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Investment MALAYSIA PROPERTY FLIPPING AND ITS UGLY EFFECT, The "death" of Flippers is good news

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TSaccetera
post Jun 28 2015, 01:21 AM, updated 9y ago

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This thread is intended for Matured Discussions.
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Malaysia Property Flipping and its Ugly Effect
Vanitha Nadaraj June 24, 2015
http://www.establishmentpost.com/malaysia-...ng-ugly-effect/

It was the lure of fast and easy money, lots of it, that made James Lam jump at the chance to be a Malaysia property speculator or property flipping. That was two years ago and he immediately signed up for a series of training when his friend told him about it. The thought of buying properties and selling them quick for a good profit excited him.

“I was greedy,” says the 53-year-old who is in the top management of a multinational company. He already has a well-paying job, but the opportunity was too good to resist. In the Malaysia property speculation training, he was taught how to look for good bargains in the secondary residential property and different ways of beating the system. “I managed to sell a couple of houses and made a decent amount of money,” Mr Lam tells The Establishment Post.

One way of beating the system is to secure loans for several properties from as many banks all at the same time. If done all at once, the banks will also do the checks all at once and find that he is creditworthy. In 2010, the central bank Bank Negara Malaysia introduced pre-emptive measures to limit the number of outstanding housing loans so as to cool the Malaysia property market. Once Mr Lam gets the bank loans, he has to make sure he sells the properties quickly and at a higher price before the loan repayment commences. He has a small window period of a few months to get this done.

But this did not happen for the two properties in a prime area in Kuala Lumpur that he now has. “I cannot get a buyer. Not even a tenant (to rent). I have to start paying the banks for the loans with my own money.” He also realises that the property market is slowing down and his chances of selling these properties off is getting slimmer by the day. With Real Property Gains Tax made steeper in 2014 at 30 per cent for properties sold within three years, he would need to have a huge profit margin to offset the tax.


The mighty flippers may flop

Situations like this are nothing new to Siva Shanker. He has seen loads of such cases and he does not see a rosy end to this tale. His 34 years of experience as a real estate agent tells him that Mr Lam will either start cutting down his expenses so he has spare money to service the banks loans until a buyer comes along. “Or he will start borrowing from relatives or, worst still, from loan sharks.”

The number of property speculators, or flippers, caught between a rock and a hard place are likely to increase as the market slows, says the chief executive officer of the Agency of PPC International Sdn Bhd. PPC International is a 24-year-old company that handles a wide range of services from valuation to estate agency, property management, research and consultancy.

“A sharp rise in value (of properties) creates the flipping culture,” he tells The Establishment Post.

“In 2010, 2011 and 2012, thousands of properties were sold to flippers. These are people who neither need the property nor can afford to buy it. They buy it purely on speculation,” adds Mr Shanker, the immediate past president of the Malaysian Institute of Estate Agents.


Getting the DIBS on Malaysia Property Flipping

One of the reasons for a huge rise in flippers is the Developer Interest-Bearing Scheme (Dibs) where a house buyer need not pay down payment upon signing of the sale and purchase agreement. The developer will also bear the other expenses like stamp duty, legal fees and also interest on finance during the project construction period until the handing over of the keys.

This is when the buyer will have to come up with the remaining payment. In essence, the buyer only pays for 90 per cent of the property value. In Malaysia, down payment for properties is at 10 per cent.

It may appear to be a win-win situation for all. The buyer thinks he is paying less for a property, and the developer has a marketing tool to sell properties quick. But speculators do not realise is that the value of properties sold under Dibs are actually marked up.

This artificially hikes the property value and has caused the property market to rise unnaturally. Dibs was scrapped in Malaysia Budget 2014. Bank Negara was forced to take this measure when household debt soared to 86.8 percent of gross domestic product in 2013.

But the worst is not over. The effect of Malaysia property flipping is going to hit the property market in a bad way, according to Mr Shanker. “We will see a new category in property transactions – properties from flippers.”

Presently, all property transactions involve the primary market, which are the newly built units, and the secondary market, which are the houses built and bought long ago that have now been sold.

He feels this category of property transactions will constitute a sizeable “5 to 10 per cent of new stock”. Flippers may be forced to sell their properties at much reduced, or even lower than the purchase price, so not to be saddled with a property they cannot afford to hold.

So when a sizeable number of properties are made available in the market at much reduced prices, it is not going to be pretty for property investors and owners.


Iskandar under flipper attack

When talking about the economic region in the southern state of Johor, Iskandar Malaysia, Mr Shanker says that Iskandar is a case of a great development project that is overbuilt in one sector, namely housing. “Everything else is still blue chip.”

He says Iskandar has everything working for it: a state government that is committed towards supporting this region by building good infrastructure; supporting industries and incentives for businesses to start and develop; supported by world-class health and education sectors. It is all that Singapore would need to accommodate its growth.

“But the idea got hijacked. Flippers rushed in and one sector is grossly overbuilt. We should give Iskandar a chance to grow,” he adds.


Elsewhere, property flipping is losing its appeal

Property flipping is fast becoming a thing of the past in the West. “China, Singapore, Malaysia, Hong Kong are now where the West have been and gone through,” Vijay Manavalan, a property negotiator in Malaysia involved in promoting properties in UK for investment.

“To get value out of property investment, it is best to get slow income, and not flip. There will not be many more markets around the world to flip. Investors need to look at the rental income that can be generated,” he tells The Establishment Post.

He says that many Malaysians and Singaporeans are starting to see the wisdom in this and are buying properties in the provinces in the United Kingdom. Generally, in places where they had done their tertiary education like Birmingham and Brighton.

“A property in London is like a trophy asset, not purely investment but trophy-led. Yields from rental are not as high as the yields in provinces outside London,” he says. “London experienced the flipping from 2001-2014. Cooling measures have been put in place last year. We’re not predicting too much growth in London.”

With a combination of government measures and diminishing opportunities, Malaysia property flipping may just be a thing of the past and Malaysian property market can be allowed to grow naturally and at a steady pace.

This post has been edited by accetera: Jun 28 2015, 01:22 AM
TheRoadRunner
post Jun 28 2015, 07:05 AM

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QUOTE(accetera @ Jun 28 2015, 01:21 AM)
» Click to show Spoiler - click again to hide... «



https://m.facebook.com/story.php?story_fbid...517333231733894
I'm not very active in property. But have been following some advises here and there. Wonder if the above link is shown a flipper or an investor?

Yes it's pretty hard to get a dream home now. Many have been pointing the arrow to flippers. But if you do not follow the market trend, you will be left behind. No?

This post has been edited by TheRoadRunner: Jun 28 2015, 07:07 AM
SUSjolokia
post Jun 28 2015, 08:05 AM

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Lucifah please move this to serious Kopitiam as icemanfx already discuss this in his Multiple Effect of Property Bubble V19
travis8481
post Jun 28 2015, 09:05 AM

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I would say high risk high return. If u only target middle cost condo, u won't end up like this. At least u can get rental to offset part of it repayments. Of course return is less
AMINT
post Jun 28 2015, 09:08 AM

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QUOTE(travis8481 @ Jun 28 2015, 09:05 AM)
I would say high risk high return. If u only target middle cost condo, u won't end up like this. At least u can get rental to offset part of it repayments. Of course return is less
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Agree with ur statement. Middle cost is safer now.High end condo like in KLCC and Menara Warisan can still make money but many also buy them as trophy properties.

This post has been edited by AMINT: Jun 28 2015, 09:16 AM
mthc
post Jun 28 2015, 09:13 AM

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QUOTE(travis8481 @ Jun 28 2015, 09:05 AM)
I would say high risk high return. If u only target middle cost condo, u won't end up like this. At least u can get rental to offset part of it repayments. Of course return is less
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+1. Absolute amount is rather higher now for entering the market. Unlike last time. You would need to hold much longer now.
travis8481
post Jun 28 2015, 09:41 AM

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QUOTE(AMINT @ Jun 28 2015, 09:08 AM)
Agree with ur statement. Middle cost is safer now.High end condo like in KLCC and Menara Warisan can still make money but many also buy them as trophy properties.
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QUOTE(mthc @ Jun 28 2015, 09:13 AM)
+1. Absolute amount is rather higher now for entering the market. Unlike last time. You would need to hold much longer now.
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IMO there is always demand for Middle cost property.
acbc
post Jun 28 2015, 09:45 AM

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I know someone who does this flipping business full time and recently he's in a very bad shape.
CK15
post Jun 28 2015, 10:17 AM

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QUOTE(AMINT @ Jun 28 2015, 09:08 AM)
Agree with ur statement. Middle cost is safer now.High end condo like in KLCC and Menara Warisan can still make money but many also buy them as trophy properties.
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Boss, still in hunting mood?
AMINT
post Jun 28 2015, 11:06 AM

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QUOTE(acbc @ Jun 28 2015, 09:45 AM)
I know someone who does this flipping business full time and recently he's in a very bad shape.
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Really? What is his plan? I am also restructuring my portfolio now
AMINT
post Jun 28 2015, 11:07 AM

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QUOTE(CK15 @ Jun 28 2015, 10:17 AM)
Boss, still in hunting mood?
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Yes. This year bought Vipod and Opus Warisan merdeka. I dont believe in flipping but long term investment.
CK15
post Jun 28 2015, 12:22 PM

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QUOTE(AMINT @ Jun 28 2015, 11:07 AM)
Yes. This year  bought Vipod and Opus Warisan merdeka. I dont believe in flipping but long term investment.
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Just a response v can differentiate a BOY and MAN. tongue.gif

Congrats, boss!
max_cavalera
post Jun 28 2015, 12:37 PM

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buyamaya showtime747

Kasi bukak mata skit
acbc
post Jun 28 2015, 12:37 PM

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QUOTE(AMINT @ Jun 28 2015, 11:06 AM)
Really? What is his plan? I am also restructuring my portfolio now
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Apparently he has been buying up properties in unpopular areas and finding hard time to sell or rent out. I guess he's probably trying to find friends who could buy or help him find buyers.
CK15
post Jun 28 2015, 12:52 PM

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QUOTE(acbc @ Jun 28 2015, 12:37 PM)
Apparently he has been buying up properties in unpopular areas and finding hard time to sell or rent out. I guess he's probably trying to find friends who could buy or help him find buyers.
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Ur friend is real flipper. Buta buta taruk tot can make money. tongue.gif
paskal
post Jun 28 2015, 12:54 PM

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Eh property can go down one? How come? I was told it was up up up up up and up somemore?
CK15
post Jun 28 2015, 01:17 PM

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QUOTE(paskal @ Jun 28 2015, 12:54 PM)
Eh property can go down one? How come? I was told it was up up up up up and up somemore?
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Location! Location!! Location!!!
Bukan tembak buta buta!
SUSjolokia
post Jun 28 2015, 01:22 PM

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QUOTE(max_cavalera @ Jun 28 2015, 12:37 PM)
buyamaya showtime747

Kasi bukak mata skit
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Max you believe made up story ah ? You think bank is idiot ?

Why don't you try & see, buy 10 properties sent 10 loan application to 10 banks & see get approved 90% or not ?

Don't believe everything you read from these type simply name one fellow, I can name i person name Mr. Max buy 1 whole floor 15 units by sending to 15 banks at one go, then with 5K salary can buy 10 millions worth of properties, you believe or not.


paskal
post Jun 28 2015, 01:28 PM

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Expected replies. Don't believe the no name statistics.

Buy now later have to live under a bridge. Must buy now because KL is the only place to retire. Kah kah kah
max_cavalera
post Jun 28 2015, 01:42 PM

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QUOTE(paskal @ Jun 28 2015, 02:28 PM)
Expected replies. Don't believe the no name statistics.

Buy now later have to live under a bridge. Must buy now because KL is the only place to retire. Kah kah kah
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Careful later unker yolokia angry...
acbc
post Jun 28 2015, 01:48 PM

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I believe flipping is like trying to strike Toto. Sometimes u lucky and made lots of money but other times, no luck and almost bankrupt.
SUSjolokia
post Jun 28 2015, 02:03 PM

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QUOTE(acbc @ Jun 28 2015, 01:48 PM)
I believe flipping is like trying to strike Toto. Sometimes u lucky and made lots of money but other times, no luck and almost bankrupt.
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Actually is the other way around, hoping for property price to reduced significantly is like buying lottery, maybe once in a blue moon you find a naive & desperate owner, but most if the time you pay what they want or else no deal.

As you wait the price become higher & you are getting older so the amount of year you can loan getting shorter, so you pay higher monthly mortgage, thus bank will give you lesser loan base on your nett income, you end up need to put down more down payment.


AMINT
post Jun 28 2015, 02:10 PM

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QUOTE(acbc @ Jun 28 2015, 12:37 PM)
Apparently he has been buying up properties in unpopular areas and finding hard time to sell or rent out. I guess he's probably trying to find friends who could buy or help him find buyers.
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Oic. Sometimes we have to think to bypass many2 promotions. When time is good, far2 away places also ok. All happy can flip. When time is bad, everybody will start to go back to fundamentals: location3. This is what i think.
BD73
post Jun 30 2015, 12:07 PM

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Market corrections are always a good thing...it allows for the flushing out of the speculators and for the long-term serious investors to keep going on...People should hold on to good properties and maintain them as the market will return, with fewer cowboys in the system. As previous posters have said good locations will get returns, but we need to get rid of the fools who inflate the market unnecessarily through greed and short-term thinking. My 2.34567 sen's worth.

This post has been edited by BD73: Jun 30 2015, 12:07 PM
katijar
post Jun 30 2015, 01:37 PM

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cannot be lah, so many UUU around, discount 5% they will sapu all one ....

 

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