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Sunday, January 4, 2009

Property: Investing in something tangible

Embattled investors singed by the performance of the equity and financial markets in 2008 may want to look at more tangible assets to invest in going forward.

In such an unpredictable environment, one of the most tangible of assets is property, especially for more conservative investors who are looking for steady but unexceptional returns.

That leaves the question of when and at what price point investors should acquire properties, assuming that more gloomy economic and business data are still on the way which may have an effect on consumer sentiment and therefore, negatively impact property prices.

Those in the property industry, from developers to agents, will tell you that any time is a good time to buy property, especially if purchasing to stay because there is a probability that postponing a purchase may result in that particular property becoming unavailable or becoming pricier.

On the other hand, now may be the time to conserve cash and wait for opportunities, even for those who are looking to upgrade. For those who are investing for returns, that is a more difficult question to answer because launch prices have not plateaued although secondary market prices have fallen.

Property industry experts will tell investors that prices have not risen by much in the country compared with Singapore while falling secondary market prices may be due to any number of factors including location, accessibility, amenities and the number of new units coming into the market in any particular location.

iProp Realty Sdn Bhd managing director Victor Lim says investing in commercial property is always a safe bet. “If you look around, there are fewer good commercial properties compared with residential properties, so they can command a premium,” he tells StarBizWeek.

Victor Lim

He says compared with residential properties, business tenants are a more stable source of income. “Tenants in residential properties have a tendency to move whereas business tenants will stay longer,” Lim says.

He says the general rule of thumb is that the investment must yield at least 6.0% gross return before it can be considered. However, prime locations will also have better capital appreciation.

“I’ve a client who invested RM1.6mil in a shopoffice in the early 2000s in Desa Sri Hartamas and sold it last year (2008) for RM3.2mil,” Lim says.

He says investors may not wait even when times are bad. “Another client who has been eyeing a plot of land in Puchong bought it for RM2mil cash, sometimes investors just have to seize the opportunity and wait it out,” he adds.

Lim says another way to diversify a property investment portfolio is through purchasing real estate overseas. “Those who buy abroad do so for a number of reasons, maybe they’re buying with an eye to migrating or maybe it’s for their children’s education,” he says.

“I know a number of my clients have started to look at properties in the US and Australia because of their attractive prices. They cashed out of the local property market early this year and are now looking at the US and Australia, at least one of them is serious about the US,” Lim says.

On the other hand, Hartaemas Real Estate Sdn Bhd marketing manager Bernard Yong says that for the year ahead, condominiums in prime locations are still a top pick.

However, he says a good time to invest in property is probably at the beginning of the second quarter of 2009. “I’m looking at Mont’Kiara condominium units, at prices between RM500 psf to RM600 psf,” Yong says, adding that Bangsar is another alternative.

He says launch prices have not come down but developers have become more creative at selling. “They’re giving more incentives or more creative financing,” Yong says.

He says secondary market prices for residential properties in Mont’Kiara, KLCC and KL Sentral have been affected with the KLCC location being the most speculative.

“From next year till 2011, there are between 8,000 to 9,000 condominium and serviced apartment units becoming available in the KLCC location where demand for units of 1,000 to 1,600 sq ft has been healthy but the larger units are unsold,” Yong says.

He says that while properties closer to the Petronas Towers may not see any drop in prices, there may be a stagnation of prices for newer projects.

“Those looking to buy into the location may see opportunities there,” Yong says.

By The Star (by Fintan Ng) Posted on 3th Jan'09

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