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5% to 10% property price correction seen

KUALA LUMPUR: Luxury condominiums and even landed property may face a 5%-10% price correction this year in response to a slower occupancy rate last year.

This does not, however, mean that property prices would start to tumble as overall mass market housing would be able to sustain slower growth.

According to real estate services provider CH William Talhar & Wongmanaging director Foo Gee Jen, the occupancy rate among luxury condominiums in Kuala Lumpur registered only 67% last year, which was “not a very healthy sign”.

That said, the property market outlook for 2013 is flattish, with fair opportunities in prime locations and more focus on areas near public transport lines and affordable housing.

“The occupancy rate has been under pressure, but sales has been surprisingly strong,” Foo pointed out after releasing the Property Market Report 2013.

“If the scenario continues, then the occupancy rate could fall as low as 60%,” he said, noting that the high-end category now encompassed condominiums above RM700,000 in prime locations.

With the lower occupancy being the issue, Foo believes the market needs to re-evaluate its holding power, “How long can you hold an empty building without tenants?”

As for mid-range residential properties, which Foo said the price was hovering around RM400,000 now, there would not be any price correction as “the demand for these is always there”.

Separately, prices in the secondary property market would remain in tandem with the primary market. “The secondary market always benchmarks its prices against the new property within the locality,” he said.

Foo believes that the total transaction value for the sector would be lower, as there would be more affordable housing entering the market, although volume is unlikely to drop.

“I believe this year would be the reverse of last year, when transaction value was higher, because the market was focused on developing properties worth RM500,000 and above in 2011 and 2012,” he said.

Going forward, Foo saw the emergence of new high-density residential developments along expanding public transport lines, such as the MRT, LRT or new highways.

“The market for affordable houses is those who rely on public transport, (therefore) developers won't go into such housing projects unless the area is supported by infrastructure,” he said, noting that these projects need to be government-driven.

“The Government would need to give the green light to build high density, only then would it be viable for the developers.”

Following the same line of thought, Foo opined that low-cost housing should not be the main focus in property development as the country moves towards a high-income nation status.

“I think we should move away from building boxy houses as we move towards becoming a high-income nation,” he said.

As for office buildings, Foo said there would likely be an oversupply in the Klang Valley with upcoming mega projects, and the vacancy rate could go up a further 2.5% from 14% in 2012.

He believes rental would be under pressure on landlords competing for tenants who may prefer to pay only slightly higher rent at newer buildings with facilities.

“Old building owners would suffer more and many landlords are prepared to negotiate early with current tenants to lock in their tenancy instead of waiting for the tenancy to expire,” he said, adding that these landowners needed to upgrade their facilities, bring in retail components like upmarket cafes or find a niche market to appeal to. - The Star

Tycoon Robert Kuok's record payment for land in Johor is talk of the town in M'sia-S'pore

PETALING JAYA: The price that tycoon Robert Kuok is paying for a piece of 5.06ha freehold land in Puteri Harbour, Johor, has become the talk of the town and even across the causeway, where the Singaporean media is hailing it as the “new price benchmark” in Nusajaya.

The views on the transaction are varied, though. While Singapore'sBusiness Times wrote that it was a record price for the Nusajaya land, substantiating it with the toppish RM334 per sq ft (psf) price paid by Kuok, there are others who are claiming that the billionaire is getting the land on the cheap.

Robert Kuok

To recap, Southern Marina Development Sdn Bhd (which is 70% owned by Kuok-related companies and the remaining byKhazanah Nasional Bhd) is paying RM182mil (or RM334 psf) to UEM Land Holdings Bhd for a 5.06ha parcel of land in Puteri Harbour.

This price works out to a significant 58% premium over what a consortium of corporate tycoons Tan Sri Surin Upatkoon, Tan Sri Lee Oi Hian, Tan Sri Wan Azmi Wan Hamzah, and Wee Ee Chao had paid for a 17.81ha plot also in Puteri Harbour. The vehicle the tycoons used, Liberty Bridge Sdn Bhd, paid UEM Land RM401mil, which works out to only RM211 psf.

Real estate investment consultant Gavin Tee Swee Heng told StarBizthat the land was considered a good purchase due to the vast potential in that prime area, but noted that it was definitely “not cheap.”

An analyst pointed out that the land had been appraised by property valuer Messrs Assetz Sdn Bhd at RM330 psf, so Kuok is paying 1.21% higher than the valued price, and it was justified by the fact that it was one of the rare parcels of land that was facing the marina.

However, to be noted is the fact that another recent transaction in Iskandar Malaysia was done at a higher price than what Kuok is paying. Last December, mainland Chinese firm Country Garden Holdings Co Ltdpaid a total of RM900mil, or RM376 psf, for a 22.26ha land in Danga Bay.

The analyst explained that there was generally a price difference between land in Danga Bay and Puteri Harbour.

“Danga Bay sits in flagship zone A or Johor Baru, while Puteri Harbour is situated in flagship zone B under Nusajaya. Furthermore, Danga Bay is reclaimed land, and, hence, carries higher infrastructure cost,” said the analyst.

Tee is bullish on the development around Puteri Harbour.

“Puteri Harbour will be the number one play (in the region) in terms of class,” he said, adding that its value should be the highest in the vicinity due to the marina lifestyle conceptualised and target market which consisted of the international business and corporate population.

Meanwhile, concerns arose in the social media arena as some commentators claimed the land was cheap based on the projected development value.

Recall that the proposed development by Southern Marina would comprise a mix of residential and commercial development with a gross floor area of more than two million sq ft, at an estimated gross development value exceeding RM1bil.

Said Tee: “The land is definitely not considered cheap. There are many unforeseen costs that the developer might have to bear, as it takes time to develop the area.

“There is also a fair bit of holding cost that would incur over the period of time.”

Another consideration of the valuation of the land would be the plot ratio approved by the authorities, he added.

Besides that, he reckoned that there would definitely be some form of risk that developers had to take, as the development in Nusajaya was still considered at its initial stage and it would entail extra costs for them to hold until the area matured. - The Star

Malaysian home prices to rise 10-15% this year: WTW

KUALA LUMPUR: Residential property prices in the country will continue to rise 10 to 15 per cent this year, according to real estate services firm C H Williams Talhar and Wong Sdn Bhd. Managing Director Foo Gee Jen said sales for new housing developments will sustain this year driven by high demand for residential properties in the country.

"Areas of high demand will be close to the high-level infrastructure projects such as Mass Rapid Transit (MRT), Light Rail Transit (LRT) and Komuter train lines," he told reporters at the launch of the company's Property Market Report 2013 here on April 24.

"A big volume correction will be seen this year. House prices will remain generally flat but prices could face upward pressure from rising materials prices and other cost-push factors," said Foo.

The landed residential market is expected to continue to be in resilient mood with stable growth although fewer new units may be launched, he said. Developers are also trying to sustain profit margins by raising the new launch prices and testing new grounds for affordability.

"In tandem with that, they are putting in more eco-friendly and green building features as an added value to the projects.

"We have seen developers veering away from high-end niche devlopements and swtiching to more mid-range products in tandem with the government's PR1MA scheme," he said.

Foo said the outlook for the affordable housing segment is very positive. "We can expect units in this segment to continue to find a ready market. High-end residential properties continue to sell well in the major cities of Johor Baharu, Kuala Lumpur, Kota Kinabalu and Penang.

"We can expect with the seemingly strong demand, prices may be pushed upwards," he added. - Bernama

ARREIT to buy factory in Penang

KUALA LUMPUR: Amanahraya Real Estate Investment Trust (ARREIT) has entered into a sale and purchase agreement with Precico Electronics Sdn Bhd to acquire a factory in Penang for RM41.6mil.

Arreit ventured into the agreement via trustee CIMB Islamic Trustee Bhdin a bid to acquire the factory buildings located at Lorong Perusahaan, Prai Industrial Estate Mukim 1 Seberang Perai Tengah. - The Star

CapitaMalls M’sia Trust awards RM7m job for enhancement works to Gurney Plaza, Penang

KUALA LUMPUR: CapitaMalls Malaysia Trust (CMMT) has awarded a contract worth RM7mil to CapitaLand Retail Malaysia Sdn Bhd (CRMSB)to undertake the asset enhancement initiative works to Gurney Plaza, Penang.

In a filing with Bursa Malaysia, CMMT said CRMSB will be the project manager for the asset enhancement initiative works, which is to create additional retail space and enhance Gurney Plaza's retail offering.

The asset enhancement initiative works would include reconfiguration of space to improve the trade mix and sightlines, the company added.

The company also said that the asset enhancement initiative works would commence in the middle of next month.

The asset enhancement initiative works are slated for completion by the first quarter of next year.

CRMSB is a related party of CapitaMalls Malaysia REIT Management Sdn Bhd, the manager of CMMT. - Bernama

Real estate investment trusts losing lustre, investors opting for more aggressive strategies

PETALING JAYA: Local real estate investment trusts' (REITs) allure for investors may be waning on a combination of factors including lower returns due to REIT prices approaching target prices pegged by analysts.

Analysts said that while the industry's longer-term prospects remained positive, REITs were now downgraded to “neutral” as unit prices approached targets.

Maybank Investment Bank Bhd analyst Wong Wei Sum said the average gross yield for Malaysian REITs was a trough of 6.4% compared to 6.6% in January 2013 and 7.4% at January 2012.

She said in a report that investors might be adopting more aggressive strategies post-general election (GE) as some of them had used defensive strategies after close to two years.

“Investors may adopt a more aggressive approach for the property sector favouring the high-beta developers post-GE,” she added.

Other reasons for the change in weighting included competition from business trust and potential higher overnight policy rate (OPR) in the fourth quarter, which was expected to see a 25 basis-point hike in anticipation of a higher inflation rate, she said.

Meanwhile, two other analysts told StarBiz that OPR estimates by their respective research houses were maintained at healthy levels, which would not pressure the profitability of REITs.

Wong also said: “DiGi.Com Bhd, the third-largest telco in Malaysia, is mulling over setting up a business trust, we understand. If it were to materialise, DiGi's net dividend yield would be even more attractive than the current level of 5.3% (financial year 2014) and more competitive than large-cap Malaysian REITs' 4.4% (net yield).”

She added that competition could also stem from asset-rich developers like WCT Bhd, Dijaya Corp Bhd and Malaysian Resources Corp Bhd to unlock their assets value through REITs.

A general view of Mid Valley City. Maybank Investment Bank has downgraded IGB REIT to ‘hold’ while it has a ‘buy’ call on CapitaMalls Malaysia Trust.

An Affin Investment Bank Bhd analyst said competition posed by business trust in the near term would be minimal as investors might need time to understand its structure.

An RHB Research analyst said REIT sponsors had to inject at least RM1bil worth of assets to the instruments to achieve decent viability and liquidity.

She said that judging from the current completed assets that some of the developers had, it might take them a few more years to grow the asset sizes before listing them as REITs.

Thus, she did not see stiff competition from the REIT universe in the near term while KLCC Stapled REIT, which was en route to be listed this year was already on investors' radar.

Nonetheless, she was also neutral on the sector.

“Having said that, we will not see a selldown and a steep decline in REIT prices as the sector remains a good dividend play backed by asset value. Besides that, interest rates in the region are considered low,” she said.

The Affin analyst said she maintained an “overweight” for the sector this quarter but might tweak her computation following the financial results REIT players would announce in the coming weeks.

She said yields from REITs had been compressed to historical low and might look to downgrade the sector.

Maybank Investment has, in the report, downgraded Pavilion REIT,KLCC Property Holdings Bhd, Sunway REIT and IGB REIT to “hold” while it had a “buy” call on CapitaMalls Malaysia Trust.

The analyst from RHB Research said the brokerage's top pick was Pavilion REIT due to its location, asset quality and long-term growth prospects.

“When the mass rapid transit is ready, the Golden Triangle (in Kuala Lumpur) will be more vibrant and its growth will be even more attractive,” she said. - The Star

House buyers want interest waived

SOME 150 people who bought houses in an abandoned project in Taman Topaz in Dengkil, Selangor, held a peaceful demonstration after receiving bank notices over unpaid loans.

One of the buyers said the project, which was started in 2000, was only half completed, Malaysia Nanban reported.

He said most had been paying their loan instalments but stopped in 2003 after realising that the project had been abandoned.

“Most of us have agreed to pay the principal but we want banks to waive the interest charged from 2003,” he said yesterday. - The Star

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