With everyone looking at Europe through a veil of fear and uncertainty, you might think that you need to rush to buy bargain European stocks on the cheap before the big sale ends. But buying stocks isn't like shopping for Christmas presents on Black Friday. Often, those who wait get the best bargains of all.
Ugly and uglier
The turmoil in Greece has turned all eyes toward the Euro zone, as fears have risen that sovereign debt defaults could cause a huge ripple effect throughout the world's banking system and the global economy as a whole. After weeks of maneuvering and stalling, the European Union and the International Monetary Fund announced a $1 trillion rescue package early last week, similar in scope and purpose to the TARP bailout that the U.S. implemented two years ago in response to its own financial crisis.
As happened here two years ago, European stocks got a brief shot in the arm from the news. Markets in Britain, France, and Germany all reversed some of the steep losses they'd suffered, and the euro halted its freefall against the U.S. dollar -- temporarily.
Some think that means opportunity. But buying now could be jumping the gun.
Looking longer-term
The problem is that in crafting a short-term solution, Europe left itself exposed to the same troubles that plagued the U.S. two years ago. The huge budget deficits that resulted from government spending here prompted a flight away from the U.S. dollar to the euro and other currencies, which at the time were perceived as being more stable.
Now, Europe is in the same boat. Even though the European Central Bank is generally perceived as being more hawkish in preventing inflation than its Federal Reserve counterparts in the U.S., the ECB can't really afford to raise rates without endangering the effectiveness of the rescue package.
The region is also going through political upheaval. The election in Britain earlier this month resulted in a fragile coalition government that has further diminished confidence in the British pound. The ruling party in Germany suffered a defeat in local elections that brings into question whether current Chancellor Angela Merkel will survive the fallout from the unpopular EU bailout.
Meanwhile, the U.S. economic recovery seems to be continuing. Improvement in job growth and greater import demand could further revive once-struggling consumers. Resulting inflation pressure would typically lead the Fed to raise interest rates, making the U.S. dollar even more attractive.
Don't cut your winners
What this means for investors is that looking for bargains in pound- or euro-denominated assets is probably premature. In the U.S., it took months for markets to become convinced that the financial system wasn't falling apart -- and patient investors who waited it out throughout 2008 got cheaper entry points for their stock purchases in early 2009.
Among direct currency plays, buying CurrencyShares Euro Trust (NYSE: FXE) or CurrencyShares British Pound Sterling Trust (NYSE: FXB) would leave you exposed to further losses if the dollar keeps strengthening against the two currencies. In contrast, buying shares of PowerShares US Dollar Bullish (NYSE: UUP), which uses futures in the euro-dominated US Dollar Index, will likely give you profits if the euro keeps declining.
On the stock side, remember that a rising dollar will actually help some European companies. GlaxoSmithKline (NYSE: GSK) got 36% of its 2009 revenue from the U.S., while German software giant SAP's (NYSE: SAP) U.S. market makes up about a quarter of its revenue. As it will take three to six months for a stronger dollar to filter its way through to financial reports, you can likely afford to wait for better exchange rates before investing.
In contrast, a stronger dollar may eventually cause trouble for U.S. companies that do significant business in Europe. The last time the dollar was strong, McDonald's (NYSE: MCD) and Mattel (NYSE: MAT) both argued that it hampered their profitability.
Race to the bottom
Those who are bearish on the U.S. dollar's prospects have reason for their pessimism. But as bad as fundamentals may look for the dollar, they're even worse for the euro and pound. That means that the dollar may get a respite here, at least for now.
Scared of investing internationally? Let Matt Hoffman show you how not to get mugged in the world's financial markets.
Wednesday, 19 May 2010
Tuesday, 18 May 2010
What rousing currency means?
Currency strength boosts confidence
By SHAUN HO and KAREN CHAPMAN
newsdesk@thestar.com.my
PETALING JAYA: The stronger ringgit is bringing cheer to Malaysians eager to squeeze more from their money. In the travel industry, operators are expecting a boom in business because many will want to cash in on the chance to see the world for less.“And with low-cost carriers offering so many destinations, people will tend to travel more at a relatively cheaper cost,” said Malaysian Association of Tour and Travel Agents (Matta) president Datuk Mohd Khalid Harun.
He recalled that when the Australian dollar was selling at a lower rate (RM2.50 to the dollar) a few years back, there was a big shift of Malaysians going there.
However, he reminded travellers always to get value for their money, because the cheapest travel need not mean the most enjoyable experience.
Writer Foong Chee Yan, 23, who will be going on a business trip to England, was happy he would be spending less during his trip.
Parents with children studying overseas are also happy with the stronger ringgit.
Peter Yoong, 49, a residential manager, said his eldest son would be leaving for his Computer Science studies in Oklahoma in August.
He expected to pay US$12,000 (RM38,700) in fees annually. In March, Yoong said the exchange rate was RM3.30 to the dollar. “Now, the rate is at RM3.20. There is definitely some savings here,” he said.
Global forex swings to hit exporters
Firms are more exposed to fluctuations in US dollar than to euro or pound
By ELAINE ANG elaine@thestar.com.my
PETALING JAYA: The recent fluctuations in global exchange rates will affect export-driven companies and conglomerates with substantial overseas operations, companies with large import contents and those with plans to invest abroad, experts say.
Companies are more exposed to fluctuations in the US dollar as compared with the euro or pound as it is the leading currency for trans-border trades due to its world reserve status and that most major commodities are traded in the greenback.
The ringgit has appreciated as much as 7% year-to-date against the US dollar, (19% against British pound, 24% against Euro, and 8.5% against Australia dollar)
AmBank Group treasury and markets managing director Teng Chean Choy said companies with a direct revenue base in Britain and Euroregion were exposed most to currency fluctuations following jitters in the region from the debt crisis in Greece and the uncertainties resulting from a “hung parliament” in Britain.
Since the beginning of the year, the euro and pound have depreciated by about 19% and 16% respectively against the ringgit. Teng expects the euro and pound to remain weak in the near term as sentiments remained cautious following the debt overhang problem within the Euro-region.
However, the ringgit would likely continue to remain resilient in tandem with other Asian currencies, boosted by the positive outlook on the region's fundamentals.
According to Teng, the appreciating ringgit can potentially cause foreign exchange (forex) translation losses in companies whose revenue is derived substantially from export earnings in US dollar, especially those with thin margins and little pricing power due to stiff external competition.
Industries within this sector include electrical and electronics, semi-conductor, manufacturing, apparel and timber-based industry.
Another category of companies which are adversely affected by recent forex movements are companies with substantial overseas operations, particularly in the northern hemisphere.
Teng said the weak consumer sentiment in the United States, Britain and Euro-region, coupled with the recent appreciation of the ringgit against the US dollar, euro and pound, continued to depress earnings translated back into the ringgit.
“In fact, companies falling within this category are hit in two ways: depressed revenues as a direct result of lower sales volume and indirect forex translation losses due to the weaker US dollar, euro and pound against the ringgit.
“Conglomerates with overseas exposure fall into this category,” he added.
On the flipside, companies with substantial import of raw materials priced in US dollar or euro are poised to gain from lower input cost with the recent strengthening of the ringgit.
They include those in the chemical-intensive industries in which chemical inputs are largely priced in US dollar and those in industries requiring large machinery capital expenditure which are priced either in US dollar or euro.
Teng said companies with plans to invest abroad could benefit from the recent stronger ringgit.
They include local conglomerates or venture capitalists looking to acquire overseas businesses and private funds and public pension funds seeking to diversify their investments in foreign assets.
MIDF Research senior analyst Syed Muhammed Kifni said companies with financial obligations denominated in US dollar would also gain from the depreciation in the translation amount of its debts.
For example, Tenaga Nasional Bhd is expected to gain from the decline in the US dollar vis-a-vis the ringgit on two scores.
“First, a weaker greenback will contribute to better margins from lower fuel costs due to the cheaper import price of coal.
“Second, a stronger ringgit benefits Tenaga in terms of the translation gains of its dollar-denominated debts,” Syed Muhammed said.
He added that in contrast, semiconductor companies such as Unisem (M) Bhd, Malaysian Pacific Industries Bhd and Globetronics Bhd were negatively affected by the strengthening of the ringgit as their revenues were dollar-based.
“However, the semiconductor companies are also reaping the benefits in terms of lower costs as nearly 80% of their input cost structures are in US dollar,” he said.
RAM Holdings Bhd group chief economist Yeah Kim Leng said a stronger currency in the longer term would also encourage firms to upgrade and enhance productivity through the import of technology as well as acquire foreign assets as these have become cheaper.
“This will facilitate industrial upgrading,” he said.
He does not rule out further ringgit appreciation against currencies such as the US dollar, euro and pound as recovery of the advanced economies would be weak and uneven.
Rousing ringgit
By ELAINE ANG elaine@thestar.com.my
PETALING JAYA: The recent fluctuations in global exchange rates will affect export-driven companies and conglomerates with substantial overseas operations, companies with large import contents and those with plans to invest abroad, experts say.
Companies are more exposed to fluctuations in the US dollar as compared with the euro or pound as it is the leading currency for trans-border trades due to its world reserve status and that most major commodities are traded in the greenback.
The ringgit has appreciated as much as 7% year-to-date against the US dollar, (19% against British pound, 24% against Euro, and 8.5% against Australia dollar)
Since the beginning of the year, the euro and pound have depreciated by about 19% and 16% respectively against the ringgit. Teng expects the euro and pound to remain weak in the near term as sentiments remained cautious following the debt overhang problem within the Euro-region.
However, the ringgit would likely continue to remain resilient in tandem with other Asian currencies, boosted by the positive outlook on the region's fundamentals.
According to Teng, the appreciating ringgit can potentially cause foreign exchange (forex) translation losses in companies whose revenue is derived substantially from export earnings in US dollar, especially those with thin margins and little pricing power due to stiff external competition.
Industries within this sector include electrical and electronics, semi-conductor, manufacturing, apparel and timber-based industry.
Another category of companies which are adversely affected by recent forex movements are companies with substantial overseas operations, particularly in the northern hemisphere.
Teng said the weak consumer sentiment in the United States, Britain and Euro-region, coupled with the recent appreciation of the ringgit against the US dollar, euro and pound, continued to depress earnings translated back into the ringgit.
“In fact, companies falling within this category are hit in two ways: depressed revenues as a direct result of lower sales volume and indirect forex translation losses due to the weaker US dollar, euro and pound against the ringgit.
“Conglomerates with overseas exposure fall into this category,” he added.
On the flipside, companies with substantial import of raw materials priced in US dollar or euro are poised to gain from lower input cost with the recent strengthening of the ringgit.
They include those in the chemical-intensive industries in which chemical inputs are largely priced in US dollar and those in industries requiring large machinery capital expenditure which are priced either in US dollar or euro.
Teng said companies with plans to invest abroad could benefit from the recent stronger ringgit.
They include local conglomerates or venture capitalists looking to acquire overseas businesses and private funds and public pension funds seeking to diversify their investments in foreign assets.
MIDF Research senior analyst Syed Muhammed Kifni said companies with financial obligations denominated in US dollar would also gain from the depreciation in the translation amount of its debts.
For example, Tenaga Nasional Bhd is expected to gain from the decline in the US dollar vis-a-vis the ringgit on two scores.
“First, a weaker greenback will contribute to better margins from lower fuel costs due to the cheaper import price of coal.
“Second, a stronger ringgit benefits Tenaga in terms of the translation gains of its dollar-denominated debts,” Syed Muhammed said.
He added that in contrast, semiconductor companies such as Unisem (M) Bhd, Malaysian Pacific Industries Bhd and Globetronics Bhd were negatively affected by the strengthening of the ringgit as their revenues were dollar-based.
“However, the semiconductor companies are also reaping the benefits in terms of lower costs as nearly 80% of their input cost structures are in US dollar,” he said.
RAM Holdings Bhd group chief economist Yeah Kim Leng said a stronger currency in the longer term would also encourage firms to upgrade and enhance productivity through the import of technology as well as acquire foreign assets as these have become cheaper.
“This will facilitate industrial upgrading,” he said.
He does not rule out further ringgit appreciation against currencies such as the US dollar, euro and pound as recovery of the advanced economies would be weak and uneven.
Rousing ringgit
| By Florence A. Samy The Star Publication Date : 18-05-2010 |
Most Malaysians welcome a strong currency as it reflects the country's strong economic fundamentals and a robust recovery, Prime Minister Najib Tun Razak told international financiers here yesterday (May 17). “It is a movement in a positive sense. Generally, it is good for us,” Najib said during a question-and-answer session with delegates of the Official Monetary and Financial Institutions Forum (OMFIF) inaugural meeting in Asia. At the meeting themed “Asia's Role in the World Economy - the New Global Financial and Economic Order,” he was asked to comment on the ringgit's strong performance especially against the US dollar, pound and euro. Najib, who is also finance minister, said a strong currency also reflected the fact that Malaysian exports had been doing very well. The economy recorded 10.1 per cent growth in the first quarter of this year, which was the highest quarterly growth in a decade. The ringgit is Asia's best-performing currency this year, as foreign money has poured into domestic capital markets due to a combination of strong economic growth and rising interest rates. Year-to-date, the ringgit has appreciated by about 6% against the US dollar, 19 per cent against the euro and 16% compared with the pound. In his address earlier, Najib also said the challenges that arose from the international financial crisis presented an opportunity for Asia and the West to work together to find solutions that benefited all. “Malaysia's unfolding economic story is a part of what is taking place in Asia. While Asia is indeed diverse, we are bound together by the common desire to transform and uplift our economies individually, which in turn will reinforce the region's economic and financial integration in the New World Order,” he added. “We are looking beyond Asean. We are also looking at how to get the United States and Russia on board. We want a stronger bridge in Europe and believe in open integration,” he added. Najib, who briefed the delegates on the 1Malaysia concept, New Economic Model and Government Transformation Programme, said people were seeking effective governance where economic growth was inclusive and beneficial for all. On how to survive the economic crisis, Bank Negara Governor Dr Zeti Akhtar Aziz said Asia's resilience, including Malaysia's, was a result of a decade of reform. |
Monday, 17 May 2010
YouTube Celebrates Five Amazing Years: Holding Out for Profitability in the Sixth
Since it launched in 2005, YouTube has become one of the few Internet properties that's much more than a domain name. Like Google, Facebook, Wikipedia, and Twitter, YouTube has become an essential service of the Internet. It's a utility, a social network, a search engine, a source of online storage, and an endless source of consternation for content owners. Some quick numbers:
YouTube now gets two billion views per day, 30% of which come from the US. The three most popular videos are Lady Gaga's "Bad Romance," at 196 million views and change, with "Charlie bit my finger" and "The Evolution of Dance" following behind at 186 million and 143 million, respectively. About 24 hours of video are uploaded every minute these days, and it'd take 1,700 years to watch all the video currently available.
The challenges YouTube faces in the future are both familiar and foreign. How to make money, for one thing, a challenge the site has not yet overcome (that's about the nicest way I could possibly say that--it's YouTube's birthday, after all, and I don't want to be rude). How to provide mainstream, for-profit content is another challenge, one that's the subject of constant work, from Vevo to the new movie rental service.
Then there's the challenge of the "third screen." YouTube has already conquered the first two; the computer was the first, and fell easily enough, while the mobile device was beaten thanks to the
For their part, YouTube is celebrating the milestone with a special commemorative site, featuring guest curators offering their favorite video picks (among the curators are Conan O'Brien, Pedro Almodovar, and LonelyGirl15). Conan's take? Our nation's obsession with YouTube is "probably why our country's economy is in the toilet," because we're all "watching monkeys in propeller hats flush themselves down a toilet" (parallel!). So from us, happy birthday, YouTube.
BY Dan Nosowitz
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Dan Nosowitz, the author of this post, can be followed on Twitter, corresponded with via email, and stalked in San Francisco (no link for that one--you'll have to do the legwork yourself).
Related Stories: | Topics:Innovation, Technology, Magazine, birthdays, youtube, youtube five years, happy birthday youtube, video, google, facebook, twitter, streaming video, content, Internet Broadcasting, Science and Technology, Technology, YouTube LLC, Internet |
A Multilingual Web Goes Live
Arabic and Cyrillic domain addresses are switched on.
By David Talbot
Multilingual Web content has been around for years. Now Web domain names in non-Latin languages are finally arriving--including Arabic addresses launched in Saudi Arabia, Egypt, and the United Arab Emirates earlier this month; Cyrillic, launched in Russia last Thursday; and soon Chinese--easing Web access for hundreds of millions of people around the world.
"This is the biggest change in the Internet in 40 years," says Tina Dam, senior director of international domain names for the Internet Corporation for Assigned Names and Numbers, or ICANN, which is working on implementing 21 international applications for domain names in 11 languages. "You should have seen the Russian celebration of this, it was so emotional. Suddenly their own language can be used."
The first complete Cyrillic address is http://президент.рф, meaning "president.rf" for the office of the president of the Russian federation. While the "http://" part remains in Latin characters, users will not have to type them to reach their destination.
As the change opens up the Internet, it also potentially opens up new security issues, though ICANN says it has tried to anticipate and prevent them. Web addresses formerly based only on 37 characters--A though Z, the 10 numerical digits, and the dash symbol--can now use 90,000 characters from several languages, many of these being Chinese characters. And just as a capital "O" and a zero look similar, various characters within other languages do, too.
Some security experts say that the plethora of new address possibilities could give phishers--scammers who use phony websites to trick people into handing over personal information--ways to create links that appear to be from recognized addresses. As a result, ICANN has already set a rule that any one address must only draw from one language. So while the Russian letters for C, V, and E, for example, are visually indistinguishable from their Latin counterparts, nobody will be able to create a hybrid address to exploit this. E-mail is not fully functional yet with the international domain names, but the technical protocols are being tested.
"One of the biggest principles of the Internet is the uniqueness principle," Dam says. "Computers will know the difference. But if people can't see the difference and don't know what address we are clicking on, we will have a break in the uniqueness principle."
Strictly speaking, multilanguage domain names have been possible for a decade. But, crucially, this was not true of the top-level domain--such as ".com" and ".gov," or country names like ".cn" for China or ".ru" for Russia--until recent weeks. Since few people used hybrid domain names in non-Latin languages over the past decade, the real security tests lie ahead.
Meanwhile, the software industry has some catching up to do. One example: it is common in many applications and e-mails for Latin-based Web addresses to automatically become highlighted in blue as a hyperlink. But this doesn't always happen with the new non-Latin addresses, because commonly used software does not recognize the new multilingual top-level domains for what they are. The major Web browsers, however, have all been updated.
"Nobody thought it was going to happen and didn't develop software that is capable of handling these new top level domains," says Veni Markovsi, the Russian and eastern European representative to ICANN.
Nevertheless, the impact will be enormous around the world, he says. "Think what would have happened if the Internet was created in China, and we in the U.S. needed to write the Web address in Chinese. And suddenly the world Internet community says, 'Well, now you can type your Web address in Latin characters.' That is the same feeling is for people who don't know Latin [letters]. Suddenly you will have people who might get online because they are not going to be afraid of the keyboard."
 |
| Credit: Technology Review |
"This is the biggest change in the Internet in 40 years," says Tina Dam, senior director of international domain names for the Internet Corporation for Assigned Names and Numbers, or ICANN, which is working on implementing 21 international applications for domain names in 11 languages. "You should have seen the Russian celebration of this, it was so emotional. Suddenly their own language can be used."
The first complete Cyrillic address is http://президент.рф, meaning "president.rf" for the office of the president of the Russian federation. While the "http://" part remains in Latin characters, users will not have to type them to reach their destination.
As the change opens up the Internet, it also potentially opens up new security issues, though ICANN says it has tried to anticipate and prevent them. Web addresses formerly based only on 37 characters--A though Z, the 10 numerical digits, and the dash symbol--can now use 90,000 characters from several languages, many of these being Chinese characters. And just as a capital "O" and a zero look similar, various characters within other languages do, too.
Some security experts say that the plethora of new address possibilities could give phishers--scammers who use phony websites to trick people into handing over personal information--ways to create links that appear to be from recognized addresses. As a result, ICANN has already set a rule that any one address must only draw from one language. So while the Russian letters for C, V, and E, for example, are visually indistinguishable from their Latin counterparts, nobody will be able to create a hybrid address to exploit this. E-mail is not fully functional yet with the international domain names, but the technical protocols are being tested.
"One of the biggest principles of the Internet is the uniqueness principle," Dam says. "Computers will know the difference. But if people can't see the difference and don't know what address we are clicking on, we will have a break in the uniqueness principle."
Strictly speaking, multilanguage domain names have been possible for a decade. But, crucially, this was not true of the top-level domain--such as ".com" and ".gov," or country names like ".cn" for China or ".ru" for Russia--until recent weeks. Since few people used hybrid domain names in non-Latin languages over the past decade, the real security tests lie ahead.
Meanwhile, the software industry has some catching up to do. One example: it is common in many applications and e-mails for Latin-based Web addresses to automatically become highlighted in blue as a hyperlink. But this doesn't always happen with the new non-Latin addresses, because commonly used software does not recognize the new multilingual top-level domains for what they are. The major Web browsers, however, have all been updated.
"Nobody thought it was going to happen and didn't develop software that is capable of handling these new top level domains," says Veni Markovsi, the Russian and eastern European representative to ICANN.
Nevertheless, the impact will be enormous around the world, he says. "Think what would have happened if the Internet was created in China, and we in the U.S. needed to write the Web address in Chinese. And suddenly the world Internet community says, 'Well, now you can type your Web address in Latin characters.' That is the same feeling is for people who don't know Latin [letters]. Suddenly you will have people who might get online because they are not going to be afraid of the keyboard."
Related Articles
 The head of Google's Web-spam-fighting team warns that spammers are increasingly attacking websites. |  A protocol that could make the Internet more secure is finally being implemented. |
Wise home improvements
RENOVATING your home is often an aesthetic choice, but if done right, it can enhance both the abode's rental worth as well as its resale value.
Whether it's something minor (such as changing the faucet on your kitchen sink) or a major reconstruction (like adding a new floor to your home), some renovations will help recoup your returns near instantly, while others might be nothing more than an investment disaster.
Know what you want
Before getting started, it's important to decide whether the house you intend to renovate is for keeps.
“If you don't intend to sell or rent, than you're limited only by your imagination,” says KL Interior Design executive designer Robert Lee. “For the investor who's looking to rent or re-sell some day, he should realise that some renovations, though appealing to him, may end up making the house less marketable to a potential buyer or tenant,” he says.
Lee recalls a client many years ago who insisted on having nearly everything in one of the rooms in pink. “It was for his daughter. He wanted pink drapes, a pink carpet, wall, door, everything. Many years later, his daughter moved out of the home and they were looking to rent out the room but had problems finding a tenant.”
Making upgrades or changes to your home can be a costly affair. According to Lee, renovations can cost more and take longer to complete than initially envisaged.
“A lot of people that decide to renovate their home are often taken aback by how much it actually costs. When this happens, they go for relatively unknown contractors who, though cost less, tend to cut corners and give you a cheaper but less durable product,” he says.
Lee recalls a neighbour who wanted to install a new kitchen cabinet and sink but was “not willing to pay beyond a certain amount.”
“She paid RM1,500 but after only three years, the sink was shaking in its place, water was seeping into the cabinet and the wood started rotting. She ended up paying RM3,000 for a new cabinet, which, after five years, is still going strong.
“It's better to fork out a little more for something that lasts a long time. My neighbour could have just paid RM3,000 initially for a good job but because she was thrifty, she ended up paying RM4,500.”
Lee says people who want to renovate their home but are worried about the costs should do thorough research and find the best price.
Home improvements do not have to be expensive to look good and marketable. Home-Deco Art Sdn Bhd director Rachel Tam says the key to efficient spending is to spend wisely.
“The kitchen paint might be peeling but that doesn't mean you have to spend RM20,000 just to make it look good. All it may need is a fresh coat of paint and perhaps some of the appliances may need renewing,” she says.
Tam says that those looking to sell their homes should “know their limits” when it comes to making renovations.
“If you're living in a mid-to-high-end neighbourhood and plan to sell your home, it's best to limit renovations to a certain level,” she says.
“It's pointless to spend RM500,000 on renovations when the market rate for the average home within the area is just RM250,000. You're not going to make your money back when you sell.”
Lee gives an example of a client who installed a swimming pool in the yard of his home, which was located in a mid-income neighbourhood. “This guy was living in a corner single-storey terrace house. With the added space he had, he had a pool built. But when he wanted to sell the house, he had difficulties because nobody wanted to pay more for something which would require added maintenance,” he says.
For those looking to rent, knowing the type of tenant you are targeting is important too. Some tenants are only willing to pay so much.
Says Lee: “If you're living near a college or university and are targeting students as tenants, don't expect them to pay for the high-horsepower air-conditioning you installed in the room you are letting. This might be more appropriate if you are renting out to someone who's working.”
Renovations that pay
Freelance real-estate agent cum property investor Kamarul Ariff reckons that renovations made to the kitchen and bathroom are great ways to enhance the resale value of a property.
“Nowadays, people are finding more ways to beautify their kitchens and bathrooms. It's also what a lot of people look at first before buying a home.”
Ariff says renovation works can range from upgrading appliances, changing the flooring or a total make-over.
“Compared to renovating the living area or a master bedroom, the kitchen or bathroom is generally smaller and tend to cost lesser - making it easier and faster to recoup your cost,” he says.
He also says building a new room or an extension, though costly, can provide good, long-term returns. “It costs a lot but then you'll be able to rent it out. You'll be recover your money in no time,” he says.
By EUGENE MAHALINGAM
Whether it's something minor (such as changing the faucet on your kitchen sink) or a major reconstruction (like adding a new floor to your home), some renovations will help recoup your returns near instantly, while others might be nothing more than an investment disaster.
Know what you want
Before getting started, it's important to decide whether the house you intend to renovate is for keeps.
“If you don't intend to sell or rent, than you're limited only by your imagination,” says KL Interior Design executive designer Robert Lee. “For the investor who's looking to rent or re-sell some day, he should realise that some renovations, though appealing to him, may end up making the house less marketable to a potential buyer or tenant,” he says.
Lee recalls a client many years ago who insisted on having nearly everything in one of the rooms in pink. “It was for his daughter. He wanted pink drapes, a pink carpet, wall, door, everything. Many years later, his daughter moved out of the home and they were looking to rent out the room but had problems finding a tenant.”
Making upgrades or changes to your home can be a costly affair. According to Lee, renovations can cost more and take longer to complete than initially envisaged.
“A lot of people that decide to renovate their home are often taken aback by how much it actually costs. When this happens, they go for relatively unknown contractors who, though cost less, tend to cut corners and give you a cheaper but less durable product,” he says.
Lee recalls a neighbour who wanted to install a new kitchen cabinet and sink but was “not willing to pay beyond a certain amount.”
“She paid RM1,500 but after only three years, the sink was shaking in its place, water was seeping into the cabinet and the wood started rotting. She ended up paying RM3,000 for a new cabinet, which, after five years, is still going strong.
“It's better to fork out a little more for something that lasts a long time. My neighbour could have just paid RM3,000 initially for a good job but because she was thrifty, she ended up paying RM4,500.”
Lee says people who want to renovate their home but are worried about the costs should do thorough research and find the best price.
Home improvements do not have to be expensive to look good and marketable. Home-Deco Art Sdn Bhd director Rachel Tam says the key to efficient spending is to spend wisely.
“The kitchen paint might be peeling but that doesn't mean you have to spend RM20,000 just to make it look good. All it may need is a fresh coat of paint and perhaps some of the appliances may need renewing,” she says.
Tam says that those looking to sell their homes should “know their limits” when it comes to making renovations.
“If you're living in a mid-to-high-end neighbourhood and plan to sell your home, it's best to limit renovations to a certain level,” she says.
“It's pointless to spend RM500,000 on renovations when the market rate for the average home within the area is just RM250,000. You're not going to make your money back when you sell.”
Lee gives an example of a client who installed a swimming pool in the yard of his home, which was located in a mid-income neighbourhood. “This guy was living in a corner single-storey terrace house. With the added space he had, he had a pool built. But when he wanted to sell the house, he had difficulties because nobody wanted to pay more for something which would require added maintenance,” he says.
For those looking to rent, knowing the type of tenant you are targeting is important too. Some tenants are only willing to pay so much.
Says Lee: “If you're living near a college or university and are targeting students as tenants, don't expect them to pay for the high-horsepower air-conditioning you installed in the room you are letting. This might be more appropriate if you are renting out to someone who's working.”
Renovations that pay
Freelance real-estate agent cum property investor Kamarul Ariff reckons that renovations made to the kitchen and bathroom are great ways to enhance the resale value of a property.
“Nowadays, people are finding more ways to beautify their kitchens and bathrooms. It's also what a lot of people look at first before buying a home.”
Ariff says renovation works can range from upgrading appliances, changing the flooring or a total make-over.
“Compared to renovating the living area or a master bedroom, the kitchen or bathroom is generally smaller and tend to cost lesser - making it easier and faster to recoup your cost,” he says.
He also says building a new room or an extension, though costly, can provide good, long-term returns. “It costs a lot but then you'll be able to rent it out. You'll be recover your money in no time,” he says.
By EUGENE MAHALINGAM
eugenicz@thestar.com.my
Related article:
Renovating Your Home?Find builders, interior designers. Full list of renovation firms.www.701panduan.com
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