Valuable thoughts

There is no investment better than small commercial lots in big, well managed and well located malls. For example:
Sungai Wang-1994-lots were selling ar RM800-1000 psf and rental was RM4 psf so return per sf was 6% if RM800 psf and 4.8% if price was RM1,000 psf
Today the same lots are RM20,000-25,000 psf and rental return is RM100 psf-this means return is still 6% if price is RM20,000 psf and 4.8% if price is RM25,000 psf. What does this mean? It means that there is a direct relationship between rental return and capital values ie both do not move far from each other to yield a stable return relative to the cost of funds-this is a fundamental lesson in economics and finance. The cost of money ie cost of funds/borrowing has a direct relationship with investment returns-obviously people will not want to put money into property if there is a big difference between the cost of borrowing money and the returns one gets from investing in property(unless one expects hyperinflation where money loses its value and material costs are expected to escalate-then there will be a significant divergence between cost of money and return to investments).
We are going to expect much more severe inflation from 2012 so property is probably the BEST hedge but it must be property that can fulfil these factors:
1. yield a stable and escalating return
2. located in good position
3. give owners/renters a opportunity to derive income from it
4. give owners a steady capital appreciation via market driven demand
This is why Sungai Wang, 1 Utama, Centerpoint, Merdeka Mall have all appreciated so much! What is the common link between these malls I have named? The link is SMALL, AFFORDABLE LOTS, GOOD LOCATION!
Why is Suria and 1 Borneo not doing well at all? They also have a link-the answer is they are both malls with BIG LOTS!
If your wife has a choice to go to a mall with 100 big lots or another with 2,000 small lots, where will she want to go? EVERYBODY, whether rich or poor wants VARIETY-shopping is an experience, a feast for the eyes and senses-the more the merrier!
Just imagine- what properties in Sabah over the last 10 years has appreciated the most?-is it condominiums, terrace houses, bungalows, shophouses, industrial property, leisure property, land or shop lots? Answer: SMALL shop lots! Lots in Centerpoint now over RM3,500 psf and they were only RM600 just 10 years ago!
Key to investment: get into properties where you get a steady rental income that can service your loan! By the way MBSB is prepared to finance qualified buyers for 100% of our sales price as they have done their study of our project(they spent time studying the building designs, location, our financials, market studies n consulted many real estate valuers and they are very happy with what we are doing so they want to finance us as well as the end buyers-its very, very rare for any institution to want such a big double exposure to any single project!)
What we sold for RM1,000 psf is now RM2,500 psf when we launch-buyers only paid 15-25% of purchase price and enjoy this significant appreciation! But my prediction is that in 10 years these lots will be RM12,000 psf because of the coming tourism boom from China and the urban migration factor(people from small towns all coming to KK like in Johor Baru and KL)-the development is small towns and job opportunities are limited so people will flock to KK which will develop as an entreport like what Singapore was. KK is a natural hub for trade between BIMP EAGA and East Asia(China, HK, Korea. Taiwan, Japan)-it will be an entreport whereby goods from E Asia will break bulk for transhipment to BIMP EAGA region and a export and food processing zone for food from BIMP EAGA-what does East Asia need more than anything else? FOOD!!!! Sabah can be an integrated food hub to collect, trade, grade, brand, process foodstuff for re export to East Asia- this would encourage wider scale and larger scale agriculture and animal husbandry as well as a bigger fishing industry. It will also create a huge boom in logistics, warehousing and transhipment requirements.This is my vision and I cannot see how this wont happen because it simply MUST!  The 1st step is to create a FTZ(Free Trade Zone) in Sepangar to facilitate tax free transhipments to other BIMP EAGA countries. Sabah must become a “break-bulk” center for exports from E Asia to BIMP EAGA. Use China’s consumer base, China’s manufacturing and construction prowess, China’s huge demand for food and natural resources, China’s money to fast track development in Sabah-more can be achieved out of private economic initiatives than from G2G bargaining! Use China as they are in need of allies who understand their needs and help resolve some of their own problems like food security issues. China has HUGE food security issues-if Sabah can help them, they will be more than willing to return that favor many times over!
Think about the fact that Sabah now has 70% of Malaysia’s oil & gas reserves and 35% of total palm oil acreage-what does this translate to? MAJOR BOOM! So as an economist, I would have no hesitation of putting EVERY cent I have in this fantastic state! Sabah MUST control its own financial policies and education policies-it must encourage real talent to settle here and not be protectionist if it wants rapid and stable development-people who come to Sabah quickly fall in love with the environment, esp if they come from oppressive Peninsula and they become LOYAL! You need smart and hard working people to settle here-harness their talents and resources-make them commit by bringing in money and contacts.
Encourage the new concept of “Longer Staying Tourists” ie short time retirees to come here because they are always people with money and contacts-just think about the fact that every longer staying tourist will buy or rent houses/apartments, patronise local restaurants and shops and grocery stores, buy local vehicles, travel locally-they will spend MUCH MORE than the average short term tourists! In addition, their families, relatives and friends from their home countries will come to visit them so Sabah will become more popular! Relax Sabah’s MM2H policies and give more incentives for overseas people to come to Sabah to both retire and start businesses-they will not be the sort to come here to take away jobs from Sabahans but they will in fact create jobs for Sabahans. INVEST HEAVILY in local talent, ensure they speak better English than the Peninsula Malaysians and have better work ethics, more IT literacy than Peninsula guys and guess who major cos will want to employ when they have a choice? Peninsula guy or Sabahans who speak better, work better and are more IT savvy??? Thats why Sabah must control its own education policies! Dato Masidi manjun already made this call some months ago for Sabah to control its own education policies-thats a really wise and necessary move! He should be fully supported in this initiative-many people didnt understand why he made this call! Use interactive e-learning and e-tutoring techniques via satellite transmission to reach out to the interior people who cant afford to come to the city for studies-the most important investment any country or state can make is in its people and this must not be neglected at any cost.
This is me shooting from the hip as usual..I call it as I see it, no holds barred!

No related posts.

Tagged as: Centre Point, rental Yield, Retail Lot