A reader asked me for data on my stand on Iskandar. I've done a lot of extensive research and I pick my markets carefully. You should only buy when there is a shortage of homes, e.g. London, Houston, New York.
I apologize that I don't have the time to put up all the research I've done for copyright reasons. But the gist is this: Iskandar has a population of 1.7m. 4.5 people per household. Divide 1.7m by 4.5 and you need about 377,777 homes. There are 420k houses now with a further 80k to be completed next two years! There is an oversupply of 120k homes!
Even if 50% of the 300k Malaysians bought iskander, you will need about 411k houses and that is an overhang of 90k!
Under such circumstances, even in if prices hold steady, rents will definitely plunge as vacancy rates fall! Remember the perfect storm of 2015/16!!
Wednesday 31 July 2013
Sunday 21 July 2013
Fergus and Judith Wilson : An Inspiration
They built up a £180m property empire in buy-to-let boom but now the suburban tycoons are selling up ... do they know something we don't?
By LAURA POWELL
This certainly doesn’t look like the stately pile of a billionaire. There’s no gold jacuzzi, no personal tanning salon (like Simon Cowell), no £16 million private jet (like Sir Philip Green), not even a Rolls-Royce (like Del Boy).
The only indication that the owners have a bob or two - as I pull up the gravel drive of an unremarkable suburban house in Boughton Monchelsea, near Maidstone, Kent - is the tired-looking Jaguar X-Type outside.
Even this, however, is parked next to a battered old Land Rover. So battered, in fact, that the wing mirrors are attached with sticky tape.
It is hard to believe that this is the home - albeit the second home and office - of Judith and Fergus Wilson, proud owners of a £180million property empire.
Humble: Judith and Fergus Wilson aren't bothered about spending their millions
In fact, their fortune probably peaked at a staggering £250 million - although that doesn’t stop property experts labelling them Britain’s first buy-to-let billionaires.
They even overtook the Beckhams in the 2007 Sunday Times Husbands And Wives Rich List.
But you couldn’t tell from their lifestyles. They haven’t holidayed for more than 20 years - ‘Why would we want to leave Kent?’ - they shop at the local supermarket, and even their choice of biscuits, Rich Tea, is rather humble.
But they are now planning their biggest luxury to date: retirement.
Yes, property prices are up almost 8 per cent since March, and estate agents are urging budding landlords to buy now to cash in on rising rental prices - but the Wilsons have had enough.
And so the couple, who own between 700 and 900 houses - Fergus hasn’t counted recently - along the M20 corridor in Kent, are selling their entire portfolio. Which is rather worrying, given that Fergus ‘watches property like other men watch the football scores’ and that their acumen is so astute that they have made six people millionaires through their advice alone.
So is there something they’re not telling us? And is the future of the property market rather dicier than we have been led to believe?
‘Why we’re retiring now is no big secret,’ says Fergus, solemnly. ‘I’d happily keep going, but Judith tells me I can’t rule from the grave, so we have to sell at some point. And right now isn’t a bad time to sell.
‘The difference between interest rates and rent prices will never be as good as it is now so if we sell, we’ll make more profit than we will any other time in the near future.’
Fergus, 61, is also adamant that their fortune has stood relatively steady against the recession. In fact, he believes that as their properties appreciate, their wealth is increasing by a mind-blowing £70,000 a day.
After buying their first houses in 1986, the Wilsons rode the boom until 2003 when they hit their peak and amassed 180 houses in one year - mainly two and three- bedroom properties with neat front lawns and magnolia paintwork.
They finally stopped buying in May, after bagging one final bargain: a detached house in Ashford that no one else would buy because ‘it was painted silly colours’.
Hidden gold: House prices have gone up 8% since March as rents are rising
Now, if they sell their portfolio for the £180million asking price, after paying off their meagre borrowing debt (£45million) and taxes, they will retire with a cosy nest-egg of around £100million.
Not bad for a couple who began life with barely two pennies to rub together.
They were so hard up, in fact, that 40 years ago, while he was a student, Fergus slept rough in Greenwich Park.
Later, they both worked as maths teachers in a South London comprehensive and survived on £200 a week.
But while they are now set to enjoy the fruits of their labours, Fergus is terrified by the prospect of the empty days ahead of him. As a result, the Wilsons’ idea of retirement now sounds like rather a lot of hard work.
For 59-year-old Judith, retirement means a few spare hours to make crab apple jelly, ‘and do the things old ladies like to do’ in between juggling other business ideas.
Meanwhile, Fergus, a self-confessed insomniac who wakes at 3.30am sharp, wants to direct a handful of property companies, dabble with a television show - a sort of The-Apprentice-meets-Dragons’-Den - and even buy a couple of farms to breed cattle.
Even more peculiar is that Fergus seems more intent on losing money during his retirement than enjoying it.
‘I wanted to get rich, but when I did acquire wealth, it didn’t really mean anything. I mean, what can you do with it? Everyone is buying houses and we’re selling them. So farming is a good option because it eats money!’
After spending an afternoon with the ‘billionaires’, it’s not hard to see why they find it so difficult to spend - not only because of their penchant for 38p packets of biscuits and somewhat battered cars - but because they appear to have absolutely no interest in the trappings of wealth.
First, Fergus kindly insists on collecting me personally from Maidstone East station. ‘I’ll call a taxi,’ I say. ‘Absolutely not,’ he says, adamant.
Then, when I arrive at their home, Judith clucks about like a kindly grandmother, not the woman who spearheaded the Judith Wilson Property Investment Bond scheme and whose name is on the deeds of hundreds of properties.
‘Let me take your coat dear. . . tea? How many sugars? Tuck into the biscuits or he’ll eat them all.’
‘In the pecking order, I come about number 38,’ Fergus says.
‘I come after Judith’s six dogs, 12 horses, seven cats, four budgies, even her nine finches. After they’ve all been fed, I’m fed.’
That’s a little hard to believe.
She replenishes the tea in Fergus’s ‘Cool Dude’ mug, straightens his collar and tie and makes sure he has enough Rich Tea.
Next, she ushers me to the sitting room, filled with paintings of horses, ornaments of pigs, a stray bottle of creme de menthe, and clashing multi- coloured floral wallpaper that I suspect has been on the walls since the Seventies — before they even bought the house.
It’s easy to see why fellow racing pundits — the Wilsons’ racehorse, Cerium, came fifth in the Grand National this year — have labelled them ‘eccentric’. The most fitting nickname of the lot — for Fergus at least — is surely Del Boy.
Fifty years ago, Fergus was already wheeling and dealing. Aged 10, he earned pocket money by pushing wheelbarrows around an Essex building site.
As a teenager, he made a bob or two sparring and boxing. He earned £2,000 with a home-made Tshirt printing business when he was a student at Goldsmiths, University of London.
Instead of ironing on each of the prints individually, he worked out a way of printing en masse in a borrowed baker’s oven.
Then, when he married Judith, they rented a four-storey house in Blackheath, South London, and sublet the lower three storeys to other couples at a price that covered the Wilsons’ own rent.
‘I thought that was good business at the time, but I’d never do that now,’ says Fergus. Cheekily, he adds: ‘Now, I’d rent each storey for even more money — I’d live there rentfree and make a profit!’
They met as maths students at Goldsmiths, ironically, during one of Fergus’s business ventures.
‘Everyone else walked around with brightly-coloured dyed hair, but we were standard mathematicians — absolute squares. I was working on my T-shirt stall when Judith came over and asked if I had a T-shirt in her size.
‘I liked the look of this girl. She was wearing Dame Edna glasses, which I thought made her look quite intellectual. So I told her I didn’t have a T-shirt in her size, but I had one in my bedroom!’
Within a year, they were married — and soon had two daughters, Samantha, now 40, and Tanya, 37.
Few people know that Fergus began to design dream homes using Weetabix boxes. Judith also started to collect Lilliput Lane houses, plaster cast miniatures of stately homes.
Then, in 1975, they bought a three-bedroom house for £8,000, just down the road from the house we are sitting in, which doubles as an office.
They still own that first house and rent it out — ‘We never sell anything, my dear’ — but these days, it is valued at £320,000. They clearly have a gift for this sort of thing.
All the while, they kept buying investment properties on interest-only mortgages.
‘There are certain rules that I have set and stuck to,’ says Fergus. ‘First, I always painted them magnolia.
'Second, I made sure all business letters fitted on one side of A4 paper — even if it meant shrinking the font and margins. And I tended not to buy flats.
'They’re like battery farming people. If I’d invested in those instead of houses, I’d commit suicide. You can quote me on that.’
Between slurps of tea and demolishing more Rich Teas, he taps a foot and bounces his knee. He is still not used to sitting still and can’t tolerate televisions.
‘Put me in front of one and I’ll fall asleep,’ he says.
Until recently, he filled sleepless nights working as a nightwatchman, guarding his own house because the man recruited for the job — one of just 14 staff on his books — was scared of the dark.
Right now, though, Fergus is waiting. Waiting to see whether the potential buyers — the Russians, Bulgarians, Saudis, Chinese, Japanese or Indians who have all expressed interest — will buy the entire Wilson portfolio in one go.
Sometimes he spends hours playing ‘pattacake’ with his guard dogs. He doesn’t respond when I ask whether the buzz of buying has dried up. No doubt, after nearly 900 houses, it has.
Besides, he has seen all walks of life pass through his rental houses: ‘six murders, battered wives, sometimes battered husbands.’
Twice a week, newspapers and television crews visit and he recites the same old anecdotes about his childhood — sometimes word for word. He has, it seems, become a little jaded, a little cynical.
But he really opens up when the photographer arrives and Judith comes back into the room.
‘I’m not putting my arm around you,’ he jokes.
‘Oi, cheeky, maybe I don’t want to put my arm around you!’ Judith ripostes.
And with that, he picks her up, right off the floor, until she shrieks. Later, Fergus tells me: ‘Judith’s the only one who’ll put up with me, now.’
‘Have you any hobbies?’ I ask him. ‘We don’t socialise much. It’s just me and Judith most of the time.’
Then he adds, in all seriousness: ‘As for other hobbies, being a landlord. Really, it’s just a hobby that got out of hand.’
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Sunday 14 July 2013
Valuations Are Important Whether for Properties or Stocks
To succeed in any kind of investments, you need to know the correct way of valuing. With real estate, the best measures are: 1) net operating income (gross yield – all expenses) spread over 10y govt bond yield. 2) supply and demand balance, 3) future development, 4) comparables.
My take for Singapore real estate is as follows 2013: you will see rental yields start to fall due to oversupply. 2014: yields will continue to fall but prices hold steady due to liquidity. 2015: rental yield will fall from 2.9% in 2013 to 2.0% in 2015. Mortgage rates may surpass yields and we could see prices start to correct 10 – 20%. 2016: perfect storm in Singapore / Iskandar?? This may coincide with a time when Europe / US are growing steadily and hiking rates.
For stocks, you need to look at 1) comparables in terms of PE, Price to book, ROIC, ROE, 2) historical PE, dividend yields, Price to book, ROIC, ROE, 3) macro factors, 4) technicals. I prefer method 2 because relative valuation can be nonsensical because when an entire sector is overvalued, you can keep justifying why you should buy. That happened when I was an analyst back in 1998 – 2001 and saw how my industry colleagues justify PCCW at 100x PE.
Remember this, when the PE is single digit, price to book is below 1.5x it is difficult to fall by a lot. However, when PE is over 18x, price to book > 2.5x, it’s like buying a house at 2% yield in Iskandar / Singapore, hoping that a “greater fool” will buy from you at a higher price but without any cash flow from rental. Once expectations are very high, PE multiples are extended, a SINGLE DISAPPOINTING EVENT CAN CAUSE STOCKS TO TUMBLE 50 – 60%. In 2007, I was extremely bearish on the stock markets because price to book was at the highest I’ve seen since 1999. But nobody talked about valuations then.
The day will come when we will have to be bearish, when valuations don’t make sense (PE > 18x, dividend yield < 2%, price to book > 2.5x), but the day is not now. Stocks are still cheaper than bonds. Interest rates can only go up. But stocks’ valuations can go up a lot more before we consider them expensive.
Read this article
As the valuation guru Aswath Damodaran puts it: "If you do not believe in intrinsic value and make no attempt to estimate it, you have no moorings when you invest. You will therefore be pushed back and forth as the price moves from high to low. In other words, everything becomes relative and you can lose perspective."
The professor of finance at Stern School of Business at New York University adds: "Without a core measure of value, your investment strategy will often be reactive rather than proactive. Crowds are fickle and tough to get a read on. The key to being successful as a (momentum trader) is to be able to read the crowd mood and to detect shifts in that mood early in the process. By their nature, crowds are tough to read and almost impossible to model systematically."
Gap between value and price
But the gap between a business's value and its price can remain for a long time. The timing of the closing in the gap is never certain. According to Prof Damodaran, you can reduce your exposure to it by, one, lengthening your time horizon; and two, providing or looking for a catalyst that will cause the gap to close.
PUBLISHED JULY 13, 2013
SHOW ME THE MONEY
Stay strong and keep herd mentality at bay
Understanding the worth of the business is key, especially when the share price slumps below intrinsic value
SENIOR CORRESPONDENT (HOOILING@SPH.COM.SG)
A friend gave me the book The Value Investors: Lessons from the World's Top Fund Managers by Ronald Chan not too long ago.
In the chapter on Tweedy, Browne, one sentence caught my attention. The line is: "Tweedy, Browne presents empirical evidence to show that 80-90 per cent of investment returns have occurred in spurts that amount to 2-7 per cent of the total length of the holding period. The rest of the time, stocks' return have been small."
Anecdotal observations on my part seems to suggest that this is true, at least for certain types of stocks. One very distinct example came to mind.
Portek International was listed on the Singapore Exchange in 2002 at 30 cents a share. For pretty much the next nine-and-a-half years, it traded at around 40 cents. In mid-2008, it traded above 60 cents before plunging to a low of 15 cents in February 2009. Investors who bought the stock at its initial public offering and sold any time before the second half of 2011 can't be said to have made a phenomenal amount of returns from that investment.
But throughout that period, the company's founder Larry Lam was tirelessly building up the company's logistics infrastructure and network in Africa. In September 2011, Japan's Mitsui & Co paid $213.5 million, or $1.40 a share, to take Portek private. The Japanese trading company had wanted the quick access into Portek's assets in Gabon, Algeria and Rwanda.
From IPO till the privatisation, including the yearly dividends paid, an investor would have made an annual compounded return of some 23.5 per cent a year from Portek. That's equivalent to growing one's money by some six times within that nine-and-a-half years. But the catch is, the bulk of the returns came at the very end, when there was an offer to take the company private.
It has to be said that the company did pay decent dividends. Based on the average price of about 40 cents a year, dividends over the years averaged about 7 per cent. Only in one year - 2007 - was dividend cut sharply.
So even without the takeover, Portek had been a decent investment. And eventually, the timing was ripe to have the assets taken off it by the Japanese group. It just so happened that in the last few years, countries in the African continent have managed to get their politics more right than before. Consequently the world at large has rediscovered its interest in the lost continent. There is an element of luck in the timing of everything.
Had the countries that Portek was in been mired in civil wars, then there might not be buyers for its assets. Worse still, the assets may be expropriated.
In this case, the outcome was a happy one.
Another example of an outsize return which came in a short spurt of time was recounted to me by an ex-colleague this week. He was reminiscing about his career and shared the time in the early-70s when there was a massive bubble in the local stock market. Then, OCBC shares traded to a high of $50 each. My colleague shared that Metro traded to about $26 during that period.
He had bought four lots of Metro at about $2-plus. After he bought them, the stock fell, and he panicked. When the stock price came back up to near his purchase price, he quickly sold them. Lo and behold, soon after, the shares surged to $26 each.
"Four lots at $26, that's about $100,000. I could have bought a bungalow and retired then," he lamented. Had he done that, Singapore's media industry would have been much poorer for it. As things turned out, he has enjoyed one of the most illustrious careers in journalism in Singapore. No one is likely to surpass what he has accomplished, that's my bold prediction. Anyway, that's another story.
Numerous times, we have experienced ourselves, or we hear our friends expressing regret that - soon after disposing of a stock, the price would surge.
I think stocks which saw their investment return that came in spurts are typically less liquid stocks, which are under the radar of most analysts and investors. For the big cap stocks which are very well-followed, the price appreciation tends to be more gradual - unless there is a huge bubble. Then, even the big cap stocks would be lifted way above their intrinsic values.
So how does one keep faith in a stock when it has done nothing much in terms of share price in, say, the nine years that you've held it?
Understanding the worth of the business, be it on its own, or its value as a cog in a bigger machinery, is key to keeping one anchored. Owning shares is equivalent to owning a slice of a real business.
As the valuation guru Aswath Damodaran puts it: "If you do not believe in intrinsic value and make no attempt to estimate it, you have no moorings when you invest. You will therefore be pushed back and forth as the price moves from high to low. In other words, everything becomes relative and you can lose perspective."
The professor of finance at Stern School of Business at New York University adds: "Without a core measure of value, your investment strategy will often be reactive rather than proactive. Crowds are fickle and tough to get a read on. The key to being successful as a (momentum trader) is to be able to read the crowd mood and to detect shifts in that mood early in the process. By their nature, crowds are tough to read and almost impossible to model systematically."
Gap between value and price
But the gap between a business's value and its price can remain for a long time. The timing of the closing in the gap is never certain. According to Prof Damodaran, you can reduce your exposure to it by, one, lengthening your time horizon; and two, providing or looking for a catalyst that will cause the gap to close.
On lengthening one's holding period, the ideal situation is to have a stock which pays you to wait, not unlike Portek.
And if one of those sleepy stocks that one owns suddenly woke up one day and sprung up sharply to a level closer to its intrinsic value, one should be ready to take that opportunity to lock in one's return. A missed opportunity could mean a wait of another three or four years!
In previous articles, I've used the measure of dividend yield divided by price-to-book to identify stocks which pay investors to wait. The higher the measure, the greater the "value" of the stock. Some readers have written in of late for an updated list following the recent market correction.
I've compiled the list to go with this week's article. I've added an additional screen for the debt levels of these stocks. Those with higher debt to equity ratios are dropped in view of the fact that interest rates may rise. There aren't many stocks in the big cap sector that pay good dividends and yet still trades at below their book value. So the stocks in the list are the smaller cap stocks.
Sunday 7 July 2013
BUY DETROIT SINGLE FAMILY HOMES? WALK IT FIRST!
Good and the bad: Renovated homes sit next to a home in disrepair. In 2011 Wayne County had to write off US$170 million in uncollected taxes. About 100,000 city-owned properties, many of which are abandoned, are in limbo until a study of property values is completed. - PHOTO: BLOOMBERG
[DETROIT] The solid red brick house on a block of similar homes in Northwest Detroit sounds like a steal at US$3,728. But in many ways, it's a lemon.
The house, sold at an auction last fall, sits at the edge of Detroit's infamous urban blight. And scrap thieves, or "strippers", have taken anything of value, including the kitchen sink and metal pipes, requiring repairs of up to US$15,000.
"You could take a great picture of this house, put it online and make buyers . . . think it's a good thing," said Antoine Benjamin at real estate firm Benjigates Estates, which bought the house at a Wayne County auction to renovate and rent out. "But you have to understand how close you are to wasteland."
Low property prices in Detroit in the wake of the housing crash in 2008 have lured investors from California to China. Speculators bank on high returns despite a financial crisis so dire Detroit's state-appointed emergency manager, Kevyn Orr, has cited a 50-50 chance the city will file for bankruptcy.
But small-time speculators eyeing quick profits often let the houses fall into disrepair because they lack the funds for renovations or end up abandoning them - and frequently do not pay real estate taxes.
In 2011 alone, the last year for which data is available, Wayne County had to write off US$170 million in uncollected taxes on Detroit properties. About 100,000 city-owned properties, many of which are abandoned, are in limbo until a study of local property values is completed.
"The city has made no effort to make those 100,000 available, so we don't have a real market," said Jerry Paffendorf of Loveland Technologies, whose widely followed property database includes Detroit's tax delinquencies and foreclosures.
Bill Nowling, a spokesman for Mr Orr, said the city does not intend to sell right now because there is no way to discover fair market value, and the emergency manager is awaiting the result of the Michigan Tax Board study.
"There is serious concern that the assessment process in Detroit is broken and many, if not most, properties have been inappropriately assessed at artificially high levels for years," Mr Nowling wrote in an email.
A state plan to demolish abandoned buildings may eliminate some of the blight, but would do little to resolve city property codes that are unclear or largely ignored.
"The lack of property code enforcement means there is no risk for investors who buy here and neglect their properties," said Khalilah Gaston at local nonprofit Vanguard Community Development Corporation. "We have to ensure there is risk and not just reward."
One speculator, 22-year-old graduate student Darin McLeskey, who also runs a non-profit urban farming group, noted Detroit's many rules on property use but few resources to police them. "With no code enforcement, it's the Wild West," said Mr McLeskey, who moved to Detroit from an outer suburb. And he has taken his shot, spending US$25,000 to snap up 20 empty plots and three homes in the city.
Mr McLeskey is a rarity among speculators because he plans to make Detroit his home. Detroit's population fell 25 per cent in the past decade to 700,000, well off its 1950 peak of 1.8 million, as manufacturing declined and white residents moved to the suburbs following race riots in the late 1960s.
In a few neighbourhoods, sales are picking up on recent talk of new infrastructure projects including a light rail line, a new hockey stadium and a new bridge to Canada.
At Wayne County's annual foreclosure auction last year, 12,000 properties were sold online, some for the minimum US$500 bid. More bargain seekers are expected this fall when around 25,000 properties will go on the block.
"Just a few years ago the big joke was, 'You can buy a house in Detroit for US$500, ha ha ha'," said Ted Phillips at nonprofit United Community Housing Coalition, which helps homeowners fend off foreclosure. "Now the buzz is,'You can buy a house in Detroit for US$500 and it's a great investment'." Detroit property prices rose 20 per cent year-on-year in April, Standard & Poor's Case-Shiller Home Price Index showed.
Mr Benjamin estimates the house Benjigates bought in Northwest Detroit for less than US$4,000 will ultimately cost about US$20,000 after renovations. But the company has a renter lined up and should be able to sell it for US$30,000, he said.
The North End district in central Detroit sits alongside the route of a planned US$137 million, 5.6-kilometre light rail line and has attracted serious investors. On a recent visit to the area, groups speaking with New England, British and other accents were seen walking the neighbourhood looking for deals.
Mr Phillips of the United Community Housing Coalition worries about a get-rich-quick mentality. "These homes are not just paper investments," he said. "If they're left to disintegrate, they undermine neighbourhoods."
To monitor abandoned properties and foreclosures, Loveland Technologies, a for-profit company, has created a private online database, www.whydontweownthis.com.
Data provided to Reuters by whydontweownthis.com depicts the city as a patchwork of neighbourhoods where multiple foreclosed homes belonged to individual owners.
One such owner, Shirley Ray of Signal Mountain, Tennessee, bought dozens of houses on April 21, 2011, for US$10,000 each, according to whydontweownthis.com. Of the more than 20 Detroit-area homes still listed under her name, most have been foreclosed on and the rest are seriously delinquent.
Other speculative buyers hurt the city's cash flow by refusing to pay property taxes. According to whydontweownthis.com, a local investor named Ralph Kinney owes more than US$70,000 in property taxes on seven Detroit homes.
Mr Kinney's property manager Darren Pettway said Mr Kinney buys homes cheap and rents them out. He then sells them at a profit to buyers who also agree to pick up the back taxes.
Occasionally, Mr Pettway said, Mr Kinney defers foreclosure proceedings by paying down a nominal amount of the property taxes he owes. "He (Mr Kinney) hasn't lost a house in seven years," he said. "The taxes eventually get covered by someone else, so it all works out."
In some of Detroit's more vibrant neighbourhoods, residents are fighting back, targeting blight where the city lacks the resources to do so.
Economics are improving to the point that some "benevolent speculators" are investing in ways that benefit neighbourhoods, Ms Gaston of Vanguard Community Development said. For instance, Abass El Hage's Upstream Real Estate Investments has bought 30 homes to renovate, rent out, or sell to investors, she noted.
Vanguard is helping Mr El Hage seek up to US$1 million in financing toward a retail and restaurant project called Milwaukee Junction in an abandoned and stripped red-brick building purchased for US$15,000 last year. Mr El Hage said longer-term investments, like Milwaukee Junction, are the next wave in Detroit's real estate market. "Too many people are trying for a quick flip," he said. "That kind of deal is gone." - Reuters
Klang Valley vs Iskandar
PUBLISHED JULY 05, 2013
Klang Valley a cheaper alternative to Johor
Long-term view: Klang Valley, comprising Kuala Lumpur and its surroundings and suburbs, is expected to have 10 million residents by 2020. - PHOTO: BLOOMBERG
WARY of Johor's escalating property prices? An investment bank has suggested that homebuyers head back to Klang Valley, where the approval of at least one - if not two - Mass Rapid Transit (MRT) line is pending.
Maybank-IB also points out that the Klang Valley in central Selangor, comprising Kuala Lumpur and its surroundings and suburbs, is also home to between five million and six million people; this is targeted to expand to 10 million people by 2020, which makes for a market buoyed by sustainable demand and primed for growth.
CEIC data underscores just how heated Johor's property market has been: Its House Price Index (HPI) surged nearly 16 per cent year-on-year in the first quarter until end March.
This was more than twice the national average growth of 6 per cent, and higher than Penang's rise of 7.8 per cent, and Kuala Lumpur's 6.8 per cent.
By state, Selangor's 3.1 per cent was more muted.
On a quarterly basis, house prices contracted as buyers held back because of the May general election mid-way through the quarter.
Even so, Johor's HPI was the least affected, contracting by just 0.5 per cent; Kuala Lumpur's shrank by 4.5 per cent and the national average, by 2.6 per cent.
Notwithstanding the sharp jump in prices in Malaysia's southern-most state, the incoming supply of properties in the next few years, especially of high-end condominiums, is perhaps of greater concern.
It underpins Maybank- IB's call to investors to refocus on the Klang Valley, with its planned improvements in transport infrastructure and larger population.
Better public transportation is crucial to Klang Valley's growth.
The first MRT line there is expected to be completed in 2017, and the remaining two lines by 2020.
Demand for properties near the MRT stations has been especially robust, and builders are awaiting news of the next line.
MRT contractors have urged the government to get cracking to trim the amount of idle time for tunnelling equipment and labour between the lines. At its peak, some 13,000 people are expected to be deployed on the job.
The government land awards are also going to be closely watched in the coming months.
As the owner of a few large choice tracts of land in land-scarce Klang Valley, the state is under pressure to ensure that some of this land is carved out for affordable housing, although it seeks to maximise the value of its landbank.
One plot, for example, is in Sungai Buloh, the starting point for the first MRT line ending in Kajang.
The Employees Provident Fund, the country's biggest pension fund and a government-related investment fund, owns 1,215 hectares of land there, where the Rubber Research Institute of Malaysia used to be.
An "iconic township" is to be developed over the next 10 to 15 years, with media reports stating that parcels of between 40 and 202 hectares could be tendered out.
Monday 1 July 2013
Diversification for Financial Assets and Properties
Many of my close friends and family invest mainly in Singapore shares. For their property portfolios, they swear mostly by Singapore properties too. At most, their property diversification crosses over to Iskandar.
My advice is that for stocks, you should have half of your portfolio in developed markets like the US, Europe or Japan. The other half should be in emerging markets like China, Russia and India.
Similarly for properties, you should not have everything in Asia. The diversification benefits is poor because the economic cycle is the same in Asia. If Malaysia is in a recession, Singapore is likely to be in a mess too. But in the US and EU, things may be honky dory. Right now, ASEAN is right at the peak, but US and EU is just beginning to rise.
http://www.guardian.co.uk/money/2013/jun/28/new-class-landlords-profiting-generation-rent
Above is a hyperlink on the generations of buy-to-let investors. Fergus and Judith Wilson apparently fell into hard times because their 700+ property portfolio was highly leveraged and several banks tried to recall the loans. Once rentals fall, the couple's cashflow turned negative dangerously.
To weather the storm, you need to keep your property and stock portfolios diversified. Fergus and Judith focused on Ashford and Maidstone. When the credit bubble burst, tenants defaulted. My question to my friends and readers is this: what will happen when interest rates rise in Singapore? Will your portfolio turn negative in cashflow too?
If you have a three to four properties in Singapore, another two to three in Iskandar, two in Australia, four in the UK and another five in the US, even if Asia falls into hard times, you will not lose everything. You have the option even to close shop in Singapore and move overseas to start all over again.
Stocks Looking Extremely Cheap
By the way, the correction that I signalled on 6 June appears to be extremely deep. It turns out that bonds and bond funds have been badly hit. I believe we should see a bottom very soon. Valuations for equities are looking extremely cheap.
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