fake gurus and flippers were only targetting investor friendly projects. NOT ALL PROJECTS.

yes but you simply cant have a 100% investors free project....bcos developers cant survive by just selling to ownstayers. thats the fact.

What you are saying is there's potentially too many developers, hence there's not enough demand from genuine prop buyer for their over supply.

A functional free market will correct that by disqualifying the redundant developers and the supply will normalize to meet genuine demand. Having redundant supplier/developer and disruptive demand from flippers is not the healthy way to grow the property industry. Of course in the greed to pursuit more profit by developer and more tax for gov, they don't care.

Aminvestment Sector Report on property sector:

 We have a NEUTRAL stance on the property sector in 2018. The local property sector has been languishing over the last 4-5 years, since hitting a peak in mid-2013. We believe the most encouraging signs we have seen in 2017 are:
(1) developers adjusting to the reality that mass-market affordable housing is where the demand is; and
(2) the willingness of certain developers to cut prices (to the tune of 10-15% or more) in order to clear unsold stocks. We expect these trends to
prevail in 2018, bringing some life back to the sector.

 We do not expect a full-fledged recovery of the sector within the next 12 months, as various key challenges remain, including:
(1) the generally still elevated home prices;
(2) the low loan-to-value (LTV) or financing margin offered by banks; and (3) house buyers' inability to qualify for a home mortgage due to their already high debt service ratios (DSR).
The DSR is calculated by dividing one's debt service obligations by his or her income (most banks observe a cap of 60% for the low-income group, and up to 80% for the high-income group). Potential house buyers may have little room left to
take on a home mortgage due to their existing debt service commitments (arising from outstanding study, car or personal loans), while their incomes have not kept pace with the commitments.
 In addition, the still subdued consumer sentiment against a backdrop of rising cost of living, weak job security (on the back of industry consolidations, particularly, the financial and oil & gas sectors) and elevated household debts, is holding
consumers back from committing themselves to the purchase of big-ticket items including a house. Not helping either, is the potential hikes in the overnight policy rate in 2018, given the recent shift in Bank Negara Malaysia's policy stance towards slightly more hawkish than before.

 We believe these issues could be partially addressed with the offering of affordable housing, coupled with more flexible
financing plans to the low-income group such as a "step-up" scheme initiated by Perbadanan PR1MA (where borrowers only service interest but not the principal in the first five years) as well as a "rent-to-own" scheme introduced by a local
bank recently.
 We are mindful that affordable housing typically commands low margins. The margins could be crimped further given rising competition as the segment gets more crowded by the day. We believe the investment case for an affordable housing developer only holds water if the developer is able to sell affordable houses in large quantities, has access to highly cost-effective and speedy construction methods, and most importantly, has the ability to secure strategic landbank with a high plot ratio at cheap prices. Otherwise, we are more inclined to see selling affordable housing as a means for
developers in general to tide themselves over while waiting for the property market to turn around.
 We see a bright spot in developers with overseas projects. We have already seen green shoots of recovery in property markets in the UK, Australia, Singapore and Vietnam since 2017. These markets are ahead of Malaysia in terms of their
recent boom-bust cycles. They have been through the consolidation phase and are now on a recovery path.
 REITs tend to underperform in a rising interest rate environment. Retail REITs may be hurt further by the rise of ecommerce.
We advocate stock picking in the REIT sector.
 We may upgrade our NEUTRAL stance for the property sector to OVERWEIGHT if: (1) the banks are to ease lending policies on properties; or (2) consumer sentiment is to improve significantly.
 We may downgrade our NEUTRAL stance for the property sector to UNDERWEIGHT if: (1) the banks are to tighten further their lending policies on properties; or (2) consumer sentiment is to deteriorate further.
 Our top picks for the property sector are Sunway (BUY, FV: RM1.99) and Titijaya (BUY, FV: RM1.91).

Food for thought.

As you can see in many industries now that are asset based, they are on a leased basis. Say Airasia. There is a reason for it. You cannot make money when the risk of asset ownership is there.

All this rental yield, blah blah blah, all cooked up to hoodwink those not financially sound.

Too bad. Now they are stuck with it.

Take it to the grave is the best advice.

I remember the days when working with the construction and property industries years ago.

The profit then were phenomenal. Companies were giving free floors away to heads of states for supporting the work.

300%-500% was the norm. And mind you, this was the time when developers were selling the stock at way less than market value, and hence flipping was a sure thing then.

Today all developers know that if there is no IRR of 20%, they wont go near a project.

What is your IRR? And that all depends on the NRV at the end of the day.

The developers NRV has always been the market value which they dispose to you.

Your NRV is way less than that. No matter how good the income during the intervining period, your IRR is going to be less than that, way less.

Have a go.

This post has been edited by pearl_white: Dec 11 2017, 09:35 AM

Yes, well.
I have a photo taken from just a few years ago.
170 double-storey terrace houses in Rawang, build cost RM17 million.

So that means, each house cost RM100,000 to build.

Do you think the houses will be sold for RM100,000? No, right?

Going by market value, it's at least RM500,000 per house. So that's a 5x increase in price.

That means, they only need to sell 20% of their houses to break even.

What makes you think any property launch ... only sells 20% throughout the lifetime of the property?

They're still making lots of money, and are just trying to bamboozle people by saying they're not.

Have U factor in all other costs like land, architeck fees, various licence fees, building of infrastructure, etc, etc ? Maybe the RM17m just payment for the workers and materials ?

And the other factors cost 4x the cost to build a house, are you serious?
(Opinion, I'm allowed to have one right?)I'm actually thinking the real cost of building a house is bribing the land department or alienating the title ...
Come on it's very hard to believe, since you know more, provide a breakdown of costs, ok?

building cost just a portion of it, u need to consider infra, land cost, professional fees and so on. but developers do make a lot of profit from these development, i think the least would be at 2x profit.

Sorry, I don't know more since I'm not in the construction field. I guess land is not cheap nowadays and could cost up to the cost of the house ?

the rule of thumb is

1/3 land cost
1/3 building cost
1/3 profit

of course during good times, the dynamic of such equation might change to favour developers.

There are no rules of thumb. Each company is different.

If you wish to access the construction accounts, parked under assets under construction, the easiest way is to find a project of your interest, find out with JV/subsidiary company the company is licensed to, and extract the info from SSM, you may need 3/4 years of financials to determine the profit, (since project runs for few years, and under accounting rules, reflect the profit based on percentage of completion).

Budget rm45-rm60 for the extraction of financials.

Preferably search for JV/subsidiary companies that have 1 project at hand. Very easy to get profit information that way.

Profit from project is the gross profit from the company. There are usually no other expenses in the p/l as they are typically absorbed by the project.

This post has been edited by pearl_white: Dec 15 2017, 09:17 AM

Oh I almost forgot , please bear in mind that the HQ will include inter-company management/corporate expenses into the construction accounts, typically 25%-40% of the development value.

A full financial info extraction will yield this in the inter-company transactions that are dislosed.

interesting thread.

40% drop is possible if we talk abt condo or service apartment that use to sell at rm60-70 per sqft. during peak, developer asking price is 600k for a 900 to 1100 sqft condo, not even in city centre but location like puchong, cheras etc. a 40% drop mean back to 350k to 450k, i believe this is the 2008 - 2012 level. did our income n growth that drastic in the last 5 to 10 years that could push the price up to the current height?

that said, i suppose the trigger is whether the job market remain stable, if it is, then the drop might be a mild one. but does it make sense to hold small condo for long term that is not for own stay and with low rental return? thus the possibility of 40% drop can happen.

This post has been edited by YH1234: Dec 30 2017, 11:42 AM

Refresh what has been forgotten.

Seems like rumah selangorku also getting cold response from buyers.

What gives?

oversupply.
even affordable homes also over supply. got rumahwip, pr1ma, ppa1m, rumah selangorku. too many choices.

Location lah....

If u have right location sure can sell....even pp1am.

One must not forget, everyone is leveraged (loaned) to the max, with a MAJORITY from 25 years to 35 years.

70% of income is into repaying loans, and all sort of debts.

It will take a very long time for these group of people to have excess cash to invest in property again.

It is a long wait. These same people won't have the same amount of spare cash lying around like those from the 1920s to 1970s to pass it on to their kids.

Double whammy.

If everyone is leveraged to the max, how come still got people buying properties ?