FINANCE PROPERTY BUYING REALTY ABROAD? Intermediary companies can be an invaluable help in sourcing the right property and detangling the legal complexities involved. By Tho Li Ming as marketing agents for select foreign property projects. ese companies position themselves as expert intermediaries that are able to bridge the gap between two different cultures. Jazmine Goh, director of business development and international real estate at Henry Butcher Marketing Consultancy Sdn Bhd, says they help bring clarity to the different terminologies used during the buying process. “We are a Malaysian company providing fellow Malaysians with services. We help buyers who may find difficulty communicating with foreign parties even though they speak the same language. We handhold them in all aspects of the buying process.” Some local advisory companies join forces with strategic foreign A s Malaysia’s middle class continues to expand and become more affluent, their appetite for investments is now extending beyond domestic shores. is is reflected in the increase in foreign property ownership. According to a 2012 Knight Frank report “International Residential Investment in London” published in late January, Malaysians ranked fourth among all active overseas buyers. ey were responsible for 4% of the total overseas transactions done in the UK capital. e most active were Singaporeans (22%), followed by Hong Kongers (16%) and Chinese (5%). London is not the only hot spot. Australian cities such as Melbourne, Perth, Brisbane and Sydney as well as Singapore rank as favourites. James Wong, managing director with VPC Alliance (KL) Sdn Bhd, says these are places people are familiar with, where they have family roots and that offer an easy travel link. “ey also have a common denominator in the English language and follow the English legal system.” While some buyers purchase their properties directly from developers, others engage the services of a third party (or intermediary) locally or overseas. ese companies act as marketing agencies for property projects or as independent buying advisories acting solely in the buyers’ interests. We speak to three parties to find out the pros and cons of using these intermediaries. DIFFERENT CHANNELS Unlike a decade ago, buyers now have various local and foreign options when it comes to finding their dream property overseas. One channel they can turn to is property advisory companies, which also act According to a 2012 Knight Frank report “International Residential Investment in London” published in late January, Malaysians ranked fourth among all active overseas buyers. They were responsible for 4% of the total overseas transactions done in the UK capital. 30 PERSONAL MONEY | APRIL 2013 Reuters PM_30t33_0413.indd 30 PM_30t33_0413.indd 30 3/13/2013 9:12:00 PM 3/13/2013 9:12:00 PM
Transcript
FINANCE PROPERTY
BUYING REALTY ABROAD?
Intermediary companies can be an invaluable help in
sourcing the right property and detangling the
legal complexities involved.
By Tho Li Ming
as marketing agents for select foreign property projects. Th ese companies position themselves as expert intermediaries that are able to bridge the gap between two diff erent cultures.
Jazmine Goh, director of business development and international real estate at Henry Butcher Marketing Consultancy Sdn Bhd, says they help bring clarity to the diff erent terminologies used during the buying process. “We are a Malaysian company providing fellow Malaysians with services. We help buyers who may fi nd diffi culty communicating with foreign parties even though they speak the same language. We handhold them in all aspects of the buying process.”
Some local advisory companies join forces with strategic foreign
As Malaysia’s middle class continues to expand and become more affl uent, their appetite for investments is now
extending beyond domestic shores. Th is is refl ected in the increase in foreign property ownership.
According to a 2012 Knight Frank report “International Residential Investment in London” published in late January, Malaysians ranked fourth among all active overseas buyers. Th ey were responsible for 4% of the total overseas transactions done in the UK capital. Th e most active were Singaporeans (22%), followed by Hong Kongers (16%) and Chinese (5%). London is not the only hot spot. Australian cities such as Melbourne, Perth, Brisbane and Sydney as well as Singapore rank as favourites.
James Wong, managing director with VPC Alliance (KL) Sdn Bhd, says these are places people are familiar with, where they have family roots and that off er an easy travel link. “Th ey also have a common denominator in the English language and follow the English legal system.”
While some buyers purchase their properties directly from developers, others engage the services of a third party (or intermediary) locally or overseas. Th ese companies act as marketing agencies for property projects or as independent buying advisories acting solely in the buyers’ interests.
We speak to three parties to fi nd out the pros and cons of using these intermediaries.
DIFFERENT CHANNELS Unlike a decade ago, buyers now have various local and foreign options when it comes to fi nding their dream property overseas. One channel they can turn to is property advisory companies, which also act
partners. Th ese Malaysian companies also act as marketing agents for their strategic partners. For instance, VPC Alliance is affi liated with UK property consultancy company Cluttons LLP as well as Ray White Group in Australia. Wong says these partners provide buyers with an added sense of security due to their familiarity with the developers they work with.
Between these two companies, an agency fee may or may not be charged. If buyers are interested in a residential property that is being marketed by a Malaysian company, the buyer will not need to pay an agency fee. “If it’s a residential property in our product line-up, the fees will come from the property developer or owner of the property upon completion of the sale,” says Goh.
If the buyer is not interested in the list of foreign properties marketed locally, these same property consultancies can act as advisers and agents. In such cases, there will be an agency fee based on the property’s value. Henry Butcher’s rates are between 2% and 3%, while VPC Alliance’s rates are about 1.5% or less.
“If prospective buyers don’t want the [foreign] properties we market in Malaysia, we can hook them up with our strategic partner, Cluttons. If the buyer selects a project that is listed by Cluttons, there will not be any agency fee charged. If the buyer wants to look for a specifi c property not on the list, Cluttons will charge a fee of 1.5% of the selling price,” explains Wong.
A third option is to fi nd advisory companies that are based in the respective countries; they are seen as able to secure better deals via their network of partners. AllenWargent, a residential property-buying adviser, is one such company with offi ces in London and Sydney. Director Paddy Allen says because he and his partner Pete Wargent live in the two cities respectively and have worked for investors in these two markets, they can evaluate both the functional and investment elements of the properties for their clients. “Our local knowledge [of London and Sydney] also means that we can compare properties, evaluating individual requirements versus cost for our clients.”
Th eir fees are similar to those of Malaysian marketing agencies, depending on the type of property and the nature of the search. “Buyers can expect to pay between 1.5% and 2% if they wish to engage a buying adviser. Many advisers will also charge a registration or sign-on fee, which varies. Th e practice at AllenWargent is to agree on an upfront fee with the client. Typically this would be approximately 1.5% of the client’s budget,” explains Allen.
SERVICES OFFEREDTh ese intermediaries often position themselves as one-stop centres that assist buyers throughout the process of purchasing a property — from sourcing of properties and negotiation of the price to drawing up purchase agreements. It usually includes legal and tax advice as well. Some may off er optional
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APRIL 2013 | PERSONAL MONEY
Australian properties are popular among Malaysians
services such as helping owners furnish and rent out their property.
Th e expertise provided by these companies is usually limited to specifi c types of properties and locations. Some Malaysian consultancies prefer carrying off -plan properties, whether it’s high-rise or landed, due to the better assurance of quality upon completion.
Goh explains: “In London, developers are bound by the defects liability [clause in the agreement] of between one and two years, depending on the project and developer. Any issues pertaining to quality can and will be rectifi ed by the developer. In contrast, we cannot provide any guarantees for the quality of secondary properties because it is diffi cult to assess their true condition since they are not new.”
EVALUATING THESE COMPANIESAside from the obvious, such as the range of services and location of properties off ered, the authenticity and reliability of these service providers must fi rst be determined. Buyers will need to know that they can be relied on before, during and after the purchase. Wong says the fi rst thing to note is whether they are registered with the right authoritative bodies.
“When dealing with a Malaysian practice, they should always check that the company is registered with the Board of Valuers, Appraisers and Estate Agents. If there is evidence of wrongdoing and misrepresentation, buyers can report to the board. Generally, the larger ones will try to maintain their good reputation as they don’t want their licence [which is renewable yearly] to be revoked.”
Property companies in London must comply with the Estate Agents Act 1979. Allen says companies can take up the option of becoming members of the National Association of Estate Agents or the Royal Institution of Chartered Surveyors (RICS). “Since we are regulated by the RICS, we have to follow the guidelines set out by them and also have an independent client redress process in place to protect all of our clients in the event
WHY TARGET FOREIGN BUYERS?OF LATE, there has been some negative perception that Malaysian consultancy companies sell only cast-off and unpopular overseas developments. These same projects are not sold in their home market because their location and quality of product are deemed inferior. Goh acknowledges that while there may be some bad apples in the industry that spoil the market by accepting cast-off properties, reputable companies take every care and precaution to prevent that from happening by performing thorough due diligence.
James Wong, a chartered surveyor and director with VPC Alliance (KL) Sdn Bhd, explains why foreign project developers choose to market heavily to overseas buyers like Malaysians before their properties are even built. “After the global fi nancial crisis in 2008, the credit squeeze made it increasingly diffi cult for foreign developers to obtain bridging loans from banks. Foreign buyers based in the respective cities were unable to get loan fi nancing due to the poor economic situation and high unemployment rates. Therefore, one of the solutions was for the developers to provide upfront sales of 40% to 50% of the proposed project before the bank would provide loans.”
Director of AllenWargent, Paddy Allen, adds: “The sale of off-plan properties means the developers reduce their risk and cost of fi nancing. Therefore, targeting overseas buyers like Malaysians could be part of their development business plan.”
they want to make a complaint,” he says. In Australia, every state has its own laws, Allen says.
For example, Sydney is in New South Wales and the law requires that buyers’ agents hold a licence from the New South Wales Offi ce of Fair Trading. Th ese companies are governed by the Property, Stock and Business Agents Act 2002.
It is also advisable to fi nd out how much due diligence a company does before marketing or selling properties to buyers. Goh says the advisory companies must select the developers and projects carefully before marketing them to ensure buyers get the property they were promised in the fi rst place.
“We have a list of established property developers that we regularly work with. We select them based on their reputation, fi nancial ability to complete their projects, quality assurance, prices of their previously sold
properties and that their properties off er good returns [rents] and price growth. We also check out the area ourselves to verify the information provided by the developer.”
Independence of the company is also vital. Intermediary companies should not be tied solely to the projects they market but should also be able to provide a range of other options according to the requirements and needs of the buyer. This way, says Allen, clients get to see all properties on the market, not just properties from a particular developer or agent. “We are wholly independent and not associated with any owner, developer or agent. This means there is transparency in the process and that we are trying to get the best deal for our client at all times.”
Companies that market properties as well should be monitoring the status of the project from start to completion, and keep buyers in the loop even before the start of the project. “We provide progress reports on the construction of the properties at least once a year. For example, when we go to London, the entire team goes to the site so that everyone understands the project well. We take pictures and pass them on to buyers. Any feedback that we receive from the buyers will be passed on to the developer,” explains Goh.
Above all, prospective buyers should do their homework and verify the information provided by the intermediary. “Look at their list of completed projects, how long it takes to sell the projects as well as comments from previous buyers,” Wong advises.
Avoid companies that off er deals that are too good to be true, such as higher discounts than their competitors. “In cases like that, the developer could have infl ated the property prices beforehand in order to give you the illusion of a larger discount,” says Goh.
