Prism Outlook 2016

PRISM 2015 wrapped up a few weeks ago and one of the Key speakers was Steve McKnight. Steve McKnight is a qualified chartered accountant who acquired his first property in 1999, and since then he has purchased over 800 income-producing dwellings.

In both his talks on topics ‘How to use real estate to achieve your true life’s purpose’ and How to find and buy a great deal’, Steve talked about guiding principles that one must adopt before investing.  Steve also talked about the kind of attitude and aptitude reprogramming one needs to make his or her vision a reality.

Steve shared how he began his journey as an investor. It was after attending a wealth creation seminar in May 1999, Steve began investing in positive cash flow real estate, beginning his property portfolio with a $44,000, 3-bedroom house in Ballarat, Victoria. What was special about the property was that after all expenses, the rent provided a small surplus.

“The plan was simple”, says Steve. “If we could own enough positive cash flow properties, then the surplus income could be used to replace the earned income from the accounting practice, at which point Dave and I would be financially free.”

Using the money made in their accounting practice, Bradley & McKnight began buying positive cash flow rental homes and blocks of units in Ballarat, La Trobe Valley, Tasmania and New Zealand. Aside from rental income, some of the properties were on-sold using vendor finance to potential home buyers who could prove creditworthiness but lacked a deposit.

Steve spoke to a full house and the crowd sat listening intently. There were far too many takeaways to mention so, don’t forget to book your tickets for PRISM 2016. We look forward to having Steve back again in the future and we wish him all the best.

IMPACT OF GST ON PROPERTY INVESTMENT

Since its implementation on the 1^st April 2015, Goods & Service Tax (GST) has never been fully understood in totality, especially with property investors. Thus, the Senior Assistant Director of Customs II, Sector III-Property, Construction and Professional, GST Division of Royal Malaysian Customs, Lau Thye Mun share with us at PRISM 2016 and gave us closure on the ‘Impact of GST on Property Investment’.

Who is liable to register with GST? Lau answered, “Property owners, developers, contractors, real estate operators professionals and any person involved in the operation of land development, whether in a company, partnership, statutory body or as a sole proprietor are liable to register if their annual turnover exceeds the RM500,000 threshold of 12 months supply. However, one may apply for voluntary registration if the annual turnover does not exceed the threshold, but must remain in the GST system for a minimum period of 2 years”.

The procedure to develop SoHo as residential shall comply with the Housing Development (Control & Licensing) Act 1996 and the condition are:

Obtained Approved Planning Letter to develop residential property

Approved layout plan and approved layout building shall contain the characteristic, features and design or adapted to be used or to be used as  a dwelling

The sale and advertisement required permit issued according by the Housing development Rules

The developer and purchaser sign the Sale and Purchase Agreement under the Housing Development Rules

WHAT, WHERE AND WHEN IN THE MALAYSIAN PROPERTY MARKET DURING CHALLENGING TIMES

Dr. Daniele Gambero is the Chief Executive Officer of REI International Holding Sdn Bhd, the strategic marketing consultant for property developers. In the recent PRISM 2015, he talked to property players about the ‘What, Where and When in the Malaysian Property Market During Challenging Times’. According to him, property investment decisions are made based on reality, not perception. One must stop buying concept driven developments and start buying demand driven developments. To know the demand, we must first analyse our Malaysian demographics, who are the buyers? He stated that 38% of Malaysian renters consists of 18 – 24 years, while 48% of owners are from the 25 – 32 years group of people. Which group are we looking at? Generation-Y, are more interested in safety features, trendy & conducive life-style as well as connectivity. The next question would be their purchasing power. This generation needs affordable housing as it is harder for them to get their mortgages approved. Dr. Gambero said “60% of houses should have values from minimum RM200 up to max RM700 psf to cater to the Generation Y’s needs.

He also highlighted in his talk that one of the game changers in the Eleventh Malaysian Plan is to strengthen infrastructure to support economic expansion. This improves on the connectivity, which implies the ‘where’ you should invest or develop your property. “Smart buyers will look for scarcity,” he added. How do you get your facts and figures right when investing? The answer is – education.

5 LATEST MUST-KNOW LEGAL TRENDS FOR SUSTAINABLE PROPERTY INVESTMENT IN MALAYSIA

Chris Tan is the Founder and Managing Partner of Chur Associates, a boutique legal practice that thrives in delivering business friendly solutions for its clients and having a niche positioning of ‘Everything Real Estate’ serving the entire value chain from the upstream to the downstream.

Speaking to Chris, he seems to have it all-together. He is an interesting speaker and he brings his own flair to his talks. One cannot help but remember him. Chris shared an interesting topic with us “5 LATEST MUST-KNOW Legal Trends for Sustainable Property Investment in Malaysia”. Chris talked about the 5 current trends in the property market today.

And what exactly are these 5 trends?

Homebuyers protection over investor’s protection

Property Management as a Driver

Harder to be a developer

Collective Investment

Strata is the way of life

If these are the current trends according to Chris, then 2016 will have a similar impact. Perhaps we need to do our homework as it is a big financial and emotional decision and therefore we need to take into consideration what experts have to say about current trends before we make our decisions.

Chris also shared his insight on a panel discussion entitled “Post Budget 2016 – Where is the Economy Heading” together with fellow panelist Veena Loh General – Manager of Malaysian Property Incorporated, Ho Mee Ling – Founder and Manging Partner of HML & Co and Richard Onn – National Tax Director of TY Teoh International.

It was an interesting and engaging discussion and for those of you who missed it, we advise you to book your tickets early for PRISM 2016.

REVISITING LESSONS FROM 97-98 & 2009 CRISIS?

Faizul Ridzuan, founder and CEO of FAR Capital, a consulting firm specializing in property investment and author of ‘WTF? 23 properties by 30’  was the first speaker of PRISM 2015. The enthusiastic young investor spoke on ‘Revisiting lessons from 97’ to 98’ and 2009 Crisis’ to a very receptive audience.

Mr. Faizul started with a brief history of what happened to Asia in 1997 where we had a high dependence on foreign currency debt via corporate debt, foreign exchange reserves to short term debt was low and the rise in inflation led to the expeditious rise in property prices. Policy makers reacted to these affects by hiking short-term nominal interest rates and real estate rates. SME’s were put out of business, bank loans were tightened and it was an extremely difficult time.

So, is Malaysia heading into another crisis? Faizul takes us through a step by step analysis of the situation. Non-performing loans have decreased inversely with the increase of monetary deposits (as of September 2015). Malaysia’s unemployment rate is still lower than some of the more economically stable countries such as Canada, Germany and United Kingdom. So to answer the question above, fundamentally, it is a “no”. Malaysia has lower interest rates. Our banking system is more resilient and we are persistently taking deflationary measures.

Faizul shared an elaborate plan and strategy on investing in these challenging times, complete with future projections. Starting with four properties and a monthly net cash flow of –RM2,359, one can earn RM20,938 in 25 years. Those are just a few of the many tips he talked about during the event. But most importantly, his reminder to us all, “Do not buy to flip!”

“The property market will be challenging in 2016” says Faizul. “But due to the inelastic nature of the market, it will be more resilient in terms of sensitivity to price shocks against the stock market.”