Lure of Penang sees spike in property prices

GEORGE TOWN: The scarcity of land on Penang island and its lure as a tourist destination and a second home for foreign retirees have caused residential property prices to soar by more than 25% over the past five years.
According to real estate valuers, the prices are among the highest in Malaysia, which is why the Consumers Association of Penang claimed that only the rich could live on the island a world heritage city.
A survey by The Star revealed that condominium units in Batu Ferringhi, Tanjung Bungah and Gurney Drive which front the sea are being sold at astronomical prices, in some cases beginning with RM2mil for a 1,000 sq ft unit.

Crowded skyline: High-rise buildings dot Gurney Drive, which was once a sedate, low-density area where locals came to relax. — K.T. GOH / The Star

Even pre-war houses in the inner city for example, in Campbell Street have been snapped up mostly by non-Penangites, who have turned them into boutique hotels or simply kept them because of their architectural beauty.
The prices of the houses have rocketed from about RM500,000 in 2007 to approximately RM800,000 today an increase of about 30%.
Raine & Horne Malaysia director Michael Geh said the increase was among the steepest in the Pulau Tikus, Gurney Drive, Tanjung Tokong, and Tanjung Bungah residential neighbourhoods, which experienced a rise of over 25% in prices of condominium units.
Other areas where prices of condominium units and terrace and semi-detached houses have shot up by at least 25% are Bayan Baru, Sungai Ara, Minden Heights and Batu Maung.

The medium-range housing schemes in George Town neighbourhoods of Perak Road, MacCallum Street, Burmah Road, Jelutong Road and Sungai Pinang have not been spared.
“These have seen over a 25% increase in prices over the past five years,” Geh said.
An apartment located in such a neighbourhood cost RM180,000 in 2007 but is now RM250,000,
Geh said the rise in property prices had driven many people to buy homes in Seberang Prai, where property prices are a third of those on the island.
“But we are seeing property prices on the mainland rising as well,” he added.
An apartment in Butterworth town is now selling for RM250,000, compared to RM180,000 five years ago, while a terrace house now costs RM500,000, compared to RM300,000 in 2007.

Mushroo ming buildings : A file picture showing Penang’s Gurney Drive in 2008. Many high-rise projects have sprouted there since.

Given the rise of raw materials prices and the scarcity of land, property prices in Penang were expected to continue rising, Geh added.
Meanwhile, Penang Barisan Nasional chairman Teng Chang Yeow said there were only one or two major hillslope projects during the previous administration. Now, there were hillslope projects all over the island.
He said the present guidelines on hillslope development were adequate, but the state government should be more stringent in enforcing them. - The Star

Magna unit in RM100mil land deal

Shah Alam 20-acre acquisition to be paid by RM70mil cash and share issuance

KUALA LUMPUR: Magna Prima Bhd unit Magna Ecocity Sdn Bhd has proposed to buy 20 acres from PCM Bina Sdn Bhd, located in Section 15, Shah Alam, for RM100mil via cash and share issuance.

Magna Prima signed a conditional sale and purchase agreement with PCM Bina Sdn Bhd yesterday and stated that the RM100mil payment would be satisfied by RM70mil cash and the balance in the form of 1.11 million issuance of new ordinary shares representing a 30% interest in the enlarged share capital in Magna Ecocity or at approximately RM26.92 per Magna Ecocity share.

The cash consideration portion of the proposed land acquisition would be financed through a combination of internally generated funds and bank borrowings, of which the breakdown had yet to be determined, Magna Prima said.

The said land was located at the north-west intersection of Federal Highway, Expressway Lingkaran Tengah (ELITE) Highway and Guthrie Corridor Expressway, it said in a statement to Bursa Malaysia.

“Magna Ecocity will be responsible to undertake the overall construction and completion of the proposed development of the property. Currently the property is vacant,” it said.

Magna Prima is proposing to develop the land into a mixed residential and commercial project, comprising 180 units of 3-storey shop offices and 1,620 residential apartments.

“The gross development value of the proposed development is estimated at RM832.67mil and the total development cost is estimated to be RM624.83mil with an expected gross profit of RM207.84mil. The proposed development is expected to commence in 2013 and is estimated to be completed by 2016,” it said.

The proposed land acquisition is subject to approval and barring any unforeseen circumstances, the proposed acquisition is expected to be completed within the fourth quarter of 2012, it said. - The Star

M’sian investment in Aussie properties to grow

GEORGE TOWN: Investments from Malaysia in the Australian property market is expected to grow by about 15% this year from RM125mil in 2011.

Property Talk director Steven Cheah said in an interview that for the past two years the investment in Australia had remained flat at about RM125mil per annum.

“This was due to the stronger Australian dollar. But since March, the Australian currency had weakened slightly and so we are anticipating more property investments in Australia.

“We have also been getting a lot more enquiries since March 2012 about investing in properties in Sydney and Melbourne,” he said.

Artist impression of the Array project in Melbourne by Mirvac

Cheah said every year many Malaysians go to study in Australia, thus creating a severe shortage of property for rental.

“Many parents find that buying property for their children make more economic sense than renting. Once their children completed their education, the property can be rented as rental income or they can sell with good capital income,” he said.

According to Cheah, Melbourne was the top destination for Malaysian property investment funds.

“This is because many Malaysians have relatives who have migrated to Melbourne, where you can find a variety of Malaysian restaurants.

“According to the latest research by Australian Property Monitors, of the major capital cities, Melbourne has been the standout performer for house price growth over the last five years, with prices increasing almost 30% in just 15 months.

“Perth was the worst performing city, with the median house price unchanged in five years, which is largely a hangover from a resource-fuelled boom in prices in the early 2000,” Cheah said.

He added that Sydney and Melbourne were always voted as the top three most livable cities in Asia by ECA International, a research firm with its Asia headquarters in Hong Kong.

On Mirvac's new project in Melbourne, Cheah said the Array project, comprising 169 condominiums was next to the Yarra River.

“The project, introduced in Shanghai recently, received very positive response. Some 35 units were sold in one week,” he said.

The Array condominiums, positioned on the north-facing bank of the Yarra River, with built-up areas from 55 sq m onwards are priced from A$513,000.

“A limited number of three bedroom, deluxe Sky Residence options, priced from A$1.41mil, is also available,” Cheah said.

The project will be exclusively previewed at Hilton Kuala Lumpur on June 9 and June 10.

“Construction work on the Array project has started and is scheduled for completion in end-2014,” Cheah added. - The Star

Heritage laws need ‘more bite’ Conservation expert: Plan must encompass every aspect

GEORGE TOWN needs to simplify the structure for managing its Unesco World Heritage Site.

New South Wales Public Works (Government Architect’s Office) senior heritage architect Mary Knaggs said there were many related bodies and departments but their roles weren’t clearly defined.

“There needs to be one body with more bite.

“Preserving intangible heritage is a challenge.

“Australia really started to look at heritage conservation only in the 1970s because the community demanded it,” she said during the recent ‘Heritage Explained: An Australian Perspective’ talk in Komtar.

Knaggs said managing heritage had many benefits, including environmental and economic sustainability, but many people see it as a burden.

She also said heritage conservation started with a listing by the government, preparing a management heritage plan, doing a heritage impact assessment and finally, preparing an assessment report or recommendation.

Stressing the importance of a management heritage plan, she said it must encompass every aspect including buildings, streets and maintenance.

“Study the fabric of your heritage through sources like documents, maps, physical structures and oral history.

“You must understand what you are trying to preserve before making any changes,” Knaggs said.

She added that energy efficiency, disabled access, fire hazards and health and safety issues were among the challenges of adaptive re-use of heritage buildings.

Peter Romey, who is a partner in Godden Mackay Logan, Australia’s largest heritage consulting firm, said all levels of the government — federal, state and local councils — had a critical role to play in setting a good example for private property owners.

“People are intimidated when they hear the words ‘heritage architecture’ but it’s just about getting the methodology right,” he said.

“There’s no reason why heritage and modern architecture can’t co-exist.

“What’s crucial is researching not just the history, but its significance such as the aesthetics, historic, scientific, social or spiritual values for the past, present and future generations,” Romey said.

He has over 30 years of experience in heritage conservation as a consultant.

Both Romey and Knaggs are Australian heritage specialists who have been involved extensively in their country’s heritage management.

Penang Heritage Trust president Khoo Salma Nasution said heritage conservation in Australia was handled “very professionally” as it involved various levels of the government, community and the private sector.

She said heritage conservation translated to improving the quality of life as it was a connection to our past.

“We should look at the Burra Charter (widely recognised as the standard for heritage conservation best practice in Australia), and apply it to our own cultural settings,” she said.

The recent two-hour event was organised by the George Town World Heritage Incorporated. - The Star

Villagers protest against development project

GEORGE TOWN: Some 60 villagers of Kampung Pokok Assam in Jelutong protested against an ongoing development project which they claimed was damaging the road and causing flash floods.

Jelutong Timur Residents' action committee chairman Zarus Yusof, who led the group of villagers, claimed the housing project had caused the 3.2ha land there to sink, resulting in blocked drainage.

He also alleged that heavy construction vehicles had damaged the roads.

“As a result, we have been experiencing flash floods even when the rain is not heavy.

“How are we to move about in our own village?” Zarus said during the protest which was held along the main road outside Kampung Pokok Assam yesterday.

The villagers carried placards and banners claiming they were duped by the Penang Municipal Council (MPPP).

Zarus said the council should have built alternative routes for the villagers before the project started instead of blocking some of the roads there.

Villager Kung Soon Guan, 62, claimed the house he has been living in since birth had been demolished and he was now renting a room in Jalan Gemas.

The village is believed to be about 100 years old.

Residents claimed they were duped by the state government, which wanted to evict them from the village to make way for access roads to the new development project.

“We were given forms which we thought were census forms distributed by the State Land Office when in actual fact, the forms were to obtain our support for the roads to be built and to widen the Jelutong Muslim cemetery plot,” Zarus said.

He added that about 200 people from 34 families were affected by the project.

Jelutong MP Jeff Ooi said the state had met with the villagers and informed them that they would be given units of houses as compensation by the developer. - The Star

Buildings only on land below 76m in height

GEORGE TOWN: Hillslope development in Penang will only be approved if the land is less than 76m high.

However, State Local Government and Traffic Management Committeechairman Chow Kon Yeow said developers who had obtained planning permission from the Seberang Prai Municipal Council and Penang Municipal Council prior to 2007 were exempted from the ruling.

“Yes, we have approved hillslope development but our approval is subject to scrutiny by the high-risk land development committee as well as over 10 other relevant authorities, including the local councils' internal departments,” he said.

Chow said the local councils were finalising their reports on hillslope development approvals for submission to the Housing and Local Government Ministry.

“We will submit a full report by this week,” he said.

State Public Works, Utilities and Transportation Committee chairman Lim Hock Seng said recommendations of the high-risk land development committee, which he heads, were not binding on the local councils.

The committee comprises professional bodies such as the Mineral and Geo-Science Department, Public Works Department, Drainage and Irrigation Department and Public Works Institute.

State Town and Country Planning, Housing and Arts Committeechairman Wong Hon Wai said hillslope development was necesssary as the Penang population of 1.6 million was expected to reach two million by 2020. - The Star

Residents against destruction of environment in Penang

GEORGE TOWN: As developers get ready to erect more high-rise buildings on the hillslopes of Penang island, more people have come out to protest against what they see as the destruction of the environment.

At least nine projects are believed to be in the pipeline in Tanjung Bunga and Batu Feringghi along the northeastern coast of the island, Bukit Gambier near Universiti Sains Malaysia in Gelugor and Sungai Ara in the southwestern interior.

Among the development projects which came under heavy scrutiny and criticism was the land reclamation in Bayan Mutiara in the south-east of the island.

Tanjung Bunga Residents Association chairman George Aeria said the area could not sustain any more high-rise buildings.

A hillslope in Sungai Ara on the island being levelled to make way for a housing project. — NG AH BAK / The Star

He added: “As land becomes more scarce, developers are moving towards the hills, but they are not only building on the slopes they are cutting into them.

“We are seeing mud and muddy water streaming down to the sea.”

Sunrise Garden Kondominium management committee chairman Manuel Nicholas said high-rise buildings had to be spread out for proper development.

He disagreed that there was insufficient flat land on the island.

“There is a lot of space and flat land on the west coast of the island. If proper roads and facilities are built, people would want to move there,” he said. Sunrise Garden is in Sungai Ara.

The state government has come under heavy criticism for hillslope developments since 2008.

On May 30, residents of Mount Pleasure in Batu Feringghi objected to the approval given by the Penang Municipal Council for the construction of 21 four-storey villas and 80 double-storey bungalows.

A Google Earth map showing the coastline along Batu Ferringhi where housing projects have sprung up. Many islanders are now protesting against the continuing hillslope development.

A group calling themselves the Concerned Residents of Mount Pleasure have been objecting to the development in their area since January 2010.

On the other side of the island, Sungai Ara residents protested against the approval issued by the council for two hillside development projects on April 8.

Both the Penang Barisan Nasional and Pakatan Rakyat have blamed each other for the situation, accusing the other of approving the projects or failing to revise the plans.

While Pakatan leaders have said that some of the projects were approved by the then Barisan government, there have been allegations that a huge project stalled by the previous government was approved by the present state government. - The Star

Sunway: Warning sign from property segment

Sunway Bhd (May 30, RM2.26)
Maintain buy with revised target price of RM2.60 from RM2.94: Sunway Bhd delivered earnings of RM64.4 million in 1QFY12, which accounted for 16% of our and 18% of consensus forecasts.

Weaker 1Q results were mainly due to lower revenue contribution from the property segment as well as slower progress of construction.

In tandem with lower revenue in 1Q (-2.3% y-o-y), earnings declined by 5.6% y-o-y to RM64.4 million. Earnings in the property development segment declined by 42.1% y-o-y and construction by 61.1% y-o-y.

The property investment division's earnings declined by 28.9% y-o-y, mainly due to higher interest expense incurred following the restructuring of the group's borrowings.

The exception was the trading and manufacturing segment, which saw its earnings grow by 2.1% y-o-y .

After adjustment for the one-off items, core profit increased by 15.8% y-o-y, mainly because most of the profit was generated by wholly-owned subsidiaries resulting in lower minority interests.

Nevertheless, earnings were still widely off our and consensus forecasts due to lower billings and sales of local property developments, slower progress billings of local construction jobs as well as the delay in the LRT construction job.

Sunway property sales of RM174 million for 1Q were below expectation, accounting for about 13% of the full-year sales target. We reckon slower sales could be due to the delay in some of the scheduled launches.

Sunway said it expects new property sales to moderate in the near to medium term as demand was affected by Bank Negara Malaysia's (BNM) responsible lending policy and uncertain economic conditions.

Unbilled sales declined from RM1.8 billion in 4QFY11 to RM1.7 billion in 1QFY12, suggesting that the burn rate was well above the replenishment of new sales.

Recently, Sunway was awarded the viaduct guideway package of the Klang Valley MRT. Excluding the awards of internal projects such as Sunway Velocity, total external construction jobs secured were RM1.21 billion which equal 81% of targeted order book replenishment per year.

Property sales of RM174 million registered in 1Q were below our expectation. Furthermore, the construction segment was affected by slower progress billings of some local projects and delay in the commencement of the LRT extension.

Hence, we are revising downward our earnings forecast for FY12 by 12% and 15% for FY13.

We are also ascribing a higher discount of 40% against the fully diluted sum-of-parts valuation (FD SOP) of Sunway as we are wary about further deterioration of the property segment from 2Q onwards.

Despite the heavy discount on FD SOP, we maintain our "buy" recommendation for Sunway as the company shares are still undervalued. It is noteworthy that Sunway is the only big cap developer trading below its net asset value. — MIDF Research, May 30

This story appeared in The Edge Financial Daily on May 31, 2012.

Mah Sing to build up landbank

KUALA LUMPUR (May 31): Mah Sing Group Bhd is scouting the Klang Valley, Penang, Sabah and Iskandar Malaysia, Johor in search of land to boost its landbank.

Group managing director and CEO Tan Sri Leong Hoy Kum said the group has achieved 73% of the RM5 billion gross development value (GDV) planned for this year.

Its current landbank is more than 1,500 acres (600ha).

"There are still seven months to go this year so we need to lock in more land. The land must also fit into our business model," said Leong, adding that Mah Sing wants to maintain the lead position in the property market.

The property group may acquire land via joint ventures (JVs) with landowners or participation in government land privatisation.

Mah Sing has 39 ongoing projects in various stages from planning to mature. It has a GDV of RM18.2 billion, of which 98% is unbilled sales.

As at May 15, the group achieved property sales of RM1 billion or 40% of its 2012 sales target. Properties in greater KL contributed 82% to sales, followed by Johor Baru with 10% and the rest from Penang.

Leong said the projects are in well-placed locations and can sustain the company's earnings for the next eight years.

"We deliver the right products coupled with strong branding and a good track record. I would say we are doing the right thing and will continue to do the right thing," he said.

Leong said Mah Sing will continue to focus on mass market property worth below RM1 million, such as link houses, and landed property of above RM1 million in good locations, such as its bungalows and semi-detached units in Cyberjaya.

Asked if the group has plans to expand overseas, Leong said the focus remains in Malaysia as it is doing well but it will continue to explore.

"We are cautious but will not stop exploring. When the right time comes, then we will decide," he said.

For 1QFY12 ended March 31, the group posted RM457.8 million in revenue and RM59.9 million in net profit.

Commenting on property prices in the Klang Valley, Leong said prices are holding well.

"Only selected places in the Klang Valley would do well and appreciate more. This year house prices should maintain," he said, adding that the group's projects in Rawang and Bangi, M Residences and Southville City are expected to do well.

Mah Sing is also looking to lock in more land in Iskandar Malaysia, Johor where it has one industrial and four residential projects.

"Iskandar region is well-positioned. Most of the products should be able to attract buyers from Singapore. It is definitely the next destination to invest in for foreigners and locals," he said.

He expectis its industrial project Mah Sing Hi-Park there  to do well due to its close proximity to the Port of Tanjung Pelepas.

Mah Sing's new launches have not been severely affected by tighter home loan requirements by Bank Negara Malaysia.

Its Garden Plaza project in Penang has a take-up rate of 70% for Tower 1 and 65% for Tower 2, while the land in Rawang it acquired last October has locked in RM81 million in sales.

"Malaysia has a young population and high savings rate. And the banks still give competitive rates. Our market is actually targeting first-time buyers and up-graders. That segment is not affected," said Mah Sing executive director Steven Ng.

Leong said the group intends to target the foreign buyers, who make up about 5% to 10% of its clients.

It has set up an office in Shanghai and will be setting up offices in Jakarta, Singapore and the UK to attract investors, especially through the Malaysia My Second Home programme.

This story appeared in The Edge Financial Daily on May 31, 2012.

KL prime property market quarterly snapshot shows progress

Despite increasing economic uncertainties, Kuala Lumpur's prime property markets continued to perform well as 2011's momentum carried into 2012, albeit at a slower rate.

Condominium

In the first quarter of this year, the high-end condominium stock increased to 21,214 units with the completion of 285 units in a Bangsar located project. The freehold development, designed for “young and aspiring urbanites,” has six types of unit layout with built-up areas ranging from 671 sq ft to 1,610 sq ft all of which have been sold.

The number of high-end launches slowed as developers focused on the more saleable mid-price range market. One high-end development, located in Ampang, was launched in the first quarter. With good demand from both owner occupiers and investors and early pre-launch marketing by the developer, the freehold development, comprising 500 units, has been almost fully sold. Activity in the high-end condominium market is, however, expected to slow this year, in line with more caution in the market. More developers are expected to adopt a wait and see attitude and many are expected to promote and market their products to gauge demand before officially launching them.

Demand in both the sale and leasing markets has been stronger for smaller units and we anticipate this trend will continue this year with developers building smaller more affordable' units, which cover a larger purchaser catchment. We also expect to see more developers delivering SOHOs (small office home office), SOVOs (small office versatile office) and SOFOs (small office flexible office) in the short term.

Generally, market prices and rental values remained stable and rental rates were steady and average net yields were in the range of 3.5% to 5%. We anticipate that market prices will consolidate this year and rentals will continue to face downwards pressure despite the relatively strong holding power of many investors.

Office

Following the completion of two buildings, located in the city's Golden Triangle, the total existing supply of prime office space in Kuala Lumpur city increased by 1.1 million sq ft. The city centre's prime office market is expected to increase by 2.04 million sq ft this year with the delivery of four prime office buildings.

The average occupancy rate in KL city centre declined from 84.9% in the fourth quarter 2011 to 81.3% in first quarter this year as the newly completed offices were yet to register any physical occupation. However, one of the two was reported to be fully pre-committed. The office market in the city centre registered a net absorption of just below 190,000 sq ft and notable leasing activity was recorded within numerous prime buildings in the Golden Triangle.

In the first quarter this year, the average net rental reduced marginally as many landlords are still maintaining the same rental rates. Some, however, are now willing to offer attractive incentives such as longer rent free periods to attract prospective tenants.

With limited stock available in the market and steady demand from Malaysian investors, the investment market was relatively quiet and no major transactions were concluded.

We believe that if all buildings are delivered on time, the oversupply scenario will become more serious and with steady local demand, but slowing foreign demand, the occupancy rate in the city centre will decline. The lower occupancy rate will result in some landlords reducing their rental rate expectations in a tenant favourable market. Generally, market prices are expected to remain stable but assets with high occupancy rates and superior specifications within prime locations could register some capital appreciation.

Retail

Supply increased marginally, with the completion of the refurbishment and extension of one suburban, prime-retail centre, adding approximately 92,000 sq ft to the total stock and a further 1.4 million sq ft of prime space is expected to be completed by the end of the year in both the city centre and the suburbs.

The average occupancy rate declined marginally from 91.7% to 91%, predominantly due to retail centre owners and retailers undergoing refurbishments of their outlets. However, strong demand prevailed with the majority of the vacant space in new retail developments being pre-committed to by tenants.

Rental and market prices generally remained stable for the first quarter of this year with limited investment stock available. No en bloc transactions involving prime-retail centres were recorded. Investor interest, however, remained strong with a keen focus on prime-retail investment opportunities in either the city centre or the suburbs.

In the city centre, the average occupancy rate is forecast to increase over the next 12 months as retailers take physical occupancy upon completion of their fit-outs and renovations. In the suburbs, however, the market is expected to enter a temporary adjustment period where the occupancy rate is anticipated to reduce marginally as substantial supply will be completed during 2012.

We expect rental values to generally remain stable this year, but there is room for improvement in select prime retail centres in the city centre. Market prices are more likely to see an upside as interest from both local and foreign investors remains strong and many owners remain “unwilling” to sell at the prices most investors are prepared to pay. - The Star

David Jarnell, senior vice-president and head of research at Jones Lang Wootton, has over 25 years working experience in the property market and has been based in KL since 1996. This is an extract of a report released this week.