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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Little by little, a little becomes a lot

NOW that Christmas, New Year and Chinese New Year are over, many of us have started to reconcile the amount spent for these celebrations.

Not surprisingly, many have underestimated the current cost of living and have therefore overspent.

Hence, it did not come as a surprise to me when I overheard one of my relatives saying that the price of an eight-course Chinese New Year package at the restaurant that she often frequents has increased by 15% from RM898++ to RM1,028++ within a year. Not only has the price increased, she also noticed the serving portions were smaller than the previous year.

The rising cost of living caused by the depreciating ringgit, hike in transportation costs, the goods and services tax implementation, etc, was the hottest topic of discussion during these festive gatherings. Among the various counter-measures, some young ones welcomed the option to reduce the Employees Provident Fund (EPF) contributions, citing that it would help relieve their burden.

The reduction in EPF contribution came about early this year when the Government announced that employees had the option to reduce their EPF contribution by 3% from March 2016 until December 2017 to spur economic growth and at the same time, put more money into the rakyat’s pockets. According to our Prime Minister who is also the Finance Minister, this move is expected to increase consumer spending by RM8bil a year.

It sounds good as we now have the option to have more disposable income. Yet, should we encourage spending or saving during this challenging time.

Before answering this question, let’s ask ourselves what we should do with the extra disposable income. Repay credit card instalments, go after items such as expensive household goods, electronic gadgets or gourmet food?

If we are not careful, we will end up spending based on our desire instead of necessity. Hence, having more money to spend is not necessarily good. It depends on how we plan our future finances, and whether we spend the money on “good debt” or “bad debt” as explained in my previous articles.

If we unnecessarily spend the additional income on luxury goods such as a new car which depreciates over time, we are practically paying for “bad debt”, as these items are liabilities instead of assets.

In contrast, if we convert the additional income into “good debt” such as investing in commodities/ shares or to fund our housing loan, we can enjoy the long-term benefits as the value of these assets will likely appreciate over time.

At a glance, 3% taken out from the EPF per month may not be seen as a lot. However, it will become a significant amount in the long term.

For an individual earning RM5,000 a month, 3% equals to RM150. As such, the total amount is RM3,300 for the duration of 22 months (March 2016 to December 2017). Assuming the average EPF interest rate at 6.5% per year (based on the dividend declared this year), the compounding rate for RM3,300 could potentially become RM23,190.64 after 30 years!

Therefore, unless there are really good reasons to use this additional disposable income, it is better to retain this seemingly small amount as retirement funds, giving its potential to grow significantly in the longer term. Besides, the savings in the EPF can also be withdrawn during rainy days to fund the payment for children’s education, purchase a new home and payment of medical expenses for treatment of critical illnesses.

At this testing time when many are faced with the burden of rising costs and economic slowdown, it is important to resist the temptation of instant gratification, be prudent in spending, and be able to differentiate between “good debt” and “bad debt” in making financial decisions.

For those who have yet to opt out from reducing the EPF contribution from 11% to 8%, it is important to use the additional money wisely so as to ensure that your retirement fund is not affected. Every ringgit saved or invested is essential in making a difference in our future financial position.

When I was a kid, my parents encouraged me and my siblings to save. Each of us would have our own piggy banks and they would continue to remind us about the beauty of saving. Until today, I still like this Malay proverb – ‘Sedikit, sedikit, lama-lama jadi bukit’ (little by little, a little becomes a lot).

Datuk Alan Tong has over 50 years of experience in property development. He is the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

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A challenging year ahead

AS the Fire Monkey swings in to take its place, many have predicted this year as a challenging one. So, what’s in store for everyone in this particular year?

Many came to me for advice on how to deal with this challenging period. Frankly speaking, I am not a feng shui master or an astrologist who can somehow predict the future. Neither do I know how to read a crystal ball and tell you what lies ahead. Having been through a few round of recessions and bad times during my early days, I can, however, only share my own experiences and observations.

As shared in my last article “Lessons from my father”, I have learnt how to live frugally since young from my late parents. I recalled starting up my own architectural firm at the worst possible time. The year was 1964, and it was during the time of the Malaysia-Indonesia confrontation. The country was experiencing an economic recession and it is not hard to imagine how tough it was to make a living. I basically lived on “char kuey teow” as my lunch for two years! Being frugal and practising delayed gratification somehow helped me sail through that rough period.

While it is wise to spend prudently, it is even wiser not to be in debt during times of uncertainty. I read an article which highlighted that Malaysian household debt as of August 2015 was 88.1% of gross domestic product against only 60.4% in 2008. The figure was among the highest in the region. It is rather alarming considering most young people tend to be indebted with at least a car and a huge outstanding of credit card and personal loan repayment.

It is important not to put ourselves in a vulnerable financial situation, in order to face the challenges ahead. Most items purchased with the use of personal loan, credit card and hire-purchase are likely to depreciate over time. As a result, if repayments are not made on time or at all, these items with depreciated value becomes a loss. Such loans are then dubbed as “bad debt”. A “good debt” is one that brings returns. It is time to re-look into our debt categories and reallocate our resources appropriately.

Conserving funds, while important, is not enough to withstand the inflation impact. It is therefore crucial to invest to fight inflation especially monetary inflation (money printing) which is a real problem in today’s world economy and is currently also causing asset inflation to continue. It is difficult to know the best form of investment during uncertain environment. However, I believe each of us has areas of expertise, and we should focus on those areas.

If you are planning to own a property, a good inflation-hedging tool, do creative searching for your dream home.

Muhamad Azree Abdul Rahim, a 26-year-old Malaysian, solved his problem of owning a property by thinking-out-of-the-box. He turned a used shipping container into his home by taking a RM75,000 loan and buying a plot of 2,400 sq ft land some 25km from Shah Alam. He was able to build a decent, fully-functional home with a garden next to it. His unconventional way of building his own house without being manacled to a 30-year housing loan is something that we should learn.

While everyone would love to stay near to the city centre and preferably, own a big comfortable home, we need to be realistic in order not to be financially overstretched. Start with a smaller home, and buy a home that you can afford, not what you like. It is absolutely fine if you chose a house next to the last MRT station, far away from KL city centre, as long as you find it easy to commute. No point being near the city yet having to endure the daily routine of traffic madness and at the same time, forking out a large sum beyond your means.

In the 1986 recession (the worst recession that I could remember), I had a team of 20 sales team members. Instead of waiting for customers to drop by our office, we went door-to-door and street-to-street to look for customers. Imagine swimming against the current, you may feel very tired and exhausted, but at least you are few steps nearer to your destination and you become a much stronger person. Hence, building resilience and perseverance in weathering the storm during challenging times is just as important.

Back to the year of the Fire Monkey, I realised that there are similar characteristics that we can learn from those who are born in the year of the Monkey. According to Chinese zodiac analysis, monkey is the mnemonic symbol associated with intelligence, creativity, perseverance and flexibility. Perhaps, take the cue from the monkey and brave through this challenging year by applying some of its traits.

Land & Property 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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Real estate crowdfunding in Malaysia

CROWDFUNDING – the practice of funding a project or venture by raising small amounts of money from a large number of people typically using an online platform – has gained popularity due to the massive demand and supply in today’s competitive market.

In one way, it benefits start-ups and entities that require funds to either commence or expand their business portfolio.

Investors have the opportunity to participate in any potential investment that they are comfortable with and which corresponds to their personal investment portfolio via a simple click online. It is a chance to participate early in something potentially very big.

The Securities Commission has approved six equity crowdfunding platforms for issuers to offer share subscriptions to interested investors. This comes with strict compliance and regulations imposed on the platforms providing such equity crowdfunding services. The good news for investors is that these platforms, which represent another type of investment option, are expected to be launched very soon.

Rising property prices have increased the investment cost for real estate investors. Consequently, real estate investment trusts, which offer liquid stakes in real estate complemented by constant dividend yields, have become fashionable. Alternatively, real estate investors may also leverage on the informal real estate investors club that attracts a lower acquisition cost with bulk purchasing arrangements with developers.

We can draw one conclusion from these real estate investment options – that property investment is no longer an individual game but a team sport that thrives on leverage and collective bargaining.

There are even suggestions that political parties raise funds via crowdfunding in a bid to promote transparency and efficiency. This makes it easier to comprehend the call for crowdfunding in a sector like property. So, how does real estate crowdfunding work?

Online platform

The basic concept of crowdfunding is an online platform operated by an approved operator and regulated by a certain ministry that provides services to matchmake the issuer and the investor. The obligation of the operator is to conduct sufficient due diligence on the issuer and its product prior to allowing the issuer to campaign for fund-raising on its online platform.

To promote independence, there should not be any relationship between the operator and the issuer, and the operator should not personally join the fund-raising campaign by the issuer. Besides this, the operator has to approach private financial institutions or trust companies to set up trust accounts for the investment funds to capture, as trustee, those investors who are willing to invest in the issuer.

Similarly, to remain independent, the operator should not be related to the private trustees or financial institutions.

In this investment option, the utmost requirement for the issuer is that they shall be either a developer, a real estate agency or a land owner who owns the property slated for development and who is seeking to raise funds for that purpose. The operator may perform due diligence on the land background and require the issuer to show proof of ownership of the said land and also the proposed development plan. These are to be advertised on its platform as convincing tools to attract investors.

Nonetheless, contrary to conventional real estate investment where you would get the key to the property and may use it as a tangible asset for further financing in the future, any investment into the real estate crowdfunding platform does not give you ownership of an immovable property, unless it is agreed upon and offered by the issuer based on its fund-raising campaign.

The upper hand here is that the expected term for your return on investment (ROI) may be fixed and shorter. Investors may receive the expected ROI upon completion of the development. The investment amount is also within an affordable limit, and information is easily accessible via the Internet. Crowdfunding also promotes transparency in one’s investment and with collective investors, the bargaining power with the issuer is also greater as compared to individual investors.

Real estate crowdfunding might still be a new concept and some might have never heard of it until now, but with real estate investment running the risk of remaining merely a dream for the mid-range salary earner, it might be a good alternative to maximise returns on your hard-earned money without a hefty price tag.

However, as with all forms of investment, there are risks involved here despite the due diligence performed by the operators. Smart investors, nonetheless, always walk the extra mile to conduct their personal due diligence on the accuracy of the information made available on the crowdfunding platform.

The current regulatory framework only permits equity crowdfunding for the real estate business and is not yet a direct crowdfunding avenue into the acquisition of real estate.

By Chris Tan Real legal viewpoint

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

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Immigration & education drive property prices; Secondary property sales may take lead

Immigration and education are two drivers of property prices in cities in the next 10 years to 2024, said property consultancy Knight Frank International.

Its Asia-Pacific reaearch director Nicholas Holt said up to 76,000 Ultra High Net Worth Individuals (UHNWI) from China have immigrated the last 10 years - the highest - while up to 72% of Malaysia’s UHNWI send their children abroad, the highest. (See graphics below).

The cities include London, New York, Hong Kong and Singapore.

Holt was presenting his Wealth Report 2015 updated till third quarter 2015 at the 25th National Real Estate Convention in Kuala Lumpur.

He defined UHNWIs as those with US$30mil and above in investible income excluding their primary residence.

In an Attitudes Survey involving 600 advisors of UHNWIs by Knight Frank, the advisors - bankers included - said about 10% of their Malaysia’s ultra-high net worth clients were considering changing their domicile in the earlier part of this year.

“This compares with an overall 12% in Asia who are considering changing domicile,” said Holt.

Data show drop in primary market transactions

SUBANG JAYA: The ongoing slowdown in the local property sector could see transactions in the secondary property market overtaking that of the primary market.

Citing data from the National Property Information Centre (Napic), PPC International Sdn Bhd managing director Datuk Siders Sittampalam said the economic slowdown has affected transactions in the primary property market this year.

"Siders: ‘Total volume of transactions in the primary market has dropped, and this has also resulted in values dropping. >>

“Total volume of transactions in the primary market has dropped, and this has also resulted in values dropping.

“As such, there will come a time when the secondary market will lead the primary market,” he said at a press conference after the launch of the 25th National Real Estate Convention (NREC) 2015 yesterday.

Siders said it was difficult to provide a specific timeline on when he expected transactions in the secondary market to exceed that of the primary market.

“In terms of value, the primary market will find it harder to match the secondary market due to rising land and building costs,” he said.

Siders said he expected transactions in the primary market to improve once cooling measures imposed on the local property sector have been relaxed.

“Once the economy picks up and Bank Negara backs off on its cooling measures, the primary market will pick up again.”

He also said a drastic hike in interest rates will have an impact on the property sector.

“Over the last few years, the property market had been steadily growing due to various measures such as the developers interest bearing scheme (DIBS). Because of these measures, pricing in the market has been distorted.

“Now, when people have committed to their loans, especially youths and first time buyers, and there is a sudden hike in interest rates, there will be a dip in the market.

“Loans go bad and many properties will go under the hammer. This will not be a healthy market.” Siders said he was hopeful that any interest rate hike by the central bank would be a “sustainable increase.”

Bank Negara maintained its overnight policy rate in September at 3.25%.

The NREC was organised by the Royal Institution of Surveyors Malaysia and the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector, Malaysia.

The event highlighted major concerns for the future of the real estate industry in Malaysia during the current economic period.

BY EUGENE MAHALINGAM

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A strata property living nightmare: leakage

The party responsible is not your upstairs neighbour but the management

Stiff penalty: Whoever fails to give access to the party carrying out the inspection commits an offence. The fine imposed is up to RM50,000 or imprisonment of up to three years or both, under regulation 63(2).

IF you live in a high rise building and have an inter-floor leakage issue, you can be rest assured that you are not alone. Inter-floor leakage is without a doubt one of the biggest problems faced by many dwellers of high rise buildings.

Whilst the leakage may appear only in a particular parcel, the source of the leakage may lie in the parcel above or even elsewhere. The cooperation of more than one party is therefore required; without which one cannot even begin to identify the problem, let alone solve it.

Two issues must be identified when there is an inter-floor leakage. Firstly, the source of the leakage and secondly, the person or body responsible for repair or rectification. Who is supposed to identify the source of the leakage to start with? The person or body responsible of course, you may say, but how do you know who is responsible before the cause of the problem is ascertained? A bit of a chicken and egg situation arises.

New Act

Will the new management Act answer to all ceiling leakages?

In February 2013 the Strata Management Act 2013 (SMA) was passed by Parliament. With that came a presumption in law, under Section 142 of the SMA, that if the leakage is on the ceiling, then such leakage is presumed to be from the parcel above unless it is proven otherwise. So, if you have a leakage from your ceiling, go to your upstairs neighbour and tell him/her that he/she is responsible and must therefore find the source of the leakage and do the repair. What if he/she disclaims responsibility? Simple, You just quote Section 142 of the SMA. What a magical section with a “one fits all” answer to ceiling leakages! I thought so too when I first read Section 142, but I was not completely right for the law does not place the entire responsibility squarely on the upstairs parcel owner.

It was to be another couple of years before the SMA was implemented in June 2015 but the good news is that with that came also the implementation of the Strata Management (Maintenance & Management) Regulations 2015 (SMR). Many thanks to those (including HBA volunteers) who worked tirelessly on drafting and fine tuning the provisions of the SMR, we now have some definite answers on what to do if you have a leakage from your ceiling.

Who is responsible?

In dealing with inter-floor leakage one must not just look at Section 142 of the SMA but also Part XV of the SMR. Indeed it is Part XV of the SMR which tells you what to do if you discover dampness, moisture or water penetration from your ceiling or if you were to go home one day only to find that it is raining in your apartment.

Go to the developer if you are still covered by the defects liability provisions.

If the leakage is still covered by the provisions of your sale and purchase agreement (SPA), follow the provisions of your SPA. For homebuyers, these are typically cases where the leakage or defect occurs during the defects liability period, and which the housing developers are required to rectify, as provided in the statutory SPA.

JMB/MC/Management first in the line of responsibility – regulation 56

If the leakage is not one which is covered by the SPA, then notice may be served by the owner of the affected parcel on the developer or the joint management body (“JMB”) or the management corporation (“MC”) or the subsidiary management corporation (“sub-MC”), as the case may be.

This is provided for in regulation 56(1) of the SMR. What regulation 56 essentially means is that you serve notice on the body responsible for the maintenance and management of the common property, which for convenience I shall refer to as “the management”. So, now you see, the party first in the line of responsibility is not your upstairs neighbour but the management.

Once notice is received, the management must, within seven days, carry out an inspection to determine the cause of the leakage and the party responsible for rectification (regulation 57). Thereafter, the management must issue a “Certificate of Inspection” stating the cause of the inter-floor leakage as well as the party responsible for rectification (regulation 59). A standard form certificate for this purpose can be found in Form 28 under the Second Schedule of the SMR.

So, what is the purpose of Section 142, you may ask? Section 142 merely creates a presumption that the defect lies in the parcel above. In practical terms, this does nothing towards resolving any inter-floor leakage issues other than perhaps as a starting point for inspection. After all, one cannot possibly rectify a defect which causes the leakage until and unless the actual defect is identified. The legal implication of Section 142, however, is perhaps best left to those much more qualified than I but I do wonder if this statutory presumption alone can be a valid ground for holding the upstairs parcel owner responsible and if so under what circumstances in light of the provisions of the SMR.

Determining factor(s)

Under regulation 58 of the SMR, the management must take into account not just the aforesaid presumption but also the following matters which to my mind are far more relevant once the defect is identified:-

(1) that any defect in something which serves more than one parcel is a common property defect; and

(2) that any defect in something which serves only one parcel is a defect of that particular parcel even though that something is situated in common property or in void space.

In other words, the determining factor is not the location of that defective something but which parcels that something serves. If it serves just one parcel, that particular parcel owner is primarily responsible and must rectify the defect failing which the management shall carry out the rectification works and charge the expenses to that particular parcel owner. I say primarily because whilst regulation 61 of the SMR imposes the obligation on a specific parcel owner such obligation is expressly stated to be without prejudice to that parcel owner seeking indemnity from someone else.

That of course begs the question of who can be held liable for such indemnity; a question which is beyond the scope of this article but I certainly will not rule out any parcel owner, including the affected parcel owner, who contributes towards the defect or any delay in the rectification of the defect.

The decision of the management is, as expected, not final. Anyone not satisfied with a decision made against him/her may refer to the Commissioner Of Buildings (COB) who shall ascertain the cause of the leakage and the party responsible in accordance with regulation 64(1) & (2) and the decision of the COB shall be complied with by all parties concerned.

Grant access for inspection or risk prosecution

It goes without saying: that neither inspection nor rectification works can be effectively carried out without access to all relevant parcels and common property. Hence, the imposition of a statutory obligation on all relevant parties to give access as provided by regulation 63(1) of the SMR comes as no surprise at all.

Whoever fails to give access to the party carrying out the inspection commits an offence! And the punishment is severe too; a fine of up to RM50,000 or imprisonment of up to three years or both, under regulation 63(2).

Given that the lack of cooperation on the part of some parcel owners/occupiers has remained one of the main causes of delay in resolving inter-floor leakage problems, these provisions are definitely a step in the right direction. It does puzzle me, however, that whilst a failure to give access for inspection tantamount to an offence, the same does not seem to apply to a failure to give access for rectification.

Some of you cynics out there may be tempted to brush this aside as something unlikely to be enforced by the authorities but do you want to take that chance? Do you really want to risk prosecution over something as simple as giving access for inspection and/or rectification?

Beside, now that the Strata Management Tribunal has been set up you may be slapped with an order much sooner than you think.

By Chang Kim Loong Buyer Beware

Chang Kim Loong AMN is the honorary secretary-general of the National House Buyers Association: www.hba.org.my , a non-profit, non-governmental organisation manned purely by volunteers.

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Not wise to sell property or house to shore up ringgit Malaysia

ON Thursday, at a seminar organised by Malaysia Property Inc, the Employees Provident Fund (EPF) said it would continue to seek “opportunistic” investments abroad.

There are various reasons why EPF and the other funds absolutely need to do so if they are to provide a steady dividend stream to contributors over the longer term and to diversify risk.

As we have seen the last year or so, the ringgit has come under tremendous pressure and year to date, it has weakened against most currencies, especially the US dollar, the British pound and the Singapore dollar.

Had EPF not made forays abroad in 2009, its 14 million odd contributors would not have received dividends ranging between 6% and 6.75% between 2011 and 2014 and in the interim years of 2012, 6.12% and 2013, 6.35%.

Prior to this, EPF declared dividends of 5.8% in 2007, 4.5% in 2008, 5.65% in 2009 and 5.8% in 2010.

The Asian financial crisis in 1997/98 and the 2008 global financial crisis were costly lessons for EPF and the other funds.

Before its move to buy property abroad in 2008, less than 1% of its total funds were invested in real estate. Today, it has the mandate to invest up to 4% of its total funds of about RM700bil in local and foreign properties. It can also invest up to 26% of its available funds in non-ringgit denominated investment instruments including bonds, securities, properties and other others.

So far, EPF has invested more than £1bil in UK and more than 1bil euros in France and Germany. It also has properties in Japan and Australia.

Its core investments in Europe, excluding UK, are in the office and logistics sector. In UK, it has offices, logistics and 12 hospitals under the Spire brand. It also has a 20% stake in Battersea Power Station mixed used project. According to its head of global real estate in the private markets department Kamarulzaman Hassan, EPF would like to add retail hypermarket chain to its stable.

It is prudent and logical for EPF to seek opportunities in mature markets because although it knows the home market well, it is already in every sub-segment of the local real estate market - logistics, retail, office, residential.

As Kamarulzaman aptly said, EPF is “a big fish in a small crowded pond.” Other big fish in this small pond include Permodalan Nasional Bhd, Retirement Fund Inc (or KWAP) and Lembaga Tabung Haji, Perbadanan Hartanah Bumiputra among others.

There are several reasons why EPF has made forays abroad. It was badly hit in 1997 and 2008. Prior to this, it invested only in Malaysia. It had all its eggs in one basket.

Earlier this year, as the ringgit was weakening, certain parties in the government called on the various funds to bring their money home to shore up the ringgit. They were to curb investments abroad.

EPF subsequently sold 1 Sheldon Square, UK for £210mil (RM1.14bil), which it bought in 2010 for £156.7mi, giving EPF a net gain of £54 mil. Whether it made that decision to sell based on that call to bring the money home is a moot point. That property was tenanted out to Visa Services Europe until December 2022, with a 5.75% annual yield.

So far, KWAP and Felda have said they will not be selling their investments which gave them a good yield.

The thing is, if there is better yield to be had, and forex to earn, why dispose of them?

And why curb funds from investing abroad if they have done proper due diligence and are able to manage these investments well.

As it is, according to Kamarulzaman, London properties are so hot today that investors are willing to get 3.5% to 4% in annual yield.

Selling overseas real estate which were purchased when the pound was low, when it is offering a good yield, just to shore up the ringgit does not seem to be a wise call.

It is like killing the goose that lays the golden egg just to provide food for a day. Yes, London’s property prices are frothy now, but these property investment have long leases.

Besides, the markets it has invested in are mature markets with high liquidity. There is interest in these markets from around the world.

Because property sector is cyclical, the timing is important. EPF entered UK when the it was about RM5 to a pound. These investments came with long leases, which fit into EPF’s need for a steady income flow as it needs to pay dividends to contributors.

In short, going abroad gave it a much needed new investment platform which was not available at home.

These mature markets offer transparent legal and tax structures and clearly, governance was well established.

There is a clear exit option and this was demonstrated when it sold 1 Sheldon Square earlier this year.

UK properties have gone up in value considerably since. Whether EPF will continue to liquidate depends on various factors but to liquidate just to bring home the money to shore up the ringgit should not be one of them, especially when its investments are yielding good returns.

Property is today the biggest alternative asset class for institutional investors and forms the largest allocation for pension funds, insurance companies and sovereign wealth funds.

It is also not homogenous but in today’s volatile environment, it is more tangible than most other asset classes.

Comment by Thean Lee Cheng The Star/Asia News Network

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• 
  

Malaysian Strata Management Act 2013 will be enforced from June 1, 2015 in Penang

Cheers for high-rise house buyers

GEORGE TOWN: The state government has endorsed the Strata Management Act 2013 (Act 757) which will be enforced from June 1.

In making the announcement, State Housing, Town and Country Planning Committee chairman Jagdeep Singh Deo said the new Act was introduced to replace Act 663 or the Building and Common Property (Maintenance and Management) Act 2007.

It was reported that the new law allows both the landlords and tenants to be brought to court, compared to the previous Act which only allowed action to be taken against the landlord.

Gazetted in 2013 but still awaiting all states in Malaysia to endorse it, the Act streamlines the issuance of strata title and makes it faster for an owner to obtain it from the housing developer.

Besides this, it will impose higher penalties for non-compliance, put more responsibilities on the housing developer for the strata buildings and make sure the management of strata properties is more responsible.

Chief Minister Lim Guan Eng said the Act would ensure that application for strata titles, the management of buildings and the issues involved would be eased.

“The state exco decided today to give its endorsement so that there will be no disruption to application for strata titles.

“At the same time, we decided to show our willingness to cooperate with the Federal Government by endorsing the Strata Management Act which was approved by the state exco just now during our meeting.

“This means that Penang will be a part of the national implementation of the new Act,” he told a press conference in Komtar yesterday.

Lim added that the endorsement was important as around 60% of housing on the island were stratified units. - The Star/Asia News Network

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Building structural integrity & failure: problems, inspections, damages, defects, testing, diagnosis, repair

Structural integrity and failure is an aspect of engineering which deals with the ability of a structure to support a designed load (weight, force, etc...) without breaking, tearing apart, or collapsing, and includes the study of breakage that has previously occurred in order to prevent failures in future designs.

Structural integrity is the term used for the performance characteristic applied to a component, a single structure, or a structure consisting of different components. Structural integrity is the ability of an item to hold together under a load, including its own weight, resisting breakage or bending. It assures that the construction will perform its designed function, during reasonable use, for as long as the designed life of the structure. Items are constructed with structural integrity to ensure that catastrophic failure does not occur, which can result in injuries, severe damage, death, or monetary losses.

Structural failure refers to the loss of structural integrity, which is the loss of the load-carrying capacity of a component or member within a structure, or of the structure itself. Structural failure is initiated when the material is stressed beyond its strength limit, thus causing fracture or excessive deformations. In a well-designed system, a localized failure should not cause immediate or even progressive collapse of the entire structure. Ultimate failure strength is one of the limit states that must be accounted for in structural engineering and structural design.

These articles explain the inspection, detection, diagnosis, and repair of all types of structural defects on residential and light commercial buildings and will answer most homeowner concerns. We address brick and other masonry structures, wood frame structures, log homes, modular and factory built homes, even mobile homes.

Chimneys, crawl spaces, decks, building flood damage, foundation crack and movement damage, rot or insect damage, sink holes, and water entry are examples of topics for which InspectAPedia provides inspection, diagnosis, and repair advice. Our page top photo illustrates Story Land[26] a remarkably askew wood-framed structure that would have been quite challenging to frame.

Guide to Detecting & Evaluating Structural Defects: Inspection, Diagnosis, & Repair of Settlement, Improper Construction, Rot & Insect Damage to Buildings

Articles found in this section address just about all types of residential & light commercial building structural construction, inspection, diagnosis & repair topics such as foundation damage, leaning, buckling, bowing, and cracking, FRT plywood failures, chimney inspections & safety concerns, causes and cures for rot, mold, & termites in buildings, sinkholes at building sites, stair and rail fall & trip hazards, & also special inspection methods for mobile homes.

Most structural problems can be avoided by proper design and planning; but structural failures have been common for a long time, and sometimes are costly to handle properly.

The sketch at left( courtesy Carson Dunlop) names the major structural components of a typical wood frame house set on a masonry foundation.

Structural Defect Recognition, Repair, Prevention for Building Structures, & Building Structural Failures

This photo of the leaning tower of Pisa was sent to us by our friend Tom Smith who knows a crooked building when he sees one. Smith points out that the problems with the Tower have been known for generations and must have been apparent even during construction, as the upper level was constructed with an offset to try to re-balance the structure.
Modern reinforcement has permitted removal of cables that used to be tied to the tower of Pisa. As Bernie Campbalik says about old buildings, "Yep, we had guys like that back then too."

• ARCHITECTURE & BUILDING COMPONENT ID - series of articles providing photo and drawing aids to architectural type and age of buildings and building components.
• Balloon Framing: see Framing Methods
• BASEMENT WATERPROOFING and FOUNDATION WATERPROOFING collect articles on keeping water and moisture out of buildings
• BASKETBALL MOLD SYNDROME - BBMS - sudden attention to old clues in buildings makes them seem brand new to some observers
• Best Practices Guide to Residential Construction - Steven Bliss Book Review by DJ Friedman
• Chernobyl Nuclear Plant this interesting document describes serious flaws in the construction of the Chernobyl Nuclear Facility, conditions which were discussed among Russian authorities long before the Chernobyl nuclear disaster that occurred in the Ukraine in 1986

• Chimneys, flues, wood stoves & fireplaces: chimney inspection, defects, safety concerns, Articles about Chimney Inspection, Collapse, Damage, Repair
  • Bracing & Support for Chimneys - bracing needed at chimneys (just below)
  • BRACKET CHIMNEY COLLAPSE & FIRE RISKS - what is a "bracket chimney" and where are they found and why do they collapse
  • Chimney Collapse Hazards - Main Article
  • Chimney Movement Causes - what causes chimney separation, leaning, or curving, what can we see outside
  • Chimney Movement - Indoor Evidence - what can we see indoors that tells us that chimney or fireplace movement are occurring?
  • Chimney Movement - Outdoor Evidence is a guide to recognizing outdoor evidence of chimney movement
  • Chimney Movement is Ongoing - Evidence is a guide to recognizing when chimney movement has been ongoing rather than a single or initial settlement or movement event.
  • Chimney Crack Detection & Diagnosis - what causes cracking in brick chimneys, how dangerous is it?
  • Cracked Concrete Block Chimneys - an example of cracking in a masonry block chimney exterior
  • Curved Brick Chimneys - what causes curving in brick chimneys, how are they evaluated and repaired?
  • DRY-IN, DEFINITION of - what is dry in or dry box in building construction and what building steps must have been completed to reach dry in status?
  • Earthquake or Storms can Cause Chimney Collapse
  • Foundation Support for Masonry Chimneys
  • CHIMNEY LEANING, REPAIR OPTIONS - how do we stabilize and repair a moving chimney, when does it need replacement, what are the alternatives?
  • Loose Wobbly Chimneys need bracing or lateral support to avoid collapse
  • Rooftop View Turns to Darkness a news report of a person who was trapped inside of a collapsing chimney is in our footnotes
  • Split Openings in Brick Chimneys & Chimney Collapse Risk - we describe a case of an imminent catastrophic chimney collapse - SPLIT OPENINGS in BRICKS, CHIMNEY COLLAPSE

• Deck & Porch Construction Guide - Deck & Porch construction details for safe, durable structures. Also see DECK COLLAPSE Case Study and DECK FLASHING LEAKS, ROT Case Study
• ENERGY SAVINGS in BUILDINGS - articles on insulating, finding and fixing air and heat leaks, ventilation, etc. for energy efficient buildings
• Flood Damage Control - FLOOD DAMAGE ASSESSMENT, SAFETY & CLEANUP
• Action Guide after Flooding: First Priorities of Action in Response to Building Flooding
• Cracks in Concrete Floors & Slabs, how to diagnose, evaluate, & repair slab cracks

• Flooded Building Mold Prevention how to respond to avoid mold
  FLOOD DAMAGE ASSESSMENT, SAFETY & CLEANUP - see list of detailed articles & advice found here
• Flooded Septic Systems Septic Systems what to do after a septic system has been exposed to flooding
• FLOOD VENTS & FLOOD PORTS to avoid structural damage during building flooding, flood venting, flood ports, or flood gates on buildings
• FOUNDATION CRACKS & DAMAGE GUIDE - Foundation Inspection, Materials, Defect Diagnosis, Repair Guide, how to inspect and diagnose foundation problems, in-depth diagnosis, and evaluation of all types of structural and non-structural cracks in residential foundations [Brick, Concrete, Masonry Block, Stone]
• Foundation Inspection Methods
• Site Factors Affecting Foundations
• Foundation Construction Materials how to identify different materials and types of foundation, how to recognize the effects of sequence of construction on building durability

• FOUNDATION FAILURES by TYPE & MATERIAL - see detailed links at page top & left
• FOUNDATION DEFECTS OF OMISSION how to recognize things that were left out, like footings, reinforcement, soil compaction, during foundation construction
• FOUNDATION CRACK DICTIONARY how to recognize and diagnose different types of foundation cracks, movement, damage, by the size, shape, location, pattern of cracks
• CONCRETE SLAB CRACK EVALUATION how to recognize and diagnose different types of slab or concrete floor cracks and movement
• FOUNDATION FAILURES by MOVEMENT TYPE how to recognize an diagnose different types of foundation damage by the kind of movement which has occurred
• FOUNDATION BULGE or LEAN MEASUREMENTS a simple procedure for documenting the amount of lean or bulge in a foundation or other building wall
• FOUNDATION MOVEMENT ACTIVE vs. STATIC how to determine if foundation movement was a one-time event or an ongoing problem
• FOUNDATION DAMAGE SEVERITY some rules of thumb for deciding how much foundation movement requires further action
• FOUNDATION DAMAGE REPORTS how to report foundation inspection results and damage
• FOUNDATION REPAIR METHODS a catalog of methods used to repair damaged foundations and masonry building walls
• Foundation Crack Repairs: How to Seal Cracks in Concrete a description of various products and methods used to seal or repair cracks in poured concrete walls, foundations, floors, & slabs.
• Foundation Crack Repair Using Polyurethane Foam to stop basement or crawl space leakage
• FOUNDATION INSPECTION STANDARDS a definition of scope of what a foundation inspector is required to observe and report

 

Framing & Wood Beams / Timbers Damage Inspection, Diagnosis, Testing, Repair

• FRAMING DAMAGE, INSPECTION, REPAIR - see detailed links for building framing, diagnosis, and repair at the "More Reading" links at the bottom of this article . Our photo (left) illustrates site built truss construction in a tango hall in Buenos Aires, Argentina. See these articles related to the assessment of wood framing, timbers, & structural members
• CONNECTORS, FASTENERS, TIES - where to buy, how to install, how to use structural connectors like joist hangers, rafter ties, framing connectors, anchors
  • Cracks, Checking or Splitting Beams & Log Homes
  • FIRE DAMAGE vs MOLD DAMAGE - how to distinguish between fire damage and black mold on building surfaces, how to test for mold, use of sealants and paints after a fire or after a mold cleanup
  • ROT, FUNGUS, TERMITES
  • ROT RESISTANT LUMBER
  • ROT, TIMBER FRAME
  • ROT, TIMBER ASSESSMENT
  • STRUCTURAL WOOD ASSESSMENT
• Fire Retardant Treated FRT Roofing Plywood Failures inspection, detection, testing of defective FRT plywood roof sheathing
• HOPPUS MEASURER - early carpentry & construction measurement guides & tools, history, photos, & excerpts from Hoppus's Measurer
• INSECT INFESTATION / DAMAGE - wood destroying insect inspection, diagnosis, evaluation, repair, and prevention at buildings
• Log Home Guide a guide to inspection, diagnosis, & repair of log homes, antique or old log cabins, modern kit log homes, vertical log construction, horizontal log construction, log checking, log home leaks, log home rot, log home sealants, gaskets, and coatings.
• Mobile Home Inspections manufactured homes or "trailers" require special procedures
• NOISE / SOUND DIAGNOSIS & CURE includes a discussion of the sources and cures of sounds in buildings
• Post and beam framing: see Framing Methods

• WOOD DESTROYING INSECTS carpenter ants, powder post beetles, & other wood destroying organisms
• Sears Houses: How to identify Sears catalog kit houses photos and tips for identifying these interesting homes.
  
• Sink Holes: Can X-Ray Vision [Advanced Building & Building Site Inspection Techniques] Warn of Sink Holes? in Florida or elsewhere
  
  

• STAIRS, RAILINGS, LANDING INSPECTIONS, CODES - stair construction dimensions and specifications, stair codes
• Stairs and Railings: A Checklist for Stair, Railing, Landing Safety Inspections

• TIMBER FRAMING, ROT and TIMBER ASSESSMENT - Timber Frame Construction, Barn Collapses, Timber Frame Rot: post and beam framing history, inspection, diagnosis, repair
• SOLAR ENERGY SYSTEMS Solar house designs, problems, retrofits, optimization
• TERMITE SHIELDS vs TERMITICIDE - how to avoid termite damage to buildings that use foam board insulation at the foundation or underneath stucco.
• THERMAL EXPANSION of MATERIALS how temperature changes affect building materials and cause building leaks or other failures
• Trailer vs Mobile Home vs Modular vs Panelized Construction an explanation of terms and how to identify these structures.
• WATER ENTRY in BUILDINGS series of articles on the causes and cures of high indoor moisture, wet basements, wet crawl spaces, and moisture related problems like attic condensation and mold.
• X-Ray Vision for Home Inspection: [Advanced Building & Building Site Inspection Techniques] - Developing your X-Ray Vision, Levels of Fear, and how to use them to find and report significant, hidden problems on Buildings or in the inspection of almost any complex system
• X-Ray Vision for Home Inspection: a Power Point Presentation© of the X-Ray Vision Home Inspection class detailed-text shown above.

Rot, fungus, Termites, Carpenter Ants, Powder Post Beetles, & other Wood Destroying Organisms

Our photo (left) illustrates a combination of factors leading to a strong indication of serious structural damage at a home: aluminum siding at ground level (risk of insect attack) combined with buckled siding at the bottom course (a condition that only occurs long after original construction) point to crushed wooden sills under this structure, most often due to insect attack or rot or both.

• INSECT INFESTATION / DAMAGE - complete guide to wood destroying insect inspection, diagnosis, evaluation, repair, and prevention at buildings
• The Sick House/Sick Building Information Website Organized, un-biased, in-depth advice about mold, allergens, and other indoor contaminants: finding, testing, cleaning, clearance testing, and preventing mold, mildew, wood destroying (rot) molds (fungi). Explains how to assure that testing for toxic or allergenic molds is performed using valid field and lab methods. Advice and test procedures are provided for odors and odor source detection, toxic gas testing and gas source identification.
• "House Eating Fungus" Meruliporia incrassata (also called "Poria" the house eating fungus) in the U.S. or Serpula lacrymans in Europe) can cause severe structural damage. Evidence of hidden "poria" may be found by expert inspection methods which include tracing sources and paths of probable Building leaks and moisture traps. Further, careful indoor particle sampling methods can often permit the presence of this mold to be identified in the laboratory.
• WOOD DESTROYING INSECTS carpenter ants, powder post beetles, & other wood destroying organisms

Continue reading at BRICK FOUNDATIONS & WALLS or select a topic from the More Reading links shown below.

Suggested citation for this web page

STRUCTURAL INSPECTIONS & DEFECTS at InspectApedia.com - online encyclopedia of building & environmental inspection, testing, diagnosis, repair, & problem prevention advice.

More Reading

Green link shows where you are in this article series.

• STRUCTURAL INSPECTIONS & DEFECTS
• ARCHITECTURE & BUILDING COMPONENT ID
• BRICK FOUNDATIONS & WALLS
• BUCKLED FOUNDATIONS due to INSULATION?
• BUILDING DAMAGE ASSESSMENT & REPAIR
• BUILDING SETTLEMENT
• CHIMNEY CHASE Construction & Defects
• CHIMNEY INSPECTION DIAGNOSIS REPAIR
• COLD POUR JOINTS, CONCRETE
• COLUMNS & POSTS, DEFECTS
• CONCRETE FOUNDATIONS
• CONCRETE SLAB CRACK EVALUATION
• CONCRETE SLAB CRACK REPAIR
• CONNECTORS, FASTENERS, TIES
• CRAWL SPACES
• DECK & PORCH CONSTRUCTION
• DISASTER BUILDING INSPECTION & REPAIR
• EARTHQUAKE DAMAGED FOUNDATIONS
• ENGINEERED WOOD Products
• FIRE DAMAGE vs MOLD DAMAGE
• FLOOD DAMAGE ASSESSMENT, SAFETY & CLEANUP
• FLOOR FRAMING & SUBFLOOR for TILE
• FOOTING & FOUNDATION DRAINS
• FOOTINGS EXPOSED, Repair Methods
• FOUNDATION BULGE or LEAN MEASUREMENTS
• FOUNDATION CONSTRUCTION TYPES
• FOUNDATION CONTRACTORS, ENGINEERS
• FOUNDATION CRACKS & DAMAGE GUIDE
• FOUNDATION DEFECTS OF OMISSION - MISSING
• FOUNDATION FAILURES by TYPE & MATERIAL
• FOUNDATION FAILURES by MOVEMENT TYPE
• FOUNDATION INSPECTION METHODS
• FOUNDATION MATERIALS, Age, Types
• FOUNDATION REPAIR METHODS
• FOUNDATION SETTLEMENT
• FOUNDATION WATERPROOFING
• FRAMING DAMAGE, INSPECTION, REPAIR
• FRAMING DETAILS for BETTER INSULATION
• FRAMING DETAILS for DOUBLE WALL HOUSES
• FRAMING CONNECTORS & JOIST HANGERS
• FRAMING FASTENERS, NAILS, SCREWS, & HIDDEN
• FRAMING & SUBFLOOR for TILE
• FRAMING MATERIALS, Age, Types
• FRAMING METHODS, Age, Types
• FRAMING SIZE & Spacing, Age, Types
• FRAMING TABLES, SPANS for DECKS
• FRENCH DRAINS
• FROST HEAVES, FOUNDATION, SLAB
• GLUES ADHESIVES, EXTERIOR CONSTRUCTION
• HOUSE PARTS, DEFINITIONS
• I-JOISTS, Wood Roof Floor
• INSECT INFESTATION / DAMAGE
• LOG HOME GUIDE
• LVL Laminated Veneer Lumber, Beams
• MOBILE HOMES, DOUBLEWIDES, TRAILERS
• MODULAR HOME CONSTRUCTION
• OSB - Oriented Strand Board
• PANELIZED CONSTRUCTION
• PLYWOOD Roof, Wall, Floor Decks & Sheathing
• PORCH CONSTRUCTION & SCREENING
• PRE-CUT & KIT HOMES
• PRESERVATIVE TREATED LUMBER
• RAILINGS, DECK & PORCH
• RAILINGS, STAIRWAY
• RETAINING WALL DESIGNS, TYPES, DAMAGE
• ROT, FUNGUS, INSECT DAMAGE
• ROT RESISTANT LUMBER
• ROT, TIMBER FRAME
• ROT, TIMBER ASSESSMENT
• SHEATHING, FIBERBOARD
• SHEATHING, GYPSUM BOARD
• SHEATHING, OSB
• SHEATHING, Plywood
• SIDING TYPES, INSTALLATION, DEFECTS
• SINKHOLES, WARNING SIGNS
• SINKING BUILDINGS
• SPLITS & CRACKS in STRUCTURAL WOOD BEAMS
• STAIRS, RAILINGS, LANDINGS, RAMPS
• STONE FOUNDATIONS
• STONE VENEER WALLS
• STRAW BALE CONSTRUCTION
• STRESS SKIN INSULATED PANELS
• STUCCO WALL METHODS & INSTALLATION
• STRUCTURAL DAMAGE PROBING
• STRUCTURAL WOOD ASSESSMENT
• TERMITE IDENTIFICATION & CONTROL
• THERMAL EXPANSION CRACKS in BRICK
• TIMBER FRAMING, ROT
• TIMBER ASSESSMENT
• TRUSS UPLIFT, ROOF
• TRUSSES, FLOOR & ROOF
• WALL CONSTRUCTION BARRIER vs CAVITY
• WATER BARRIERS, EXTERIOR BUILDING
• WATER ENTRY in BUILDINGS
• WINDOWS & DOORS, Age, Types
• WOOD FOUNDATIONS
• WOOD STRUCTURE ASSESSMENT
• WOOD BEAM VISUAL INSPECTION
• FAQs below discusses field reports of problems & solutions for this topic

 By InspectAPedia<sup>®

Structural Integrity and failure:</sup>
http://en.wikipedia.org/wiki/Structural_integrity_and_failure

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