Wednesday, July 24, 2013

MIEA: No threat of property bubble

 Siva:(Centre) ‘We are expecting a nice steady growth of 10%maybe 12%or 13%if we are lucky.’

KUALA LUMPUR: The local property sector is expected to register a steady 10% growth in value this year and there is no threat of a property bubble, according to Malaysian Institute of Estate Agents (MIEA) president Siva Shanker.

“We are expecting a nice steady growth of 10% maybe 12% or 13% if we are lucky. The growth won’t echo the phenomenal growth of about 30% like we did previously,” Siva said in a Property Market Outlook: Post GE13 briefing yesterday.

He explained that the property sector was relatively slow in the first few months of the year due to the uncertainty of the General Election.

“As soon as the election was over, there was a frenzy of activities in the sector. There were pent up demand in the first few months,” Siva said, adding that the market is “playing catch up now”.
In addition, he said there were no indication that prices would trend downwards. Siva said there were also a changing trend whereby multifunctional property where one can work, play and live in the same area is in demand now.


“Gated and guarded property is the in thing now and it will be a hard sell for developer if they don’t provide this,” he added.

Knight Frank Malaysia managing director Sarkunan Subramaniam noted that the Bank Negara has adopted proactive measures to ensure there is no property bubble in the country. He said the measures were put in place by the central bank to cool things down.

Meanwhile, MIEA immediate past president Paul Nixon said of late many smaller and newer investors are investing in commercial properties by pooling their resources and making collective purchases.
He said investments in commercial properties, are generally more expensive in comparison to residential properties. Paul noted that newer developments tend to take three to five years before commercial activity and occupancy reaches optimum levels.


Knight Frank’s Sarkunan said the KL City (71%) accounts for the bulk of office market supply while the remaining 29% comes from KL City fringe. By 2015, office supply in KL City and KL fringe is expected to grow by about 13.7% and 33% respectively. Sarkunan added that as at mid-2013, more than 1.1 million sq ft office space has been absorbed.

Source: Star Online 

Tuesday, July 16, 2013

4 Reasons Why REITs Are Better Investments Than Real Estate

This article is written by REITSWeek, a subscription-only journal on REITs and Listed Real Estate Securities delivered weekly to institutional and individual investors.

Scottish American industrialist and philanthropist Andrew Carnegie once said that 90 percent of millionaires became so through owning real estate. This wisdom, though dispensed in the 18th century, is a wisdom that has persisted today judging from the popularity of real estate as an investment class.

There is nothing inherently erroneous in this advice despite the carnage that has unfolded in recent years in the real estate market. As an asset class, real estate investments generate a reliable stream of income besides holding the prospect of capital appreciation. And unlike the yesteryears when real estate investments are within reach of only the very wealthy, prospective investors today can participate in real estate investments through a Real Estate Investment Trust (REIT).

But the popularity of REITs in recent years has brought about a perennial debate as to which is a better mode of investment, buying real estate physically or holding it in a REIT? Each method has its own merits but this article we will discuss four advantages that REITs investors have over traditional property investors.


Real estate, be it a single building or an estate, will require constant maintenance and repair. Certain property types such as shopping malls will require even greater maintenance costs as they will need to sustain a decent fa├žade in order to attract shoppers and continue generating income. An investor who puts his money on a single property will need to consider the expenditures on leaking roofs, faulty plumbing or termite infestations as part of his investment costs. In some cases, these costs can be quite hefty and may not be easily recoverable from the tenant.
In REITs, building maintenance costs, or more commonly referred to as capital expenditures (CAPEX), are borne by the REIT managers and are in effect distributed across many shareholders. In some cases, favourable lease terms allow these costs to be passed on to the tenants, practically absolving the REIT investor from any sort of building maintenance costs. As a REITs investor, it is unlikely that you will see CAPEX making significant impact on the returns of your investment. This is the scalability that REITs investors enjoy over property owners.

Owning a single property would usually mean that your fortunes are pretty much tied up in the sector that your property is vested in. For example, if you own a small factory complex, it is unlikely that you will benefit from the surge of tourist arrivals in your country. And should the demand for manufacturing slows, you may be in trouble finding a tenant for the property.
REITs investors are able to expose themselves to several sectors of the economy at any one time by distributing their investments across different REIT categories such as Retail REITs (to benefit from surges in consumer spending), Hospitality REITs (to ride on tourist arrivals) or Healthcare REITs (to benefit from increased spending on medical services). This minimises the risk that an investor is over exposed to just one particular sector of an economy. To achieve the same level of diversity with traditional property holdings would require a very hefty investment.


Professional Management

An investor who decides to buy and manage a property as an investment will usually have to depend upon himself in managing the property including renovations, sourcing for tenants and making sure that the building adheres to local safety regulations. These functions can be outsourced to third parties, but this would severely increase the costs of managing the property and erode the returns on investment.
REITs on the other hand are managed by dedicated teams of REIT managers who make it a daily endeavour to look for growth opportunities while keeping borrowing costs low. REIT managers are also very experienced in financing and asset enhancement strategies, often increasing the value of the properties that they manage over time. This is the advantage of having a professional management that REITs investors enjoy over traditional property investors.


Favorable Tax Rulings

In many economies, building owners are liable to annual property taxes, administration fees and stamp duties, on top of paying personal income taxes as an investor. The combination of these taxes can be very overwhelming.
REITs on the other hand are largely exempt from paying taxes at the REIT level in virtually most economies as long as they distribute at least 90 percent of their income to shareholders. In economies like Singapore, the government has gone even further to exempt REITs investors from paying taxes on capital gains and dividends from REITs. Tax rulings vary across the different economies. But one similarity that these economies have is the markedly favourable tax rulings that REITs investors enjoy over the traditional property investor.

Sunday, July 14, 2013

Singaporeans Are The Fastest In The World To Become Millionaires

Singapore is home to some of the wealthiest people in the world. 

It takes most Singaporeans less than 10 years to become a millionaire. That is the fastest rate anywhere in the world, says a wealth report released by the Barclays Bank on July 5, 2013 in Singapore.

The Bank surveyed 2000 high net worth individuals globally in early 2013 to ascertain how entrepreneurs, business leaders and investors make, spend and share wealth.  The respondents were individuals with net worth of more than $1.5 million. A  fifth of the 500 interviewed were based in Asia.

While the popular belief is that the wealth of millionaires in Singapore has come from the dramatic rise in property prices over the years,  that is only partly true.  According to the survey, 72% of the wealth was made from personal investments, followed by 58% from property and 55% from savings through earning and bonuses. (Respondents could choose multiple answers).

The financial crisis too, despite its seismic economic, political and social fallout, the world over, enabled close to 50% of the rich Singaporeans to increase their wallet size. This was mainly on the back of a buoyant Straits Times Index (STI) that doubled in value from 2008 to 2013. Regional bourses in Thailand, Indonesia and Malaysia showed a similar vibrancy. A quarter of Singaporeans interviewed said their wealth had jumped five-fold or more over their lifetime.

However, considering the highly -integrated nature of the island state’s economy, Singapore’s rich also experienced the highest fluctuation in their fortunes; more any other country.   Almost 70% said their wealth was volatile and moved “a great deal” overtime.

When it comes to spending, despite headline grabs of $26,000 cocktails, Ferrari-speckled roads in Singapore, the survey reports that Singaporeans  use 61% of their money for saving  and investing, just a notch behind their Chinese brethren in Hong Kong at 66%, and ahead of mainland Chinese who  would put 58% of their money to work in banks or the stock market. The second most popular use of money among Singaporeans was on travel and social activities (16%). Only 7 per cent spent on cars, jewelry or collectibles. This is in sharp contract to the new rich in India where 17% are spending on tangibles like cars, homes or jewels.


And what is the psyche of a typical Singaporean on sharing wealth?  He would rather gain personal fulfillment and a sense of purpose in life.  While 13% Singaporeans prefer to pass on their assets in inheritance, more than 50% want to give their wealth to charity. And they prefer to do it in their lifetime.

 In Pictures: Singapore’s 40 Richest People