Global infrastructure investment: Emerging markets are winning; Singapore #1, Malaysia Asia #2

Emerging markets are winning the race to attract global infrastructure investment

- Singapore, Qatar & UAE top the ARCADIS Global Infrastructure Investment Index ranking

- UK, USA are moving up the index, but need to take urgent action to attract greater funding to replace their aging infrastructure

- Emerging markets including Philippines and Indonesia are rising up the index

Singapore is the most attractive market in the world for infrastructure investment, according to ARCADIS, the leading global natural and built asset design and consultancy firm.  Qatar and UAE completed the top three with their strong business environments, healthy pipelines of development work and growing economies, making them attractive to investors, including pension funds and banks.

The findings come from the second ARCADIS Global Infrastructure Investment Index which ranks 41 countries by their attractiveness to investors in infrastructure.  In order to gauge their appeal the study looked at various issues including the ease of doing business in each market, tax rates, GDP per capita, government policy, the quality of the existing infrastructure and the availability of debt finance. Combining all of these factors provided a strong overview of the risk profile for each market and how attractive each one is likely to be to potential investors.

Rob Mooren, Global Director of Infrastructure at ARCADIS said: “Good infrastructure is important for the long term economic development of a country.  Many governments are struggling to finance infrastructure investments.  As traditional debt markets are now harder to access, governments need to find alternative finance and agree to progressing projects.  By encouraging private finance into infrastructure, governments can remain globally competitive and meet their social and economic objectives.”

The GIII 2014 ranks the following as the top ten most attractive countries for infrastructure investment in 2014.  The difference from their 2012 ranking is in brackets:

2014	Country	Difference 2012
1.	Singapore	(=)
2.	Qatar	(=)
3.	UAE	(+1)
4.	Canada	(-1)
5.	Sweden	(=)
6.	Norway	(=)
7.	Malaysia	(=)
8.	USA	(+3)
9.	Australia	(-1)
10.	UK	(+3)

Singapore attractive, but better investment opportunities may lie elsewhere

Singapore’s integrated strategic plan linking infrastructure planning with business and social requirements helped it to retain its top position in the index.  However, the government self-finances most major projects so investment opportunities are limited.  Therefore other countries with major investment plans such as Qatar and the UAE, and emerging Asian markets such as Malaysia and the Philippines are considered more promising for investors.


USA and UK enter top ten, but must deliver against pipeline promise

The USA and the UK entered the top 10 for the first time through improvements in their economies as well as the growing need for investment in infrastructure.  However, both countries must work hard to attract private investment funds, as they compete against countries that provide more clarity on government infrastructure policy and are able to act on their promises to delivery major projects.


Continental European countries struggling to attract finance

Continental European countries present a mixed picture in their attractiveness to investors. At the top of the Continental European table, low risk markets like Sweden and Norway remain stable at fifth and sixth. Both have highly efficient business environments with transparency in regulation and efficient legal systems. Continental European countries such as Holland, France and Italy are either lacking public finance needed to upgrade their ageing infrastructure or have a lack of commitment from their governments to deliver proposed projects.  They have therefore slipped down the rankings.


Latin America countries vary in attractiveness

Chile is the highest placed Latin America country at 13th position, but its potential is limited by its size. In 2013 its construction market was estimated to be worth US$41.8billion but this is highly concentrated in mining.  Brazil is placed nearer the bottom of the ranking in 32nd place, indicating that some of the difficulties experienced with delayed programs have the potential to be risky for investors.


Rob Mooren continued: “A key difference that we have seen in the Asian and Middle Eastern markets is that those countries that have a clear integrated strategy tying infrastructure development plans to business and economic objectives have higher rankings.  This gives long term clarity to investors and is something that developed markets would do well to copy if they are to succeed in attracting more private finance into infrastructure.”


The report also explored the factors that governments, infrastructure owners and operators need to consider in order to attract private finance.  It suggested the structuring of infrastructure projects is key to this. For example, in project finance, mature markets like Canada, Australia, the US and the UK have sponsors that understand the pricing of assets, are aware of the rates of return expected and appreciate the key risks involved, making it easier to attract infrastructure investment. These markets have experienced the early challenges of introducing PPP and PFI and have learned what to expect from both an investor and political perspective


Rob Mooren concluded: “Markets that have created the right political environment committed to infrastructure development, can demonstrate the economic conditions required to sustain long term growth.  They have attractively structured infrastructure schemes which will stay ahead of the competition when it comes to attracting the pool of international investors who are increasingly considering this asset class.”
.

The full report can be downloaded here	View infographic here:

- Andy Rowlands, Head of Corporate Communications at ARCADIS  


M'sia second in Asia for infrastructure investment

Malaysia has been ranked second in the Asian region in terms of being an attractive market for investment in infrastructure, according to Arcadis.

The leading global natural and built asset design and consultancy firm said Malaysia scores highly across the investment criteria, placing it ahead of other large regional economies like Japan, China and South Korea.

Globally, Malaysia is placed at the 7th position, ahead of the US, Australia and United Kingdom.

The findings come from the second Global Infrastructure Investment Index, where it looked at various factors including the ease of doing business in each market, tax rates, GDP per-capita, government policy, quality of existing infrastructure and the availability of debt finance.

Arcadis Head of Infrastructure for Asia Richard Warburton said that infrastructure is the backbone of a country and a catalyst for its long-term economic development.

With Malaysia's average annual population growth rate of 1.4%, he said, investment in new infrastructure will be imperative.

"Combined with Malaysia's goal of a high-income status by 2020, plans are already underway for specific cities and urban clusters under Greater Kuala Lumpur/Klang Valley to be developed into vibrant, productive and liveable cities that are comparable to other major cities in the world.

The top 10 most attractive countries in Asia Pacific for infrastructure investment this year are Singapore, Malaysia, Australia, Japan, China, Thailand, South Korea, Indonesia, India and Philippine.

Warburton said countries that have created the right political environment for sustained long-term economic growth and have attractively structured infrastructure schemes will stay ahead of the competition to attract international inventions.

Sources: TheSundaily/BERNAMA/PropertyGuru

Related posts:

Property investments: good Infrastructure a way to huge profits and success

Property investments: good Infrastructure a way to huge profits and success. Buy property with good connectivity, investors advised - The road to huge profits. Packed room: Lee giving his talk on 'Infrastructure goes a long way ...

Property prices to further rise in Malaysia, Credit Suisse predicts

Higher selling prices does not necessarily mean bigger profits for developers with Credit Suisse noting that developers’ cost of doing bus...

Healthy wealth management

THE term “wealth management” came about in the 1990s to describe a complex series of services similar to financial planning. The phrase has also been adopted by accountants, estate planners, lawyers and some finance specialists. These experts cater mostly to high-net-worth clients.

Rather than just perceiving wealth as product of a toil-and-reap process, money can be considered a tool with which you can gain profit

Instead of just spending your money, invest it wisely to get returns.

Unlike professions such as accountancy, taxation or auditing, which involve specialised fields of study where professionals are provided official certifications by governing bodies who supervise the field, wealth managers are yet to require official certifications.

However, the Investment Management Consultants Association (IMCA), the governing body that awards the CIMA certification (Certified Investment Management Analyst), began offering a certification for wealth management in 2007 known as the Certified Private Wealth Advisor (CPWA).

The certification recognises individuals who specialise in the life cycle of wealth – accumulation, preservation and protection and distribution.

They identify and analyse challenges faced by high-networth clients and how to develop specific strategies to minimise taxes, monetise and protect assets, maximise growth and transfer wealth.

What is wealth management?

Wealth management is a system that involves the effort of both experts and clients to design and adopt ideas to manage and grow the clients’ wealth.

Wealth comes in many different forms – hard cash, properties, shares, luxury items, businesses, lands and others.

Managing it, however, involves collective consultative processes that build a specific portfolio for owners. It is a slow and painstaking process that requires the clients’ trust and the consultants’ patience.

Deciding to involve a wealth manager in planning your finances is an important step.

It requires you to entrust the management of your wealth to someone else.

However, leaving your wealth to stagnate or deplete would be less desirable but this is most likely the case for most people.

What wealth managers do is enhance wealth while providing a valued experience for clients. In addition to learning about the many financial areas, those undergoing the CPWA certification study family dynamics.

This includes the study of anthropology and building relationships based on shared experience.

This is particularly important if the wealth involves a few generations of a family.

The difference between wealth managers and financial advisors is that wealth managers are a niche group of people.

They have cultivated specific tools and skills over the years and have a relatively small number of clients.

They can also apply distinctive designs and have a better skill set compared to other more common models.

Wealth as a tool

A common mistake that people make is to see income as a figure to make purchases with.

Having wealth does not necessarily translate into profitability.

Rather than just perceiving wealth as a product of a toiland-reap process, money can be considered a tool with which you can gain profit.

In this circumstance, having professional help will evolve this tool into a working design that will snowball into a self-sustaining model. The process often involves a lifestyle change for clients as well.

Even those who do not fall within the high-net-worth bracket should consider getting consultancy aid since the nature of wealth management allows it to be adaptable as a tool to manage one’s situation even when in deficit.

Behavioural issues

Humans are generally protective of their finances, therefore a new concept such as wealth management may not be easily accepted as it is still largely unexplored and remains unknown to many people.

As a result, finances are normally made stagnant or spent, not giving much return to its owners if not put in a bank or invested with little or no returns.

K. Gunesegaran, financial planner and money coach from Wealth Street Sdn Bhd, was recently a guest on BFM (a Malaysian radio station) and spoke about how to keep emotions in check when dealing with money.

He suggested that adhering to a certain behavioural portfolio regardless of the market’s response and adopting a shared behavioural framework that clients and investors can agree on and adopt in any finance management context offer a good solution to the behavioural issue surrounding wealth management.

Towards a bright future

As Malaysia readies itself for the increase urbanisation of its cultures and communities, the growth of wealth will mean more opportunities for the wealth management field to develop.

By substantiating certification and licensing as well as educating the changing demographics about wealth management, the field will gain more recognition within the finance industry.

Creating a niche market of professionals is also a better option than generalising the industry’s talent.<

For example, a wealth manager who specialises in real estate or the ICT industry would prove to be better than a general wealth manager in certain contexts.

Scouting for a niche specialist wealth manager, especially if the wealth involved is derived from or being invested into a certain industry, would then be a better approach to handling wealth.

However, as a client, the first step is to better understand how you would like to use and invest your money before seeking professional help.

The role of a wealth management consultant

Deciding to involve a wealth manager in planning your finances is an important step. It requires you to entrust the management of your wealth to someone else. However, leaving your wealth to stagnate or deplete would be less desirable but this is most likely the case for most people.

Most banks offer wealth management services catered to highnet-worth individuals. There are also private, stand-alone wealth management firms that not only act as advisors but as executors of clients’ instructions pertaining to their finances.

The biggest challenge for a wealth manager is to understand the financial needs of the clients.

It is important for clients to understand the role of wealth advisors to ensure their credibility and market value.

Experts need to convince middle-income and low-income earners of their skills, as these earners have the potential to become higherincome earners.

This creates business opportunities and expands networks, which is the perception of wealth management that the industry is aiming for.

This is important because their relationship with clients is not usually a short-term one and the advice and information given need to be accepted by clients with trust and understanding.

There is no one way to manage wealth because people’s lifestyles differ and different people require different aspects of their wealth to be managed, including tax management, risk assessments, retirement planning, portfolio management, estate planning, generational legacy, trust fund managements and specialised services for executives and small business owners.

Sources: Money & You, StarSpecial


Related posts:

• Financial talent crunch worsen 

• A question of talent in Malaysia

Car or house buying cooling off measures?

Cooling off measures for car purchases also?

Key points: 

(1). Higher percentage of bankruptcies from inability to repay cars HPs than housing loans.
(2). The second largest household debt component, about RM145bil, is paid for an asset that is contracting in value every year.

WHAT are the considerations when you purchase a car?

Are the model and its functions important? Does the status symbol carry more weight? Or affordability is the main concern? Don’t get me wrong, I am not conducting a survey to change my profession. I am just curious to find out the major considerations of purchasing a car.

The topic interests me as car ownership among Malaysians, especially the young adults keep increasing. Many times, their choice of car is somewhat extravagant compared to the income they may be generating at this early stage of their careers.

This issue caught my attention when a news report last month stated that 122,169 Malaysians were declared bankrupt between 2007 and 2013, according to the Department of Insolvency. About 26% of the bankruptcies were due to the inability to settle the hire-purchase payment for vehicles, which involved 33,570 people since 2007.

When I searched further for other causes of bankruptcies, the available information for the period from 2005 to May 2010 indicated that car loans was also the chief reason for bankruptcy during that period. It was followed by 11.8% due to personal loans, 10.9% of bankruptcies due to non-repayment of business loans, and only 7.5% was caused by housing loans. Looking at the statistics, it is significant that for many years, more than one-fourth of bankruptcies in our country had been caused by car loans. It reflects on the household stress in repaying car loans, and this high default rate should trigger some thoughts among the authorities and the people.

According to Bank Negara statistics, as at April 2013, housing loans account for 57.5% of total household debts, while car loans, personal loans and credit cards account for 26.5%, 10% and 6% respectively. It means that the second-largest household debt component, about RM145bil, is paid for an asset that is contracting in value every year.

I wonder how many households are struggling to repay their car loans today, and how many of them, especially the younger generation, have deferred their financial wealth planning because of car loans? With the high percentage mentioned above and the rising household debt, there arises the question of whether cooling-off measures should also be extended to the car industry which is causing severe household stress.

Cooling-off measures for the car industry that can be considered include shorter loan period, more stringent loan-to-income ratio, and to impose certain charges if a car owner purchases additional cars in less than a certain number of years. These measures may help to reduce the number of cars on the road and discourage household spending on private vehicles. In the process, we will also be reducing traffic jams.

As shared in my previous articles titled “Reality Check on Debt Mountain” and “Good Debt, Bad Debt”, a car depreciates 10% to 20% per year based on car insurance calculation and accounting practice. In contrast, housing loans have underlying assets that are likely to appreciate over the long term.

Depreciative asset

Do we want to defer our financial planning instead and trade our opportunity of owning an appreciative asset for a depreciative asset? Perhaps, the authorities should encourage the people to borrow only for very good reasons, and to purchase assets only after thorough research.

This reminds me of an episode that I am personally aware of. It goes back to the early 1900s, when a 16-year-old migrant from China came to Malaya (now Malaysia) to seek a living, with no money in his pocket. Due to his diligence, hardwork and frugality, he was able to marry a young pretty girl ten years later and start a family and they eventually had 13 children.

What was astonishing is that he was able to send 7 of his 8 sons overseas for their tertiary education, all due to his frugality, hardwork and integrity. When he passed away, he was even able to leave behind a legacy of a bus company with over 30 buses and 4 small pieces of land in a small town.

Would this episode stimulate our young people to contemplate about what is best for their future?

Although the cooling-off measures for the car sector may be a new idea to ponder, however, with the Government’s plan to upgrade our public transport facilities and services, it is an area for consideration to increase public transport usage and encourage healthy financial planning in the long run.

After all, if senior executives in major cities like London and Tokyo are comfortable using public transportation to commute in their daily lives, can we not also do likewise (if our public transportation are improved)?

Coming back to the questions I asked in the beginning of this article... while I understand people put emphasis on different features of a car depending on their requirements and stage of life, it is always good to include the affordability aspect in a car purchase decision, so as not to be dragged down by the car which is bought to carry us forward.

P/S: The 16-year-old migrant happened to be my late father. He passed away at the age of 63 in 1962.

Contributed by Datuk Alan Tong

FIABCI Asia-Pacific regional secretariat chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com. The views expressed are entirely the writer's own.

Related posts: 

•  Our cars are costing us our homes!

•  Is having a car still a symbol of freedom?

•  Make the right money moves: investing in a property is still best..

• Malaysia needs to produce more houses to achieve 20/20 by 2020

• Property investments: good Infrastructure a way to huge profits and success

• Increase transparency in property prices

• New kid on the block: Singapore's 'shoebox king' Oxley spices up Kuala Lumpur a record RM3,300 per ssq ft

End the lawyers' monopoly on conveyancing in Malaysia

End the conveyancing monopoly

Lawyers set outrageous fees despite the fact that the work done does not involve additional skill.

WHEN I started my legal practice many years ago, it was quite common for lawyers to give discounts on fees chargeable for conveyancing and loan transactions. In fact, some of us charged time costs to clients because the work was quite straightforward (even if the sums involved were large).

In those days, there was already a no-discount rule. The legal fraternity then was more realistic and the Bar Council was lenient when it came to the amount of fees we could charge: no one would be liable for disciplinary action for not following scaled fees, and breaches were more frequent than observance. Those were happy days.

By and large, conveyancing and loan documentation for financial institutions are straightforward matters. They usually involve standard terms that lawyers use on a daily basis without much effort (though some lawyers might dispute this).

Conveyancing fees are what we call “easy money” – clerks do all the work and lawyers collect their fees for signing on the right pages. The higher the value of the property, or the value of the bank loan, the higher the fee.

I have never thought it right to charge high fees on this basis; after all, high-value residential property transacted in Ampang, for example, requires the same work and skill as that of lower-valued property in Klang, so why should there be a difference in fees?

The fact is that the scaled fees mandated by the Bar Council favour the lawyer who undertakes larger property transactions – but why this is so can be difficult to understand, and I suggest you read Michael Joseph’s Conveyancing Fraud, which was first published in 1989.

Joseph was an English solicitor who did his part to expose the arbitrary and unfair system by which the Law Society of England and Wales (the governing body for solicitors) set outrageous fees despite the fact that the work done had no relation to any additional skill.

Ultimately, good sense prevailed and solicitors lost their monopoly over conveyancing in England and Wales. A new breed of professionals called “conveyancers” was given the right to do this work as well and, as a result, fees were much reduced and services improved. That’s what competition does to any industry.

But not in Malaysia. Here, the Bar Council still insists that only lawyers can undertake conveyancing work and scaled fees must be strictly followed – a practice abandoned long ago in other Commonwealth countries.

When it comes to this issue, the Bar Council somehow always overlooks the question of public interest. It seems that, to the Council, it’s their members’ interests that are more important.

The economist Adam Smith warned us 250 years ago that when people of the same trade met, the conversation usually ended up in a conspiracy against the public through the raising of prices.

We now have the Competition Act 2010, which in essence seeks to promote the competitive process, and the rule of the game is to discourage anti-competitive behaviour. The stance taken by the Bar has been definitely against the Competition Act, although no one dares to challenge the lawyers’ monopoly.

The question remains: why must lawyers be the only type of professionals allowed to do conveyancing work?

A solicitor friend countered this view by saying that the Competition Act itself allows for exclusion. For example, Section 13 of the Act exempts any agreement or conduct that complies with a legislative requirement. My friend argued that the Solicitors’ Remuneration Order 2005 (which allows for scaled fees to be charged) is such a legislative requirement.

But wait a minute. I’m not saying that the Bar is in violation of the Competition Act. I’m saying merely that the Bar’s monopoly on conveyancing is not in compliance with the spirit of the Act. The Bar is once again out of touch!

The Malaysian Competition Commission, under the able leadership of former Chief Judge of Malaya Tan Sri Siti Norma Yaakob, should exercise its power under Sections 11 and 12 of the Competition Act to perform a “market review” of the situation and publish the results.

I am sure such a study will show the need for the establishment of a new breed of professional conveyancers so as to give lawyers some fair competition, and I’m sure the market review will benefit the public immensely.

Arguments that conveyancing work is complicated and must be done by lawyers have already been used in Australia and England, and have been found to be baseless – in fact, the quality of conveyancing services in Australia and New Zealand actually improved after the lawyers’ monopoly was broken.

In Malaysia, there are many former legal clerks and Land Office employees who can qualify and be registered as conveyancers. Of course, local conveyancers will have to be properly regulated under their own professional standards organisation to ensure that a high quality of work will be maintained.

The lawyers’ monopoly has no purpose whatsoever in this day and age. Moreover, given that the Bar Council has always fought for the political and human rights of the people, I believe it should extend this public spirit to conveyancing and other spheres, even if it means less “easy money” for lawyers.

In fact, the real test of our commitment to a particular cause is our willingness to persist even if it hits our pockets, so I say again: the public will surely benefit from an end to the conveyancing monopoly, services will improve and prices will fall. So why can’t we do it?

Contributed by by datuk zaid ibrahim The Star/Asia News Network

> Datuk Zaid Ibrahim, true to his Kelantan roots, is highly passionate about practically everything, hence the name of this column. Having established himself in the legal fraternity, Zaid ventured into politics and has been on both sides of the political divide. The former de facto Law Minister at one time is now a legal consultant but will not hesitate to say his piece on any current issue. He can be reached at zaid.ibrahim@partners-corp.com. The views expressed here are entirely his own.

Related posts:

Ethics vital for lawyers! Force to sign documents & hit client?

• Lawyers must constantly improve skills 

• New directions for young lawyers

• Bankers and lawyers should know better 

• Beware of rogue lawyers in Malaysian legal system

• 'Violent lawyer' may face action
•  Legal profession unattractive in Malaysia?

S P Setia's head honcho Liew resigns, looking forward to mentoring in Eco World

Ten months after S P Setia Bhd unveiled its succession plan, head honcho Tan Sri Liew Kee Sin has announced his intention to resign as president and chief executive officer.

Also quitting the company is chief financial officer Datuk Teow Leong Seng.

Liew’s departure was expected by industry observers but Teow’s resignation came as a surprise as he was named deputy chairman in the property player’s succession plan earlier, analysts told StarBiz.

Liew would leave the property giant on April 30 while Teow would stay on until July 31.

Liew and Teow would continue to be involved in the Battersea Power Station project in London until September 2015 given the prominence of the international project.

Liew would also remain managing director for Qinzhou Development (M) Consortium Sdn Bhd, a Sino-foreign joint venture company to develop the China-Malaysia Qinzhou Industrial Park in the republic until the same period.

Sources said the property magnate would eventually emerge in Eco World Development Group Bhd after his stint in S P Setia.

It is also speculated that present chief operating officer Datuk Voon Tin Yow, who was appointed the company’s acting president and chief executive officer, might also resign later.

In a statement, S P Setia said Voon’s appointment would be effective from May 1, 2014 until April 30, 2015.

Voon would be supported by executive vice-president Datuk Khor Chap Jen who would be appointed acting deputy president during the same period, it said.

Non-independent non-executive director Tan Sri Lee Lam Thye has also resigned yesterday to focus on his new role as the deputy chairman of the National Unity Consultative Council.

S P Setia chairman Tun Zaki Tun Azmi said: “Whilst the board and I are greatly saddened by the departure of Liew, Teow and Lee, we are confident that the group will continue to be in steady hands under Voon and Khor.”

Observers expected its biggest owner Permodalan Nasional Bhd (PNB) to take more proactive measures in managing its talents as well as setting the company’s direction going forward.

It was earlier reported that Datuk Jamaludin Osman of I&P Group Sdn Bhd – PNB’s property arm – was among the candidates tipped to take over Liew’s stewardship. There were also talks of a possible asset injection by PNB into S P Setia.

Liew said: “Given the solid footing which the company is on, I believe the time has arrived for me to step down after 18 years as CEO.

“With my children all growing up and starting out on their own career paths, I am looking forward to spending more time with them, mentoring and guiding them.”

Liew’s eldest son, Tian Xiong, is a major shareholder and director in Eco World, another property firm set up by former S P Setia top brass.

S P Setia fell five sen to close at RM2.88 while Eco World was up one sen to RM4.15.

Analysts said the market has priced in Liew’s retirement from S P Setia and they expected the company’s operation to remain intact for the time being.

Bloomberg data showed that its forward price-to-earnings (P/E) was 13.4 times compared to 16.06 times currently. Its average P/E ranged from 17 times to 20 times from financial year ended Oct 31, 2011 (FY11) to FY13.

Liew is instrumental in growing S P Setia from a RM200mil entity in 1998 into a multi-billion ringgit international property company.

With him at the helm, S P Setia achieved sales of RM8.24bil in FY13, almost double from what it registered in FY12.

The group has 4,782 acres of undeveloped land bank worth RM102bil while its unbilled sales stood at RM9.6bil as at FY13.

- Contributed by Ng Bei Shan The StarBiz/ANN

Who’s who in Eco World

Fresh from graduating as a Bachelor of Commerce from Melbourne University late last year, Liew Tian Xiong, 22, is not short of persuasive skills that a sales person possesses as he introduces EcoSky to StarBizWeek when we visited Eco World Development Sdn Bhd’s sales gallery.

In fact, one of the key performance indicators he has to meet, is to sell off 30 units of its KL project, EcoSky, which will then determine whether he gets his bonus.

Besides sales and marketing, he is also involved in project planning, land acquisition and liaising with land consultants.

Asked on people who influenced him, the affable young man says: “I have probably learnt from my father throughout my whole life. He taught me to keep my head down and listen to people, and to keep asking questions.”

He says he has learnt from both CEO Datuk Chang Khim Wah and COO Datuk S. Rajoo and what he is going through, is essentially a fast track management training programme.

Chang says: “There is a lot of things (for him) to learn. He’s doing groundwork like sales and marketing, planning and reading legal documents although he is holding the director’s card.”

“Tan Sri Liew (Kee Sin) told me that I can scold him (Xiong). I was scolded by Tan Sri Liew back then, so it’s pay back time now,” Chang jokes.

However the relationship among the management team when StarBizWeek met up with them is warm and fervent.

Chang quips: “We even play futsal with him (Xiong)… ”

The experienced management personnel like Chang and Rajoo had known each other for about two decades, but Xiong, at his tender age, seems to be gelling well with them.

Xiong’s younger brother, Tian Rong, 20, is also with the company as a contract staff. He is pursuing an economics degree from University London College and is having a stint in the company.

The man who helms Eco World, Datuk Chang Khim Wah, 50, joined S P Setia in 1994 and had been there for about 20 years. Prior to that, he was a consultant engineer in Australia. He was one of the members instrumental in setting up S P Setia’s Johor Baru division and went on to set up an office in Singapore and Jakarta.

He concedes that the team has S P Setia’s DNA in terms of team effort and competitiveness. His relationship with Liew was depicted as an understanding that required little words.

“We don’t speak long sentences (but) we understand each other,” he shares.

Chang’s counterpart, Rajoo, 50, assumes the position of COO in Eco World. He spent his first seven years in S P Setia in the Klang Valley helping the development of Bukit Indah Ampang and Pusat Bandar Puchong

and subsequently in some of the township developments in Johor where he then worked closely with Chang.

After that, he was overseeing S P Setia’s projects in the northern region for seven years and had carried out 13 projects with a gross development of more than RM2bil in the Pearl of the Orient.

Heah Kok Boon, 46, the chief financial officer of Eco World, is a chartered accountant who has over two decades of experience in the field of corporate finance, corporate fund raising, investments, merger and acquisition as well as other finance-related areas.

He was with S P Setia’s corporate affairs department for six years prior to his current role.

When introducing the major shareholders behind Eco World, Chang says Leong and Rashid are the two major shareholders.

“These two names are more than enough (for Eco World’s credibility),” Chang says, joking that Xiong has no shares in the property outfit.

One of its major shareholders and directors, businessman Tan Sri Abdul Rashid Abdul Manaf, 65, was trained as a legal practitioner from Middle Temple London.

He was chairman for the board of S P Setia Bhd from March 12, 1997 until Oct 25, 2012.

Another director, who is a corporate figure, is Datuk Eddy Leong Kok Wah, 58. He holds a master of business administration from University of Hull, United Kingdom, and is also a member of Institute of Bankers (UK). He has an extensive career in the banking industry and is currently an executive director of Salcon Bhd and also sits on the board of a few other companies. He was in S P Setia’s remuneration committee from Sept 21, 2005-Feb 28, 2013.


Related posts:
1. Succession issue: give children a message,not money
2. Robert Kuok is still top among 40 richest Malaysians

Penang to unveil stricter housing rules

Owners of low-cost and affordable houses in Penang will find it harder to sell their properties as the state government eyes to introduce stricter housing rules to rein in property speculation, reported The Star.

With effect from 1 February 2014, owners of affordable houses acquired for less than RM250,000 on the mainland and RM400,000 on the island are prohibited from reselling their units during the first five years of ownership.

Owners of public housing (low-medium and low cost units) acquired for RM72,500 or less are barred from selling their properties for 10 years.

Owners of said units who still wish to sell them during the moratorium period will have to appeal to the state government, said Chief Minister Lim Guan Eng.

Once the appeal is approved, the owner can only sell the unit to qualified 'listed buyers' registered with the state housing department.

Lim noted that the new rule will cover past and future acquisitions.

Moreover, the new rule also states that foreigners can only acquire properties valued at RM1 million and above, and RM2 million if it is a landed property on the island.

For their acquisitions, foreigners will be imposed a three percent levy. However, an exemption will be granted if the property is used for industrial purposes or to promote “employment, education and human talent.”

Meanwhile, “a two percent levy will be imposed on the seller, for all properties sold within three years from the date of the Sales & Purchase Agreement signed from February 1, 2014. Property bought with the SPA signed before February 1, 2014, will not be subject to this levy,” noted Lim.

He also clarified that the two percent levy will not be applicable to affordable housing.

Announced during the tabling of the 2014 budget, the new housing rules was refined for certainty and clarity during the last Penang state exco meeting.

 
Image source: Penangmonthly.com

Increase transparency in property prices

Companies factor in freebies into the cost of the property

 

The marketing tactic of offering lifestyle-oriented freebies is often quite effective when it comes to high-end premium homes

DEVELOPERS often offer sales gimmicks and marketing ploys like free legal fees, rebates, air-conditioners and furniture. Budget 2014, however, seems to make it a requirement that developers be transparent about their property prices.

The adage “There’s no such thing as a free lunch” rings true in this instance. While developers are quick to advertise various blandishments such as “free legal fees/stamp duty, etc”, such freebies are always factored into the property price. These freebies should be translated into cash incentives to be deducted from the purchase price of the property, as otherwise, it becomes meaningless to offer these gimmicks, which are usually recovered in the form of substandard materials. Here, we again thank our Prime Minister for announcing that developers, when offering their products, should disclose the value of the freebies to the buyers. Such transparency is a move in the right direction so that buyers would know what they are letting themselves in for. The enforcers of the law should be able to count on the Urban Wellbeing,

Housing and Local Government ministry to do its job to ensure that there is strict compliance and observance.

Whilst such a requirement will not deter speculation, it will hopefully educate house buyers on what makes up their final property price and not to be misled by developers advertising such freebies.

Additional measures

The National House Buyers Association (HBA) reiterates its call on the Government to take additional measures to stem the steep rise in property prices. There are basically two ways to reduce speculation: increasing the entry cost and increasing the exit cost.

Whilst Budget 2014 has increased the exit cost in the form of the higher real property gains tax or RPGT, more measures are needed to increase the entry cost to further reduce speculation.

The current stamp duty payable for the transfer of properties is based on the value of the property. This does not deter speculators, as the stamp duty payable is the same, regardless of the number of properties already held or bought.

The Government’s current low stamp duty regime has been misused by property speculators to accumulate multiple properties, driving up these prices by creating false demand and denying genuine buyers the opportunity to buy such properties.

It is every Malaysian’s wish to buy at least one property in their lifetime for their own dwelling, and perhaps an additional piece of property as a long-term investment or to fund their children’s education.

Hence,HBA has proposed that the current scale stamp duty remains the same for the first two properties bought, but is increased to a flat rate based on the property price for the third and subsequent properties to discourage speculative buying.

(See table for a comparison between the current stamp duty and the stamp duty proposed by HBA.)

With the same scaled stamp duty payable regardless of the previous number of properties held, speculators are not deterred from buying multiple properties.

Even for properties costing RM600,000, the stamp duty payable is only 2% of the value of the property.

The HBA-proposed stamp duty would not cause any disruption to genuine house buyers who can only afford two properties in their lifetime (one for their dwelling and one for long-term investment).

On the other hand, property speculators would be discouraged as the stamp duty greatly increases their entry cost.


RPGT will not lead to higher property prices 

Certain parties with vested interest are claiming that the revised RPGT rate would lead to higher property prices, as speculators would definitely factor in the RPGT into their property prices, only for the subsequent buyer to end up paying the RPGT indirectly.

Such statements only confirm that speculators are indeed responsible for driving up property prices.

If indeed the speculators factor in the additional 20% to 30% RPGT into their property prices, then it would make the property prices unattractive to the next buyer.

Financial Institutions may be unwilling to finance such exorbitantly overpriced properties, as such institutions have their own market intelligence to determine the fair value of such properties.

RPGT will lead to an orderly property sector
 
The aspiration of every rakyat is to own a roof over their heads and shelter their young rather than making money from properties. Hence, having the RPGT in place would deter speculators, and eventually lead to a more orderly property sector driven by market demand and not speculative forces.

Therefore, HBA supports the Government’s RPGT proposal and urges the public to support such a move to curb the current excessive speculation in the property sector.

HBA strongly believes that the cost of a roof over one’s head should not be left to market forces. The repercussions whereby a large section of society is deprived of affordable housing is serious and far-reaching. The present property price increase does not commensurate with the present rise in wages. The affordability of house ownership is becoming an elusive dream to the present generation. Controlling the upward spiral of property costs is not in the interest of housing developers. In fact, they certainly favour it. Therefore, it would be totally unrealistic to expect any developer to be interested in bringing down property prices.

Contributed by Buyers Beware Chang Kim Loong

CHANG KIM LOONG is the honorary secretary-general of the National House Buyers Association (www.hba.org.my), a non-profit, non-governmental organisation (NGO) manned by volunteers. He is also an NGO councillor at the Subang Jaya Municipal Council.

Related posts:

1.  Property gain tax won't hurt genuine buyers
2,  New tax rate on property to keep away flippers

New tax rate on property to keep away flippers

 

Profiteering nipped: Flip-happy property ‘investors’ – or rather, speculators – are not laughing now with the new stringent government measures to rein in excessive speculation.

Property prices have been spiralling and Budget 2014 introduced tough measures to cool prices down.

AHYAT Ishak was in the midst of selling off a property when Budget 2014 was tabled which saw hikes in the Real Property Gains Tax (RPGT).

It was higher and tighter than he expected. “Because of this announcement, I would have to make several different decisions. I bought that house less than three years ago.

“Previously, I would have been taxed 10% as RPGT, but with the recent announcement, I would need to fork out 30% of my profits for the RPGT.

“So right now, I am thinking that I should not sell it,” says the 30-something Ahyat, who has been investing in properties for the past 10 years and also runs workshops for wannabe property investors.

“If you have been strategic about investment, you would have known that the RPGT can go up anytime and you would have taken that into account in your investment plan. The worst strategy is when you have only one strategy,” he stresses.

Change of strategy: Property investor Ahyat is having second thoughts about selling a property he bought less than three years ago because of the higher RPGT. >

So he is not worried about hanging on a bit longer to the property that he had originally wanted to sell, because one of the rules he goes by is to make sure what he buys is an “investment-great asset”.

For him, this means two things – that the property is “tenant-able” and that it has good potential for capital appreciation.

As a player, he also makes sure he has the holding power to hang on to a property and service the loan.

“But it’s seen as uncool and yucky to talk to young investors about tenant-ability and capital appreciation. ‘Buying for rent’ is so old school to them. I’ve had people calling me a ‘sissy investor’ .

“Everyone was talking about ‘I buy, I get the keys, I flip’. How can that be sustainable?

“When I advocate responsible and sustainable investment, it is like a joke,” he says.

But those flip-happy property “investors” – or rather, speculators – are not laughing now with the new stringent government measures to rein in excessive speculation.

Other than the higher RPGT, the government is also prohibiting the developers interest-bearing scheme (DIBS), making developers spell out details of the house price and all the so-called “freebies” included, as well as making it a regulation that foreigners are only allowed to purchase properties that cost RM1mil and above.

Viewing the budget announcement as “very positive”, marketing and strategic consultant for developers Dr Daniele Gambero thinks this is what the market has been looking for.

“It is necessary to curb completely the investment of investors or speculators who are using property as if it is a forex or stock exchange market (where there is massive buying and selling in a short period).

“Property is not an asset for the short term. It is for the medium or long term, otherwise it becomes unhealthy and the market blows up,” he warns.

Gambero, who has been in the business for 15 years in Malaysia, says the kind of packaging housing developers have been offering over the past five years has been “ridiculous”.

“They are offering renovation packages, ‘free’ trips to, say, China and some even had a lucky draw for a Mercedez Benz.

“It’s ridiculous because these are actually not free. It is factored into the pricing and this is what has been pushing house prices up by a good 20%,” he says, stressing that developers are not angels and are merely responding to what the market is asking for.

He also takes to task the buyers for their “short-sightedness” in following their “emotions” instead of using practical and logical consideration when they buy property.

“If the value of the house is RM400,000 and these ‘free, free, not-so-free’ things bring the house price up to RM500,000, do they calculate how much this extra RM100,000 will cost them at the end of the loan tenure?

“At the end of the 35-year period, they might end up having paid RM180,000 extra in loan for these ‘free-free, not-so-free’ things the developer has thrown in to sweeten the deal. Don’t look at how much you are paying today but how much it will cost you in 20 to 30 years’ time,” he advises.

Besides, Gambero’s personal feeling is that most of the renovation offers built into the house price in fact ends up going down the drain, because about 40% to 50% of buyers end up having to renovate again because they want something that suits their personal taste.

One other thing that people should really sit up and take notice of is that with developers having to come clean with all the pricing, how will this impact on the amount of loan they can get to buy a property.

Both Ahyat and Gambero talk about the repercussions from banks.

“How is the banking industry going to react to this?

“When it is stripped bare and developers have to be transparent with details of the pricing, such as club membership, aircon, renovation and so on, the banks are going to be looking at that RM600,000 house and saying ‘Hey, this property’s value is actually RM500,000’ and that extra RM100,000 is just ‘fluff and whip cream’.

“Valuers from banks would give ‘zero’ value to those elaborate plaster ceilings, aircon and chandeliers. In the world of valuers, it is a big sin adding on all these add-ons.

“You can’t give loans on something that is inflated. You give loans based on the fundamental value,” says Ahyat, warning that the repercussions could be massive.

Concurring, Gambero says, the purchaser is at a “double losing end”.

“Say you bought the property for RM600,000 and a few years down the line you want to sell it for RM800,000, and find someone willing to pay that price.

“But when that person goes to the bank to ask for financing, the bank will look at the sales and purchase agreement and get their valuer to do a valuation and the valuer will give a value for the bricks but ‘not the plus, plus free-not-so-free’ package added in by the developer.

“And that real value of the house might only be RM700,000, so the bank will slash the margin of financing. So you might not be able to sell the house at RM800,000,” he says.

But will these new measures bring down the price of property?

Adrian Un, the founder and CEO of a property education arm, says the Budget announcement brought in the first wave and caught new young investors, aged 25 to 35, who came into the market with minimum downpayment, by shock.

The second wave, he believes, will come in when the details of the actual guidelines are spelt out.

“What has been announced is very general and the tip of the iceberg. Investors want to know in detail ‘if I do this or that, do I get a waiver’,” he says.

He thinks seasoned players will wait for a while and that after the Chinese New Year, when the news sinks in, they will continue to buy.

Un notes that developers with new launches planned will have to launch “no matter what” and they will now strategise on how to innovate and find new ways to entice people to buy.

“When they do away with the DIBS (a scheme where the developer bears the interest during the construction period and buyer pays nothing because that interest had already been factored into the price of the house), people might now be asking if it is worthwhile to buy the property.

“Developers might find a way to reimburse the buyer on the interest in a different way. For example, they may ask the customer to pay it first and then give a rebate or reimbursement every quarterly,” he says.

Un says it’s hard for house prices to come down.

“The cost of raw material has gone up, developers are going to have to pay GST from April 2015 (on supplies and material), the cost of labour has gone up, inflation is going to creep up with the introduction of GST and land cost is not getting any cheaper.”

Coming back to Ahyat, he says he doesn’t disagree that the property market is overvalued and that DIBS, among other things, had helped fuel speculation.

And he wonders too if other fiscal policies might be in the offing, like a hike in interest rates.

“We are in a low-interest environment right now and cheap credit fuels speculation.

“If there is a rise in interest rate, some say it would signal the bursting of the bubble because more people would die standing as their holding power would reduce significantly. And people can’t get loans or buy too if interest rates are too high.

“My question is, can Malaysia afford to let the development and construction industry contract and cool down? This is a very scary question to ask,” Ahyat notes.

Contributed by Shahanaaz Habib The Star

Related posts:
1.  Malaysia Tax Budget 2014 Updates 
2.  Malaysia's high property taxes may not stop prices...\
3.  No asset bubble, said Malaysian Central Bank gover...

Malaysia's Budget to increase real property gains tax (RPGT) will dampen market short term but rise up prices eventually

GEORGE TOWN: The Federal Government should leave real property gains tax (RPGT) alone in the 2014 Budget.

New Bob Group director Dr Lee Ville said that if the RPGT is increased, then it will dampen the property market, which has already started to cool.

Lee is also president of ERA Malaysia, which is the world’s leading real estate brand.

It is expected that the Federal Government will raise the RPGT rate to 30% from 15% for properties sold within two years, and 15% from 10% for properties sold within three to four years.

For properties sold in the fifth and sixth year, the RPGT is expected to remain unchanged at the current 10% and zero RPGT respectively.

“The anticipated RPGT will not deter foreigners from buying, as they are allowed to dispose their properties only after the third year,” he said.

Mont’Kiara and Sri Hartamas apartments Kuala Lumpur

Lee said the anticipated RPGT would work in the initial stages, curbing speculation in the short term.

“If implemented, developers will respond by reducing their delivery of residential housing projects.

“This will eventually lead to a shortage, triggering demand and causing property prices to rise up again in the long term,” he said.

Lee said the Federal Government should look into controlling price, other than cement, of essential building materials, as the rising price of raw materials was a reason for soaring property prices.

Meanwhile, Raine & Horne Malaysia director Michael Geh (pic) said the RPGT would hurt current speculators who had already bought properties, and not the future ones who had yet to buy properties.

“If the existing speculators are hurt, the banks will also be dragged down.

“The Federal Government should look at curbing speculation through other means such as providing middle-income homes with an effective delivery mechanism that ensures only the eligible income category benefits,” Geh said.

Contributed by  BY DAVID TAN The Star/Asia News Network

Related Post:
Time for crucial fiscal reforms: Malaysia Budget 2014 - Rightways 

Penang residential prices to rise 8%

RESIDENTIAL property prices in Penang are likely to rise by 7% to 8% by the first half of 2013 due to the steady demand and a stronger gross domestic product (GDP) projection for 2013.

< Geh says new properties launched with a bundled-up financial package would be most popular.

According to the latest Finance Ministry report, the GDP forecast for 2013 is between 4.5% and 5.5%, riding on the growth in the agriculture, construction, mining, manufacturing, and services sectors.

Raine & Horne Malaysia director Michael Geh says new properties launched with a bundled-up financial package would be most popular.

“This is why this segment will perform better than those properties in the sub-sales market, where the buyer and seller have to do more paper work,” he says.

Saw says harder loans may be cause of lower volume.>

Currently, the price for terraced property in prime locations such as Tanjung Bungah and Tanjung Tokong is around RM1.2mil to RM1.5mil.

The selling price of development land in prime locations ranges between RM450 and RM1,000 per sq ft.

“The stringent guidelines for housing loan, now based on the evaluation of net income rather than on gross income and the difficulty in obtaining the desired valuation report will mean that the sales of condominiums in the secondary market will face more challenges,” he says.

The new guidelines from the Penang government for foreign purchasers to buy only high-rise and landed properties priced from RM1mil and RM2mil respectively will impact adversely on foreign property transactions in Penang, according to Geh.

“More foreigners will prefer to rent than to buy, thus one can expect rental yield in the state to increase gradually,” he adds.

According to the latest National Property Information Centre's (Napic) property market report, total transactions for residential properties in Penang hit around 18,316 for the first nine months of 2012, with a transacted value of RM5.2bil.

The whole of 2011 saw the state registering some 30,674 residential property transactions valued at RM7.7bil.

Geh says the total volume of property transacted for 2012 was unlikely to catch up with 2011's.

“That the total value of property transactions has risen although the volume transacted has decreased is not surprising, as this is normally the trend,” he adds.

PPC International Sdn Bhd director Mark Saw says the lower volume of transactions may be because housing loans are harder to obtain nowadays.

“Another reason could be that the preferred choice of properties might not be available,” he says.

Malaysian Institute of Estate Agents deputy president Siva Shanker says Malaysia is unique as property prices have not dropped following the decline in transactions.

“In fact property prices will hold and then shoot up when times are good again,” he says.

Penang Master Builders & Building Materials Dealers Association president Lim Kai Seng says construction cost will likely be maintained in the first quarter of 2013.

“Although sand prices have gone up, the smaller volume of construction jobs available is offseting the impact of rising sand prices.

”Due to the competition for jobs, construction cost will be maintained,” he says.

The price of sand per load of 30 tonnes is around RM1,200, compared to about RM800 in early 2012.

Since the price of cement went up in August, the cost of construction has increased by about 3%, Lim says.