Have property scams grown in the pandemic?

Is this the biggest property scam ever? | 60 Minutes Australia

 With more real estate businesses moving online, it is easier than ever for fraudulent transactions to occur.

 

Home buyers should verify the authenticity of the real estate practitioners they are dealing with

By Yanika Liew

If you are new to the property scene, dipping your toes in can feel like taking a dive. It can be intimidating to wade through stories of digital impersonations, stolen deposits and backdoor deals. The digitalisation of commerce has skyrocketed as a result of the pandemic. Enterprising companies are launching platforms for their services in a changing market and property is no different. With more real estate businesses moving online, it is easier than ever for fraudulent transactions to take place.

Take the recent cases in Singapore where scams involved convincing victims to pay a home-viewing deposit to secure an appointment. Armed with unregistered identity cards, scammers impersonated property agents by sending a picture of their credentials to the victims. There are multiple instances of scammers uploading fraudulent listings on websites. By the time their victims realise they have been duped, it is already too late.

“Scammers use technology and social media to reach out to prospects more easily. It is very disturbing and there is very little anyone can do to help buyers and sellers who have been cheated by unregistered estate agents or unregistered real estate negotiators,” Malaysian Institute of Estate Agents (MIEA) president Chan Ai Cheng said.

Real estate transactions are a gold mine for scammers, as the process involves large amounts of money being transferred to another account. Scammers can create fake online websites to get customers to bank in the money to them, Propnex Realty chief operating officer Evon Heng commented, who is also MIEA secretary-general.

According to both Chan and Heng, many transactions involve collecting a deposit in a sale or rental, and this money is kept by the individuals. It is a very common case for scammers to abort the deal without returning the refund, causing the buyer to lose out on the deposit. Whereas a registered agent is required to transfer any and all deposits to an account managed by the firm, under the client's name. This ensures that the buyer is protected by the law should anything happen, significantly reducing the risk of exploitation.

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“Scammers use technology and social media to reach out to prospects more easily,” Chan said.

Another common scam involving property is the sale of a project that is non-existent, such as the scam promising victims affordable housing. Scammers claim they have access to units from a high-demand affordable housing scheme, without complying with the eligibility criteria.

While there are instances of affluent victims being caught up in these scams, Chan reports that a majority of property scam victims are in the B40 category, the second being the M40. These groups are less aware or experienced in real estate matters. Similarly, those located away from the city, in small, rural towns are disproportionately targeted. These areas are especially vulnerable due to fewer safety nets available. With B40 families having fewer resources than other income groups, they have more to lose and fewer pathways to receive support, whether from authorities or their community.

So who do you have to watch out for? Chan outlined a framework the public can use when identifying these scams.

“The case of scams defined as defraud or embezzlement in an estate agency transactions is predominantly by illegal brokers as they are not regulated by law and also because they need not operate via a firm,” Chan said.

Real estate practitioners are required to follow strict guidelines when advertising, which include the practitioner’s real estate negotiator (REN) or real estate agent (REA) number and the registration number of the firm they represent. This is crucial information that the public can use to verify with the Board of Valuers, Appraisers, Estate Agents and Property Managers (BOVAEA). Those who are unable to present proper paperwork should be questioned. Chan also warned the public against real estate practitioners who pressure their clients into financial commitments, more so when they seem to be withholding information.

What can you do?

When you realise you have fallen for a scam, the first instinct is to panic. MIEA reported that one of the barriers to victims coming forward was the embarrassment they faced when they admitted to falling for a scam. Particularly in regards to transactions that do not involve a large sum of money, victims seldom choose to confront the situation.

Regardless of such inhibitions, Chan recommends victims lodge a report to the police. If the scam involves a housing development, victims should lodge a report with the Ministry of Housing and Local Government (KPKT). These reports will be able to provide authorities with data, assisting not just yourself, but future victims. In order to warn the rest of the public of such instances, she added that victims could contact the press for further outreach.

 

 “Research and verification are vital for any transaction or purchase,” Heng said.

Homebuyers are encouraged to work only with registered RENs or REAs, whose authenticity can also be verified via a written authorisation from the owners of the property being sold. In the case of homeowners eager to rent or sell their property, reach out to professionals rather than appoint an unregistered broker, even if it is someone you trust. Especially when making deposits, ask yourself these questions; could it be an individual’s bank account you are sending your money to? If it is a company, is it a registered one?

“By no means it’s all safe and well, dealing with registered persons but at least they are known, the regulatory bodies are able to take more immediate action or even deregister them, there is accountability when one is registered,” Chan said.

As more and more Malaysians become comfortable handling transactions online, their vigilance begins to diminish. 

“Not only are property scams more prominent, but other scams are also. Research and verification are vital for any transaction or purchase,” Heng said.

She noted that the digitalisation of real estate created other challenges for homebuyers and estate practitioners. Many people enjoy visiting the unit itself or its sales gallery when looking for property. These are preferences that will be easier to accommodate with the easing of Covid-19 pandemic restrictions, but the trend of digitalisation is not likely to falter in the coming years.

As the property industry continues to evolve, there will be new challenges for all stakeholders involved. Learn more about protecting yourself in real estate transactions by visiting MIEA’s public awareness campaign, via www.instagram.com/myrealagents/ 

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Interest rate cuts, govt incentives spur buying interests

“We believe the strong growth in our young buyers is both a natural evolution and as a result of a conscious strategic effort we have made to appeal to this important customer group,"-
Datuk Chang Khim Wah

 

Eco World Development Group Bhd president and chief executive officer Datuk Chang Khim Wah told StarBiz the increase in younger buyers was due to a conscious strategic effort made by the group to appeal to this target market.

Property developers are seeing a pick up in sales, especially from younger buyers, as the numerous interest rate cuts and government incentives have spurred buying interest.

Eco World Development Group Bhd president and chief executive officer Datuk Chang Khim Wah said the increase in younger buyers was due to a conscious strategic effort made by the group to appeal to this target market.

“During our initial years of operations (circa 2015) the percentage of young buyers (below 40 years old) was around 43% and today it is more than 70%.

“We believe the strong growth in our young buyers is both a natural evolution and as a result of a conscious strategic effort we have made to appeal to this important customer group, both through the products we are offering as well as the way in which we engage them via social media and digital channels, ” he told StarBiz.

Of the 70%, Chang said around 50% are in their 30s and the remaining 20% are in their 20s. “We are particularly happy that a good number of these buyers include children of our own customers and residents in the vicinity of our development. This validates our efforts over the last few years to make a strong pivot to serve the needs of this market segment and the wider M40 group.

“Our upcoming launch of the new Duduk series of vertical townships offering semi-furnished apartments priced below RM400,000 at Eco Ardence and Eco Sanctuary, as well landed homes starting from RM500,000 at Eco Botanic 2, will enable us to further capture the hearts and minds of this very important market segment.”

Chang said the prolonged movement control order (MCO) period has really made many young people realise that the quality of home and living environment matters greatly.

Mah Sing Group Bhd chief executive officer Datuk Ho Hon Sang (pic below) said as the bulk of its projects comprised units within the affordable range segment, the majority of its buyers comprised those below 35 years of age.

“For Mah Sing, 84% of our target sales for 2020 are for residential properties priced below RM700,000 with key focus in the affordable segment. We typically see about 65% of buyers who are 35 years and below, for most of the affordable projects were launched in recent years. Hence, the majority of our buyers are first time homeowners.”

Despite the challenging market environment in view of the Covid-19 pandemic, Ho said demand continues to be resilient as property remained one of the safest forms of asset class for long-term capital protection and appreciation.

“Malaysia’s population is still very young with 66% below 40 years old and as such, household formation continues to be strong. Affordably-priced properties of good quality and at strategic locations remain highly sought after.

“This is especially for first-time home buyers, which augers well for Mah Sing’s product composition.”

Sunway Property said it is seeing increasing interest from younger buyers from 25 years to 35 years in its properties that are transit-oriented and have good facilities nearby.

“For example, our developments such as the transit-oriented Sunway Avila in Wangsa Maju, the integrated and transit-oriented Sunway Velocity TWO and the youth-focused development of Sunway Grid in Sunway Iskandar has seen enthusiastic response from younger purchasers, ” it said.

Property data, analytics and solutions provider MyProperty Data chief executive officer Thor Joe Hock said the median age for residential property transactions has gradually dropped over the years.

“When we look at the over 2.5 million residential property transactions, including serviced apartments, it appears that the median age of buyers from 2000 to 2019 has remained largely unchanged at between 34 to 35 years of age.

“However, when you break it down into landed and non-landed transactions, we start to get a clearer picture. The median age for non-landed properties has fallen from 40 years in 2000 to 28 years in 2019; while the median age for landed property purchasers marginally decreased from 40 years to 37 years over the same period.”

MyProperty Data manages a property data portal called PropertyAdvisor.

Meanwhile, Lagenda Properties Bhd managing director Datuk Jimmy Doh said more than half of its buyers are below 39 years of age.

“We believe as young people start new phases in their lives, for example getting a job or starting their own families, they prefer to stay independently and have their own space, granted that the properties are within their price range.

“Over the past few years, we have been seeing an increase in buyers. Our properties are priced below RM200,000, ” he said.

MIDF Research in a recent report said the aggressive overnight policy rate (OPR) cuts have improved home buyers’ purchasing power.

“Bank Negara cut its overnight policy rate for the fourth time this year by 25 basis points (bps) to a record low of 1.75% in July due to the severe impact of the Covid-19 pandemic on the global economy. The aggressive OPR cuts this year are positive to the sector as it improved home buyer’s purchasing power by reducing loan installments.

“We estimate monthly installments to reduce by 14%, after 125 bps cut for RM500,000 loan with a loan repayment period of 30 years, which is quite significant in our view. Hence, we think the record-low interest rate will partly help to alleviate home buyers’ issue of securing home financing, as the record low yield has boosted the affordability of home buyers.”

MIDF Research also said it expected loan demand to recover in the second half of 2020.

Citing Bank Negara’s statistics, it said total applied loan for the purchase of property improved sequentially by 52.9% month-on-month to RM13.1bil in May, after plunging by 64.8% month-on-month in April.

“Note that total applied loan recorded steep decline in April due to the disruption to business activity following the commencement of the MCO.

“Nevertheless, total applied loan in May was lower by 61.8% year-on-year while cumulative total applied loan in the first five months of 2020 was lower by 33.6% year-on-year, indicating buying interest was subdued.”

Looking ahead, the research house expected buying interest to recover in the second half of this year, spurred by incentives introduced by the government.

Under the Short-Term Economic Recovery Plan (Penjana), which was announced in June, the government reintroduced the Home Ownership Campaign (HOC). Under the HOC, stamp duty exemption will be provided on the transfer of property and loan agreement for the purchase of home priced between RM300,000 and RM2.5mil.

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Lessons from Penang affordable housing

AS we all know, affordable housing is the saving grace for the middle to low income group in our common dream to pursue the “roof over our heads”.

Most often, aspiring homebuyers are sandwiched between increasing property price and developers’ tendency to build high-end apartments especially in greater KL for the last decade.

The introduction of PR1MA and other affordable housing agencies by the federal government is aimed at addressing this gap and to promote better home ownership as part of the prime minister’s national transformation programme. Nonetheless, not many realised that affordable housing is also a state initiative whereby state governments are free to introduce affordable housing schemes given that land and development are within the exclusive power of the state under the Federal Constitution. For instance, Penang is fully behind the notion of affordable housing by placing their top priority on increasing homeownership ratio within the state.

Checking online, there are currently 29 affordable housing projects in Penang with 12 being developed by the state government and the other 17 by the private sector. Penang is delivering a commendable amount of affordable housing by trading plot ratio of built-up area in exchange for more units to be built.

The state government is constantly reviewing and updating the criteria for the purchase of affordable housing in Penang. A person who already owns a property can still purchase affordable housing in Penang provided the person can satisfy the conditions imposed.

For example, the house to be purchased must be of higher value than the one already owned.

In addition, for those who are not born in Penang, under the talented and skilled category, they may also purchase affordable housing in Penang provided they undertake to reside there for a minimum of five years. In short, affordable has become a driver for talent retention. This ultimately helps to upgrade living standard in Penang.

On the flip side, Penang has uncovered a problem. Those who are entitled to affordable housing may not qualify for financing, especially those from the lower income group as they are considered as high risk by banks.

Job and income security at this level are extremely vulnerable given the high cost of living that in effect reduces disposal income. Bank and financial institution are after all profit-making entities. Loan disbursements below a certain threshold amount does not always generate their desire margin. Many expiring home owners are left helpless.

While nothing is perfect, one can only achieve success through lessons learned along the way and from history. The federal government is aware of the high loan rejection rate. It has, therefore, provided a 10% loan guarantee and First House Deposit Financing to help purchasers with their downpayments. The “Rent to Own” scheme was also introduced to circumvent the stricter loan financing situation.

Penang has introduced a similar Rent to Own scheme. Under this scheme, the state government provides 30% of the home price so that the house buyer can seek a 70% loan margin.

PR1MA, on the other hand, is facing difficulties finding suitable land as land is state matter. There is also a tendency for the state government to allocate land for this purpose in areas they want to urbanise, but which are often far from amenities and transportation links.

We all know that to develop affordable housing is not the best commercial decision to make because profit margins are definitely lower. As such, we cannot expect private sector developers to always bear the cost.

Penang, on the other hand, is able to overcome this problem by reducing the development charges via an increase in plot ratio. This then attracts private sector developers to come in.

A recent survey conducted by PR1MA shows that buyers prefer to purchase residential projects close to schools, clinics and shops. They also prefer access to transportation. Penang is closer to achieving its objective in the affordable housing arena because it “focuses on the homeowners”.

Under the recently announced Penang Transport Master Plan, the state government is mulling over RM8bil worth of projects that will enhance connectivity.

The development of an underground tunnel from Gurney Drive to Bagan Ajam, Gurney Drive to Jelutong Expressway and an alternative road connecting Gurney Drive right up to Batu Feringhi will really improve connectivity.

Penang is ambitious in executing its affordable housing plans. It is also spot-on when it comes to addressing the different issues connected with this subject.

The banking sector must buy into it. Banking and financial institutions are governed by the fiscal policy of the federal government. Maybe some mandatory quota or corporate social responsibility initiatives can be imposed on banks to provide loans to deserving house buyers. So it is timely that Bank Negara has called for a comprehensive and carefully designed National Planning Policy to support the Government’s aim in delivering more social housing in its recently released annual report.

By Chris Tan

Chris Tan is the founder and managing partner of Chur Associates.


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