My First Feng Shui Criteria Before Invest in Property

In my previous post, I mentioned that there are 4 different types of Feng Shui believer and I'm basically the "Type 3" of Feng Shui believer who makes a lot of common sense out of Feng Shui. However, regardless of you believe in Feng Shui or not, the property price will still be affected by Feng Shui. So, you still cannot completely ignore Feng Shui.

What I would like to share with you is  my first and most common Feng Shui or environmental factor that I look at before I invest in a property. Assuming I want to buy a residential property in a township, the first thing that I look at is how many different routes can enter to the township. It must have at least 2 different routes enter into your property area and the more the better. Let's see the following maps to illustrate this:


Example A: 1 route to the township

It is not good because there is only 1 way or 1 route to the township. Assuming if any thing happen that blocks the route, you have no way to go out or you have no way to go in. You basically stuck there!

Example B: 2 routes to the township

This is better than example A because there are 2 different routes to township and it is preferable at different entrance as shown. If it is a small area, one entrance is fine too. Of course, if there are more different routes and different entrances to the township, it will be better.


I'm not sure if that makes sense to you but this is the first thing how I evaluate a property before I decide to buy a property. I will usually try to avoid a property area with only one route and one entrance, and if property that has more than 2 routes entrance, I will usually give it higher weightage in my decision making.

Let me know what you think, what is your first "Feng Shui" or environmental criteria before you decide whether you want to invest in a property? What is the first thing that you look at?

Remember to Pay Your Land Tax (Cukai Tanah)

In case you do not know, you need to pay the land tax (cukai tanah) once a year for all the properties that you own in Malaysia. However in some cases,  the land office doesn’t have the address information about you so they won’t send you any statement reminder.

This is especially true if you buy your new house or new property from the developer. By right, the developer should instruct the land office to change the address to your new house but this doesn’t happen to all the cases. So they can’t send you the statement as a reminder. You will have to update the address by your own at land office.

Anyway I checked with the land officer(for Kedah only), they told me even though they have the address, they won’t send out the statement as well. The homeowner needs to come the land office to pay for their land tax. Huh, what a crap? You will get the penalty too if you don’t pay and they also won’t send you any penalty statement as well. What a crap?

Assuming if you take the loan for 30 years, your land tax fee is RM80 and the penalty is RM20 yearly. So for 30 years, you will owe the land office RM3000. You will need to pay this when you want to settle your loan with the bank or else the bank will not release your house title to you. You also need to pay this this one shot if you want to sell your house.

This happened to me this year when I wanted to settle my loan but luckily it was only for 4 years so I did not need to pay a lot. Assuming for those who do not know about this, they will have to pay large amount of money including the penalty fees. Why we need to waste such money right?


Few Tips:

• Make sure you pay your land tax (cukai tanah) every year if you own any properties. If you do not get any statement or make any payment for your land tax (cukai tax) before, I think it is better for you to check it out at the land office.

• For strata buildings, you have 2 titles (i.e. Master title and Strata title). You have 2 payments to made. The first payment is land tax / quit rent (cukai tanah) for master title. The second payment is door tax (cukai pintu) for the Strata title. See note (1) below.

Note (1) : Master title refers to the land where the building the land is shared between the unit owners. The Strata title however belongs to the individual unit owner which refers to the door tax (cukai pintu) of which payment is not shared.


Hope this is something useful to share. I'm not sure what "Cukai Pintu" should be called in English, so I just call it "Door Tax" but it sounds funny. Please check your land tax (cukai tanah) payment with the land office if you haven’t paid a single cent before and the worst thing is you need to remind yourself to do such payment every year!

Also, this probably most applicable for those who has landed property because usually for Strata property, everything will be taken care by your property management and they will request you to pay for it.

Worldwide House Price Trend (2006–2010)

This is the worldwide house prices trend in the past 5 years which includes USA, Japan, Britain, China, Australia, Singapore and Hong Kong. Too bad, there is no data for Malaysia but you can kind of guess that  Malaysia should be somewhere  below China and follow the similar uptrend like China. Let’s check it out the graph below:

Source: www.econmist.com

The house price fell in USA was due to the subprime mortgage crisis in 2006. The house price drops by ~35% after this crisis and has never been recovered until today. By the way, this trend is also similar to Ireland which is not shown in this graph (I don’t want to make the graph too crowded) . As for Japan, the house price has never been recovered after the Japanese asset price bubble from 1986 to 1991. Surprisingly if you look at the house price trend in Britain, it was that badly affected by the subprime mortgage crisis if compare to USA. 

The house price for the rest of countries especially for Asia (except for Japan – i.e. China, Hong Kong, Singapore) and Australia, is moving uptrend. The slight downtrend in 2008 – 2009 was probably due to the stock market crash during that time.  After the stock market crash, investors start moving their target to real estate or property. That is probably the reason why you see the house price has been increasing dramatically after 2009 until today.
 

When is the next bubble burst?

You can kind of expected the house price in the western countries will probably stay flat in the coming years. But what really interesting here is the property market in Asia. Will it be keep going up or is it already at peak? Bloomberg reported Hong Kong is the world’s most expensive place to buy home. 65 million apartments in China are said to be empty creating “Ghost Cities”. Are these obvious enough to tell the property bubble is going to burst soon?


Well, I do not know but if you ask me about Malaysia, I think generally most of the investors in Malaysia have the strong holding power and this makes me think the property bubble bust is unlikely to happen in Malaysia. Could I be wrong? Another very interesting discussion is the property price in Penang and KL seems to have huge gap as compared to the other states or cities within Malaysia. Can the bubble burst only happen within certain states or cities (e.g. Penang and KL)?

So, what do you think? Do you think property bubble burst is forming in your country? What is the next trend?

Malaysia Property Market ROI by States in 2010

When you buy a property, the first thing that come to you mind will mostly likely to be “What is my potential return of investment (ROI)? However you know that no one can guarantee you the exact ROI. What you really can do is the study the past history or so called track record. What do you think of the property capital gain in Malaysia for all the states? Let’s see…

Malaysian State	Average Transaction Value (RM)	2010 House Price Increase (%)
Kuala Lumpur	488,522	25.3
Putrajaya	310,625	-27.2
Pulau Pinang	265,078	17.1
Sabah	222,698	17.4
Labuan	204,852	-11.6
Johor	166,802	12.3
Sarawak	142,927	7.9
Pahang	127,159	8.4
Melaka	127,081	4.4
Kedah	122,772	-5.2
Negeri Sembilan	116,808	-2.4
Perlis	106,562	7.6
Perak	94,764	3.3
Kelantan	82,337	39.5
Terengganu	74,056	7.7

Source: NAPIC, 10MP, RAM Economics

This table concludes few things as in general:

• The most expensive houses in Malaysia is at KL. Well, I thought is Penang but Penang is not even at the second price. So, can I say Penang property is still considered cheap as compared to KL and Putrajaya?

• The cheapest houses in Malaysia is at Terengganu and followed by Kelantan. Well, this is not a surprise to me. Want cheap house? Go to Terengganu!

• The highest ROI of property investment in Malaysia is at Kelantan! Wow, again my impression is either KL or Penang. Another Blogger (i.e. Kris) told me is Sabah which is kind of surprise to me too. It has the same capital gain (i.e. 17%) with Penang.

• The lowest ROI of property investment in Malaysia is at Putrajaya! Who say property sure make money? Look at Putrajaya, Labuan, Kedah and Perlis. They have –ve ROI. I’m surprise that Kedah is –5.2% or perhaps I should said I”m sad to hear the news. Hopefully this doesn’t apply to my property in Kedah.

Discussion

Having said so, this data is only for 2010 and if you look at it for long term (e.g. 10 years), the property price should appreciate around 3% to 4% (based on my personal observation), not as much as you think and due to the compound interest you should see the capital gain is around 30% for 10 years or since year 2000. 

The property price went up crazy in the past 2 years (i.e 2009 and 2010) was due to the severe stock market crash of 2008 and therefore investors switched their focus to the property market (safest investment vehicle). 

So what is next? One high possibility is the property market may be stable down for the coming years as now the investors are switching back to stock market. What do you think?

Do You Believe Feng Shui in Property Investment?

Do you believe in Feng Shui? If you do, I’m sure you do consider Feng Shui as part of your decision making process before you invest or buy a property. But if you don’t, will you still take Feng Shui into consideration?

Before we can answer these questions, let’s look at what type of Feng Shui believers out there in the market. So I interview my friends, relatives and strangers too. The conclusion is there are 4 different types or 4 different level of Feng Shui believers:


Type 1: Person who does NOT believe in Feng Shui at all.

This type of person does not give a damn about Feng Shui at all. These people are usually my non-Chinese friends such as Malay and Indian friends. Well, I have one Indian friend who believe in Feng Shui too but I think that is the minority.


Type 2: Person who believes in Feng Shui only at surface

This type of person believes in Feng Shui only at surface level. They know the basic rules of Feng Shui and some basic Feng Shui’s fundamentals such as house should not face directly to the road and etc.


Type 3: Person who believes in Feng Shui based on common sense

This type of person do their own research about Feng Shui and make common sense out of it. For items or Feng Shui practices that are out of their common sense, they choose to NOT believing in them. These are usually an educated people with strong analytic skills (e.g. an engineer). So, I”m actually belong to this type.


Type 4: Person who very believes in Feng Shui by knowing the rules

This type of person are the strong believers in Feng Shui and they know almost all the Feng Shui’s rules. However, they need someone who they think is reliable to tell them the rules of Feng Shui. So, they listen from friends or relatives about all these Feng Shui’s rules. For those rich one, they usually hire a Feng Shui master to tell them these “rules”.


Which Type of Feng Shui’s Believer You Want to Be?

No matter which type of Feng Shui believers are you, ultimately you should always invest or buy property at least like type 3 or type 4 of Feng Shui’s believer. The reason is very simple because type 3 and type 4 are the superset for the rest of the types. Look at the diagram below for better illustration.

The diagram basically tells you few things:

• If you’re type 3 and type 4 of Feng Shui’s believers, you can sell your house to type 2 and type 1.
• If you’re type 2, you can only sell to type 1.

Note: The reasons why you see there is overlap between type 3 and type 4 is because there’re rules that doesn’t make sense to Type 3 and also Type 3 of Feng Shui’s believers tend to always create or invent their own Feng Shui’s rules.

So now, which type of Feng Shui believers you want to be? Even though you don’t believe in Feng Shui or even Feng Shui is a fake thing, you should also start to change by analysing your property with your Feng Shui.

This is a demand and supply rule and has really nothing to with whether you believe in Feng Shui or not. Good luck in your property investment!

Tax Deduction Incentive for Property – Should I go for it?

The recent news for Malaysian that they may now eligible to claim up to RM10K tax deduction for the loan interest that they pay. I have summarized this news below:

• Applicable to all types of properties (i.e. landed house, flat, apartment or condominium)
• Applicable to those who buy the property between March 10, 2009 and Dec 31, 2010.
• Applicable to one property only and to those who buy the property for living (non-rental) purposes only.
• If you’re eligible, you can enjoy this tax deduction incentive for 3 consecutive years.

So, the question now is should we buy property during this economy crisis especially with this kind of incentive?

Few things that you may want to consider:

What if the property value drops after you buy it? Isn’t that possible during this bad economy?

[In my opinion]: I don’t think it will drop. Worst come to worst if it drops, I believe in long term the property will still appreciate down the road. If you scare, you have till Dec 31, 2010 and you can still wait and see the market condition before making any decision.

What if the developer cannot finish the construction as promised after your down payment?

[In my opinion]: Yes, I do think this can happen especially for those not reliable developers. Even for the reliable one, we need to be careful also during this bad economy. So if I were to buy, I would prefer to buy those existing finished construction properties. I don’t dare to buy any still under-construction property, do you?

Summary

If you’re jobless now or financially not stable, I don’t think you should buy any new properties for the sake of this incentive program. If you have already planned to buy property for quite some times and you’re not jobless now and financially stable, I think you should definitely make use of this tax deduction incentive. Good luck!