Govt housing loan transfer of estimated RM42bil seen to boost commercial lenders' growth

PETALING JAYA: A move to restructure the Government’s housing loan division will shave the fiscal debt and possibly raise housing loan growth by commercial banks.

Analysts are expecting the Government to transfer RM42bil worth of civil servant housing loans into the banking system whereby staff will pay the normal 4% per annum and the Government subsidise any interest above that threshold.

All commercial banks are also expected to be eligible to participate in providing housing loans for government servants and analysts expect the transfer of loans to commercial banks and development financial institutions will lower total federal government debt by around 4% to 4.5% from 51.8% of GDP as of June 30, 2013.

The idea to restructure the Government’s housing loan division was first mentioned in last year’s Budget as part of efforts to consolidate the fiscal deficit and to ease the Government’s financial burden. During the budget speech it was mentioned that the Government would appoint panels from commercial banks to manage new housing loans effective January 2013. But this had yet to implemented, said a local research house.

The research house reckoned the staff housing loans would be transferred to government-owned development financial institutions such as Bank Rakyat, Bank Simpanan Nasional, Agro Bank and Bank Pembangunan, which will manage and administer the existing stock and future stream of civil service home loans.

Another a local bank-backed brokerage analyst said whether it made sense or not for banks to be allowed to handle government staff housing loans would much depend on the profitability of such loans.

“Banks should take into account whether in the long term it is profitable to do so after weighing in various factors such as its capital consideration and interest rate environment, among others,’’ he told StarBiz.

He said the treasury housing loans charged a flat rate of 4% (compared with between 4.2% and 4.3% for new home loans by commercial banks) and all would depend whether it would profit banks after taking into consideration the above factors over the long term.

An industry observer said the move could uplift loan growth in the banking system, coupled with other positive factors, if some of the RM42bil were to be transferred to commercial banks.

Another bank-backed analyst said the transfer could be positive for the banking system as the recent measures to shorten the tenure for mortgage and personal loans as well as the potential fiscal tightening by the Federal Government via subsidy rationalisation programme in the later part of the year could dampen loan growth momentum in the retail segments.

This move to transfer could to an extent boost loan growth in the banking system moving forward. Total banking system loan growth to date stands at RM1.17 trillion. Some analysts are, however, maintaining their loan growth projections this year.

On a year-to-date annualised basis, the banking system’s outstanding loans growth was relatively flattish at 9.8% in August. Property loans remained the key driver, where loans for the purchase of residential and non-residential properties accounted for 56% of credit growth.

This is followed by working capital and hire purchase loans, contributing 15.2% and 11% of credit growth, respectively.

Lending indicators for August gained momentum year-on-year but fell on a month-on-month basis.
Loan applications, approvals and disbursements dropped by 9.9%, 8.1% and 2.4% month-on-month to RM67.5bil (July 2013: RM75bil), RM33.5bil (July 2013: RM36.5bil) and RM80.1bil (July 2013: RM82.1bil), respectively. - The Star

Real property gains tax hike likely in Budget 2014

PETALING JAYA: The local property sector may only see a real property gains tax (RPGT) increase in Budget 2014, according to a report by Kenanga Research.

It said it was expecting the tax rate to increase to 30% from 15% for properties sold within two years and 15% from 10% for properties sold within three to four years.

It said the 10% rate would remain unchanged for properties sold in the fifth year and zero RPGT for properties sold in the sixth year onwards.

“We believe this has been largely been discounted and priced-in somewhat, but we do expect some slight knee-jerk reactions for a couple of weeks post announcement,” it said. Budget 2014 will be tabled on Oct 25.

Kenanga Research also said the market could experience “panic buying” by investors next year if the goods and services tax (GST) was implemented in 2015.

“Experience from other countries had seen such trends in anticipation of future cost push inflations on asset prices.

“This will benefit 2014 sales of developers as financing terms for the primary market is more favourable compared with that of the secondary market.

“We do expect developers to front-load their launches in 2014 on the back of higher demand, which will be a big booster to future earnings,” it said.

On the Johor property market, Kenanga said the restriction on foreigners from buying secondary properties from locals would be good for the rental market and new launches.

On the the 4% to 5% tax rate of the sales price of all properties, it said was unlikely to slow down demand from foreigners, especially Singaporeans, as properties in Singapore are three times to five times more expensive than Johor.

On another note, Kenanga said it did not expect the build-then-sell (BTS) model to be implemented in Malaysia.

“The Malaysian economy is not ready for a BTS model as many smaller developers will not be able to cope with such a model while larger developers with strong financial positions will likely price-in premiums of selling BTS properties.” - The Star

New British home scheme

LONDON: Britain launched a flagship scheme to help people get on the property ladder, defying critics who believe the state-backed mortgage programme could fuel another housing bubble.

“Help to Buy” was launched hours after a survey suggested British house prices were rising at their fastest pace in 11 years.

Royal Bank of Scotland (RBS) and Lloyds, two banks in which the government retains big stakes after bailing them out during the financial crisis, will start marketing state-backed mortgages this week. HSBC, Europe’s biggest bank, announced it would join the scheme later this year.

Smaller lenders Virgin Money and Aldermore have also agreed to participate. But Barclays and the British unit of Spain’s Santander were still considering whether to join the programme which allows homebuyers to put down a deposit of as little as 5%.

In a sign of the breadth of concern, a cross-party committee of lawmakers warned the scheme risked raising prices rather than supply.

“Mistakes could distort the housing market or carry threats to financial stability,” the head of parliament’s Treasury Committee, Andrew Tyrie, said.

When the programme was announced in March, Britain’s housing market and its economy both looked in need of serious help. Now things look very different.

House prices nationally are rising at more than 6% a year, according to mortgage lender Halifax and parts of the capital are seeing gains in excess of 10%.

The government and Bank of England said there was no obvious risk of overheating, pointing to buying/selling and lending activity still well below long-term norms. More broadly, Britain’s economy is also recovering more quickly than expected.

A survey yesterday showed British firms recorded the best growth in domestic trade for at least six years in the third quarter. The British Chambers of Commerce said the results of its quarterly economic survey suggested economic growth sped up to around 0.9%–1% in the third quarter.

Prime Minister David Cameron and his Finance Minister George Osborne trumpeted the mortgage guarantee scheme at the Conservative Party conference last week and announced it would start three months early.

Under the scheme, the government will offer to guarantee up to 15% of mortgages, helping people who in recent years have been unable to get on the property ladder because they lack the high deposits lenders now require.

Now, a deposit of 5%, could suffice on any property worth up to £600,000. Participating banks would not have to set aside capital to cover the state-backed portion of mortgages they offered as part of the programme, the Bank of England said.

In exchange for the guarantee, the government will charge a fee of up to 0.9% of the loan’s value. This is designed to cover any losses to the taxpayer, if borrowers default, and to comply with European Union state aid rules. — Reuters

Northern Corridor Implementation Authority set to reach RM10bil target

GEORGE TOWN: The Northern Corridor Implementation Authority (NCIA) has raked in RM7.2bil in investments in the first half of the year, closer to realising the targeted RM10bil investments for 2013.

Chief executive Datuk Redza Rafiq Abdul Razak told StarBiz that the NCIA had surpassed the targeted 25% investments from the local private sector.

“Of the RM7.2bil achieved, 43% is from local private sector participation, while the remainder is from overseas.

“The investments have created 10,750 jobs, compared with the targeted 8,000 jobs from the RM10bil investments,” he said.

Redza said the NCIA was confident of reaching its RM10bil target, as there were new investments flowing into the services sector in the northern region.

“For example, we recently roped in RM575mil in investments for the hotel industry in Taiping until 2016.

“Of the RM575mil, some RM160mil would be spent this year for hotel projects in Taiping.

“We expect similar investments to pour into the services and hospitality sectors of other northern towns and states this year,” he elaborated.

Redza said the NCIA was currently negotiating for biotechnology investments from overseas into the northern region to take the agriculture sector to the next level.

“We are in the advanced stage of negotiations with a biotechnology company from the United States to invest in a northern state,” he said.

On Budget 2014, Redza said the NCIA was hoping to see the implementation of demand-driven incentives to encourage multinational corporations (MNCs) to utilise the resources of small and medium enterprises (SMEs).

“For example, to complement the existing incentives for MNCs, the Government could introduce attractive measures to drive the local SME-MNC partnership.

“We would arrange financial facilities for the SMEs working with the MNCs with institutions such as Malaysia Venture Capital Management Bhd and Malaysia Debt Ventures Bhd,” he said.

Redza added that the NCIA would also like to see the implementation of economic measures that would raise the incomes of farmers via the introduction of high-value crops.

“Such measures would also reduce Malaysia’s imports of food products, which have an estimated value of RM14.2bil per year, more than the RM13.4bil worth of food products exported,” he said. - The Star

More demand for secondary property

Prices of new homes in primary market too high for most people

Geh: 76% of urban wage earners can’t afford homes in the primary market.

Some 70% of residential property transacted in the country today are in the secondary market, while the remaining 30% are newly launched projects.

Raine & Horne Malaysia (Penang) director Michael Geh said more people were going after secondary property because of the pricing which ranged between RM72,000 and RM350,000.

“This market has been very active in the last 12 months and I foresee that it will be very active for the next six months, in terms of sales and rental,” he said at the recent Malaysian Secondary Property Exhibition (MASPEX) Penang 2013 at the Penang Times Square.

“Another reason for its popularity is that the secondary property is already built which means buyers can move in immediately.”

Geh said that in the primary market, many residential units were now being sold at a high price due to market demand and inflation among other factors.

“It is only due to the recent Bank Negara credit curbs that the rise in property prices has slowed a bit,” he said.

“These high price tags for new residential projects has made owning a home a distant dream for the middle class.

“The rental market will thrive in such circumstances as more turn to renting instead of buying their own homes.”

On the affordability level of new houses, Geh said that according to the Urban Wellbeing, Housing and Local Government Minister Datuk Abdul Rahman Dahlan, about 76% of urban wage earners in the country earned RM5,000 or less each month.

“This means 76% of the urban working population can’t afford to purchase their own homes in the primary market,” he said.

Meanwhile, Malaysian Institute of Estate Agents president Siva Shanker said between 5,000 and 7,000 people visited the three-day fair.

“We received some 2,000 enquiries, and about 200 of them turned into sales,” he said.

“We are still gathering information on the deals closed at the fair.”

An estimated RM1.5billion worth of secondary property was showcased during the three-day event.

The event featured more than 1,000 units of residential property in Penang and a few in Kuala Lumpur.

房政部探讨计划 奖掖建可负担房屋

（吉隆坡7日讯）城市和谐、房屋及地方政府部长拿督阿都拉曼指出，该部正在研究及探讨为有意要承建可负担房屋的发展商，提供相关奖掖，以在国内增设更多可负担房屋。
他说：“这是一项长期性的计划，目前还在商讨阶段，可建议向发展商发放的奖掖包括提供税务及进口准证方面的优惠。”
他是于今日出席“世界人居日”推介礼时，如是指出。
另外，阿都拉曼也说，他保证在人民房屋计划下出售的房屋单位价格，不会随着建筑成本涨价而提高。
确保房屋单位　不随成本提高
他说，房屋单位价格在东马及西马将各别维持在35万令吉及42万令吉的售价，保持不变，政府目前并没有计划要提高房屋售价，这些房屋单位宽度介于500至750平方公尺，设有3间房及一个晾衣处。
他续称，该部也希望政府能在2014年财政预算案中考虑增加可负担房屋计划的财政预算。- 光华

City & Country: Showcasing courtyard homes in Penang

OVER the years, Malaysian developers have turned Penang island into one of the hottest property markets in the country. In the mix is Runnymede Group of Companies.

Established in 1994 by its managing director Datuk Ramzan Ibrahim with Lembaga Tabung Angkatan Tentera, the group took its name from the heritage building Runnymede Hotel in Penang.

Prior to starting Runnymede, Ramzan worked for Citibank, which he joined in 1974. “I underwent intensive training at Citibank,” he recalls. “And after two years, the bank put me in property. There was a massive global property market meltdown in 1975 and the bank decided to recruit 60 officers from all over the world to be trained to handle the property business.

“We were sent to Paris for training for 3½ months where we learnt valuation and quantity surveying and were taught all the technical knowledge needed to understand the property market well.”

Clearly, all that training stood Ramzan in good stead over the years as Runnymede was able to withstand not only the 1997/98 Asian financial crisis, but also the 2008/09 global meltdown. On top of that, it has managed to survive in the highly competitive property industry.

“The key is how you structure your transactions, purchase the land and, more importantly, identify your property and select the site for your development,” remarks Ramzan.

His advice to young developers is: “Don’t be greedy. In terms of prices, you must ensure you can sell some units to break even. For instance, the slowdown today was caused by the central bank’s move to stop the market from overheating. One has to be receptive to it.

“You could come up with some innovative structure or move on to another project that could diversify your risks. If you can see there will be a slowdown and that your cost will be affected, you have to adjust accordingly. You must be on your toes because the property market is cyclical. When the times are good, you must move quickly.”

We always ask ‘what if?’ So we always build into our plans a Plan B. - Ong

Ramzan’s right-hand man and technical director Ong See Lian attests to his boss’ emphasis on risk management. “We always ask ‘what if?’ So we always build into our plans a Plan B. In case something happens to the original plan, we can start on Plan B straightaway.”

The Sanctuary’s Vilaris Courtyard Homes 
Runnymede’s maiden project in Penang is the 28-acre The Sanctuary in Batu Uban. Situated about 10 minutes from the Penang International Airport and five minutes from Queensbay Shopping Mall, The Sanctuary is a premier gated community and is being developed in four phases.

The RM160 million Phase 1, which is also called The Sanctuary, sits on 12.81 acres and features 56 high-end bungalows, 11 semi-detached houses and two townhouses. This phase, which boasts RM1.5 million worth of security features, was completed in 2010 and is now fully occupied.

Runnymede is now launching the RM125 million Phase 2, which is called Vilaris Courtyard Homes. According to Ramzan, Vilaris is a combination of the words “villa” and “laris” (which means to sell well in Bahasa Malaysia).

The 5.36-acre Vilaris offers 56 courtyard homes with a minimum area of 24ft by 80ft. The built-ups start at 3,940 sq ft and the launch price at RM2.3 million. The take-up rate is about 50% after 24 units were snapped up at an earlier private preview.

As Vilaris is a low-density development, space is not an issue. “We are not a quantity developer but niche,” Ramzan points out.

Once completed, the courtyard houses will offer design elements that are not common. “When we were designing the houses, we thought of the people who would be living in them, especially the different generations,” says Ramzan. “Also incorporated into Vilaris is a modern rendition of traditional Peranakan [or Straits-born Chinese] designs, such as inner courtyards.”

How the courtyard homes will look like once completed

Interestingly, the Vilaris show unit features a porch that slopes beneath the first level of the house. “We have basically tucked the cars below the house,” Ramzan explains. “So when you open the sliding doors for ventilation, you have an unobstructed view.”

According to Ong, the porch is also designed in such a way that it serves as a space for small functions.

There are two entrances to the houses. One has to ascend some steps to reach the main entrance while the second is on the lower level, which leads one to a space that Ramzan says has three possible uses.

It could be a granny flat with access to a small back garden for the older generation to potter around. It is also private because of a linear garden in the back. “Boundary to boundary, there are 20ft between the houses,” Ong says.

The space could also be a SoHo. “It would be ideal for an office for those who work from home,” says Ramzan. “It is separate from the rest of the house and will not disturb the occupants.”

Lastly, it could be used as guest quarters, a den, a children’s rumpus room or an audio-visual room. The key word here is flexibility.

The courtyard on the first level of the homes brings the Peranakan element to light. It allows in plenty of natural light, which is something Ramzan is passionate about. “Natural light and cross-ventilation are very important,” he says, gesturing to the double-volume windows of the staircase to prove his point.

The first level is an open space that flows seamlessly from the living and dining areas to the kitchen. The airiness and spaciousness give the homeowner flexibility in designing the interior to his taste, says Ramzan. However, under the deed of mutual covenant, the homeowner must maintain the façade of the house. The en suite bedrooms are on the top floor of the homes.

Another unique design element that the developer has built into Vilaris is the option for some of the units to have a lift. At present, 19 units have lifts, says Ramzan, adding that not all homebuyers want a lift. However, if one buys a unit with space for a lift and wants one installed before construction starts, Runnymede will do it for a fee. After vacant possession, the homeowner has to undertake the installation and cost himself.

Ramzan says Phase 3 of The Sanctuary will feature three condominium towers with 500 units but will not reveal the details, except to say the phase will be different and something not seen before in Penang. A preview is scheduled for the first quarter of next year.

Top: The linear park within the development. Bottom-Left: The family area in the Vilaris show unit. Bottom-Right: The design allows plenty of natural light into the homes

The last parcel will feature a stratified high-rise, but all Ramzan and Ong are willing to share is that it will be eco-friendly. Previews will possibly start in 2015.

As the Penang property market is still quite active, Ramzan and Ong see bright prospects for the rest of this year and next year, barring unforeseen circumstances.

“The market will not move as aggressively as it did last year because of Bank Negara Malaysia’s initiatives, but it will still be on an upward trend,” opines Ramzan. “The speculators are quite quiet now. They are the ones who use DIBS [developer interest-bearing scheme] to buy four or five houses and wait. But they will slowly vanish. When that happens, the market will be much healthier.”

Ong agrees. “The market will be sustainable and property values will continue to rise as land gets scarcer and the population increases. Malaysia will become attractive to foreign buyers as well because relative to other major cities in Asia, our properties are still very affordable.”

At present, Runnymede has landbank in Penang, Kuala Lumpur and Western Australia, where it has a one-acre residential project on Swan River in Perth and a 25-acre tract in the Margaret River region for a resort and residential development. The details of these projects are still being ironed out.

The group also has 20 acres of development land in Penang and 12 acres in Kuala Lumpur, plans for which are still being drawn up.

This article first appeared in The Edge Malaysia Weekly, on September 23, 2013. 

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Mapex expected to ring in RM300m sales

PETALING JAYA: Real Estate and Housing Developers' Association Malaysia (Rehda) is upbeat that the Malaysia Property Exposition (Mapex) next month will generate some RM300 million in new property sales.

According to Mapex organising committee chairman and Rehda immediate past president, Datuk Ng Seing Liong, the value of the properties on display will top RM20 billion.

"We are quite bullish on Mapex as more people are coming out to buy their first property. We are also expecting a large number of owner occupiers to come forth," Ng said at a media briefing on Mapex recently.

Mapex, which will be held at the Mid Valley Exhibition Centre from October 25 to 27, will showcase over 20,000 properties from 90 property developers.

The developers include NazaTTDI, Bina Puri Properties, Glomac, I&P Group, IJM Land, IOI Properties, PKNS, Tropicana Corporation, Bandar Utama Development, MKH and new player, Eco World Development.

There will be 242 exhibition booths displaying properties priced between RM270,000 and RM5 million, located in Kuala Lumpur, Selangor, Johor, Malacca, Negeri Sembilan, Pahang and Sarawak.

SP Setia Bhd and Salvo Property Group will also showcase their respective developments in London and Australia.

Ng said that Mapex is a good platform to shop for properties as buyers will get first-hand information about the developers, their respective projects and location, and yield comparison.

Key players in the industry will be there to offer useful tips on making sound property investments.

There will also be services and advice offered by banks such as Citibank Bhd, Standard Chartered Bank and Bank Islam Malaysia Bhd, as well as government agencies.

"I encourage those who have not purchased their first property to look at Mapex. Your home is, at the end of the day, your investment," said Ng.

Mapex will open its doors from 10am to 9pm daily and admission is free.

Business Times

Penang and Zenith to sign undersea tunnel job on Sunday

KUALA LUMPUR: Consortium Zenith BUCG Sdn Bhd will sign a preliminary agreement with the Penang government this Sunday to carry out feasibility studies and detailed design works (FSDD) for the proposed Penang undersea tunnel, which reportedly will cost RM6.3 billion.

“This is the prelude to the major road and tunnel works that we will execute after we have submitted the feasibility studies and after it has been approved,” Zenith BUCG chairman Datuk Zarul Ahmad toldThe Edge Financial Daily.

“The main agreement will come after we receive this approval, then we will proceed with the detailed design and detailed environmental impact assessment (DEIA). Once the DEIA has been approved, we will start construction,” he said.

On Sunday, Zenith BUCG will also sign an agreement with China Railway Construction Corp International (CRCC), a China state-owned conglomerate, for a detailed design of the project, engineering, procurement and construction of the major roads and tunnels.

Penang chief minister Lim Guan Eng and CRCC’s chairman will be present for the signing ceremony this Sunday.

Zarul: This is the prelude to the major road and tunnel works that we will execute after we have submitted the feasibility studies and after it has been approved.

CRCC is currently in a joint venture with Zenith Construction Sdn Bhd for the RM6.3 billion project. Together they own a 70% stake in Zenith BUCG. The remaining members in the consortium are Beijing Urban Construction Group, Sri Tinggi Sdn Bhd and Juteras Sdn Bhd, each of which hold a 10% stake. However, it is not clear yet how much equity each partner will pump into the deal.

In a previous interview with The Edge, Zarul said bankers, both local and international banks, were keen to provide funding for the project. The 10-year job will see the construction of a 6.5km undersea tunnel connecting George Town with Butterworth, and three bypasses on Penang island of over 20km, including a tunnel portion to divert traffic.

The project will be funded without a government soft loan. The funding structure will involve the Penang government awarding 110 acres of its entitled landbank on Eastern & Oriental Bhd’s Sri Tanjung Pinang 2 and a 30-year toll concession to operate the tunnel.

The 110 acres that Zenith BUCG will receive are split, with 50 acres along the shoreline of Gurney Drive and the other 60 acres on the reclaimed island itself.


This article first appeared in The Edge Financial Daily, on October 03, 2013.