Apr 28, 2017 Last Updated 8:39 AM, Sep 4, 2016

Mortgage Expert

Is Pricing The Crux Of The Housing Affordability Issue?

The problem of housing affordability continues even after many cooling measures were put into place by the Government.

Malaysians will not be able to afford properties if housing prices continue to escalate unchecked, warned Datuk Charon Mokhzani, managing director of Khazanah Research Institute.

One way to contain the rising property prices is by flooding the market with supply to pull down the prices, so more people could afford to own property, said Charon.

Other ways are by employing technologies such as three-dimensional building plans and using the industrialised building system would help to reduce costs, hence lowering selling prices.

However, some fear that flooding the market with an ample supply may lead to a property market crash and its chain effect could have worse consequences on Malaysians.

An economist with an investment bank contacted by The Edge Financial Daily said, oversupply in the property market could result in a crippled financial system, similar to the US subprime loan crisis.

“The danger in doing this is that, if we look at the financial crises that have occurred, a lot of these were caused by a collapse in the asset price market, including property prices,” he said.

Speaking at a forum on “Does Greater Prosperity Come with Less Housing Affordability” last week, Charon said that housing prices in urban areas such as Kuala Lumpur and Penang are categorised as severely unaffordable and other less urbanised areas are facing the risk of descending into the same category if rising property prices are not contained.

Government subsidies and cheap home loans were not sustainable ways to address this, reducing housing prices was the solution, added Charon.

Although median household incomes (11.7%) have risen slightly more than median house prices (10.6%), the median house price in KL and Penang is still 5.2 to 5.5 times of median annual household income. According to Charon, this indicates the housing prices are severely unaffordable. An affordable market is one where the median house price is three times median annual household income.

With an increase of barely 1.1% extra, compared to the hike in median house prices, would growth of household income at a faster pace resolve the issue?

An economist, quoted in the same report by The Edge Financial Daily, acknowledged that the transformation of the economy from one that is geared towards low-skilled, low-wage to a high-skilled, high-wage economy is a long-term solution to address the issue of housing affordability.

“From all the investments that we have seen so far, the type of investments Malaysia is attracting is moving in the right direction towards creating high-income jobs,” he said. “But whether it will be enough for the country to propel to a high-income nation status remains to be seen,” he added.

Based on the economist’s observation, the government has not shown a strong commitment to curb the economy’s reliance on cheap labour and low value-added manufacturing to drive the economy.


Iris Lee The editor of iMoney.my, enjoys writing about various topics on personal finance, including property and insurance. She believes that knowledge is the key to making wise financial decisions. Prior to iMoney, Lee was a magazine editor and a book editor.

7 Things To Consider As A Savvy DIY Investor

One thing most people are guilty of is not taking control of their money. Due to lack of education and knowledge, they would rather entrust someone else to take care of their money – be it the bank officers, financial planners or, even, their partners.

The most common investment factors that intimidate the average Joe are that either investing is too complicated or the risk of losing money is too great.

However, with the advent of technology, both factors can be dealt with and it becomes easier and requires less effort to kick-start your investment.

Investing will, of course, require more work than not investing at all. But if you have done your homework, especially to address the two issues above, then investing can be a very rewarding endeavour, with the potential to grow your wealth substantially.

From things to invest in, to ways to do it, the wealth of opportunities you can find and do on the Internet have made it simple and cost-effective to take control of your money.

Whether you’re saving for your child’s education fund, down payment for your first home or your retirement nest, if you have five years or more before you need to get your hands on the money, you’re better off investing in order to grow your money.

The value of your investment may fall but history has repeatedly proven that over the years, a well-managed fund is likely to grow faster than cash in a fixed deposit, or savings account.

Here are a few things you need to consider before you embark to be a savvy do-it-yourself investor:

1. Compare and do your homework

First-time investors often find themselves unable to entrust the responsibility of investing their hard-earned money to a complete stranger like financial planners and it can also be quite troublesome to visit different fund houses or bank branches to compare and finally invest in a unit trust.

Being a personal investor, your best bet will be relying on independent investing platforms to compare and invest in unit trusts.

The emergence of these platforms is the crucial driving force behind the DIY investment trend. With these platforms, investors no longer need to call a bank officer or financial adviser to buy and sell. Instead they can delve into the wealth of information, research articles and performance charts available online and do it themselves for lower fees.

The rise of these investing platforms allows investors to access their investments from the comfort of their computer, or even smart phone in some cases.

2. High return and high risk, or low risk but average return?

Identify your risk profile: conservative, medium or high risk, before you select the funds to invest in. The funds selected should match your risk profile.

Choosing which funds to put your money in is the stage that can be truly daunting for the uninitiated. But there are some obvious starting points.

Review the fund’s volatility quarterly or annually. You can see how a fund performs by looking at the historical data. Compare the fund’s best years with its worst to see if the ride is too wild. If it is too wild for your risk tolerance, consider other funds that are more stable to mitigate the risk of losing money in your investment.

Besides that, investors can also take a look at a list of funds recommended by online platforms. These funds are selected by their in-house research team and are based on both quantitative and qualitative parameters.

Though investment always involves some level of risk, you can improve your chances of making positive returns by choosing a fund that holds some promise of outperforming the market. There is no one best fund for every investor, but it depends on the investor’s financial goals and risk appetite.

3. Drip feed your investment over time

For investors who invest the DIY way for the first time, start by investing a small sum monthly rather than dumping a huge lump sum into one fund. The fear of losing money always looms large when investing, hence no one would appreciate losing 10% or 20% of their hard-earned cash.

Regular investments in smaller amounts can help you weather the storms while still reaping rewards when the sun shines, but whatever you do, investing will always involve some risk.

By drip feeding your investment, you can utilise the dollar cost averaging concept of investing, which is the practice of investing a fixed amount of money regularly regardless of market conditions. By investing a fixed amount on a monthly basis, you accumulate more units when prices are low but lesser when prices of units are high. Thus, a lot of stress is avoided as you do not have to decide whether the fund is expensive or not and whether the market condition is suitable to invest.

4. Be in it for the long-term

One important thing to remember about investing is that it is for the long term. Over the long term, investing your money in a wisely-picked fund will produce far greater returns than you’ll get from your savings accounts.

Financial experts agree that any investment you make should be for the long-term and held for a minimum of 5 to 10 years. If you think you will need the money sooner, to buy a property or pay for your wedding, stick to short-term investments.

5. Beware of investment costs

Though investment costs should not be the sole factor when choosing a fund, it is still important to consider the costs involved. Some of the common costs to look out for are sales charge, annual management fee, trustee fee, to name a few. These fees and charges can reduce your return significantly.

The odd 0.5% here or 1% there may not sound as though it will have much impact on your returns. But, over time, charges make a significant difference to the speed at which your investments grow, so as a DIY investor it makes sense to compare costs before you commit your money.

However, by choosing to be a DIY investor on platform, you can reduce the charges significantly as it has a lean operating structure that enables cost savings to be passed down to investors in the form of lower sales charges.
The last thing you want is to be paying over the odds for a return that is mediocre at best.

6. Don’t auto-pilot your investment

Though your investment should be for long-term, it should never be left unmonitored. Investors should always monitor and keep track of their investments to ensure that they correspond with their ever-changing financial goals and risk tolerance.

Make it a habit to review your portfolio at least once a year to make sure it still matches your goals.

A sensible starting point for the DIY investor is to read up on different funds and monitor their performance over a short period before deciding on one. Set up an account online and invest a small amount first on these investment platforms.

Remember, this is your money and your future. Take control of it and enjoy the rewards that follow after.

7. Understand the market conditions

Whether you are investing in local or overseas markets, knowing the market conditions is crucial for making better investment decisions. You should be well-informed with the latest market changes as a major event in any market may result in a chain reaction, and eventually affecting the returns of your funds.

While research articles are often expensive and kept exclusive to institutional investors, there are investment platforms that provide free independent research article on funds and coverage of various markets to keep DIY investors up-to-date and enable them to make the right call with their investments.

Remember, to be a savvy investor, it‘s important to know what you are investing in, instead of blindly following what’s hot in the market.


source: IMoney

Is Airbnb A Better Deal Than Just Renting Out Your Property Traditionally?


So you’ve bought your first investment rental property, and are now wondering whether to offer long-term or short-term rental options to potential tenants.

Online platforms like Airbnb allows property owners to put up their property for lease for very short-term periods. What makes more money sense? A short-term lease or long-term one?

Both have their own sets of benefits and drawbacks, so it is important to weigh in and consider which options best works for your financial situation and goals.

What are the differences?

airbnb (1)

The long and short of rental

Many landlords prefer a long-term leases as there is more security when a tenant signs on a fixed-period lease, which typically spans from six to 12 months.

Long-term lease arrangements also mean less worry about vacant units and less work to scout for prospective tenants. The long-term period also provides a steady flow of income for the landlord and relieves stress about meeting a mortgage payment for the property.

However, having a fixed-period arrangement also means there will be fewer opportunities for the landlord to make higher profits. For example, if rental rates for the area were to go up, the landlord will not be able to raise their tenant’s rent or adjust the rate to match the market price until the existing lease with a tenant expires.

For the landlord, a short-term rental arrangement will come with higher tenant turnover and thus vacancy rates. Tenants, on the other hand, have been known to favour short-term rental as many do not want to be tied to a longer fixed period.

For the vacationer, short-term residential property rental may make more money sense, as sometimes it can cost a lot less than a hotel.

For example, three nights at Georgetown, Penang for four people (two deluxe rooms) can cost about RM1,678.80 at Sunway Hotel Georgetown.


Taken from Agoda’s website.

However, getting a three-bedroom apartment in the same area only cost about RM631 on Airbnb.


Taken from Airbnb’s website.

While landlords who offer a long-term lease tenure could have a harder time securing a tenant, landlords offering short-term rental find themselves in a growing pool of competition. For example, concepts like couch surfing are becoming more popular than ever and rental properties are cropping up in popular vacation hotspots, so landlords with properties in these areas may just have to double up their efforts to stand out the crowd to snap up potential tenants. While your potential tenant market is wider, so is your competition!

The upside to short-term rental deals however, is that landlords are often able to charge more to make up for the lack of security in these arrangements. While the tenant often has to pay more for short-term rental, they do not have to worry about maintenance fees and has the flexibility to pick their stuff up and leave in a jiffy.

The same type of apartment is being a charged a rental of RM3,500 a month for long-term, while on Airbnb, it costs about RM4,999 for a month.


Taken from Airbnb’s website.

It is also easier for the landlord to make any necessary adjustments to the terms and conditions, as well as to raise the rent without having to wait for an existing tenant’s lease term to end. This will benefit the landlord, who will be able to ensure a healthy profit margin and to even out any fluctuations in market prices or increased expenses.

However, landlords who offer short-term rental will have to ensure their rental is enough to cover utility bills such as water, electric and Internet. Another drawback of short-term rental is that there is a potential loss of revenue if the landlord cannot fill the unit quickly. Short-term rentals depend on the season, as non-peak seasons may see a drop in tenancy.

Also, each time a tenant moves out, the property owner will have to advertise the unit and get it ready for the next tenant. This can include cleaning, painting, replacing fixtures, carpeting and fixing any wear and tear, all of which will incur additional costs.

What are the costs?

There are various factors to consider when it comes to deciding which rental arrangement will work best for you. Short-term rental deals do not offer the security of a long-term lease, but if your property is at a location that appeals to vacationers, a short-term arrangement can be lucrative for you.

On the flipside, you will have to put up with the recurring cost and process of putting up a rental ad. Services like Airbnb charge hosts a 3% host service fee every time a booking is completed on their online platform. The fee covers the cost of processing guest payments and comes out of the house payout.


Taken from Airbnb’s website.

While the service fee may not seem like much, the amount can add up to quite a fair bit if you engage their services on a regular basis.

Meanwhile, if your property is situated near a college, or parked at a commercial areas, a long-term lease can make your property more desirable and you can already expect a steady stream of income in the long run.

Landlords can put up an ad on sites like Propwall at rather affordable rates.


* Rates in Ringgit Malaysia

Landlords may also enlist the help of a real estate agent to secure a tenant, but it will not come for cheap. Many real estate agents charge a standard one month’s rent as commission of finding a tenant. Real estate agents also prefer being paid upfront to avoid being shut out of a commission after a tenant has been found.

There are no hard and fast rules as to whether a long-term lease or short-term rental will work best for your property, but it will help for you to understand the demographic around your area before you start looking around for tenants. For example, should you target expatriates, students, young professionals, vacationers or corporate tenants?

With the right arrangement, in the right location and managed right, the investment rental experience can be extremely rewarding.



Source: IMoney.my

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