Gavin Tee, a property investment consultant who has a huge following among the Chinese community in Malaysia gazes at the crystal ball and gives his RM2K worth of opinion. Gavin is also the President and founder of Swhengtee International Real Estate Investors Club, a fast-growing property investment club.

“The real estate market had gone through a roller coaster ride in recent years, from a soaring market in 2008 to a depressed market in 2009 and skyrocketing again this year! With all the ups and downs in such a short period, what should we expect in 2011?

There will be a very special phenomenon in 2011 because the best and the worst opportunities in the real estate market will emerge. The implementation of a maximum loan-to-value (LTV) ratio of 70% will affect the investing movements in the housing market, while the Prime Minister Datuk Seri Najib Tun Razak’s Economic Transformation Programme (ETP) will create new prospects and opportunities in the real estate market.

The targeted implementation of the LTV ratio is expected to moderate the excessive investment and speculative activity in the residential property market which has resulted in higher than average price increases. The main objective of this policy is to encourage home ownership, according to the government. On the other hand, this policy will not help to curb speculation! Instead, it will jeopardize the real estate market and dampen the national economy!

Property prices are still relatively low and transaction activities are stifled. For example: Many owners of high-end apartments and second-tier urban houses are facing difficulties at selling their properties and the 70% mortgage cap simply made the situation worse.

In the secondary market, many houses are presently facing financing problems. The 70% mortgage cap will cause further difficulties to them in disposing the properties. Even some of the “hottest” properties in the market are affected by this policy. As the economy has not fully recovered from depression, this measure will cause a double blow to the real estate market.

On the other hand, the development plans that Prime Minister Najib announced earlier in the Budget 2011 will spur the real estate market, especially in globalized areas where economic activities are most active. Investors must be aware of the strategic plans announced by government as the real estate market in Malaysia will move forward with globalization.

The Greater Kuala Lumpur project will create a strong impact for the country. Strategic urban planning and development will not only enhance Malaysia’s image internationally, but also promote the development of the surrounding cities and towns. For example: the construction of the 100-storey Warisan Merdeka will attract large numbers of local and foreign investors to invest in our country as this iconic office cum commercial building will create an international identity for Malaysia in this globalized era.

Looking into the future, the market will continue to flourish next year. Even though the market had gone through major changes in the past few years, the best and the worst deals will occur in 2011. Commercial property with special design concepts, office buildings, green buildings, as well as commercial properties related to the tourism industry have high potential next year.

Besides, the real estate market is estimated to continue growing next year. Taking medium cost property as an example, the price of such properties near urban areas has not increased very much for the past 15 years. Even though new properties launched in these areas have increased their prices by 20% to 30%, it does not signify a bubble in the real estate market. The overall housing prices are still considered relatively low at the moment and have plenty of room for growth.

However, there seems to be a very unhealthy trend in the real estate market this year as many investors rushed to purchase new projects even though the selling price is comparatively high. This has resulted in pockets of bubbles in certain areas. Some of these projects do not have high potential for investment. These investors might face difficulties in renting or disposing their property next year. I advise investors to dispose off any such properties even with low capital appreciation.

Innovation and interesting concepts are the factors causing new buildings to sell at higher prices compared to old buildings. However, smart investors should not just look for new properties but also old ones as the prices are much lower and investors can renovate the building with new concepts.

In a nutshell, I believe that properties with great potential at low prices are available everywhere. However, investors must do their homework and search for the best opportunities that come along.”

iProperty.com.my: How do you foresee the property market outlook in the last quarter of 2010?

Gavin Tee: There are three areas people worry about – oversupply, overpriced and over-speculated. High-end condo like Mont Kiara and KLCC are oversupplied. I recommend a lot to my clients to buy these especially in KLCC where the secondary market is picking up a bit. In KLCC, there is an oversupply but the price is not very high.

In Malaysia, most of the high-end condo situation is like this. If you really think to buy in the secondary market, keep in mind to keep extra cash for 2 to 3 years. You may not gain in terms of rental yield but most definitely capital gain.

When you talk about the last quarter of the year, people usually speculate in medium cost apartments, shoplots, and gated semi-Ds. As the prices of these have shot up for the past 6 months, people think they could speculate in them. There are still some new launches, and prices are not coming down. They may still be picking up, especially for medium-cost apartments.

My comment to a lot of investors is that the price of medium-cost apartments for the past 10 years has been stagnant and has not moved much. If you go all the way from Jalan Pandan to Jalan Maluri, and from Jalan Klang Lama all the way to Sri Petaling, and then from Segambut and Gombak, to all those near the city areas, and Petaling Jaya, you will realize that the prices of link-houses and medium-cost apartments have not experienced big changes in the past 10 years. It is time for them to appreciate.

Very near the city centre, medium-cost properties will never have problems like oversupply. If you go to Seputeh area, no matter what you build, there will never be an oversupply. Most of the land use there has been utilized.

Concerning the price, I feel that some are overpriced especially those in new areas which are a bit too far away [from town centre].

The story is that Malaysian investors will not differentiate so much on the location or the value or usage of the properties. Rather when you talk about medium-cost, investors think that RM350K for Puchong, RM300K for Bukit Tinggi and Kota Kemuning are fair prices. Even Puchong’s shoplots costing about RM2-3 million are considered okay. 10 years ago, the price of a Telawi shophouse in Bangsar was bout RM3 – RM4 million, Bukit Bintang also RM4 million for the double storey to 4 storey shop houses.

As you can see, a lot of prices are not right, which means it’s bound to be adjusted. So, when all these people talk about oversupply, they think in general. When they think it is speculated, they think about it in general.

In the third quarter, I think prices of medium-cost apartments will still remain strong in the established neighbourhoods. Established areas mean there are a lot of landed and old properties in the area.

The second thing I am looking into is the secondary market, where prices are not so active for many years. Only lately, people have realized prices have changed so much. For example, in SS2, three or four years back, the price was RM300K. Today, prices have shot up to RM600K. People transacted already at RM580, RM600K.

In Taman Desa, four or five years ago, prices were RM400 – RM500K, today they are transacted at RM700-800K. In Seputeh area, years ago the price was RM500-600K. Today, you can only buy it at RM1 million. Price have appreciated so much. So they put the word out that there has been some speculation. This is not really true.

A matured housing estate or garden will have many individual owners, thus it is not quite possible to speculate on the prices. For gated semi-D or bungalow of about 6,000 sq ft, the price is RM500- 600 psf. Compare to high-end condo which are going for RM800-1000+ psf. Buying a condo nowadays include guardhouse, club house, good landscape, and etc.

So comparing RM1,000 psf with RM600 psf, would you stay in a gated bungalow or in a condo. Because in today’s gated bungalow, it caters to the smaller family to live in, and you have bigger master bedroom, luxury bathroom and all these, so it’s no more like big bungalow where you stay inside and feel so lonely. So, I always say that there is much much room for this kind of property to appreciate, and if you say it is overpriced, then I think you may be wrong.

We don’t look at property investment in the basic terms. We don’t look in the past how much they have appreciated, how much people have lost, in respect to this present transaction, so we look into the future at how much further can they appreciate. So when you look at it that way, you study, there are actually reasons why some types of properties appreciated in price.

When you talk about speculation, it’s those unreasonable ones, where there is no market, you know like in 1998, all the way to Semenyih, Pulau Indah, build nice big bungalows and Rawang country homes all the way to Beringin and Nilai. Those are the properties that when the price get so high, you know that speculation took place.

But today we don’t see much of that. Other than in 2008/2009 when KLCC market was speculated a lot. It is mainly because when the government started to open up to global market, foreigners can buy many units after 2007. They can buy commercial, they can take the loan, so compared to before, the global investment market turned hot during the years 2007/2008, especially with Dubai. The success of the Dubai investment story created a wave of investment trend. Singaporean, Hong Kong and then China market came up, also starting 2007/2008. So property investment became a hot topic around the world, and Malaysia at that stage also opened to the world.

That’s how people come in, when they came in, they just bought bloc by bloc. The Koreans bought a lot, Middle Eastern people, Hong Kong people, Singaporeans bought a lot. Mainly in the KLCC and Mont Kiara areas. These are the key areas.

Of course there are some in Penang also, quite a lot. Even in Kota Kinabalu in Sabah, there are quite a lot of foreigners who started to come in during that time. Today, the Koreans went back to Sabah to buy resort properties.

So, the only thing I want to advise is that there is not much of an oversupply in good areas while the price increases in not so prime areas cannot be justified at all.

Gavin Tee is founder and President of SwhengTee International Real Estate Investors Club, and has more than 20 years of experience in property & retail marketing in both the United States & Malaysian markets. He has written a book on Property Rental in Malaysia and is host of a Chinese TV show on real estate in Malaysia.

Here is the Budget Wish Lists by some of the property industry’s players. It’s noteworthy that three out of 5 wished that the Government will increase incentives to developers to ‘green’ their developments. Interestingly, agents would like to see the Government providing grants/subsidies for first-home buyers.

Mr Ho Hon Sang, Managing Director

Property Development Division, Malaysia
Sunway City Berhad

1. Overall for the upcoming budget, we hope that it will translate to initiatives that will support the growth and development of the Malaysian property sector and to increase its competitiveness in the global arena.
2. For example, we hope that there will be no increase in the Real Property Gains Tax which is currently at 5% for disposals within five years. This is to spur the growth of the property market.
3. We also hope that the Government will not impose the 80% Loan to Value ratio for mortgages as only landed properties in strategic locations are enjoying high capital appreciation.
4. To have greater financial and tax incentives for property developers that comply with the Green Building Index and other green related initiatives during construction. Sunway City Berhad is one of the pioneers in developing green buildings and we are focused on continuing our commitment in promoting green technology and building standards for our properties.
5. We also support and look forward to the speedier and realistic implementation of the Economic Transformation Programme which will help to boost the property market.
6. The effectiveness of the MM2H programme should also be reviewed and targets should be set for relevant ministries to attract foreign buyers under MM2H. Malaysia Property Incorporated will certainly play a major role in promoting Malaysian properties as well.
7. With regards to the Bumi quota, we hope there can be a clear policy on the release of unsold Bumi units to the open market as this will facilitate the selling process.
8. Reduction of corporate tax by another 2%.

Mr Brian Koh

Executive Director
DTZ Nawawi Tie Leung Property Consultants Sdn Bhd

1. Ensure adequate and quality affordable housing which are linked to proposed transport hubs in the Greater KL plan
2. Incentives for green initiatives for housing developments, and also land located in sensitive areas.
3. Protection of forests from rampant developments such as mass plantations, golf course, etc.

Mr Gerard Kho (compiled from the agents)

Senior Vice President
Reapfield Properties Sdn Bhd

1. Interest rates for loan would remain.
2. More incentives to encourage more new buyers of their first home eg. 90% loan, subsidy of 5K.
3. Interest rate incurred on bank loan can be used for tax exemption for one house.
4. Cost of renovation on secondary properties can be used for tax exemption.
5. RPGT is to maintain at current rate for stability and consistency of policy.
6. Allowing us to withdraw 10% from our EPF account 1 to purchase first home. Currently we can only withdraw from Account 2. We are entitled to withdraw 10% from Account 1 to invest in Unit Trusts. It will be good if we can use the 10% to invest in our own owner-occupied property which yields better returns than Unit Trusts.

Mr Gavin Tee

President of SwhengTee International Real Estate Investors Club

1. The green incentives that the Government offered last year weren’t that much, and the procedures to obtain them were very complicated. So we all hope this year that the Government can provide more incentives for new and existing projects
2. For the past 3 years, I have been talking about tourism-related types of real estate i.e. hotels, resorts and retreats. Real estate agents can help in the tourism industry. So hopefully, the Government can give some kind of incentives to tourism-related real estate.
3. Many people think that there is no more FIC (Foreign Investment Committee) requirements, and that everything has been relaxed. However, the fact is foreigners don’t feel we are friendly to them, and that our property market is not attractive to them, so there are not so many foreign investors. I am looking forward to see if the Government can come up with some kind of interesting plans to change the perception of our property investment market

Mr. Adrian Wang

CBD Properties founder & CEO

1. To provide MPI (Malaysia Property Inc) with more funds to promote Malaysian properties overseas & for Malaysia My Second Home Programme through the active registered agencies. As one of MPI’s selected members, we hope to work very closely with the Government to create awareness on the growth potential of our property market.
2. To expedite the creation of infrastructure and improvements on public transportation throughout the Klang Valley, as this will help to alleviate the traffic problems.
3. Government to provide grants for first-home buyers.

Dubbed the "Jews of the Orient" (东方的犹太人), the Wenzhou people from southeast China have been stereotyped by other Chinese as real estate speculators. A Chinese publication reports that Wenzhounese speculators played a disproportionately large role in the property bubble in China, and probably in other parts of the world. One estimate attributes half of the buyers in the Hainan Island to Wenzhounese speculators who usually buy in groups with money pooled together. "It was kind of like a hit and run thing where they swooped on Hainan island causing prices to escalate and then fled at the top of the housing bubble," said an observer.

Mythical Reputation

Another publication writes glowingly of them: "Wherever they went, there would be skyrocketing prices of real estate. Wenzhou folks are arguably the world’s most successful housing speculators, for three main reasons. First, they are intimately familiar about the characteristics of China’s housing market, i.e., that the government itself is the biggest developer in the biggest housing market on the planet. This leads, therefore, to the second reason, i.e., they know that housing prices will continue to rise as long as the government operates in the land and housing development business for its own interest. The third, and not the least, of the three reasons is that Wenzhou folks can mobilize money extremely efficiently from an increasingly sophisticated informal, i.e. "underground," i.e. illegal, banking system."

Their invincibility as property speculators took a dive however in the wake of the Dubai crisis. Many of them got badly burnt with losses estimated at 2 billion yuan. Following more government restrictions on the property market in China, they apparently decided to take a break from property and switched to gold instead.

Coming to Malaysia?

Rumours of them intending to come to Malaysia surfaced some months ago. We asked property consultant Gavin Tee, one of the speakers at the recent House Buyers’ Association (HBA)’s seminars on how credible the rumour is. His response:

"Wenzhou people invest in anything. There was speculation that they went to Singapore to buy properties. So, I checked with some Malaysian friends who deal with Chinese businessmen. I also checked with the folks at the ministry. So far, I haven’t found any such evidence."

We believe that they have yet to come to Malaysia in droves. If they had, Malaysia would be in the thick of a property bubble now. As it is, the Malaysian property market still suffers from a "laggard" reputation in comparison with its neighbours, particularly Hong Kong and Singapore.

As to whether they would be coming, who knows?

According to OSK Research Sdn Bhd in its recent report, Malaysia’s property sector is set to see its biggest residential boom in a decade, led mainly by medium-to high-end landed properties. "The sector may peak sometime in 2012/13 before going into a potential slump, when mass housing boom will take over and continue in the first half of this decade." In fact, the research house was of the view that this sector was already entering the early stage of a property "super cycle".

Excited by such a prospect, we asked property consultants Ho Chin Soon and Gavin Tee for their opinions and the following are their responses:

Ho Chin Soon: The up-swing in real estate prices for middle and upper middle class properties has already begun.

Gavin Tee: In my opinion, I would say that a major mass housing boom will not likely occur for the entire real estate industry. But there might be oversupply in big cities such as Klang Valley, Penang, Kota Kinabalu, Melaka and Johor. The effect is most visible in globalized areas such as KLCC, Bukit Bintang and the surrounding business districts.

Besides, I believe that tourist areas might also be affected by the boom.

My reasoning is that when the international real estate market and economy recover from the downturn, it will spur global trading and economic activities, which will result in more foreign investors investing in our local real estate market. This might lead to the housing boom.

However, this is only applicable to certain areas where the foreign investors are interested in and it is not an overall market boom. In fact, based on Malaysia’s history, it is rare that a general boom or general bust would strike our property market.

Are we in the early stage of the "Super Cycle"? I would say that our current market conditions do not depict such a scenario yet. Perhaps it is happening to the high-end condos but I still think that the signs are not strong.

Government policies and foreign investment guidelines are crucial factors in this matter. We will have a better view after the budget 2011 is released. Perhaps by March 2011, we will be able to attract more
foreign investors and if that happens, it might be the beginning of a "Super Cycle".

In addition, I believe that 2012-2013 would be a high peak for commercial properties, high-end condos and landed properties. I don’t think that the general secondary market will enjoy the benefit of the "super cycle". And, I don’t think there will be a slump after the cycle, especially for medium-cost houses. There might only be minor price adjustments for medium cost houses even if other types of properties are facing the boom.

Moreover, I foresee that institutional or international players (big players) will be more interested to invest in areas that are more globalized such as locations with high-end properties and commercial properties. These prime assets in the market will eventually be owned by a few giant corporations.

In the next few years, the rental market will be the leading real estate market. Unfortunately, in Malaysia, our management skills and knowledge are not up to international standards yet. So, rental management business could be one of the rising industries when the super cycle comes.

Note: Gavin Tee is founder and President of SwhengTee International Real Estate Investors Club, and has more than 20 years of experience in property & retail marketing in both the United States & Malaysian markets. He has written a book on Property Rental in Malaysia and is host of a Chinese TV show on real estate in Malaysia.

A special guest, Mr. Ho Chin Soon will be our invited guest speaker for our 2011 Forecast Talk on 22 Jan 2011 @ Grand Dorsett Subang Hotel. Hurry and book your seats to grab the promotion ticket before 31 Dec 2010, Call 03-2288 8588 / 016-2020 001.

Meet the RICH and FAMOUS personnels in the real estate industry at our exclusive dinner on Feb 19! If you are interested, call 03-2288 8588 / 016-2020 001 to join us! First come first serve basis.

Malaysia Real Estate Outlook for 2011

Gavin Tee: The Best and the Worst, All in 2011

Kuala Lumpur - The real estate market had gone through a roller coaster ride in the recent years, from a soaring market in 2008 to a depressed market in 2009 and skyrocketing again this year! With all the ups and downs in such a short period, what should we expect in 2011?

“There will be a very special phenomenon in 2011 because the best and the worst opportunities in the real estate market will emerge,” said Gavin Tee, Malaysia well-known real estate investment consultant, in his recent talk "2011 Real Estate Market Forecast”. He also mentioned that the implementation of a maximum loan-to-value (LTV) ratio of 70% will affect the investing movements in the housing market, while the Prime Minister Datuk Seri Najib Tun Razak’s Economic Transformation Programme (ETP) will create new prospects and opportunities in the real estate market.

The targeted implementation of the LTV ratio is expected to moderate the excessive investment and speculative activity in the residential property market which has resulted in higher than average price increases. The main objective of this policy is to encourage home ownership, according to the government. On the other hand, Gavin Tee, President and founder of Swhengtee International Real Estate Investors Club said that this policy will not help to curb speculation! Instead, it will jeopardize the real estate market and dampen the national economy!

He added that the property prices are still relatively low and transaction activities are stifled. For example: Many owners of high-end apartments and second-tier urban houses are facing difficulties at selling their properties and the 70% mortgage cap simply made the situation worse.

In the secondary market, many houses are presently facing financing problems. The 70% mortgage cap will cause further difficulties to them in disposing the properties. Even some of the “hottest” properties in the market are affected by this policy. As the economy has not fully recovered from depression, this measure will cause a double blow to the real estate market.

On the other hand, Gavin Tee reckons that the development plans that Prime Minister Najib announced earlier in the Budget 2011 will spur the real estate market, especially in globalized areas where economic activities are most active. Investors must be aware of the strategic plans announced by government as the real estate market in Malaysia will move forward with globalization.

Gavin Tee believes that the Greater Kuala Lumpur project will create a strong impact for the country. Strategic urban planning and development will not only enhance Malaysia’s image internationally, but also promote the development of the surrounding cities and towns. For example: the construction of the 100-storey Warisan Merdeka will attract large numbers of local and foreign investors to invest in our country as this iconic office cum commercial building will create an international identity for Malaysia in this globalized era.

Looking into the future, Gavin predicted that the market will continue to flourish next year. Even though the market had gone through major changes in the past few years, the best and the worst deals will occur in 2011. He indicated that commercial property with special design concepts, office buildings, green buildings, as well as commercial properties related to the tourism industry have high potential next year.

Besides, the real estate market is estimated to continue growing next year. Taking medium cost property as an example, Gavin said that the price of properties near urban areas have not increased very much for the past 15 years. Even though new property launched in these areas has increased their prices by 20% to 30%, it does not depict a bubble in the real estate market. He stressed that the overall housing prices are still considered relatively low at the moment and have plenty rooms for growth.

However, there seems to be a very unhealthy phenomenon in the real estate market this year as many investors rush to purchase new projects even though the selling price is comparatively high. This has resulted small bubbles in certain areas. He reckons that some of these projects do not have high potential for investment. These investors might face difficulties in renting or disposing their property next year. Gavin advise investors to dispose any properties even with low capital appreciation.

Gavin further explains that innovation and interesting concepts are the factors causing new buildings to sell at higher prices compared to old buildings. However, smart investors should not just look for new properties but also old ones as the prices are much lower and investors can renovate the building with new concepts.

In a nutshell, Gavin Tee believes that properties with great potential at low prices are available everywhere. Investors must do their homework and search for the best opportunities that come along.

Gavin will be presenting project briefing at Bayu Kemensah.

10 Seats reserved exclusively for club members -- RSVP required

We will be looking at the potential of gated and guarded community projects at Bayu Kemensah.

Date : 4th December 2010 (Saturday)
Time : 10:00am - 12:00pm
Venue: Bayu Kemensah Sales Gallery

Kindly RSVP asap as seats are limited! 016-2020 001 / 03-2288 8588

Please find the attached invitation card and location map for your kind reference.

Free Talk by Gavin Tee on
"Investment Opportunity in Gated/Guarded project in Greater KL"

Date : 4th December 2010
Time : 10:00am - 12:00pm
Venue: Bayu Kemensah Sales Gallery

RSVP by SMS 016-3030298

For more information ：03-2288 8588/016-2020 001。Email : swhengtee@yahoo.com