Challenging outlook looms over property market

Various groups with vested interests in the property sector are still dissecting the multi-faced measures announced a few months ago in Budget 2014. They are concerned about the impact it will have on the market and are trying to make the best of the situation.

The measures to cool the market underscore the Government’s resolve to curb property speculation and promote a more healthy and sustainable market. A focused policy on affordable housing is also one of the main thrusts of the Government initiatives. The new budget measures apply to all property projects nationwide except those in the Medini enclave in Iskandar, Johor, which has been declared a special economic zone.

Property consultants concur the unveiling of the budget measures have jolted both developers and buyers, especially speculators, and there is bound to be a short-term consolidation as they wait out to see the impact of those measures on the market.

Yam: ‘Budget 2014 has an adverse impact on the property market.’

Needless to say, developers are feeling the heat. Many are concerned the imposition of the full real property gains tax (RPGT) regiment may stall buying interest and impact sales.

The hike in pricing threshold for properties that foreigners can buy from RM500,000 to RM1mil is also a cause of concern for developers with projects targeting foreigners.

Meanwhile, potential buyers and investors are keeping their fingers crossed for better deals in the form of more innovative product offerings at more competitive pricing as the new year unfolds.

Real Estate and Housing Developers’ Association president Datuk Seri Michael Yam sounded the alarm when he said that “Budget 2014 has an adverse impact on the property market and will cause negative sentiment to permeate in the market place.”

“The industry and the consumers would take a more conservative approach in respect of sales launches or a buying decision. Going forward, developers would need to be more careful with its market research to ensure there is high probability of take-up in their project launches. Buyers are also expected to adopt a wait-and-see attitude with the hope of a fall in prices, while sellers are holding on to their prices waiting for an opportune time to sell,” he surmised.

Yam suggests developers do more indepth research and test the market before deciding to sell, or if necessary defer launches. He notes that this will likely lead to further imbalances in the supply and demand.

Despite envisaging a slight negative impact on the market, executive director of property consultancy CB Richard Ellis Malaysia, Paul Khong expects a fair and stable outlook for the property market next year.

He says investors hoping to flip their properties for short term gains will now be compromised if they do not dispose off their properties by this year due to the latest RPGT guidelines. The new RPGT regime is effective from Jan 1, 2014.

“Buyers will now have to revisit their investment criteria carefully. As for developers, they also have to work much harder to conclude more sales in 2014.

“With the abolishment of developer interest bearing schemes, the number of pure speculators and short term investors will drop in tandem,” Khong observes.

Khong expects a fair and stable outlook for the property market next year.

He says project launches will continue in 2014 as developers still need to develop as property development is their core business.

“But the project launches will be targeted more towards the mass market and will be at more reasonable price levels.”

Khong says in a more competitive environment, developers may need to provide higher quality products and more trendy developments to entice buyers, and buyers can look forward to better deals and hopefully greater value for their money.

On the average market, players will take three to six months to digest the impact although they will continue to invest with different objectives in mind.

The RPGT basically follows the principle of “No gain, No tax”, so it lessens the quantum of gain in the overall picture and does not penalise actual buyers, Khong says.

“The budget measures basically eliminate short term investors who are looking for high and quick gains in the local property market and force the market to stabilise and investors to take a longer term view on their investments,” Khong concludes.

DTZ Nawawi Tie Leung executive director Brian Koh says the tapering of bond purchase by the US Federal Reserve may result in a more challenging market outlook for the local property market.

“The market is likely to be more challenging given the related effects of rising interest and a tighter credit environment. It is likely to take a breather with new supply and launches likely to be delayed in the first few months of the year as developers tread cautiously to test the impact from the cooling measures of Budget 2014,” he explains.

Koh says it will be “a sort of reset for the market, so that the various parties are brought back to review their basic assumptions and expectations on more fundamental issues such as sustainability of trend, affordability and potential risks/returns going forward.”

“Developers are likely to launch less projects, downgrade specifications, reduce sizing, squeeze on construction costs, and accept lower margins.

“As for buyers, speculators who are caught in the new changes will have the most to lose, if they do not have the holding power,” Koh points out.

So what type of projects will be popular in this new environment?

Koh: ‘a sort of reset for the market.’

Rehda’s Yam says the perenially popular types of housing would be guarded and gated landed houses, double-storey terraced housing, semi-detached and detached houses, small size condominiums in prime locations including those on top of or in the vicinity of MRT stations.

“For retirees and lifestyle living, properties on the island of Penang, beach resort and parts of Iskandar will be sought after,” Yam concludes.

Khong says inner city integrated developments like Pavilion and Tropicana Mall or the newly launched Damansara City and Damansara Uptown Phase 2 will lead the pack on the strata residences sector, followed by the ever green landed terrace houses (guarded and gated concept) in good locations.

He believes branded residences with good amenities such as MRT stations nearby and fully fitted/furnished units will also go far with buyers.

“As for projects targeted at the foreign buyers, they will now have to be more high-end driven following the higher price threshold of RM1mil imposed on foreign buyers from January 1,” Khong adds.

Koh says the market can expect more projects that cater to the family and for owner-occupation. - The Star

Renovating your house

A HOUSE may be the largest investments in one’s life, but that is not all. One may want to renovate it and it does not come cheap these days.

Success Concepts Life Planners chief executive Joyce Chuah shares withStarBizWeek that renovation cost has increased by about 12% over the past eight years.

“Having said that, one has to deliberate on how much one should allocate for one’s renovation budget,” she says.

Advocating that one needs to be clear of the objective of the renovation, she says if it is for one’s own stay, allocating a 5% to 10% of the house value as the renovation budget is feasible. It is common to exceed the budgeted amount and then have difficulties paying for it later on.

Shanke : ‘It is not advisable to do extensions as the value is questionable’.

“It is very subjective with many variables in play. For example, how many children will be staying in the house, the size of the house, and so on,” she says.

For people puchasing their house with a mortgage, she says it would be wise to allocate another 5% to 10% of the purchase price for renovation in the loan amount as well.

Retired financial planner Mike Lee, on the other hand, notes that renovating a house should only be considered if other responsibilites are well taken care of. Citing child education and savings, for instance, Lee says much of this renovation cost could be invested for better returns.

“Except if you’re a person who needs to entertain guests at your house, spend only the minimum to make the house look better. One should look at simple decorations instead of expensive furnishings,” he says.

He adds that it is common for retirees to withdraw their pension savings to renovate their house. But he cautions against this move as the renovation does not generate income.

Does renovation increase the property’s value?

Malaysia Institute of Estate Agents (MIEA) president Siva Shanker says when the house is for one’s own stay, one can do according to one’s taste. But if it is for investment, do not expect your tenant or buyer to have the same taste.

“If it is for investment, one just needs to touch up the house to ensure it is clean and presentable. It is not advisable to do extensions as the value is questionable as well,” he says.

Chuah: ‘There should be a balance between consuming and growing your wealth.’

He adds that most renovation does not result in raising property value. “For renovations with no proper approvals, valuers will not even include the renovation cost in their valuation,” he says.

Apart from that, he says most renovations would be discarded by the new owner.

“In some cases, you will see extensions being done to create more rooms, occupying exisitng land which was once used to be a garden. But your next buyer may prefer the original layout,” he says.

Lee says people buy a property because of its location.

The age old adage of “location, location and location” remains the main influence of property value. However, if the house is for one’s own occupation, and one has the means to enjoy the finer things in life, why not?

Success Concepts’ Chuah sums this up nicely: “There should be a balance between consuming and growing your wealth.” - The Star

水晶花园共管机构起诉两造 禁止银行拍卖土地

（槟岛西南区21日讯）水晶花园（Krystal Garden）高级住宅区共管机构今日召开特别大会通过两项动议，首项动议是要求联邦直辖区报穷局以清盘师的身份，起诉伊斯兰银行和槟州土地及矿物局以解除土地抵押令，禁止银行拍卖住宅区土地。

丹 绒区国会议员黄伟益指出，有关发展商REKA MESRA有限公司已於2010年清盘，联邦直辖区报穷局作为该公司清盘师。但该公司早在2004年1月，将该住宅区的土地抵押给伊斯兰银行，而该银行於 今年7月31日在英文报刊登告示，指银行将根据1965年国家土地法典赋予的权力拍卖有关土地，所有在该土地上建构的房子将被清拆。

“共管机构於是召开特别大会动议通过报穷局以清盘师的身份起诉上述两造，以解除抵押令禁止银行拍卖有关土地。”

不过他说，有关诉讼是“友善”性质的，所有购屋者受促联络该银行或律师以呈上相关文件，以确认个别的产业拥有权状况，包括已赎回、局部赎回或完全未赎回自己的产业。

“至于第二项动议是一旦抵押令解除并取得总地契后，共管机构会聘请测量师申请分层地契。屋主们也同意共同负担第一项动议的2万令吉诉讼费和第二项动议的3万令吉测量费。”

黄伟益是在该共管机构特别大会后，和理事们召开记者会发表以上谈话。他受询时表示，此次召开的特别大会已超过法定人数，所以是合法的。- 光华

KWAP rising up to the challenge

RISING equity prices is a boon for investors. At Kumpulan Wang Persaraan or KWAP, the FTSE Bursa Malaysia KL Composite Index’s (FBM KLCI) 9.5% gain year-to-date lifted the fund’s asset value to above RM100bil for the first time ever.

That growing pile of money will come in handy when the pension fund is called to assist the Government in funding its bulging pension liability, which some estimates put at close to RM300bil today.

At a glance, it seems to be a massive RM200bil shortfall in funding the Government’s future pension liability. But because the civil service pension scheme is funded entirely from the Government’s coffer, the burden actually falls on future taxpayers.

Experts say the existing pension scheme needs to be reformed to avoid further stress on the already stretched public finances.

Kamaruzaman is confident KWAP will perform better this year , or at least match its performance last year.

Allianz International Pensions, in a report in August, said the Government Transformation Programme (GTP) introduced in 2010 include a change to the civil service pension scheme from the current tax-financed defined benefit (DB) system into a funded defined contribution (DC) scheme.

The intended reform will reduce the Government’s future fiscal burden.

“We are preparing ourselves for that eventuality when we have to take over the Government’s pension scheme,’’ KWAP chief executive officer Wan Kamaruzaman Wan Ahmad said.

As it is, 16 consecutive years of fiscal deficits had raised concerns whether enough funds can be made available by the Government to cover for its growing future pension obligations.

This is why KWAP was set up years ago – to help the Government pay for its future pension liabilities.

KWAP traced its roots back to 1991 when the Pensions Trust Act was enacted to assist the Government in funding its pension liability with a launching grant of RM500mil.

In 2007, KWAP was established and corporatised. By that time, its fund size stood at RM48bil.

KWAP’s financial statements show that the Government contributes between RM4bil and RM5bil a year. It also gets to keep all the profit it makes to be reinvested. This compounded interest effect has enabled the fund to more than doubled its size in six years.

Pension fund?

Presently KWAP is more like an asset management company than a pension fund.

Kamaruzaman, however, is quick to point out that KWAP has not lost sight of its original purpose to assist the Government in meeting future pension commitments.

To keep up with the growing pension bill, he reckons the fund must achieve a steady rate of return of at least 6% a year.

Last year, the fund’s gross return on investment was 6.84%.

Kamaruzaman is confident KWAP would perform better this year, or at least match its performance last year.

The outlook for 2014, however, is more challenging.

The bull run in the stock market, now in its fourth year since it began in earnest back in March 2009, is starting to show signs of fatigue. With the US Federal Reserve trimming down its stimulus programme, the upside potential for the local index in 2014 is limited, according to MIDF Research.

The more subdued outlook for equities could take the wind out of KWAP’s recent impressive run. Bond yields, however, have moved higher in 2013 and have partially priced in tapering risk with the benchmark 10-year Malaysian Government Securities holding at above 4%.

“Equity is the kicker for us,’’ Kamaruzaman says. “But we need to look for other alternative investments to ensure returns are more sustainable.’’

The former treasury general manager at Employees Provident Fund took over the KWAP helm in May this year to succeed Datuk Azian Mohd Noh, who retired in March.

Kamaruzaman, however, did not get to enjoy his honeymoon period, as the regional markets took a huge tumble barely a month after he came on board amid worries that the US Federal Reserve will reduce its bond purchases programme sooner than expected.

By August, the stock market in Thailand had plummeted 20% from its peak, while the FBM KLCI was barely hanging on above water for the year, as foreign investors ditched shares and bonds in emerging markets to chase rising yields in developed markets.

Markets were calmer in September and sustained buying by large institutional domestic investors in the past months drove up the index to several record sessions in the past two months including to its new all-time high of 1,850 points last Tuesday.

The support provided by funds like EPF and KWAP even drew a comment fromBank Negara governor Tan Sri Dr Zeti Akhtar Aziz who earlier this week said that institutional investors would be important contributors toward stabilising the market once the US quantitative easing (QE) tapering exercise takes place.

“We recognised the fact that institutional long-term investors like us have a role to play in developing the capital market,’’ Kamaruzaman says.

Last year, KWAP invested RM1.5bil in a perpetual sukuk issued by Malaysia Airlines (MAS), which is the first sukuk in the world with no maturity period. Kamaruzaman says the fund does not own any shares in the airline, but bought the perpetual sukuk because MAS’ controlling shareholder Khazanah Nasional Bhd carries a strong credit rating.

“There is always a lot of conservatism in our investment decision,’’ Kamaruzaman says.

KWAP had lost big money before on some of its investment.

The Auditor-General, in its most recent report, chided KWAP for a taking a big hit over its huge exposure in Time dotCom Bhd and its investment committee for failing to keep proper records.

“That was a wake-up call for us to improve our process,’’ Kamaruzaman says, adding that changes have been made to strengthen its investment structure and decision-making process.

“We are also looking into improving our talent management,’’ he says.

The fund had recently obtained government blessing to invest up to 19% of its assets overseas.

Critics have argued that the fund is taking on unnecessary risk by going overseas. KWAP says it needs to diversify its assets to ensure sustainable returns,

“The local market is too crowded,’’ Kamaruzman says.

There are seven major government-linked investment companies with total asset under management worth RM1 trillion and growing. EPF alone collected RM46bil in new contribution in 2012.

“There is only a limited supply of blue-chip companies in the market, which means everyone is going after the same stocks,’’ he says.

Kamaruzaman, however, believes there is still value buys in the stock market, even at current lofty levels.

“We just need to look harder,’’ he says.

In August, KWAP has allocated RM300mil to small and medium capitalised stocks on Bursa Malaysia as the fund sought to find value in fast-rising emerging companies. Currently the fund own shares in about 90 listed companies.

Kamaruzaman says the fund has equity investment overseas with a planned allocation of between 50 million euros and 100 million euros to buy shares in large European companies.

The investment will be in addition to RM1bil already invested in companies listed on the London Stock Exchange.

“There are also other types of investment that we can do within our risk appetite,’’ he says. This includes private equity investment, but that is just a “tiny portion” of the fund.

The old saying about “not putting all of your eggs in one basket” rings true when it comes to investing.

The next big thing for KWAP is the property sector.

Kamaruzaman says the investment in the property sector is expected to generate steady rental returns of between 6% and 8% a year.

Pension liability

This year alone, the Government will spend close to RM13bil for promised pension payments.

The bill in 2010 was RM9bil.

Under the current arrangement, the funding for civil service pension scheme came direct from government revenue.

There is no contribution from its employees, who are either directly employed by the Government, statutory bodies or local authorities. Apart from the reserves managed by KWAP, the Government pension liability is largely unfunded.

The risk is that with years of salary increases and longer life expectancy, the fiscal cost faced by future generations to take care of the public sector retired workforce could balloon further.

In 2009, the Finance Ministry and the Public Service Department undertook a Pension Liability Study to establish how KWAP can assist the Government in funding its pension liability.

The term pension liability refers to the amount of money that the Government has to account for in order to make future pension payments. It is the difference between the total amount due to retirees and the actual amount of money it has now to make those payments.

At that time it was estimated that the Government future pension commitment stood at RM260bil.

Last year, the Government raised the retirement age for its employees to 60 years to keep the lid on rising pension cost.

With its 1.4 million workforce, the public sector is one the largest employers in the country. Its pension benefits, with up to 60% monthly payment on last drawn salary and free healthcare at public hospitals, is almost unmatched by the private sector.

One thing is certain, the cost of paying for these benefits will continue to rise and reform is urgently needed to avoid further future fiscal burden. - The Star

Beefing up property assets

KWAP is looking beef up its property portfolio with more office buildings. CEOWan Kamaruzaman Wan Ahmad said the fund is close to securing its maiden property deal in the heart of Kuala Lumpur that will also house its new headquarters.

The completed office tower, eyed by KWAP, is already partly tenanted.

“This would allow us to get immediate rental income once the transaction is completed,’’ Kamaruzaman says.

KWAP bought its first property in Australia in 2010.

It now has six properties in big cities in Australia and in London. (see table)

Kamaruzaman says the fund is currently doing a due diligence on a potential property acquisition in the United States.

He laments the hassle and slow process of buying properties in Malaysia.

“It is easier and quicker for us to complete an acquisition in developed countries,’’ he says.

Kamaruzaman says KWAP is also looking for opportunities to acquire plots of land with development potential in the Klang Valley.

“We have revised our investment guidelines to allow for land acquisition, undertake construction risk and property development project,’’ he says.

Another area that the fund is keen to venture into is ownership of infrastructure assets that provide steady recurring income.

Kamaruzaman says the fund is interested to invest in highways, ports and power plants, although an expansion into this type of investment will probably be confined to domestic assets.

“Infrastructure asset fits well into our investment strategy,’’ he says. - The Star

Property investment is not riskless

EARLIER this week, a developer signed an agreement valued at about RM100mil with a company that “specialises in wealth management through property marketing and risk management.”

The investor bought 100 units of commercial suites in Petaling Jaya that will be completed in a couple of years. The 100 units make up about 40% of the nearly 300 units in the freehold development. With this agreement, the project will be 100% sold.

It was launched in June this year with an average price per sq ft of about RM970 with an 8% rebate for buyers, before the Budget 2014 measures and Bank Negararuling which discouraged the giving of rebates, and which put the country’s property sector on the path to transparency.

A representative from the developer say the investor will buy the units with the 8% rebate, similar with earlier buyers. On a per sq ft basis, the bulk purchaser will pay between RM950 and RM1,000 for the units. Because the investor is taking over all the unsold units, they are randomly located, with sizes ranging hovering around 1,000 sq ft.

There are a couple of things about this agreement that raise some questions. First, this investing company is bulk buying only to sell the units later, as with previous investments. The company was established in 2003. It has two shareholders. In 2007, it bought 100 units of a project in Kota Damansara, Petaling Jaya for RM20mil. It subsequently sold 123 units when it was engaged by other purchasers to sell their units. In 2011, the company bought 40 units of another project in Bangsar South, Kuala Lumpur for RM20mil. They subsequently sold all its holdings.

Last year, it bought 40 units in mixed development the Mont’Kiara/Segambut area for about RM20mil. Although this project is currently under construction, the company has only three units left, the managing director of the investing company said after the signing ceremony. With this current investment, his plan is to sell the 100 units to parties on his data base. Two real estate consultants who declined to be named say the transaction is legal but may have ethical undertones, particularly at a time when the government is trying to curb speculation.

Budget 2014 with regard the property sector essentially deals with three issues - a more stringent real property gains tax (RPGT) compared with previous years, the banning of Developers Interest-Bearing Scheme (DIBS) and increased transparency imposed on developers who now have to display detailed sales price including benefits and incentives such as legal fees exemption, cash rebates and free gifts. In short, the net price minus the freebies. Its aim is to ensure sustainable and transparent pricing.

“Legally, there is a willing buyer and seller. The job of the developer is to build and sell his project. What happens after that is between the investor and subsequent buyers. A true and real investor will look on the longer term. He will not flip at the first opportunity,” says a property consultant. Both agents pose the following questions: Is the sales and purchase agreement (SPA) done in one single agreement or for 100 units? Will the 100 units be officially transferred from the developer to the investing company? Will the subsequent buyers be buying from the developer or from the investor? The developer did not respond to the emailed questions.

The consultants and two lawyers contacted also brought up the RPGT which kicks in on Jan 1, 2014.

The lawyers contacted say it will be considered as a sub-sale when the investing company sells the units to subsequent buyers.

“How the agreement between the developer and the investor is framed is important,” one lawyer says. There is no stamp duty involved because the project is yet to be built, they say.

Says one lawyer: “A property company pays tax, not RPGT. In this case, the investing company is a wealth management company which specialises in property marketing, but is not a real estate company. Does this mean it collects money from other investors? Then it will be governed under the Financial Services Act. When they resell later on, they will still have to pay RPGT. So it is a tax question.”

With the various anti-speculation measures by the government kicking in next month, the question that begs to be asked it, will there be other “wealth management companies specialisiing in property marketing and risk management” entering the scene to bulk purchase, and bulk flip?

Deputy news editor THEAN LEE CHENG wonders what 2014 holds for the property market. - The Star

How market reacts to cooling measures

THE property market with all the recent cooling measures announced by Bank Negara and the Finance Minister in Budget 2014, seems to be holding its breath and assessing the likely impact. So as we move into 2014, the question is how will the nature and complexion of the market change.

Insofar as the residential market is concerned, and for the country as a whole, house prices are generally in line with important fundamentals such as household income, going neck to neck at about 5.5% increase per annum. It is only in select localities in the Klang Valley, Penang, Johor Baru and Kota Kinabalu that house prices are somewhat higher than the normal multiple of 4 to 5 times annual household income. In some instances, prices have risen to close to 15 times the average state household income.

To view this condition in a proper perspective, we need to go back in time to early 2009 when the developer interest bearing scheme (DIBS) was first introduced. It was introduced to forestall a cooling of the residential market, mainly the primary market, i.e. sales by developers, following the global financial crisis of 2008. As we moved away from 2009, a substantial number of developers adopted the DIBS and added on a range of incentives as well, reaching out to new categories of house buyers who are not necessarily the traditional first-time house buyers or upgraders.

In 2009, there was a total of 211,600 residential transactions; 25,898 or 12.24% were primary market transactions whereas 185,702 or 87.76% were secondary market transactions.

In the following year i.e. 2010, the total number of residential transactions was 226,874, out of which 29,162 or 12.85% were primary market transactions, while 197,712 or 87.15% were secondary market transactions. The important point is that primary sales made up about 12% of total transactions.

In 2011, the total number of residential transactions was 269,789, out of which 55,745 or 20.66% were primary transactions whereas 214,044 or 79.39% were secondary transactions.

Note should be taken of this percentage jump in the proportion of primary transactions versus secondary transactions. It is attributed to the DIBS and the other incentives that were given by developers, impacting the market, which in effect were luring buyers into the primary sector of the market as against the secondary sector. Their lure was also due to the fact that real estate seems to draw in investors and speculators particularly during difficult times. There are very few alternative investments that can attract a switch in savings as well as excite the outright speculators as real estate.

Looking at it from another point of view, the DIBS and the growing degree of incentives offered can also be considered as an invitation to speculate. For 2012, out of the total residential transactions of 272,669, 60,241 or 22.09% were primary market sales whereas 212,428 or 77.91% were secondary market sales. Note the drop in the proportion of secondary market sales from 214,044 in 2011 to 212,428 in 2012.

In view of rising house prices in the Klang Valley, Penang, Johor Baru and other areas, coupled with the concern that ordinary Malaysians were being crowded out of the market and the rise in household debt, the authorities introduced several cooling measures, with the culmination of a substantial dose in Budget 2014.

Transparent incentives

Like Singapore, the DIBS was also targeted as an unacceptable feature for the market, and where incentives are given by developers they are now required to be transparent. This enforces the need for the real price of houses to be clearly discernible. Lending by banks and financial institution are now constrained from being led by house prices that include incentives which mask the real house price.

Going forward, it is likely then that the runup in the primary sector of the market by about 35,000 units a year or close to 3,000 units a month could be reversed partially or fully. But then where will such “speculators” turn to in the compelling search for alternative investments? This is a question to ponder on.

Residential house prices are normally sticky on the downside and it is unlikely that prices will ease substantially. However, there could be a rediscovery of the real price of houses once the value of the DIBS and other incentives are stripped from it. The effect is a slight downward slide in prices.

The market discovery of real house prices in the hotspots could also help in more robust residential property indices, which are important for the growth and development of the industry.

In the commercial sector of the market, in the Klang Valley, there is clearly excess dedicated office space in the market as noted from the amount of unoccupied space – about 26 million sq ft. There are also a substantial amount of office space under construction (18.77 million sq ft) with an even more substantial amount of office space expected from all the mega projects as currently contemplated. Rents are under pressure and it is important to bear in mind that it is rents that drive the market.

Grade A office buildings today have rental of between RM7 and RM8 per sq ft gross and higher than this figure are only for a few special Grade A plus office buildings which also enjoy exceptional management and good location.

Rents determine capital values by way of the expected yield. Broadly, capital values less the cost of development and expected developers profit and adjusted for time value of money determine the price one should pay for land that is slated for commercial development. At current market prices of commercial lands in the KLCC area at more than RM3,000 per sq ft, it does indicate that buyers are assuminig a permissible plot ratio of 10 or more. More significantly, rents will trend upwards of RM10 per sq ft in the short to medium term. Is that a reasonable expectation, given the substantial current and future supply of office space?

For the retail sector, there are also a substantial amount of retail centres entering the market. There is pressure on some of the smaller neighbourhood shopping centres. Many of these centres in the Klang Valley are looking for a buyer. The outlook for the leading retail centres, however, ought to be helped by the fact that 2014 is a designated Visit Malaysia Year. On the other hand, one has to contend with some possible crimping of consumer spending arising from the reduction of subsidies and increase in tariffs.

Khong & Jaafar group MD Elvin Fernandez believes in the free market and timely nudging by policy makers and key market participants to iron out any, and only where needed, imperfections in the system. To do this, and over time, they need a steady stream of in-depth market knowledge and insight. - The Star

Penang’s new housing rules to start in February

GEORGE TOWN: The new housing rules that will be implemented by Penang next February are definite, even as discussions are being held with the various stakeholders, said Chief Minister Lim Guan Eng.

He said briefings were being conducted for the Bar Council, banks, property developers both in and outside of Penang and other stakeholders to update them on the new housing rules.

Under the new rules, all low-cost (up to RM42,000) and low-medium cost (up to RM72,500) houses cannot be resold for up to 10 years from the date of the sale and purchase agreement (SPA). This 10-year rule covers all past and future purchases.

In addition, houses that were initially purchased at a cost below RM400,000 on the island as well as below RM250,000 on the mainland cannot be resold for five years if the SPA is signed on or after Feb 1 next year. - The Star

Penang Property - The Realtor Who Protects Your Interests: Botanica CT 2 Storey Terrace For Quick Sale

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Sunway wins RM267mil land bid in Penang

KUALA LUMPUR: Sunway Bhd through its wholly-owned subsidiary, Sunway City (Penang) Sdn Bhd, won the bid for four parcels of land at RM267.4mil in North East district, Penang, from C. H. Williams Talhar and Wong, the property agent forLuxor Precision Sdn Bhd.

Sunway, in a filing with Bursa Malaysia yesterday, said the parties will enter into a sales and purchase agreement for the proposed acquisition, including existing buildings, plant nurseries and other structures on the land, within 14 days from the date of the notice of acceptance of Dec 16.

It said the proposed acquisition would provide Sunway with an estimated gross development value of RM1.5bil when fully developed, as the land was strategically located within the vibrant centre of Penang Island and surrounded by tourism spots as well as mature residential townships.

It added that the proposed development for the land consisted of commercial shops, small office home office and high rise residential units and that it would strengthen Sunway’s presence in the Penang property market.

On prospects, it said residential and commercial properties in Penang, especially on Penang Island, had good potential due to scarcity of land and continuous strong demand. – Bernama 

Penang to weed out squatters, illegal hawkers and structures

THE Penang government will come down hard on illegal hawkers, illegal buildings and encroachment of state land next year.

State executive councillor Chow Kon Yeow (DAP-Padang Kota) said a committee has been formed to tackle the matters.

He said he had instructed the Penang Municipal Council (MPPP) and Seberang Prai Municipal Council (MPSP) to list out the problems and come up with solutions.

Chow, however, pointed out that the state government was not out on a ‘killing spree’ over the matter.

“We need to know why people do not want to comply with the law, or why they want to put up stalls by the roadside, and the issues they are facing.

“We have so many laws in the country, in the state, and by-laws of the local authorities, but some people just do not want to follow them.

“We have to do something and start somewhere, to become an international city and developed state.

“The Chief Minister has voiced his support for this,” he said.

Chow said an international city is one which is orderly and free of illegal hawkers.

“But, I believe the developed states too, have undergone the painful process of getting rid of all the illegal hawkers.

“Singapore is what it is today because it acted on the problem some 30 years ago.

“We want the people to see solution to problems, better facilities and reduced red tape,” Chow said.

Developer focuses on creating unique projects in Kuala Lumpur and Bandar Sunway

Artist impression of The SkyVillas project at Jalan Sri Hartamas.

THE Penang-based DK Group, currently developing the D’Latour and DK Senza properties in Bandar Sunway, Subang Jaya, with a combined gross development value of RM1.1bil, plans to launch RM2.7bil worth of mixed-development property projects in Kuala Lumpur next year.

The schemes include the development of the highest residential tower development in South-East Asia for the RM2bil D’Twist, the final phase of DK City in Bandar Sunway, and the RM700mil SkyVillas@Dutamas along Jalan Sri Hartamas.

Property investors and home-buyers can now look forward to owning a “landed property in the sky” with the proposed launching of the RM700mil SkyVillas@Dutamas in late 2014, a scheme that comes with a garden area for every condominium.

“I am all for unique designs, as they differentiate one building from another and bear the signature trademark of the developer. It is also the designs that provide the unique living experience for buyers, giving them value for every ringgit they spend to buy a property from DK Group,” said DK Group founder and managing director Danny Koek.

Founded in 1997, DK Group is owned by Koek, who took the holding company DK Leather Corp Bhd public in a 2004 listing.

In 2008, DK Corp was privatised, and subsequently the group invested heavily in property development, focusing largely on Kuala Lumpur, via its property development arm, DK-MY Properties Sdn Bhd.

Koek spent RM165mil in cash to buy back the 330 million shares from the public shareholders of DK Corp.

Located on a three-acre site, SkyVillas, undertaken by DK Group’s subsidiary DK-MY, is a stone’s throw away from Publika Mall in the Sri Hartamas area.

The development is surrounded by the offices of oil and gas service companies that employ a sizable expatriate executive workforce.

“The market segment we are targeting is investors who will buy the SkyVillas properties and then subsequently rent them out to expatriates working in the area,” he said.

The SkyVillas, designed by Jon Ignatowicz of RDA Harris Architects, is described as a landed property in the sky because each unit comes with its own garden area, which enhances the green aspects of the project.

“The garden area on every level produces a perforated building mass, which allows cool breezes to percolate the entire structure of the building. There is also a car lift to go to a common parking area on top of the roof,” Koek said.

The 16-storey SkyVillas is planned to accommodate 402 residential condominiums, 16 levels of high-rise boutique offices and 140,000 sq ft of retail space.

The top floors are designed for eight double-storey super villas with their own private parking space that can accommodate two cars, which is accessible via private car lifts.

Below the residential floors will be 140,000sq ft of commercial retail space on the ground and first level, cineplexes, and boutiques offices. The residential units in SkyVillas have built-up areas ranging 670sq ft to 1,800sq ft.

Scheduled to be unveiled in the second half of next year is the D’Twist mixed-development project, comprising three tower blocks of 300 office suites, 816 residential duplex suites, and 188 duplex hotel suites and 122 hotel rooms.

“There are three tower blocks constructed on a podium comprising four two-storey levels of commercial space of 400,000sq ft, which will serve as a shopping centre. The residential tower block of 80 floors will take the height to 300m, making it the tallest residential building in the Asean region,” Koek said.

The selling price for D’Twist office and residential properties are priced at RM1,200 per sq ft and RM1,300 per sq ft respectively.

According to Koek, the targeted segment for the residential duplex suites of D’twist will be the students from Taylor’s, Monash, and Sunway universities in the vicinity.

“There is shortage of accommodation for students. We expect investors to buy the duplex units for the potential rental market in the area and for their own use.

“The current market rental rate in Bandar Sunway is RM1,000 per bed. Our survey shows that Taylor’s hostel students are paying higher, although its hostels don’t have many facilities,” Koek said.

According to Koek, D’Twist will have adequate recreational facilities to attract students to make the scheme their home while they pursue their studies.

“We are providing cineplexes, a bowling centre, and 400,000sq ft of shopping area.Put it this way, we have sufficient entertainment and leisure activities to cater to a population of 15,000, which is what we expect for DK City, which is located on a 11.45acre site,” he added.

Koek said the group expected to sell all the properties in D’Twist within 12 months after the launch in the second half next year.

“The residential duplex units and the office units are for sale, while the properties in the mall and the hotel will be kept.

“We are now negotiating with several four-star international chains to run the hotel and expect to finalise the deal in three months,” he said.

According to the company, its current projects DK Senza and D’Latour have been enjoying brisk sales since their launch in 2011 and 2013.

The two projects were carried out without any financing from banks.

The RM300mil 23-storey DK Senza project comprising 348 residential condominiums, 58 small home offices, and 54 commercial units on the ground floor, was sold out shortly after the launch.

“The price of DK Senza, which will be complete early next year, has appreciated by 70% to 80% within two years to about RM800 per sq ft, from RM460 per sq ft,” Koek said.

The RM800mil D’Latour project comprising 332 serviced suites and 629 SOHO duplexes in two tower blocks, has sold 50% of its serviced suites and all the SOHO duplexes since their respective launches in November and March.

Both D’Latour, DK Senza and D’Twist form the 11.45 acre DK City township scheduled to be completed in 2017. The land was acquired for RM100mil in 2005.

Koek said the group is expected to generate an annual sales revenue of RM1bil in two years and rental income of RM100mil in five years from their office buildings and commercial assets.

“We will invest another RM500mil to acquire more land in Kuala Lumpur, Selangor, and Penang before the end of next year, to add to our existing landbank of more than 200 acres he added. - The Star