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  The real estate business can be a good barometer of social and economic change as well as offering some revealing insights into the lives of Bruneians. The new dwelling tax has bought many existing issues into sharper focus. Among other things, it is set to revolutionise the relationship between the people of Brunei and their government. There is a big difference between the government financing the people and the people financing the government.

The new tax will have a substantial impact upon most owner-occupiers and this is going to be a painful experience for many. The ever-increasing cost of living means that paying off a housing loan, a car loan and raising a family is not as easy as it used to be.

Those who rent will also feel the impact of taxation. Landlords will pass on most, if not all of the new tax to their tenants. The Tax impact will be most keenly felt upon people living in low rental properties below a $1,000 per month. For them it will be a substantial increase in rent. It may come as a surprise to know that there are a growing number of local Malays renting such properties.

Take Haji for example. He represents a growing trend. You see Haji is about to retire from his government job. Is this a happy time for him, a time to relax and enjoy his family and friends? Well it should be, but sadly, it is not. For more and more Bruneians it is a distressing time.

You see Haji is about to become homeless. His government job provided him with an income of about $2,000 per month. Not a fortune perhaps, but comfortable enough to get by on because his job also provided a government flat with a very low rent. Now he has to leave his government flat, the family home for the last twenty years or so, and find somewhere to live. His pension of about $1,000 per month is half of what his salary used to be.  The question is, what can he afford to rent? The answer is, not a lot.

That's where I come in. Haji is one of the growing number of people that have been calling me over the last year or two, asking if I have any houses to rent around Bandar for four or five hundred dollars a month. Well, I think we all know what the answer to that is, no. It’s very rare to get anything except a room to rent for that kind of money.

Anyway, Haji still has two kids in school, so a room would be of no use to his family. He is facing a reality that possibly thousands of government servants will face when they retire. Haji applied to buy a perpindahan house about 20 years ago, expecting to have the house in time for his retirement. Sadly, this has not materialised, and with over forty thousand people on the waiting list, he is not optimistic that it ever will in his lifetime.

Let us assume that Haji manages to find a low cost rental for maybe six or seven hundred dollars a month. The new dwelling tax will inevitably be passed on, in whole or in part, to the tenant. If it’s a small house, the tax may be about $30 or $40 per month. However, that means that Hajis’ rent could go up by that amount, taking an even bigger slice from his $1,000 a month pension.

What about the impact the tax will have on Brunei business? The construction of shophouses has been going on apace for the last ten years; it is astonishing how many shops Brunei has for a country with a population of only 360,000 people. To some extent, this is testimony to the ability and ambition of local business people, more and more of whom are Malay. Contrary to popular belief, local Malays are very capable at business and their entrepreneurial skills have been under-estimated.

Realistically we have to expect a drop in consumer spending when the new tax is applied. Will we also see an increase in shopping in Sarawak? It’s hard to imagine anything else. Bruneians are estimated to have spent RM2.8 Billion in Miri alone last year.

To quote Sarawak’s Datuk Michael Manyin Anak Jawong, Minister of Urban Development and Tourism Sarawak, "From the figure of 1.4 million people multiplied by RM$2,000 (spending), we should say terima kasih or thank you to Bruneians for spending their money in Sarawak," he said.  In addition, how much more have Bruneians spent in Limbang?

Moreover, the Minister is well aware that it is not recreational spending, he added, “Another good example: one tin of Milo costs roughly $7 in Brunei and in Singapore, while in Malaysia, it's at RM$7, which means you can actually buy two tins of Milo." Well, his arithmetic is correct.Can the government make Brunei more competitive with its neighbours so that fewer Bruneians will be tempted to do their shopping outside the country? That would create real benefits for Brunei.

A drop in spending and turnover may lead to a long overdue reduction of some shophouse rents. Shophouse rents in certain areas are very high and many businesses would heave a huge sigh of relief if their rentals were reduced. It could make or break businesses in tougher times. Many self-employed businesspeople in Brunei are working for their landlords, not themselves. This unhealthy situation should change. From a real estate perspective, this could lead to a drop in the value of the shophouse. Twenty years ago a three-floor shophouse in a good location cost a million dollars. About ten to fifteen years ago, it would cost $6-700,000. Today you can buy a 3-floor shophouse from around $400,000. Whether this trend will continue and how far prices may fall is anyone’s guess.

What can be done to help mitigate the tax burden and aid Bruneians in these changing times? Well, one way is for everyone to use his or her money more wisely.

This applies especially to homebuyers. Buying a home is the most expensive purchase that most of us will ever make. The good news is, with a little care you can save a lot of money on the cost of a house loan. Banks are not all the same and the cost of borrowing can vary a lot from one bank to another. So shop around, visit three or four banks and get written quotes before you decide which loan to take. Make sure you get the best deal available. It could save you thousands of dollars on a house loan of $200,000.


The answer to that question is an emphatic YES! Investing in property in Brunei is a good investment. The comparatively small population means that capital appreciation on houses is smaller than elsewhere. If you buy a house for $200,000, it is not as likely to rise in value as much as say, a house in Australia. However, the tenant will pay for a substantial part of the house for you. In addition, a tenant acts as an unpaid janitor, taking care of your property. An empty house deteriorates more quickly than a cared for, occupied house.

The monthly repayment on a house loan of $200,000, over twenty years is about $1,500, per month. If you rent your house for $1,000 per month then your loan only costs you $500 per month, or $120,000 to buy a $200,000 house. That's a real bargain, and once the house is fully paid you receive $1,000 month in rental income, maybe more if rents increase, for the rest of your life. Compare that to the cost of a luxury car. You can pay nearly as much each month for a BMW or a Mercedes, but the car, which will eventually be scrap metal, will cost you a fortune to own and never pay you a cent!

Investing in the shophouse is more problematical. As mentioned earlier shophouses have fallen substantially in value in recent years and this trend may continue. Houses are usually cheaper to buy and maybe easier to rent out. They look like a safer option for most people. However, there are always exceptions. A well-located shophouse at the right price could still be a good investment.

We live in interesting times for both the real estate business and for Brunei.


By: Ron Knox, Executive Manager, RussTini Real Estate
(As published in the Borneo Bulletin, Saturday 5th Aptil 2008)

BUYING a house is not only the most expensive purchase most of us will ever make; it's also one of the best investments we will ever make.

We provide a home for ourselves mid our family and an asset for future generations as well. It's probably the best investment we can make for our own security and to help our children.

There are several steps to take before you actually start looking around to buy a house. The first thing many people do is to go out and look at a tot of houses. This is putting the cart before the hone.

The first step is to make an appointment and sit down with a real estate agent. He will be able to provide you with a lot of free information and give you sound advice about buying a house. The agent can also help you take the next step - to arrange a loan.

FINANCE: Very few people are able to pay cash for a house or land. Banks are the most common source of finance for a house purchase.

First, you must find out how much you can borrow. There is little point in looking at houses costing say, $300,000 only to be told later that you can only borrow $200,000. This may seem obvious but many people start looking around without knowing how much. or even if, they qualify for a loan.

BANKS: Banks offer loans called 'mortgages' for property purchases. Mortgages differ from personal loans in that they we secured by the property being purchased. That means if you fail to make the loan payments, the bank can take the house or land 'mortgaged' as security for the loan.

GOVERNMENT LOANS: If you have a government loan, USE IT. They are a fantastic bonus. Borrowing money isn't cheap! Not many people realise just how expensive it is to borrow money. Government loans are interest-free. Your government low is worth tens of thousands of dollars!

That's how much money you will save by buying a house with a government loan instead of a bank loan. Government loans are best for people who already own land. They can use their government low to build a house on their own land.

It's not easy to use a government loan to buy other properties. This is partly because the seller has to transfer the house to the new owner first. Properly transfer in Brunei can easily take six months or even a year, and many sellers can't wait that long for payment.

But if you are a landowner and have access to and have access to a government loan use it. It will save you a small fortune.

Okay, you've spoken to a bank and you know approximately how much you can borrow. What's the next step? Well, go back to your helpful real estate agent and find out what houses are available in your price range.

What kind of house can you buy?

There are several different kinds of houses. The most popular is the detached house. A detached house is an individual house built alone on a single piece of land. A detached house may be the most popular, but it is also usually the most expensive option. Not everyone can afford a detached house.

If you really want a detached house but don't want to break the bank, consider the traditional Malay-style-stilt house.

It is less expensive to build than a double-storey house and you can build in the ground floor later when you can afford it. The stilt house is an excellent starter home for people on a limited budget.

Another low-cost option is the single-storey house or bungalow. They are popular for small families and inexpensive to build in comparison to a double-storey house.

The next style of house to consider is the semi-detached house. It is two houses joined together. Because less land is used and they share a common wall, semi-detached houses we usually cheaper than detached houses.

Last but not least, we have the terraced house. A terraced house is one of a number of houses joined together in a 1 me. You can build build more terraced houses on a piece of land and they share common walls, so terraced houses arc often the cheapest option available.

But that doesn't mean that they lack amenities. Modem terraced houses we well designed to make the best use of available space and they can also offer excellent value for money.

Buying a house is serious business. There are a few things that the first-time buyer should be aware of First of all, you will have to pay a booking fee to reserve the house while you process the bank loan.

That means that the owner has to take the house off the market and hold it exclusively for you. A booking fee is not refundable, so before you take that step, make certain that you have decided to go ahead.

Secondly, there are several other expenses involved in buying a house. The bank will charge you for a valuation of the properly. This usually costs about $300 to $500, depending on the value of the house.

They will also charge you a fee for setting up your Ioan. This will cost about the same as the valuation. Occasionally banks have special offers such as free valuations and loan charges. It's worth shopping around and finding out which bank is offering the best deal.

You will also have to pay for a Sales and Purchase Agreement drawn up by a lawyer. These are very expensive in Brunei, in comparison to Australia, for example. A typical S&P agreement in Australia will cost about $500. In Brunei, it can easily cost three times that amount! Lawyers, just like other businesses, we in competition. You can haggle with a lawyer just like any other trader and you can usually get a discount.

So a summary of the house buying process includes the following steps:

1. Talk to a real estate agent and get some advice first. It em save you a lot of wasted time later.

2. Check with your bank to find out if you can get a loan. Many Bruneians already have substantial personal loans so this may reduce the amount that you can borrow for a house. Your real estate agent can help set up an appointment for you with a bank loan officer.

3. The government loan is a fantastic bonus. Use it if you em.

4. When you know how much you can borrow to buy 'a house, return to your real estate agent and find out what is available in your price range.

5. Bear in mind that you will have to pay a booking fee to reserve the house. You will have to pay the bank for a valuation and loan set-up. And you will have to pay for a sale and purchase agreement.

6. And you will also need money for furniture, curtains, air-cons and all the other things that make a house into a comfortable home. Sometimes a bank will allow you to increase your borrowing to cover these furnishings.

Buying a house is a complex procedure and it's very important to get good advice right from the start to make the process as easy as possible.