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Thread: Malaysia investor clubs blamed for distorting property prices

  1. #1
    Blue blood

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    Default Malaysia investor clubs blamed for distorting property prices

    MR JERRY Tan, a used car business owner, has spent RM20,000 (S$7,700) in the past four years to attend various property investor clubs' talks in Kuala Lumpur.

    His reward? He managed to buy two condominiums in 2011 and 2012 on nearly 15 per cent discounts which promised to bring good resale value. But he has found that the rents for his properties are barely enough to cover his mortgages while their values have been stagnant.

    "It's a big risk even with big discounts in the clubs," says the 47-year-old. But many are willing to take these risks, he says.

    At least seven property investor clubs have sprung up in Malaysia over the past five years, with the clubs being accused of keeping property prices on the boil as the government faces an endless uphill battle to cool runaway property speculation.

    These clubs, with members hungry for inside scoops on property deals, are keeping prices hot. And experts believe that if they are left unchecked, it could lead to more runaway speculation.

    "Typically, these investor clubs approach property developers and offer to buy 50 to 100 units or even an entire block of apartments and in return, receive an en bloc discount of between 15 per cent and 25 per cent," says property analyst Tang Chee Meng of Henry Butcher Marketing.

    He says investor clubs have mushroomed over the past few years because of the boom in the property market and the double-digit rise in home prices which have led to the heightened interest in investing in the property market.

    The problem comes when the developers mark up prices to cover the en bloc discounts given to the investor clubs.

    The organisers of the clubs ask for 20 per cent discounts on new launches and pocket 5 per cent as commission, Mr Tan, the used car business owner, says.

    The International Real Estate Federation (Fiabci) says these clubs contribute to rising property prices and prompted the government move to cool rising prices.

    "We are concerned," says Mr Michael Geh, a spokesman for the Malaysian chapter of Fiabci.

    Among the cooling measures in the 2013 Budget were raising real property gains tax from 15 per cent to 30 per cent if a piece of property is resold within three years and 20 per cent for the subsequent two years.

    Foreigners have also been barred from buying properties worth less than RM1 million, under the Guidelines on the Acquisition of Properties with effect from March 1 this year.

    In 2009, the minimum threshold imposed was RM250,000 which was raised to RM500,000 in 2010.

    Despite the government's moves against speculation, Malaysia's national home prices still rose 10.1 per cent for the quarter ended last September, year on year.

    Kuala Lumpur has the most expensive homes in Malaysia, at an average of RM620,758, even though prices rose only 4.3 per cent for the year before last September.

    Home prices surged in Johor by 20.4 per cent, 14.3 per cent in Penang and 6.3 per cent in Negeri Sembilan in the same period, according to government data.

    Mr Geh says the phenomenon in Malaysia started some five years ago with self-proclaimed property "gurus" who were successful themselves and had garnered several properties.

    "Then, they started a club to share their knowledge and charged members for tips," he says. "They are either subscription based or charge a fee per talk."

    Property experts believe there are at least seven property clubs in Malaysia with varying membership sizes, ranging from several dozen members to hundreds.

    "Their fees can be from RM200 to RM2,000, sometimes RM5,000," Mr Tan says.

    Members are often told to have their cheque books with them and "expect a very good deal" on a new property.

    "It's all by word of mouth to keep them exclusive. They will offer deals like 25 per cent discount for the first 10 buyers," says Mr Tan.

    The Malaysian Institute of Estate Agents says speculators' practice to "flip" their properties for short-term gain has led to properties being sold at 30 per cent to 40 per cent higher than developers' selling prices, distorting the market.

    To control the activities of the investor clubs, the government has proposed to restrict pre-launch sales of developers, says Mr Tang, the property analyst.

    "However, this has, of course, met with stiff resistance from the developers and may not be easy to control."

    Attempted calls to reach central bank officials for comment on property investor clubs were unanswered.
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  2. #2

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    Also happening in Singapore.

  3. #3

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    False prophets.....

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