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Why The Flip’s Not Flopping In Kuala Lumpur

February 12, 2009Article by Ray Withers

Flipping is buying a property that is either not yet built or is under construction and then reselling the property at the time building is finished. The idea behind flipping is that in a housing market fuelled by inflation, the property price goes up before the investor has to start paying out for the mortgage and running costs – and in theory walks away with a tidy profit. The problem is with many property markets now stagnant or falling, flipping is not a strategy to make money from property in the short term unless you can find a market that is still on the rise and is like to perform well while you are holding property to sell.
One place to look is Malaysia investment property, where small units of about 120 square metres are showing dynamic returns for investors.
Property in Malaysian capital Kuala Lumpur stacks up with several property plus marks –
* Malaysia is an oil-exporting country
* Malaysia is experiencing a tourist boom
* The country has a young business-minded population and Kuala Lumpur is developing in to a major Far East financial centre.
* Lastly, unless investors have carried out very careful due diligence, Air Asia is starting cut-price flights from London Stansted from £99 with the aim of linking in to Malaysia as an Asian airport hub. This puts Australia, New Zealand and China all within a medium haul flight and knocks a considerable amount of flight costs.

The key risk of a flip strategy in the current property worldwide banking crisis is that your country of choice will have the same buffeting as the US and UK housing markets – but Malaysian property seems to be holding its own with strong local demand.

Another key flipping consideration is tax – and for investors the good news is Malaysia has a 0% rate of capital gains tax, but, of course, you must consider any similar taxes due in your country of residence.
Recently property in Kuala Lumpur has experienced strong capital growth. Investors can still acquire properties for good value compared to other Asian cities.

During 2007-2011 the majority of developments currently under construction within the city will reach completion. It is estimated that in 2007 approximately 4,150 new units were completed; with almost 80% of the units scheduled for completion in 2007 and 2008 having already been sold. Impending supply in 2009 have also achieved sales rate of 75%. One development, winning a recent award for best high rise in Malaysia at the CMBC Asia Pacific Property Awards, is the Axis Pandan that is just 10 kilometres from the city centre and an attractive suburb for young professionals.

The development offers apartment accommodation in two blocks – the Axis Residence Deluxe, Kuala Lumpur and Axis Crown Premier, Kuala Lumpur -all units are delivered fully finished including all fixtures and fittings. A furniture pack is included that contains all furnishings as well as air-conditioning units and electrical goods such as a TV and microwave.

A turn-key two bed apartment costs just over £45,000 and has 60% loan-to-value finance (subject to status), meaning investors can purchase for under £20,000, including cash deposit and purchase costs.

Author

Ray Withers

Ray has over 17 years’ experience in the international property market and bought his own first international property investment back in 2002. Aside from running Property Frontiers, Ray has been involved in residential, hotel, student and commercial property investment and development in both the UK and overseas and co-wrote "Where to Buy Property Abroad - An Investor's Guide". As Founder and Trustee of the Frontiers Foundation, Ray is directly involved with many of its projects to ensure they have a direct and tangible impact in individual communities across the globe. He is passionate about property, travelling, scouting out new opportunities and finding time to spend with his young family.
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