world expensive cities list.

Bringing up the rear in the South-East Asia list is Kuala Lumpur. The Global Property Guide estimates that the average price of property in this city is US$1,546 (RM4,854) per sq m. Our apartment will therefore cost US$185,520 (RM582,543). This puts Kuala Lumpur at No. 81 on the global list.

After making these investments, how much yield can one expect?

According to the guide again, Jakarta is the city that is most friendly to property investors one can charge up to US$1,819 (RM5,711) a month to rent out the apartment, thus offering a gross rental yield of 10.21%. This also makes it the third most profitable city in the world in terms of rental returns.

Metro Manila is No. 2 on the South-East Asia list in terms of yield. Here, our apartment can be rented out for US$1,836 (RM5,765), thus offering a yield of 7.63%. The rental rate is higher than in Jakarta, but the investment is also much higher, hence the returns are not as good as in the Indonesian capital. Manila is No. 11 on the global list.

In Kuala Lumpur, our apartment can fetch a rental of US$1,072 (RM3,366) a month, thus giving us a return of 6.93%, putting the city at No. 3 in the South-East Asia list and No. 22 on the global list.

Bangkok comes in next with a yield of 6.49% followed by Phnom Penh with a 3.26% yield and finally Singapore with a return of 2.94%. On the global list, Bangkok is at No. 25, Phnom Penh at No. 73 and Singapore at No. 77.

Of course, it is most advisable to be cautious when investing. These examples are not meant to be an advisory on where is best to invest in property. This is merely meant to show that data such as this can throw up some surprises which, all the more, emphasise the need for more research and professional advice when one is considering such investments.

So, before you catch the next flight to Jakarta or Manila, talk to your investment advisor first.

l Teh Lip Kim is the MD of SDB Properties Sdn Bhd, a lifestyle property company. Bouquets and brickbats are welcomed. Send by email to md@sdb.com.my

Pointers for those considering a property investment

HERE are some pointers for those considering a property investment in the near term:

Elvin Fernandez

Valuer and managing director of Khong & Jaafar Elvin Fernandez

“The global environment is changing. Strictly speaking, an upgrader sells the old house to buy the new. If he is going to hang on to the old, he will have to consider the rental market where yields are falling. He has to consider whether the market has peaked in the areas he wants to buy and whether it can go further and that may be unlikely in many areas. Value has gone above the normal governing fundamentals of price versus household income, and price versus rental returns.

“Although Malaysia is rapidly developing and we have a young population and we have seen more years of prices running up than going down, this may not be replicated as sentiments may be poor as a result of what is happening in Europe.

“As for commercial properties, the retail market looks stronger than the office market as there is an oversupply in this sub-segment.

“As for first time buyers, we have a whole range of housing from the low cost to the high-end. But many of the properties that young people may be able to afford are poorly maintained and because of this, these properties are not desirable. The authories should have more stringent legislation for people who default on their service charges. It makes good sense to seek professional property management instead of doing it on a piecemeal basis. Taking care of the maintenance issue is more logical step than building more, only to have the maintenance issue cropping up again later on.”

Charles Wong

Tetap Tiara Sdn Bhd executive director (Jaya One) Charles Wong

“Prices will have to stabilise. When considering buying the larger residential units for investment, the question to ask is, Can you rent it out? Smaller units will be more feasible. But having said that, we are seeing a huge number of 400 sq ft units of service apartments being built. While these may be affordable, buyers must consider rentability. Access, connectivity and proximity to amenities are important. And if there are so many of these units, you may need to take a longer period to rent and to re-sell in the secondary market in today's uncertain climate.

“In the retail market, rental rates have been coming down and are softer than two to three years ago. For landed properties, the rental are expected to drop from 3%-4% to sometimes 1% or 2% and condominium yield from 7% to 8% to 4%-5%.”

Tan Sri Leong Hoy Kum

Mah Sing group managing director/chief executive Tan Sri Leong Hoy Kum

“The demand will be for smaller units, and for mid-end housing, instead of the high-end ones. If it is a location they want, for example KLCC area, people will buy a little further away like in Jalan Ampang where prices are lower.”

GV International managing director Samuel Tan

Samuel Tan

“In Johor, price increase is expected to be gradual. Areas with good connectivity will be popular. In the last several years, the emphasis on infrastructures like highways has helped to spur interest and prices. The western coastal highway from Skudai to Bukit Indah has made travelling a breeze and prices have moved 10% or more. Developers are expected to report good sales in the near future although September was a soft month, as a result of the US downgrade in August. Iskandar Malaysia will become more visible and is expected to generate interest from the Japanese, South Koreans and Singaporeans.”

Real Estate Housing Developers' Association (Penang) chairman Datuk Jerry Chan

Datuk Jerry Chan

“Demand for landed units on the mainland and Penang island will continue but yield on the island is expected to be low, at 1% or 2%. The price movement for this year has been greater than last year. We continue to see land prices going up. For the lower to mid-end, prices are still moving. Demand is expected to remain firm for properties priced RM600,000-RM700,000 and below. For those between RM800 and RM1,000 per sq ft or about RM1mil, people will have adopted a wait-and-see attitude.

“Currently, prices on the mainland is a quarter or a fifth of those on the island. Penang people are beginning to find it too expensive on the island and are moving to the mainland.”

Apple's iPhone 4S Hits Stores

TOKYO/LONDON/SAN FRANCISCO (Reuters): Apple Inc's new iPhone debuted with a splash around the globe, spurring thousands to queue around city blocks and snap up the last gadget unveiled during co-founder Steve Jobs' life.

Apple shares leaped 3 percent to close at a record after people thronged stores in Sydney, Tokyo, London, Paris, New York and San Francisco to get their hands on the iPhone 4S, ignoring criticism about the lack of a design revolution and reports of software glitches.

Fans in Sydney, Tokyo, Frankfurt and London made sure Jobs, who died last week, remained part of the iPhone 4S launch, with flower, candle and photo shrines erected outside stores. A black-and-white picture of the visionary leader in Covent Garden carried the line: "Let's make a dent in the universe."

In New York and San Francisco, hundreds showed up as expected, but the mood proved more subdued than was typical on an iPhone launch day.

"I have a lot of respect for how he led the company and so the turnout, and especially the preorder sales, is a mark of appreciation for him," insisted Chris Centers, who was one of the people who lined up outside the store.

One of the buyers also stopped by to lay flowers at the San Francisco store's glass wall in honor of Jobs.

The new model looks similar to the previous iPhone 4, but has an upgraded camera, faster processor, enhanced security and voice-activated software, which lets users ask the phone questions. The voice software drew glowing reviews.

Unveiled just a day before Jobs died, it was initially dubbed a disappointment, partly because it looked identical to its predecessor. But anticipation of the "Siri" voice software helped it set an online record in orders on Oct. 7.

Rivals' woes may have provided a boost. Research in Motion Ltd struggled for days to fix an international outage of its email and messaging services.

Also, about one in four people who thronged Apple stores from Tokyo to San Francisco told Reuters they were ditching BlackBerries, discarding Nokias , or even giving up Google Inc Android-based phones, hoping for something better.

Apple CEO Tim Cook and his executive team hope the first device sold without Jobs leading Apple will protect the company against a growing challenge from the arch-rival Samsung Electronics Co Ltd .

Analysts believe the South Korean company, which powers its phones with Google's Android software, surpassed Apple as the world's biggest smartphone vendor in terms of unit sales in the third quarter.

Apple does not release sales on launch day, so gauging initial figures is difficult. But the company took more than 1 million online orders in the first 24 hours after the release of the iPhone 4S, exceeding the 600,000 for the iPhone 4, which was sold in fewer countries initially.

Sprint Nextel Corp - joining Verizon and AT&T Inc in Apple's roster for the first time - said on Friday it had chalked up a launch-day sales record for any device by around noon. AT&T said that by 4:30 PM on the east coast, it had activated a record number of iPhones in one day and was on track to double the previous record for iPhone activations on a single day.

Jobs "made everything better and the products he released were thought through in such detail," Duncan Hoare, a foreign exchange trader, said as a loud roar greeted the opening of an Apple store in London. "It was about the beauty of something and the simplicity."

GLITCHES?

The iPhone - seen as the gold standard for smartphones - is Apple's highest-margin product and accounts for 40 percent of its annual revenue. The newest iteration uses chips from Qualcomm Inc , Toshiba Corp and a host of smaller semiconductor companies, according to repair firm iFixit, which cracked the device open on Thursday.

Despite the enthusiasm at stores, Friday's launch was marred somewhat by widespread complaints on the Internet this week about problems downloading iOS 5, the latest version of Apple's mobile software.

There were also problems with iCloud, Apple's online communications, media storage and backup service formally launched on Wednesday. Users reported glitches such as losing their email access.

Queues in Paris were smaller than those normally seen for a brand-new iPhone, with some fans there wondering if the somewhat underwhelming introduction put people off. But in London and elsewhere the lines were as long as ever.

"Despite the initial disappointment that this wasn't an iPhone 5, the reality is we're still seeing the usual frenzy that we've got used to on launch day," analyst Ben Wood at CCS Insight told Reuters. Analysts expect global sales of a few million phones on the first weekend, he added.

Analysts point to several factors in Apple's favor, including a $199 price that matches up well with rival devices and availability promised on more than 100 carriers by the end of 2011, far more than its predecessors.

Underscoring the enthusiasm for the new phone, Japanese mobile carrier Softbank Corp had to temporarily stop contract applications after its computer system was overwhelmed with more requests than it expected.

Some analysts expect fourth-quarter iPhone shipments to reach 30 million or more, almost twice as many as a year ago.

"I am a fan, a big fan. I want something to remember Steve Jobs by," said Haruko Shiraishi, waiting patiently with her Yorkshire terrier Miu Miu at the end of an eight-block queue in Tokyo's smart Ginza shopping district.

Malaysia’s rich spend mostly on cars, yachts and planes

KUALA LUMPUR, Oct 14 — When they have some extra cash to blow, Malaysia’s rich prefer splurging on a fancy new set of wheels, luxurious yachts or private jets, the Asia-Pacific Wealth Report 2011 has revealed.

These big spenders see less glitter or glamour in jewellery or swanky watches, unlike their rich Southeast Asian counterparts in Singapore, who prefer burning bucks on these sparkling adornments.

Last year, 46 per cent of Malaysia’s rich invested their ringgit in luxury collectibles like cars, boats and jets, the highest percentage of any country within the Asia-Pacific region.

In 2010, 46 per cent of Malaysia’s rich invested their ringgit in luxury collectibles like cars, boats and jets, the highest percentage of any country within the Asia-Pacific region. — Reuters file pic

The region’s average topped at just 30 per cent, with Malaysia leading the list and followed by Taiwan at 38 per cent, Indonesia 36 per cent, China 35 per cent, Japan and Australia tied at 30 per cent, South Korea 28 per cent, Hong Kong 23 per cent, India 21 per cent and Singapore, merely six per cent.

Twenty-four per cent of Malaysia’s rich chose jewellery over gleaming sports rims while 16 per cent took a fancy to acquiring rare collectibles like special wines or old coins.

A small 10 per cent thronged art galleries to spruce up their collections while others invested in their favourite sports teams and other miscellaneous “investments of passion”.

The report, released yesterday by Merrill Lynch Global Wealth Management and Capgemini, surmised that such “investments of passion” would continue to hold appeal to all “high net worth individuals” or HNWIs within the Asia-Pacific market as the ranks of the wealthy in the region continue to grow at a brisk pace.

HNWIs are defined as those having investable assets of US$1 million (RM3.13 million) or more, excluding primary residence, collectibles, consumables, and consumer durables.

“Investments of passion hold appeal for all HNWIs, both for their aesthetic appeal and their potential to gain in value. Asia-Pacific HNWIs’ appetite for investments of passion increased in 2010, especially in emerging markets that suffered less than developed economies in the global downturn,” the report said.

The report also said last year’s spending pattern revealed that a majority of HNWIs in Asia-Pacific remained most heavily invested in real estate and equities.

An estimated 30 per cent of the financial assets of Malaysia’s rich is in real estate, followed by 28 per cent in equities, 26 per cent in fixed income, 10 per cent in cash or deposits and six per cent in other alternative investments.

A majority of the HNWIs’ holdings also stayed within their respective home regions, the report added.

“Malaysia, China, and India, the allocations to home-region investments remained high at around 85 per cent,” it said.

When compared to its neighbours in the region, however, the report said Malaysian HNWIs assets were the least diversified with 86 per cent in home-region investments.

The report surmised that the Asia-Pacific HNW segment had “thrived” last year but was expected to face a slump this year and in 2012.

“The number of HNWIs in the region grew to 3.3 million in 2010, from 3.0 million in 2009, making the HNWI population 18.3 per cent larger than in 2007.

“As a result of that growth, the Asia-Pacific HNWI population also became the second-largest in the world, overtaking Europe (which had 3.1 million HNWIs in 2010), and nearing that of North America (3.4 million),” the report said.

Economic expansion in the region was likely to “abate slightly”, however, this year and in 2012, as economies absorb the withdrawal of fiscal and monetary stimulus, rising inflation, constrained capacity, and the macroeconomic imbalances prompted by large foreign-capital inflows.

“As a result, GDP growth in Asia-Pacific excluding Japan is expected to slow to 6.9 per cent in 2011, and 6.8 per cent in 2012 (down from 8.3 per cent last year),” it said.

PM: Another round of economic liberalisation in 2012 Budget

KUALA LUMPUR (Sept 12, 2011): There will be another round of economic liberalisation in the Budget 2012 announcement next month, says Prime Minister Datuk Seri Najib Abdul Razak.

"Liberalisation is good for our long-term sustainable competitiveness. It builds our intrinsic strengths not through protection or subsidies," he said in an interview withForbes Asia Magazine
.
The interview was featured in a special edition of the magazine this month.

"We have been liberalising the economy, but I have to assuage domestic concerns that opening up too fast would be threatening," the Prime Minister said in reply to a question on how Malaysia was liberalising its economy.

"We should be competitive because of factors such as our productivity, technologies and processes," said Najib who is also the Finance Minister.

On how the Malaysian economy was performing, Najib said that the country's recovery from the global financial crisis had been robust.

"Following the economic contraction in 2009, we achieved 7.2% growth in 2010. The strong recovery is continuing in 2011 and we expect to achieve five to six percent growth this year," he said.

Najib said figures on fundamentals such as public and private investment as well as consumption were looking strong.

"One of the key factors for the turnaround is an increase of 530% in foreign direct investment (FDI) whereby it touched about RM28 billion in 2010," he said.

Najib last week had announced that for the first half of 2011, Malaysia had wooed RM21.3 billion in FDI.

"Investors are becoming more confident in our economic transformation programme (ETP) and our new economic model.

"We are making decisions expeditiously on customising incentives for FDI that contribute significantly to high paying jobs, new technology and positive spin-offs for the local economy," he said.

Najib noted that at this time of global recovery, "we are positioning Malaysia strategically as a hub for Asean and East Asia."

On Malaysia's economic ties with Asian countries and the Middle East, Najib said the country had good economic ties with China with total trade having reached the RM149 billion mark.

"One area I would like to enhance significantly is to encourage the Chinese to increase their long term investments in Malaysia beyond short-term investment such as projects in construction."

With Singapore, he said Malaysia had resolved a thorny 20-year problem on their points of agreement and were now in a constructive mode in terms of their bilateral ties.

"Even though we compete, we should develop a productive relationship wherever we can. That is the strong political signal given by both governments."

Najib also said he had developed very strong personal ties with leaders in the Middle East and as a result they were looking at Malaysia for economic involvement.

"Abu Dhabi has become our partner in the KL Financial Center and would like to build a downstream integrated aluminium facility in Sarawak," he said. – Bernama