Get your cash working for you

There is no denying that cash is king. But how can this be if you do not first get it to work for you? The current global financial turmoil makes predictions tough. Depending on who’s speaking and to what kind of audience, the bet is on a recovery taking place any time between now and the next two years.

While many intelligent guesses have been made on how long the turbulence will last, no one knows for sure if the bleeding has indeed stopped or how much longer it will go on. In the meantime, painful price retreats continue to be seen the world over.

The international housing property market slowdown has come on the heels of boom times in many parts of the world. Over the last decade, housing property values have been known to record increases of 10% to 20% annually in some places. The five years to 2007 saw sharp gains year on year, with values quickly doubling in some cases.

Charles Weston Baker, director of Savills International Residential Department, put it in perspective when he said recently that even today’s largest price falls of 50% in some cases will still leave a long-term legacy of substantial price growth.

The Financial Times reported recently that Monaco has displaced London as the world’s most expensive residential market. Prime property in Monaco is going for €50,000 (RM248,632) per sq metre (up 2.1% in 2008), followed by London at €28,000 psm and Manhattan at €16,500 euros (down 4.1%).

London also witnessed one of the biggest falls in value (down 17%), beaten only by the 25% price decline in Hong Kong, according to the report quoting the annual Wealth Report compiled by Citi Private Bank and Knight Frank.

Asian housing markets are driven by rising incomes and inward migration towards the cities. Still, compared to the West, the growth in mortgage markets generally remains in its infancy. In Hong Kong, often cited as an exciting property destination, the slowdown in sales of luxury and super luxury units was felt in the second half of 2008 after a resilient first half.

According to the recently released Savills Global Residential Review 2009, luxury property prices in Hong Kong peaked in 2Q2008. The average prices of townhouses and luxury apartments on Hong Kong Island dipped 5% and 6% respectively, with prices of selected properties now back to their levels of six to nine months ago.

It is noteworthy, however, that these are still well above 1997 levels. The Hong Kong luxury residential leasing market, understandably, also shows signs of softening.

As for Australia, a favourite foreign property investment stop for Malaysians, forget about scooping up cheap real estate there. Savills has found that interest in Australia’s luxury property among foreign buyers remains strong due to the favourable Australian dollar exchange rates. Thus, despite the current tough times, the outlook for the Australian residential property market is more robust than most of the developed countries.

Closer to home, private housing prices in Singapore rose in 2H2006 before surging at double digits in 2007, fuelled by robust economic expansion and active investment sales. The momentum, however, failed to continue into 2008.

Prices of high-end non-landed homes retreated for a third consecutive quarter in 3Q2008. The tag for high-end and super luxury homes stood at S$2,065 (RM4,956) psf and S$3,240 psf respectively, or a dip of 14.3% and 12% since the start of 2008, noted Savills.

In Malaysia, the property market slowdown had been apparent even before the credit crunch crisis erupted last year. Selective easing of prices had been felt in a quiet market. Leasing activities, especially for high-end condos that target expatriates, have slowed considerably, with rates dipping in addresses where supply outstrips demand. But the market is not stagnant.

After weeks of hibernation in the last six months, developers, boosted by market acceptance of a need to hedge against inflation, are bouncing back to make their presence felt among prospective investors.

Away from the public eye, real estate deals are being struck. Magna Prima Bhd just announced that it has landed a much sought-after prime freehold tract, a stone’s throw from the Petronas Twin Towers in Kuala Lumpur City Centre. Sitting on the 113,962.6 sq ft land on Jalan Ampang is the Lai Meng primary school and kindergarten, which will be relocated to a site in Bukit Jalil in the deal. At press time, there was no confirmation on Magna Prima’s plans for the prized buy.

Besides timing — to enter or re-enter the property market — what and where should one put one’s money and why? What should the investment strategy be in times of recession? These will be among the issues to be tackled by speakers at the upcoming The Edge Investment Forum on Real Estate 2009 on April 4.

For those who have been unable to secure seats, look out for our report on the forum in the next issue of The Edge. We hope to see you next year, though.

Au Foong Yee is editor of City & Country

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 748, March 30-April 5, 2009.