Investors should broaden investment horizon, refocus on rental income

CYBERJAYA: Property players and investors should broaden their property investment horizon and refocus their attention on rental income, according to Zerin Properties chief executive officer Previndran Singhe.

Equating the property market with used computers that “hang” after several years of use, he said investors need to “reboot” their investment strategy so that they can gain maximum returns from their investments.  

Presenting a paper on Malaysia’s 2014 property market outlook yesterday, Previndran said real estate is and has always been a long-term and not a three-year or two-week horizon investment.

“It’s a minimum of five to 20 years investment range,” he said, adding that a reboot strategy is needed to sustain income from a real estate investment.

Previndran said investors also need to reboot their strategy by focusing on actual gains, and not just capital gains.

“Buyers should try to refocus on rental income to sustain properties that they have purchased, and look at funding systems that are available such as the bullet payment scheme,” he said.

On the latest market trend in commercial properties in Kuala Lumpur, Previndran said new buildings are being occupied but at the expense of older buildings which will end up vacant.

“These older buildings might be transformed into boutique or budget hotels or even new office buildings,” he said, adding that old buildings are not necessarily old but are not relevant to the market anymore.

Previndran pointed out that take-ups for new office buildings are mainly from financial, oil and gas and expansionary services.

He is optimistic about the industrial sector, which will continue to drive the local property market.

“The industrial sector has been very slow in providing supply to the market. Yet, 50% of our GDP [gross domestic product) is from the industrial sector and it is still growing. I think we will see more activities in the industrial sector and its sub-sectors,” said Previndran.

He said properties within the proximity of the mass rapid transit (MRT) and light rail transit (LRT) stations will be the hot spots. “We just need to look at how it happened in Singapore.”

On the property cooling measures that the government announced in the 2014 Budget last October, Previndran said they are not going to improve the current situation.

“It’s not answering the fundamental question in the market, which is supply that is taking too long and too expensive to come in.”

Among the measures were an increase in real property gains tax to 30% for properties disposed of within three years, and the raising of the value of properties that foreigners buy from RM500,000 to RM1 million.

Previndran said the cooling measures would hit the secondary market in the first quarter of the year. The Iskandar Malaysia region will probably experience the worst hit in the first quarter because of the stringent foreign investment regulations.


This article first appeared in The Edge Financial Daily, on February 13, 2014.