House price hike likely

Penang properties said to increase 5%-10% due to more costly cement

GEORGE TOWN: The selling price of properties in Penang will soon surge by 5%-10% following the recent move by Lafarge Malayan Cement to raise cement prices by about 6%, according to housing developers here.

Following Lafarge's announcement, a 50kg bag of cement is now priced at RM17.50, compared to RM16.50 before the hike.

Penang Master Builders & Building Materials Dealers Associationpresident Lim Kai Seng said 60% to 80% of the materials used for a building comprised cement and cement-related materials.

“This is why an increase in cement price will have a significant impact on property prices.

Lim: ‘The price of sand is now RM40- RM43 per cu yard.’

“The other cement manufacturers in the country have sent signals that they will raise prices very soon,” Lim said.

There are six cement producers in Malaysia, namely YTL Cement Bhd,Tasek Corp Bhd, Cement Industries of Malaysia Bhd, Lafarge, CMS Cement Sdn Bhd, and Holcim (M) Sdn Bhd.

Only Sarawak-based CMS Cement has confirmed it would keep prices at the current level.

Lim said the price of other essential building materials such as sand and aggregate had also increased.

“The price of sand is now between RM40 and RM43 per cu yard, depending on the grade, compared to RM38-RM40 earlier this year.

“The price of aggregates is now at RM21 per tonne, compared to RM20 per tonne earlier this year,” he said.

House prices on the island are expected to rise by 10%, while in Seberang Prai, housing prices are expected rise by 5%, following the hike in cement price.

Kuala Lumpur-based developers such as Mah Sing Group Bhd and SP Setia Bhd with projects in Penang will continue to absorb the cost of the cement price increase.

Ideal Property Development Sdn Bhd managing director Datuk Alex Ooisaid the company was now revising the selling prices of its new projects upwards, due to the hike in cement price.

Ooi: ‘There will be a 10% hike in the selling price of properties in Penang.’

“There will be at least a 10% hike in the selling price of properties on the island.

“A hike in cement price means the price of all cement-related products such as concrete and bricks will rise. Construction cost will go up by between 15% and 20%.

“We expect the rest of the cement manufacturers in the country to adjust the price of cement upwards in the next one to two months,” he said.

In addition to the rise in cement prices, the cost of labour and transportation charges have also increased this year.

Tambun Indah Land Bhd managing director K.S. Teh said the cost of labour had increased to RM45 per day this year, compared to RM35 a year ago.

Transportation charges for sand have increased to RM450 per truck load this year from RM400 a year ago.

“There is also a labour shortage, as many Indonesian workers have gone back to Indonesia, which is booming currently.

“The selling price of properties will be impacted by the hike in raw materials and labour costs.

“However, Tambun Indah will absorb the increase in the price of raw materials until year-end.

“We will revise our pricing next year,” he added.

Teh said the selling price of properties on the island would increase more because of the additional transportation charges to ferry the raw materials to the island.

“This is why the increase in property prices on the island will be around 10%, compared to about 5% in Seberang Prai,” he said.

Tambun Indah will be launching next month the Straits Garden@Jelutong on the island, the Pearl Residence@Pearl City and Pearl Indah@Pearl City projects in Simpang Ampat.

The Straits Garden is a high-rise project comprising 183 condominiums priced from RM688,000 onwards, while the Pearl Residence@Pearl City and Pearl Indah@Pearl City schemes comprise landed properties priced between RM353,000 and RM508,000.

Mah Sing managing director and chief executive Tan Sri Leong Hoy Kum said the cement price hike would have less than a 1% impact on construction cost.

“Most of our projects have been tendered out and the construction costs are already locked in,” he added.

SP Setia property (north) general manager Khoo Teck Chong said the group would absorb this impact for now to be competitive.

”If other raw material prices such as bricks, rebar and tiles were to increase drastically, we may then have to review and adjust our property selling price accordingly,” Khoo added.

Meanwhile, the Malaysian Competition Commission (MyCC) chief executive officer Shila Dorai Raj had said the price hike by cement manufacturers did not at this juncture warrant a formal investigation.

“Price increases are by themselves not anti-competitive in nature. However, if there is evidence of collusion among the competitors to increase prices, this would be of concern to MyCC and may merit an investigation,” she said. - The Star

Free School plot sold for RM5.7mil

GEORGE TOWN: The Penang Municipal Council sold off a 0.24ha plot of land near Jalan Free School for RM5.72mil because it had no plans to develop the site.

Council Financial Management sub-committee alternate chairman Tan Hun Wooi said this was done since there were enough public amenities within 1.5km radius of the land.

He was commenting on a claim by state Barisan Nasional Youth head Oh Tong Keong that the company which bought the land plans to sell it for RM10mil.

Tan said that since the land was designated as a residential zone, the new owner might develop the land for housing.

“However, we have no say on anything now that the land had already been sold,” he said at a press conference here yesterday.

Oh had claimed the council sold the land in 2009 for RM2mil.

Tan said the council sold the land in January last year.

He said the money would be channelled to a special fund which would be utilised to acquire other plots of land for the benefit of the people.

“We are currently acquiring a 3ha plot in Teluk Kumbar for the construction of a multi-purpose hall, a market complex as well as a mini library.

“We are also buying another land in Balik Pulau which will be turned into a mini park,” said Tan. Also present was councillor Teh Lai Heng. - The Star

A downright classic

IN what is believed to be one of the first heritage landmarks in Penang to be restored through a fully private sector initiative, Logan Heritage stands proudly in the busy Beach Street in George Town.

The classy neoclassical commercial structure, which reopened to the public in December 2010 after an intensive year of restoration, was formerly a symbol of hope and justice in the mid-19th century.

According to Ken Lim (pic), a business executive for Tec Century Sdn Bhd who is currently the building’s property manager, the historical structure used to be occupied by a lawyer named James Richardson Logan in the 1800s.

“A lot of people from China and India were over to Malaya during that era to find work and there was no one to defend them or fight their cases when trouble occurred.

“It was Logan who stepped up to represent many of them,” he said in an interview.

Lim said the century-and-a-half-year-old structure, which was known as Logan’s Buildings in the past, contained an inner courtyard and was originally three stories tall.

“The building was damaged during the Second World War when the Japanese dropped a bomb near Union Street.

“It was later rebuilt into a two-storey building,” he said.

On the restoration of Logan Heritage, Lim said the original structure of the clay and sea sand building had been retained.

“The condition of the structure was quite bad. We had a big tree growing out of one side of the building while the timber flooring needed a lot of attention.

He added that the restoration project had cost RM6.8mil with building owner OCBC Bank forking out RM5mil and Tec Century footing the RM1.8mil balance.

The restoration also won firm y.Architects Sdn Bhd a Mention in the PAM (Pertubuhan Akitek Malaysia) Awards 2010 in the Conservation Buildings category.

Logan Heritage, along with the neighbouring century-old Whiteaways Arcade, is among the many heritage sites that will be passed by non-competition Starwalkers in a new 6km route this year.

Other sites include the Acheen Street Malay Mosque, the Clan Jetties, Tan Kongsi, Wisma Yeap Chor Ee, Customs Building (formerly Malayan Railway Building) and Pinang Peranakan Mansion.

Penang Yang di-Pertua Negri Tun Abdul Rahman Abbas will flag off Penang Starwalk at Birch House, Penang Times Square, at 6.30am on Sept 17, a replacement public holiday for Malaysia Day that falls on Sunday. - The Star

土库街多层停车场15日起 首半小时免收费

（槟城13日讯）要到银行界处理事务的民众，以后无需随街停车，从本月15日开始，土库街市政局多层停车场首半小时免收费，公众不需再和槟岛市政局执法队玩“躲猫猫”了。

自从槟岛市政局推行锁车轮计划后，土库街一带成为该执法队伍的重心点；一些要到银行办理事务的公众人士，都尝试躲避执法队伍，或等执法人员车辆离开后，才随意在路边停放车子，然后以最快的速度进入银行办理事务。

不过，随着有新承包商从本月15日开始接管土库街多层停车场后，每辆使用该停车场的车将获得首半小时免收费优惠，相信能有效地解决土库街非法停车的问题。

逾200停车格　每半小时60仙

相隔8个月后，土库街多层停车场终于有承包商接管，收费从每辆2令吉，降低至每半小时60仙，首半小时更是免收费。光华

教授建议调控高企屋价 停建豪宅多建中价屋

（槟城13日讯）槟岛高涨的屋价让很多槟岛人民透不过气来，教授也喊吃不消，并建议州政府采取有效调控，暂时对槟岛的豪华房屋发展计划喊停。

槟岛屋业发展近年不断向上挺升，新推出市场的房屋一个比一个豪华，造成槟城屋业发展出现“中空”的现象，没有人愿意针对中产阶层需求兴建20至30万令吉价位的房屋，如果他们要置业却不愿意屈就中廉价屋，就要向上购买豪华公寓。

这个现象让原本可以在现今社会过得比较舒适的中产阶层，就变成被高屋价“绑架”的一群，他们因此被房贷所困，家庭收入大部分要用来供房子，令提高生活素质的开支被缩减。由于想要拥有一个家，使得每个月的可支配收入变得捉襟见肘。

连惠慧:收入负荷不了屋价

马来西亚理科大学经济系副教授连惠慧博士说，虽然过去几十年的发展，让人民的收入获得了提升，经济能力看起来似乎比过去好了许多。“但是，当我们把屋价“疯涨”的因素归纳进入，我们却发现本身增加的收入完全跟不上屋价的上升。” - 光华

槟乔治市和广东中山市因孙中山结缘 签署备忘录结友好城市

（槟城13日讯）槟州乔治市与中国广东省中山市这两座与孙中山拥有深厚渊源的城市，周一签署备忘录结为友好城市。

槟州首长林冠英表示，他于去年9月率领代表团到中山市进行友好拜访，在深入交流后，双方皆有意结为友好城市关系。他感到欣慰的是，只筹备将近1年的时间，终可如愿以偿。

筹备近1年　终如愿以偿

他说，槟城乔治市与中山市早在上个世纪已有交流。来自中山市的中国革命家孙中山曾在槟城主持“庇能会议”，1911年著名的“黄花岗起义”，也是在槟城策划。而槟城乔治市目前仍然完美保留着孙中山的基地，坐落在打铜仔街的孙中山槟城基地纪念馆及中路的阅报书社，已成为了热门旅游景点。

他也指出，孙中山在1910年12月20日，创办槟城第一家，也是全球历史最悠久的中文报《光华日报》。他表示，随着乔治市于2008年7月7日被联合国教科文组织列为世界遗产后，槟城已逐渐受到国际瞩目。而槟城今年又获得国际荣誉，被评为ECA国际2012年全球最理想居住城市，亚洲区的第8排名及大马排名第1。槟城已连续2年排名前于首都吉隆坡，这是对槟州的肯定。- 光华

Are developers really making too much?

LATELY, there have been many ongoing discussions on the topic of high property prices. It made me ponder on the various causes that might have contributed to the situation, including the question of whether developers are making too much.

As I took a sip of tea, many thoughts came to mind which I found interesting and worth sharing before we dwell further into the real factors of rising property prices.

Based on annual reports (see chart) of three major property developers in Malaysia, namely SP Setia, UEM Land Holdings and Mah Sing Group, they are generating an average of 18% profit margin from their projects, and at the same time incurring a staff cost of about 7% of their total revenue.

These companies are major developers in mass residential properties which have high sales turnover, and therefore a good reflection of the average developers' profit margin in the residential market.

These findings may contrast with people's perception of the profitability of the property development industry.

Though it may sound like a fantasy, assuming I could convince these three property developers to give back their entire profit to their customers, it would mean an average of 18% discount on property prices for the year in question.

This would seem like a fantastic bonanza for the buyers of the properties in question. But would a 18% discount really make these properties affordable? I would imagine that people will still find these properties expensive.

Let's take an example of a terrace house that costs RM700,000 in Petaling Jaya. It would be priced at RM574,000 after the 18% discount.

If a home buyer is able to secure a 90% loan with a maximum repayment period of 30 years, the monthly loan instalment for RM700,000 and RM574,000 would be RM3,081 and RM2,526 respectively (based on a BLR-2.4% loan package with current BLR at 6.6% per annum).

From the above example, while the discount may seem substantial at absolute price, it is not significant in terms of monthly loan instalment for home buyers.

The debt commitment level for the latter is still considered high and out of reach for most people especially those who have just started their career.

Now, let's take a hypothetical scenario that the property developers decide to make their staff work for free that year.

It would mean another 7% discount to customers after deducting staff cost. Even with this total discount of 25%, property prices in many areas would still be considered unaffordable to many.

Anyhow, back to reality, it is impossible for any commercial enterprise to work for free or give up its profit if it was to run a sustainable business, as well as to satisfy its shareholders' expectations.

For the property development industry which has a product life cycle of four to six years (starting from land acquisition to handover of keys to customers), it is a challenge to further compress the profit margin after taking into account the risk and inflationary factors involved in such a long product life cycle.

Let us look at other industries as a comparison and review their profit margins.

For the banking industry, the three largest local banks that were selected are Maybank, CIMB and Public Bank. Likewise, the three major players from the mobile telecommunication services were Axiata, Maxisand Digi.

The results showed that the average profit margin for the banking industry is 35%, while the mobile telecommunication industry is enjoying an average profit margin of 26%. So, back to my question “are developers in Malaysia really making too much?”

Compared with the average profit margin of the banking and telecommunication industries, the profit margins of property development companies are significantly lower and definitely not on par in terms of the actual profit before tax figures.

Putting aside the profit margin for property development which is already relatively low compared with the other two industries, what are the other factors that are causing high property prices?

Many other underlying factors could be looked into in relation to the escalating property prices, instead of merely contemplating the issue as a market trend or as a result of developers' profits.

The Government, property developers, home buyers, as well as NGOs (non-government organisations) will need to work together to identify the root causes of inadequate supply of affordable homes in Malaysia.

Let's ponder this issue over the next few weeks and I welcome any suggestions and feedback to shed some light on it as I dwell further into this crucial topic in my next article.

● FIABCI Asia-Pacific chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

Union Investment Real Estate to double investment in M'sia

KUALA LUMPUR (Aug 9): Germany-based Union Investment Real Estate is confident of doubling its investments in Malaysia, from the current RM440 million.

"We are optimistic about the medium term growth prospect of Malaysia's real estate, which explains our investment in Malaysia," managing director Ulrich Dischler told reporters here on Thursday.

In 2007, Union Investment entered the Malaysian market by acquiring Cap Square Tower in Kuala Lumpur from Bandar Raya Development Bhd for RM440 million.

"Cap Square Tower is an important investment for the fund, as it is in line with our strategy to grow our Asian portfolio, through yield accretive acquisitions in stable markets which are supported by sound economic fundamentals," he said, adding that the building currently enjoyed 40 per cent occupancy.

He said Union Investment was also confident of earning a green building index certificate next year for its Cap Square Tower.

Dischler said Malaysia's sound economic fundamentals augured well for its real estate sector and that it was one of the fastest growing economies in Asia.

"Although real estate investment in Malaysia is still at its infancy stage, this presents more opportunities as well as options for value-addition.

"As a core investor with a long term investment horizon, we are confident that Cap Square Tower will benefit from the positive rental reversion in tandem with the progressive growth of the Malaysian economy," he said.

On its plans in Malaysia, he said: "Our strategy is to acquire existing buildings. We are tracking the market and currently there is no specific project that we are negotiating. Of course it also depends on the price expectation."

Dischler said over the next five years, Union Investment also intends to invest up to Euro one billion in the Asian growth markets on behalf of its global real estate funds.

"We remain optimistic about the medium to long term growth prospects and we anticipate rentals and prices to pick up again in 2013-2014.

"Our confidence stems from Asia's robust economic fundamentals, which includes its youthful demographic, dynamic workforce, rising income levels, growing consumer base, sound public finances, sizeable external reserves and healthy corporate balance sheets.

"This would underpin the healthy and sustainable growth of rentals and capital values across Asia's real estate markets," he added. — Bernama

Reducing traffic blues

PLANNING for Phase Two of the road upgrading project on the island by the Penang Municipal Council (MPPP) is expected to start next year.

Chief Minister Lim Guan Eng said that RM30mil would be allocated for the projects aimed at alleviating traffic congestion on the island.

“Since the six packages under Phase One worth RM28mil are scheduled to be completed by 2013, the planning for the next phase will start following the end of the first phase,” said Lim who marked the completion of the Jalan Gottlieb and Jalan Bagan Jermal road upgrading project with a brief ceremony at the site yesterday.

The upgrading of Jalan Gottlieb and Jalan Bagan Jermal involves expanding the road to five lanes, thereby increasing the road capacity.

The project, which is worth RM3.5mil, commenced in November 2011 and was completed in July.

“Besides that, the walkways were upgraded and a bicycle lane added,” said Lim.

The first package to be completed was in July 2011. It involved the upgrading of the Lorong Batu Lancang and Lebuhraya Thean Tek intersection.

Smoother flow: Jalan Gottlieb after the upgrade

The RM300,000 upgrade was completed in three months and it provides a free-flow left-turn for northbound traffic on Lorong Batu Lancang towards Lebuhraya Thean Tek.

The second package involved the upgrading of the state mosque interchange to provide additional lanes, plus more right-turn lanes into Jalan Air Itam.

The RM1.2mil upgrade which commenced last August was finished in January this year.

Of the three remaining packages, only the upgrade of a part of Jalan Masjid Negeri from Jalan Delima to the Udini Roundabout had begun in April and is expected to be completed in 18 months.

It involves the upgrading of the Udini Roundabout to provide free-flow U-turn for northbound traffic.

The other two packages which are scheduled to start in September and November respectively are the road widening works at Jalan Air Itam and upgrading of Lorong Batu Lanchang from Lebuhraya Thean Tek to Jalan Masjid Negeri.

Both the projects amount to RM8.5mil.

Also present at the ceremony yesterday was MPPP president Datuk Patahiyah Ismail. - The Star

Court orders villagers to move out

GEORGE TOWN: Three villagers in Kampung Pondok Upeh, Balik Pulau, have been given a month to vacate their homes for a residential development project.

Sessions court judge Zainol Rashid Hussain ordered M. Jagadeesan, Quan Yam San and O. Arumugam to deliver vacant possession of their homes to the developer, Evergreen One Development Sdn Bhd.

He also ruled that Evergreen One was to pay the trio, represented by counsel Yusmadi Yusoff, a total of RM72,000.

Met outside the court, Yusmadi, who is also Balik Pulau MP, said the defendants would appeal to the High Court against the decision.

“I will also file for a stay of execution,” he said yesterday.

It was reported in August last year that six households in Kampung Pondok Upeh would seek legal redress against eviction notices served on them to vacate the land.

The notices were issued on May 21 after the developer was vested with power of attorney by the two owners of the land at Lot 485, Mukim 6, in the Southwest District.

The plaintiff claimed that the defendants had no rights to the land, as well as rights to ask for compensation.

Yusmadi said hearing for the three other defendants would continue on Aug 14. - The Star