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Property Still A Good Option

Property has always been seen as a reliable investment tool, with location being one of the most important factors to ensure attractive appreciation value and rental returns.

YY Property Solution chief executive officer Y.Y. Lau said property investment had a leverage concept.

“If you have RM50,000, you can still buy a property worth RM500,000 because you can borrow the remaining 90% from the bank.

“In stock market, you can only buy RM50,000 worth of shares, not RM500,000,” she said.

OCBC Bank (M) Bhd head of secured lending Thoo Mee Ling said: “A good investment can take you to the future.  When you buy a property at a strategic location, you’ll enjoy a good appreciation and this allows you to upgrade easily later on.”

According to a real estate agent who declined to be named, strategic locations usually have a premium price tag but “cheaper places might not appreciate as much and, worse still, remain at the same price level over three years,” she said.

For individuals with RM50,000 to invest, they could look at new developments such as Mutiara Damansara, Kota Damansara and Damansara Perdana, she said, adding that mature areas like Taman Tun Dr Ismail, Bangsar and Mont’ Kiara, while still attractive, would be too expensive for the limited funds.

For those who prefer landed property, there are old single-storey houses for sale in established neighbourhoods like SS3 and SS1, which cost less than RM300,000.

However, these properties may not appreciate as much as those in Bangsar.  “Investors might need to wait more than five years before seeing some marginal returns,” the agent said.

Beside location, accessibility and monthly expenses, one should also consider whether it was freehold or leasehold before investing in a property, she said.

“If not, a person might be buying a leasehold property that has only 33 years left and face the risk of redevelopment or levy cost after the lease expires,” she added.

She said that to generate positive rental returns, the gross rent should be more than enough to cover the monthly expenses such as assessment fees and maintenance costs for condominiums and apartments.

“Even unfurnished, semi-furnished and fully furnished lots generate different rental incomes, so investors should research on the rental potential before buying,” she added.

On financing, while interest rates are on a rising trend, potential buyers can still expect some competitive offers from banks.

Last month, OCBC Bank rolled out its Graduate Home Loan scheme, which is targeted at young graduates between 21 and 35 years old who hold at least a diploma and minimum two years’ working experience.

Thoo said fresh graduate might settle for cheaper properties at the “wrong locations”, resulting in them not being able to enjoy a positive appreciation later.

“With our low entry rates, they would be able to choose a better located home and not get into a bad investment from the beginning,” she said, adding that the banks would review the debt servicing ratios of applicants.

“The monthly installment should not be more than 40% of the person’s gross salary, and we do not take into consideration the person’s commitment with other banks,” Thoo said.

If down payment was an issue, OCBC also offered financing via credit card and its PowerCredit plan, she added.

Standard Chartered Bank Malaysia Bhd’s MortgageOne, on the other hand, combines savings, current, home loan, credit into one account.  Any deposits made into his account reduce the loan outstanding, hence lowering the interest payments and trimming the repayment period.

Hong Leong Bank Bhd offers a similar scheme in MortgagePlus – when any additional deposits are put into the current account, the balance will be used to reduce the loan balance outstanding for interest computation and lead to savings on interest payments.

Low rates make investors turn to other avenues

Malaysia is deemed to have one of the highest savings rates in the world.  The Department of Statistics said that for the first quarter of this year, gross national savings were 39.7% of gross national product (GNP).

Last year, the savings rate was 37% of GNP compared with 37.3% in 2004.

Beside provisioning for rainy days, what does average Malaysian do with the additional money of, say, up to RM50,000?

Based on the feedback from several individuals interviewed by StarBiz, stocks and properties remain the favourite investment options.

According to 28-year-old Chan Wan Hong who works in the corporate finance department of a local banking group, the present fixed deposit rates are not attractive and lower than the inflation rate.

Shares and properties, he said, offered higher upside potential despite their higher levels of risks.

“I believe in diversification and not putting all my eggs in one basket.  In case of a stock market slump, I can still depend on my other investment,” he added.

Chan prefers to take change of his own money instead of “putting them into somebody else’s hands” such as buying of unit trusts.

“Unit trusts are for those who do not have time to monitor the stock market.  Since I do keep abreast with the market, I’m able to manage my own funds,” he said adding that the unit trust management fees were high.

Corporate events manager Jay Teoh also invests in properties and shares.

He said the appreciation and rental returns could be very high for properties in the right locations.

“Properties are good umbrellas for a rainy day.  If there is an emergency, I could sell them off,” he said.

He added that to purchase a property only required a deposit and if the rental was higher than the monthly installment, “somebody would be paying for the property for you.”

Teoh said stocks selection was based on recommendations by various brokerages as well as research into specific industries.

“I also look at the shareholdings of the company.  When a reputable fund holds a significant stake, it shows confidence in the company,” he said, adding that compared with the stock market, “property is still safer.”

An accountant at a foreign accounting firm said she placed her money mainly in unit trusts and investment-linked insurance.

“In terms o rates of return, unit trusts have a better record than banks.  Since I have no time to monitor the stock market or specific counters, unit trust is the next best option for me,” she said.

As for opting for insurance, she said the product offered “room for appreciation and flexibility” compared with conventional insurance policy.

“After covering myself with the basic protection, I found the investment-linked policy was quite worthwhile,” she added.

She also has some exposure in real estate investment trusts (REITs) instead of choosing to buy a property herself.

“The cash outlay and liability of owning a property is rather high compared with REITs.  Beside, REITs allow me to have an exposure in the commercial property market, which I would not be able to do as an individual,” she said, adding that her investment was focused between three and five years.

D. Nair, a manager with Accenture Malaysia who started investing during his college days, said property investment was the most effective in terms of generating returns.

“Even though it is a long-term investment, the appreciation value and the rental returns have been very positive so far,” she said.

He recently withdrew from the stock market, given the lack of time to monitor the performance of shares.

He also invests in unit trusts and investment-linked insurance.

Source : The Star Newspaper
~ 9 October 2006 ~