GEORGE TOWN: Determined to demonstrate that it is not side-lining Pakatan Rakyat-held Penang, the Barisan Nasional (BN) federal government has decided to pump in some RM1.25 billion in projects in the state this year.
Federal Action Council for Penang chairman Datuk Zainal Abidin Osman announced yesterday a slew of 19 new projects, mainly for traffic infrastructure and health, as well as a few for education, to commence this year.
Zainal, who is also state Umno chairman, stressed that these new projects are in addition to 24 projects worth a total of RM5.1 billion that have already been completed in 2013 — including the 24km Second Penang Bridge.
He said the RM4.5 billion bridge is scheduled for opening next month by Prime Minister and BN chairman Datuk Seri Najib Razak at a yet-to-be-determined date, following some final minor installations.
“All these show that the federal government is not marginalising or neglecting the people of Penang,” he said at a press conference at the federal building here.
“We are definitely concerned about improving the prosperity of Penangites.”
The projects slated for this year include an RM400 million multi-storey block with space for 331 beds at the Seberang Jaya Hospital, an RM250 million new wing for women and children at the Penang Hospital, an RM205 million upgrading of the narrow road between Teluk Kumbar and the Penang International Airport, and an RM60 million new flyover in Batu Maung at the southern end of the Bayan Lepas Free Industrial Zone.
Asked about the status of affordable housing projects under the federal PR1MA Corp Malaysia that were announced for Penang early last year, Zainal insisted that the projects are still on for implementation in next two years.
He stressed that the issue of confirming the sites is not easy in view of limited available land in Penang.
“In the process, we will have to get approval from the State Planning Committee (chaired by Chief Minister Lim Guan Eng). We therefore hope to get cooperation from the state government in this regard,” he added.
Zainal said the federal government is certain to develop 10,000 units of houses through PR1MA, as announced by Najib, and another 10,000 by federal agencies like the Penang Regional Development Authority, UDA Holdings Bhd and JKP Sdn Bhd.
Najib had on April 30 last year — five days before the last general election — announced 9,999 affordable housing units in Penang.
On Aug 28, almost four months after the BN retained control of the country, PR1MA announced that 20,519 affordable homes will be built in Greater Klang Valley, Johor, Penang, Sabah, and Sarawak.
However, the Penang government has complained that its enquiries for details on the units in the state have failed to elicit response from PR1MA or the Urban Wellbeing, Housing and Local Government Ministry.
For more stories, go to www.fz.com, the website for freedom of expression and fairness in articulation.
This article first appeared in The Edge Financial Daily, on January 29, 2014.
Wednesday, February 5, 2014
Saturday, January 25, 2014
UBB, Ideal Property plan RM1.5bil projects in Penang
GEORGE TOWN: United Bintang Bhd (UBB), an importer and exporter of used and reconditioned heavy machinery, will pursue property development plans in Penang under the direction of its new majority shareholder, Datuk Alex Ooi.
Ooi, who now owns 32% of UBB, is the executive chairman of UBB and chief executive officer of Ideal Property Group.
He said UBB would work with Ideal Property Group, a Penang-based developer with 12 years of experience in the business, to pursue some of these projects, as the latter owns about 80ha of landbank on the island, located largely in the south-west district.
“We are looking at building more condominium properties priced between RM500,000 and RM700,000 per unit.
“The plan for this year is for UBB and Ideal Property Group to jointly launch some RM1.5bil worth of such projects on the island in the second half of 2014,” he said.
UBB is also looking to tap into the growing tourism market in Penang, which has attracted some six million visitors since it was declared a Unesco World Heritage Site in 2008.
“We plan to take this opportunity to invest in the development of new tourist attractions in the coming years as part of our diversification strategies, which include building a theme park in Penang.
“To cater to the increasing number of tourists in Penang, we plan to build two new hotels in Bayan Baru,” he said.
Ooi said UBB saw more future benefits for its shareholders from the development of high-quality premium development projects.
“This initiative will consolidate, strengthen our current finances and transform UBB and Ideal Group into one of the top property developers in Penang.
“With new funds, we want to be more than just a property developer. Being a Penang home-grown developer, Ideal Property wants to create a legacy for Penang, not by encouraging the appreciation of asset values but build properties that promote great appreciation of life for the next generations to come with great emphasis on wellness,” Ooi added.
He added that UBB’s board of directors had already endorsed the change of UBB’s name to Ideal United Bintang Bhd (IUBB).
The name IUBB has been approved by the Companies Commission of Malaysiaand is now waiting for the shareholders’ approval at the forthcoming EGM. - The Star
Property sales likely to drop amid stringent loan conditions
GEORGE TOWN: Property transactions are likely to decline this year amid cautious sentiment and stringent housing loan regulations by financial institutions.
Real Estate and Housing Developers’ Association (Rehda) Penang chairman Datuk Jerry Chan said the property market was likely to register a decline in both sales and value.
The market is likely to see a 20% decline in value, he said after briefing reporters on the three-day Malaysia Property Exhibition 2014 to be held from Feb 2.
Organised by Rehda Penang and Henry Butcher Penang, properties ranging from RM370,000 will be on showcase for prospective buyers.
Chan said the central bank’s move to tighten consumer loans was likely to impact the property market, and that between 80% and 90% of prospective buyers depended on loans to purchase houses.
Besides, he said, buyers were also becoming more cautious this year, given the backdrop of the rising cost of living.
However, Chan said Malaysia’s property market was still bullish, as the segment was driven by low interest rates and economic growth.
He explained that 2014 would be a good year for buyers to purchase properties despite the uncertainties. “Developers would sell new products at new costs and land values amid rising construction and labour costs,” he added. – Bernama
E&O unveils its latest luxury condo project
EARLIER this week, lifestyle property developer Eastern & Oriental Bhd (E&O) launched its latest downtown condominium project The Mews. When completed in 2017, it will be one of three high-rise residential developments on Jalan Yap Kwan Seng in Kuala Lumpur.
There will be three residential projects along that stretch of about 500m. The Mews starts at RM1,700-RM1,800 per sq ft (psf). It will be among the highest in terms of price point among the three on-going projects there currently.
The first project to be launched close to the Jalan Yap Kwan Seng-Jalan Tun Razak intersection is Mirage Residences. The Mirage was launched a couple of years ago at RM1,000 per sq ft with prices trending up to between RM1,300 and RM1,400 psf last year. According to a member of the marketing team, some of the units were sold at RM1,600 psf last year. The Mirage is 100% sold and is expected to be completed by May 2015.
It is a 25-storey block comprising 102 units developed by OSK Properties Holdings Bhd. Most of the units have built-up areas of between 1,000 sq ft and 1,200 sq ft with two bedrooms.
The second project to be launched closer to the Petronas Twin Towers at the Jalan Yap Kwan Seng-Jalan Ampang intersection is Star Development. This was launched late last year by joint-venture partners Symphony Life Bhd (previously known as Bolton Bhd) and United Malayan Land Bhd.
It comprises three residential high-rise blocks of which the first will be 57 storeys. Its next two blocks are expected to have 61 storeys. Besides the residential portion, there will also be a retail portion.
When completed, Star Development will have a total of 1,500 serviced apartment units, comprising mainly one-bedders with sizes ranging from 650 sq ft and 750 sq ft.
Each of these three projects have their pluses.
The Mirage, at RM1,000 psf seems like a steal considering today’s prices and when matched against The Mews. It is also not as dense as The Mews, which will have 256 units on 1.29 acres compared with Mirage’s 102 units on just under one acre. Both are on residential titles, which is a plus point.
The Mews will be more private than Mirage, located about 100m on one of the inner roads, and does not directly front Jalan Yap Kwan Seng.
Sizes range between 900 sq ft and 2000 sq ft for the one- and 3+1 bedroom units. There are four penthouses with built-up areas of about 2,500 sq ft each. Two of the penthouses have been sold. E&O is a lifestyle brand. It built St Mary Residences in Jalan Tengah, parallel to Jalan Raja Chulan in the main commercial district of Kuala Lumpur and Dua Residency along Jalan Tun Razak.
While St Mary Residences is both urbane and stylish, The Mews will have an understated elegance in earthy tones and colours. This will be E&O’s first joint-venture development with Japan’s largest developer Mitsui Fudosan Residential Co Ltd with E & O having a 51% stake.
When E&O’s deputy managing director Eric Chan first unveiled the company’s plans for this project a couple of years ago, they mulled over what would appeal to females. Hence, the large shoe cabinets and storage area. Units come with bedroom and kitchen built-ins.
There will be one parking bay for one-bedroom units, two for two-bedders and three for the larger units. The penthouses will have four parking bays.
The development will come with pool, gym and squash courts and concierge services. According to Chan, about 70%, or 180 units have been sold, of which about 20 units have been purchased by Japanese. About half the buyers are Malaysians. Shuttle services will also be provided to Twin Towers and the vicinity. With the traffic situation in the Klang Valley today, that will be a huge plus.
From what is seen of St Mary Residences and Dua, The Mews is expected to be another oasis in the busy and bustling city centre.
On how the various cooling measures will affect sales, Chan says the long term prospects for the sector are still good.
“We are still in the first three months of the year. We are focusing on the long term,” says Chan.
Mitsui Fudosan (Asia) Pte Ltd executive director (head of residential team) Tomoo Nakamura says it has been a good experience working with Chan and his team and this partnership will pave the way for further cooperation.
Dense development
The largest project along that Yap Kwan Seng stretch is Star Development with prices beginning from RM1,500. It will be built on commercial land and there will be 1,500 units on four acres, or 375 units of residences per acre compared with Mirage’s 100 units, and Mews’ 198 units. There will also be a retail portion. While there is convenience, it may not be that private.
It will be the most dense among the three projects but in terms of proximity, it will be the closest to the Twin Towers. Located behind Avenue K mall, it will be within walking distance to the KLCC LRT station via Avenue K. Because Star Development is built on commercial land, upkeep and maintenance will be a consideration. Also, the price of the unit does not include a car parking bay. Residents will have to rent it at RM150 to RM200 a month. Moving forward, having a unit that comes with a car park will be a luxury.
A point to note is this: If one is buying for investment, there are literally thousands of smallish one-bedders in the Klang Valley today and there will be more entering the market as projects come to completion. Getting it tenanted may not be that easy. Most of the buyers at Star Development may be foreigners as small units tend to attract investors.
Another thing to note is the price, which has moved up considerably from RM1,000 to RM1,700 psf in a matter of two to three years – a jump of 70%. All three projects are not comparable because they are not homogeneous, both in terms of location and finished product.
The steep rise in price is something to be considered, especially in today’s volatile times. There is a lack of clarity for now and with inflation at a 25-month high of 3.2%, those who have the means may well consider a branded unit. But there will be many others who will settle for bread-and-butter housing, without the frills.
Either way, with the various cooling measures in place and maybe more to come, a property investment is for the long term and for those who have the holding power. - The Star
An effortless way to get rental yield
Firstly, let’s define “effortless” in the context of rental yield.
Effortless means, without the huge initial capital, the hassle of securing tenants or the renovation costs involved to make a property “tenantable”.
Deep down, which property investor really enjoys managing tenants or is fond of the costs associated with it, such as renovation costs, repairs, etc?
Yet, this is a small inconvenience compared to the potential capital gain an investor can reap in a relatively short time, using the power of leverage.
For more sophisticated investors, they would gravitate towards the passive nature of rental income. Not as thrilling as capital gain, but this still outweighs the pain that comes with tenant management.
If any property investor were to have a magic wand to redefine the ideal property investment, I reckon it would be close to what is written below.
“Perpetual inflation-adjusted rental income and doubling of property value every (insert your desired number) years, with a competent manager to manage all tenancy related matters besides not being entry-cost prohibitive.”
That something “close” lies in Real Estate Investment Trust (REIT) counters has dropped so much for the past month or so. Seriously.
Here’s a review of what kind of yield you’ll be getting with reference to closing prices on Dec 31, 2013. The actual Distribution per Unit (DPU) or final dividend for most REITs in the financial year 2013 will be published in each respective REIT annual report in two to three months’ time.
Note: Bear in mind – these are gross yields. The net yield is 90% of the gross yield which is the amount which goes into your pocket. The 10% gets deducted at the REIT level as withholding tax.
Retail REITs
Retails REITs are one of the most “defensive” but their profit margin is going to be impacted the most by the hike in electricity tariffs taking effect this year. It is interesting to see how retail REIT managers are managing this by passing on the costs to tenants so that their shareholders still get decent distributions.
Sunway REIT closed at RM1.24 for the year 2013. If its DPU is not less than 8.3 sen in future, the yield is at a minimum of 6.7%.
In relation to Pavilion REIT at a closing price of RM 1.28, its DPU of 6.8 sen will give you 5.3%.
Capita Malls Malaysia Trust will give you a 6.0% yield with DPU of not less than 8.44 sen with reference to a closing price of RM1.40.
If Hektar REIT can maintain its DPU at 10.5 sen, then you as the prudent investor, will get 7% easily at an acquisition cost of RM 1.50 per share.
Office REITs
Let’s look at offices, which are generally less defensive due to oversupply. However, bear in mind that it is mostly the new office buildings that are having difficulty in renting out their units due to this situation. So, I think it is fair that we apply a small “discount” to its last DPU in 2012 due to the overall market performance.
Let’s just assume UOA REIT is able to distribute not less than 10.2 sen per unit going forward, so you would have essentially locked your yield at 7.0% with a cost of RM1.45 per share.
How about Tower REIT? If it is able to declare at least a DPU of 11.2 sen (Its 2012 DPU was at 11.52 sen), then the investor is getting 7.47% return at an entry price of RM 1.50, doing nothing.
If AmFirst REIT is able to declare 6.7 sen DPU going forward, thena 6.7% yield is certain, if your cost of acquisition was at RM1 per share.
Similarly, Quill Capita Trust’s estimated DPU of 8.3 sen (or more going forward) will bring a 7.0% return with an entry price of RM1.18.
Industrial REITs
Axis REIT has dropped tremendously from its previous high to RM2.93 per share. It has enjoyed the reputation of increasing its DPU year after year even during times of economic recession. Therefore, it should be able to declare even a slightly higher DPU than last year’s 18.5 sen – say, 18.8 sen. Therefore, you will be effortlessly getting a yield of 6.41%.
Should the underdog in industrial REITs, Atrium, be able to distribute at least 8.80 sen per unit moving forward, a DPU of 6.77% is certain for cost per share at RM1.30.
The reader needs to understand that the DPU is correlated with rental income, which should increase over time, regardless of a bull or bear cycle. This is absolutely true for REITs with a long proven track record like Axis REIT. Also, there is no reason why quality assets acquired by REIT should outpace inflation in terms of rental income return.
It is true that property investments have made many millionaires in a relatively short time. However, I think it is also true that unsuccessful stories are seldom told, as evident in this article - Completed but empty: Will Budget 2014 help fill up vacant properties? You don’t want to be the proud owner of a luxury condo unit and yet be “bleeding money” internally – hanging on your property in the hopes of selling for a profit.
This is especially true if you do not have the holding power. While laymen investors might not be aware and are eager to jump on the bandwagon, insiders tell us that it is a distortion of the market. Too much money is spent speculating on property, while the main core of the market cannot afford them at these prices.
REIT investment is one alternative to shield ourselves from the hassle and risks associated with direct property investment, especially during times when the property market is hot. It may not be as exciting as direct property investment, but if you ask me, I will always consider the risks first before the potential returns that come along with it. In this case, the risk from direct property investment is quite evident from various independent sources should an investor lack holding power.
I am obliged to tell you that I am holding long positions in most of the REITs listed above. The above should be construed as an invitation to buy. If you buy, I have nothing to gain and am not responsible for your profit or loss.
Lieu Ching Foo is the founder of the Malaysian personal finance blog – “LCF on Personal Finance” and is the co-founder of the “REITMethod” online educational program. He is also an advisor with the financial advisory firm Fin Freedom. - The Star
The Mews Gallery launched in Kuala Lumpur
KUALA LUMPUR: The launch of the newly-opened gallery of The Mews serviced residences in Kuala Lumpur was attended by representatives of Malaysian premier lifestyle property developer Eastern & Oriental Berhad (E&O) and Japan’s largest developer, Mitsui Fudosan Residential Co. Ltd (Mitsui Fudosan).
E&O and Mitsui Fudosan inked a joint venture in March 2013 to develop The Mews serviced residences comprising 256 custom-designed residential units distributed evenly over 38-storey twin towers sited on 1.29 acres of land just off Jalan Yap Kwan Seng.
The Mews gallery, showcasing fully fitted one, two and 2+1-bedroom show units for The Mews, was officially launched at a Japanese-themed ceremony attended by E&O board members and senior management, representatives from Mitsui Fudosan and close to 100 guests.
A view of the dining area at The Mews serviced residences.
“This gallery brings to life the brand and persona of The Mews. Our appointed team of interior designers have meticulously infused different characters to each show unit, whilst subtly weaving in elements that reflect a refined Japanese style. Each element in the show unit is there to articulate the different lifestyles that The Mews caters to,” said E&O deputy managing director Eric Chan.Mitsui Fudosan residential overseas business department II general manager Ryousuke Uematsu said, “Together with our partners E&O, we are very proud to present our buyers and potential buyers with this elegantly furnished collection of show units that sets a new benchmark for modern urban living, reflecting the essence of The Mews – which is understated stylish simplicity.”
Targeted for completion in 2017, unit choices at The Mews range from built-up areas of 922sq ft to 2,619 sq ft, of which 75% of total units are 1- and 2-bedroom serviced residences. Meanwhile, 20% of the units follow a 2+1 layout, while the remaining four are penthouse units. The positive response to The Mews is evident with its take-up rate already reaching 70%, even at the soft launch stage.
The sixth floor of The Mews showcases the development’s water sanctuary facilities. A lawn and private garden are located on the 37th floor where residents can enjoy a view of the city.
Tapping on E&O’s hospitality and management expertise, The Mews come with E&O’s signature five-star concierge service and emphasis on security systems.
“The Mews is a testament of E&O’s passion in delivering properties that are ever cognisant of our customers’ aspirations. We are fortunate to be working with our highly-esteemed partners at Mitsui to deliver on this promise,” said Chan.
“We are very happy to see how the Mitsui-E&O partnership that began in 2011 has flourished and we look forward to strengthening our collaboration in the future,” said Uematsu. - The Star
KSL Week draws property enthusiasts
Members of the public were given an exclusive view of the property market at KSL Week which was organised by KSL Holdings recently. KSL Week was held at Canary Garden@ Bandar Bestari, KSL’s 448-acre flagship development in the Klang Valley which boasts a French-inspired garden.
KSL Week’s activities include two talks, a property showcase by KSL Holdings and test drive opportunities by BMW Malaysia.
Visitors and guests during the event received the latest updates on Canary Garden’s development progress for its residential phases, with completion slated for the second quarter of 2014. Also included in the presentation were the details of its 52-acre French garden and images depicting the progress of the first phase, the proposed Canary Garden club, as well as additional news and details of Canary Garden, dubbed the ‘Commercial City’.
The first talk, entitled “Greater KL Update and Growth Pattern for Klang” was presented by property valuer Ho Chin Soon as part of KSL Week, which featured KSL’s portfolio of residential and commercial properties. The second, presented by TY Teoh International national tax director Richard Oon addressed the property market in light of Budget 2014.
Property expert Ho Chin Soon delivers his talk entitled ““Greater KL Update and Growth Pattern for Klang”.
Ho, a fellow of the Institution of Surveyors and a registered valuer with the Board of Valuers, Appraisers and Estate Agents presented on the connectivity of the MRT project and the growth patterns, showing images of the railway lines that are being developed while discussing rising property prices. Ho also explained the Quick House Price Index, pointing out that Kuala Lumpur house prices have increased by more than threefold in the past 22 years.
He also spoke on Canary Garden being situated on the last freehold land in Klang and its position as the next growth corridor, seeing that the township is aligned to many highways such as the South Klang Valley Expressway (SKVE), Federal Highway, KESAS, the North- South Expressway Central Link and the proposed West Coast Expressway.
During the post-budget talk, Oon highlighted topics such as special relief for middle income tax payers and the decrease in individual income tax rates, also in view of the Goods and Services Tax (GST) that will implemented in 2015.
TY International national tax director Richard Oon.
Stating that “property investment is still a lucrative way of making money,” Oon said that the implementation of GST would affect investors during property transactions, and in relation to commercial properties prices as well as SOHO(Small Office/ Home Office) and SOVO (Small Office/ Versatile Office) units, depending on whether the units fall within the residential or commercial sector. Oon is attached to TY Teoh International, a leading consulting service provider, a member firm of MSI Global Alliance with more than 20 years’ experience in taxation and business advisory.
Visitors at KSL Week were also invited to test drive various models of BMWs courtesy of KSL Holdings’ collaboration with BMW Malaysia, with interested buyers being offered rebates of RM150,000. - The Star
Saturday, January 18, 2014
Ewein has value in mind
PETALING JAYA: Ewein Bhd’s joint venture with Consortium Zenith BUCG Sdn Bhd to develop a 3.67-acre freehold plot in Penang will be a mixed development which will provide high yields for purchasers.
Datuk Zarul Ahmad Zulkifli (pic), who is the chairman for both Ewein’s wholly-owned subsidiary, Ewein Land Sdn Bhd, and Consortium Zenith BUCG, said the planning for the project was still at a preliminary stage.
He pointed out that the joint venture would want to “do one thing at a time” and focus on establishing the Ewein Zenith brand first.
“Whatever we do, we will consider the buyers’ needs and will ensure that the properties we develop are able to provide high yields for them.
“Some of the value-adding features for the houses might include private lifts to apartments as well as medical facilities within the development to enhance response time,” he told StarBizWeek over the phone.
Ewein Land and Consortium Zenith BUCG’s 60:40 joint venture Ewein Zenith Sdn Bhd, had bought the land in Bandar Tanjong Pinang for RM133mil as part of Ewein’s intention to diversify its business. Ewein’s core business had been metal fabrication.
The land is the Penang state government’s payment to Consortium Zenith BUCG for its works for the multi-billion ringgit undersea tunnel project.
Zarul said: “As the consortium does not receive money upfront, we need to get the developer (in this case Ewein) to fund part of the construction works of the tunnel.”
Ewein is paying close to RM80mil for its 60% stake in this development project.
He explained that the consortium would be paid by the state government based on work completed and anticipated the milestone deliverable claims to be completed by March.
“However, we cannot wait for that as it will impact the developer’s cashflow. Hence, we are already planning while waiting for the land title,” he explained.
Once approvals from authorities are obtained, Zarul said he expected the project to be completed in two-and-a-half years.
Commenting on the property market, he said the economic growth in the northern region as well as the connectivity, which would in turn help to disperse traffic in the Pearl of Orient, would support the housing prices in Penang.
Asked if Ewein would get a share in the construction works of the third link, he said Ewein would be the partner for the property development but it would not be involved in the direct construction of the tunnel. The Star
Property's hazy outlook
Last weekend, about 1,600 participants attended a property seminar calledProperty Outlook Conference 2014 in Kuala Lumpur.
Organised by an event organiser, speakers comprised property consultants, developers and property gurus. Participants comprised largely investors and investor-wannabes, property professionals from companies and real estate agencies, a sprinkling of analysts and the media.
One of the speakers says it was one of the largest groups he has ever spoken to when it comes to a local property seminar. Usually, the turnout hovers between 600 and 800, he says.
An executive director of an international property consultancy who was there says he felt as though he was attending “a multi-level marketing seminar.”
The fact that an event manager organised the seminar single-handedly, albeit with developers as sponsors, underscores the leverage offered by the property sector.
Secondly, the turnout underscores the investing public’s hunger for information, says two property professionals. Early bird registrants paid RM200 per pax, a couple paid RM499 while latecomers paid between RM800 and RM1,000 per pax. They were “hungry” because since the introduction of the cooling measures in October, coupled with the various price increase involving toll charges, petrol, electricity tariffs, cut in sugar subsidy, the sector has become rather opaque.
Says Malaysia Institute of Estate Agents (MIEA)president Siva Shanker: “Both developers and investors did not know what hit them post-Budget 2014. The last three months of 2013 were bad. The sector went into a tailspin.”
Siva says in the last four years, prices in some areas went up 30% to 35% in the span of a year - an unhealthy situation because the fundamentals were not there. On a national basis, the issue of house prices is not an issue, it is only in certain areas that prices have gone up multiple times in relation to annual household incomes, he says. He likens the property market before the budget to a car about to crash as it careens downhill, if the cooling measures were not introduced.
“If the car does not slow down, it will crash,” he says.
Siva says of all the sub-segments in the property sector, he is most concerned about the residential sub-segment, the main driver of the sector.
Siva says there is a huge oversupply in Kuala Lumpur, Penang and Iskandar Malaysia in Johor, including serviced apartments which are developed under commercial status.
The 2013/14 slowdown
Siva says not many may have realised it, but the property sector slowed down in 2013. “We think 2014 will see a slowdown of the sector, but that actually started in 2013.
“Sales are expected to be slow for the first two quarters. We expect to see sales going up in the second half of this year and find its own level, barring external factors. Sales will not be great, but it will not be as bad as first two quarters of this year,” says Siva.
“The goods and service tax (GST) due in April 2015 will create another bout of uncertain. Although most of the countries in the region - with the exception of Brunei and Malaysia - have some form of GST or value added tax (VAT), we have yet to experience its effect. We expect some knee-jerk reaction which will result in a price increase but it is 2016 that I expect prices to climb,” he says.
But before 2016, there is 2014 to deal with.
“2014 will be Iskandar Malaysia’s tipping point. (But) there is also a huge oversupply in Penang and the Klang Valley, especially high-rise projects, be there condominiums or serviced apartments,” he says.
Stocker Roberts & Gupta Sdn Bhd valuer Das Gupta who runs a firm about 10 minutes walk from the Petronas Twin Towers says the slowdown actually started in 2012.
“Many missed the signals,” he says. “Land and property prices around here (Kuala Lumpur City Centre) have been stagnating since 2012.
“That was a slow year. High-end properties around the KLCC and in Mont’ Kiara stopped moving forward the past one year in terms of both capital appreciation and rental.
“In some cases, rental and prices have dropped a notch or two,” he says.
How does one account then for the sale of a parcel of land sandwiched between Wisma Central and a Chinese temple fronting Jalan Ampang sold to Singapore-listed developer Oxley Holdings Ltd by Loke Wan Yat estate?
The 1.25 hecatres (3.1 acres) parcel was sold in December for a record RM3,300 per sq ft or RM446.7mil.
“That was an exceptional parcel because of its location and size. It is not the market norm and should not be used as a measure of overall property sector performance,” he says. Das says while land deals belong to the big boys’ arena, it is the ordinary people that he is most concerned about. “Nothing hits the rich,” he says.
Das says suburban vacant land with demand potential have become exorbitantly high. Some of these owners are second or third generation owners. They have no liabilities on these real estate. “Developers have to price their end products very high in order to justify paying such high prices. (So) they rather walk away.”
The retail story
Royal Institution of Surveyors Malaysia (RISM) vice president Adzman Shah Mohd Ariffin says the market is evolving. “There are a number of developments in the United States and in Asia. All these events will impact Malaysia.”
Adzman highlighted Indonesia’s rupiah weakening last year and Thailand political demonstrations, now in its second month.
Adzman says the weak rupiah may attract companies to invest there. That will impact Malaysia.
“We seem stable when compared to our neighbours but we have our own issues to settle,” he says.
Adzman, who runs a property and retail consultancy Exastrata Solutions Sdn Bhdsays businesses are recalculating their margins with the various price increases involving electricity tariffs, sugar, possibly toll rates and petrol prices.
He draws attention to the recent inflation figures by Standard Chartered Bank South-East Asia regional head of research Edward Lee. Lee says Malaysia’s inflation rate is expected to increase to 3.4% for the first nine months this year from 2.1% in the same period last year. The jump reflects one of the biggest in Asia; it is also the fastest acceleration in almost two years.
Adzman is helping three malls with retail tenancy. Two of them are new while the third is an existing mall.
“Retailers today are cautious about location, their catchment areas and overall expansion. They have been cautious since the middle of last year. There is a lot of focus now on tourism to help bring in revenue but this is limited to cities and tourist areas. Suburban malls are dependent on their respective catchment areas,” he says.
“Most businesses are waiting for first half year figures. This will be a good indication (where we are heading),” he says.
Adzman says retailers are feeling the heat because consumers are not buying.
“Retailers are clearing stock by cutting prices to ensure they are not stuck with old stocks when the market slows. They release space for new stocks in order to create demand,” says Adzman.
The raise in toll, petrol and parking charges may result in people heading to the mall closest to them instead of heading downtown which means downtown malls will be tourist-dependent, he says.
Retail Group Malaysia MD Tan Hai Hsin in a January 2014 report based on interviews with members of the Malaysia Retailers Association says the industy reported a sluggish third quarter for 2013. The July-September quarter grew 3.1% compared with 4.6% in the preceding quarter, and 4.8% for the same period in the preceding year.
Ramadan and Hari Raya, which fell on the third quarter of 2013, failed to lift overall retail sales, he says. This confirms Adzman’s views that on the Malaysia retail industry has been slow since the middle of last year.
In many ways, the retail sector and private consumption are good indicators for the overall economy.
The consumer sentiment index, according to Tan, dropped from 122.9 in the first quarter of 2013, to 109.7 (Q2) and 102.0 (Q3). The next batch of numbers to look out for will be National Property Information Centre (Napic) figures on transaction volume and transaction value.
This is expected to be released in March/April.
The jump in property prices at 30% to 35% a year in some areas since 2010 has changed the sector’s profile and has resulted in an equally stratospheric jump in interest among investors, with 20-somethings piling in.
In many ways, this is reminiscient of the 1990s stock market super bull run when college students and 20-somethings diligently applied for initial public offerings with the hope of a gain. They trotted a similar path in the recent bout of interest in the property sector.
Siva says “these young people are shielded from the international highs and lows of the global economy, and the national ups and downs, and whose trickle down effect is yet to be felt.”
“The introduction of developers interest bearing scheme (DIBS) enabled many to buy properties they cannot afford and don’t need. The question is: Will they be able to get tenants? If not, will they be able to pay the mortgage when payment kicks in?”
The introduction of cooling measures may also result in a shift in interest from the primary back to secondary market when buyers turn to sub-sales instead of buying directly from the developers. In an earlier report by Elvin Fernandez, managing director of Khong & Jaafar group of companies, he said in 2009 and 2010, primary transactions comprised about 12% and secondary market transactions about 87% of total residential transactions of 211,600 in 2009 and 226,874 (2010) respectively.
In 2011 and 2012, primary transactions went up to about a fifth of the total number of residential transactions whereas the secondary market accounted about 79% (or 214,044) and 77% (212,428) respectively. There was a drop in secondary market sales from 214,044 in 2011 to 212,428 in 2012.
Says Elvin: “This means there was a run-up in the primary sector of the market by about 35,000 units a year or close to 3,000 units a month.
The question today is, where will these group of ‘speculators’ turn to in their search for alternative investments?”
With fixed interest rates at about 3% per annum and volatility in the share market, will interest in the property market return to the secondary market? Will all the euphoria of the last several years mark a return to the days before 2009 when property investments were dull and boring? This lack of clarity is the reason why property seminars attract a full house. - The Star
How will property fare in 2014?
THE year 2013 was a bad one for gold. Bond market is risky and equities are volatile. Real estate investment trusts (REITs) are subdued compared with 2012 and 2013.
Fixed deposits are hovering about 3% while inflation rate is expected to increase to 3.4% for the first nine months this year from 2.1% in the same period last year. Tangible physical properties may be, will they remain as good a hedge against inflation has many have hoped? Here are some anaecdotes from property consultants.
Das Gupta
Stocker Roberts & Gupta Sdn Bhd valuer
Stocker Roberts & Gupta Sdn Bhd valuer
Bangsar, Damansara Heights and landed units will be little affected in the event of an economic downturn but the peripheral areas like Rawang, Meru and Semenyih are not expected to have the great increases in price anymore.
Datuk Steward Labrooy
Axis Reit Managers Bhd CEO
Axis Reit Managers Bhd CEO
Consider industrial properties. Entry cost is lower by comparison. You pay less for buildings and land and tenancy is long term compared with residential/commercial properties. But buy with roads, gas, broadband, water and electricity supply.
Veena Loh
Malaysian Property Inc general manager
Malaysian Property Inc general manager
Penang will not be so hot this year, KL will be better while Iskandar Malaysia will very good in the very, very long term.
Local and foreign buyers will take a wait-and-see attitude in the first half year of 2014.
Elvin Fernandez
Khong & Jaafar managing director
Khong & Jaafar managing director
For many, houses and shophouses will remain a perennial favourite. Interest rates may go up this year. I don’t think there will be a drastic fall in property prices, more likely a fall in volume which makes it difficult for developers and increases competition in the housing industry.
Do not compare the Malaysian market with Singapore’s. We may appear cheap and Singapore expensive but every city has an unseen hand that fixes the rent in the market so it is wrong to say we are cheap. Do not make country-to-country comparison. Prices is determined by rental. Our office rent is about RM7 per sq ft while Singapore’s office rent is more than RM25 per sq ft (S$10 to S$15 psf).
Rent is a function of profitability of a company.
During an external shock, weaknesses in the sector is exposed.
Today, globally, we are getting more and more skittish (about that situation). There has been a small tapering in December, 2013. How that is going to work out as far as the money outflow from the region is concerned is a big question. This is an external event but it will impact on the property, bonds and equities market. The opacity is real.
Siva Shanker
Malaysian Institute of Estate Agents president
Malaysian Institute of Estate Agents president
The measures instituted by the government may result in short-term pain but this is good for the sector in the long-term.
When people are rushing to sell, that’s the time to buy. There are many who bought in Cyberjaya who are now rushing to sell. This will continue throughout 2014.
Property is not a short-term play and vary your portfolio. Location is no longer everything. Things have changed. Pricing, affordability and concept are factors to be considered in addition to location.
The condo market is slow and will consolidate. If you have invested in a commercial or industrial property, you will be shielded and I don’t mean serviced apartments disguised as a commercial unit.
Young people who bought into shoebox-sized units have not done themselves a favour, unless they plan to stay there.
They may have problems renting the unit out.
James Wong
VPC Alliance Malaysia Sdn Bhd managing director
VPC Alliance Malaysia Sdn Bhd managing director
The commercial property market is affected by the oversupply in the office market and the slower take-up rate expected in 2014. For Kuala Lumpur, the new assessment hike and increased electricity tariff will reduce the rental income and yields of office buildings, making it even harder for them to be sold because of lower yields. Hence, we expect fewer office buildings transactions in 2014.
Likewise, for the retail shopping market, there is also an oversupply.
With inflation and the hikes in electricity, petrol, toll charges without a proportionate increase in wages, consumer spending for luxurious and non-essential goods will be affected.
Retailers experience lower sales turnover during the year-end festive holidays and this trend will is expected to continue during the year. However, shopping malls in city centres will do better this year.
In the Klang Valley housing market, Damansara Heights, Desa Park City, Hartamas, Bandar Utama, Mutiara Damansara and Bangsar would be the evergreen locations which cannot go wrong. However, landed properties in these locations are at a premium. MRT will continue to attract investors/purchasers and properties around the stations will obviously benefit. Gated and guarded projects within the landed segments will continue to excel in good areas. Commercial markets will continue to trade reasonably well and the shophouses/shopoffices segments in good locations will still see appreciation this year, especially those with good rental returns and secured tenancies.
The Star
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