Archive for February, 2012
Get The Most For Your Money When Buying Real Estate
Posted by Chas W. Leeper, SRA in Uncategorized on February 6th, 2012
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Unstable Year For Real Estate Investment Trusts
Posted by Chas W. Leeper, SRA in Uncategorized on February 4th, 2012
Headwinds from the depressing global economic and financial fronts, specifically in the United States and the eurozone, will bring challenges to the performance of the local real estate investment trusts (M-REITs) this year.
Stewart Labrooy, chairman of Malaysian REIT Managers Association said that the M-REIT sector will face slower growth and competition for tenants as an oversupply situation appear in the office market leading to lower rental yields.
“It is going to be a volatile year ahead with the eurozone uncertainty coupled with low growth in the European and US markets. These markets are very important to growth in Asia and the impact would be felt in all export-led countries. Capital market activity will remain muted worldwide in 2012,” Labrooy told StarBiz.
In Kuala Lumpur, property prices are anticipated to remain flat for 2012 with some weak points in the high-end residential and office markets
In the office sector, the seven million sq ft of new office space programmed for completion this year would eventually result in softening in rental and occupancy.
Inspite the gloomy outlook, Labrooy said the Malaysian capital markets were to remain healthy this year with a considerable number of transactions particularly the listing of Felda’s assets in the first half of 2012.
“We are fully aware of the issues involved as some of the M-REITs have been through the 2008 global financial crisis and are taking a pro-active stand to retain their tenants through this period and manage their gearing leverage conservatively.
“Most M-REITs have strong tenant covenants and long leases to counter cyclical financial events. They also practise very conservative valuations so we don’t see any downward pressure on them in 2012 and beyond.
Consequently, the average gearing of most M-REITs are in the range of 20% to 40%, precluding any event of a default on their loan covenants,” he said.
Labrooy said a silver lining from the ambiguity and instablity of the global markets was that investors and fund managers had begun diverting to dividend stocks with strong asset backing and renewed their interest in M-REITs as defensive stocks in unstable times.
“I believe that we will continue to see a strong subscription in the M-REIT sector this year bearing in mind that the sector performed fairly well to outperform the KLCI in 2011,” he added.
He said the local Malaysia property market are still facing liquidity problem as the size of M-REITs was still small by international standards with only five having market capitalisation of over RM1bil. This influenced weak involvement among retail investors.
Although the combined market capitalisation of M-REITs has increased to over RM15bil, its market capitalisation is still much behind that of Singapore which has US$27bil in market capitalisation.
Labrooy, who is also the chief executive officer of Axis REIT Managers Bhd, said the latest listing of Sunway, CapitaMalls Malaysia Trust and Pavilion REITs had develop the liquidity of the local market.
Labrooy further stated there was lack of listing of foreign assets as REITs on the local bourse, further adding that those who are interested to go for listing had decided to do so in Singapore by reason of the latter much higher liquidity and better tax structure. The local regulatory and tax framework must get better to compare with Singapore, and a similar tax code would help in getting greater retail participation.
On whether there was a possibility for other types of REITs to enter into the market, Labrooy said: “Malaysia probably has one of the most diversified REIT offerings in Asia. We are currently offering hospitals, plantations, office, retail, education, hospitality, industrial and diversified REITs.
“In addition three are syariah-compliant to cater to the Islamic investors.
“The sectors that will see growth are in industrial, medium cost housing, healthcare, education and tourism. These growth areas are in the Iskandar Malaysia in Johor, Greater Kuala Lumpur and Penang.”
Al-Hadharah Boustead REIT chairman Tan Sri Lodin Wok Kamaruddin agreed that the prospects for the REIT market has not been fully explored in terms of consciousness between potential investors.
He said M-REITs were viewed as a much safer investment as compared with other REITs in the region. This was primarily due to the domestic-centric focus of their property investments, lower refinancing danger and comparatively lower foreign shareholding.
“Malaysia is in a strong position for greater growth and has the potential to lead the REITs market in Asia given its good track record and stable market conditions in Malaysia.
“Generally, potential investors are not well informed about REITs. We believe the level of awareness can be increased nationwide as knowledge plays an important role,” he said.
Lodin pointed out.
On the types of M-REITs, he said: “It would be good if the market could diversify to different types of REITs. Malaysia has a lot of property related assets with the potential of being “REITed”. The only factor at play right now is time. Once the conditions are favourable, industry specialists should develop these assets into REITs.”
Foreclosures
Posted by Chas W. Leeper, SRA in Uncategorized on February 4th, 2012
Investments in Foreclosed Homes - Opportunities for Self-Starters
Among its efforts to combat the Great Recession, the Federal Reserve has maintained interest rates at historically low levels. The levels make borrowing very attractive, but they also depress interest rates on bonds and other investment securities. Individuals who deposit their funds in savings accounts receive hardly any return on those investments. In order to increase return on investment, investors will look to residential real estate as a likely source of enhanced returns.
Of course, the amount of the return will depend in large part on the price paid initially for a residential property. Foreclosures in real estate allow investors to buy residential property at a lower price. This is so because we are assuming that there will not be a strong run up of home prices in the near future. This is another reason why an individual must become completely familiar with the neighbourhood in which he intends to invest. One must need to identify if the property is in use or for sale or if it is a foreclosed property. In order to obtain an attractive purchase price, one must know values in the area.
Foreclosure - Opportunities for Self-Starters
Persons who are currently underemployed or unemployed and persons can take advantage of this economic climate. Additionally, self-starters who are willing to devote their evenings and weekends to a program of economic self-improvement will locate multiple opportunities as well.
One of the first steps to take is to select a neighbourhood or area on which to concentrate and then become completely familiar with that area. This is done by driving through the area and Contacting real estate agents and having them show the properties that are currently available and describe properties that sold recently. After a couple of weeks of this kind of effort, an individual will become quite familiar with both the physical and economic condition of a neighbourhood and the nature of that neighbourhood’s real estate market.
By this program of self-teaching, the person can become prepared to enter into transactions that can lead to income and profit. These transactions will benefit not only the individual but the community as a whole.