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Is Property Still A Good Asset in The Pandemic Era?

Published 09 Sep 2020

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By Fi Life Team
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Malaysians seem to love properties as an asset as well as a source of income. But in this COVID-19 era, is it still a safe asset and source of income? What about REITs? On this webinar, we discuss whether you should still have properties in your asset portfolio and your options going forward.

Guests:
Rajen Devadason - CEO of RD WealthCreation
Michael Geh - Board Member of FIABCI

Moderators:
Wong Shou Ning - Producer/Presenter, Morning Run
Malek Ali - Founder, Fi Life Sdn Bhd

Show Notes:
1. Klang Value Property Outlook
Michael 1:32
- In 2019, the Home Ownership Campaign by developers resulted in a good performance.
- The market began losing momentum in Q1 of 2020.
- Covid19 will continue to affect us for at least 18 months.
- Auctions in 2019 will roll into 2020, expect properties that are 20-30% lower than its original value.
- With the current moratorium, there won't be mass auctions this year.
- Developers’ market price is still firm, banks are still keen to release loans, especially for first time home buyers.
- Bank Negara did a good job -market did not lose much of value.
- Location is key.

Rajen
- Look out for locations that are 5km around the latest railway projects.
- Due to MCO, we can expect a reduction in recovery in office space.

2. Cost to consider and the yield for buying a property
Michael 22:02
- Initial purchase, there are taxes/lawyer fees. For commercial, management and maintenance fees.
- Yield and annual return:
- Residential - 5% is considered very good.
- Commercial - 5 to 8% is good.
- Never buy a property on impulse or just because of low-interest rate.

Rajen
- For new investors, the condo's upfront yield is higher than landed properties but landed is better for long term capital gain.

3. Global trends outlook and property as investment
Shou Ning
Global trend -Property prices have gone up 40% even sales are low.

Rajen 8:22 18:28 33:39 45:25
- In a ‘K shape’ recovery, when the market drops: it is strength for some people, a weakness for others.
- Those involved in investment will experience the top leg of the K. And there will be a structural move to extreme poverty globally.
- The entire world is going through a structurally low-interest rate.
- Japan & the EU are having negative interest rates. Soon the US will follow.
- In Malaysia, the OPR is expected dropping to 1% as the government tries to jumpstart our economy.
- Structure conventional loans with fixed-rate mortgages, not variable rates.
- Usually, when interest rates go down, it is time to invest in bonds & REITs.
- Take advantage of buying the good bonds and REITS as we expect lower interest rate for the next 3 years.

4. Is our house a true investment or is it a ‘trap equity’?
Michael 29:06
- Investing in a house is part of building a family.
- Being debt-free early from your home mortgage is the ultimate achievement.
-You can also leverage your property (refinancing) in the future.

Rajen 24:25
- Buy a home within one’s means.
- You may use EPF2 to pay off your home mortgage as fast as you can. Once you own your home, your level of risk dramatically goes down and there is a psychological shift.
- Peter Lynch encourages buying your own house as there is compounding.
- Distinguish the house we live in and property investment.
- your real estate investment should be part of the diversified portfolio across different asset classes and geographical regions (ideally global).
- Quickly sell your investment property if are unable to find good tenants.
- Invest in good dividend-paying stock/funds, buy REITs so you still enjoy rental but no longer have the stress of rental management. You should give up future capital gain for steady rental flow from REITs.
-Practise delayed gratification, live modestly and invest largely.

5. REITs
Rajen 50:08 56:16
- Singapore is a REITs centre for SEA.
- Ringgit is weak, hence we should consider internationally diversified REITs.
- US Tower REITs (Riding the wave of 5G)
- Logistics and warehousing REITs(e-commerce boom)
- Healthcare REITs (due to the pandemic)
- Be wary of physical retail REITs.