The Budget Hotel

1. Senai is a relatively quiet town located a good 30km away from Johor Bahru. It’s most famous landmarks are the International Airport and Industrial Zone that boasts the likes of Hitachi, Dyson, Flextronics and many others.
2. The hotel business thus makes good sense to cater to travelling salespeople as well tourists who would like to explore Johor before making their way to Singapore. With Johor Premium Outlets being set up not too far away, the potential from tourist spending just became greater for this town.
3. Sometime ago, a friend mentioned that a 20 room budget hotel was for sale in Senai and invited me to tag along to be an extra pair of eyes as he inspected the unit.
4. The price was Rm980k for a 3-storey shop fronting the main road and this figure was matched by a bank approved Valuer’s report.
5. Banks usually finance 85% of valuation and in this case, it works out to be Rm833k. Down payment will thus have to be Rm147k and this is excluding Stamp Duty, Legal Fees and other costs that could add up to another 5% of the purchase price.
6. Due to its worn-out condition, the 10 year old hotel required a further Rm250k in restoration cost. Despite haggling for a reduced price, the property agent was adamant it was not possible and the price was final and non-negotiable.
7. My friend walked away from that deal with a heavy heart as he lacked the financial muscle to make that purchase, let alone the renovation cost to restore it.
8. Months went by and one day, he received a call from a lawyer friend who was offered a budget hotel for sale and was looking for a partner to run the new business.
9. It turned out to be the exact same unit but this time, it was directly from the owner at a cut price of Rm850k. With the bank willing to loan up to Rm833k, actual down payment only amounted to Rm17k.
10. Due to direct purchase from the owner there a saving of 1% on agent fees and on top of that, all legal fees were waived by his lawyer partner. What a deal indeed!
11. The lawyer only wanted to be a passive investor by providing his share of finance and left the entire operations to my friend. With 2 parties financing the purchase and restoration, the venture became a success and is doing brisk business today.
12. The odds of this situation recurring is very slim but it just simply shows that having a network of professionals in the property chain makes absolute sense when one intends to be a serious player.
13. Invest your time in getting to know people in the right industry. Who knows, you may get that once in a lifetime deal that’s far sweeter than the one above.
14. Happy investing!

Personal Insurance FAQ - Fundamentals

1. It's that time of the year where insurance companies mail out premium certificates for tax submission purposes.

2. It's also the time when some of us also realise the amount of premiums paid and also wonder whether we have taken the correct policies?

3. In view of this, here's a quick FAQ on the subject of insurance :-

a. What must I look for when buying a Medical Card?

A good Medical Card should be acceptable by major hospitals close to where you live. It should also be Renewable at the Insured's option and not at the Insurer's.

Other matters to be considered is whether it provides uniform coverage for all illnesses or does it discriminate and provide lesser coverage for more serious one's like Cancer and Kidney Failure.

One final matter to look is whether it covers all hospitalisation expenditure or does the Insured need to share a portion of the total bill.

b. How do I choose a Critical Illness plan?

In Malaysia, this type of plan covers 36 Dreaded Diseases that in the event it occurs, can force the patient to lose his/her job. Hence why it covers serious ailments such as Stroke, Heart Attack, Cancer, etc.

When choosing a plan, the effect to inflation is the main matter to consider. Does the insured want to take a Participating plan that will grow as the years go by or take a Non-Participating Plan that remains stagnant?

Another factor to consider is whether one is looking at pure coverage only or does one want a plan that has an element of savings/investment as part of the premium?

c. Then how about Personal Accident plans?

PA plans, as the name suggests, generally cover only Accidental misfortunes that usually has external injuries such as cuts, knocks, bruises, etc.

Many take this plan as they are deemed to be cheap. However, the proper way to choose is not to look at the Death benefit, rather, one should look at the Living Benefit.

Statistically, the probability of an accident occurring for most people who are not in hazardous jobs, are very low. Even if it does occur, odds are, one is still alive.

The usual outcome of this misfortune is the MC given by the doctor. Plans that have Living Benefits will pay a weekly allowance for each completed week of the MC duration.

4. While there are many policies and providers out there in the market, the 3 plans mentioned are the first few plans one should take before moving on to others.

5. Most policies are similar and so are the providers. What makes the difference is your advisor. Get someone that you can trust to do a good job for you and your family. 

6. One of the best ways to achieve this is to ask close friends to refer their trusted advisors. The odds of making a mistake is thus, drastically reduced.

7. Here's to a wonderful day ahead.

Scope of Charge: Categories of Income

1. In our last post, we looked into the difference between Revenue and Capital Income, where an income is classified as Revenue, it would be subject to taxation under the Income Tax Act, 1967 and where it is classified as Capital, it would be exempt from tax.
   
   
2. As mentioned previously, the Act does not define what is 'Income' however, once an 'Income' is determined to be 'Revenue' in nature, the next step is to identify which category it falls within.
   
   
3. Section 4 of the Act categorises income as follows:
   
   "Subject to this Act, the income upon which tax is chargeable under this Act is income in respect of:
   (a) gains or profits from a business, for whatever period of time carried on;
   (b) gains or profits from an employment;
   (c) dividends, interests or discounts;
   (d) rents, royalties or premiums;
   (e) pensions, annuities or other periodical payments not falling under any of the forgoing paragraphs;
   (f) gains or profits not falling under any of the foregoing paragraphs.
   
   
4. Apart from the above, Section 4A sets out special classes of income on which tax is chargeable. This section applies specifically to income earned by non residents. We will consider this section in detail in our subsequent articles.
   
   
5. The question which may pop into one's mind is that why the need to categorise the income separately? Why can't we just lump it all up and apply the applicable tax rate and compute the tax liability?
   
   
6. The answer to the question above is that, by categorising the income (and expenses) separately, the tax collection is maximised. Consider the following example:
   
   Mr A has the following income in the year 2013:
   - Salary RM36,000
   - Rental RM12,000
   
   This makes a total income of RM48,000.
   
   Mr A took a loan to acquire the property he is renting. The interest expense for the year was RM15,000.
   
   What would be Mr A's tax liability assuming an average tax rate of 10%?
   
   If the 'lum sum' approach is used, then Mr A's tax liability would be:
   
   (RM48,000 - RM15,000) x 10% = RM3,300
   
   However, where the income is assessed separately, Mr A's tax liabilty would be as follows:
   
   RM36,000 + (RM12,000 - RM15,000*) x 10% = RM3,600
   
   *The 'loss' from the rental income would be deemed to be a permanent loss, therefore not allowed to be offset against the Employment Income.
   
   As it can be seen, by categorising and computing the income and their respective expenses separately, the Inland Revenue Board would be able to maximise its tax collection!
   
   
7. So, why don't we compute the tax using the 'lum sum' method? The answer to that question lies with the provisions of Section 5 of the Act, which specifies the step by step procedure in which chargeable income is ascertained.
   
   
8. The following are the steps in computing Chargeable Income as per Section 5 of the Act:
   
   (a) The Basis Period for each source of income is determined as set out in Sections 20 to 21 of the Act.
   (b) The Gross Income for each source of income is determined as set out in Sections 22 to 32 of the Act.
   (c) The Adjusted Income for each source of income (or for business source, the adjusted income or adjusted loss) is determined as set out in Sections 33 to 41 of the Act.
   (d) The Statutory Income for each source of income is determined asset out in Section 42.
   (e) The Aggregate Income is computed as set out in Sections 43 to 44. The Aggregate Income is the total of the Statutory Income computed separately above less other deductions allowed under Sections 43 and 44.
   (f) The Chargeable Income is then computed as set out in Sections 45 to 51.
   
   
9. Once the Chargeable Income is computed, the applicable tax rate (determined based on tax resident status) would be applied to determine the tax liability.
   
   
10. The following is the summary of the tax computation process:
    
    Basis Period -> Gross Income -> Adjusted Income -> Statutory Income -> Aggregate Income -> Chargeable Income
    
    
11. The most common misconception on income among tax payers is that they need not pay taxes if they have yet to receive it. However, based on the provisions of the act, the tax payer has to account for income when is it 'accrued' or 'derived' in Malaysia. The derivation of income (as categorised above) is set out in Sections 12 to 17. We will be discussing the topic of derivation of each income in our subsequent articles.
    
    
12. This concludes our article on the Categories of Income. Our next article would be on the topic of tax residence status.

Scope of Charge: Revenue vs Capital Income

1. In our previous post, we had identified 3 areas of tax which needs to be considered prior to determining the tax liability, which are "Scope of Charge", "Residence Status" and "Deductions". In this article, we will explore the concept of "Scope of Charge: Revenue and Capital Income" in detail and discuss its tax implications.
   
   
2. In order for an income to be taxed in Malaysia, it needs to fall within the ambit of Section 3 of the Act, which reads:
   
   "Subject to and in accordance to this Act, a tax to be known as income tax shall be charged for each year of assessment upon the income of any person accruing in or derived from Malaysia or received in Malaysia from outside Malaysia."
   
   
3. Section 2 of the Act lists down the interpretation of specific terms used throughout the Act, for example, in relation to Section 3 above:
   "tax" means the tax imposed by this Act
   "year of assessment", subject to subsection (5), means calendar year.
   "person" includes a company, a body of persons and a corporation sole.
   "Malaysia" means the territories of the Federation of Malaysia, the territorial waters of Malaysia and the sea-bed and subsoil of the territorial waters, and includes any area extending beyond the limits of the territorial waters of Malaysia, and the sea-bed and subsoil of any such area, which has been or may hereafter be designated under the laws of Malaysia as an area over which Malaysia has sovereign rights for the purposes of exploring and exploiting the natural resources, whether living or non-living.
   
   
4. Therefore, as long as the conditions of Section 3 are met, the income would be subject to tax. As mentioned previously, foreign source income (except for banks, insurance, sea or air transport) repatriated back to Malaysia has been exempted from income tax with effect from year 2004 by virtue of Para 28 of Schedule 6 of the Act.
   
   
5. Since 'person' has been defined in the Act to include a company  or body of persons, which covers clubs and associations, one cannot argue that a company or association is not a 'person' since they are not natural persons.
   
   
6. As for "Malaysia" some tax payers may get creative in performing the transactions on the sea or under water and claim that the income was not performed 'in' Malaysia. Since the definition of "Malaysia" includes territorial waters, therefore, this argument is not valid.
   
   
7. This brings into question income generated in international waters. Would they be subject to Malaysian tax? On principle, if the source has been derived in international waters, therefore it is tax exempt. For example, a casino on board a ship, which picks up passengers from Malaysia and only commences casino activities in international waters. The income for the 'transportation' of passenger may be taxable. However, the casino income would not be taxable in Malaysia because the activity is carried out in international waters. Of course there are other considerations pertaining to maritime revenue, which would not be discussed in this article.
   
   
8. Some may even argue that income derived in the airspace, on board an airplane or helicopter, may not be subject to tax because Section 3 only mentions territories and territorial waters and no mention of air space! Although, logically airspace should be covered as part of 'territories of the Federation of Malaysia', Section 3 only mentions subsoil, sea bed and territorial waters. No mention of airspace! By applying the literal rule of interpretation, since there is no mention of airspace, should the income, where it could be clearly proven is derived from airspace, be liable for tax? To date, we are not aware of any case law which have been tested for this. But with commercial space tourism coming closer to reality in the near future, it is possible for 'consultancy' and 'advisory' services to be rendered in 'space' which is 100 km above Earth as defined by the Karman Line. In this case, where the income is derived in 'space' 100 km above Malaysian soil, would it still be taxed under the Act? It would be interesting to find out!
   
   
9. Please take note that the chargeable income for sea and air transport is determined by Section 54 of the Act. The above examples are to illustrate the derivation of other income at sea and air, not in relation to the rendering of transportation service as defined in Section 54.
   
   
10. From the looks of it, it seems like the Act is quite detailed in its definition and interpretation, however, despite its detailed interpretations and definitions of  the specific words used throughout, the Act does not define the most important word used within it, which is INCOME.
    
    
11. In order for a person to be taxed, there must be an element of income which falls within Section 3. If the 'income' is does not qualify to be taxed, then, the person will not be subject to income tax.
    
    
12. So, what is income? Since there is no definition of income given in the Act, one would need to look into the ordinary meaning of income and case laws to determine what is income and more importantly, what is taxable income?
    
    
13. In general, income can be classified into 2, i.e. REVENUE and CAPITAL. In Malaysia, only revenue income is subject to the Income Tax Act, 1967, whereas Capital Income is not subjected to the Act, i.e. it is tax free! (except for capital gains which are subject to the Real Properties Gains Tax Act, 1976).
    
    
14. So how does one classify income into Revenue or Capital? The general rule is that if the income arose from the day to day activity of a vocation, example, trading business, consultancy business, rental income, employment income, interest income and other frequent sources of income, this is deemed to be Revenue Income. Where the income has the characteristics of a "windfall" for example an unexpected gain, or a realisation of a long term investment, lottery winnings, gambling winnings and lucky draw prizes.
    
    
15. The preliminary tests to determine whether an income is Revenue or Capital are as follows:
    
    Frequency of the transaction
    Where there is frequency in receiving the said income, it is more likely to be Revenue than Capital.
    
    Subject matter and circumstances of the transaction
    Whether the income is received due to a vocation, i.e. employment or trading activity? If so, this would be revenue income. However, if the income is for example a lottery winning or in the form of a compensation for loss of employment, then such income may be deemed Capital.
    
    Period of ownership
    The period in which an item of trade was held prior to generating the income is also a consideration on determining whether an income is Revenue or Capital in nature. Usually, items held for a long period of time prior to disposal would indicate a realisation of investment, therefore Capital in nature. Whereas, where an item is purchased and traded within a short period of time, would indicate a trading nature, thus may be deemed as Revenue in nature.
    
    
16. Please take note that the above is not a definitive test to determine whether an Income is Capital or Revenue. In reality, the courts have applied many tests in determining whether an income is Capital or Revenue. It has been held in the case of LFY Sdn Bhd vs DGIR that whether an income is Capital or Revenue depends on the facts and circumstances of the transaction.
    
    
17. Naturally, most (if not all) tax payers would prefer to classify their income as Capital rather than Revenue in order to pay minimal (if not at all) taxes. Once, they know of the 'rules' of determining 'Capital' income, they would have the tendency to see every transaction in the light of  being Capital income!
    
    
18. For example, a "windfall income" is a characteristic of a Capital Income. A small time home renovator whose regular renovation contracts amount to less than RM200,000 would argue the big contract worth RM3 million he or she just landed is a "windfall" as it is out of the norm. Or an employee may argue that the 12 month bonus he or she received for the first time after working with the same employer for 10 years without any bonus is a "windfall". However, even though in the eyes of the tax payer, this is a "windfall" it is still an income received within their ordinary vocation, therefore it is a Revenue income.
    
    
19. The line between Capital and Revenue often gets blurred. Especially when tax payers take the route of tax planning prior to commencing a venture and in some cases, the tax payers choose to take the route of 'creative accounting' so that their income falls within the definition of Capital income.
    
    
20. Therefore, when disputes with the Inland Revenue Board cannot be resolved, the courts would look at the substance of the transaction as a whole, instead of just the 'form' of the transaction. When this happens, the tax payers who engage in 'creative accounting' to avoid taxation would be exposed, since the 'substance of the transaction' would prove that the accounting transactions were created just to avoid paying taxes.
    
    
21. Tax planning on the other hand involves structuring the business operations within the provisions of the Act, to minimise their tax exposure. It is perfectly legal and within the tax payer's rights to structure their business operations to that which would give them the most optimum tax exposure.
    
    
22. However, even though tax planning is legal, the Inland Revenue Board tends to disagree with certain tax planning exercises due to the interpretation of law. As such, when disputes arise, it is up to the courts to decide the correct interpretation and application of the law in relation to the disputed transaction.
    
    
23. So in summary, for most people, ALL income are taxable except FOREIGN SOURCE income and CAPITAL income. The Act is quite clear on what income from 'outside Malaysia' is since it has defined the meaning of "Malaysia". However, whether an income is CAPITAL or REVENUE is not defined. Therefore, one has to consider the substance of the transaction and applicable decided case laws before arriving at the conclusion that a certain income is indeed CAPITAL in nature, therefore not taxable.
    
    
24. This concludes our article on CAPITAL and REVENUE income. Kindly feel free to post your queries on Capital and Revenue income in the comments section or email us at dason@dason.com.my.

Tax Law and Interpretation

1. In this article, we will briefly discuss about the Income Tax Act, 1967 and the misconceptions about the role of the Inland Revenue Board and how the law works in Malaysia. 
   
   
2. The common misconception people have about the Income Tax Act, 1967 is that the law is actually set by the Inland Revenue Board (IRB) and therefore the IRB would have the final say in any tax disputes.
   
   
3. In reality, the laws pertaining to Income Tax are determined by Parliament and the IRB are entrusted to enforce the law. This means that the IRB officers are also bound by the provisions of the Income Tax laws and if the tax payer is unhappy with the assessment raised, there are appeal procedures available under the law.
   
   
4. Another important matter pertaining to the tax law in Malaysia is the rule of interpretation. In law, there are generally 3 rules of interpretation, namely, golden rule, mischief rule and literal rule. In short, the golden rule and mischief rule allow a certain degree of discretion in the interpretation of the wording of the law to determine the 'purpose' or 'fairness' of the application of law. However, the literal rule demands strict application of the law to the letter of the law. This means, there is no room to consider the 'purpose' or 'fairness' of the application of the law.
   
   
5. In Malaysia, tax laws are are interpreted using the literal rule. This has been determined in the case of Mamor Sdn Bhd vs Director General of Inland Revenue. So, what does this mean to the tax payer? It means that if a certain provision is not literally stated in the Act, then we cannot make presumptions about it.
   
   
6. Let's take a look at the provisions of Section 3 of the Act which reads as follows:
   
   "Subject to and in accordance with this Act, a tax to be known as income tax shall be charged for each year of assessment upon the income of any person accruing in or derived from Malaysia or received from outside Malaysia."
   
   
7. Applying the literal rule on the above, in order for income tax to be charged, there must be an element of 'income', it must be earned by a 'person' in Malaysia or received in Malaysia from outside Malaysia.
   
   
8. If for example, in a highly unlikely scenario, a show animal is able to legally receive an income of say RM1 million a year in its own name in Malaysia, it would not be subject to tax because it is not a 'person' as defined under Section 2 of the Act. The definition of a 'person' under the Act is limited to natural individuals, companies and body corporates.
   
   
9. Even though, it would seem unfair that a natural person who earns RM80,000 would be subject to tax and the show animal in the above example which earns RM1 million is not taxed. One cannot argue that the animal must be taxed due to fairness under the literal rule of interpretation of the Income Tax Act, 1967. If the Golden rule or mischief rule of interpretation is used, then probably one can argue that the show animal needs to pay tax. However, since it has been decided in the Mamor case that the literal rule is to be applied, it is a binding precedent which will not be changed with regards to the interpretation of the Income Tax Act, 1967.
   
   
10. The above scenario is of course absurd, however it is to illustrate the point that since the literal rule is applicable, one has to read the Act to the letter when dealing with tax matters, instead of making assumptions or drawing logical conclusions.
    
    
11. Frequently we encounter clients who argue that they refuse to pay taxes because they feel it is unfair due to various reasons. Sometimes, their reasons and circumstances may even be justified given the circumstances. However, even with the best justification, one cannot be exempted from paying tax unless it is specifically allowed under the law, i.e. one cannot refuse to pay tax on the grounds of just and equity because of the literal rule of interpretation used on the Income Tax Act, 1967, which clearly states that income tax liabilities must be paid, even if the person is no longer alive!
    
    
12. This concludes our article on Tax Law and Interpretation. We hope that this article would set the foundation on the significance of the wordings of the law and its application. The next article would deal with the concept of "Scope of Charge" and how to determine whether an income is taxable in Malaysia or not. 

Introduction to Malaysian Taxation

1. In Malaysia, there are 2 types of tax systems in operation, which are, direct and indirect taxation. Direct taxation involves paying taxes on income or gains generated from a venture and indirect taxes is imposed by way of tariffs, custom duties, sales tax, services tax and the soon to be implemented Goods and Services Tax better known as GST.
   
   
2. Direct taxes come under the purview of the Inland Revenue Board whereas indirect taxes come under the purview of the Royal Malaysian Customs Department. Ultimately, both these agencies come under the Ministry of Finance.
   
   
3. The focus of these articles would be on the direct taxation system, which is legislated by the Income Tax Act, 1967 (henceforth referred to as the Act). However, we would post articles on indirect taxation and other tax related matters from time to time.
   
   
4. For many, taxation is a very complicated subject, with many rules and regulations to be adhered to. But in reality, the 'complication' actually boils down to only 3 matters. Once these 3 matters are identified, computation of the income tax can be done by applying the appropriate tax rate. The 3 matters of consideration are "Scope of Charge", "Residence Status" and "Deductions".
   
   
5. The "Scope of Charge" determines the chargeability of the income. Section 3 of the Act sets out 2 conditions for income to be taxed in Malaysia. First, the income must be accrued or derived, i.e. earned in Malaysia. The second condition is that the income must be received in Malaysia from outside Malaysia, i.e. foreign sourced income.
   
   
6. However, with effect from year 2004, foreign sourced income which are repatriated back to Malaysia is no longer subject to tax by way of the exemption granted under Para 28, Schedule 6 of the Act. As such, the second condition mentioned above is no longer applicable for everyone except, companies in the business of banking, insurance, sea or air transport.
   
   
7. The "Residence Status" would determine the applicable tax rates, whether tax reliefs are available (for individual tax) and/or whether the income derived would be subject to withholding tax and in some cases, whether income would be exempted from tax. In the context of the Act, citizenship does not determine the Tax Residence status. A person would be deemed to be a Tax Resident so long as the individual (whether citizen or not) satisfies the conditions (i.e. the number of days stay in Malaysia) as set out in Section 7 of the Act, and Section 8 for Companies.
   
   
8. The "Deductions" comprise of expenses and reliefs which may be claimed against the income to reduce the taxable income. These 'deductions' come in the form of expenses, capital allowances, double deductions, and personal reliefs which are allowed under various provisions of the Act, the specifics of which, will be discussed in future articles.
   
   
9. If there are only 3 matters of consideration to taxation, how can it get complicated? The complication arises due to the interpretation of the law. Naturally, the tax payer would like to interpret the law to his or her benefit and pay as little tax as possible whereas the Inland Revenue Board would take the view of maximising tax collection for the government coffers. This differing view ultimately leads to tax disputes, and where no resolution can be found between the tax payer and the authorities, the matter would need to be referred to the courts to interpret and resolve.
   
   
10. This concludes our Introduction to Malaysian Taxation article. Our future articles would be a further discussion on the topics of "Scope of Charge", "Residence Status" and "Deductions". If you have any queries on this article or any other tax related questions, kindly feel free to post it on the comments or email us at dason@dason.com.my. Thank you.

Property Investment Musings

1. The second half of 2013 witnessed some major changes in the areas of banking, property and taxation. Loan approval was based on net income after all deductions. In the past, it was based on gross income.
   
2. This move alone handicapped a significant number of applicants and many had their loans rejected or approved for lower amounts instead. The buyer thus had to forego the purchase or had to come out with higher down payments.
   
3. For those who poured out high down payments, the reduced disposable cash served its intended goal, which is to stifle speculation activity for those who aimed to flip it as soon as practicably possible.
   
4. However, this measure did not stop foreigners who had the benefit of higher exchange rates from making continued and sustained purchases. Very often, these foreigners made cash purchases and the tweaking of loan requirements were of no consequence to them.
   
5. Then came the next salvo. Minimum price for property purchase by foreigners was raised to RM1m and this was coupled with an upward revision of the Real Property Gains Tax (RPGT).
   
6. By referencing against the Singapore Dollar (SGD) at an exchange rate of RM2.50, the entry price thus became SGD400k. Not exactly a deterrent since HDB flats in Singapore cost way more than that.
   
7. As such, genuine foreign buyers still made a bee-line to developers doors albeit the need to fork out more in terms of entry price. This thus made the foreign quota allocated by developers, a sure sale.
   
8. The RPGT put a major halt to speculators who bought just to trade it away as a commodity. Coupled with restrictive lending, a dampener has been put in place to restrict runaway prices.
   
9. The effectiveness in the interim at least, looks promising. Only time will tell whether these cooling measures have achieved its intended outcome.
   
10. While foreigners seem to be unscathed by these revisions, the general pulse among local purchasers look a little withered these days. Those who jumped into the property bandwagon at elevated prices seem to have no spare cash to purchase another unit.
    
11. This is evident by the new banners put up by some developers. The artwork may have changed but the model is still the same. It simply indicates that these houses remain unsold even though the banner and buntings have faded due to rain and sunlight.
    
12. Usually, these are luxury units such as bungalows and semi-detached houses. Locals simply do not earn high enough to afford while foreigners who have no problem with the price, have used up their quota. The developer thus, is left with unsold units.
    
13. Locals who bought at steep prices in the past mainly did so out of fear rather than need. Many, whom we have spoken to, were willing to part with their entire savings due to the fear of not being able to afford a house in future.
    
14. Another segment bought extra units either as investments for their children or simply out of greed to capitalise on the frenzy of fear by selling it to those who missed purchasing it in the past.
    
15. Back to the unsold units. we anticipate the usage of very creative financing options by developers to get these units sold. Among the popular methods known is the rebate approach to reduce initial down payment to the popular guaranteed rental scheme.
    
16. Our thoughts are that this will continue for a while and if the “discounts” are enticing enough, there will be takers. For now, prices still seem to be at lofty heights and we don’t see them crashing down.
    
17. Otherwise, there will be pandemonium in the financial markets with banks, developers, loan borrowers and even the stock market experiencing major turbulence which can bring back memories of the 1997 financial crisis.
    
18. As we see it, either one has to increase income to stay where one wants to live, or consider moving to areas beyond city limits where it’s more affordable. Such is the price of development.
    
19. Otherwise, the government has to come out with significant number of units of affordable housing within city limits or drastically improve our badly needed public transport system to encourage migration to suburban areas. Only time will tell how this pans out.
    
20. In the meantime, here’s wishing everyone all the best in finding your property of choice. May you find it sooner rather than later.
    
21. Merry Christmas and Happy 2014!