Oil price rockets high; BEST TIME to INVEST in PROPERTY

The sharp increase of petrol and power prices is expected to have a great impact on the real estate market with slower transaction predicted, however, it makes a great opportunity for investors to make their property investment. It is the best time to buy, according to real estate market analyst Gavin Tee.

The chain effect of rise in petrol prices has caused the consumers to change the buying and investment behavior. Due to the extra burden on the expenses, many may drop the plan to purchase a new home or to make a new investment . However, Gavin thinks this behavior is only an immediate short live response to the increase , and the slow down of real estate market is just a temporary scenario.

Gavin is the managing Director of Arborland & Co, also a principal consultant of 5G Channel introduced by FECAM to serve the Chinese community in property investment matter. He is also the council member of Malaysia institute of estate agent (MIEA).

Gavin is optimistic of the impact on property market by the hike in oil price , as he believes that property is an investment that provides good hedges against inflation.

Unlike commodities where the sensitivity level is higher , any increase in oil price will trigger immediate effect . Property sensitivity level is lower and tend to have delay respond. However , after a short time the price will be adjusted substantially. The prices will likely to escalate within 6 months time. Therefore, the following 6 months will be the best time to buy.

Gavin believes the secondary market of completed properties will become the new star in property transaction for the reasons that these properties prices are not affected by the rising construction cost in building materials . Furthermore, the property price for the secondary market has not been appreciated much in the last two years when compared with other new projects. Hence this sector of property will attract more buyers as it offers more freedom for negotiation and larger capital appreciation when compares to the new project which prices is heavily relied on the cost of building materials and other external factors.

For the new projects or under - construction properties , there is not much choice but to raise the selling price. For the completed properties , they may not have to follow.

Gavin views the medium cost new housing projects will be the main sector hit by the hike of oil prices as construction cost contribute the main portion of cost when comparing to high-end project where costs are well distributed into design fee, conceptual set up, location and other professional charges. In addition, the medium cost housing project are constrained by the ceiling prices set by the market unlike the high end property has less constrain on pricing. ( ie. Construction cost may attribute 50% of selling price to medium cost project while it may only be 25% in the case of high cost property.)

It is expected that many smart investors will take this opportunity ( before the property price shoot up ) to invest heavily in the real estate market. The number of such investors may not be substantial however they will become of the most profitable ones.

Gavin also believes that the repercussion to the foreign investors is mild as Malaysia real estate prices are considered relatively low in the Asia region as foreigner investors mainly invest in high-end condominium , land, commercial or corporate buildings which has smaller impact by the latest increase of petrol price is small.

Loan Applications: Documents Required

You need to provide the following basic documents before the financial institution
can process your loan application:

• A photocopy of identity card or passport
• Your latest 3 months’ salary slip
• Your latest income tax return form (form J)
or EA form
• Sale and Purchase Agreement/deposit or booking receipt/letter of offer from the
housing developer
• A photocopy of the land title (if any)
• The latest bank statements (compulsory in the absence of salary slips and/or Form J/EA Form) dating back six months/savings passbook/fixed deposits
• Valuation report for completed houses and/or

Some financial institutions may require
Additional supporting documents

• If you are self-employed, you need to provide your business registration documents, latest 3 months bank statements, latest financial statements and other supporting documents to support your income However, some financial institutions may require additional supporting documents.

Upon acceptance of the letter of offer, you will need to appoint a lawyer to draw up the loan documentation for you. Normally, you would select your lawyer from a list of panel lawyers provided by your financial institution. Some of these documents need to be submitted to the relevant government authorities for registration and to the Stamp Office for stamping.

Upon completion of the above, these registered documents are then submitted
to the financial institution and you will be given a copy of the Loan Agreement.
In general, the timeframe for the completion of this legal process should not exceed 6 months.


A common criterion is that your monthly loan instalment repayment should not be
more than 1/3 of your gross monthly household income. If you have savings or
fixed deposits, they can be used to support your loan application as financial
institutions may take them into account in evaluating your eligibility.

Different financial institutions have different criteria in calculating the repayment capacity. In the case of a floating rate loan, you should also note that your monthly repayment may increase substantially when interest rates go up.

For example, when there is an increase in the Base Lending Rate (BLR), the interest rate on your loan will also go up, and your repayment would be higher. However, in most cases, financial institutions would allow you to pay the fixed amount of monthly repayment throughout the loan tenure and would make any adjustment caused by the variation in interest rate by increasing or shortening the loan tenure. You should check this out with your financial institution.


The amount of financing provided by a financial institution depends on the market
value (for completed properties only) or purchase price of the house, whichever is lower. The margin of financing could go as high as 95% of the value of the house.

It is assessed on factors such as:


The length of a loan can range anytime up to 30 years or until the borrower
reaches age 65 (or any other age as determined by the financial institution),
whichever is earlier.
• Type of property
• Location of property
• Age of the borrower
• Income of the borrower


Each financial institution packages its housing loans differently. You should
examine all the features of a loan package and not just base your decision on any single feature. Pricing is just one consideration; other features like flexible
repayment terms could balance the scale or even translate into greater loan savings.

Financial institutions generally offer housing loan packages either in the form
of a term loan, overdraft, or a combination of a term loan and overdraft.


• Term Loan
– A facility with regular predetermined monthly instalments. Instalment is fixed
for period of time, say 30 years
– Instalment payment consists of the loan amount plus the interest
• Overdraft facility
– A facility with credit line granted based on predetermined limit
– No fixed monthly instalments as the interest is calculated based on daily
outstanding balance
– Allows flexibility to repay the loan anytime and freedom to re-use the money
– Interest charged is generally higher than the term loan
• Term loan and overdraft combined
– A facility that combines Term Loan and Overdraft. For example, 70% as term
loan and 30% as Overdraft
– Regular loan instalment on the term loan portion is required
– Flexibility on the repayment of overdraft portion


Financial institutions may charge you interest either on daily rests or monthly
rests depending upon the products offered. In the case of daily rests, the loan interest is calculated on a daily basis, while in the case of monthly rests, interest is calculated once a month based on the previous month’s balance. Under both types of loan, the principal sum immediately reduces every time a loan instalment is made.


A graduated payment scheme allows lower instalment payments at the beginning of the loan but this will gradually increase over time. This type of payment scheme will help house buyers to reduce burden of loan repayment for the first few years and allow them to allocate more money for other purposes. Over time, as earnings of house buyers increase, their repayment capabilities will also increase thus allowing higher repayment instalments at a later stage.
( Sources from Bankinginfo. )

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