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Saturday, October 24, 2009

Making right buy can result in big gain

MALAYSIAN property has withstood the test of time quite well and the many economic downturns over the years have failed to weaken its position as an attractive and reliable investment instrument.

Whether it is used as a roof over our head or for capital appreciation and rental income, many Malaysians have benefited from buying property in one way or another.

Astute property investors who have bought the right property, whether residential or commercial, at the right time have reaped attractive capital appreciation or rental yields from their investment.

In fact, there is quite a number of successful investors who have gone on to become multi-millionaires by merely leveraging on property investment.

Those who have made it as successful property investors have sworn by its efficacy as the first step towards achieving one’s financial freedom. The list of the “Who’s Who” and gurus of property investment include Renesial Leong, dubbed the Queen of Properties; Dr Peter Yee; and personal finance trainer Azizi Ali.

The latest global financial crisis has shown that local property, especially landed units, are resilient and have withstood the onslaught of the “value eroding” impact of the economic downturn.

Although prices of high-rise residences in Mont’Kiara have dropped between 10% and 15% while those in the KLCC areas have eroded by up to 20% in the sub-sale market, landed residences have held out quite well.

So, is this the best time to invest in property and start building up one’s portfolio of real estate assets to join the club of property investors?

For those with the financial resources and surplus cash, investing in property is certainly a much better option than stashing one’s cash in a savings or fixed deposit account going by the low interest rates.

Even those who don’t have much ready cash to invest or have low tolerance for risk can afford to build up a comfortable nest of property assets by leveraging on the low cost of funds prevailing today.

Given its reputation as a good hedge against inflation and the possibility of higher inflation setting in when the economic recovery picks up steam down the road, there is a stronger possibility for property prices to strengthen than to depreciate going forward.

Before prices start to climb again, it will be a good time to lock in at the current prices.

It must be noted that the current environment for property buying is very positive given that the entry cost is still at an all time low.

If developers continue to offer their housing packages and allow buyers to sign up for a property with just a 5% to 10% down payment, the low entry cost will continue to make it easy for property ownership.

Coupled with the other perks including the low mortgage rates of 3.2% to 3.5% a year offered by financial institutions, zero mortgage instalment until the property is completed, and free legal fees and stamp duty for sale and purchase agreement and loan documentation, it must be one of the best time to shop around for a house if you have not already done so.

The exemption from real property gains tax (RPGT) for profits made from property sales will also be one of the inducements for more buying and selling activities. (Under Budget 2010, the Government has proposed to reimpose the RPGT next January.)

There’s also the potential wealth creation effect to consider when prices start to appreciate again.

Based on a 13-year property cycle, renowned mapmaker and property researcher, Ho Chin Soon predicts the local property market will peak around 2011 if the economic recovery continues unabated.

He says the last property boom which took place before the Asian financial crisis in late 1997 saw a 70% jump and a 14% compounded growth rate in property prices over a four year period.

Property investment looks like a wise choice. After all, unlike some other intangible investment instruments, property is a tangible asset and its value will not just evaporate overnight unless a major natural disaster struck.

To ensure they make the right purchase, the onus is on property buyers to do the necessary homework of checking out the background of the developer and the project’s feasibility before signing on the dotted lines.

While believing in the tenacity of the local market, deputy news editor Angie Ng cautions against an over-speculative market as unchecked spiralling property prices are prerequisites for potential bubbles.

By The Star (by Angie Ng)

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