Sunway Belfield vs Sunway Shares

 

In Sep 2020, when the world was still full of uncertainties due to Covid-19 pandemic, I decided to invest in a new property in KL.

This would be a much less ideal investment because I was not qualified to get 90% bank loan but in the end, I still decided to proceed as I like the whole package of this development so much.

It is located at KL city center, within walking distance to the upcoming Merdeka 118 precinct, close to monorail/MRT stations, freehold, built by renowned developer Sunway and selling at RM750 psf for its smallest unit. 

It appeared to be a "bargain" to me at least, compared to nearby Opus Residences & BBCC's Lucentia Residences which were well above RM1,500 psf. 

Now the project has achieved VP in Mac25 and I have collected the keys in Apr25. Do I regret my decision to invest in Sunway Belfield?

Case Study: Property Investment No.1

 

My first property purchase, which was also my biggest investment at that time, was a home for my family.

It was in August of 2009 which was around 15.5 years ago.

The property is a newly launched double storey semi-detached (DSSD) house in a gated community bought at a price of RM348,000 directly from property developer.

I was lucky because at that time the property boom was just about to start.

The selling price of new similar properties in the vicinity increased rapidly, in which new launches were snapped up like buying vegetables in the market.

At the time when I moved into my new house in the fourth quarter of 2012, the market value was already close to RM500,000.

Currently the launching price of new smaller size DSSD in the same area is well above RM700,000.

EUPE Joins Belfield & Merdeka 118

 

Since the euphoria in the second half of 2020, the stock market has not been doing well for the past one and a half year.

It seems like my best investment so far since 2021 is the property I invested in, which is Sunway Belfield. 

Of course it's still too early to make any conclusion to this investment. Anything can happen down the road and it might still be possible to turn into a bad investment.

Tower A & B of Sunway Belfield are almost fully sold. Tower C was launched in November last year and the launching price was more than 15% higher for the smallest unit compared to Tower A.

I'd expect at least 30% appreciation in price once the construction is completed in 2024 or 2025. This is the reason I invested in Sunway Belfield in the first place.

In other words, I bought the smallest unit at around RM750 psf and I hope it can reach RM1000 psf once it's completed.

One thing for sure is, there will be much more supply of residential units in this Belfield or Kampung Attap area in the near future.

Big Decision: Property or Not

I mentioned in Sep20 that I'm interested to purchase another property for investment. I'm not just simply talking only, it's for real.

I thought I will not invest in another property again after my last purchase in 2012 but now the HOC announced in Jun20 has encouraged me to look for one.

The main reason is the removal of the 70% financing cap for a third home loan during the HOC period.

I've been out of property investment for quite a long time, and I'm not up-to-date regarding recent projects and price trend. 

After doing some research and attending some webinars about property investment, finally I made a decision to purchase a unit in Klang Valley.

However, one day before I was supposed to place my booking, I realized that I'm NOT entitled to 90% loan for a third residential property!

Case Study: Property Investment No.5

My last property purchase was back in April 2012, which was more than 8 years ago.

My in-laws used to stay in relative's house. When that house was sold, they were forced to rent a house.

Instead of paying rentals every month, I thought it's better to get a house and pay the loan. 

So I decided to buy a house in the same area of my house for them.

At that time, developer was planning to build apartment priced above RM230k there, and 8-year-old landed freehold single storey terrace houses there were asking for around RM130k.

My instinct told me to grab one before it's too late.

Property vs Stock Market Investment

There is no doubt that property and stock market are the two most popular investment not only in Malaysia, but all around the world.

Which one is a better investment?

A successful property investor will tell you that property investment is better and stock market is too risky.

A successful stock market investor will tell you that stock market is better and property is too slow.

When I started my investment journey, I started with unit trust and then stock market. The reason is simple, how can a person with a saving of RM7000 and monthly salary of slightly over RM2000 invest in property?

When Is The Next Property Boom?

Property gurus say: "Property price will double every 10 years". Is it true?

My parent bought a house which cost RM40k back in 1983. If the theory is true, then in 1993 it will cost RM80k, 2003 RM160k, 2013 RM320k and 2023 RM640k.

I don't know at what price similar houses in that area were transacted in the past, but now I know it's worth around RM450k.

This 10-year property price theory looks good as it successfully predicted that after 2013 its valuation will be more than RM320k.

However, we only have 3 more years to reach 2023 and I don't think it can appreciate another RM200k to reach RM640k in such a short period of time.

Batu Kawan: Nothing Comes Cheap

I have been following the development of Batu Kawan for around 10 years. I witness it growing from an embryo to a toddler now.

Yes, it is growing. It's not a miscarriage. 

If you check the label of "Batu Kawan" in this blog, you'll know how much my interest is in its development since it was an empty land with shit everywhere. 

This Batu Kawan is not a plantation company. It's the next satellite town in the mainland of Penang.

I always have a plan to own a property in Batu Kawan and I watched closely those property companies involved.

I quickly signed a cheque to book a unit in Eco Horizon, only to give up after the price of 2 storey terrace was confirmed to be over RM800k.

I went to the initial launch of Aspen's Vertu Resort Condominium in early 2016. The price of those half-furnished units were around RM400 psf, which was not too bad but the total units launched were almost 1,300!

Paramount property also launched their first project of Utropolis Batu Kawan at the end of 2016 called "Sensasi". Even though the price tag was "affordable" at below RM300k, it's only a 500 sq ft single room unit which was more than RM500 psf.

Now 4 years have passed, Eco World has launched 3 phases of its landed projects there, namely Ashton, Byrdon & Camdon. 

Camdon is promoted as "New landed home ONLY from RM426k". Well, you only get one floor of a 2-storey townhouse, not even one and a half floor... I think this starting price of RM426k is only for the upper floor, so it's a "landed home" without a land except car park. 

Aspen has added Vivo & Vogue high-rise & high density projects, as well as a rare landed development Viluxe which was priced almost similar to Eco Horizon. Paramount has come up with two more high-rise projects Suasana & Sinaran.

I read that people queued overnight to book a unit of Vivo Executive apartment in 2019. I thought this only happened in 2010-2012? 

Luckily this Vivo project offers 1,530 units to fulfill the needs of so many people.

Let's check out how many units of apartment have been launched in Batu Kawan now, excluding the low-medium cost Pangsapuri Suria by the state government.

Utropolis @ Batu Kawan

Utropolis Sensasi

2 blocks

Size: 500 - 729 sq ft

Total units: 612

Utropolis Suasana

2 blocks

Size: 926 - 1313 sq ft

Total units: 491

Utropolis Sinaran Residence

2 blocks

Size: 667 - 1044 sq ft

Total units: 982

Aspen Vision City

Vertu Resort Condominium

5 blocks

Size: 740 - 1290 sq ft

Total units: 1282

Vivo Executive Apartment

3 blocks

Size: 730 - 830 sq ft

Total units: 1530

Viio Executive Apartment

2 blocks

Total units: 980

Vogue Lifestyle Residence

2 blocks 

Szie: 530 - 1750 sq ft

Total units: 627 

In total there will be 6,504 high-rise units available when all these 7 projects are completed. Surely, there will be more to come, as Eco World hasn't started its high-rise project.

If you are buying for own stay, there is no problem. If you are buying for investment, then you might face some problem in renting or selling it. 

However, I think long term should be alright if you have the holding power.

I foresee Batu Kawan as a thriving township in the future. That's why I always wish to get a property here either for own stay or investment. 

Before that, everything was blur, you heard the news but not sure whether they were going to materialize. 

We have a 18-holes golf course & Eco Marina cancelled. Bosch's initial RM2bil solar project was called off. The UK Hull University is also nowhere to be seen.

Columbia Asia Hospital, in which its construction was initially expected to be completed in 2019, might see its plan postponed or whatever. 

We saw Ivory divested from its partnership with Aspen to develop the prime land surrounding IKEA, and also Malton exited the land currently occupied by Eco Horizon.

Nevertheless, now we have IKEA up and running, that's the main thing, along with the decent Penang Design Village. 

Hull University is now The Ship Peninsula College who partners with another UK-based University of Plymouth, while KDU is now University of Wollongong (UOW) Malaysia KDU Penang University College. 

Peninsula College is starting their student intake now in Jun 2020, while UOW has done so earlier this year.

SJK(C) Kuang Yu is also said to be relocated to Batu Kawan from Kuala Muda.

For me, the catalyst for Batu Kawan development is its modern industrial park (BKIP). There are Honda, VAT, hp, Flextronics, Western Digital/Sandisk, Micron Memory, Haemonetics, Jabil, Boston Scientific, Hotayi as well as local companies stock market investors are familiar with such as Inari, Pentamaster, Vitrox, UWC, Mi Technovation, Greatech etc.

Bosch is making a comeback after recently signed a deal to set up a manufacturing facility here for the testing of semiconductor components and sensors.

You can imagine how many thousands of people working in Batu Kawan. There will be demand in properties here.

At the moment only the Utropolis Sensasi is completed and put on sales or rent. A simple search online shows that rental rate is not bad with 500 sqft asking for around RM1000, 729 sqft around RM1400 and studio around RM700 in average.

However, I'm not sure whether these rental rates have their market or not. If not, owners might need to drop it substantially to fight off the stiff competition. 

Vervea, the 3-storey shop offices next to IKEA & opposite of Eco Horizon, which were completed quite some time ago, are still mostly vacant even though the asking rental is quite attractive.

After giving up temporarily to grab a property in Batu Kawan since 2013, I do hope that I can get a cheaper one when a financial crisis strikes before year 2020.

Now it looks like the hope is slim.

Eco Meadows: In A Class Of Its Own

The sales office of Eco Meadows in Simpang Ampat has quietly opened to public last weekend.

This 60-acre freehold development will be Eco World's second project in Penang state after Eco Terraces, and first in mainland Penang.

The site is visible from North-South Highway near Penang second bridge interchange.

First project to be launched, probably very soon within July 15, will be gated & guarded double-storey terrace houses.

If not mistaken, there are total 375 units of DST planned for Eco Meadows and there is no semi-D or bungalow.

The facilities provided include swimming pool, gym, kindergarten, park and clubhouse.

Four types of DST are available which are Type 1A/1B and 2A/2B, with land size of 20 x 70 and 22 x 70 feet respectively.

The final layout plan is still not available at this moment but some units will come without a balcony.

Type A is called Bay Window Collection which is without balcony. Type B is Balcony Collection.

There will be no other landed residential property after this. Future launch will be shop offices, service apartments and probably a shopping mall.

Here comes the most important question... What is the price?

In Oct 2013, I predicted that DST in Eco Meadows will start from RM500k, while DST in Pearl City is about RM350k at that time.

Obviously this prediction is already outdated.

One year ago in mid-2014, Asas Dunia priced its DST in Hijauan Valdor, which is about 2km from Eco Meadows, at RM550k.

Apparently Eco Meadows will certainly price its DST at at least RM700k now to show that it is in different class. Agree?

True enough, though  official selling price of Eco Meadows's DST is not confirmed yet but according to sales person, it will be approximately RM700k.

Management fees is expected to be around 15-20sen per sq ft.

Now, gated DST (22 x 60 ft) in Raintree Park of Pearl City is priced from RM478k. If Eco Meadows sells its DST at RM700k, then it really makes Tambun Indah's DST looks cheap.

Despite its premium price, I think Eco Meadow's DST will still sell like hot cakes due to its brand power and lots of its well-to-do fans.

Anyway, what are the difference between Eco Meadows and Pearl City?

Location wise, both are located in Simpang Ampat but Eco Meadows is closer to PLUS Bukit Tambun toll and Batu Kawan while Pearl City is closer to Bukit Mertajam, AEON & Tesco Alma.

Pearl City is a big 1,000 over acres township which houses a new KTM station while Eco Meadows is just 60 acres though it will have its own commercial component.

Pearl City will be much more crowded so traffic and safety might be an issue. However, it will be more happening & convenient as GEMS International School, Pearl City Mall & Jit Sin SPS branch have been confirmed. Future plan includes a medical center as well.

Eco Meadows brings with it luxury and high quality feel in which buyers expect high quality materials, fittings and finish, on top of tastefully designed landscape.

Pearl City will also have its own high-end gated projects such as Raintree Park. However, it is not expected to match those" quality" & "features" offered by Eco Meadows.

Do you think it is worth to pay RM200k more to get Eco Meadows DST over Raintree Park DST?

       Location of Eco Meadows, Pearl City & Hijauan Valdor

If you are keen to get your dream homes in Eco Meadows, just prepare a RM10k cheque and go to the sales gallery at the actual site to book a priority of unit selection.

The RM10k is fully refundable if you can't get your preferred unit, but please reconfirm with sales person before you hand in your cheque.

Frankly speaking, my wife and I dream of staying in a community like Eco Meadows.

However, I know that it is not worth it and also not possible that at this stage of my life.

Should I buy for investment?

How much is the expected rental? RM2000 rental per month will be great I guess, but monthly loan repayment and management fee should be at least RM3000.

How fast will it appreciate? Do you think Eco Meadows DST price will appreciate to RM1mil upon completion in 3 years time?

Equity vs Property

What is the best form of investment?

We know that putting our money in savings account will make us poorer. If we put them in fixed deposit, it is just enough to beat inflation and we are not getting any richer.

We can start our own business which is what most rich people do, but not many of us possess the entrepreneur skills and perseverance to become really successful.

This leaves many people especially the middle class to put their money in equity investment and property investment.

Between equity and property, which one is better?

This seems to be a burning question.

If you ask someone who is successful and comfortable in stock market investment, he will definitely say that equity is much better.

If you ask someone who makes a good fortune from property investment, he will tell you that property is much better.

There are also some people who have their hands in both equity and property. These people may tell you that one is better than the other but they might not invest in the same way as you will in the first place.

I myself invest in both stock and property, but I'm not in a position to tell anyone that which one is better. It varies between each individual depending on their risk appetite, interest and expectation.

Some people think that property investment has higher risk because of high initial capital and illiquidity.

Some people think that stock market has higher risk because of high volatility and uncertainty.

Some people think that property investment has lower risk because property price almost always appreciate with time if the location is not too bad.

Some people think that stock market has lower risk because a good company's share price almost always appreciate with time despite short-term fluctuation.

Some people like property because of the feeling of land or building ownership.

Some people like stock market because of easy transaction and "faster" gain.

Some people don't like property because of hassle in tenant management, huge debts, higher fees & stamp duties payment.

Some people don't like stock market because of hearing stories that people get burnt or gone bankrupt in stock market.

One thing for sure is, it is much easier to start investing in stock market as it is simple and does not require a big sum of capital to start with. If you make a bad decision, it is much easier to make amends and start all over again.

If you make a bad decision in buying a property, not only your initial capital will be tied down, you still need to serve monthly bank loan while unable to rent out or sell the property except at significant loss.

So, both financially & psychologically, it is not easy to take a first step into property investment.

Personally I started my investment journey by investing in equity, first in unit trust in 2004 and then directly in stock market in 2006. However, I  have never been serious with it until 2013.

I started to look into property investment in 2009. In that year, I bought my first property which is my current house.

After that, I constantly looked for properties for investment. I did quite a lot of research on properties in Klang Valley and Penang.

I registered for developers future projects, went to new property launches, screened through property advertisement, viewed numerous subsale properties etc.

I can feel the difficulty in taking a first step in property investment, as there will be fear of making mistake.

Even though I'm just a little tiny property investor, I still hope that it will help in my journey toward financial freedom.

If I were to depend on stock market alone, I need to achieve at least 30% annual return compounded for 10 consecutive years. Is it possible?

If I can get 30% for 4 consecutive years but not careful enough to lose 50% on the 5th year due to big bear market, it is almost like back to the starting line.

Property investment sounds "more secure" in that sense. If I buy a property at RM300k, take RM270k loan and get tenants to cover the monthly loan repayment, I can just sit back and watch property price appreciates with time.

After 10 years, I will still owe bank RM230k. However, I don't put a lot of cash into the property after the 10% down payment as long as the property get rented out without negative cashflow.

If  I sell the property which lets say appreciates to RM600k 10 years later (which I think is not impossible if property is bought before 2012), I can get a profit of RM370k after settling the outstanding loan (excluding other fees). This will help my retirement plan significantly if I have more investment properties.

For me, when I was more active in property investment in 2009-2012, I think that it is a good investment. Actually now I still think it is.

After year 2012, I find it extremely difficult to get a positive monthly cashflow from renting out newly-purchased properties anymore, as property price has escalated much faster than rental & salary. Furthermore, house price seems to appreciate more slowly now. 

Even though one can still make money in the long run, property investment is no more attractive to me at the moment, compared to stock market.

Nevertheless, I am still alert on current property market. I still view new and subsale properties once in a while hoping to get a bargain.

Perhaps I will only buy property again when property price falls significantly.

Is this possible?

After the US subprime mortgage crisis in 2007, I will not assume that house price will never fall massively.

How To Stamp Tenancy Agreement

I first became a "landlord" and signed my first ever tenancy agreement 2 years ago. Now it's time to renew it.

Last time my property agent helped me to do everything including finding tenant, drafting the agreement and doing the stamping. I think I should learn to do it myself.

For tenancy agreement, we can download it free of charge from internet and just make some necessary amendment.

To know how and where to do the stamping, a search in internet brought me to a good local property investment blog known as "horlic".

However, this blog seems to be inactive now...

Here are steps I went through to get the tenancy agreement stamped.

1. Prepare 2 copies of tenancy agreement signed by both parties
2. Download and fill up PDS 1 & PDS 49A forms. Forms are available at LHDN website & branches
3. Bring the forms and tenancy agreement to nearest LHDN branch. Get a queue number for stamp duty and then submit to stamp duty counter
4. Wait for your name to be called at payment counter and then pay the stamp duty
5. Get the tenancy agreement back and go home

*LHDN = Lembaga Hasil Dalam Negeri (Inland Revenue Board)

As there was not many people when I went there, I get everything done in less than 10 minutes.

It's much easier than I thought.

According to the staff there, now we can only stamp the tenancy agreement within 30 days after the starting date of tenancy period.

For example, if you rent your property from 15th April 2015 to 14th April 2017, you can only stamp the agreement from 15th April 2015 to 14th May 2015.

However, I'm not sure how strict they are with this new rule. Previously we can stamp it before the date of tenancy period.

How much stamp duty we have to pay?

LHDN staff will have a list to refer to, but we can calculate the stamp duty by ourselves using a formula. 

To know how much to pay, calculate your annual rental first then refer to the table below.

Annual Rental	Tenancy period
	< or = 1 year	> 1 to 3 years	> 3 years
First RM2400	Exempted	Exempted	Exempted
Every RM250 after RM2400	RM1	RM2	RM4

The first RM2400 of annual rental is exempted from stamp duty. This means that if your monthly rental is not more than RM200, you don't need to pay stamp duty.

It's easier to understand by using example.

If your rental is RM1200 per month and tenancy period is 2 years, annual rental will be RM14400.

As first RM2400 is exempted from stamp duty, only RM12000 will be charged.

So RM12000 divided by RM250 = RM48.

As it is a 2-year agreement, RM48 x RM2 = RM96.

The stamp duty will be RM96. However, we need to pay another RM10 for second copy of agreement.

So, total payable to LHDN will be RM106.

This stamp duty is commonly paid by tenants.

What if the calculated stamp duty is not a round number? 

Lets say if you rent your property at RM1600 per month for 1 year. Stamp duty will be:

[(RM1600 x 12) - 2400] / 250 = RM67.20.

I'm not sure whether it will be rounded up to RM67 or RM68. Those who knows might want to clarify on this.

In conclusion, DIY your tenancy agreement stamping is not difficult at all.

How Will GST Affect Property Developers & Buyers?

This year will still be a good year for property developers. There is no doubt about this.

So far I do not feel any slowdown in property market. Developers are still launching their products in great pace and buyers are still "sweeping" properties like buying vegetables.

Furthermore, more and more unknown and even listed companies start to join the property business.

Is it a sign of prosperity in property sector, or a warning sign of pending property collapse?

Tropicana recently sold RM600mil worth of property in just 6 weeks. This amount matches its whole FY12's  revenue and is almost half of FY13's revenue. Just 6 weeks.

Eco World has also launched the first phase of Eco Majestic at Semenyih in May. It offers 612 units of double storey terrace house in which 95% are snapped up. Buyers still queue up for days before the launch.

This might be Pre-GST property shopping spree.

As we know, GST will be implemented in April next year. How will it affect the property price?

There are generally 3 types of GST:

• Standard-rated GST
• GST 6% charged at every stages of supply chain
• eg. cloth, car, fruits
• Zero-rated GST
• No GST charged
• eg. basic food item
• Exempt-rated GST
• GST is not charged to only final consumer
• eg. residential property, healthcare services

A great schematic explanation of GST can be obtained at loanstreet.com.my website.

For standard GST, manufacturer & retailer who pay the 6% GST while receiving the goods/service can claim back 100% from the government. So the final consumer is the one who will bear the entire tax burden of GST.

In other words, GST does NOT result in extra expenses for most manufacturers and retailers. So their financial result should not be affected.

For exempt-rated GST which includes residential property, manufacturer (contractor) can claim back 100% GST paid to construction material suppliers. 

However, retailer (developer) cannot pass the GST to consumer (buyer) and cannot claim back from the government. So developers have to bear the entire tax burden of GST.

This sounds like developers are loser while house buyers are winner, but it is actually not necessary so.

Inevitably developer's cost will increase as it cannot claim back GST paid to contractor from government. In order to maintain the profit margin, developer can increase the selling price of residential property.

So basically the profitability of developer is not really affected as the profit margin remain the same, unless developer is forced to sell at lower price because of low demand.

As a result, new residential property price will increase, as shown below (extracted from loanstreet.com.my)

In summary, GST will not affect developer very much but new house buyers will need to bear higher house price. Government is a clear winner as it collects more tax compared to current tax system.

So consumer is not a winner but a loser.

How about new commercial property?

Commercial property is in the category of standard-rated GST, which means buyers have to bear the entire tax burden of GST throughout the supply chain. This sounds scary. 

If a developer sell a new shop office at RM1 million, should a buyer pay 6% GST of RM60,000 on top of the RM1 million paid to developer?

I have modified the residential GST scheme table above for commercial property. Lets assume they have the same cost and profit margin.

Even though the 6% GST is applied to commercial property buyer, the final cost of the property to buyer (RM572,400) is still same as the residential property. 

This means that the final price that buyers pay (include tax) for new commercial property will also increase after GST, and it is at the same rate as residential property.

The difference is, when selling commercial property, developer can claim back the 6% GST charged to it by contractor from the government. Government will collect more tax because there is an extra 6% tax in the end of supple chain compared to residential property.

It sounds like developer will earn more by selling commercial property because it can claim back the GST charged to it. It is not necessary so as the profit will depend on the margin. Actually in the example above, developer earns less in absolute amount by selling commercial property (sales price - final cost after tax claim).

After all, the pre-GST property shopping spree is warranted as property price will increase after GST implementation.

However, property developer's profit should not be affected directly by GST but it may suffer indirectly should the demand of property drops as a result of increasing property price.

These are what I know and it might not be totally right. Please correct me if I'm wrong.

Tax On Rental Income

In Malaysia, rental income is taxable.

For most new and small property investors, the rental income is taxed under individual (BE-form).

If Mr.A earns a salary of RM6,000/month  + a rental income of RM1,000/month (total income RM84,000 a year), and assume a total tax relief of RM24,000, the final chargeable income will be RM60,000. So Mr.A's tax rate will be 19%.

If Mr.B earns a salary of RM6,000/month and has no rental income (total income RM72,000 a year), and also has a similar tax relief of RM24,000, his chargeable income will be RM48,000. So his tax rate is at 11%.

Mr.A has to pay a total tax of RM11,400 while Mr.B has to pay RM5,280.

Mr.A earns RM12,000 more than Mr.B in a year, but pay RM6,120 more tax.

In other words, RM510 of the RM1,000 monthly rental income is being "taxed", and Mr.A only earns RM490 more than Mr.B in a month, not RM1,000 he thinks.

Fortunately for property investors, there are deductible expenses from rental income.

These deductible expenses include:

• assessment
• quit rent
• loan interest
• fire insurance premium
• expenses on rent collection
• expenses on rent renewal
• expenses on repair
• service charges, maintenance fees, sinking fund, Indah Water bills

However, initial expenses before the property is "officially" rented out are NON-deductible. These include:

• advertising cost to obtain the tenant
• legal cost & stamp duty for rental agreement
• commission for real property agent 

Many people may think that all commission for property agent and stamp duty for tenancy agreement are tax deductible. Actually they are not deductible for the first time you rent out the property. For subsequent renewal of tenancy agreement, they are deductible.

The information above are from limited personal knowledge and experience, and might not be accurate. Please correct me if there are any mistakes.