Askmrproperty

Askmrproperty Property is very near to the heart of all people. All are interested in property to buy to own and to invest. They want their properties to be worth millions.

Unfortunately, the property market is complex and complicated. It is an imperfect market REAL ESTATE SERVICES

31/03/2025

This site has been dormant for a long time.I intend to revive it, and am doing so now. The whole idea was to explore issues related to valuation of real estate , in particular real estate valuations in Malaysia.
There are continuing confusions on principles and practices in particular with approaches and methodologies. Whilst the world over has accepted the three approaches to valuation, there appears to be great divergences in the application of these to individual property valuations. Each individual appears to interpret the approach in his own way, in some cases, in start contrast to accepted textbook recommendations. Add to that the confusion that textbook authors using American approaches appear to differ to those from the English or British background. Valuers in Malaysia caught in the midstream, without sufficient grounding on fundamental theories, tend to meander along, to fulfil their jobs.
Perhaps we can use this platform to iron out some of these inconsistencies. The large majority will remain silent as it is not sure what and who is right, so perhaps the small minority can express opinions which we hope can and may nudge us along the right directions.
Hope to hear from people of kindred minds.

28/10/2021

Recently there are stories going around of how leasehold titles are getting freehold. The reason for this could be, originally the parent titles were freehold, but upon subdivision were given leasehold titles. This was found to be wrong in some established cases. Basing on these cases and one or two more recent cases, owners of leasehold titles have been securing freehold status. It is certainly not converting leasehold to freehold but rectifications of errors done when freeholds were issued with leasehold subdivided titles.

Watch out for Facebook talk on investment method on 14 September 2021.
13/09/2021

Watch out for Facebook talk on investment method on 14 September 2021.

17/08/2021

I would like to ask for your opinion on hotel valuation. Nowadays in Thailand there are only few tourists. Hotels have only 10-20% occupation rate instead of 50-70% Room rates are heavily discounted. No capitalization rate can be seen. In this case, how to value hotels today. Kindly advise at your earliest convenience.

Hotels belong to the category of property which are business related. These are properties wherein the business is difficult to be separated from the real estate entity. Obviously, there are cases where such properties are rented or leased just like any other investment property. But these instances will be very rare.
In periods of Covid-19 pandemic, all sectors and types of real estate have been and still are, affected. There lies a lot of uncertainties in the impact of the disease on the economy in general and real estate in particular. And hotels are no exception.
The generally accepted method in valuing hotels has been through the income approach. Most valuers do use the Discounted Cash Flow (DCF) method or the investment method. Other alternatives are the Market Data Approach and the Cost Approach. I will not go into the merits of these methods generally. I will confine my thoughts to the application of these methods to the valuation of hotels specifically.
Income Approach.
The investment method is a good method to apply. If there is a rent passing, then this rent can be examined with regards to how the pandemic has affected the income and the market perception of the sustainability of the income. These considerations will affect both the rents and the capitalisation rate.
The basic thought is whether the pandemic will last forever or there will be developments in medicine to curtail, control and overcome its dreadful impact. I am optimistic that mankind will discover means of overcoming this pandemic. On this score, we need to review the future rent.
Future Rent
I believe the current rents are affected badly and landlords have given rebates and discounts to hotel operators to enable them to overcome the temporary problems.
I believe when recovery takes place, travelling and tourism will return. Businesses will return and business travellers will need suitable accommodation. I, therefore, would place a significant reduction in the rent (drop of 70 to 80 %) for the next two years to take the impact of pandemic. For the subsequent two years, I would increase the rents (40 to 50%) to reflect the return of confidence. After that I will consider that the market will have fully recovered to its original level.
Capitalisation Rate
The uncertainties found within the economy and the particular industry will have brought up severe lack of confidence because of the risks. This will have translated in less confidence in the investment which will cause a rise in the expected returns to reflect the risks. This would be reflected by a 50 to 100 basis points in the capitalisation rate.
Using DCF
The use of DCF will provide a clearer picture of how the impact of Covid-19 pandemic can be utilised in the valuation of hotels.
As stated above to arrive at net cash flows, the revenue from rooms and food & beverage outlets will need to be studied. The first two years would be estimated to be very low; the net cash flow may even be negative. Followed by another two years of steady growth, before the estimated general occupancy levels can be achieved. Once the Cash flows both inflows and outflows have been determined then the problem easily unveils.
The Discount Rate
Again the discount rate will be somewhat affected. The use of differential discount rate may be advisable to reflect the risk in the first 4 to 5 years. Once this has been established, the terminal value can be determined as usual.
The end result will be the market value today of the hotel under the current covid-19 pandemic.
Obviously, the situation will vary from country to country, state to state and town to town. These will have to be taken into consideration.

I hope that the above has given some assistance to you.

02/08/2021

I have 2 burning questions which I need to be educated on (1) Can evidence that is available only after date of valuation (even if the date of transaction is before date of valuation) can be used in our valuation. There is a guidance note from RICS which says that even though one is doing a retrospective valuation, one has to put oneself in a position as if the decision on the market value is made on the date of valuation and hence evidence available after date of valuation cannot be used (2) Land Acquisition is a statutory valuation and hence award for a small portion of the land can be adopted as the market value of the whole land. May I have your views on the above?

For the second part, refer to FC decision in Bertram Consolidated decision by Salleh Abas CJ, and amendment to the land acquisition act first schedule about how to value part of the land. Also see several cases where previous awards which are all on all fours can be accepted, there is a plethora of cases. Unfortunately, errors could still have been made in valuing a portion of a larger land, without the knowledge of the relevant sections.

The first question is still fluid . In the case of land acquisition , the Act clearly states post dated sales cannot be considered but silent on post dated evidence ( though sales took place before date of valuation) . On the second question , First Schedule has been amended and explained

To get back to the first question, post dated sales are totally excluded only for land acquisition. Prior to the amendment, it was possible to use post dated evidences; in fact lots of valuers in the private sector then, used that case of a land in sg choh to claim higher compensation. The amendment shut the doors on that.

But evidence is not merely registered transactions, there are a whole lot of items that can be used as evidence, only the weight attached to it's acceptability matters. Too long to go into that here. I believe even if the knowledge of the sale is known only after the date of valuation but the fact remains that the sale was actually struck before that date, the transaction will still be valid evidence. Only sales that are actually transacted after the date are excluded. However, for other matters, civil matters, stamp duty etc the sales can be considered. Reasons must be adduced as to their acceptability and events that have transpired between the valuation date and the transaction date.

Does a Property transferred based on letters of probate attract and valorem duty for stamp duty.? If so based on which d...
02/08/2021

Does a Property transferred based on letters of probate attract and valorem duty for stamp duty.? If so based on which date?

For RPGT
http://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=7&bt_posi=1&bt_unit=1&bt_sequ=13
Once the heirs or beneficiaries sell off the Property , it Is subject to stamp duty n RPGT (no loss no gain).
A tax of RM10 paid by beneficiaries for
Stamp Duty for transfer to beneficiaries attracts no stamp duty.

For stamp duty, regardless of whether the estate left is testate (with Will) or intestate (without Will), there will be a nominal amount of RM10.00 if it is to transfer to the beneficiary. However, it is not the case when the property is to transfer to the third party purchaser.

https://www.propertyhunter.com.my/news/2016/10/2983/sabah/rest-in-peace-property-transfer-of-the-deceased-rsquo-s-estate
No ad valorem stamp duty .. to the beneficiary. There may be some admin fee etx.
No amendment so far but gifts between siblings, grandparents, parents to children and grandchildren.. involve some exemptions.

I notice almost all of our local texts on the Profits Method does not make an allocation for goodwill (if any) from the ...
02/08/2021

I notice almost all of our local texts on the Profits Method does not make an allocation for goodwill (if any) from the divisible balance 🤔

A non allocation for goodwill from the divisible balance may result in an over valuation of the real estate component ?

To answer that question one has to look into how the tenants share allocation is made. The consderation for the tenant's share is the ease of opening the business, the ease of obtaining licenses, the time the business has been operating etc. All these add to the element of goodwill in the business. Hence, the acuracy in determining the tenant's share will determine the real estate portion of the valuation.
Goodwill taken from
Tenant’s share 👌

12/02/2021

Valuers carrying out investment based valuations are often faced with the question of voids.
What are voids? And how are they to be reflected in the investment valuations?
Voids generally and traditionally were necessary used in the valuation of multi tenanted buildings on the premise that at any one point in time there could be a few tenants moving in and out and that generally the building is never fully occupied. That rationale makes sense.
However, this application has crept up even for single tenancies and also in an absurd sense for the valuation of single tenanted shop spaces.
Single tenanted spaces are generally not subjected to voids, they are either occupied or not. There is no place for partial occupation as we understand for voids. Besides, in the market, the cap rates derived are on the same basis, rent divided by the market price paid for it. No specific measure for voids is reflected in the analysis.
This is different for multi tenanted premises which are generally affected by voids. If the level of voids vary, there is a need to make adjustments in the cap rates to adjust for the difference in rates.
It may be possible to reflect vacant periods etc in a DCF computation, if such occurrences are known. However, to turn a DCF value into a market value, the derived discount rate must be market derived. If the market derived rate did not include a voids period, then the DCF computation should also not allow, otherwise there will be an under valuation.

23/11/2020

It's been along time since I posted something on this page.
If there are any questions in valuations please post here.

02/01/2018

What are easements? Easements can be created by adjoining owners. The one enjoying it is the dominant land and the one providing it is the servient land. Upon an agreement it can and should be endorsed. Once endorsed it is deemed to be known to everyone and the rights and liabilities pass on together with both the lands. In other words if you own an interior land which has the benefit of an easement that right continues to the successors in title. Easements can be many forms access is one, right to light, right to support, right to water etc are other forms. In Malaysia we do not recognise the prescriptive rights to easements or profits aprendre as recognised under English law. We do not recognise equity rights in land although we might find old caselaws that have allowed it, though wrongly, in the words of Azlan Shah J. Collectors right of way is created by law and an application has to be made and accepted by the collector. Once registered it stays. This used to be shown in the old survey sheets. This practice was common in kelantan and kedah to avoid land acquisition and also to provide access to land locked lands. Easements can also be annulled by agreement between both the dominant owner and the ancient owners. Any non registered use will be trespassing under our system of landlaw.

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