Leaving a legacy by buying a house first before a luxury car ...

DURING big festive celebrations such as Hari Raya Aidilfitri, Deepavali and the recently celebrated Chinese New Year, it is common to see families with a few generations gathered together.

Our grandparents, parents, uncles and aunties would talk about the legacies left by our ancestors, and the stories often attract a lot of attention whether from the young or old.

Perhaps, the topic of leaving a legacy is something worth sharing as we embark on a brand new year.

For years, I have been touched by the catchy tagline of a renowned Swiss watch advertisement, “You never actually own a (the watch brand), you merely look after it for the next generation”.

While most of us can relate to the thought, not all of us can indulge in such luxurious watches or be interested in buying one. However, at some point in time, we may be looking at buying a property to pass down to our younger generations.

Whenever the topic of leaving a legacy is brought up, I would recall the lesson that I learnt from my late father. My father embarked on a long journey from China to Malaysia at the age of 16. With years of hard work and frugality at his peak, he managed to own a bus company, the Kuala Selangor Omnibus Co.

Other than his bus transport business, he only invested in his children’s education and real estate. He financed seven of his eight sons to have an overseas university education, and when he passed away, he also left four small plots of land in Klang and a company which had 34 buses.

As I look back now, what my late father invested in unintentionally was very beneficial to me when I came back from my studies as an architect. With the land he handed down and the knowledge he equipped me with, I intuitionally got myself involved in small real estate development, and later founded my property development company, Sunrise, in 1968.

Many people have thought of leaving a legacy. The crucial questions often asked are, when should we start planning for it, and how should we go about it?

For financial planning and investment, I always believe that the earlier we start, the better off we are. The same goes to leaving a legacy.

If you plan to buy a property, it is advisable to start earlier as it is more affordable to buy it now as compared to 10 or 20 years down the line especially with rising costs and inflation in mind. You can start with what you can afford first and focus on long-term investment.

It is proven that property prices appreciate over a period of time, especially when we plan to hand over assets to the next generation that easily involves a 20- to 30-year timeline.

As a developing nation which enjoys high growth rate, Malaysia’s property values will also appreciate in tandem with the economic growth in the long run.

Nowadays, we often hear youngsters comment on the challenges of owning a house due to the rising cost of living. I believe that besides starting with what you can afford, it is also important to plan your financial position wisely and to differentiate between investment and spending.

Investing in properties, commodities, shares, etc. is also a form of savings which can help to grow your wealth and to leave a legacy. On the other hand, money spent on luxury items may depreciate over time from the day you buy them. If we can prioritise investment over expenditure, it is easier and faster to achieve our financial goals.

So, if you haven’t already started to plan, do consider leaving a legacy by buying a house first before a luxury car, branded bags or expensive gadgets, as the latter are considered ‘luxury’, not necessity.

Even if you may not have a spouse or children at this point in time, it’s better to start now than later, as our financial commitments tend to grow bigger as we progress into the next stages of our lives.

Most of us hope our lives matter in some way that can make an impact on our loved ones. The idea of leaving a legacy can take many forms, such as equipping the younger generations with knowledge and values, or leaving them fond memories.

Those are all important to work on and they leave a footprint to those lives you touch. If you are also planning to hand over physical gifts, always remember to start earlier with what you can afford, and focus on long term investment.


By 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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Cars are more expensive than houses? A house can buy how many cars?

IN about 3 weeks' time, we will be celebrating the New Year.

Each New Year comes with new resolutions and new goals. Some would plan to own big ticket items such as a house or a car as part of their resolution. If your plan is to own a new car, finish reading this article before nailing down that resolution.

Owning a car in Malaysia is expensive. In one of my previous articles, I highlighted that Malaysia was ranked second in the world where owning a car is expensive.

But what many do not know is by how much, relative to homes. Yes, homes in Malaysia are expensive too, but relative to Australian homes and cars, our cars are 10 times more expensive than those sold in Australia compared to homes. Let's do some simple math together.

Khazanah Research Institute (KRI) reported that the median house price in Malaysia is about RM250,000. This is the cost of two Honda Civics (priced at RM110,000 per car).

In Australia, the median house price is A$660,000, while a Honda Civic costs about A$30,000. This means, a median-priced Australian house of A$660,000 can buy 22 Honda Civics, versus a median-priced Malaysian house of RM250,000 which can only buy two cars of the same model. Yes, our homes may not be cheap but our cars are more expensive in comparison.

I further compared Malaysia against the United States and United Kingdom. A median-priced house in US and UK can buy 12 and 16 Honda Civics respectively, which is still more affordable compared to the two which can be bought with a median-priced Malaysian house.

The story does not end here. In addition to the cost of purchasing a car, there are many other financial commitments that comes along with owning a car. These include petrol, parking, toll charges, maintenance, and repair costs. Then, there is the cost of depreciation which ranges from 10 per cent to 20 per cent per year. It does not help that most of these supplementary expenses are frequently being increased. Our cars are indeed costing us a lot.

It is undeniable that a car is a necessity to those who have limited access to public transportation. Until our public transportation system is good enough, people will still need private vehicles to move from one place to another.

Unfortunately our cars are so expensive that the rakyat, especially the younger generation, are forced to put off buying a home until they can afford it. In the meantime, that "wait" causes house prices to appreciate, thus making it even more unaffordable for these people to own a home. This vicious cycle will continue until the government has a permanent solution to address both public transportation and affordable housing.

Perhaps, it is also timely to revisit the rationale behind our National Car Project which was introduced in 1982 to bring a higher level of industrialisation in Malaysia. Since its inception, the price of national and non-national cars have progressively increased through increase in car taxes and excise duties.

The price of non-national cars in Malaysia generally cost 50 per cent to 100 per cent more than the price of the similar make of car in other countries. On the other hand, one of my managers came back from his Aussie trip and shared that a Proton Preve in Australia is RM11,000 cheaper than one that is acquired in Malaysia.

Originally, the National Car Project was a form of protectionism for the national car industry. After more than 30 years since its inception, it has now become a burden to the rakyat, by eating more and more into our disposable income. The National Car Project has served its original purpose, and it is time that we review it.

So now, instead of jotting down my resolution, my wish list for 2016 is for the Government to rationalise and reduce the taxes imposed on cars. This will put more money back into the rakyat's pockets to start their home ownership journey much earlier. Concurrently, the Government can continue to channel and reinvest some of these funds to build a comprehensive and effective public transportation system in Malaysia which will greatly reduce the rakyat's dependency on private vehicles.

And for those who still wish to buy a car, think twice as owning a car is too expensive and unaffordable - it may also cost you your home.

By Datuk Alan Tong Food for Thought

Food for thought  By DATUK ALAN TONG

> FIABCI Asia Pacific chairman Datuk Alan Tong has over 50 years of experience in property development. He was FIABCI World president in 2005/06 and was named Property Man of The Year 2010. He is also the group chairman of Bukit Kiara Properties. (email atfeedback@bukitkiara.com) 


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Save Penang Hill from the greedy

Uphill battle: A hiker passing by a vegetable farm on Penang Hill overlooking Air Itam.

penangforum.net

Treasured heritage seems to be losing its charm to illegal farms and development

THE stall at the Air Itam market in Penang is said to offer the best asam laksa in Malaysia.

Rain or shine, it pulls in the crowd.

The ingredients for the dish such as ginger bud (bunga kantan), mint leaves (daun pudina), laksa leaves (daun kesum) and kalamansi limes (limau kasturi) come from Penang Hill, which is less than 200m away.

Farmers who cultivate the land at the hillslope sell their produce at the wet markets on the island.

The fertile hillslope from Air Itam to Paya Terubong is cultivated with vegetables and fruits.

Demand for the produce is so great that farmers are illegally clearing the hillslope to expand their farms.

About 2km from the market along Jalan Paya Terubong, there is a trail leading to a hillslope.

Lately, hikers and mountain bike enthusiasts have been using the trail to reach the 135-year-old Cheng Kon Tse Temple, nestled on the slope of the hill.

Travellers can see vegetable farms and fruit trees on both sides of the trail.

There are nutmeg trees, kalamansi lime trees, papaya and banana trees.

The vegetables include lemon grass, lady fingers and sweet potato.

As one continues walking up, a large swathe of hillslope which had been cleared near the telecommunication towers comes into view.

The bald patch can be seen from the Paya Terubong road below.

The slopes on Penang Hill have been cleared by farmers over the past few decades.

Such illegal hillslope clearing has been raised by environmental groups but there has been no firm action from the authorities.

A former Penang Island City Councillor claimed that he had provided pictures of the clearings to state leaders and that he had also raised the matter with the Consumers Association of Penang and Malaysian Nature Society.

“The press should continue to highlight the issue so that something is done finally,” said the former councillor who did not want to be identified for fear that the farmers might go after him.

“Penang Hill is our heritage. But no one seems to bother,” he said.

Besides Penang Hill, bald patches are also appearing on hills in several parts of the island.

Bukit Relau in Jalan Bukit Gambier has been dubbed “botak hill”.

There is also hill clearance in Bukit Kukus in Paya Terubong and Bukit Laksamana, a water catchment for the Teluk Bahang Dam.

More and more hillslopes are going bald because of developers and contractors who cleared the land without the authorities’ approval.

The clearings are done on weekends and smoke can be seen from far when the trees are burnt.

A large swathe of land has also been cleared at a place referred by hikers as level 45 station.

It should not be difficult to nab the culprits since there are cemented trails all over the hillslopes in Air Itam and Paya Terubong.

When The Star reported on Feb 14 last year that more bald spots could be seen, a state exco member said they had pictures of the illegal activity and that action would be taken against the culprits but till now, no one knows what the action is.

It is troubling that all this is happening under a state government which emphasises on Competency, Accountability and Transparency.

Penang Hill seems to be losing its charm.

Yet, the state government seems to be focused on mega projects and land reclamation.

At a state assembly sitting last month, Chief Minister Lim Guan Eng said the Penang Island City Council was using drones to check on illegal hill clearing and CCTVs would be installed next year to monitor illegal earthworks.

The spate of hill clearings has prompted the Penang Forum, a coalition of public interest NGOs, to hold a forum on Save the Hills of Penang tomorrow.

Hopefully, the outcome from the event will reach the right ears.

There is a compelling need to save the hills from greedy farmers and developers.

Comment by K. Suthakdar

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Illegal estate agents on the rise

The Board of Valuers, Appraisers and Estate Agents Malaysia (BOVAEA) is concerned that the number of cases involving illegal real estate brokers will increase if the problem is not addressed soon.

To curb the problem, the board will be working with the relevant government agencies in order to trace and bring these criminals to justice.

In a statement, BOVAEA revealed around 50,000 illegal real estate brokers are duping innocent Malaysians into parting with their hard earned money.

To earn quick cash, these unscrupulous characters impersonate developers’ representatives, property investors, unregistered salespersons, community leaders, foreigners and even housewives.

Last week, a certified negotiator discovered his photograph was printed on name cards under different companies which were being distributed to unsuspecting shop lot owners, who were duped into paying the necessary sales and rental deposits.

“We are afraid the number of cases will increase with desperate property owners trying to cope with the slowdown in the property market,” said BOVAEA Estate Agency Practice Committee (EAPC) chairman Eric Lim Chin Heng.

Lim said they were shocked at property owners’ apathy on determining the authenticity of the people representing them. BOVAEA underscored that estate agency practice is regulated by law.

“Anyone who is not a registered estate agent or is not a certified real estate negotiator is breaking the law. More importantly anyone using the services of anyone who claim to be agents without the authority to practice is not protected by law,” he explained.

To avoid being at the losing end, Lim urges potential property sellers and buyers to check the tags instead of relying on the name cards alone.

“There is a Quick Response (QR) code on each tag so customers can scan the code with their smartphones to find out the background of the agent, the firm they represent, their REN No and their identity.”

Under the Valuers, Appraisers and Estate Agents Act, those caught abetting an illegal agent can also be fined RM300,000 or face three years imprisonment or both, said Lim.

Farah Wahida, Editor of PropertyGuru, wrote this story. To contact her about this or other stories email farahwahida@propertyguru.com.my

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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Deterrent action for housing developers mooted

DEVELOPERS who carry out earthworks without approvals or permits from the Penang Island City Council (MBPP) could face the possibility of having their applications for future development projects frozen for five to 10 years.

Bukit Setiawangsa concrete embankment has collapsed due to soil erosion

Local Government Committee chairman Chow Kon Yeow (DAP - Padang Kota) suggested that stringent action be taken against such errant developers.

“The state government or the city council will freeze all future development applications of such developers between five and 10 years, if they are found to be carrying out illegal earthworks.

“Such action needs to be taken against these ‘environmental violators or sinners’ to curb illegal hill clearing,” Chow said during his winding-up speech at the state assembly yesterday.

He said if such measures were imposed, developers would be more concerned and serious about getting valid approval for earthworks.

Chow added that MBPP was also seriously looking into the hill clearing issue at Bukit Relau.

“MBPP has met General Accomplishment Sdn Bhd (GASB), which is responsible for the mitigation works on the hill, 13 times since April 26 last year.

“The city council has issued order notices to the company for more mitigation works .

“GASB has carried out hydro-seeding and close-turfing works to minimise the soil erosion on the hill.

“The company has also been ordered by MBPP to supervise the close-turfing, trench and sediment pond at the hill, so that the soil erosion can be controlled,” he added.

Besides that, Chow said a stop- work order had been issued to the developer who had been carrying out illegal earthworks near the Teluk Bahang Dam on Jan 12.

- The Star Community by Christopher Tan, Logeiswary Thevadass and Crystal Chiam  Shiying at Penang State Assembly

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Erosion worsens on Bukit Relau despite slope repairs

GEORGE TOWN (Nov 15 2013): Mitigation works on Bukit Relau, where massive illegal clearing of greenery has stirred widespread condemnation from Penangites, have not been effective, as shocking new photographs of the aggressive erosion have emerged.

This was confirmed during a site inspection by the Penang Island Municipal Council (MPPP) on Nov 2 after the scars on its slopes had appeared to worsen despite the landowner having been convicted by the courts.

The Penang government has however denied that the controversial clearing activity has continued, saying that new damage to the hill are due to landslips and erosion.

Chow Kon Yeow, the state executive councillor for local government, today refuted allegations that the earthworks activity has expanded.

He explained that the apparent increase in the hill’s scarring is due to landslips that happened following mitigation works on the slopes.

“The earlier mitigation has not been effective,” he said. “The grass did not grow well. And the rainy season in September and October caused erosion and landslips.”

He added that MPPP engineers together with MPPP secretary Ang Aing Thye and representatives of landowner General Accomplishment Sdn Bhd (GASB) were present at the site visit on Nov 2 to inspect the conditions.

GASB has since been asked to engage a landscape consultant to improve the situation.

“The landowner must then submit an earthworks plan to the MPPP to approve the mitigation works,” he said.

Chow said this during a visit to the site of the Briksa community park in Farlim where the MPPP is expected to complete landscaping and building of recreational facilities by next month at a cost of RM649,930.

Deep gullies seen at site

Meanwhile, MPPP councillor Dr Lim Mah Hui expressed alarm at photographs of deep gullies taken by a group of hikers and nature lovers at the site last week.

“From the pictures they took, one can see that the erosion is bad,” he said. “It is so clear that they are not just landslips. There are gullies that are about six and seven feet deep.”

“I have raised this matter before in MPPP but nothing is being done. I am a lone voice in the wilderness,” he said. “The media should do its part to highlight this matter.”

Lim lamented that six months have passed since the general election and nothing significant has happened on the site even though Batu Uban assemblyman Dr T Jayabalan and Seri Delima assemblyman RSN Rayer have brought this matter up with the state.

About six acres cleared

When contacted, Tan Sri Tan Kok Ping, one of the four directors of GASB, said the mitigation work done following the stop-work order by MPPP was only to cover the exposed soil with white and blue plastics but that was not adequate.

“Due to the sun, rain and wind, the plastic covering came off and withered. We stopped covering the soil in September to submit the rectification plan,” he said

“I know the erosion is bad because the covers came off. But every time it rains, about six to seven workers are there daily to check on the condition and make sure the lower parts of the area are not badly affected,” he stressed.

He added that the cleared land spans about six acres but the remedial works would involve 30 per cent of the land.

“This will ensure erosion and soil run-off do not occur in future. We will listen to the consultant’s advice on whether to plant grass or trees and spend as much money as needed to repair the damage caused by the clearing,” he added.

The controversy over the clearing, which can be seen from many parts of Penang, blew up in April.

On July 11, GASB was sentenced to a fine of RM30,000, in default of three years jail, by the Penang Sessions Court.

The maximum sentence for the offence is jail term not exceeding five years or a fine of not more than RM50,000, or both.

The deputy public prosecutor has since filed an appeal so that a heavier sentence can be meted out.

by Himanshu Bhatt and Sangeetha Amarthalingam The Nation Malaysian Insider

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Can Malaysia's household debt at 87.9% in 2014 be reduced to 54% ?

BEING a teenager, my granddaughter started to pick up interest on how the economy works, what are the real assets and liabilities in one’s financial planning. As the topic itself can be slightly “dry”, I made an attempt to discuss it in a way that was easier for her to digest.

“Our national household debt to GDP ratio edged up to 87.9% last year. Is the number alarming?” she asked one day.

“It depends. We have good debts and bad debts in life. For example, 10 years later, our new cars may have depreciated more than 80% and our new clothes would have been worn out. Those are liabilities. On the other hand, houses are assets as they will appreciate in the long run. Debts which are backed by appreciating assets are considered good debts,” I said.

As she nodded in agreement with my simple explanation of good debts and bad debts, her question has piqued my curiosity to look into the details of our household debt.

Overall, is our nation having more good debts or bad debts?

Bank Negara report shows that our household debt was at RM940.4bil or 87.9% of GDP as at end of 2014. Residential housing loans accounted for 45.7% (RM429.7bil) of total debts, hire purchase at 16.6%, personal financing stood at 15.7%, non-residential loans were 7.7%, securities at 6.5%, followed by credit cards and other items at 3.9% respectively.

At first glance, our residential housing loans were the highest among all types of household debts. However, a recent McKinsey Global Institute Report highlighted that in advanced countries, mortgages or housing loans comprise 74% of total household debt on average. As a country that aspires to be a developed nation by 2020, our housing loans that stand at 45.7% is considered low. In other words, we are spending too much on other depreciating items instead of appreciating assets like houses.

If advanced economies, which are usually consumer nations, have only 26% debts on non-housing loans, we shouldn’t have as high as 54% loans on items such as hire-purchase (which are mostly cars), personal loans, credit cards and others.

If we were to follow the household debt ratio of advanced economies, our housing loans of RM429.7bil should be at 74% of total household debts, and other loans should be reduced from 54% to 26%, i.e. from RM510.7bil to RM150.9bil. With such reduction, total household debt would be slashed significantly from RM940.4bil to RM580.6bil (existing housing loans plus reduced non-housing loans), the amount would be at 54.2% of GDP instead of 87.9%.

I am wondering why we can’t have a household debt to GDP ratio of 54.2% as illustrated above. Are we spending too much on depreciating items?

Non-housing loans comprise mainly borrowings for cars, personal loans and credit cards. Car value depreciates about 10% to 20% per year based on insurance calculation and accounting practice. Borrowings for personal loans and credit card are also likely to depreciate over time which can be dubbed as “bad debt”.

Perhaps it is time for the Government to introduce massive cooling off measures for non-housing loans in order to curb bad debt in our household debt.

According to our Deputy Urban Wellbeing, Housing and Local Government Minister, our homeownership rate currently stands at 50% and the Government strives to increase the number with more affordable homes. As a comparison, almost 85% of Singaporeans are homeowners.

We can expedite the above vision if more stringent measures are imposed on non-housing loans, it will free up more resources for household financial planning. The rakyat should be encouraged to secure a roof over their heads with effective execution of affordable housing policy by the Government.

It is time to re-look our debt categories and reallocate our resources appropriately. If we are willing to cut back on cars, clothes, shoes and other depreciating items, reducing a household debt to GDP ratio of 54.2% is not only an aspiration, but an achievable reality.

By ALAN TONG Food for Thought

And the more beneficial effect is, more rakyat will have the financial resources to own a house, which is both a shelter and an appreciating asset.

■ 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.

 
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The Malaysian world's top performing IFCA Software stock surges 1,300% in Kuala Lumpur!

IFCA Property Development Management Solution is a fully integrated Business Management Solution designed specifically for the Property industry. With a culmination of more than 20 years experience, IFCA Property Development Software embraces comprehensive functions, features and adopts the latest ICT tools that are poised to help elevate your Business to a paradigm shift. IFCA Software™ provides a complete solution for property developers to best manage their project development from the initial phases until key collection and beyond. It has complete built-in functionalities to ensure proper recording of each sale and its subsequent billing and administration. The software is saliently focused on its scope of capabilities. It supports multi-company, multi-projects and multi property types. It tracks and measures the effectiveness of sales campaigns and sales staff performances. It also supports user-definable payment scheme and loan financing. Headquarters IFCA MSC Bhd Wisma IFCA, No 19, Jalan PJU 1/42A, Dataran Prima, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia. marketing@ifca.com.my www.ifcasoftware.com 

IFCA MSC Bhd (Formerly known as Software Online Sdn Bhd)  InfoTech http://www.ifca.com.my

Forget Silicon Valley, Tel Aviv and Bangalore.

To find the world’s top-performing software company, you have to go somewhere that few would think to look for winning investments in the technology industry -- Malaysia’s capital city of Kuala Lumpur. Better known as the home of state-owned energy giant Petroliam Nasional Bhd., it’s also where shares of IFCA MSC Bhd., a maker of cloud-based software for property companies, have jumped 14-fold over the past 12 months.

IFCA’s earnings are surging just as fast as its stock after the company took an 80 percent market share among Malaysian developers and began expanding into China, where early adopters of its sales tracking and payment processing software include billionaire Wang Jianlin’s Dalian Wanda Group Co. IFCA Chief Executive Officer Ken Yong Keang Cheun (pic above) predicts that the world’s second-largest economy will become the biggest market for his $198 million software firm by 2018.

“The growth in China is incredible,” Yong said in an interview at his office in Petaling Jaya, a suburb near Kuala Lumpur. He plans to double the number of IFCA offices in the country to 16 by the end of this year.

IFCA has about 100 clients in China, where the National Bureau of Statistics estimates there were more than 90,000 real estate companies as of 2013. The country last month announced measures to make buying and selling a home cheaper, giving a boost to developers as authorities seek to cushion a slump in the property market that has weighed on economic growth.

The stock rose as much as 1.5 percent before closing unchanged at 1.35 ringgit in Kuala Lumpur, near its April 9 record.

GST Boost

Wanda uses IFCA’s software for its cost systems, bidding and capital leases, Huang Chunlei, an assistant to the president of Dalian Wanda and deputy general manager of the company’s IT department, said via e-mail.

In Malaysia, 800 of the biggest 1,000 property developers are its customers, Yong said. The company’s software sales in the country surged 76 percent in 2014 as a new goods and services tax prompted companies to upgrade their software to comply with the change. Profit jumped 12-fold last year to 21.1 million ringgit ($5.8 million) and Yong said he’s “confident” earnings will climb to another record in 2015.

“The good thing about the software is that it is niche for property developers,” Chow Yuh Seng, general manager for IT at Mah Sing Group Bhd., Malaysia’s fifth-biggest developer by market value, said in an interview.

Shares of IFCA have surged 1,321 percent over the past 12 months, the most among software companies worldwide with a market value of at least $150 million, data compiled by Bloomberg show. That compares with an average gain of 46 percent for global peers.

Malaysia Tech

“There was a strong theme for IT and software-related development companies last year, and this year is a continuation,” said Danny Wong, chief executive officer of Kuala Lumpur-based Areca Capital Sdn., which owns shares in IFCA. “The shift to Internet and technology is the new way of doing things.”

IFCA isn’t the only Malaysian software company with booming sales. Grabtaxi Holdings Pte., a mobile application that assigns cabs to nearby commuters, has grown to become Southeast Asia’s largest taxi-booking mobile application, luring investments from Temasek Holdings Pte., Singapore’s state-owned investment company, and SoftBank Corp., the Japanese wireless carrier controlled by billionaire Masayoshi Son.

While Malaysia isn’t known as a hub for technology companies, the government has tried to support the industry since 1996, when it introduced the Multimedia Super Corridor, a special zone to attract technology investments and multinational companies.

Chasing Shares

The success of IFCA’s business may already be reflected in the share price, according to Ang Kok Heng, the chief investment officer of Phillip Capital Management Sdn., which manages $428 million, said by phone in Kuala Lumpur. Shares are valued at 30 times reported earnings, versus 17 times for the benchmark FTSE Bursa Malaysia KLCI Index, according to data compiled by Bloomberg.

“We normally don’t chase a stock,” Ang said.

IFCA plans to boost recurring income by introducing a software rental service that would make its offerings more affordable for customers via monthly subscriptions, Yong said. The firm also plans to set up a property listing website by year-end.

IFCA’s profit will probably jump at an annual rate of 228 percent over the next three years, according to Nigel Foo, a Kuala Lumpur-based analyst at CIMB Group Holdings Bhd., Malaysia’s second largest bank by assets.

“The property sector is a rich man’s industry with high risks, and it’s capital intensive,” Yong said. “People are willing to pay for solutions.”

By En Han Choong - Bloomberg

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GST will push up home prices by 2.6%, said Real Estate and Housing Developers Association Malaysia

But it says still too early to determine exact increase

PETALING JAYA: Home prices will rise by about 2.6% once the goods and services tax (GST) comes into play, said the Real Estate and Housing Developers’ Association Malaysia (Rehda).

The chairman of the association’s task force on accounting and taxation, Datuk Ng Seing Liong, said that the calculation was based on its consultations with industry experts and member developers.

Real Estate and Housing Developers' Association of Malaysia (Rehda) says the GST is likely to raise property prices.

Rehda’s 2.6% estimate differs from that of the Customs Department, which expects the GST to have an impact of between 0.5% and 2% on house prices, assuming there’s no change in supply and demand conditions.

Ng said the association was in full support of the GST and concurred with Customs GST director Datuk Subromaniam Tholasy, who had said that land did not incur the 6% GST rate.

However, he said land was by no means the largest cost component in property development.

“As our calculation clearly spells out, the construction cost, which constitutes 46% of the total development, is not only the largest component but also the component which will attract the GST of 6%,” he said in a letter to StarBiz.

He said the GST on this component would inevitably lead to an increase in house prices.

Appending calculations for a housing unit originally priced at RM400,000, Ng said the price post-GST would be around RM410,560.

Under the 46% construction component, costs were broken down into non-service taxable and service taxable segments, representing 44%, or RM176,000, and 2%, or RM8,000, respectively.

Under the non-service taxable segment comes items such as cement/concrete, steel, bricks and sand, while the service taxable segment includes tiles and fittings/sanitary. Under the existing sales and service tax, no tax is imposed on the non-service taxable category, while the service taxable category has a tax of up to 10% imposed on it.

Post-GST, Rehda’s calculations showed that the non-service taxable cost had gone up to RM186,560, while the service taxable cost remained at RM8,000.

It maintained the same cost estimates for other items, including land (15% or RM60,000), infrastructure and pre-development works (10% or RM40,000), professional fees and marketing costs (6% or RM24,000), finance costs (6% or RM24,000) and profit (17% or RM68,000).

Ng said Rehda also disagreed with Subromaniam, who had said that developers could easily absorb cost increases as their margins were around 30%.

He said it was currently impossible for developers to earn up to a 30% profit, as most development costs were on the rise, along with various capital contributions and charges imposed on developers.

“On average, as tabulated in the calculation, developers, most of which are public-listed companies, are only making around 17% at best,” he said.

However, Ng said it was still too early to determine the actual house price increases post-GST, as Rehda was still in discussions with the Government and there appeared to be many more issues to be ironed out.

By Isabelle Lai The Star/Asia News Network


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