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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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Singaporeans on buying sprees for Penang prewar houses; Residents see red


Singapore sweep continues

 Republic’s real estate hunters snapping up houses outside Penang’s heritage enclave.

GEORGE TOWN: Singaporean real estate hunters with a taste for prewar properties in Penang are still on buying sprees, says an NGO.

They are snapping up houses that are located just outside the state’s heritage enclave as these properties are not accorded heritage protection by Unesco, according to George Town Heritage Action.

The biggest buyer appears to be World Class Land (WCL), which is building the tallest residential skyscraper in the planet’s southern hemisphere.

Called Australia 108 because of its 108 storeys, the Melbourne development is expected to be completed in 2019.

WCL has since December 2013 reportedly snapped up 236 prewar houses in Penang, totalling more than 250,000sq ft – the equivalent of 26 football fields.

Recently, it applied to build a 46-storey condominium tower in Gurdwara Road, just 200m from Komtar after buying 37 prewar properties in that area.

Its latest block buy appears to be 26 prewar houses on Penang Road and Bertam Lane, also across from Komtar.

The properties were owned by six descendants of Tunku Kudin (1835- 1909), the great grand uncle of the late first prime minister, Tunku Abdul Rahman Putra Al-Haj, for nearly 100 years.

The offer from WCL was about RM980 per sq ft, totalling RM21mil.

Tengku Abdullah Tengku Mahadi, 61, who collected the monthly rent from the tenants on behalf of his 92-year-old father, said the deal was sealed in Thailand through one of the six heirs who spoke for all of them.

“All the heirs are in their late 80s and 90s. It will cost too much to develop the land ourselves.

“We didn’t really feel like selling. We know the new owner will change the whole place but we are all old and don’t want to stand in the way of development,” he told The Star.

He said the heirs only earned about RM50 per month from each unit when the Rent Control Act was in force.

After it was repealed in 1997, they raised the rent to about RM600 and it had stayed the same since.

WCL lawyers have sent eviction notices to the 60-odd tenants who have until end November to move out.

A subsidiary of Aspial Corporation Ltd, WCL has completed many projects in the island republic and Australia.

Aspial chief executive officer Koh Wee Seng is listed by Forbes this year as the 43rd richest man in Singapore.

George Town Heritage Action has been vociferously against the state government’s apparent lack of control over the alleged WCL buying sprees.

“This company’s business model is to buy the properties, evict the tenants, renovate or rebuild, and then drastically increase rentals,” said its co-founder Mark Lay.

At a press conference yesterday, he showed a list of 236 properties purportedly bought by WCL through several subsidiaries.

Totalling more than 250,000 sq ft, these include rows of old houses along 19 roads, including Dato Keramat, Macalister, Transfer and much of the Seven Streets precinct (known locally as Chit Tiau Lor) near Komtar.

Lay warned that if the state government allowed “one company to accumulate more than 230 prewar houses, it will kill diversity and people’s moral rights to the city”.

“Our concern is also socio-cultural. Any company can damage the fabric of George Town when they have a monopoly,” he added.

In June, The Star reported that Singaporean companies typically raise rentals by 400% to 500% after sprucing up the old houses.

In response, Penang Town and Country Planning Committee chairman Jagdeep Singh Deo had said that the state cannot interfere with free enterprise.

By Arnold Loh The Star/ANN

Penang residents see red over Singaporeans snapping up properties

 

GEORGE TOWN: Public anger in the state is on the rise as Singaporeans continue to buy up pre-war houses here by the blocks.

NGOs and netizens are reacting negatively following The Star Online’s Facebook posting of the news yesterday.

Many are calling for stricter measures to limit foreign buying, but Penang Citizens Chant Group legal adviser Yan Lee warned that it would be useless as foreigners could sidestep such restrictions by simply forming Malaysian shell companies with local directors who are proxies or trustees.

“The corporate veil will shield them from these simple stop-gap measures. Instead, these measures end up keeping out individual foreigners who earnestly want to own property here because they just want to live in Penang.

“The Penang government is more concerned about collecting development charges. The more it allows development, the more money it collects,” he lamented.

Yan Lee was commenting on cooling measures here since 2012 that prevent foreigners from buying landed property of less than RM2mil on the island and RM1mil on the mainland.

For stratified property, the cap is not less than RM1mil both on the island and the mainland.

There is also a state approval fee of 3% over the purchase price.

State Town and Country Planning Committee chairman Jagdeep Singh Deo said in a statement yesterday that statistics had shown that these measures had reduced foreign buying of Penang property by about 50% since 2013.

George Town Heritage Action held a press conference on Thursday to reveal that Singapore developer World Class Land (WCL) had acquired 236 pre-war houses in and around the heritage zone totalling about 250,000sq ft, equal to 26 football fields.

According to the annual report of WCL’s parent company, Aspial Corporation Ltd, the properties are held by six Malaysian companies – WCL (George Town) Holdings, WCL (Magazine), WCL (Macallum), WCL (Noordin), WCL (Bertam R) and WCL (Bertam L).

In the Companies Commission of Malaysia’s online portal, there are also company records of WCL (Malaysia) and WCL (Penang).

By Arnold Loh The Star/ANN

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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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Airbnb and other Home-sharing businesses have Hotels worried in US


Tired of “sterile hotels,” Brooklyn resident Kelly Dwyer turned to home-sharing site Airbnb three years ago when planning a Southern California trip, finding a Silver Lake apartment that came with two roommates: a dog and a cat.

“It was such a good experience that it sort of pulled me in,” said Duncan, 40, a pet owner and musician. “I can’t remember the last time I stayed in a hotel.”

Hotel executives have long shrugged off Airbnb and other short-term rental websites. The home-sharing businesses weren’t considered a threat to the $176-billion hotel industry because they were believed to primarily serve penny-pinching millennials.

But eight years after Airbnb launched with a single air mattress for rent in a San Francisco loft, the hotel industry is starting to worry that short-term rental sites may pose a serious problem. Not only is the company expanding, there is evidence that competition from rental sites is holding down hotel rates in some areas.

Airbnb, the most popular of the home-sharing sites, has an estimated 2 million listings worldwide, with revenue of about $2.4 billion in the U.S. last year. The business has been valued at $24 billion, higher than the $21-billion valuation of hotel giant Marriott International.

Even more concerning for hotel managers is Airbnb’s torrid growth. In Los Angeles County, Airbnb listings increased 42% in the seven months ended in January, a Times review found. In some neighborhoods, the increase was much larger.

“Hotel companies are going to start paying a lot more attention to Airbnb now that their numbers are as big as they are,” said Jamie Lane, a senior economist for the hotel research arm of real estate firm CBRE.

The industry came out firing recently with a study contending that a growing number of Airbnb landlords are really running “illegal hotels” in major cities, including Los Angeles, which lets them avoid taxes and regulations that hoteliers pay.

If Airbnb is impacting hotels in any way, it’s in the ability to raise rates. — Brandon J. Feighner, director, CBRE hotel valuation and advisory services

That study, by the Pennsylvania State University School of Hospitality Management, concluded that nearly 30% of Airbnb’s revenue in 12 big cities comes from people who rent out their properties at least 360 days a year, drawing an average of more than $140,000 annually.

Traditional hotels welcome competition, said Vanessa Sinders, a spokeswoman for the American Hotel & Lodging Assn., the trade group for the nation’s 53,000 hotels, which commissioned the study. But she added that the growing number of Airbnb properties operating year-round aren’t required to meet the health, safety and cleanliness standards that hotels must maintain.

“Competition in our industry thrives because everyone plays by the same set of rules designed to protect homeowners, guests and communities,” she said.

Airbnb rejects such contentions, saying most of their hosts live in the homes they rent.

“In Los Angeles, 82% of Airbnb hosts in L.A. share the home in which they live, and furthermore, 80% of entire home listings in L.A. are rented for less than 90 days a year,” Airbnb spokeswoman Alison Schumer said.

Hotels and online travel sites clash over booking scams
Hotels and online travel sites clash over booking scams

Nationwide, Airbnb lists about 173,000 units, equal to about 3.5% of the more than 5 million rooms rented out by traditional hotels — not enough to pose a serious threat to the hospitality industry, according to a study by CBRE’s hotel research arm. The study analyzed Airbnb’s operations from October 2014 to September 2015.

The study goes on to say that Airbnb properties have started to pressure hotels to keep rates low in a handful of cities where home-sharing units are plentiful, including Los Angeles, San Francisco and New Yorks.

In Southern California, Airbnb may be keeping hotel rates from skyrocketing in areas such as Santa Monica, Hollywood, Beverly Hills and Marina del Rey, according to CBRE.

For example, hotel room rates around Los Angeles International Airport rose nearly 13% in 2015 over the previous year while rates in the Santa Monica and Marina del Rey area increased only 5.6%, CBRE found.

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In Santa Monica and Marina del Rey, Airbnb has one bedroom listed for every two hotel rooms, the report said. Around the airport, Airbnb has one room listed for every 4.4 hotel rooms.

In addition, Airbnb’s rates around Santa Monica and Marina del Rey are nearly 30% lower than the hotel rates in the same area, according to the CBRE report. Around LAX, the Airbnb rates are 8% cheaper than hotel rates.

“If Airbnb is impacting hotels in any way, it’s in the ability to raise rates,” said Brandon J. Feighner, director of CBRE hotel valuation and advisory services.

Another area in Southern California where hotel rates may be held in check by Airbnb is Venice, where the home-sharing site had 1,741 listings in early January, according to data collected by Inside Airbnb, a site that tracks the company’s short-term rentals.

That figure was 25% higher than the number of listings in May 2015, a Times analysis shows. The tourist-friendly area leads all Los Angeles County neighborhoods for Airbnb listings, ahead of Hollywood and Santa Monica.

Mark Sokol, an owner of the 120-room Hotel Erwin in Venice, said he feels pressure to keep his rates low because too many short-term rentals in Venice have turned into illegal hotels that operate year-round and don’t pay the fees and workers’ salaries of traditional hotels.

“When you have that much supply, it definitely has price pressure,” he said.

Some hotel owners say they don’t worry about competition from Airbnb because only hotels can offer guests the assurance of a clean room, with amenities such as a coffee maker, a television and a comfortable bed.

“Hotels are going to provide a standard hotel experience whereas Airbnb can be an adventure or a nightmare,” said Ken Pressberg, owner of the Orlando, a 95-room boutique hotel near the Beverly Center.

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As young travelers advance in their careers and earn more money, he said he believes they will eventually abandon Airbnb for traditional hotels.

A survey of 1,650 adults by the travel search site Hipmunk found that 74% of millennials have stayed in a home-sharing property for a business trip, compared with just 38% for Gen Xers and 20% for baby boomers.

To lure young people away from short-term rentals, many hotel owners are investing in their properties, such as upgrading Wi-Fi speeds in the lobby, adding electronic tablets in the rooms and offering meals and drinks that are unique to their hotels.

“Airbnb is just another competitor that you have to keep your eyes on,” said Phil Anderson, general manager of the DusitD2 Constance Hotel in Pasadena.

But for many young travelers, the quirky extras found at Airbnb properties are what attract them — extras they won’t find at traditional hotels.

Tasmin Lofthouse, a 22-year-old marketing assistant from Blackpool, England, said she has booked an Airbnb property for her trip to Los Angeles in June because she wants to avoid the “commercialized and touristy” setting of a hotel.

“From what I’ve seen so far, Airbnb hosts are willing to go the extra mile, and some even let you help yourself to any homegrown vegetables or fruit they may have,” she said. “I doubt you’d see that at a hotel.”

 

Hotels and online travel sites clash over booking scams

 

A battle is heating up between online travel sites and U.S. hotels over the best way to book your hotel room.

Like most things in business, the feud comes down to money.

The American Hotel and Lodging Assn., the trade group for hotels in the U.S., is pushing for legislation to crack down on fraudulent online booking sites that trick travelers into paying for hotel rooms but have no relation to the hotels. The group says the scams cost travelers up to $1.3 billion a year.

A coalition of online travel sites isn’t buying it. The sites say the hotel industry is exaggerating the online scam problem to push travelers to book directly on hotel sites so that hotels can avoid paying sales commissions to the online booking sites.

“It’s just a veiled attempt at trying to scare consumers to book directly with the hotel chains themselves,” said Philip Minardi, a spokesman for the coalition of online sites, including Expedia, Priceline and Airbnb.

Hotel chains launch Wi-Fi warHotel chains launch Wi-Fi war

http://www.latimes.com/business/la-fi-hotel-chains-launch-wifi-war-20141226-story.html

The stakes are high in this feud. Travelers make an estimated 480 online hotel bookings per minute in the U.S. Hotels pay third-party booking sites commissions of up to 25% of the room price. Hotels also want travelers to book directly from them so they can pitch future deals and packages and develop guest loyalty.

Hotel industry officials reject suggestions that they are using the scams to scare travelers away from outside booking sites.

“The fact is online scams are hurting consumers and jeopardizing their confidence in the online booking process, while also harming the reputation of hotels,” said Katherine Lugar, president and chief executive of the hotel trade group.

BY Hugo Martin/Los Angeles Times

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Homestays, a booming business HOMESTAYS, once popular in rural areas, have now become big businesses in towns and cities nationwide…

Homestays, a booming business: Homes vs hotels, a study of the industry


Homestays, a booming business

HOMESTAYS, once popular in rural areas, have now become big businesses in towns and cities nationwide.

Thousands of homeowners have discovered how to make money with their properties and avoid paying taxes.

They have joined global home-sharing marketplaces, and just like how Uber has made life for government-regulated taxi drivers difficult, the home-sharing phenomenon is shaving off hotel revenues.

By paying a mere 3% service fee per booking, homeowners – also called hosts – can connect with over 60 million travellers worldwide through online giants like American company Airbnb and Singapore-based HomeAway.

Airbnb’s website has a tool to help homeowners gauge their expected weekly income and according to this, the country’s chart-toppers are those in Langkawi who can make RM2,801 a week, followed by those around Malacca’s Jonker Walk (RM2,495 a week).

Close behind are Penang home-shares in Tanjung Tokong (RM2,494) and Pulau Tikus (RM2,449). In Bukit Bintang in Kuala Lumpur, they can expect to earn RM1,676 weekly, while those near Taman Pelangi in Johor Baru can expect RM2,287 a week.

The above estimated earnings are for apartments or houses catering to groups of five travellers.

There are homeshares even in the hinterlands. They can make an average of RM923 a week in Kota Baru, Kelantan. In Kangar, Perlis, homeshares can expect to collect RM1,619 a week.

Unlike hotel occupancies, the government has no knowledge nor way of tracking these check-ins.

All the payments are transacted via the home-sharing portals’ overseas payment gateways and the earnings are transferred to homeowners through international money wires, PayPal or direct deposits.

Their guests are also “exempted” from the RM2 per room per night heritage tax fee in Malacca and Penang’s local government fee of RM3 per room per night for four-star and five-star hotels, and RM2 per room per night for three stars and below.

“They don’t have to pay corporate or income taxes. They don’t need to collect GST or report their occupancy rates.

“They don’t need to install fire doors or water sprinkler systems. If this goes on, budget hotels can just take down their signboards and become home-share operators,” said Malaysia Budget Hotels Association president P.K. Leong.

He said his association had raised the issue of home-sharing with the government several times and urged them to regulate this business but no action had been taken.

“We estimate about 15% of our business is being siphoned into the home-sharing market. And it’s not really sharing,” he said.

“People are buying residential properties specifically to start short-term rental businesses. We believe this is growing at an alarming rate but we don’t have any way to track them.”

In 2014, Airbnb was reported to have over 800,000 listings worldwide. Now, the company declares on its website that it has over two million.

Five-star resorts contacted, however, do not feel threatened by the home-sharing operators.

Managers in two five-star hotels, who declined to be named, said these setups target budget travellers who come to Penang on business or already know what to do when they come to Penang.

“Our hotel offers a level of service not found in home-shares. It’s a different market,” said one manager. – By Arnold Loh The Star

Homes versus hotels

 

Home-sharing services like Airbnb are becoming a hit among Malaysians. But hotels are urging the Government to regulate such services, claiming that rental of private apartments and studio units is illegal. Noting such calls, the Government is currently discussing how to address the matter.

LIVING rooms instead of hotel lobbies. Apartment units instead of hotel suites. This is the trend today.

More Malaysian holiday-makers are choosing to rent private properties as accommodation on their trips, instead of booking hotel rooms.

They do this using home-sharing services like Airbnb and Singapore-based HomeAway, which offer travellers the option to stay in a local host’s property.
Ranging from single rooms to entire apartment units, guests can book their accommodation from hosts, who list their property on such websites to be leased out for a fee.

Sometimes, the fees are even lower than the room rates offered by hotels.

This is one of the factors that drive the popularity of such services, with the San Francisco-based Airbnb having over two million property listings for rent from local hosts in about 191 countries around the world.

In Malaysia, home-sharing services are also gaining traction among travellers and homeowners, who want to earn some income from offering short-term rentals.

However, the hotel industry in the country is claiming that such services are eating into their business, with some estimating about 5% to 15% of their business being diverted.

Hoteliers are also saying that consumers are not fully protected under such arrangements.

Likening home-sharing services like Airbnb to Uber in the taxi business, hoteliers claim that the hosts are not subjected to the same regulations imposed on hotels and do not need to pay taxes or collect the Goods and Services Tax (GST).

As the industry calls on the Government to regulate such services, the Tourism and Culture Ministry says discussions are ongoing to address the matter while the Urban Wellbeing, Housing and Local Government Ministry is open to feedback on the issue.

Malaysian Association of Hotels president Sam Cheah sees the growing popularity of such home-sharing platforms like Airbnb as a threat to the hotel industry.

“It isn’t a level playing ground because the hosts who are offering their properties for rent are not subjected to the same requirements, including safety standards,” he says.

Cheah points out that the hosts can afford to offer lower rates because their operating costs to run their businesses are smaller.

“They pay domestic usage for quit rent and utility bills. They are not required to adhere to safety requirements such as installing proper fire protection,” he adds.

Cheah explains that hotels also have public liability insurance and protect consumers in the event of negligence or fire.

“We are obligated to protect our customers. But there is no such policy for home-sharing hosts,” he says, urging consumers to be aware of such risks.

Cheah also points out that it is illegal for homeowners to operate a business for tourists and travellers when the property is meant for domestic dwelling.

“It is unfair for residents who are neighbours of such hosts as they will have strangers walking in and out of the premises,” he says.

These tourists will also be using the swimming pool, gym and other facilities meant for residents.

However, Cheah says the association, which consists of 881 member hotels, cannot discount or prevent such a business model from being practised.

“But the Government should regulate such businesses to protect tourists and make it an even playing field for hotel operators,” he says.

If left unchecked and unregulated, Cheah foresees the Government will have a problem dealing with the projected 36 million tourist arrivals by 2020.

“If we do not regulate Airbnb and other home-sharing services, we wouldn’t be able to monitor the industry. We wouldn’t know if we have an oversupply or over-development and businesses may lose out.

“It is just like Uber and GrabCar in the taxi industry. You cannot stop them but you have to regulate them. Then it makes sense,” he says.

Echoing Cheah’s call to the Government to impose regulations, Malaysian Association of Hotel Owners secretary Anthony Wong calls such home-sharing services illegal as hosts are not licensed to provide lodging and insurance for guests.

“It is amounting to making private arrangements and guests who are hurt during their stay are unable to claim insurance for any mishaps.

“As legal entities, hotels have permits to comply with. Our operating costs are expensive and we pay taxes,” says Wong, adding that hotel rates are also competitively priced.

He claims that the emergence of such services and illegal homestays have caused hoteliers to lose about 5% in revenue.

Acknowledging the concerns by hotels, Tourism and Culture Ministry secretary-general Tan Sri Dr Ong Hong Peng says the ministry has received complaints from the industry on the emergence of home-sharing platforms.

“This issue has been acknowledged and discussed extensively by the Special Task Force on Service Delivery and its working group.

“This working group is represented by government agencies such as the ministry, Malaysia Productivity Corporation, the Urban Wellbeing, Housing and Local Government Ministry and the police,” he tells Sunday Star.

Dr Ong adds that the question of regulating home-sharing platforms and conducting enforcement on homeowners under such services comes under the purview of local councils.

In the meantime, the ministry has its Malaysian Homestay Programme, which offers a unique experience to tourists.

“The programme enables tourists to stay and interact with local families who act as hosts.

“Under this programme, families and their houses register with the ministry after completing the homestay training module and following the guidelines,” he explains.

But Dr Ong points out that this is different from merely offering accommodation as it is a community-based tourism programme which offers tourists a lifestyle experience of rural villages.

In 2015, Malaysia attracted 25.7 million tourist arrivals, a decline of 6.3% compared to 27.4 million tourist arrivals in 2014.

For the first quarter of 2016, Malaysia registered an increase of 2.8% in tourist arrivals, which Dr Ong perceives as a positive outlook.

“A strong growth in arrivals is expected for the remainder of this year,” he says.

Former Urban Wellbeing, Housing and Local Government Minister Datuk Abdul Rahman Dahlan, who was just replaced in a Cabinet reshuffle on Monday, says it is still too early to decide whether to regulate homeowners involved in home-sharing services.

“This will require extensive discussion. The ministry welcomes feedback from stakeholders on this matter, including hoteliers, and will be more than happy to listen to their concerns,” he says.

The issue of regulating or even banning Airbnb and other home-sharing marketplaces is of growing concern.

Recently, it was reported that New York State in the United States may make it illegal to advertise apartments on Airbnb if a Bill is made into law by Governor Andrew Cuomo.

Meanwhile, the German capital of Berlin has stopped tourists from renting entire apartment units using Airbnb and other similar websites. The move bans homeowners from leasing their property to tourists without a city permit.

Japan released national guidelines for home-sharing services, making properties only available for rent if guests stay for a week or longer.

Other places are more receptive towards home-sharing platforms, including London, which amended housing legislation that makes it legal for locals to rent out their homes through websites like Airbnb. –  By Yuen Meikeng The Star

Airbnb: Malaysia is a really ‘exciting growth market’ 

AS more Malaysians open their homes to tourists, Airbnb describes Malaysia as an “exciting growth market”.

Nevertheless, the world’s leading community-driven hospitality company also encourages hosts to familiarise themselves with regulations in their area.

“These can differ from council to council and even street to street, all over the world,” Airbnb tells Sunday Star in an email.

Despite the growth of Airbnb across Malaysia, the company says the traditional hotel sector continues to do well too, with growth in occupancy and room rates.

“We’re proud of the economic benefits Airbnb provides to families, communities and local businesses that otherwise wouldn’t benefit from the tourist dollar,” it says.

Overwhelmingly, Airbnb says its hosts are renting out their homes occasionally, earning a little extra to help supplement their income.

“The vast majority of our hosts across Malaysia are everyday people renting their spare room or home occasionally, not commercial operators,” it adds.

Airbnb also says it has a good working relationship with the Malaysian Government and have partnered with it in the past.

In December last year, it was reported that a pilot project was being conducted in Malacca involving 130 homestays in 11 villages to help them market their business using online listings.

The programme was a collaboration between the Multimedia Development Corporation, the International Trade and Industry Ministry, the Tourism and Culture Ministry and Airbnb.

Airbnb says over 80 million guests have had a safe, positive experience using the platform.

“We help promote positive experiences through a global trust and safety team available 24/7, authentic reviews, verified profile information, and the $1 Million Host Guarantee,” it says.

A check on its website showed that the Host Guarantee will reimburse eligible hosts for damages up to A$1mil (RM3.06mil).

“The Host Guarantee should not be considered a replacement or stand-in for homeowners or renters insurance,” read the website.

Airbnb also has a refund policy for guests if the host fails to provide reasonable access to the booked listing, the listing booked is misrepresented or isn’t generally clean or unsafe, among others.

“Airbnb’s community operates on the principles of trust and respect. Our host and guest review systems demonstrate our commitment to responsible behaviour,” it says.

Meanwhile, some local Airbnb hosts in Malaysia have mixed views about the idea of having the Government regulate their business.

A full-time Airbnb host in Malacca, known only as Chen, says she welcomes such a move as long as it is done fairly and does not overly restrict the business.

“It can be beneficial for both the hosts and guests.

“If we are given licences by the Government, we can even put up signages to advertise our business. And for guests, they would have more protection,” says the 30-year-old lass who rents out one apartment and two townhouses.

Chen, a former marketing manager, quit her job two years ago to become a full-time Airbnb host, calling it her “interest and passion”.

She denies having any opposition from her neighbours in renting out her properties to tourists.

“I informed my neighbours before doing this. While they were initially doubtful, they are now happy I have guests,” Chen adds.

And in the event the Government decides to ban such services, Chen says hosts like herself will transform and adapt to the situation.

“This is the global trend and many are using this business model now. It is important to stay competitive and adapt to the times,” she says.

Another full-time host, Ridzuan Effendy, 29, hopes the Government does not impose regulations on Airbnb.

“Home-sharing services aren’t the same as hotels. Many tourists use Airbnb because the prices are cheaper compared to hotels.

“It is a case of having a willing buyer and seller. It shouldn’t be illegal,” says the former engineer, who lists his properties in Kuala Lumpur.

Related: Travellers drawn to cheap prices

Home-shares annoy neighbours 

BE nice. Buy fruits for your guests or colouring books for their kids and potentially make RM8,000 or more each month renting your apartment or house to short-stay tourists.

Unofficial hotel: At one time, nine of the 28 units of one of the blocks in Halaman Pulau Tikus were available for short-term rentals by medical tourists.>>>

The key performance indicators for home-share operators are the guest reviews on their listings in global marketplaces like Airbnb and HomeAway.

“My guests and I review each other. It’s like Uber (global ride hailing app). You will know your guests’ reputation and your guests will also know yours.

“If anything bad happens, the guests or I can report it to Airbnb and we can be banned,” said an operator in Penang who only wants to be known as Sue, a housewife.

She rents out a house in Batu Ferringhi (RM320 a night) and a condominium unit in Pulau Tikus (RM400 a night) as a host on Airbnb and said her properties were now rated four-and-a-half stars.

The location may seem to be a secondary consideration, with one three-bedroom low-medium cost apartment in Air Itam having a five-star rating on Airbnb.

“It may look like a low-cost apartment from the outside and parking is limited. But it is lovely inside. Love the design and everything,” wrote a reviewer.

From the photos on this listing, the owner had decorated the place with a profusion of wallpaper and the furnishings and paintings within can rival a plush hotel room. There is bed space for up to eight guests and it is only RM150 a night.

But the surge of home-share operators may have inconvenienced neighbours.

Halaman Pulau Tikus management corporation chairman Khoo Boo Eng said his block in Lengkok Berjaya had become the haunt of medical tourists looking for a place to stay while seeking treatment here since several years ago.

He said he had seen medical tourists arrive who were truly sick.

“They shouldn’t be allowed to stay in our residential area. Some of my neighbours are worried that if they had contagious diseases, we would all be at risk,” he said.

He said at one time, nine out of 28 apartments in his block were rented out this way and many unit owners complained about the constant flow of strangers.

“Ours is a small, exclusive residence. We had to install extra security cameras and have a security guard 24 hours a day for our residents’ safety.

“They are making commercial use of their residential properties. We are planning to take them to court and seek injunctions to stop them from renting to short-stay guests,” he said.

Earlier in the week, officials from four departments of the Penang Island City Council (MBPP) carried out a spot check and four unit owners in Birch Regency Condominium in Datuk Keramat were fined RM250 each for operating a business without licence.

They knocked on the doors of 15 units believed to be available for rent on a short-term basis and found four being occupied – two units by Singaporeans, one by Australians and another by Canadians.

Tanjung MP Ng Wei Aik, who was present, said the officers spoke to the foreigners who confirmed they were here on holiday.

However, owners argued that there were no laws prohibiting them from renting out their units for any length of time.

One hurdle they had to go through is the complaints from other condo owners.

“We get many complaints from our fellow residents about these short-stay guests. We’re just doing our duty to maintain the peace in our condominium,” said a condominium committee member.

When contacted, Penang Island City Council Building Department director Yew Tung Seang said there could be a legal loophole that would make it hard for authorities to stop residential property owners from offering short-term rentals.

“Property owners have the right to earn rent and there is a grey area over short-term and long-term rentals.

“But when apartments or houses become like hotels, their operations can become a nuisance for neighbours.

“The council is planning a machinery to control this sort of activity,” he added.

In January, Johor Tourism, Trade and Consumerism committee chairman Datuk Tee Siew Kiong was reported as saying that homestay operators at housing estates in the urban areas in the state would no longer be allowed to use the word “homestay” to promote their accommodation.

He said there were plans to regulate and standardise the homestay segment in Johor.

He said many home owners in the urban areas had converted their properties into homestay facilities to cater to customers looking for a short stay.

In the United States’ New York State, legislators tabled a bill last month to ban the advertising of short-term home rentals of less than 30 days, with fines of up to US$7,500 (RM30,000).

“Every day I hear from New Yorkers who are sick and tired of living in buildings that have been turned into illegal hotels through Airbnb because so many units are rented out to tourists, not permanent residents,” Manhattan assembly-woman Linda Rosenthal was reported as saying last month.

It was reported that New York City has over 40,000 home-share listings and each earns an average of US$5,700 (RM23,300) a month.

Study the homestay industry

 

I REFER to the reports “Home versus hotels” and “Travellers drawn to cheap prices” ( Sunday Star, July 3) and “Govern home-share under new laws” (see above).

It is well known that homestay is popular not only in Malaysia but also all over the world now. I have used both types of lodgings and find pros and cons in both.

Homestays are likened to the Airbnb concept which was launched in 2008 and has experienced rapid growth since then. Statistics show that at the end of 2015, Airbnb hosted eight million guests, chalked up three million nights of cumulative booking, were used by 50,000 renters per night and has a market capitalisation of US$2.5bil. This demonstrates the effectiveness and popularity of the concept used by Airbnb.

However, in the US where this concept began, there is concern among the traditional hospitality industry that it is a threat to their business. There is pressure on the government to either put a stop to Airbnb activities or regulate them. According to a report commissioned by hotel associations in the US, some of the financial effects of Airbnb (focused in New York city but gives a strong indication of what may be happening in other parts of the world too) are:

i) Airbnb is growing because it is less labour intensive and requires lower level of service;

ii) There is no marginal cost for such services as new rooms can be added incrementally (or removed) and overheads are negligible compared to hotels;

iii) Hotels were losing revenue due to loss of room nights. This also had an ancillary effect on other services offered by the hotels such as F&B outlets and business centres; and

iv) Hotels in areas where Airbnb is established have responded to increased competition by reducing their prices.

I also looked up issues of competition in this market which may be a cause for concern. If we look at the homestay concept, what it offers is the opportunity for consumers on the supply side to supplement their income by providing a service via a peer-to-peer platform. It also offers travellers a chance to live like the locals and take part in cultural exchanges.

It is also basically a connection where supply meets demand and other needs such as budget constraints, personalised service, easy accessibility and homely atmosphere and all are rolled into one. Airbnb portrays itself as “a platform that allows the little guy to build up a complimentary industry, one that increases the size of the hospitality pie rather than take a slice from existing business.”

Applying this concept in Malaysia, it is a wonderful way to not only expand our hospitality industry especially in areas where hotel rooms are limited or extremely expensive but also allow locals to interact (people from the peninsula going to Sabah and Sarawak and vice versa, for example) or foreigners a chance to live like the locals.

This would in turn generate a multiplier effect on the local economy as other services such as restaurants, laundry, cleaning or transport would be required to support the homestay service. Besides all these, it would put money in the pockets of local residents and also support small businesses outside the hotel districts.

Will the homestay industry be a threat to the hotels? From a competition point of view, there may be some concerns (especially to budget hotels) but these could easily be overcome with careful formulation of policies and guidelines.

As consumer demand has shifted, the markets are or may be different, and it is ultimately up to the consumer to choose where he wants to stay.

Hotels are mainly located in the city or town centres and offer better services, amenities and standards. On the other hand, homestays and Airbnb serve up lodging options that cater to a more local and less touristy experience. Hotels and Airbnb/ homestays operate differently so there is room for both to coexist as long as they are after different customers.

Having said that, regulators and policy makers in Malaysia need to carefully study the implications of introducing regulations to homestay or Airbnb users from the supply side. Many countries have taken steps to address the issues emerging from the rapid rise of Airbnb and homestays. It would be useful for the Malaysia Competition Commission (MyCC) to commission a study on the effects of such concepts on the hospitality industry in Malaysia. This will then give the policy makers some empirical studies to formulate the required guidelines or regulations.

Competition is always threatened when there is a threat to the sharing economy (as in Uber versus the traditional taxi service). The sharing economy is where industry can collaboratively make use of under-utilised inventory via fee-based sharing. The market is always uncertain and nervous when a new marketplace is created, which in turn increases the difficulty of defining the market in competition law. The way businesses are being done and change in consumers’ tastes all merit a thorough study before any action is taken to manage a growing industry.

Two factors have arguable given rise to the rapid growth of peer-to-peer platforms – technology innovations and supply side flexibility. A win-win situation is always possible. If competition is distorted, as in when people buy into residential property to turn it into a business venture, that is when the authorities could step in.

By SHILA DORAI RAJ Founding and former CEO Malaysia Competition Commission

Related post:

While young adults all over the world are renting homes, Malaysian prefer to own homes as soon as they get their first pay cheque Instea…

Young adults in developed countries rent, we buy houses for good


While young adults all over the world are renting homes, successful Malaysians and Singaporeans prefer to own homes instead of cars, as soon as they get their first pay cheque.Instead of blowing their cash on pricey gadgets, young Malaysians are saving up for their first home.

While most Gen Y shy away from owning property in developed countries and big cities, demand from millennials here is still holding, especially with parents assisting them with the downpayment, Real Estate and Housing Developers’ Association Malaysia (Rehda) president Datuk Seri F.D. Iskandar said.

(Gen Y, also known as millennials, are commonly referred to those who are born in the early 1980s to 2000s. They are sometimes referred to as the strawberry generation).

Demand from first-time buyers, including the younger generation, remains strong although housing affordability is a challenge, said Bank Negara.

The central bank added that they accounted for 75% of 1.47 million borrowers.

Owning and investing in a house remains a priority for many Malaysians.

This is reflected in the household borrowing trend where the buying of homes continues to be the fastest growing segment of household lending, with annual growth sustained at double-digit levels (11% as at end-March 2016), said Bank Negara in a statement.

Those who cannot afford it themselves, and do not have parents to help, turn to their friends.

In his 30s, Daryl Toh, and two of his college mates own a condominium in Penang; they pooled their resources to purchase the unit five years ago.

“It’s in a premium area and since we couldn’t afford a place on our own – at least not prime property, we became joint owners.”

Financial adviser Yap Ming Hui said it makes perfect sense to own.

“Of course the Gen Y here are still keen on buying. You pay the instalments and eventually own a home. Only those who can’t afford to buy are forced to rent.”

Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector of Malaysia adviser Wong Kok Soo said property prices in Hong Kong have escalated beyond the purchasing power of the Gen Y but the trend hasn’t caught on here – yet.

Wong, who is also a consultant with the National House Buyers Association, however, said there were signs that the Gen Y could no longer afford to live in big cities like Kuala Lumpur, Penang Island, Johor Baru and Sabah.

“Parents are chipping in for the downpayment. And, commuting from the suburbs to the city centre is still an option.

“But when prices get inflated far beyond their means, the same will happen here (as in Hong Kong),” said Wong, who, however, felt that even if demand dropped, it would not be substantial.

Iskandar agreed, saying that although the property market was slow now, the drop was manageable. “Like everything else, it’s cyclical. “The property market goes up for years and after some time, begins falling before rising again.”

He said the market would pick up with the completion of infrastructure development and public transportation facilities.

Rehda, he said, was working closely with the Government to find ways to facilitate home acquisition especially among first-time buyers.

“We proposed a review of the financing guidelines that have negatively impacted buyers’ ability to secure financing,” he said. – The Star/Asia News Network

Demand from first-time buyers still strong despite affordability challenge

PETALING JAYA: Instead of blowing their cash on pricey gadgets, young Malaysians are saving up for their first home.

While most Gen Y shy away from owning property in developed countries and big cities, demand from millennials here is still holding, especially with parents assisting them with the downpayment, Real Estate and Housing Developers’ Association Malaysia (Rehda) president Datuk Seri F.D. Iskandar said.

(Gen Y, also known as millennials, are commonly referred to those who are born in the early 1980s to 2000s. They are sometimes referred to as the strawberry generation).

Demand from first-time buyers, including the younger generation, remains strong although housing affordability is a challenge, said Bank Negara.

The central bank added that they accounted for 75% of 1.47 million borrowers.

Owning and investing in a house remains a priority for many Malay­sians.

This is reflected in the household borrowing trend where the buying of homes continues to be the fastest growing segment of household lending, with annual growth sustained at double-digit levels (11% as at end-March 2016), said Bank Negara in a statement.

Those who cannot afford it themselves, and do not have parents to help, turn to their friends.

In his 30s, Daryl Toh, and two of his college mates own a condominium in Penang; they pooled their resources to purchase the unit five years ago.

“It’s in a premium area and since we couldn’t afford a place on our own – at least not prime property, we became joint owners.”

Financial adviser Yap Ming Hui said it makes perfect sense to own.

“Of course the Gen Y here are still keen on buying. You pay the instalments and eventually own a home. Only those who can’t afford to buy are forced to rent.”

Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector of Malaysia adviser Wong Kok Soo said property prices in Hong Kong have escalated beyond the purchasing power of the Gen Y but the trend hasn’t caught on here – yet.

Wong, who is also a consultant with the National House Buyers Association, however, said there were signs that the Gen Y could no longer afford to live in big cities like Kuala Lumpur, Penang Island, Johor Baru and Sabah.

“Parents are chipping in for the downpayment. And, commuting from the suburbs to the city centre is still an option.

“But when prices get inflated far beyond their means, the same will happen here (as in Hong Kong),” said Wong, who, however, felt that even if demand dropped, it would not be substantial.

Iskandar agreed, saying that although the property market was slow now, the drop was manageable.

“Like everything else, it’s cyclical.

“The property market goes up for years and after some time, begins falling before rising again.”

He said the market would pick up with the completion of infrastructure development and public tran­sportation facilities.

Rehda, he said, was working closely with the Government to find ways to facilitate home acquisition especially among first-time buyers.

“We proposed a review of the financing guidelines that have negatively impacted buyers’ ability to secure financing,” he said. – By Christina Chin The Star

A pricey priority

 

Wary of big, life-changing purchases, the ‘Strawberry Generation’ – those ‘easily bruised’, coddled young people in their 30s – prefers to rent, global reports say. Malaysians, however, are bucking the trend despite steep property prices. Mainly thanks to supportive parents, it seems.

BEST friends Leh Mon Soo, 38, and Brandy Yu, 39, are finally buying their first home.

After months of serious scouting, the two managers found units that matched their budget and needs, coincidentally, in the same condominium in Petaling Jaya. Leh is getting a three-bedroom unit while Yu is happy with a 48sqm studio apartment.

Yu feels that the RM365,000 she’s paying is affordable as she can still save about RM1,700 monthly after paying the loan instalment.

“I’m only paying RM400 more a month than what I’ve been forking out for rent. And unlike the rental, this unit will be mine one day,” she says.

Leh ended up forking out a whopping RM690,000 even though she dreads the long-term commitment. While “not a bargain, and at the upper limit of what I can afford”, she says that it’s still a pretty good price, as other, smaller, units were going for higher prices.

“I was only willing to pay RM500,000 initially. Then I saw a two-bedroom in the same condominium going for RM680,000. So I bit the bullet and got this. Property prices won’t be dropping any time soon and our ringgit’s shrinking. It’s now or never. I’ll have to cough up even more later if I don’t get a place now,” she says pragmatically.

The soon-to-be neighbours think property is still in demand, even among Gen Y-ers, aka Millennials (those born in the 1980s and 1990s, typically perceived as brought up and very familiar with digital and electronic technology).

But they’re more privileged because their parents have either already invested in property for them or are helping them buy it, Leh offers. Renting is not for the long-term, she says firmly, and even the younger ones know that.

The Malaysian mindset, Yu quips, is that everyone must own at least one property.

Gym owner Chip Ang, 26, agrees. He got the keys to his new 78sqm unit in Shah Alam last week.

Although it was his parents who suggested he get the RM168,000 place under the Selangor Government’s affordable housing scheme, Ang says property ownership is always a hot topic between him and his friends. Young professionals want to own property. The issue is affordability, he thinks.

“Many are unrealistic. They want their ideal home in the ideal place. Of course that’s unaffordable. Most affordable homes are in up and coming townships, not prime locations.”

The experience of getting his own place was a “blur” because it happened so fast, he says, though he does recall that, “because it’s affordable housing, I had to fulfil a number of requirements including proving that I’m a bachelor”. While the RM700 monthly mortgage payment is doable, he’s still nervous about being “tied down”.

Writer Teddy Gomez, 29, doesn’t think people have given up on owning property but sees a new trend emerging.

“Buying property is still big here but I see more renters because it’s cheaper and more flexible,” says Gomez, who got “a little help” from his dad buying a 83sqm apartment in Kuala Lumpur last year. Although the cosy RM400,000 unit is “not really affordable”, he says it’s time to leave the nest.

Like Gomez, a blogger who only wants to be known as Robyn, 24, thinks it’s nice to have your own space. She’s moving into an apartment in Petaling Jaya soon. The fresh graduate admits being lucky because her dad’s the owner. She’s getting the three-room unit for less than RM140,000 although it’s valued at over RM750,000.

“For the next three years, I’ll pay the RM3,800 monthly loan instalments. Now, I’m only contributing RM2,000 because I just started working. Dad’s helping until I can afford to take on the full amount myself.”

She knows she’s better off than most her age and is thankful for her family’s support – many of her friends are also looking for properties to buy but are resigned to living outside the city in places like Bangi and Kajang in Selangor. Still, with a RM200,000 budget, they’re willing to travel and own property rather than pay rent indefinitely.

Federation of Malaysian Consumers Association (Fomca) secretary-general Datuk Paul Selvaraj says it’s unfair to tell consumers to live on the outskirts of city centres because public transportation is still a problem in the Klang Valley. Unless the homes are accessible, living far away from the workplace isn’t practical.

National House Buyers Association (HBA) honorary secretary-general Chang Kim Loong sees a very strong demand for affordable properties in Malaysia because of our young population and urban migration.

For instance, the Government’s First House Deposit Financing (MyDeposit) scheme that was launched on April 6 received more than 6,000 online registrations within a week, a sure sign that Malaysians are still keen on owning property.

Fomca’s Selvaraj says property is a priority for most Malaysians because it’s a sound investment. They just can’t afford it in most urban areas.

“If you’re living on bread and water after paying your loan, then the house is unaffordable. For most young families, RM300,000-plus is affordable but it’s RM600,000 homes that are being built.”

Property is the best hedge against inflation so demand will always be strong, says HBA’s Chang. But there’s a “serious mismatch” between what’s classified as affordable by developers and the rakyat’s definition. To developers, an affordable property for first-time buyers is RM500,000. For upgraders, it’s up to RM1mil. Definitions on the ground are much lower. First-time buyers deem RM150,000 to RM300,000 affordable while those looking to upgrade can only pay between RM300,000 and RM600,000.

But if you can afford it – with family help, perhaps – M. Rajendran, 53, says invest early. The air traffic controller got his double-storey home in Kajang 21, Selangor, years ago for RM146,000. It’s worth at least RM600,000 now.

“If I hadn’t bought it then, I definitely wouldn’t be able to afford it now with the financial commitments I have. And at my age, no bank is going to give me a loan. Buy when you’re young because it’s cheaper and you can settle your loan faster.”

However, he warns that current economic challenges could result in a rise in the number of abandoned projects, so those looking at new properties should be cautious and do their homework.

“Scout around. Choose locations with infrastructure and amenities so that the potential for property prices to appreciate is higher.” – By Christina Chin The Star

Don’t bank on the banks

 Chang Kim LoongRELAXING lending conditions won’t help more people buy their own homes. It will only worsen the situation as developers increase prices further to match the lending surge, predicts Chang Kim Loong, honorary secretary-general of the National House Buyers Association (HBA).

Datuk Paul Selvaraj also doesn’t think it’s a good idea. The Federation of Malaysian Consumers Association secretary-general says home ownership is a right, and it’s the Government’s responsibility to make it a reality. The Government, he stresses, must either build more affordable housing or force developers to cater to the neglected market. It’s wrong to force banks to take bigger lending risks by calling on them to relax lending conditions, he feels.

“Banks will only lend money if they can get it back. It’s unfair to expect them to do otherwise. Also, if the borrowers cannot pay, they themselves will end up with a big headache.”

Banks are rightly stringent as times are uncertain, says Wong Kok Soo, an adviser to the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector of Malaysia and consultant to the HBA.

Lenient policies encourage purchases that are beyond one’s means and are not a good idea; instead, the margin of financing should be increased or the loan tenure extended, for first home buyers. For existing loans, there should be some flexibility in extending tenures and adjusting debt servicing ratio, he feels.

Last year, housing in Kelantan, Penang, Sabah, Sarawak and Selangor, as well as Kuala Lumpur, were listed as severely unaffordable by market experts. Nationwide, only Malacca made the affordable category with housing in the other states deemed either seriously or moderately unaffordable.

Bank Negara’s “Financial Stability and Payment Systems Report 2015” showed an increasing supply of homes above RM500,000 while those priced below RM250,000 accounted for less than 30% of the total launches in the first nine months of last year.

Deputy Urban Wellbeing, Housing and Local Government Minister Datuk Halimah Mohamed Sadique has since called on developers to build more houses priced at RM300,000 for Malaysians.

The next generation won’t be able to own property without financial help from their parents unless concrete measures are taken to increase the supply of properties costing between RM150,000 and RM300,000 and to stem the steep rise in existing property prices due to excessive speculation, says HBA’s Chang.

A Khazanah Research Institute report reveals that Malaysia’s housing market is considered to be “seriously unaffordable”, with a median house price of more than four times the median annual household income. This problem, Chang notes, surfaced a little under a decade ago but if prices continue to soar, the situation could worsen.

Not that there aren’t affordable schemes and funding plans in place to help – in the last 50 years, scores have been introduced but information on them is scarce, he observes. Details of projects by developers, state agencies and federal bodies must be available in a public database, he suggests. And a single umbrella body under the Federal Government must coordinate the distribution and availability of such units.

Chang stresses also that there’s no place for racial profiling when it comes to housing. Whoever deserves a house must get a house, he insists.

There’s never a wrong time to buy property but one must balance the risk of buying with renting, he advices. Owning a house is riskier as buyers take on enormous debts, sign multi-year loan agreements and become responsible for homeowner costs, he cautions.

“Flip through the newspapers – you’ll see many proclamations of sales of units for public auction that are below RM50,000. Some even dip below RM10,000. On bank websites, you’ll find property foreclosure cases.”

A list of properties put up for auction by CIMB bank showed 35 units in Selangor at reserved prices of less than RM42,000 – that’s the price of a new low-cost unit, notes Chang.

Low-cost units auctioned off for half of the purchase price is an alarming trend, he says. Unfortunately, there aren’t any official statistics on how many low income earners have lost their homes or are struggling with their monthly loan commitment. Where do these homeowners and their families end up living, Chang wonders.

Foreclosures can devastate a family’s economic and social standing, possibly leaving them poorer than before they bought the property. Financiers, local authorities and communities benefit from homeowners being better informed of their rights and responsibilities as borrowers. Ensuring that lower income households have sufficient personal financial management skills and support is crucial.

It’s not enough just to provide homes for the low- and medium-income group. Chang recommends that a homeownership education programme be set up to raise financial literacy and prepare households for the responsibilities of owning a home.

“Manuals, advice or information given via telephone, workshops or counselling to help households maintain their homes and manage their finances must be given before first-time buyers sign the sale and purchase agreement. Public housing schemes are only successful if buyers can hold on to their property.”

Specifically, Chang says education should cover:

> Pre-purchase period – understanding the various types of available housing, the process of buying a house, loan process, and financial preparation needed; and evaluating household needs.

> Post-purchase period – budgeting monthly expenses; making payments promptly; avoiding loan defaults; living within a community; social responsibility; property taxes, assessments, insurance, service charges and sinking fund; home maintenance; and handling problems with the property.

Educate yourself and learn from the mistakes of others to avoid being disappointed or, worse, becoming “house poor” (when most of your income goes towards home ownership), Chang advises. Aspiring buyers must get something that’s within their budget. It could be an older or smaller unit but start small and slowly increase your property portfolio, he says.

“Don’t let friends or family influence you into getting something that’s above your budget, as home ownership is a long term investment. You must be able to service the loan while maintaining an acceptable standard of living.”

The majority may prefer to rent while waiting for the market to soften but it’s better to have your own shelter, says HBA consultant Wong.

The average Malaysian, he insists, can still own property. Consider buying at auctions. Research is a must, though, as inspections aren’t allowed at auctions. It’s an “as is, where is” bid, he stresses. Find out about the surrounding units and the neighbourhood, he suggests.

Better to own but…

PROPERTY investment helps maintain our socioeconomic well-being and must be encouraged, says Datuk Seri F.D. Iskandar, president of the Real Estate and Housing Developers Association Malaysia (Rehda).

Property – a wealth-creation instrument without the volatility of stock markets – has consistently out-performed traditional investment options like bonds, he points out.

But to invest, one must study the property and its market potential. With the right location and strategy, property can be a very profitable investment. The value will appreciate over time, he says.

To many, the most important aspect of owning property is to secure a home. In current conditions, most developers are coming up with attractive packages to close the deal, so it’s a good time to buy. Securing a bank loan now, though, is one of the biggest barriers, he says.

Rehda’s recommendations to the Government and Bank Negara are:

> Encourage innovative home financing packages like the developers interest bearing scheme (better known as DIBS).

> Allow flexible or accelerated tiered payments (longer loan tenure so you pay less now but more later when your salary has increased).

> Relax loan approval criteria with higher financing margins (up to 100%).

Also, banks, he says, shouldn’t just focus on a loan applicant’s current net income; future prospects of higher salaries and other incomes and bonuses must be taken into account.

He dismisses talk that the average Malaysian has been priced out of owning his or her first home.

There’s still a range of prices and options in both the primary and secondary property markets, he says.

With new launches, developers usually offer special incentives, rebates or discounts that will help buyers reduce their initial payment. In the secondary market, however, what you see is what you get. Depending on what you’re looking for, factors like location, surroundings, facilities, transportation and infrastructure will help you decide.

“Property prices in city centres are high because of land value but there are many cheaper options in less-urbanised areas. There are many affordable houses, including those by PR1MA (the 1Malaysia People’s Housing Scheme). The average Malaysian can definitely afford these.

“With an improving transportation system and connectivity, these places are now easily accessible from city centres.”

We are paid enough

Property price and value to Income per country in SEA 20014

WAGES are rising in tandem with the country’s consumer price index (CPI), which is a broad measure of inflation and our productivity.

Both criteria are used to determine wages here, says Datuk Shamsuddin Bardan, executive director of the Malaysian Employers Federation.

While Malaysians lament how their salaries aren’t enough to cope with soaring costs of products and services, their grouses aren’t reflected in the low CPI numbers, he says.

“Measured against the CPI, our average salary growth isn’t lagging. In the region, our salaries are second only to Singapore. Of course, you must consider the currency exchange. Singaporeans earn an average of S$3,000 (RM9,000) while Malaysians take home RM2,800 monthly.

“But bear in mind that the productivity of Singaporeans is 3.8 times higher than ours. Their per unit cost of production per employee is lower than us. In the United States, the productivity level is seven times higher than ours. So when you say we aren’t earning enough, you have to consider our productivity level too,” he states, pointing to how in some of our neighbouring countries, the average salary is less than US$100 (RM400).

However, he acknowledges that houses are beyond the reach of most – and fresh graduates in particular – and adds that even when both husband and wife work, they still may not have enough for the down payment and are forced to rent.

It’s tough, he admits, even for those who have already been working for a decade, to own a house now without financial support from parents.

Related: Renting is OK too

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