Saturday, October 27, 2007

The Edge Investment Forum on Real Estate

Went for The Edge Investment Forum on Real Estate 2007 this morning. It is definitely a fantastic session!

Some of the speakers include:-
1. Allen See, Managing Director, Regroup Associates Sdn Bhd
2. Ang Kok Heng, Chief Investment Officer, Phillips Capital Management Sdn Bhd
3. Ho Chin Soon, Director, Ho Chin Soon Research Sdn Bhd
4. Kumar Tharmalingam, President, FIABCI Asia-Pacific Real Estate Federation (moderator)
5. Datuk Richard Fong, President, International Real Estate Federation (FIABCI) Malaysia and Executive Vice President, Glomac Bhd
6. Lai Voon Hon, President/Chief Executive Officer, Ireka Development Management Sdn Bhd, Executive Director, Ireka Corporation Bhd.
7. Previn Singhe, Chief Executive Officer, Zerin Properties Sdn Bhd
8. Dato' Alan Tong, Group Chairman, Bukit Kiara Properties Sdn Bhd
9. Dato' Michael Yam, Managing Director, Sunrise Berhad.

This is pretty much one of the best gathering of real estate experts in the country, to share with fellow Malaysians. Of course, Ho Kay Tat, Group Managing Director, Nexnews Berhad, Group Editor-In-Chief, The Edge/The Sun was there too.

It is provided for free too, for all of us.

Some of the lessons learned:-
1. KL Real Estate is really underpriced. Top-notch service apartment/condo in Singapore would cost about S$5,000 (RM11,500) per square foot (psf), whereas in KL, the maximum is at about RM2,000. Even in Ho Chi Minh, the high end condo cost is more than Kuala Lumpur. So, it is definitely great opportunity for us in Malaysia to invest (of course, I am not sure from where I'm going to cough up this RM1-2 million for such a property). But I think it is a great lesson to learn about the situation.

2. Properties in Malaysia definitely offers very high yield. Those by Sunrise in Mont Kiara definitely lead it with a yield of 11% to 13%. On average, high end properties in KL would generate 5%-7%. In Singapore, the average yield rate is at around 2.55%.

3.In Shanghai, a total of 240,000 units of housing is being sold annually, whereas Klang Valley only does around 80,000 units. In Singapore, it is doing around 30,000 units a year.

4. Currently, there are about 4,000+ units of high end condos which was sold at above RM500 per square foot (that's a little more than USD140).

5. Investment in real estate is high in gearing. Essentially, we can borrow money to invest, and that means the returns is very high, counting into the fact that the yield can support the interest rate. There isn't much information on property, which means that the industry is less efficient, and hence, more opportunities to make a profit out of it. Prices of real estate is more stable (i.e. less volatile). It would follow a long run up trend as well, just like stock. Except that for real estate, the variability is much much lower.

6. There has been sort of consensus that Langkawi, Kota Kinabalu and Johor Bharu (Iskandar Development Region) area are very good for investment! There has been significant growth in enquiries for those areas.

7. Correlation between stock and property is also very low, at 0.02. This means that the cycle of boom and bust for stock and property is not essentially the same. This is good for investment!

8. Dato' Alan Tong shared on the conception of Mont Kiara, which started from O.G. Heights. The area was like a very hilly area, and it was really unaccessible. But Mont Kiara is within a few km from City Center and eventually it managed to get developed. O.G. Heights was initially sold at RM110 psf in 1985. Mont Kiara Pines (the first development in Mont Kiara) was sold for RM190 psf in about 1990-91. Currently, it is more than RM600 psf in Mont Kiara.

9. Dato' Michael Yam shared that on average a bank branch manager would need to work for about 16.2 years in Malaysia to afford a 1,800 sf luxury condo. For Bangkok, they need to work on average of 19 years to do so and in Singapore, they need to work 26.5 years to do so. So, essentially, for Malaysians, it is still underpriced.

10. Ho Chin Soon stressed that 3 mantras for real estate: Location, Timing and Branding. He stressed a lot that we should look for established developers.

This talk definitely opened my eyes a lot more on real estate. Of course, I hope that they shared more on those investment for those with lower budget. The ones they share are all high-end.

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