Gavin Tee: Secondary Property Market in Malaysia On the Brink

COUNTDOWN: All eyes are on September as a convergence of factors come together to determine the direction of our real estate market, in particular the secondary market  

by NST RED: Jan Yong

September may be a watershed month for property buyers and investors as a convergence of factors emerges which will set the tone and direction of the real estate market in the coming months. In particular, if the cooling measures by Bank Negara remain, the secondary market might be adversely affected which might eventually affect the entire economy, said Gavin Tee, a property consultant during an exclusive interview with NST RED.
“The situation is dire as many people have had their loan applications rejected as banks are now assigning a lower or more conservative valuation to properties and thus offering lower loan amounts that are based on the lower valuation irrespective of the purchase price. This has resulted in the purchaser having to fork out more to make up for the difference which in many cases they can’t resulting in their having to withdraw their applications,” Tee explained.
Since the beginning of this year, there has been a significant drop in loan approvals as a result of both the 70 per cent cap on LVR (Loan to value ratio) for the third home onwards and a stricter loan evaluation process which is now based on net income instead of gross income. The drop has been estimated to be over 20 per cent compared to the same period last year, according to sources.
Aborted sales: “Lately, a lot of resale (secondary) market buyers suffered from not being able to get the fair market valuation price. Most of them could only get 60 or 70 per cent loan margin resulting in a lot of deals being called off. A lot of people lost their deposits due to difficulties in getting a loan. Imagine even if you want to buy a RM1 million house from the developer (which does not face valuation issues), you would still need to come up with cash of RM400,000. Imagine how much this would impact the secondary market,” Tee elaborated.
Tee, who is also the Founder and President of SwhengTee International Real Estate Investment Club acknowledged that compared to the primary market, it was difficult to value second hand or subsale properties but the fact remains that the Malaysian secondary market is definitely undervalued relative to markets in other countries. “While the primary market prices and global property prices have risen, our Malaysian secondary market is still moving very slowly with generally low prices. What more now with the lower valuation assigned by banks, the secondary market may slow down even more as there will be much fewer transactions.
“A lot of people want to upgrade but cannot sell their house because the buyers can’t come up with close to 50 per cent cash of the purchase price, plus extra for renovation. So it becomes mission impossible to buy in the secondary market. Buyers then go to the primary market, resulting in more units coming into the market. More new stock means prices in the secondary market become depressed.
“The situation is compounded with the 70 per cent cap on LVR and the net income policy which have definitely dampened demand. And with the general election and the Budget around the corner plus festive seasons like Hari Raya and the Hungry Ghost month, the next two months are expected to be very slow which will very likely lead to a watershed month in September when all these factors come together. In a worst case scenario, the impact which includes external weak sentiments like the Euro crisis, might even snowball into a property market crisis,” said the consultant.
Good news needed: Tee cautioned that unless the election and Budget come up with some good news, and there are some easing of restrictions in financing and valuation policies, a real estate market crisis might be looming in the horizon.
“On the other hand, if the government were to review and ease the financing restrictions, and optimism returns to the market, we may see a robust property market which is healthy for the economy.
“Banks should relax their lending policies as no new loans are effectively created in a subsale transaction. The effect is more like a transfer of loan obligations at maybe higher interest rates. So, the debt level of the nation is not so affected. If the secondary market can boom again, it would also benefit the developers because there would be more liquidity in the market which means more sales in the primary market.
“We also don’t want to see a lot of unoccupied properties or in some cases “ghost towns”, which can happen if the secondary market grinds to a halt,” the consultant added.
Noting that there are many advantages to having a robust property market, Tee said: “It gives confidence to foreign investors. It is a crucial time now to maintain our secondary market movement as our country opens up to liberalisation.
A booming property market no doubt helps fuel more foreign interest in our market. As Greater KL aspires to be a world class city and the property market becomes more globalised, it only makes sense for its property market to be in demand. More property transactions also means more income for the government in terms of the stamp duty and real property gains tax collected. This money can be used to build the infrastructure and develop the property market further, for example, financing more low cost housing.”
In summing up, the property consultant recommended that commercial banks be given the freedom like before to give loans of up to 90 per cent margin especially for second hand properties. “The government shouldn’t worry as banks are expected to practise prudent lending since it is to their own benefit,” he said.
“The valuation aspects should also be looked into, for example, speeding up the data on transacted properties. If such things are looked into, then this slowdown may be seen as just a blip and this may turn out to be the best time to invest (if you have the cash). Or you may want to wait until September when the picture is clearer.
“If the market indeed falls in September, it is likely that the upcycle will begin in March 2013 which will be the start of a supercycle when properties will boom again due to the many infrastructure and mega projects as well as other positive factors.”

NST RED Cover Story: Eye on Australia

International real estate companies including those from Australia are making a beeline for our shores to cater to increasing demand for overseas properties (April 13, 2012)

Australia properties have long been a popular and favoured option for Malaysian purchasers bent on migrating or on proximity to Malaysia as compared to other countries and the fact that many Malaysians send their children for higher studies Down Under. Australia also ranks high for its culture and climate as well as its status of being a tourist haven. Australia's  stable economy and government are some of the other advantages leading Australian real estate to ride on the crest of demand from Malaysian buyers.

It is for reasons such as these and more that having established the existing demand for Australian properties in Malaysia, Ronal M. Cross, Chief Executive Officer of ParkTrent Properties Group-one of the largest privately-owned real estate business in Australia took the time to highlight the company's range of Australia properties available for the benefit of Malaysian investors. The company also has a development arm that builds about 300 to 400 dwellings each year with a special focus on town houses and homes.


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Swhengtee CNY 2012 Open House

SwhengTee Chinese New Year Talk, Property Forecast Talk by Gavin Tee & Feng Shui Talk by Kenny Hoo on 1-02-2012 (Wednesday).

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2月1日(星期三),郑水兴房地产市场预测与许鸿方龙年风水讲座。 欢迎出席。Call 012 376 0020.


Swhengtee Annual Property Focus Talk - The Shift in Property Focus in 2012

Kuala Lumpur -The year of the dragon looks to be volatile and unpredictable. There’s both uncertainty in the economic and political environment both locally and internationally. Would the growth continue? Would there be a decline? A crisis? A bubble?

Gavin Tee, the Property Guru thinks the focus on property investment will see swift changes in 2012. What was traditionally preferred may no longer work while emerging trends and new opportunities abound. Medium cost properties will take prominence along with tourism related properties being the new spotlight. South East Asia will also be the focus of the world. However, it would not be without its challenges. Gavin expounds further.

Since 2007, Malaysia’s property market has experienced drastic changes. In 2007, there was a sharp upsurge in property market especially with high end condominium. This was due mostly to welcoming changes made on policies with regards to foreign purchase and investment, the abolishment of the FIC had a positive impact on the property scene.

However, things took for a downward turn in 2009 when trouble brewed in Middle East and Korea. The decline was sharp but short lived and 2010 saw the property scene bouncing back with rapid growth especially with landed properties and shop lots. This growth continued sharply into the first two quarters of 2011 and tapered off to almost flat growth in the last two quarters of 2011.

What is the outlook for 2012? Gavin Tee, Founding President of Swhengtee International Real Estate Investors Club, shared his strategies and predictions on the overall property market outlook for year 2012 at the Swhengtee Annual Property Forecast – The Shift in Property Focus in 2012, on January 7th (English) and 8th (Mandarin), from 10am to 5pm, at the Plenary Theatre Auditorium, Level 3, Kuala Lumpur Convention Centre. The talks are an annual highlight much look forward to by both the public and especially with members of the Swhengtee International Real Estate Investors Club, where they share knowledge and manage portfolios of the members whom are savvy property investors. The club gathers professionals in the industry to share views and knowledge and in this event, Gavin is joined by industry experts Ahyat Ishak, Elizabeth Siew, Legal Advisor; Gordev Singh; Seasoned Investor; and Kee Wah Soong, Financial Advisor who imparted information on how to be a smart investor in 2012.

“2012 would see much changes and these changes would have a large impact on Malaysia and the property scene. The cautious stance investors are taking especially on the market in China and in the West would influence sentiments in Malaysia. There’s huge uncertainty and the market is down but this is an opportunity for those who know how” Gavin said.

Among the strategies and forecasts he shared is that the scenario in US is uncertain especially with the exchange rate, the Euro crisis and the tight controlling policies in China. These factors are happening at a time when South East Asia is relaxing its policies, making it very attractive to global investors.

Hence Gavin is confident on the emerging market especially in South East Asia. He adds that these countries as having low entry and high potential. The changes and the right timing will shift the focus of the world on South East Asia. In addition, Malaysia has one of the most friendly policies and its viability could prove more attractive in 2012.

In addition, when economy is low, tourists are attracted to South East Asia. This will boost the tourism industry. Those that stand most to benefit from these forecasts are resorts and tourism related industries. Tourist focused properties will gain grounds in the 2012 environment.

On best investments in such situation, Gavin propose to side step risks and invest firstly in matured residential and commercial area. Pocket land and boutique developments in developed commercial and residential areas are good choices. Redevelopments within such areas are also attractive. Watch out for opportunities to get a good rate from balance stock in these areas. He recommends medium cost and niche projects.

Meanwhile Gavin sees that locals would growingly invest in overseas market therefore the government should promote Malaysia to foreign investors especially in Japan, China and Singapore.

He sees the ETP and Economic Corridor as a strong attraction to international investors.

“Overall, the first five months would be slow and quiet but the third quarter would see some active transaction with the niche market seeing growth in price first. He feels there’s a possibility to make and record stronger property prices in the latter half of the year” Gavin concluded.

For more information, please contact 012-2666572 (Mei Sin) or email

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