Insights into the Real Estate Landscape in Malaysia by Christopher Lim
The goalposts have shifted in property investment today and it follows that savvy investors also need to change their mindsets and overcome decades of conditioning. In the concluding part of a multi-part series about sound investment insights and property hotspots, Property Hub’s Christopher Lim looks at the property investment landscape today and finds that we need a new compass to navigate new horizons.
As I pen the concluding part of my musings over the past six months about the real estate industry and its intricacies I find myself pondering the way forward for all of us and how much real estate has become entrenched in our modern consciousness.
Indeed, regardless of our standing or experience, real estate has become a Holy Grail of sorts in our quest for shelter and financial freedom. It is an occupation for those of us in the industry and a pre-occupation for everyone else.
You could even say that real estate has become a fundamental need for us all.
Too often I have either discussed or witnessed the indecisiveness of buying real estate; the confusion and uncertainty, and all the frustrations in finding the right property. This has become quite the norm in conversations with property buyers where uncertainty results in inaction and indefinitely so.
With the impending implementation of GST and the uncertainty of the global economy, this will only lead to more questions than answers and of course, indecisiveness. It may seem obvious but setting a clear objective will certainly ensure a good buying experience and we often lose sight of that in the moment.
Firstly, always understand your own needs and what you can afford and be disciplined enough to understand your actual needs in-line with your own risk appetite or risk indecisiveness leading to buying frustrations. Above all, it may cost you time and as we all know, time can be costly, very costly. Make a conscious decision and be decisive and the experience can be both lucrative and enjoyable.
Let’s look at the typical purchasing scenarios you will likely encounter:
1. Purchasing to fulfill a need
This is referred to as a needs-based purchase. Many a time have I experienced numerous home purchasers who confuse their needs with an investment objective.
Yes, I do understand that it is in our DNA that we want to ensure good capital appreciation from our purchase of a home. But at the same time, we ought to understand that this requires a different mindset altogether.
Let’s take the example of food choice since we Malaysians generally love our food! It would be a tough decision (for most, anyway!) when faced with a choice of yummy good food versus the healthy choice. We know what we want and also what’s good for us. Yes, I do agree that we may still get a good combination of both at times but not often. Moving on from this analogy, I strongly suggest that you objectively list down the need-based essential considerations first and then try to find a common ground with the investment elements.
This may sound easy but getting this right will be crucial in determining the right purchase for you. It takes a deeper conviction from all the stakeholders of the purchase to come to a good agreement on the following:
A) The price range
B) A shortlist of at least three possible suburbs
C) Choice of lifestyle in the neighborhood
D) Landed property or condominium?
E) Any other important amenities that meets the needs
The above may sound basic and easy but possibilities abound and staying true to your priorities and being disciplined to be as detailed as possible will allow you to shortlist right and experience a better buying experience.
2. Purchasing as an investment
I would say that you are privileged to be in this category so let’s rejoice over making a good decision rather than becoming mired in the stress of shortlisting investments in real estate!
Investing in real estate normally requires a good time frame of between four to eight years to realize the full potential of the investment. This is something that investors in real estate should be mindful of as each neighborhood thrives over time and with maturity.
Indeed, the due diligence process as outlined in my earlier article on location, pricing and concept is enabled only through good, thorough research. Very likely, the investment you are getting into may not meet your personal needs. Therefore, always be mindful of the potential of the product that you are putting your money into.
Having said that, there are times when your investment needs do match your needs-based purchase considerations. This will be one of the best investment opportunities and one should recognize this almost instantaneously when the opportunity arises.
Key examples of the main pointers to assess your investment needs are as follows:
A) Price range
B) Total cash outlay
C) Importance of rental return versus capital appreciation
D) Time frame of the investment
E) Comparison of investments options
From the criteria you outline on both purchasing for a need and/or investment, you will then have a very clear and objective shortlisting and elimination process. More often than not, the choice of real estate that suits you best will be revealed with a clear conviction. Achieving this is going to be very fulfilling.
3. Speculative purchasing
We have in recent times witnessed a surge of property speculators over the last few years and I laud Bank Negara and the Government initiatives to curb such real estate speculation activities.
It is my personal opinion that properties are not meant to be speculated on and with the move by the government to increase the tax for Real Property Gains, limiting the loans-to-value ratio and moving towards more stringent credit checks on borrowers are all healthy and welcomed moves.
With that in mind, I shall not linger too much on the speculation aspect but I hope that the government will introduce more appreciative benefits for first-time home buyers. This will ensure a more balanced growth for the Rakyat and towards a more progressive and sustainable nation.
As I conclude this series, I would also like to share that the real estate market is still very much alive and beaming with potential. Although much has been said about a slowdown in the property market, one must be savvy, move quickly and research diligently for the right opportunity.
Kuala Lumpur and the Greater Klang Valley is going through an exciting phase of major infrastructure growth with the MRT projects and the recently announced highways and potential High Speed Rail project. Our capital city is also growing with a healthy rate of urbanization and with a young population, we will very soon be witnessing a very different skyline and property landscape.
Real estate is also a key driver and a yardstick for the economy and the country’s fortunes can be epitomized by the health of the industry. With that, comes government impetus and with the various initiatives under the Economic Transformation Programme (ETP), market liberalization and a move towards a more robust and open economy through removal of subsidies and the influx of foreign MNCs, we pave the way for a more sophisticated market.
This would lead to the fulfillment of a longstanding dream of mine, which is to see greater professionalism in our real estate industry, given the importance and nature of our business. The best thing you can do is to be ready, and to be well-prepared for the real estate market of tomorrow.
As the saying by John Sculley, former CEO of Pepsi and Apple goes, “The future belongs to those who see possibilities before they become obvious”. I wish all you good and loyal readers of homefinder every success, joy and peace with your buying decisions and may your love of real estate grow stronger and deeper. And remember that you are growing the industry too. Good hunting!
Article is written by Christopher Lim, Co-Founder and Senior Vice President of Property Hub Sdn Bhd, MIEA Residential Agency of the Year 2012, 2013 and most recently 2014; Congratulations! Log on to www.propertyhub.com.my for more information. The article represents his personal views.