Making all housing more affordable

WHEN I watched Usain Bolt cross the 100m line in an Olympic record of 9.63 seconds during the recent concluded Olympic Games, I saw a young focused sprinter with only one objective in mind; to cross the finish line in the shortest possible time. He amazed the world with his stunning performance again.

This reminds me of our journey in making all Malaysian housing more affordable. It is a race that requires the same amount of focus from all relevant stakeholders including public sector which is the Government, and private sectors, i.e. the property developers, home buyers and NGOs. Furthermore, like in a race where the sprinters have a sight on the direction and goal, all stakeholders in the housing industry should be aligned to the same goal before starting the race.

To understand what exactly drives up property prices, we need to analyse the various factors that influence the price of a housing development in Malaysia. This may help us identify the root cause and provide us with the correct remedies to make Malaysian housing more affordable and sustainable.

Let's begin by looking at what are the major cost components of a property project. Twenty or 30 years ago, land acquisition was only about 5% to 10% of a project cost, but nowadays, it can take up to a sizable 20% to 30% of the whole development budget before any value-added works are carried out on the land itself.

Land prices are ever rising due to scarcity of urban land especially in the major cities. For example, a piece of land that used to cost RM10 per sq ft in Mont' Kiara during the late 80's now can cost up to RM300 per sq ft. With rising land cost “eating” up a significant portion of the development budget, house prices automatically increase as a result.

The next major cost is the holding cost and construction financing cost of the project. The longer it takes to complete a project, the higher the financing costs of the project which will then increase the price of a home.

I mentioned this before in my earlier articles that property projects are sometimes subjected to one, two or more years of gestation period to obtain all the necessary approvals from the relevant authorities before they can be launched. The lengthy approval period will definitely affect the holding costs, and slow down the supply of housing units. If this approval time is not shortened, the rising demand will only further push the prices up. This is the basic market influence of supply and demand.

Another factor that influences the cost of housing, as highlighted by developers surveyed during the recent Real Estate and Housing Developers' Association (Rehda) media briefing, is the unsold and unreleased Bumiputra units.

According to the latest half-yearly property industry survey by Rehda, the number one reason for unsold properties comes from unreleased bumiputra units and has been so for the past two years.

With the requirement to hold on to the unsold bumiputra units, the additional holding cost is inevitably spread out to all the other house buyers in the form of higher priced units. Unreleased bumiputra units may also create a false impression of supply shortage in the market, and these can cause the prices to increase again. While we recognise the need for a bumiputra housing policy, the various states should agree on a transparent, auto-release mechanism to release bumiputra units if unsold beyond 18 months of launch, to make houses more affordable for everyone.

Apart from land cost, holding, and construction financing costs, another cost component that adds to the price of properties is utilities costs. In the past, utility companies would be expected to build substations and water storage towers as well as lay electrical cables and water pipes. Today, all these are required to be completed by developers themselves.

In a roundtable discussion on housing affordability, Housing Buyers Association secretary-general, Chang Kim Loong highlighted that the privatisation of utility companies have turned them into profit-oriented companies. Taxpayers' monies are no longer utilised to provide the basic necessities that they have paid for. This ends up making houses cost more because home owners end up bearing the cost of the infrastructure for these utility services.

In the illustration mentioned at the start of this article, a sprinter must stay focused on the targeted goal of winning the race without mental and physical disadvantages before and during the sprint. Imagine if Bolt needed to run against a headwind and carried a few pounds on his back all along the race. Would he still able to break the Olympic record and become a legend?

In the race to make the price of all housing units more affordable, the issues of high land cost, lengthy approval period, additional utilities expenditure and unreleased bumiputra lots are the burdens that are holding houses back from becoming more affordable. Solve these dilemmas and we will begin to break records.

● FIABCI Asia-Pacific Regional Secretariat 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 emailfeedback@fiabci-asiapacific.com.

Don: Penang should adopt rubanisation concept

PENANG can be the number one city in Malaysia by incorporating both rural and urban characteristics, said National University of Singapore Department of Architecture adjunct Professor Tay Kheng Soon (pic).

To achieve this, Prof Tay, who is also an architect, said Penang should integrate six elements — work, live, learn, play, farm and heal — from rubanisation, a word coined from the words ‘rural’ and ‘urbanisation’.

“Balik Pulau can become a strategic centre for this movement,” he said.

He was giving a lecture on ‘Rubanisation and Its Relevance to Human Settlement’ in the South-East District and Land Office, Balik Pulau.

He explained that the rubanisation concept could be adopted as there were still countrysides and mountains in the state.

Rubanisation can be defined as the act of rebalancing local production and consumption in which people can work, live, learn, play, farm and heal within 1km from their home.

The public lecture moderated by Balik Pulau MP Yusmadi Yusoff was attended by some 50 people which included Penang Municipal Council members, village leaders and members of the public.

Also present were State Speaker Datuk Abdul Halim Hussein, State Town and Country Planning, Housing and Arts Committee chairman Wong Hon Wai and Pantai Jerejak assemblyman Sim Tze Tsin. - The Star

中低阶级难置业 高收入者独霸槟岛？

根据槟城研究机构(Penang Institute)的一项槟州产业房屋研究报告，槟岛人的“居住权”潜伏被高收入者占领的危机，预料2014年后，中低阶级者或被逼迁离外州，无法在槟岛置业。

去年10月，槟城研究机构(Penang Institute)的城市规划及环境研究主任史托麦丹奴，针对槟岛和威省从2006年至2011年10月的房产资料，进行一项研究和分析报告。

报告内容分两部分，首部分是研究槟房产市场供应和需求，及槟民的住房负担能力进行评估；后部分则研究导致槟州产业价格急速飙升的因素，及槟城未来房屋发展方向。《光华日报》针对摘录报告重点，即日起以文字报道，为槟城的“房事”把脉。

房产暴涨收入却保持

人人都在埋怨，房产价格暴涨的同时收入却没有相对提升，这种失衡状况导致大多数人，工作半辈子只有能力付得起房屋“首期”，一辈子沦为“房奴”。光华

MPPP offers properties

GEORGE TOWN: Seventeen properties and a piece of land belonging to the Penang Municipal Council (MPPP) on the island are to be sold through open tender at a reserved price of RM18.6mil.

State Local Government and Traffic Management Committee chairman Chow Kon Yeow said the land and properties had a total land area of 0.8ha.

The land is a 0.4ha site in Jalan Sultan Azlan Shah, while the rest are three retail lots in Prangin Mall and 14 pre-war landed properties in Jalan Hutton, Lebuh Kimberley, and Jalan C.Y. Choy.

High maintenance cost incurred for the retail and pre-war properties and the need to raise funds for land purchase were among the reasons for the planned sale, said Chow.

“The proceeds from the sale will go towards funds to acquire new land,” he said.

Chow added that MPPP planned to acquire two plots of land in Balik Pulau and Jalan Masjid Negri and a market-cum-hawker complex in Teluk Kumbar and in Batu Ferringhi totaling 7.89ha for RM40mil.

“The 956 sq m land in Balik Pulau is planned for a recreational park, while the 0.8ha site in Jalan Masjid Negri is for a road widening project,” he said.

Chow said seven plots of land in Lebuh Union, Jalan Burmah, Jalan Hamilton, Jalan Kuala Kangsar, Lebuhraya Batu Lanchang, Jalan Cheesemen and Jalan Free School, and two condominium units in Pesiaran Gurney totalling 3.6ha had been sold since 1990 for RM29.4mil.

“Some RM44.1mil has also been spent on acquiring six plots of land totalling 117.6ha on the island for the development of community parks, public markets, landfills, access roads, and car parking bays,” he said.

On state Barisan Nasional Youth chief Oh Tong Keong's recent statement that Penang Chief Minister Lim Guan Eng might one day sell off Komtar and that Penang land was not for cheap sale, Chow said the bulk of Komtar had already been sold off.

Chow said about 60% of the Komtar Urban Redevelopment Project had been sold to private developers since 1983.

Chow said the Penang Development Cor-poration (PDC) still owned 42.95% of Komtar Tower, and 37.59% of the Komtar podium.

“The rest of the Komtar Tower was sold to state and federal government agencies, and the remainder of the podium to retailing businesses.

“PDC also owns the 1.8ha site of Phase 5, which has been designated for the Penang Heritage Square project,” he added. - The Star

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Developers urge Government to bring down cost of doing business

PETALING JAYA: Property players are hoping that Budget 2013 would introduce encouraging policies or tax adjustments that allow businesses to thrive in the current local and global economic environment.

Mah Sing Group Bhd managing director Tan Sri Leong Hoy Kum hopes to see new financial incentives, tax breaks or even infrastructure projects that will directly and indirectly benefit the sector as it is a key growth pillar for the economy due to its impact on more than 140 industries.

“We hope there will not be any policies or requirements which will increase the cost of doing business. At the same time, we hope for measures to reduce compliance cost, ultimately promoting the property market,” he said in a statement.

Leong explained that by reducing compliance cost, it would directly reduce the cost of doing business and the savings passed on to buyers would improve the affordability of the properties.

He suggested some measures to increase affordability such as charging tariff-based utility fees, limiting the requirement of land to be surrendered to improve the efficiency of land use and applying plot ratio instead of density to encourage smaller, more affordable units and at the same time reduce land cost per unit of property.

He also suggested reducing stamp duty so that the cost of property and home ownership could be reduced.

“We propose that the stamp duty be reduced to 0.5% for the first RM300,000, 1% between RM300,000 and RM1mil and 2% in excess of RM1mil,” he said.

He added: “Property is acknowledged as the best hedge against inflation, and people buy properties as a form of wealth preservation and not speculation. We hope that the Government would balance its approach in stimulating the property sector which is an important engine of growth for the country.”

To minimise the Government's loss of income, Leong said that maintaining a favourable real property gains tax regime could potentially increase sales and stronger growth of property and housing industry, which in turn bring in higher stamp duties due to higher transactions.

To further stimulate the property sector, Leong recommended a tax relief extended to all interest incurred on end financing for the first home.

“Alternatively, the Government could consider providing grants of up to 10% of the purchase price of affordable properties, to first-time home owners,” he said.

Leong also hoped that the Government would further ease policies to encourage foreigners to buy properties in Malaysia.

“As foreign purchasers account for only 2% of property transactions in Malaysia, this will not be a big cost to bear, and at the same time, can project a pro-investment image to the world at large,” he said.

On another note, Leong said that with the escalating pressure of higher cost of goods, the Government could consider reducing the personal income tax rate or increase personal income tax relief to raise disposable income.

“As a business friendly measure to encourage economic growth and to be in line with regional practices, we hope to see a reduction in corporate income tax as well,” he said.

It was also reported that property and plantations group Tradewinds Corp Bhd had hoped for measures to sustain domestic economic growth in the wake of the uncertain world economy.

Chairman Tan Sri Megat Najmuddin Megat Khas said concerted efforts were needed for Malaysia's economy to continue to expand in order to cushion the impact of the current sluggish global economy.

He noted the bearish European economy and slowing growth in China has rubbed off on the local economy.

“We've to find our own solutions (to our own problems). We should not merely rely on other countries. Unfortunately, our country is still dependent on imported goods. Hence, we should improve on our competitiveness to produce more competitive products,” he said. - The Star

EPF others jointly buy London's Battersea site for RM2bil

LONDON: The Malaysian consortium comprising property developers S P Setia Bhd, Sime Darby Bhd and the Employees Provident Fundbecomes the official owner of the 39.5-acre Battersea Power Station site after paying £400mil (RM1.99bil) on Tuesday with a £300mil bridging loan from CIMB, said S P Setia president and CEO Tan Sri Liew Kee Sin.

The remaining £100mil was paid as per the equity stake of each of the three consortium partners, with both S P Setia and Sime Darby forking out 40% each and EPF the remaining 20%.

This will be the first and the largest property development for both Sime Darby and S P Setia in Britain with a gross development value of £8bil (RM39.8bil).

The completion of the purchase saw the boards of Sime Darby and S P Setia and a team from EPF descending on London along with analysts and the press.

Plans for site: Liew (second from right) giving a briefing on development proposals for the Battersea Power Station site. Also at the briefing in London are Tincknell (left) and Murphy (right). — Bernama

Minister in the Prime Minister's Department Datuk Seri Idris Jala and London mayor Boris Johnson gave speeches to mark the official cocktail held on Wednesday evening.

At an earlier press interview on Tuesday morning British time, Liew said “although the consortium may not have the experience in this side of the world, we have the British technical team to see to it while we provide the concept and the funding.”

A newly-minted British company Battersea Power Station Development Co Ltd has been formed “a few days ago” with a logo of the Battersea Power Station and its four chimneys. This team from Battersea Power Station Development Co comprises the technical, management and financial team from those previously involved in the Battersea Power Station when it was owned by Irish firm Real Estate Opportunities (REO) before the site was placed under administration last year.

The newly-formed company's chief executive officer Robert Tincknell, who has been employed by REO for the last 10 years, will manage the project.

“Now that the project is fully paid, the next step is to work out the financing structure, whether it will be in Sterling pounds, whether it will be issuing of sukuk and seeking the best rates among banks,” said Liew.

The financing team headed by Battersea Power Station Development Co chief financial officer Simon Murphy and those in Kuala Lumpur “will find the best structure going forward for the long term,” said Liew.

Malaysian project: SP Setia president and CEO Tan Sri Liew Kee Sin showing the Battersea power station site in London that will be developed by Battersea Power Station Co Ltd, a consortium consisting of Sime Darby Bhd, SP Setia dan Employees Provident Fund. — Bernama

“We will enhance the value of the site,” he said.

What is important at this juncture is that the site is purchased clean of liabilities and it comes with an approved planning consent. The master plan is being done by renowned award-winning architect Rafael Vinoly.

The master plan will feature 3,400 new homes, 160,000 sq m of new office space, 56,000 sq m of retail and 9 ha of public parks and spaces.

Besides the long-term financing structure, the next step is to plan the development of phase one.

This will comprise the development of the residential units next to the power station and the refurbishment of the power station itself.

The units will be officially launched next year with construction to begin in April.

On comments that the deal hinges on contributions to British infrastructures, Liew said that other than the purchase price of £400mil, the consortium had to contribute £211mil over the duration of the 10- to 15-year project for infrastructure works.

“This is to be paid on a staggered basis as we go along,” he said, The first portion of £38mil will be paid in two equal portions of £19mil each in 2014 and 2015.

A major portion of £203mil will be for the extension of the Northern Lines, which involves the development of two stations with one of them at the power station site itself and the remaining £8mil for other infrastructural works.

He said this contribution towards infrastructure works was not due only from the Malaysian consortium but from other developers whose projects would benefit from the extension of the Northern Line calculated at a certain rate in proportion to the land they own and planned for development.

Liew said the fact that planning consent was already given by the British authorities and that there were already plans to extend the Northern Line close to the power station by the local authorities were huge plus factors.

Other features which add premium to the site are the nearby 200-acre Battersea Park, River Thames frontage and Chelsea and Sloan Square located on the other side of the Chelsea Bridge.

The site is also part of Vauxhall Nine Elms' largest urban regeneration project in central London.

Sime Darby president and group chief executive Datuk Mohd Bakke Salleh said the support given by the British government was tremendous.

“The British are very keen to develop and regenerate the site and this support will work for all parties concerned,” he said.

On who would be the target purchasers, Bakke said the project would be sold to everybody.

“London has a huge global market. The fact that the eurozone is facing some challenges at the moment has also enhanced the safe haven aspect of British properties,” he said. - The Star

Affordable housing a Budget priority

PETALING JAYA: Affordable housing will be one of the highlights in Budget 2013, said Datuk Donald Lim Siang Chai.

The Deputy Finance Minister said among the initiatives being looked into was the enhancement of low-cost home development projects, particularly the My First Home Scheme.

Lim said the Government had proposed to increase the limit of house prices under the scheme from RM220,000 to RM400,000 to fulfill the needs of those earning below RM3,000.

“Over 70% of Malaysians live and work in urban areas and easing their financial constraints will be highlighted in the upcoming Budget,” he said.

In July, the ministry concluded discussions via 18 focus group meetings exploring areas like affordable housing, urban transformation plan, small and medium enterprises and green technology.

More than 84 memoranda and proposals from various groups, NGOs and individuals were handed to the ministry for the Budget.

Topping the wish list were affordable housing, lower taxes, cheaper food and better public transportation.

Budget 2013 will be tabled in Parliament on Sept 28.

Lim said Malaysians should not rule out the possibility of a second round of the 1Malaysia People's Aid (BR1M) programme.

“We respect Deputy Prime Minister Tan Sri Muhyiddin Yassin's wishes for a second BR1M and are looking at our financial standing before making a decision,” Lim said after launching myTRADELINK, a new trade facilitation portal.

The portal, an initiative by the Finance Ministry and operated by Dagang Net Technologies Sdn Bhd, acts as a platform where businessmen can exchange documents required to fulfil regulatory trade processes for import, export or transit via the Internet. - The Star

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