The Klang Valley Commercial Office Market.

The KL City Centre.

As I have mentioned before, due to greater competition and the possibility of an office space oversupply, the Klang Valley commercial office markets remain rather soft so far. From what I see, the occupancy rates seems to be dropping, and rental rates are also gradually stabilizing downwards.

As per sources, the current cumulative supply of purpose built office spaces in the KL city centre area accounts at about 40+ million sq ft, with the most recent addition being Menara Bank Islam along Jalan Perak. Other new buildings completed recently includes the Hampshire Place office, with several others completing by end of this year - of which those includes Menara Carigali (as pictured above), now known as Menara Petronas 3 and Dijaya Plaza at Jalan Tun Razak. Those expecting completion early next year would be the Menara Binjai along Jalan Ampang as well as the Glomac Tower along Jalan P Ramlee. The cumulative supply of office spaces outside of KL city centre (i.e. Damansara, PJ area etc) accounts at about 15 million sq ft.

Menara Bank Islam, Jalan Perak

While there has been new buildings completed, there are also plenty of plans and proposals to upgrade and refurbish old ones. Tradewinds Corp has announced plans to demolish the Crowne Plaza Mutiara Hotel and Kompleks Antarabangsa - and for it to be redeveloped as Tradewinds Centre - a multi-billion mixed commercial development, comprising office spaces, retail, serviced apartments as well as a medical centre. Kompleks MAS is undergoing its own tender exercise for its own redevelopment, and a couple of other buildings around KL City Centre doing the same too.

I mentioned about a stable rental rate for offices at the current moment. Based on the general figures compiled, I think it is safe to say the average rental rate in the KL City Centre area now is about RM5+ per sq ft, with those outside of KL City Centre fetching about 50 cents lower. There are the super Grade A offices which gets much higher - between about RM7-RM11.50 per sq ft - Menara Maxis still garners about RM10+ per sq ft per month, while the Twin Towers are still the ones hitting the highest rates.

If you were to look at all the various indicators, I would think that the Klang Valley commercial office markets will remain very competitive - which means this will be quite challenging for the developers. However, competition makes it good for the tenants - they would have more choices to choose from as well as better rates/packages/offers. With the Government's ETP programme in full swing to attract large MNCs as well as the commencement of our mega MRT project - I would think that long term wise the market still remain very good.

Furthermore, there will be a new trend of new and modern buildings - all of which are good to improve the standards of commercial office buildings in Malaysia. I believe many developers out there are starting to 'go green' with new certifications and statuses. Recently, the Intermark obtains its MSC Cybercentre status, while its new Integra Tower (above) had obtained the Platinum LEED certification. Menara Binjai (pictured below) will be the first purpose-built office tower in the country to obtain a dual-green certification - the BCA Green Mark as well as GBI Malaysia.

As I would say... as the going gets tough, the tough gets going. =)

The Klang Valley Commercial Office Market.

The KL City Centre.

As I have mentioned before, due to greater competition and the possibility of an office space oversupply, the Klang Valley commercial office markets remain rather soft so far. From what I see, the occupancy rates seems to be dropping, and rental rates are also gradually stabilizing downwards.

As per sources, the current cumulative supply of purpose built office spaces in the KL city centre area accounts at about 40+ million sq ft, with the most recent addition being Menara Bank Islam along Jalan Perak. Other new buildings completed recently includes the Hampshire Place office, with several others completing by end of this year - of which those includes Menara Carigali (as pictured above), now known as Menara Petronas 3 and Dijaya Plaza at Jalan Tun Razak. Those expecting completion early next year would be the Menara Binjai along Jalan Ampang as well as the Glomac Tower along Jalan P Ramlee. The cumulative supply of office spaces outside of KL city centre (i.e. Damansara, PJ area etc) accounts at about 15 million sq ft.

Menara Bank Islam, Jalan Perak

While there has been new buildings completed, there are also plenty of plans and proposals to upgrade and refurbish old ones. Tradewinds Corp has announced plans to demolish the Crowne Plaza Mutiara Hotel and Kompleks Antarabangsa - and for it to be redeveloped as Tradewinds Centre - a multi-billion mixed commercial development, comprising office spaces, retail, serviced apartments as well as a medical centre. Kompleks MAS is undergoing its own tender exercise for its own redevelopment, and a couple of other buildings around KL City Centre doing the same too.

I mentioned about a stable rental rate for offices at the current moment. Based on the general figures compiled, I think it is safe to say the average rental rate in the KL City Centre area now is about RM5+ per sq ft, with those outside of KL City Centre fetching about 50 cents lower. There are the super Grade A offices which gets much higher - between about RM7-RM11.50 per sq ft - Menara Maxis still garners about RM10+ per sq ft per month, while the Twin Towers are still the ones hitting the highest rates.

If you were to look at all the various indicators, I would think that the Klang Valley commercial office markets will remain very competitive - which means this will be quite challenging for the developers. However, competition makes it good for the tenants - they would have more choices to choose from as well as better rates/packages/offers. With the Government's ETP programme in full swing to attract large MNCs as well as the commencement of our mega MRT project - I would think that long term wise the market still remain very good.

Furthermore, there will be a new trend of new and modern buildings - all of which are good to improve the standards of commercial office buildings in Malaysia. I believe many developers out there are starting to 'go green' with new certifications and statuses. Recently, the Intermark obtains its MSC Cybercentre status, while its new Integra Tower (above) had obtained the Platinum LEED certification. Menara Binjai (pictured below) will be the first purpose-built office tower in the country to obtain a dual-green certification - the BCA Green Mark as well as GBI Malaysia.

As I would say... as the going gets tough, the tough gets going. =)

The Advantages & Disadvantages of the Industrialized Building Systems (IBS).

Yesterday, my colleague asked me something on IBS; IBS has obviously been one of my favourite topics, and in fact, I have always been a believer in certain forms of IBS systems. I was the one who had 'pushed' for the introduction of system formwork usage in my office - since then, we used a lot of steel forms, table forms, the aluminium formwork system such as MIVAN, and most recently, the DOKA system.

The DOKA system formwork used at Menara Binjai.

Anyways, IBS is much more than just system formwork. I would say system formwork can only get 0.5 or 0.6 multiplier in terms of IBS scoring, cos it is still casted in-situ. In fact, The IBS is a system, or rather method of construction where the various components are constructed, and then assembled on site - similar like LEGO. =)

Precast elements plays a significant role in IBS.

In Malaysia, there are about 5 main IBS groups.

• Pre-cast concrete frames, panels, columns etc
• Formwork systems - tunnel forms, permanent steel formworks
• Steel frame systems - portal frame, roof trusses
• Prefabricated timber frames - i.e. for roof trusses
• Block work systems - lightweight concrete blocks and so on...

My colleague got a little shock to see her newly purchased house - being built the un-conventional way - in the form of IBS. After explaining a bit to her on IBS systems, I have decided to come up with this post - to further explain on the advantages and... of course, disadvantages of IBS systems. Nothing is perfect in this world... so there are always pros and cons. =)

What would be the main advantages of the usage of Industrialized Building Systems?

The immediate advantage is... discounts on levy charges for contractors!!!!! Sorry - this is of course in the contractor's point of view - which would have plenty of advantages. But with due respect, it is the buyers/end users who need to worry about it - so here are some of the strong points.

Precast panels used in linked/terrace houses.

As most components are manufactured in the factory, the quality, or rather high quality can be consistent and maintained as the working environment in a factory is easier to control. The wall surfaces, the soffit surfaces and so on can be controlled right to the millimetres in dimensions, hence improved and consistent quality. Another good point for buyers is... IBS allows projects to be completed faster than conventional systems - due to the introduction of pre-fabricated components to replace on-site works. Assuming there is a massive amount of quantity - economies of scale-wise, IBS systems will result in cheaper total construction costs, and buyers can benefit if the savings are transferred to them.

We have the yin.. how about the yang?

In most cases, there is a high initial capital costs for the contractors - which might decide to transfer the costs to the buyers. Plus, with only a handful of IBS players in the country, there is quite a 'monopoly' system. Further to that, the standardization of building components and elements also results in a lack of aesthetics value - buildings tend to be very boxy and square-y, which may not look as impressive as the conventional curvy buildings. But this part here - IBS systems are being expanded to be more architecturally and eye-pleasing.

The Singapore's HDB flats - which uses a lot of IBS elements - looks pretty boxy to me.

Another major problem... is when the contractors have bad workmanship while using pre-fabricated panels. This can result in problems in the joints - resulting in water leakages. In a country like Malaysia where it rains practically everyday, the problem can be very severe. To counter this problem - one has to thoroughly check through the completed units during handover to make sure the developer sorts out these defects.

Owner tries to hack a precast wall - only to find steel reinforcements which he has a dilemma whether to cut or not to cut. Cutting it might result in affecting the structural integrity of the building.

Another disadvantage with pre-cast elements is that these components are considered to be inflexible, with respect to changes/renovations. Most people would want to drill holes for wall lamps and so on - which is okay. But for some, they want to hack to allow for additional conduit works and wiring works - which might be a hindrance. If one buys two adjoining units, they may have problems trying to hack down some walls to allow two units to breakthrough.

The Advantages & Disadvantages of the Industrialized Building Systems (IBS).

Yesterday, my colleague asked me something on IBS; IBS has obviously been one of my favourite topics, and in fact, I have always been a believer in certain forms of IBS systems. I was the one who had 'pushed' for the introduction of system formwork usage in my office - since then, we used a lot of steel forms, table forms, the aluminium formwork system such as MIVAN, and most recently, the DOKA system.

The DOKA system formwork used at Menara Binjai.

Anyways, IBS is much more than just system formwork. I would say system formwork can only get 0.5 or 0.6 multiplier in terms of IBS scoring, cos it is still casted in-situ. In fact, The IBS is a system, or rather method of construction where the various components are constructed, and then assembled on site - similar like LEGO. =)

Precast elements plays a significant role in IBS.

In Malaysia, there are about 5 main IBS groups.

• Pre-cast concrete frames, panels, columns etc
• Formwork systems - tunnel forms, permanent steel formworks
• Steel frame systems - portal frame, roof trusses
• Prefabricated timber frames - i.e. for roof trusses
• Block work systems - lightweight concrete blocks and so on...

My colleague got a little shock to see her newly purchased house - being built the un-conventional way - in the form of IBS. After explaining a bit to her on IBS systems, I have decided to come up with this post - to further explain on the advantages and... of course, disadvantages of IBS systems. Nothing is perfect in this world... so there are always pros and cons. =)

What would be the main advantages of the usage of Industrialized Building Systems?

The immediate advantage is... discounts on levy charges for contractors!!!!! Sorry - this is of course in the contractor's point of view - which would have plenty of advantages. But with due respect, it is the buyers/end users who need to worry about it - so here are some of the strong points.

Precast panels used in linked/terrace houses.

As most components are manufactured in the factory, the quality, or rather high quality can be consistent and maintained as the working environment in a factory is easier to control. The wall surfaces, the soffit surfaces and so on can be controlled right to the millimetres in dimensions, hence improved and consistent quality. Another good point for buyers is... IBS allows projects to be completed faster than conventional systems - due to the introduction of pre-fabricated components to replace on-site works. Assuming there is a massive amount of quantity - economies of scale-wise, IBS systems will result in cheaper total construction costs, and buyers can benefit if the savings are transferred to them.

We have the yin.. how about the yang?

In most cases, there is a high initial capital costs for the contractors - which might decide to transfer the costs to the buyers. Plus, with only a handful of IBS players in the country, there is quite a 'monopoly' system. Further to that, the standardization of building components and elements also results in a lack of aesthetics value - buildings tend to be very boxy and square-y, which may not look as impressive as the conventional curvy buildings. But this part here - IBS systems are being expanded to be more architecturally and eye-pleasing.

The Singapore's HDB flats - which uses a lot of IBS elements - looks pretty boxy to me.

Another major problem... is when the contractors have bad workmanship while using pre-fabricated panels. This can result in problems in the joints - resulting in water leakages. In a country like Malaysia where it rains practically everyday, the problem can be very severe. To counter this problem - one has to thoroughly check through the completed units during handover to make sure the developer sorts out these defects.

Owner tries to hack a precast wall - only to find steel reinforcements which he has a dilemma whether to cut or not to cut. Cutting it might result in affecting the structural integrity of the building.

Another disadvantage with pre-cast elements is that these components are considered to be inflexible, with respect to changes/renovations. Most people would want to drill holes for wall lamps and so on - which is okay. But for some, they want to hack to allow for additional conduit works and wiring works - which might be a hindrance. If one buys two adjoining units, they may have problems trying to hack down some walls to allow two units to breakthrough.

The Residential Property Market and Sector.

Okay - what I am going to write about next might make you jump off your chair - or rather shocked - or some of you may already sense it already. =) I have been conducting a very thorough research on properties in Malaysia, the property markets - and for those who want to invest in property counters, yes, the property sector as well.

In my opinion, Malaysia's current residential markets look very good, and I would say that the likelihood of a residential property bubble bursting is very low. However, I do think that the larger developers would be seeing fair growth numbers for 2012 as compared to 2011. The rebound from 2008 saw a jump in 2009, a hike in 2010 and a pretty impressive 2011. But as the markets tend to hover and cool down a bit - I believe 2012 will still be a good year, just without the super impressive growth rates.

The Government - through the Economic Transformation Programme (ETP) has been releasing plenty of good news to the property markets. In a way, having new developments and so on are creating and increasing the supply numbers to cool down the high demands, on the other hand, the new developments also create an excitement amongst property players and investors.

I am a firm believer in properties in the Klang Valley region. I believe the Klang Valley properties will continue to be the main driver of the Malaysia property market - and I foresee the highest growth in terms of transaction values and capital appreciation for Klang Valley properties. As what I have seen in private developments and launches, I also noticed that in comparison to 2010 (in particularly 2nd half of 2010), housing launches have slightly slowed down. Assuming units are still being sold at the same rate, that would mean the numbers of unsold residential houses and units will continue to reduce, hence reducing the possibilities of the oversupply situation.

The MRT project under the ETP.

Some analysts and certain groups have said that the ETP projects - in particular with the Greater KL and the MRT will push the property sector further. In my opinion however, there are 2 schools of thought for this. The MRT is expected to be a RM35billion (or more) project, with multiple lines and stations. Yes - I would expect this to enhance/improve property values - however, in my opinion, implementation is always the key to success. In this case, a multi billion dollar project would take time to be implemented and constructed. The project will have its launch event next Friday - to be officiated by the PM himself.

On the Greater Kuala Lumpur part - I would say that there are plenty of good news to flow out from there. Smaller projects such as Damansara City, the redevelopment of Pudu Jail, the developments around Matrade and so on could be launched quite quickly, and actual physical works could hit the grounds as soon as early 2012. The larger projects such as the RRIM land in Sg Buloh, the Sg Besi RMAF land and the KLIFD project at Imbi side will take a much longer time for masterplan proposals, authority submissions and so on before any works can start - which I would look at about... earliest, 2nd half of 2012.

Nonetheless, I would think that the RM150k to RM500k properties are still seeing plenty of investors' attention - and would always remain within the radar. I have seen how properties in Desa ParkCity uptrend from the RM950k/unit to about RM1.2mil/unit - which is a good 26% upside. But I have also seen properties of the lower prices - go from the low RM350k to hit RM500k within the same period - which is an impressive 40+%! Hence, I believe that properties below RM500k are still very much in demand.

The Skim Rumah Pertamaku.

The Government introduced the 'Skim Rumah Pertamaku' - for 1st time home buyers to obtain 100% margin financing for homes below RM220,000. This clearly mean one thing - Affordable is the word, and very likely the word for 2012. To add on to this, the Government is also allowing those earning less than RM6k per month to obtain 90% loan margins with 10% guaranteed deposits for apartments between RM220k-RM300k. However, with the recent rise in building material prices and land costs, I would expect the developers to not focus so much on the RM220k and below units - and instead, on those above RM500k to have better margins.

Alam Idaman apartments, with units from RM240k-RM320k.

Conclusion

In general - while the residential markets look good overall, do be careful for the expensive properties. Properties at about RM200k will be a better bet, with plenty of potential upside. Those RM500k and above would always remain a fair/good bet, but easy disposal of the units will remain a question mark. Do note that the house affordability is very good, with very low interest rates and good options around the markets to scout. Banks are also experiencing better liquidity, and are giving out 30-40 year loan tenures to encourage property purchases.

The Residential Property Market and Sector.

Okay - what I am going to write about next might make you jump off your chair - or rather shocked - or some of you may already sense it already. =) I have been conducting a very thorough research on properties in Malaysia, the property markets - and for those who want to invest in property counters, yes, the property sector as well.

In my opinion, Malaysia's current residential markets look very good, and I would say that the likelihood of a residential property bubble bursting is very low. However, I do think that the larger developers would be seeing fair growth numbers for 2012 as compared to 2011. The rebound from 2008 saw a jump in 2009, a hike in 2010 and a pretty impressive 2011. But as the markets tend to hover and cool down a bit - I believe 2012 will still be a good year, just without the super impressive growth rates.

The Government - through the Economic Transformation Programme (ETP) has been releasing plenty of good news to the property markets. In a way, having new developments and so on are creating and increasing the supply numbers to cool down the high demands, on the other hand, the new developments also create an excitement amongst property players and investors.

I am a firm believer in properties in the Klang Valley region. I believe the Klang Valley properties will continue to be the main driver of the Malaysia property market - and I foresee the highest growth in terms of transaction values and capital appreciation for Klang Valley properties. As what I have seen in private developments and launches, I also noticed that in comparison to 2010 (in particularly 2nd half of 2010), housing launches have slightly slowed down. Assuming units are still being sold at the same rate, that would mean the numbers of unsold residential houses and units will continue to reduce, hence reducing the possibilities of the oversupply situation.

The MRT project under the ETP.

Some analysts and certain groups have said that the ETP projects - in particular with the Greater KL and the MRT will push the property sector further. In my opinion however, there are 2 schools of thought for this. The MRT is expected to be a RM35billion (or more) project, with multiple lines and stations. Yes - I would expect this to enhance/improve property values - however, in my opinion, implementation is always the key to success. In this case, a multi billion dollar project would take time to be implemented and constructed. The project will have its launch event next Friday - to be officiated by the PM himself.

On the Greater Kuala Lumpur part - I would say that there are plenty of good news to flow out from there. Smaller projects such as Damansara City, the redevelopment of Pudu Jail, the developments around Matrade and so on could be launched quite quickly, and actual physical works could hit the grounds as soon as early 2012. The larger projects such as the RRIM land in Sg Buloh, the Sg Besi RMAF land and the KLIFD project at Imbi side will take a much longer time for masterplan proposals, authority submissions and so on before any works can start - which I would look at about... earliest, 2nd half of 2012.

Nonetheless, I would think that the RM150k to RM500k properties are still seeing plenty of investors' attention - and would always remain within the radar. I have seen how properties in Desa ParkCity uptrend from the RM950k/unit to about RM1.2mil/unit - which is a good 26% upside. But I have also seen properties of the lower prices - go from the low RM350k to hit RM500k within the same period - which is an impressive 40+%! Hence, I believe that properties below RM500k are still very much in demand.

The Skim Rumah Pertamaku.

The Government introduced the 'Skim Rumah Pertamaku' - for 1st time home buyers to obtain 100% margin financing for homes below RM220,000. This clearly mean one thing - Affordable is the word, and very likely the word for 2012. To add on to this, the Government is also allowing those earning less than RM6k per month to obtain 90% loan margins with 10% guaranteed deposits for apartments between RM220k-RM300k. However, with the recent rise in building material prices and land costs, I would expect the developers to not focus so much on the RM220k and below units - and instead, on those above RM500k to have better margins.

Alam Idaman apartments, with units from RM240k-RM320k.

Conclusion

In general - while the residential markets look good overall, do be careful for the expensive properties. Properties at about RM200k will be a better bet, with plenty of potential upside. Those RM500k and above would always remain a fair/good bet, but easy disposal of the units will remain a question mark. Do note that the house affordability is very good, with very low interest rates and good options around the markets to scout. Banks are also experiencing better liquidity, and are giving out 30-40 year loan tenures to encourage property purchases.

Olive 108 @ Ampang.

Olive 108 Ampang is located within Ampang. A high class residential area mainly populated by foreign expatriates. Exclusive condominiums encircle this area with its lavish settings and surroundings. Situated just approximately 3.5km from the Petronas Twin Tower, Olive 108 Ampang is located along the busy Jalan Ampang road, one of the major roads heading into the city. Craving for some middle eastern food? Steak? Or if you fancy a mix of local and western delicacies, restaurants to satisfy your taste bud are just walking distance from the residence.

This is the Olive 108 Ampang - interesting, isnt it?

Olive 108 @ Ampang.

Olive 108 Ampang is located within Ampang. A high class residential area mainly populated by foreign expatriates. Exclusive condominiums encircle this area with its lavish settings and surroundings. Situated just approximately 3.5km from the Petronas Twin Tower, Olive 108 Ampang is located along the busy Jalan Ampang road, one of the major roads heading into the city. Craving for some middle eastern food? Steak? Or if you fancy a mix of local and western delicacies, restaurants to satisfy your taste bud are just walking distance from the residence.

This is the Olive 108 Ampang - interesting, isnt it?

The Suasana Bukit Ceylon Service Residences, Kuala Lumpur.

I received this in my mailbox today. =)

A stone’s throw away from the pulsating Bukit Bintang hotspot and flanked by commercial and business centres, Suasana Bukit Ceylon’s highly enviable location will make an ideal address for young professionals and smart investors, the upbeat home for the vivacious and savvy clique.

NOW LAUNCHING!

Date: 23rd - 26th June, 2011

Time: 9am - 5 pm

Suasana Bukit Ceylon Sales Gallery

G.21, Ground Floor, Kompleks Antarabangsa

Jalan Sultan Ismail

50250 Kuala Lumpur

The Suasana Bukit Ceylon Service Residences, Kuala Lumpur.

I received this in my mailbox today. =)

A stone’s throw away from the pulsating Bukit Bintang hotspot and flanked by commercial and business centres, Suasana Bukit Ceylon’s highly enviable location will make an ideal address for young professionals and smart investors, the upbeat home for the vivacious and savvy clique.

NOW LAUNCHING!

Date: 23rd - 26th June, 2011

Time: 9am - 5 pm

Suasana Bukit Ceylon Sales Gallery

G.21, Ground Floor, Kompleks Antarabangsa

Jalan Sultan Ismail

50250 Kuala Lumpur

The Biggest Errors People Make When Investing in Properties.

I read this article on The Star Property by Michael Tan - on the Three biggest errors people make when investing in properties. He spoke about whether the property was for keeping, or to sell... and then not understanding the mindset of the locals, as well as not getting to know the area well. I somewhat agree with what he said - and I would have some extra points to add on as well.

Condominiums in Penang.

If you ask me - understanding the locals would be amongst the toughest criteria to cover. It is tough to know what the local mindset is; but then again, sometimes the majority of the community can be quite predictable as most of us all are trend followers, arent we? LOL.

If you compare properties with food joints... the lower end properties are like your Chinese kopitiams, where you have your chicken rice, char kuey teow and so on for like RM6-8 and below. The higher end properties are like going to a proper restaurant like Oriental Pavilion or Ah Yat etc, and your meals are averagely RM40++ per person. The medium end... to me, are likened to bak kut teh joints, whereby your meals range from RM20+ per person.

Bak kut teh for lunch, anyone?

Say you're in the financial district of the city... i.e. KLCC area, or Jalan Raja Chulan for instance. On a bad day for the stock market, the high rollers go for a slightly cheaper meal at the bak kut teh joints, and the bak kut teh goers go to the kopitiams. On a good day, the kopitiam goers upgrade and end up at the bak kut teh shops, whereas the bak kut teh goers end up going for their abalones and shark fin's soup elsewhere. This is the same with properties. In my opinion, if you are going for the medium-end properties, which ranges from RM500k-RM700k, your investment is pretty safe, and there would be plenty of upgraders as well as downgraders - the in-between, the bridge...

SO... the next question is... to keep or to flip?

Like what Mr Michael said, properties for flipping are usually the ones with has the highest capital appreciation in the shortest amount of time. These are usually the landed properties. A simple formula to calculate capital returns would look like this...

The returns will be the total returns you would get. Assuming you achieved 30% returns in 3 years, the next thing you need to do is to divide that to determine your simple returns per year (as compared to compounded returns)

Properties for keeping are the ones that fetch rental returns higher than 6%. These are usually high-rise in nature. Here’s the formula for rental returns...

It is the main criteria to look into before you decide what strategy to adopt before deciding what type of property to invest into. Also, it’s crucial to estimate the returns of investment you desire and the timeline of which to exit. Having exit strategies prior to starting is critical to your success.

Once again, the question comes back to the same item. Rental Returns.

I had mentioned this before - and once again, my stand remains. It has come to my attention that a lot of properties in Klang Valley are not fetching yields of 8% like how they were previously. Here's my reply to that... YOU ARE RIGHT! If you could get a property that fetches you a 8% yield, by all means, dont ever sell it - at least not yet.

Based on the recent research and feedback from various agents, it seems like a lot of properties in Mont Kiara and KL area are fetching yields of 5-6%, which in my honest opinion, is very good.

TTDI Plaza.

Today, Malaysian banks are offering between 2.6% up to about 3% in interest rate returns for Fixed Deposits, a far difference from the 5-6% years ago - which had prompted property returns to about 8%. Today, at 3%, I believe that the proper adjusted property yields should hover at 4-5%. I believe that a lot of people may not agree with me - but I believe this is the scenario that we are facing now in Kuala Lumpur.

If you are hoping for capital gains, then expect your rental returns/yields to drop. =P

Centrestage, a new development in Section 13, PJ.

The Biggest Errors People Make When Investing in Properties.

I read this article on The Star Property by Michael Tan - on the Three biggest errors people make when investing in properties. He spoke about whether the property was for keeping, or to sell... and then not understanding the mindset of the locals, as well as not getting to know the area well. I somewhat agree with what he said - and I would have some extra points to add on as well.

Condominiums in Penang.

If you ask me - understanding the locals would be amongst the toughest criteria to cover. It is tough to know what the local mindset is; but then again, sometimes the majority of the community can be quite predictable as most of us all are trend followers, arent we? LOL.

If you compare properties with food joints... the lower end properties are like your Chinese kopitiams, where you have your chicken rice, char kuey teow and so on for like RM6-8 and below. The higher end properties are like going to a proper restaurant like Oriental Pavilion or Ah Yat etc, and your meals are averagely RM40++ per person. The medium end... to me, are likened to bak kut teh joints, whereby your meals range from RM20+ per person.

Bak kut teh for lunch, anyone?

Say you're in the financial district of the city... i.e. KLCC area, or Jalan Raja Chulan for instance. On a bad day for the stock market, the high rollers go for a slightly cheaper meal at the bak kut teh joints, and the bak kut teh goers go to the kopitiams. On a good day, the kopitiam goers upgrade and end up at the bak kut teh shops, whereas the bak kut teh goers end up going for their abalones and shark fin's soup elsewhere. This is the same with properties. In my opinion, if you are going for the medium-end properties, which ranges from RM500k-RM700k, your investment is pretty safe, and there would be plenty of upgraders as well as downgraders - the in-between, the bridge...

SO... the next question is... to keep or to flip?

Like what Mr Michael said, properties for flipping are usually the ones with has the highest capital appreciation in the shortest amount of time. These are usually the landed properties. A simple formula to calculate capital returns would look like this...

The returns will be the total returns you would get. Assuming you achieved 30% returns in 3 years, the next thing you need to do is to divide that to determine your simple returns per year (as compared to compounded returns)

Properties for keeping are the ones that fetch rental returns higher than 6%. These are usually high-rise in nature. Here’s the formula for rental returns...

It is the main criteria to look into before you decide what strategy to adopt before deciding what type of property to invest into. Also, it’s crucial to estimate the returns of investment you desire and the timeline of which to exit. Having exit strategies prior to starting is critical to your success.

Once again, the question comes back to the same item. Rental Returns.

I had mentioned this before - and once again, my stand remains. It has come to my attention that a lot of properties in Klang Valley are not fetching yields of 8% like how they were previously. Here's my reply to that... YOU ARE RIGHT! If you could get a property that fetches you a 8% yield, by all means, dont ever sell it - at least not yet.

Based on the recent research and feedback from various agents, it seems like a lot of properties in Mont Kiara and KL area are fetching yields of 5-6%, which in my honest opinion, is very good.

TTDI Plaza.

Today, Malaysian banks are offering between 2.6% up to about 3% in interest rate returns for Fixed Deposits, a far difference from the 5-6% years ago - which had prompted property returns to about 8%. Today, at 3%, I believe that the proper adjusted property yields should hover at 4-5%. I believe that a lot of people may not agree with me - but I believe this is the scenario that we are facing now in Kuala Lumpur.

If you are hoping for capital gains, then expect your rental returns/yields to drop. =P

Centrestage, a new development in Section 13, PJ.

Who said the Property markets were sluggish?

Whoever said the Malaysian Property markets were being sluggish are obviously not updated with the property news and updates. Let me bring your attention to a recent property launch in Sungai Buloh area last month... of which, a very prominent developer sold out all its units during the launch. =)

MAH Sing Group Bhd registered sales of RM242.5mil during the launch of Phase 1 and 2 of Star Avenue@D’Sara in Sungai Buloh recently. The launch attracted more than 800 prospective buyers and all 92 units of the three-storey shop offices, priced at an average of RM2.6mil, were snapped up.

The Avenue Street Mall offers 370,000 sq ft of nett lettable area spread over four levels, and the Mah Sing Group intends to retain approximately 60% to ensure the right tenancy mix to maximise rental yields and increase capital appreciation. The proposed tenancy mix includes F&B outlets, a supermarket, IT and telecommunications centre, bowling alley and fashion and accessories stores. With an estimated catchment of 360,000 people within a 15-minute drive and more than 300,000 commuters passing by daily Star Avenue@D’Sara is poised to be a shopping hotspot. Ample parking space is available with more than 1,500 bays on the ground floor and basement level allocated to cater to the expected influx of shoppers.

The project is also only three minutes from the proposed MRT Station in Taman Industri Sg Buluh and strategically located at the busy traffic junction of Jalan Sungai Buloh (Guthrie Corridor), Persiaran Cakerawala and Jalan Lapangan Terbang Subang. Star Avenue@D’Sara will also be able to bank on the 13,000 students at the proposed new Help University Collegue-Subang 2 Campus, via Persiaran Cakerawala which is currently being upgraded into a six-lane road. This project is also adjacent to the much talked about 3,300-acre Rubber Research Institute of Malaysia (RRIM) privatisation project to be developed by EPF.