KL property mart set to cool

KUALA LUMPUR, April 23 — This year will be a challenging one for residential property as tighter lending bites into demand, especially speculative buying, property consultancy DTZ said today.

DTZ said in a report that Bank Negara’s new lending guidelines will cool an overheated market that has run up substantially in terms of pricing in the last two years as well as focus developments toward the more affordable housing segment.

The new guidelines, which use net income instead of gross income, will likely lead to slower sales for developers, said the report.

DTZ said in a report that Bank Negara’s new lending guidelines will cool an overheated market. — file pic

It noted, however, that developers remained upbeat over the year’s prospects.

“Although 2012 will be a challenging year as tighter lending bites into demand especially speculative buying, nevertheless, developers are confident that the demand for residential properties in Kuala Lumpur will remain selectively strong, as developers focus on smaller and therefore more affordable units as well as packaging launches with attractive Developer Interest-Bearing Scheme (DIBS),” said DTZ.

Bank Negara has introduced new lending guidelines, which came into effect in January, in an attempt to put a lid on household debt, currently at about 77 per cent of GDP.

The guidelines have apparently already had the desired effect on loans.

HwangDBS Vickers said in a report last week that mortgage approvals and applications in February were respectively 27 and 18 per cent lower than last year’s peak partly due to the stricter lending guidelines.

It also said the loan approval rate has fallen to 45 per cent from 55 per cent in August last year, while margin of financing has been reduced to 70-80 per cent from 90-95 per cent in the heyday of the property boom.

The residential property market has also been moderating across the causeway with Singapore reporting a sharp drop in transactions following government cooling measures such as a higher stamp duty.

Purchases by Singaporeans slumped 12 per cent in the first quarter, while permanent residents bought 7.5 per cent less and transactions by foreigners dived 78 per cent.

Singapore home prices also suffered their first drop in nearly three years when it fell 0.1 per cent quarter-on-quarter in March.

In terms of Malaysia’s office sector, DTZ said that it is likely to see greater challenges with slower economic growth and an anticipated oversupply in the coming months, as the pressure to find tenants gathers intensity.

It noted, however, that the office rental market was stable with an occupancy rate of 86 per cent.

Rent in prime office space exhibited resilience and stood at RM6.25 per sq ft per month which was unchanged from the last quarter despite weakening market conditions.

DTZ said that while the proposed KL International Financial District was an exciting development, it could heighten concerns of a property glut.

“Whilst it will be exciting for the market to see the emergence of a rival office district to KLCC, it will ratchet up the competitive pressure on rents by several notches at a time when oversupply is a major concern,” said the report.

DTZ said that the retail sector is likely to continue growing moderately supported by relatively cautious consumer spending and tourist arrivals.

It also said that new major retail centres would continue to attract retailers who are selective and would still lease space in centres that are expected to see high footfall. - The Malaysian Insider

Surging house prices drive Singapore inflation

SINGAPORE: Singapore's inflation accelerated sharply in March, led by a jump in the cost of cars and housing, suggesting the central bank may tighten monetary policy further when it comes up for review in October.

The city-state's consumer price index (CPI) rose 5.2% in March from a year earlier, the government said yesterday, far exceeding February's 4.6% pace and beating the estimates of all 11 economists polled byReuters.

“Singapore is in danger of losing its low inflation status,” Robert PriorWandesforde of Credit Suisse said in a client note.

“The current episode is the second major' inflation shock Singapore has experienced in the last four years; but what makes this time different from 2008 is that inflation in most other Asian countries remains well contained.”

Headline inflation “could average around 5% year-on-year in the first half before easing gradually in the second half of 2012,” the Ministry of Trade and Industry (MTI) and the Monetary Authority of Singapore (MAS) said in a joint statement.

They said housing would remain the largest contributor to inflation this year as rental contracts were renewed at “considerably higher” levels, especially in government-built HDB apartments, which tend to be rented out to people on lower incomes.

Housing, which rose 9.1% from a year earlier, and transport, which rose 8.6%, were the biggest contributors to inflation in March, data from MTI showed.

Economists noted that inflationary pressures in Singapore had begun to emerge in other categories, particularly those that were more labour-intensive.

“If we do see stronger price pressures, especially from healthcare and education, hinting at greater pass-through of wage costs, then the chances are (MAS) might do something else in October,” said Barclays economist Joey Chew.

The central bank surprised financial markets with its half-year monetary policy statement this month by saying it would let the Singapore dollar appreciate at a slightly faster pace because of persistent inflationary pressures. - Reuters

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Higher prices as income grows rapidly

KUALA LUMPUR (April 18): Middle-income economies see higher property prices due to the rapid growth of these two income segments in the urban population according to Dr Yeah Kim Leng, chief economist of RAM Holdings. During his talk entitled "The Paradox of Middle Income Economy and High Propery Prices" at the 22nd National Real Estate Convention in Kuala Lumpur on Wednesday, Yeah said the paradox is that house prices relative to income exhibit an inverse relationship with the country's income status, which is high in middle income countries but show even higher in low income countries. This is due to the rapid growth in middle income households that raises demand and gives less flexibility in the housing supply, which in turn causes an upward pressure on house prices. Yeah added that together with easy credit and low interest rates, this condition will play a role in fueling the systemic condition that creates a property bubble. However, Yeah said the property bubble is not something that Malaysians should be concerned with just yet. According to him, several ways that countries can mitigate high house prices include reducing land and housing construction costs and bottlenecks with more subsidies or credit finance; programmes by non-profit developers and municipal corporations to supply affordable rental housing; the use of innovative approaches to urban land development — for example, encouraging private land owners to pool together for larger scale housing projects; as well as public sector provision of affordable housing. Yeah said countries should adopt new urbanism involving increasing density near transport nodes such as bus lines and subway stations as well as create more compact cities through establishing am efficient relationship between housing, transportation and the labour market. - The Star

 

Affordable housing underserved

KUALA LUMPUR (April 19): The government needs to address the imbalances in the local housing market, as more developers gravitate towards the more profitable luxury segment.

RAM Consultancy Services Sdn Bhd chief economist Dr Yeah Kim Leng said the lure of higher gains in the luxury segment were the main reason for the shortage in the affordable housing segment, which covers properties priced at below RM150,000.

"Private housing and finance markets, in maximising profits, tend to undersupply housing on the affordable end," said Yeah in his presentation at the 22nd National Real Estate Convention on Wednesday.

Affordable houses dominated the property market last year, accounting for 54% of the total transactions. However, this was a decline from the 57% in 2010. Furthermore, market activity in the segment declined from 55% in January 2011 to 52% at the end of the year.

Yeah said in developed countries, affordable housing was normally provided by not-for-profit developers, or municipal bodies, which run on public subsidies.

He said the government needs to continue providing low-cost housing. Under the 10th Malaysia Plan (10MP) 75,000 units of affordable houses will be built nationwide. This is a year-on-year growth of 12.6%.

Yeah said the government needed to drive developers towards affordable housing with incentives.

"Well-functioning housing and land markets are necessary to address the high residential prices, but they are difficult to create and maintain in both developing and developed countries. We need to supplement this with interventions, in order to overcome the market failures in affordable housing," he added.

He added that it was possible to establish a "dual" residential property market, where the luxury segment would be more market-driven. However, he added that it was essential to control liquidity as an excessive level of debt could lead to the development of a property bubble.

High property prices have long been a concern for the government, which raise the Real Property Gains Tax (RPGT) to 10% from 5% previously to curb speculative buys.

Yeah said it was essential for developers to take an integrated approach in urban planning to address the supply constraints in the housing market.

Adopting a "smart growth" strategy to increase the density of residences near transport nodes such as bus lines and subway stations would create "compact cities" that rely on an efficient relationship between housing, transportation and the local labour market, he said. - The Edge Property

Market to be built, finally

RESIDENTS of Batu Ferringhi can soon look forward to a new market.

Penang Municipal Council (MPPP) building director Yew Tung Seang said work on the single-storey building would start this year.

“We are going through the building plan and will monitor the project closely,” he said.

Earlier, Tanjung Bungah assemblyman Teh Yee Cheu, who visited the site of the project in Jalan Sungai Satu, told reporters that the 0.9ha land was handed over to the MPPP recently.

Waiting with anticipation: Residents looking at the plot of land for the proposed Batu Ferringhi market.

He said the developer had planned to scale down the market’s size to build ‘affordable housing’ but the plan was rejected.

He said building more houses would benefit the developer while the community would be denied of a comfortable facility.

“When they sell these ‘affordable houses’, they increase their profits but the people will have to make do with a crammed facility.

“This market is long overdue.

“Residents here have waited some 16 years for the developer to build the market for them but until today, it hasn’t happened.

“Under council regulations, developers are required to build public amenities in their projects before handing them over to the MPPP to manage.

“In this case, the developer has taken too long so we’ve transferred the land back to the state.

“The developer must still fulfil its obligation to build the market and we will make sure that everything goes as planned,” he said.

The market is expected to cost some RM4mil. - The Star

Safety a priority for development projects

KLANG Valley folks are both awed and apprehensive by the many development projects that are either in the drawing board or already under way in their midst that are bound to change their living, recreation and working landscapes.

One of the most massive projects under way is of course the My Rapid Transit (MRT) public transport system. The others include the development of the 3,300 acres of the Rubber Research Institute land in Sungei Buloh, the 494-acre former military airport in Sungei Besi, Kuala Lumpur Financial District and redevelopment of Pudu Jail.

Many of the projects are expected to take place concurrently, and when the huge boulders, skylifts and tractors roll in, there is bound to be various issues cropping up especially pertaining to public safety and worsening traffic jams, among others.

Public safety should be of paramount importance. High standards of safe industry practices and standards at the construction sites should be spelt out clearly and strictly adhered to by all the contractors. Heavy penalties must be meted out to those who fail to practice these safety standards. The safety standards should cover proper safety procedures and high standards in safety, health and environment protection in all the project sites.

The aim is to prevent injury, minimise environmental impact, and ensure minimum inconvenience to the public.

The ongoing construction work to upgrade the public transport system in the Klang Valley is bound to cause more severe road congestion and other inconveniences when work progresses. As it is, the relentless road congestion has been one of the main reasons marring the ease of travel in our cities.

Proper traffic dispersal system has to be in place and well tested to ensure the traffic jams will not lead to grid locks on the roads which frequently happen these days on roads where there is construction going on (especially when it rains).

I believe many of us must have knots in our stomachs when it comes to crossing roads during rush hours. It can be quite a herculean task when there is no pedestrian crossing or overhead bridge in sight.

With the high traffic these days, it is necessary to make pedestrian bridge a mandatory feature on our roads and highways to ensure safety of the pedestrians. This requirement should be spelt out in the contract to the appointed contractors who undertake the construction work.

The sheer size of the areas earmarked for development especially the new massive townships, and the fact that very little information has been provided on the progress of the projects must have caused apprehension among the people.

Even industry players who are keen to bid for the projects have very scant information about how things are going and are very much in the dark on how they can participate. To ensure the best and viable ideas are given due consideration, inviting bids via open tenders by industry players will be the best and most appropriate method to adopt.

It is not just about coming out with the project plans but equally important is the need to keep the public and industry players posted on the progress, and how they will be impacted or benefit from the projects.

For greater transparency and accountability, details on the progress of these projects should be regularly posted and updated on the websites of the governing authorities that are overseeing them. The public will want to know how the project will blend with the existing environment, and what are the plans for traffic dispersal system. Environment impact assessment studies need to be conducted to determine the potential impact of those projects on the overall environment so that solutions can be built into the master plan.

On the positive side, Klang Valley folks must be looking forward to these projects further sprucing up the living environment for a higher quality of life and greater conveniences for them.

If planned holistically and executed well, the large parcels of land have the potential for better integration of public infrastructure and services. They will also remain relevant and sustainable for a longer term.

I believe this is indeed a golden opportunity to replan and redesign our cities to become global cities that provide higher living standards and more wholesome and quality environment.

The development plans should not be based on profit targets, but also for the social, environmental and sustainable causes.

Supply should be of a high quality and value, and development should be coordinated so as not to upset the supply and demand equilibrium.

It is important to be alert to the tendency to build up the land to the maximum; instead there should be a purposeful intention to set aside space for parks, green lungs and other public spaces for recreation and leisure. Making the city green with the allotment of open public spaces and green networks, complete with environmental protection zones and control measures, will preserve the green areas and parks from being roped in for development in future.

Town planners must have the foresight to plan the roads and other infrastructures for the growing population over the long term. And it boils down to having holistic master plans and best intentions for our cities. - The Star

l Deputy news editor Angie Ng sees immense benefit from cleaning up our heavily polluted rivers as pedestrian walkways and bicycle lanes can be built in along riverside stretches to promote walking and cycling culture among Klang Valley folks.

While the adage “location, location, location” is still considered the ideal gauge for your property’s resale value, there are other factors that can still play a part in helping you get the best price when you part ways with your home. One of the things to consider is the upgrades or renovations that you may have made to the property. While making improvements to a home can be a good thing, there are some additions that can make or break your property’s resale value. The following are some home upgrades that will dampen your property’s resale value. Poor renovation It’s one thing to make renovations to your home – and another thing when those upgrades requires further improvements! “Nobody likes to buy a home with something that requires big money to modify or repair,” says property investor Kamarul Ariff. He gives an example of a property he had purchased that had a “badly-renovated roof.” “The roof obviously had some bad leaks in the past but the renovations were very poorly done by the former owner. Unfortunately, when people go to inspect property, not many check to see if the roofing is in good condition. After all, most homebuyers or investors check out a property when the weather is clear anyway.” Kamarul recalls that after buying the property, it rained heavily - indoors! “There were leaks everywhere! When I finally got an expert to check the roof, I discovered that there were badly done patches made to some holes on the roof, which only worsen the leaks. “In my opinion, it’s better to spend a bit more money and get a good job done than to stinge and get poor workmanship. In the long run, nobody benefits. “It’ll affect your resale value and the buyer who’s looking for his dream home ends up buying into a financial nightmare.” P. Lalitha, a home-buyer, shares a similar sentiment. “The apartment I bought had poor floor renovations in the bathroom. Of course, it was my neighbour who lived below that alerted me of this.” Upon inspection by an expert, she discovered that the cement used by a previous owner for the flooring was of poor quality. “Renovations were not just done, they were badly done. So much so that it cost me a fortune to fix them. My advice for future home-buyers? Check every inch of your house. To home sellers, if you want to get the best resale value for your home, get your renovations done by an expert,” Lalitha says. Permanent upgrades Some homeowners make upgrades to their property for personal gratification without taking into account the fact that they may need to sell it in the future. However, these renovations hardly do anything when it comes to resale value, nor do they make it easy to sell. “Among them are fixtures such as swimming pools and wall modifications,” says KL Interior Design executive designer Robert Lee. “Having a swimming pool can increase the price of a home, but it also comes with extra responsibilities that not everyone wants. If you’re a senior citizen and not the active sort, you’d probably need to hire someone to clean and maintain the pool you’d probably never use.” He also points out that major works done to a property’s structure, such as to its walls, can be hard to undo. “There was this large family living in two adjacent terrace houses and they made a huge arch in the wall between the two houses. When it came to selling, they had a huge problem! “They also wanted to sell off the house as soon as possible and refused to patch-up the wall.” Other structural changes, like turning a three-bedroom apartment or house into a two rooms can also put a damper on resale value, says Lee. “If you’re selling a two-bedroom apartment and your neighbour is selling a three-bedded one at the same price, which property do you think a buyer will you go for?” Home-Deco Art Sdn Bhd director Rachel Tam says having a distinct paint job won’t affect a home’s potential resale value. “Some people paint their homes in all kinds of colours, like a kindergarten,” she chuckles. “But it won’t affect a property’s resale value. It’s not permanent and can be easily replaced. Besides, the first thing most homebuyers do is give it a new coat of paint anyway. Unexpected outcome Some upgrades can be so extreme that they no longer look like what they were initially set out to be. “We knew of someone who bought a single-storey house for RM250,000 and spent about RM200,000 to build a second level. When he sold it, he only got RM300,000,” says Lee. “Some renovations that place a property beyond its original architecture will not increase its resale value,” he adds. Tam notes that some people turn their homes into an office or place to conduct business, which may or may not affect the property’s resale value. “It depends on how extensive the renovations are. If you’re just converting one room into an office, then it’s fine, as the future owner won’t need to do much or anything at all to convert it back into an ordinary room. “However, if you’re going to start raring animals or live stock there, which may include additional structures to contain them, then this could be a put-off for potential homebuyers who are looking for a basic place to live.”

REPORTS released in the last two to three weeks on the state of the property sector in Malaysia and other countries in this region should offer some comfort to both builders and investors.

The Malaysian Property Market Report 2011 that is issued by the Valuation and Property Services Department of the Finance Ministry has painted a fairly positive picture.

According to the report, the Malaysian property market saw its highest growth in the last five years. For instance, the number of transactions in 2011 was up 14% and the value of transactions in the same year rose 28% compared with the previous year.

Perhaps it is for this reason that sentiment remain upbeat not only among property investors in Malaysia but in other countries in this region as well, such as Indonesia, Singapore and Hong Kong.

Also released just recently is the Asia Property Market Sentiment Report 2012 by iProperty.com, a network of property websites covering Malaysia, Indonesia, Singapore and Hong Kong.

According to this report, 59.5% of those surveyed think that the Malaysian property market is still doing well, and 62.3% of them have expressed a desire to acquire new property within the next six to 12 months. That, certainly, is a show of confidence in the property market in Malaysia, and sweet music to developers' ears.

More numbers: of those surveyed, 28% have said that they were looking to buy for investment.

But then again, some may ask, is it all that great? Are those numbers for real? Even if they are, are we drawing the right conclusions, the perennial pessimist will ask.

Given the scenario, we have reason to feel positive about the Malaysian property market.

Not reported here or anywhere, but widely acknowledge and perhaps even fairly extensively practised is the purchasing of properties for the future generations.

Parents monitor the prices of houses for the benefit of their children. Many who can afford it are already buying new homes for their children, out of fear that prices could rise to a level beyond their children's means if they wait for the children to grow up, find a job and start looking for a home on their own.

This practice now begs the question: if the children of this generation can't afford to buy their own homes, how then are their own children going to fare? But that is another issue.

Looking at it from an investor's point of view, there is still a lot of upside in the property market, particularly in Malaysia.

The property market in Malaysia is still quite under-priced when compared with those in Indonesia, Hong Kong or our nearest neighbour Singapore.

There are many family ties between Malaysia and Singapore and our cousins across the Causeway have more than occasionally envied us our property prices.

The fact that Singaporeans make up a large proportion of foreign property purchasers in Malaysia, particularly in Johor, is a case in point.

Property developers are also increasingly eyeing markets outside Malaysia with many carrying out promotional efforts to attract buyers from China, Indonesia and of course Singapore.

So long as property remains cheaper in Malaysia than in those countries, we will continue to be an attractive investment destination.

Even moves by the authorities to keep prices in check, such as one proposal to raise the floor price of property foreigners are allowed to buy, may not have the desired effect of preventing prices from rising.

A recent report says that the government may decide to put in place new requirements for foreigners planning to invest in the property market in Malaysia by restricting them to properties valued at RM1mil and above. Currently, they are allowed to purchase any property valued at RM500,000 and above.

This is not likely to have much impact as most property purchases by foreigners are in the RM1mil and above category anyway.

In a buoyant market, this requirement may even encourage developers to raise prices to a level above RM1mil just to widen their target market to include foreigners. That would be one more way to keep prices going up.

On the whole, the economy is performing fairly well. Unemployment rate is about 3% while the inflation rate was at 2.2% in February. The Bursa Malaysia index hit a new high this month.

Foreign direct investment has also risen by 12.3% to RM32.9bil in 2011 compared with the previous year.

These are reasons to feel upbeat. If one needs an indicator on how good sentiments are, just count the number of new property launches since the beginning of this year.

The three hotspots of Klang Valley, Penang and Johor Baru continue to command top prices as demand continues to focus on these three areas.

Overall growth for the residential sector, according to the Malaysian Property Market Report, was 19%, with Selangor recording the highest for home transactions at 28%.

Yes, there is reason to be optimistic. The challenge now is to ensure that we continue to enjoy sustained growth, but prices remain affordable for the vast majority of Malaysians.

Most of all, we do not want the bubble to burst. - The Star

Teh Lip Kim is the MD of SDB Properties Sdn Bhd, a lifestyle property company. Bouquets and brickbats are welcomed. Send by email to md@sdb.com.my.