Commercial Property As Investment Vehicle

Smart Finance

While the Asia economy is still mired in a recession, exports indicators and employment figures have shown some signs of stabilization as of the first quarter of 2009, with economists forecasting a turnaround by year’s end. Property indices also indicate further stabilization in prices and in demand, especially in the commercial properties sector in the key regions of Singapore, Malaysia, Shang Hai, Beijing, and Jakarta from the slowdown in overall sales towards the end of 2008 as investors erred on the side of caution.

Money Wise

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This is an opportune time for business owners to seriously consider investing in commercial properties, most notably shop houses, office lots and factories, as a means of expanding their operations, utilizing surplus funds or simply to diversify their investment portfolios. Investment in private real estate such as houses for rent may also help positively diversify investment portfolios.

Commercial properties are a good buy at this juncture because business owners can capitalize on the significant drop in mortgage rates which was preceded by some national bank’s cutting of the overnight policy rate to an all-time low of 2% per- annum in February 2009. Borrowers will be able to enjoy the prevailing low rates and save substantially on interest payments by leveraging on the low mortgage rates and lock in at this level for the tenure of their loan.

For risk conscious investors, current alternative investment instruments may prove to be beyond their risk profile in this bearish environment. To mitigate risk, investors should balance their portfolio with a selection of differing investments. As such, some banker and investor believe that commercial properties offer a more stable rental yield. As the latest property induces have shown, demand for commercial spaces has remained relatively constant and unabated compared to other investment vehicles. Properties continue to be excellent assets to hedge against inflation when prices start to rise on the heels of an economic rebound.

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While it is ideal for investors to buy at the right time, the right place, and at the right price, most of the time it is all about striking a balance. An estimated 3 million square feet of office space as well as another 3 million square feet of retail space will be added to the Kuala Lumpur landscape this year as a result of launches from the past couple of years. Investors will have ample opportunity to select from diverse locations and types of spaces, and also reap the benefit of numerous freebies offered by developers ranging from free legal costs to discounts in prices. They will also be privy to an array of financing schemes.

Business Mortgage One Account (BMOA) is specifically designed for SMEs and business owners who in the course of their operations will have periods of surplus funds. The BMOA provides a very smart solution for business owners to enjoy savings by using cash in their current account to shorten their loan principal amount, with the added benefit of redrawing with no penalties charges from their surplus payments.

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In situations where the SME wishes to ensure his funds are fully optimized for the operating cycle of his business, our SMI One Account is the perfect business mortgage solution because he gets the best of both worlds — funds in his operating account can generate interest credits for the benefit of his business mortgage outstanding.

While we are mindful that property purchases are long-term investments and being fixed assets, are not as liquid as investments in equity; the return on property investment may not be lower than equity investments.

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