Are you ready to follow Robert Kiyosaki’s advice?

Money & You by Yap Ming Hui | September 1, 2012

http://biz.thestar.com.my/news/story.asp?file=/2012/9/1/business/11927075&sec=business

I am thrilled that my last article, What Robert Kiyosaki Didn't Tell You, garnered positive feedback. It shows that many people are thinking about the impact Kiyosaki's work can have on their finances. As such, I would like to continue the discussion about investors taking on and managing risks (or investors being unable to manage such risks).

Kiyosaki is right to say that we must take an active interest in how we manage our wealth and assets. Rising inflation and the high costs of living are proof that we can no longer afford to be lackadaisical with our personal finances.

That said, in a book he co-authored with Donald Trump, Why We Want You to Be Rich: Two Men, One Message, Kiyosaki said this: “If you do not decide to become rich, the chances are you will become poor.” I feel that this is simply untrue: I don't think that if you decide not to become rich, you'll be poor.

The problem is that Kiyosaki's statement evokes fear in many people, especially the middle class. Petrified that they are going to be poor, many take a leap of faith by either investing aggressively in property or starting their own business. Many people do this in the belief that they are conforming to another of Kiyosaki's fundamental points and that is to take on a good debt.

According to Kiyosaki, there are two types of debts: bad debts and good debts. Bad debts are those taken to finance your lifestyle and enjoyment. Good debts are ones taken to fund your investments that will grow your wealth. Naturally, Kiyosaki advocates you taking on more good debts. However, remember that when you take on good debts, you are also exposing yourself to financial risks. In addition, there's no such thing as good risk or bad risk. So, when you take on good debts, how much risk are you being exposed to? Also, are you ready to manage such risks?

It is the failure to consider these questions that have led people to follow Kiyosaki's advice with disastrous consequences. Those who invest in properties are usually excited by the high possibility of becoming wealthy. However, those who fail are often the ones who rush to take out loans from banks without giving their actions careful thought. Unable to rent or sell these properties, many can't service their loans and suffer financially. In some cases, their suffering includes their mental and physical health.

I personally benefitted from Kiyosaki's advice as it gave me the assurance and encouragement to start my own business more than 10 years ago. I thought it would be smooth sailing all the way and business would pour in. After all, I had created a workable business plan, saved enough money and believed that people wanted to know the services offered by independent financial advisors. In no time, I realised that starting and managing a business wasn't going to be easy, especially when independent financial advisory services were relatively new and unknown. However, I was lucky because I had the necessary support, knowledge and experience to manage my business risks by virtue of being involved in a business that emphasises risk management. I was able to avoid some of the traps that people fall into when they don't manage their risks properly.

Let me give you a real-life example: a 28-year-old engineer is frustrated in his job. He sees his bosses driving fancy cars and going on annual holidays to exotic places and wonders if he'll ever be in the same financial position. He decides that the only way to become rich is to become his own boss. So, he quits his job and opens a restaurant. Only, he has not prepared a written business plan, has little capital, no idea how to manage cash flow or his staff and knows nothing about the food and beverage industry. After three years, he is still struggling and now borrows money from relatives and friends to keep the restaurant afloat. Two years later, his business has completely failed and he's declared a bankrupt. When he falls back on the only thing he knows, which is engineering, he's already 33-years-old and has been out of the job market for five years. He'll be hard-pressed to find an employer willing to employ him.

If this same 28-year-old engineer were to approach me, I would tell him to optimise what he has now to achieve financial freedom first. In the process, he will learn about managing and minimising the financial risks he may be exposed to. In particular, I would tell him to continue working, but not give up on his dream to become wealthy and start his own business. Then, when he's comfortable, he can take on more risks.

Planning process

The rationale behind the advice I give this 28-year-old engineer is this: the process of planning and preparing for a successful business might take a few years. What is important is that throughout this process, he continues to have a steady source of income, thereby, reducing his mental stress and any strain on his finances. He will also be able to invest his savings and accumulate his wealth. When the time comes for him to assume the risk of running a business, at the very least, he will be financially secure. It may appear to be a slower and more conservative approach than Kiyosaki's, but it is, by far, a safer way to achieve wealth.

So, are you ready to follow Kiyosaki's advice? In a nutshell, you're ready if you feel comfortable taking various business and investment risks. This will mean being in a position to manage and minimise possible stress that can come with such a move.

Naturally, it is an added advantage if you know how to adapt Kiyosaki's money-making ideas within a Malaysian context. You must also be equipped with sufficient knowledge and experience about your investments. Most important of all is to have a back-up plan in place to support you and your family financially in the event such money-making ventures fail.

No doubt, this is a lot for the average Malaysian to consider if he wants to start on the journey to becoming wealthy. It is possible for him to become lost along this journey. Bear in mind that every journey begins with a single step and you should take that wisely. In my new book, Set Yourself Free, I emphasise how important it is for you to have clarity about your present financial position. Then, by using a new tool I've created called “The Money Matrix”, I show you how to successfully plot a safe path to wealth, with minimum effort and risk.

Estimating your future net worth

Recently, I’ve been thinking a lot about my net worth in next 10 or 20 years. But sorry, I’m not going to share my net worth with you. What I’m going to share here is the way you can estimate your net worth. Most of my net worth is kept as investment in properties. For simplicity in estimating my net worth, I’ll ignore other (much) smaller investments such as fixed deposit, EPF and investment linked insurance.

I’m NOT going to build a complex financial model here to impress you. What I’m going to share here is a simplified method to estimate your future net worth; especially if you are property investor like me. Before you can start estimating your future net worth, you need to understand a basic principle call time value of money. Value of your money (or net worth) will grow if you invest in right instrument. The rate your money grows is appreciation or returns. On the other hand, value of your money will depreciate in future due to inflation.

There are 2 rules of thumb that you can use in estimating your net worth if most of your money is kept in properties like me.

1.       Property value will DOUBLE every ten years  (assume  appreciation of 8% / annum)

2.       Value to money will be HALF in 20 years  (assume inflation of 3.5% / annum)

To understand underlying principle for rule #1 above, you need to understand how long does it take for your property to double its value? – Based on my experience and research, most of the times; property value will double in 7 years to 12 years. I did a simple excel simulation to validate this. From table below, you can see property value double in 16 years if the appreciation rate is 5% / annum. If the appreciate rate is 12% / annum, property value will double in 7 years. For simplicity and fairness, I like this rule of thumb à property value should double every 10 years – provided you bought properties at correct location, location, location. I personally feel this rule of thumb is a fair rule of thumb although we can see many properties double in value in less than 5 years due property boom in last few years. For property value to double in 10 years, you need to find properties with appreciate rate of about 8% / annum which is always possible as long as you invest in right property type and right location.



To validate rule #2, I simulate how value of money depreciate with inflation. From table below, you can see value of money will be half in 35 years in the inflation rate is 2.0%. On the other extreme, value of money will be half in just 14 years if the inflation rate is 5.0%. Base on releases from Bank Negara (BNM), inflation rate in Malaysia is hovering between 2% to 3%. However, this figure is always debatable, especially if you are living in Klang Valley. For simplicity let assume inflation rate of 3.5%, your value of money will be half in 20 years. 

With these rules of thumb, you can easily estimate your future net worth.

Case 1: If total value of your property is RM 1mil currently (and assuming your rental can cover bank installment for balance of 20 years mortgage)

Property value in 20 years = RM 4mil, Value in today’s currency = RM 4mil x 50% = RM 2.0 mil

Case 2: If total value of your property is RM 2.5mil currently (and assuming your rental can cover bank installment for balance of 20 years mortgage)

Property value in 20 years = RM 10mil, Value in today’s currency = RM 10mil x 50% = RM 5.0 mil

Case 3: If you purchase a shoplot in PJ for RM2.5 mil with down payment of 30%, your down payment is RM750k. With rental yield of 6%, your rental should be able to cover your monthly installment for 20 years. So your RM750k will become RM10 mil in 20 years (today value of RM 5mil). This is the beauty of property investment – you will grow rich slowly but surely.

Are developers really making too much?

Food for thought
By DATUK ALAN TONG

http://biz.thestar.com.my/news/story.asp?file=/2012/8/11/business/11821521&sec=business

LATELY, there have been many ongoing discussions on the topic of high property prices. It made me ponder on the various causes that might have contributed to the situation, including the question of whether developers are making too much.

As I took a sip of tea, many thoughts came to mind which I found interesting and worth sharing before we dwell further into the real factors of rising property prices.

Based on annual reports (see chart) of three major property developers in Malaysia, namely SP Setia, UEM Land Holdings and Mah Sing Group, they are generating an average of 18% profit margin from their projects, and at the same time incurring a staff cost of about 7% of their total revenue.

These companies are major developers in mass residential properties which have high sales turnover, and therefore a good reflection of the average developers' profit margin in the residential market.

These findings may contrast with people's perception of the profitability of the property development industry.

Though it may sound like a fantasy, assuming I could convince these three property developers to give back their entire profit to their customers, it would mean an average of 18% discount on property prices for the year in question.

This would seem like a fantastic bonanza for the buyers of the properties in question. But would a 18% discount really make these properties affordable? I would imagine that people will still find these properties expensive.

Let's take an example of a terrace house that costs RM700,000 in Petaling Jaya. It would be priced at RM574,000 after the 18% discount.

If a home buyer is able to secure a 90% loan with a maximum repayment period of 30 years, the monthly loan instalment for RM700,000 and RM574,000 would be RM3,081 and RM2,526 respectively (based on a BLR-2.4% loan package with current BLR at 6.6% per annum).

From the above example, while the discount may seem substantial at absolute price, it is not significant in terms of monthly loan instalment for home buyers.

The debt commitment level for the latter is still considered high and out of reach for most people especially those who have just started their career.

Now, let's take a hypothetical scenario that the property developers decide to make their staff work for free that year.

It would mean another 7% discount to customers after deducting staff cost. Even with this total discount of 25%, property prices in many areas would still be considered unaffordable to many.

Anyhow, back to reality, it is impossible for any commercial enterprise to work for free or give up its profit if it was to run a sustainable business, as well as to satisfy its shareholders' expectations.

For the property development industry which has a product life cycle of four to six years (starting from land acquisition to handover of keys to customers), it is a challenge to further compress the profit margin after taking into account the risk and inflationary factors involved in such a long product life cycle.

Let us look at other industries as a comparison and review their profit margins.

For the banking industry, the three largest local banks that were selected are Maybank, CIMB and Public Bank. Likewise, the three major players from the mobile telecommunication services were Axiata, Maxis and Digi.

The results showed that the average profit margin for the banking industry is 35%, while the mobile telecommunication industry is enjoying an average profit margin of 26%. So, back to my question “are developers in Malaysia really making too much?”

Compared with the average profit margin of the banking and telecommunication industries, the profit margins of property development companies are significantly lower and definitely not on par in terms of the actual profit before tax figures.

Putting aside the profit margin for property development which is already relatively low compared with the other two industries, what are the other factors that are causing high property prices?

Many other underlying factors could be looked into in relation to the escalating property prices, instead of merely contemplating the issue as a market trend or as a result of developers' profits.

The Government, property developers, home buyers, as well as NGOs (non-government organisations) will need to work together to identify the root causes of inadequate supply of affordable homes in Malaysia.

Let's ponder this issue over the next few weeks and I welcome any suggestions and feedback to shed some light on it as I dwell further into this crucial topic in my next article.

FIABCI Asia-Pacific chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com

Is Your Home an Investment?

Many treat his or her home as an investment while others not. If my memory serves me right, Robert Kiyosaki not only didn’t treat his home as an investment; in fact treat his home as a liability. For him, investments suppose to generate income for owner but owning a home incurs expenses to the owner.

From my perspective, whether a home is not an investment is really up to you.

Are you likely to move out in the future?

If your answer is NO, your home is definitely not an investment because it don’t generate income for you nor your can reap profit from selling it in the future when price increased.

If your answer is YES, you may reap profit from selling your home at higher price in future. But where are you going to live? Prices tend to rise across the entire market. So if you sell your current home and getting another new home, you are merely rich for a while before dumping profit from your old home to new home. In this case you can’t really enjoy profit from your first home. Hence, we shouldn’t treat your home as an investment. UNLESS you willing to go significantly downscale for your next home, move to a less desirable neighborhood or move out further away from city centre; those are the only way you can enjoy fruits of your home price appreciation.

Do you really make profit from your home when you move out?

Without most of us realizing, it cost more to buy, renovate and maintain a home than you think. Biggest home ownership costs are renovation and bank interest. Hence, it is important not to buy a home that is too big for your need or overly renovate and furnishing it. The profit that you make selling your home may just sufficient to cover your interest, renovation and furnishing cost. In fact, I personally have a friend that stretch his budget to buy a home in upscale neighborhood, over spent to renovate and furnish his home under the name of convenient, investment and “enjoy life”. In our previous gathering, he lamented cash flow problem he encountered in serving bank loan (for car and home) as well as credit card debt for his renovation and furnishing. He is obviously regretted; this is a good lesson not to over spend in home ownership. 

Besides straining your cash flow, you almost certainly lost some investment opportunity (i.e. opportunity cost) along the way while you were spending your money buying the home.

No matter what, I would like to stress that buying a home is still better than renting home. For me, it’s even better if you can spend less on current home and invest in few investment properties (i.e. rental properties) that able to generate positive cash flow to fund your dream home; of course not immediately, but say 10 years down the road. I personally prefer to treat my current home as a saving instrument rather than investment instrument. 10 years down the road, I’ll sell my current home (and probably 1 or 2 investment properties) to fulfill down payment of my dream home in upscale neighborhood. Monthly installment of my dream home will then by funded by positive cash flow from remaining investment properties.

What Robert Kiyosaki didn’t tell you

Money & You by Yap Ming Hui | August 4, 2012

http://biz.thestar.com.my/news/story.asp?file=/2012/8/4/business/11785165&sec=business

A FEW months ago, I was having breakfast with a friend when he told me about the seminar he was going to attend in May to hear Robert Kiyosaki speak.

In the past year, he had read all the author's books and had already taken out two maximum loans to buy properties to rent out. I was curious to know more. We barely finished drinking our coffee when he insisted he had to leave. He was going to the bank to apply for another loan to invest in more properties. There was little I could say or do to stop him from leaving.

As the day progressed, I could not shake off an uneasy feeling that something was not right. I worried that my friend might be setting himself up for financial ruin. As I edited the opening pages of my new book, I recalled my introduction to Kiyosaki's work and understanding of his principles.

More than 10 years ago, at about the same time when I made the decision to pursue a career as an independent financial advisor, Kiyosaki published his seminal work, Rich Dad, Poor Dad. In it, Kiyosaki challenged the preconceived notions the middle class had about their inability to achieve financial freedom.

In highlighting the need for financial literacy, the advantages of becoming a business owner and investor, and overcoming obstacles with a positive attitude, he underlined two fundamental concepts of financial freedom: a “can-do” attitude and fearless entrepreneurship. I have no doubt that Rich Dad, Poor Dad had a positive impact on millions of people all over the world. Indeed, reading it certainly inspired me to work towards becoming rich and doing this fast.

However, as time passed, I observed that many Malaysians who adopted Kiyosaki's approach became trapped in the “rat race” with no way out. This outcome was the exact opposite of what Kiyosaki envisaged in Rich Dad, Poor Dad. I wondered why this was so and decided to read Kiyosaki's books again.

It was clear that Kiyosaki's other books built on Rich Dad, Poor Dad and helped to crystallise some important theories about personal finance. For instance, you should not spend more money than you earn. It is important to invest in assets rather than liabilities to build a passive income from your investments. This is how to make your money work for you so that you become rich and wealthy.

Nevertheless, with the benefit of experience and knowledge as an independent financial advisor, it was not long before I became uncomfortable with what Kiyosaki was saying. In the book he co-authored with Donald Trump, Why We Want You to Be Rich: Two Men, One Message, he made statements which implied that the only way out of the “rat race” for the middle class was to become rich.

Also, all the suggestions Kiyosaki made were about “what to do”; he never gave concrete advice on “how to do it.” For example, you must take on “good debt” to become wealthy. This meant taking on more risk by acquiring loans to invest in properties. However, he didn't show you how to manage this risk or the investments you made.

I feel that the approach Kiyosaki advocated is muddled and has the potential to be both dangerous and misleading. The closest analogy I can give to illustrate my point is this: you're put in a Formula 1 race car and told not to be scared as there's nothing to stop you from driving at the same speed as other Formula 1 drivers. Only, you have never learned the special skills needed to control a race car.

The fact of the matter is that taking on more risks does not guarantee financial success. Fraught with uncertainties, it might get you rich quick, but it can also ruin you. For instance, I know a 45-year-old bank manager who, inspired by Kiyosaki's work, quit his well-paying job to start a business.

Two years later, his business is heading nowhere, he is on the verge of eviction, his wife has taken the children to live with her parents and the hire-purchase company repossessed his car.

Then, like my friend with whom I had breakfast, many have taken out maximum loans with a view to getting rental income and capital gain. However, they cannot find tenants or buyers and struggle to make the instalment payments to the bank.

To be fair, let me state that I am in favour of what Kiyosaki proposes; in fact, we share a common purpose: both of us want to help people to get out of the “rat race.” However, I feel that, on the whole, Rich Dad, Poor Dad and other books by Kiyosaki are no more than successful tools to motivate people to think about how to manage their personal finances. It is unwise for Malaysians to use Kiyosaki's work as the only guide to acquiring wealth. In other words, getting rich is not the only way to get out of the “rat race.”

I am confident enough to say this because I have discovered a more plausible and less risky solution to becoming wealthy. Instead of jumping straight into taking on more risks and acquiring debt, take a metaphorical step back and start by optimising your existing financial resources.

The aim of doing this is to help you work towards becoming financially free. The by-product of this exercise is that you will acquire knowledge and experience about how to manage financial risks and investments. When you have become financially free, your position is secure.

Only at this point is it wise to start applying Kiyosaki's concepts and ideas to increase your financial risks and acquire more wealth.

When you adopt this approach, rest assured you will enjoy peace of mind and have the ability to focus wholeheartedly on creating more wealth regardless of the outcome. This is because you will know that you are financially secure. By far, this is a more certain, safer and better approach to becoming wealthy.

Resurrections (Case Study on Kong Heng Ipoh & Pheonix Plaza)

Early Bird by Johnni Wong | July 12, 2012


http://www.starproperty.my/PropertyGuide/Finance/23181/0/0


Compared to Kuala Lumpur and George Town, the city of Ipoh hasn’t quite caught the imagination of property investors and entrepreneurs despite having an equally rich architectural heritage and building resources.


Perhaps, the lack of critical mass is one of the fundamental factors that deter investments. Sure, one or two fairly successful developments have come up but one swallow does not make a summer.
Nevertheless, one eccentric architect and his gang of friends hope to draw interest to a quaint section of the city that they think has potential for re-development.


Labour of love
KL-based landscape architect and ardent art collector Ng Sek San and his friends have set up a fund to purchase several property lots in Ipoh Old Town centred around the Kong Heng coffeeshop.


“A lot of Malaysian towns have been left in decay in the last three decades,” points out Ng in an e-mail response.


“We have been seduced with the new utopia of Americanised suburban living. Unfortunately, our local town authorities are not creative in re-branding old cities and reversing the decay. There is a lot of hidden value in old cities like Ipoh.

The triple-storey building housing the Kong Heng coffee shop will remain "in perpetuity", says Ng Sek San, one of the co-owners

“We hope like-minded people will join us to develop a critical mass to jazz up and rejuvenate the city.”


So, when Ng heard about the sale of the triple-storey, pre-war building housing the well-known Kong Heng coffee-shop at Jalan Bandar Bijih Timah, he swung into action.


The “consortium” of four individuals, not only bought that building but purchased several other units linked to it. They plan to revitalise the neighbourhood especially at night, when the area is practically deserted.
“We have eight buildings and they vary from one to three storeys, with a built-up space of about 30,000sq ft,” says Ng.


“It is all in one title with six buildings on it. The previous owner amalgamated the three (land) titles with the intention of demolishing all the buildings to build a high-rise development.”
When asked how much has been spent to acquire the properties, Ng says, “I really don’t know, I am not the money guy.”


And why are they doing this?


“Three of our partners are originally from Ipoh and one is from Kuala Lumpur.
This is purely a commercial undertaking. However, we are appreciative of history and old heritage buildings.
“What we did was just to add value to them and give them a longer lifespan and hopefully, also contribute a bit to the revitalisation of an abandoned and forgotten part of Ipoh Old Town.

The back section of Sekeping Kong Heng showcases the alternative way of "redeveloping" the property. Note the rooming facility upstairs



An old building can be modernised without losing its character

 Sentimental reason
Obviously, sentiment plays a large part in undertaking the project, as Ipoh is Ng’s hometown.


“I have a sentimental attachment to it even though I don’t live there now,” explains Ng, “We hope to get some life back into the old quarter especially at night. Most Ipoh residents prefer to live in the suburbs now.”


Phase 1 includes a rooming facility for short-term accommodation known as Sekeping Kong Heng with modern plumbing and amenities. The room rates offered on Agoda.com range from RM172 to RM690 per night.


Despite being a commercial undertaking, there are certain aspects of the project that transcend profit-making.

Guest rooms

“We are the landlord for the Kong Heng coffee shop downstairs,” says Ng, “The premises will remain Kong Heng coffee shop for perpetuity as it is the heart and soul of the larger development. “The first floor has been converted into guest rooms and the second floor

is a guest suite cum multi-function space for wedding events, meetings, product launches, dance floor, etc.,” added the landscape architect who teamed up with his former assistant, Farah Azizan, to re-configure the premises.

“We are only providing flexible space but we do not plan activities. We hope the users will be creative to adapt the space for their own use.”

Phase 2 will involve the opening a few food and beverage outlets. The plan for Phase 3 is still undecided.
The space at the back of Sekeping Kong Heng includes a derelict structure with a modern roof put in place. Further behind is a row of old shophouses.

“We intend to put in a specialty craft shop here,” says Ng referring to the derelict structure which has been spruced up yet retains the patina of age.

“The intention is to marry designers and communities to make local craft and products with outlets here. This building might also house a heritage tour centre or biking shop.
“Some of the shophouses on Jalan Belfield will be converted into food and beverage outlets on the ground floor.

“We intend to turn the upstairs of the six shop lots into guest villas. We also intend to turn the back of the shops to shoplets to activate the quaint back lanes.”

Stakeholders
As for the other adjoining lots next to the Kong Heng building, certain names of successful entrepreneurs have been mentioned as being interested.

“We are working with Julie Song from Indulgence Restaurant and Benjamin Yong of the BIG Group to open outlets in the adjoining properties. They are all Ipoh stakeholders.

“We are also planning a cooking school in the (former) Benco warehouse.”

A suspended "bedroom" on the top level of Sekeping Kong Heng

Any forseeable impact on shophouse property in the old quarter of Ipoh in terms of revival of interest?
“We are more into architecture, heritage and design and are less interested in property play. This question is really outside our expertise,” answers Ng.

Uncertain
But does Ng and his partners think that new business ventures in this part of town or in Ipoh in general, can be sustained?

“I honestly don’t know,” says Ng, “It has worked in other cities. Ipoh Old Town has interesting buildings and architectural space. It has history, good food, soul and it has interesting shops during the day time. And is it close to mass transportation hubs like railway and bus stations.

“From the business point of view, it has a lot more to offer than those new suburbs.

It does not make sense that suburban property values are equal if not higher than downtown properties. I hope this will work.”

The courtyard (left) between the main building and the derelict structure is lined with left-over paving stones. The derelict structure at the back (right) has been given a new roof with corrugated acrylic sheets

Phoenix no more
Speaking of calculated risks, a landmark shopping complex in Kuala Lumpur is being revived. The Plaza Phoenix is being transformed into Cheras Sentral by Malaysia Land Properties Sdn Bhd (Mayland) at the cost of RM125mil.

Mayland owns 85% of the strata-titled property. It bought the mall from Danaharta a couple of years ago and by 2011, Mayland acquired the rest of the available lots.

To be completed by the end of the year, the re-development project has a gross floor space of 1mil square feet (search this portal for the report on “Plaza Phoenix becomes Cheras Sentral”).

According to Mayland retail general manager Michael Chee the mall has about 500,000 sq ft of nett lettable space with an average rental rate of between RM5-RM6 psf. At the signing ceremony with anchor tenants on Monday, Chee cited three factors why this time around, Cheras Sentral can succeed where Plaza Phoenix failed. The mall originally opened in 1994 and closed in 2005.

Tenant-mix
Firstly, the notorious traffic problem in Cheras - with the bottleneck right next to the mall leading to Taman Len Seng and all the other housing estates - has been resolved with better infrastructure. Accessibility to the mall will also be enhanced with the proposed MRT station sited across the road and linked by a pedestrian bridge.

Secondly, due to the nature of the old mall with individually-held strata titles, the tenant-mix was not conducive to the overall attraction of the mall. But with new anchor tenants such as TGV Cinemas, Jaya Grocer, Celebrity Fitness, CYC World Mega Leisure World, Moon Palace Chinese Restaurant, K-Box Karaoke and Dynamic Trial Sdn Bhd, there is greater variety and more attractions. There will even be a 300-room hotel under the Silka or Dorsett brand.

Thirdly, Cheras in the mid-90s wasn’t as rich a catchment area as it is now. Greater affluence is seen in the surrounding areas with more upscale housing developed and sold.

Cheras Sentral will cost RM125mil to be ready for business

Feng shui
On whether Mayland founder Tan Sri David Chiu, a Hong Kong-based property developer and hotelier, ever consulted any feng shui master about re-developing the mall, Chee replied, “Tan Sri always says that he uses feng shui if it suits him.”

Our cars are costing us our homes

Food for thought
By DATUK ALAN TONG

http://biz.thestar.com.my/news/story.asp?file=/2012/7/14/business/11647266&sec=business

WHEN I first started my job as an architect in the 1960s, I was on a three-year contract with a monthly salary of RM628. I bought my first car, a Peugeot which cost RM7,724, equivalent to approximately one year of my salary. The car became my reliable companion for 14 years. Those were the good old days, when a car could be bought with just one year of a fresh graduate's salary.

Circumstances have since changed. Today, for a fresh graduate to own a car in Malaysia, it will easily cost him four years of his salary to purchase a foreign car, and even a local car costs around two years of his salary. If we take into consideration his living expenses and other commitments, it may take him even longer to settle his car loan. Hence, it has left him with very little option but to take the maximum car loan financing tenure of nine years.

In the table illustration below, a fresh graduate in the Washington D.C. earning about RM11,000 (about US$3,500) per month can easily buy a Japanese Honda Civic or Toyota Corolla worth RM50,000 as it is only 0.4 times of his yearly salary.

On the other hand, a fresh graduate in Malaysia earning about RM2,500 per month needs to pay RM120,000 if he would like to buy the same type of car. It costs him four times his gross yearly salary. This ratio is 10 times higher than his US counterpart.

For youths in Malaysia, buying a car is more expensive both in real terms, and in terms of debt-to-income ratio. In reality, it means they have to either purchase a car with lower price tag or commit to a longer term loan to own a car, which cost them the opportunity of owning a home.
This situation requires our youth to choose between buying a car or a house first, and many have committed to own a car first, considering our public transportation system is still in the process of being improved.

Many fresh graduates in Malaysia who start to serve their car loan tend to delay their plan of purchasing a home.

Unfortunately by the time they can afford to purchase a home, be it three, five or nine years later, the price of a property would have escalated due to among other things, inflation, higher construction cost and higher land prices.

While it may be safe to say that their salary would also increase, generally speaking the increment may not aligned to the rate of inflation. In most cases, owning a home will be a huge debt lasting 30 to 40 years of housing loan repayment.
What can be done differently to change the circumstances? Is there a better way for them to financially plan their future? These are questions that Malaysian youths ought to consider before purchasing any big-ticket items.

Let's look at the table again. It also lists the median price for three-bedroom apartments in the suburbs of these cities. The median price of an apartment in the Klang Valley is around RM300,000, equivalent to 10-year gross income of our fresh graduates. The affordability level is more favourable compared to other Asian countries, such as Indonesia and Thailand. The prices of same size apartments in Jakarta and Bangkok range from RM350,000 to RM400,000, and costing their fresh graduates 13 to 18 years of gross yearly income to purchase a house.

Therefore, when it comes to the question of home affordability in Malaysia, we are blessed compared to our regional peers.

However, there are many factors that contribute to the challenge for our youths to own a house. Two primary factors are the additional financial commitment of purchasing a car, and the relatively lower income level in our country compared to our Western counterparts.

When fresh graduates spend a substantial amount of their salary paying for a car, they are left with little savings to own a house, and their house affordability level decreases over the years as prices rise due to inflation.

Clearly the income level of our graduates has to rise, to enable better quality of living and higher affordability level, which is the current government's focus to make Malaysia a high income nation by 2020.

Perhaps it is also time to re-look at our national car policy and how it has affected the house affordability level in Malaysia. From the numbers above, it is clear that our cars are costing us our home