RCEP to boost our property market

RCEP will promote and facilitate international trade among the 15 participating countries in the Asia-Pacific region and the expected increase in free trade will have a significant impact on the Malaysian property market. -NST/file pic.

The signing of the Regional Comprehensive Economic Partnership (RCEP) signifies the world's largest trade agreement and will contribute towards sustaining Malaysia as a preferred trading hub and investment destination.

RCEP will promote and facilitate international trade among the 15 participating countries in the Asia-Pacific region and the expected increase in free trade will have a significant impact on the Malaysian property market.

Higher trade and economic activities will impact on the occupation, investment and development sectors of the property market. Real estate space is a local input in the production and supply of goods and services. Increased exports lead to the expansion of domestic production.

Increased domestic production increases the demand for industrial space. Imports also have an impact on demand for real estate space. Goods imported need to be stored and distributed through warehouses and logistic properties.

These goods are then displayed and marketed at various outlets points thereby increasing the demand for retail spaces in retail malls.

Regional trading bloc and trade liberalisation will encourage foreign direct investments (FDI). These FDIs will create demand for industrial land and buildings. New capital investments will spur demand for more financing activities from the banks.

Once the plants and machines are in operations, it will create employment and demand on other factors of production. Higher economic growth will drive the capital market which will attract more foreign investment fund flows investing into local equities.

With increased economic activities, occupation demand for real estate space will cause rental increase. With inelastic new supply, potential future rental growth and prospective capital appreciation, investors will start to invest in real estate leading to an active investment market with the more participation from the institutional investors.

Developers will react to prevailing rents and capital values when they appear to signal a profitable opportunity. If prices rise, more developers will respond to these signals, the aggregate flow of supply into the market increases.

These new spaces will meet the requirements of the occupiers and investors e.g. floor plate size, specification and network connectivity requirements

Real estate service providers such as property consultants played an important role in the whole process by aligning their service standards to the requirements of the regional and global clients.

It is envisioned that the RCEP will open up markets and help in the recovery post Covid-19 pandemic. With increased economic activities, it will give rise to more derived demand for various real estate spaces thereby leading to an improved property market performance in the future.

DR. TING KIEN HWA

Professor of Property Investment

Centre of Real Estate Studies

Faculty of Architecture, Planning & Surveying

Universiti Teknologi MARA

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Foreigners Not Welcome as Malaysia Joins Property Clampdown

Malaysia Bans Foreigners From Project

https://www.bloomberg.com/news/videos/2018-08-28/malaysia-bans-foreigners-from-project-video

https://youtu.be/Xqnq7QFJpiI

https://youtu.be/8FJw3z0J340

• Mahathir’s planned crackdown taps into nationalist rhetoric
• Housing affordability has driven restrictions around the world

Hanging a ‘foreigners not welcome’ sign on a giant real estate development, Malaysia’s prime minister this week appeared to add to housing curbs around the world fueled by soaring home prices and populist politics.

Describing the Chinese-backed $100 billion Forest City as “built for foreigners” and beyond the reach of ordinary Malaysians, Mahathir Mohamad tapped into the nationalist rhetoric that helped secure him an election victory -- and global angst over housing affordability. Around the world, post-financial crisis property booms driven by low interest rates have left locals struggling to buy homes.

“The tension around foreign investment is always going to be much more acute when affordability is getting worse,” said Brendan Coates, a researcher in Melbourne at the Grattan Institute think tank. When locals get “priced out of the market,” foreign buyers may be blamed even when their effect is small, he said, commenting on the global picture.

Hanging a ‘foreigners not welcome’ sign on a giant real estate development, Malaysia’s prime minister this week appeared to add to housing curbs around the world fueled by soaring home prices and populist politics.

Describing the Chinese-backed $100 billion Forest City as “built for foreigners” and beyond the reach of ordinary Malaysians, Mahathir Mohamad tapped into the nationalist rhetoric that helped secure him an election victory -- and global angst over housing affordability. Around the world, post-financial crisis property booms driven by low interest rates have left locals struggling to buy homes.

“The tension around foreign investment is always going to be much more acute when affordability is getting worse,” said Brendan Coates, a researcher in Melbourne at the Grattan Institute think tank. When locals get “priced out of the market,” foreign buyers may be blamed even when their effect is small, he said, commenting on the global picture.

A wave of restrictions or taxes on foreign purchases already stretches from Sydney to Hong Kong to Vancouver. Measures targeting foreign home buyers have included stamp duties, restrictions on property pre-sales to non-residents and limits on the types of homes that can be purchased.

‘New Colonialism’

New Zealand is banning foreigners from buying existing residential properties after Prime Minister Jacinda Ardern campaigned in last year’s election on pledges including affordable housing. Canada and Australia have rolled out one restriction after another, and Singapore just ramped up a tax on overseas buyers. Denmark and Switzerland have restrictions, a Grattan report shows.

The 93-year-old Mahathir’s comments came at a late stage of the game. Globally, property shows signs of cooling from the post-crisis boom. His concern seems to be sparked not by property market overheating but, rather, foreign investments that don’t benefit Malaysia and what he terms the risk of “a new version of colonialism.”

Late Tuesday, a statement from Mahathir’s office said the nation welcomes all tourists, including from China, as well as foreign direct investment that “contributes to the transfer of technology, provides employment for locals and the setting up of industries.” It didn’t refer to Forest City.


“Mahathir has never liked the idea of Forest City or the idea of many foreigners buying up property in Malaysia,” said Ryan Khoo, co-founder of Alpha Marketing Pte Ltd., a Singapore-based real estate consultancy.

Foreigners will be blocked from buying units at the project, on artificial islands in Johor, and refused visas to live there, Mahathir said at a press briefing on Monday. That left analysts and local officials parsing his words to guess at how bans might work. The Chinese developer, Country Garden Holdings Co., said his comments clashed with past assurances. The project’s targeted buyers have included people in mainland China.

With a wall of Chinese money blamed for pushing up prices around the world, local lawmakers, media and the public can struggle to disentangle xenophobia from legitimate efforts to constrain inflows of capital. In Australia, “populist reporting” exaggerated the role of Chinese investors, according to Hans Hendrischke, a professor of Chinese business and management at the University of Sydney.

Read more on global property:

Cracks Show in Property Markets From Sydney to New York  New Zealand to Crack Down on Foreign Home Buyers  Mahathir Bans Foreigners From $100 Billion Property Project  Singapore Curbs May Hit Luxury Property The Hardest  In World’s Most Livable Cities, Few Can Afford to Buy a Home

Chinese buyers had the “bad luck” of becoming overly visible in markets around the globe, said Carrie Law, chief executive officer of Juwai.com, a Chinese international property website.

Foreign buyers get blamed for soaring home costs even when the evidence is minimal. More than 60 percent of Sydney residents cite foreign investment for price increases, according to a survey from University of Sydney academic Dallas Rogers. That’s despite research by Australia’s Treasury showing only a marginal impact. Likewise, data suggest foreign buyers play only a small role in New Zealand’s housing market.

(Updates with Mahathir statement in seventh paragraph, chart on global restrictions.)

No Chinese belt, road or bedrooms for Malaysia

Construction works going on normally at the mammoth Forest City project in Gelang Patah in Johor

PERPLEXED, wounded, indignant or still optimistic. The Chinese developer Country Garden Holdings Co can put any spin it wants on its Forest City project, a US$100bil Malaysian township whose fate suddenly has been thrown into doubt after Tun Dr Mahathir Mohamad’s pointed refusal to let foreigners buy apartments or live in them long term.

One thing is clear, though: The prime minister is not acting impulsively. The project claims to be a “new global cluster of commerce and culture,” and a “dream paradise for all mankind.” However, in Malaysian political discourse, Forest City is just a gigantic Chinatown of 700,000 residents.

Taking on the developer is part of Mahathir’s broader plan to redefine Malaysia’s relationship with Beijing, pulling Kuala Lumpur away from the client-state mindset introduced by his predecessor.

Already, the 93-year-old leader has cancelled the Chinese-funded East Coast Rail Link, dealing a blow to China Communications Construction Co, which was building the US$20bil belt-and-road route. Datuk Seri Najib Tun Razak, ousted in May, claimed the link would bring prosperity to eastern Malaysia.

But Dr Mahathir, who spoke bluntly in Beijing this month against “a new version of colonialism,” took a very different view of the railway, which would have connected areas near the Thai border along the South China Sea to busy port cities on Malaysia’s western coast, near the Strait of Malacca.


He also shelved a natural-gas pipeline in Sabah, a Malaysian state on the island of Borneo. Dr Mahathir justified the cancellations on the grounds that they were too expensive.

However, the abrupt message to Country Garden, which is neither linked to the Chinese state nor would add a dollar to Malaysia’s national debt, shows that sovereignty – and Malaysia’s racial politics – are Mahathir’s real concerns.

Two-thirds of the homebuyers in Forest City are from China. Last year, as a trenchant critic of Najib’s policies, Dr Mahathir flagged the risk that anybody living in Malaysia for 12 years would be able to vote.

Country Garden should have seen the political risk in marketing the flats to mainland Chinese, who were separately lapping up long-stay visas under Najib’s Malaysia My Second Home programme. Najib’s generosity toward the mainland wasn’t the natural state of affairs. In 1965, the country expelled Singapore from the Malaysian federation out of fear that the peninsula’s majority Muslim Malays could lose their political dominance to the island’s ethnic Chinese.

If Country Garden misread the political tea leaves, it’s also wrong to bark up the legal tree after Dr Mahathir’s outburst. So what if Malaysia’s national land code permits foreign ownership? Approval of global investors may not matter all that much to a politician who has, in his previous innings, trapped their money at the height of a financial crisis.

The new prime minister isn’t as reliant on Beijing as his predecessor. If anything, he has to reward local businessmen and contractors for switching their allegiance from Barisan Nasional, the erstwhile ruling coalition that suffered its first loss of power in six decades.

It’s a given then that Malaysia under Dr Mahathir will have little appetite either for One Belt, One Road – or, for that matter, three- and four-bedroom apartments that could create a new political constituency.

Forest City could still be salvaged, but as a predominantly local project. If Donald Trump can unilaterally change the rules of game for China and Chinese businesses, so can, in his limited sphere, Dr Mahathir. As far as Country Garden is concerned, he just has.

Credit Aandy Mukherjee— Bloomberg

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Leaving a legacy by buying a house first before a luxury car ...

DURING big festive celebrations such as Hari Raya Aidilfitri, Deepavali and the recently celebrated Chinese New Year, it is common to see families with a few generations gathered together.

Our grandparents, parents, uncles and aunties would talk about the legacies left by our ancestors, and the stories often attract a lot of attention whether from the young or old.

Perhaps, the topic of leaving a legacy is something worth sharing as we embark on a brand new year.

For years, I have been touched by the catchy tagline of a renowned Swiss watch advertisement, “You never actually own a (the watch brand), you merely look after it for the next generation”.

While most of us can relate to the thought, not all of us can indulge in such luxurious watches or be interested in buying one. However, at some point in time, we may be looking at buying a property to pass down to our younger generations.

Whenever the topic of leaving a legacy is brought up, I would recall the lesson that I learnt from my late father. My father embarked on a long journey from China to Malaysia at the age of 16. With years of hard work and frugality at his peak, he managed to own a bus company, the Kuala Selangor Omnibus Co.

Other than his bus transport business, he only invested in his children’s education and real estate. He financed seven of his eight sons to have an overseas university education, and when he passed away, he also left four small plots of land in Klang and a company which had 34 buses.

As I look back now, what my late father invested in unintentionally was very beneficial to me when I came back from my studies as an architect. With the land he handed down and the knowledge he equipped me with, I intuitionally got myself involved in small real estate development, and later founded my property development company, Sunrise, in 1968.

Many people have thought of leaving a legacy. The crucial questions often asked are, when should we start planning for it, and how should we go about it?

For financial planning and investment, I always believe that the earlier we start, the better off we are. The same goes to leaving a legacy.

If you plan to buy a property, it is advisable to start earlier as it is more affordable to buy it now as compared to 10 or 20 years down the line especially with rising costs and inflation in mind. You can start with what you can afford first and focus on long-term investment.

It is proven that property prices appreciate over a period of time, especially when we plan to hand over assets to the next generation that easily involves a 20- to 30-year timeline.

As a developing nation which enjoys high growth rate, Malaysia’s property values will also appreciate in tandem with the economic growth in the long run.

Nowadays, we often hear youngsters comment on the challenges of owning a house due to the rising cost of living. I believe that besides starting with what you can afford, it is also important to plan your financial position wisely and to differentiate between investment and spending.

Investing in properties, commodities, shares, etc. is also a form of savings which can help to grow your wealth and to leave a legacy. On the other hand, money spent on luxury items may depreciate over time from the day you buy them. If we can prioritise investment over expenditure, it is easier and faster to achieve our financial goals.

So, if you haven’t already started to plan, do consider leaving a legacy by buying a house first before a luxury car, branded bags or expensive gadgets, as the latter are considered ‘luxury’, not necessity.

Even if you may not have a spouse or children at this point in time, it’s better to start now than later, as our financial commitments tend to grow bigger as we progress into the next stages of our lives.

Most of us hope our lives matter in some way that can make an impact on our loved ones. The idea of leaving a legacy can take many forms, such as equipping the younger generations with knowledge and values, or leaving them fond memories.

Those are all important to work on and they leave a footprint to those lives you touch. If you are also planning to hand over physical gifts, always remember to start earlier with what you can afford, and focus on long term investment.


By Food for Thought Alan Tong

Datuk Alan Tong has over 50 years of experience in property development. He was the world president of FIABCI International for 2005/2006 and awarded the Property Man of the Year 2010 at FIABCI Malaysia Property Award. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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