Seeing is believing

Property investors should know exactly where the projects are.

EARLY this week, an article from wire service Reuters highlighted the perils of buying properties in an unfamiliar country. The article, datelined London, was about British developers and house builders promoting their projects in Asia as a result of strict lending guidelines drying up demand among Britons.

StarBizWeek has also featured quite a number of articles about the British property market since 2009. Like stocks, bonds and other asset classes, property is another form of investment. While some may prefer to invest locally, others may invest abroad.

But whether it is Britain, Australia, Singapore or Malaysia, developers anywhere work on the same principle and that is the need to sell in order to generate revenue, in both good and bad times.

The world, with the exception of Asia (for now), is going through difficult times and this is expected to last quite a while. There is no end in sight for the eurozone crisis for many months to come, at least. That is why developers and house builders are promoting and marketing their projects in Hong Kong, Singapore and Malaysia more aggressively than before.

Kuala Lumpur is a relatively new market for them as their normal destinations prior to 2009 have been Hong Kong and Singapore. When it comes to overseas property investments, the people in Hong Kong and Singapore have been there before us.

But despite that, buyers from the former British colony have discovered that they have bought into projects based on misrepresentation.

According to the Reuters article, an investor bought into a project which he believed was “a 40-minute walk from central London.” It turned out to be “a 40-minute journey by high-speed train!”

Another bought into a project that was located on Kensington High Street. The brochure alluded to the proximity of the High Street Kensington underground station.

Some of these projects could well have been promoted here. In both these cases, there would be non-issues had the investors flown to London to see the actual site for themselves, check out the accessibility and the stations that may or may not be there.

In the case of 375 Kensington High Street, on the map that came with the beautifully printed and obviously expensive brochure, the nearest tube station seems to be Olympia. But while Olympia is along the tube line, the train only stops there during public holidays, weekends and when there is an event at the exhibition hall which is located nearby. The train does not stop at Olympia during a weekday. One will not know that based on the information provided by the map alone.

Secondly, to allude to the project being near High Street Kensington may be a bit of a stretch because the two nearest tube stations are West Kensington and Hammerstein, according to a source who used to live there. When 375 Kensington High Street was marketed in Kuala Lumpur, a thick glossy publication was given to potential investors.

Kensington Street is a long road and on which end the property is sited is important. The local equivalent would be Jalan Ampang, which begins from Lebuh Ampang, passes the KLCC to Ampang Point to the deeper corners of Ampang.

Some of Malaysia's most prestigious properties are located there and less prestigious ones as well with the KLCC as the central point of reference just as High Street Kensington tube station being the point of reference.

If one has the inclination to buy into a project that runs into hundreds of thousands of ringgit or RM1mil or more, it seems only logical to check out the area before signing on the dotted line. That holiday, which costs a fraction of the investment, will give clarity to the investment, and peace of mind.

While there, one may also request to see other properties by the same developer. Besides misrepresentation, it has been brought to our attention that some projects may not yet have got the necessary financing. British banks will only lend to developers after a certain portion of sales have been formalised.

Some projects have been marketed in Asia with the hope and aim to achieve that sales target. Lack of financing may lead to delays.

Some projects are promoted as having yield of between 5% and 6%. According to an agent, well located properties have yield of between 3% and 4%. The further away, the higher the yield. Properties in Kajang, for example, would be cheaper than those in Petaling Jaya and the yield from that Kajang house would be higher (annual rental/price).

This does not mean London is not a good property investment destination. On the contrary, the EPF have bought into some landmark buildings there. It would not be fair, therefore, to tar with the same brush all properties promoted here. Indeed, some exceptional properties have arrived on Asian shores. But like companies that do due diligence before investing, individuals too must do likewise. Whether it is Melbourne, Singapore or London, or even a project here, wouldn't checking out the site be the first thing to do?

Deputy news editor Thean Lee Cheng suggests it is time for some Malaysian investors to take a working holiday in Britain, if they have not done so already.

By The Star (by Thean Lee Cheng)