Damansara - Shah Alam Highway (DASH)

Like many other infrastructure projects in our country (MRT included), which suppose to benefit rakyat and stimulate the country's economy will upset some minorities. In the case of DASH, the objections from the residents of Mutiara Damansara is principally based on the fact that the DASH, originally meant to run through the higher-density neighbourhood of Damansara Perdana, where high-density condominiums abound, has now been re-routed to run through the quiet suburb of Mutiara Damansara, an admittedly more upscale neighbourhood..

DASH will connect New Klang Valley Expressway (NKVE) directly to the Penchala Link, allowing users to bypass the Damansara and Duta toll plazas along the NKVE, which are both prone to traffic build-up during rush hour. It would, therefore, allow Shah Alam residents using the NKVE to exit the NKVE, onto the DASH and onto the Penchala Link to Kuala Lumpur or Petaling Jaya without passing through the Damansara suburban road network.

DASH is set to bring Shah Alam - Puncak Alam Corridor nearer to Damansara / PJ enclave  which contains more facilities like shopping complexes and MNC offices. Residential areas along Jalan Batu Arang (that linking Shah Alam to Puncak Alam) such as Sunway Alam Suria, Cahaya SPK, Alam Budiman, Denai Alam and Perdana Heights will immediately reap the benefits once the highway completed. Property prices in these areas expected to increase further.

Puncak Perdana - Alam Suria - Denai Alam - Kg Melayu Subang - Galaksi - Subang 2 - Subang Airport

Subang Airport - RRIM - Surian - Kenanga - Mutiara Damansara - Penchala

When Shah Alam - Puncak Alam Corridor become so close to Damansara / PJ, I believe many young family or couples (potential upgrader) in Damansara / PJ enclave will not hesitate to live there.

Kajang Hospital to be relocate?

Since last 2 years, there are rumors that Kajang Hospital will be relocated to Semenyih due to capacity issue for the hospital built in 70s. Many speculate that Property Developer King in Kajang, MKH is eying the land as it’s strategically located in town. It’s not difficult to understand because MKH have already own some of the best prime land in Kajang; former Local Council Building (beside Kajang Police Station) and former JKR Building (opposite Hospital Kajang) just to name a few.

The Kajang Hospital is conveniently located on Jalan Kajang- Semenyih in Kajang Town

So far, I didn’t see any news to officially confirm the relocation plan. However, I found some interesting information on http://shafiza8828.blogspot.com/2012/04/general-hospital-selangor.html

According to author, the plan is to relocate Kajang Hospital to Connemara Estate, Baranang. However Health Ministry has yet to approve this plan. According to author, the site for new hospital is 15km away from current location and 7km away from Semenyih Town. In term of travelling time, a journey from KL via LEKAS Highway will take 30 minutes while journey from Kajang will take 20 minutes (but I think this is timing for smooth journey, no traffic congestion at all (^-^)

If this is confirmed, I see 2 things will happen. (i) another commercial development in current hospital’s site (ii) new and modern hospital in Baranang will be booster to property developer in Semenyih. Do update me if anyone out there have more information about this proposal.

Bulletproof your portfolio

In my last article, my advice is watch out for 2013 (and beyond). Please don’t get me wrong, I didn’t mean to stop you from property investing nor selling all or investment properties. However, I think it’s time for property investors to step back and start to bulletproof their portfolio. In my opinion, invest in properties is a sure way to improve your wealth provided you know how.

Legendary investor Jim Rogers once said “If the economy improves I’ll make money because the demand for those assets will increase. On the other side, when governments get in trouble they print more money and when they do that you can protect yourself by owning real assets.”

Here are some of the ideas how you can bulletproof your property portfolio.

Location, location, location  – look for areas that can weather any downturn. A good example is residential properties near colleges and universities that suitable for student housing. Whether economy is good or bad, investment in student housing gives you consistent returns. In fact, when the economy condition is bad, more student prefer to further their studies instead of going out to workforce market. Other that student housing, one can look for areas set to growth with infrastructure investment such as new highways and even more compelling MRT route.

Focus of fundamental – go back to fundamental criteria when evaluate investment property. Ensure the rentability and yield of the properties that you want to invest in. For investors evaluating new property launches, one can “benchmark” the rentability and yield from surrounding properties. Investors also need to consider whether the market can digest when more supplies going to the market. Finally, buy from established developers. To further strengthen your portfolio, one should invest in existing properties on the market because “what you see is what you get”. The rentabilty and yield (of existing properties) are REAL instead of developer’s promise or artist illustrations.

Know what to sell – investors should be selective in deciding which property to keep and sell the less attractive ones. They should consider selling substandard properties handed over by developers, or if the property is not so easy to rent upon completion. Unless you can see long term potential and having huge cash buffer to service the loan, one should consider sell the above mentioned properties.

If you have more idea on bulletproofing property portfolio, feel free to share in comment section. Thanks!

Watch out for 2013

In Greece, the economy will have to shrink by a fifth since 2008, GDP fall by 6.2% in Q1 2012 with no sign of recovery and youth unemployment topping 50%. Overall, unemployment spike to record high of 21%; more than 100,000 small businesses closed; wages and pensions have been badly cut. Its budget deficit, despite stringent efforts to consolidate, will reach 7.3% of GDP, and increase to 8.4% in 2013; by then, it debt/GDP ratio will rise to 168%.

The above is just an excerpt from an article in The Star’s Biz Week (Saturday, 19/5/2012). I believe most of you noticed that there are many headlines about world crisis in whatever you read, particularly on what’s happening in US and Europe. Even China is showing sign of economy slowing down this year.

The whole world seems so wrong but Malaysia is doing so well. Our stock market (KLSE) has just touched all time high recently. Bank Negara has to tighten the lending guidelines to cold down the property market because everyone seems to buy properties like buying vegetables (although property prices are also at all time high). Everything seems so unreal.

It’s not too hard to understand. Every time there’s an election, the government will spread out as many good news as possible, spends as much money as it can to stimulate the economy so they get votes. So the economy is going to look better than it does normally. Many expected our General Election (GE) by Q2 or Q3 this year. United States Presidential election is on Nov this year. Expert predicted more challenging times ahead for the world economy in 2013; after Malaysia’s GE (from micro perspective) and US Presidential election (from macro perspective).

Watch out for 2013 and starts bulletproof your portfolio.

Yield Compression

Rental yield (or simply known as “yield”) is a common indicator to gauge performance or returns of your investment. In laymen term, yield is percentage of rental return (in one year) from your property if you buy it with cash. For example, if you buy a low cost apartment for RM120k and total rental for a year is RM12k (i.e. rental of RM1k/month). Then yield (or more appropriately known as “gross yield”) for this investment is 10% per annum. This also means, if you have RM120k cash in your bank account that probably giving you up to 3% interest per annum. It’s more advisable for you to buy an apartment because that investment will give you “extra” 7% per annum. Besides, rental yield that one’s may enjoy in yearly basis, there are also potential upside from capital appreciation of your property.

For “net yield” calculation, you may deduct expenses such as building management fee, fire insurance, assessment (cukai pintu), quit rent (cukai tanah) and etc from your annual rental. For example, if all your expenses add up to be RM2k; then, net yield of your property is (RM12k – RM2k)/RM120k = 8.3% per annum. Bear in mind that all the above calculation is based on assumption that you buy the property with cash.

Based on Klang Valley housing property monitor (1Q 2012) published in City & Country recently @ 14 May 2012, we can see a drastic drop in gross yield. This phenomenal is also known as “yield compression”. Yield compression happen when rental increases at a slower rate compared to rate of property price increment; or worst if the rental remains the same but property price increase over the years. The table above shows gross yield for terrace houses has been reduced from 3.2 - 5.4% in Q1 2008 to 2.5 - 3.8% in Q1 2012. On the other hand, gross yield for high rises residential has been reducing from 5.2 – 8.3% in Q1 2008 to 4.3 – 6.6% in Q1 2012.

However, I want to highlight that although the average gross yield has been declining for properties under limelight (those being monitored by property consultancy firm), it’s still possible for one’s to get a property that giving yield at high side. Just 1 month back, I have a friend that bought a shoplot at 7.2% yield and my sister bought an apartment at 7.5% yield! For me, yield is just part of the story because tenant (rental) may come and go; more importantly is the property long term potential.

What’s the yield of property you acquired or acquiring recently?

All time high property prices

Whoever you meet and in any conversation, high chances that the conversation will touch about high property prices, investing in properties or investing in stocks. Awareness in investment seems to be all time high in conjunction with all time high KLSE Index and all time high property prices.

In Q1 this year, we see demand for properties has soften due to tightening of the lending policy by Bank Negara such as 70% loan for 3rd residential properties (onward) and use of net income (instead of gross income) for Debt Service Ratio (DSR) calculation which in turn used by Bank to decide on loan approval. According to bankers, loan approval rate had come down; but we know the property prices still inching up. 

In fact, property prices in Kajang (place I live) have gone a bit insane. For example: 2-storey terrace in TTDI Grove known as Acacia (Phase 9) is selling for above RM680k – RM720k ; serviced apartment in Taman Kajang Sentral is selling for RM368,544 for 1047sq.ft unit which work out to be RM352/sq.ft. For comparison, I bought my 2-storey terrace house (22ft x 70ft) from sub-sale market in 2008 for only RM160k and current asking price for similar houses is nothing less than RM280k. My portfolio growth in tandem with escalating property prices in Kajang because I owned few of my investment properties here. This is what I’m waiting for, since I start investing in properties in 2006. However, I’m in mix feeling; feel happy but at the same time a bit worry on sustainability of property prices. Warren Buffet has stress again and again “Be fearful when others are greedy and be greedy when others are fearful”

I like point brought up by Datuk Alan Tong in yesterday The Star’s Biz Week (Saturday, 12/5/2012) titled Food for Thought: Applying the brakes – made for the short term – can be dangerous. According to him, the basis for rising property prices now is largely due to the direct and indirect impacts of quantitative easing programmes i.e. the increase of money supply, carried out by governments around the world since the start of the global financial crisis. This phenomenal is called “value slump”. When there is too much money chasing too few goods, prices will increase but not necessarily value. In reality, we are facing a situation where there is too much money in the system, causing a decrease in the real value of money and pushing up prices of goods and services including construction materials.

He gave an example, in early to mid 2000, a condominium in Mont'Kiara which was sold around RM500k would now cost us about RM800k today, equal to a 60% increase. But if we measured in a different “currency”, that condominium would have cost us 8kg to 10kg of gold in early to mid 2000 and today, only worth about 5kg of gold. This is a sharp decline of 38% to 50% and is an illustration of how prices are going up due to the drop of currency value because of worldwide inflation and pump-priming policies.

Property developers will always “justify” the high property prices was due to increase in construction cost and land cost. This has been pointed out by Daniel Lim, COO of Property Development Division in Sunway Group during his presentation at The Edge Investment Forum on Real Estate 2012. But seriously; how long can it sustain if we are currently facing “affordability” issue? The income for average Malaysian is still too low for the high property price. The short answer is “I don’t know”. But my advice to those wants to buy property for investment in 2012 is to be careful and think long term. And remember that “you make money when you buy the property, NOT when you sale”.

Follow Your Own Passion

When Jim Rogers being asked (in an interview) "what is your advise for someone just came out from college in their twenties?" 

His answer is "All you need to do is to figure out your own passion and follow your passion. That's how you are going to be successful in life"