WTW: Regional real estate funds will return to Malaysia

Foreign funds like ING Real Estate Fund, Macquarie Global Property Advisor, Kuwait Finance House, CapitalLand and Asian Equity Partners have been quiet in Asia since mid-2008.

THERE will be moderate return of regional real estate funds into Malaysia this year looking to buy Grade A office towers, retail malls and hotels, said a property consultant.

Foreign funds like ING Real Estate Fund, Macquarie Global Property Advisors; Kuwait Finance House, CapitalLand and Asian Equity Partners have been quiet in Asia since mid-2008 - cautious about the impact of the US' economic woes.

But sentiments started to change since early last year as prices of properties in Malaysia are still relatively low, allowing for higher return on investment. There is also strong upside potential if compared with neighbouring Singapore.

"There are a few foreign funds sniffing the market. But the concern is whether are there enough prime properties to sell," said CH Williams Talhar & Wong (WTW) deputy managing director Danny S.K. Yeo.
Yeo said in 2011 there were slightly less than 10 major property transactions and he expects the market to do better this year.

Meanwhile, WTW managing director Foo Gee Jen said projects like the mass rapid transit (MRT), light rail transit (LRT) line extension and the high-speed train will open up new development areas between Sungai Buloh and Kajang, as well as Seremban, Malacca and Ipoh.

"We will see a lot of new residential projects coming up in these areas," he told reporters yesterday, after presenting the 2012 WTW Property Market report.

WTW expects the local property market to grow by 10 per cent in transaction value this year from over RM40 billion last year, and prices to increase moderately.

"We also expect the market for real estate investment trust (REIT) to grow. The REIT size is still small at US$1.5 billion (RM4.54 billion) compared with US$23 billion (RM69 billion) in Singapore. REITS will provide an alternative investment to properties," Foo said.

Foo said office rentals will remain stagnant or decline for older buildings but there will be higher asking rentals for newly completed buildings with green certification and Multimedia Super Corridor status.

He said with over 0.74 million sq m of new office space entering the market this year, older buildings will face pressure from declining occupancies as tenants seek newer, better quality offices. - The Star

亚洲房地产市场光环退色 专家唯一看好我国房地产

华尔街日报》报道称，房地产投资顾问公司IP Global看淡亚洲逐渐转冷的房地产市场认为不再值得买进，反而西方萧条市场中能找到更划算的房子。该机构唯一看好马来西亚房地产市场，因为我国大城市的平均房价约为香港的十分之一，而马来西亚大宗商品支持下的经济，也应该会比该地区中依赖出口的竞争对手有更好的表现。

房地产投资顾问公司IP Global驻香港首席执行长墨菲（Tim Murphy）说，亚洲逐渐转冷的房地产市场，已经不再值得买进了，反而西方萧条市场中能找到更划算的房子。他正在建议客户在纽约和旧金山购房，尽管伦敦一些项目的租金回报率排名也不错。

在亚洲，他唯一看好的市场是马来西亚，该国大城市的平均房价约为香港的十分之一，而马来西亚大宗商品支持下的经济也应该会比该地区中依赖出口的竞争对手有更好的表现

Slower value growth forecast for property market

KUALA LUMPUR: The local property market is expected to experience slower growth of about 10% in value overall this year compared with 11% in 2011, according to CH Williams Talhar & Wong.

Managing director Foo Gee Jen attributed the slightly lower growth to dampened sentiment, but said that it was nevertheless a good time for bargain hunting.

“We will see further growth but at a very much lower pace,” Foo said at a briefing on the outlook for the property sector this year in Kuala Lumpur.

He said that the appreciation in the market value was mainly driven by cost rather than demand due to labour shortage coupled with higher building material prices. 

Foo, however, said the property market would remain buoyant on the back of the strong housing property segment, with growth mainly coming from demand from the young population and migration to urban areas.

Offices and high-end condominiums, on the other hand, would likely experience an oversupply.

Office rentals would remain stagnant or possibly decline for older buildings, but there would be higher asking rentals for newly completed buildings with green certification and Multimedia Super Corridor status, Foo said.

He said luxury condominiums saw a huge increase in supply of up to 50% of current supply, as 13,716 units would be coming onto the market in the next five years and put pressure on yields.

Foo said occupancy rates and condominium rentals for 2012 would see a downtrend.

However, he said buyers were still actively looking for condominium properties in KLCC and Mont' Kiara areas. - The Star

Taking a closer look at the build-then-sell concept

AFTER my last article on the beauty of having both build-then-sell (BTS) and sell-then-build (STB) concepts, I received some feedback regarding the topic during the Chinese New Year break. It is surprising to observe the interest people have towards this issue, especially on the implications of making BTS the only system in our housing development industry.

Many house buyers realised that they can also enjoy the benefits of BTS when they buy from the secondary market. As mentioned in my previous article, 84% of transactions in 2010 were on a BTS basis as purchasing a completed house from secondary market is synonymous with BTS concept. However, some may wonder why it is difficult for developers to adopt the same approach for new projects when it seems to attract more house buyers with BTS?

BTS concept allows purchasers to pay the initial 10% deposit and not pay a single cent until the project is completed. The absence of progressive payments from the house buyers means that the developers would most likely require a higher bridge-financing from the banks to develop the project. At the same time, there is lack of assurance that the purchasers will take ownership of the property upon project completion.

For example, house purchasers who have paid the deposit may later terminate their agreements by just forgo the 10% deposit if the economy turns down or stock market falls since they are not required to obtain loan in the initial stage under BTS concept. This will leave developers in a “tricky” financial condition when they need to deal with unsold units and repay their borrowings at the same time. This concept may also encourage rampant speculation during the good times.

In any business, there should be a binding agreement between buyer and seller to ensure the deal is fair for both parties, and neither party should take advantage of the other. As there is lack of commitment from the purchasers under BTS concept, it is too risky for any developer to undertake massive development and borrowing.

Under our existing Housing Development (Control and Licensing) Act 1966 for STB concept, purchaser has an option to terminate an agreement regardless the construction and billing status. However, under BTS concept, developer can only forfeit 10% of the selling price regardless of the progress of project.

In Australia, both developer and purchaser are obligated to comply with the sale and purchase (S&P) agreement under BTS concept. Purchaser must take ownership of the house and pay the remaining amount when developer complete the project, otherwise there are clauses that allow developer to take legal action if buyers decide to pull out after signing of the S&P agreement.

Therefore, unless it becomes a requirement in our country that the house buyers have to secure the remaining 90% of the property value with a mortgage loan (interest free during construction period) or other form of secured deposits until the project is completed, the banks are obviously subjected to a higher level of risk, and would most likely fund reputable developers with good financial status. And, even if the loan is approved, developers are likely to be charged with higher interests due to higher financing risks.

A chain reaction will come to play when it becomes difficult to obtain a bridging loan. Existing small and/or new property developers will gradually be pushed out of the property industry and the bar for new entries will be raised. The vacuum of property developers will then lead to limited supply of new projects and less competition in the property market.

With increasing demand due to population growth coupled with reducing supply of housing projects, the average price of properties will eventually spiral upwards making it difficult for both aspiring first time house buyers and investors to acquire a property or for the matter, a selection of properties to choose from. This will ultimately defeat and destroy the government's effort of building affordable and choice homes.

Furthermore, a supply reduction in the housing sector would greatly impact the economy as the property industry contributes significantly to other business activities. According to National Property Information Centre, property industry recorded RM107.44bil worth of transaction in 2010. Residential property dominated the overall market, contributing 47.1% of the value of transactions, which is equalled to RM50.6bil in value. More than 140 other industries and trades such as construction, consultancy, engineering, banking industries, etc, would also be affected if the property industry was to slow down.

As we approach Vision 2020, we must remain steadfast on our goal to achieve a developed country status. Each industry will play a significant role in realising this goal. It is therefore crucial that there be no impediments that would either delay the growth and development of industries or, for the matter, send them a step backwards.

With sufficient rules and regulations in place, allowing the free market to dictate how the industry should be shaped will not only benefit all parties, it will equally help to steer the growth and development of the industry. Perhaps, there is more room for consideration before BTS is made mandatory by 2015. And those who want to have an assurance of their home should buy from reputable developers or in the secondary market, as what 84% have done in 2010.

*Datuk Alan Tong is the group chairman of Bukit Kiara Properties. He was the FIABCI world president in 2005-2006 and was named Property Man of The Year 2010 by FIABCI Malaysia.

Abandoned projects, distressed buyers

THE process of house hunting can be an exciting affair. There is the shopping around, breezing through different locations and show units.

At some of these launches, sales and marketing personnel flutter about introducing the development and its high points. A wonderful picture of the developer is painted in order to convince potential buyers to fork out a deposit for a unit.

So, it is a terribly painful and crushing experience when months or years down the road, the buyer discovers that the project has been abandoned. Uncertainty looms ahead.

Last Sunday, LKH wrote to Letters to the Editor page his painful experience of having bought into a project that was subsequently abandoned.

In 1996, he and his wife bought a condominium unit in USJ1, Subang Jaya. They signed a sales and purchase agreement, paid the legal fees and the stamp duties and make progress payments.

It is a painful experience when a buyer discovers that the project he has bought in has been abandoned.

They had paid RM40,000 for a RM180,000 unit. But the 1997 Asian financial crisis put paid to their planned investment.

He writes: “On and off, we would visit the site of the project hoping to encounter some good news. It therefore came as a shock when, last month, we were greeted not by the eerie black stumps of rotting structures but with a beautiful and colourful hoarding indicating the imminent launch of a new condominium project by a new developer.

“So, what happens to us poor purchasers for the condominium that has disappeared into thin air!”

A bit of investigation showed that the project is currently being marketed in USJ City Mall, Section 19 by a real estate agency hired by the new developer. The price tag has gone up to about RM500,000 or RM450 per sq ft.

Generally, when a project is revived, the new developer will advertise in the newspaper that a “white knight” has come in to revive the distressed project. If the majority of buyers vote in the new developer's favour, well and good. They may be able to buy the unit if they are able to top up the price. Alternatively, they may opt to get back their deposit, or as much of it as possible.

Abandoned projects are not new in Malaysia. But the hassle and uncertainty of having bought into such a project is crushing at worse, and a learning experience, at best.

So, when it was reported that the responsibility of reviving abandoned housing projects will fall under the purview of the Housing and Local Government Ministry, it is rather surprising that the news evaporated into thin air, like LKH's condominium, without anyone so much as bat an eyelid.

It may be too early to tell but since the ministry is responsible for issuing licences to developers, it seems logical they should clear up the mess, if there is one.

Secondly, this will hopefully pave the way for the ministry to be more vigilant as to which developer they grant licences to.

Third, because the revival of abandoned projects now falls under a government ministry and not a government agency they will have some clout to get projects moving again.

Some projects will not see life, however, because they may be located in the boondocks. Which begs the question, how is it the project got approved? Basis for another story.

In January, the ministry said that it will revive 35 abandoned projects, involving 12,000 housing units, throughout the country this year. The Government had revived 84 abandoned housing projects since 2009, about half of projects left derelict for some reason or other.

They were in distressed mode for between six to eight years before the government stepped in, at a cost of RM8mil. At that price, most of them would be low-cost housing.

At a time when property houses have moved up so much, RM8mil does not seem a lot.

Before the ministry came into the picture, government agency Syarikat Perumahan Negara Bhd (SPNB) had that responsibility. SPNB is a wholly-owned subsidiary of the Minister of Finance Inc (MoF) with a paid-up capital of RM10mil. In 2010, it was reported that it had borrowed RM1.3bil from the Employees Provident Fund to fund its projects.

Because it was part of MoF, the Government was also helping SPNB with land acquisition for its projects. In short, where funding and land acquisition was concerned, the Government was at its disposal.

The funny thing is, besides its role to revive abandoned projects, it is also a developer. Now which role would be more lucrative? The hassle of having to deal with angry and frustrated house buyers, or being a developer and market affordable housing and make loads of money, with the government coffers available to them?

* Assistant news editor Thean Lee Cheng believes the Housing and Local Government seems to be in a better position to revive distressed projects and help distressed buyers. It cannot slip into the role of a developer.

Land sold above evaluation, says Guan Eng

PETALING JAYA: Penang Chief Minister Lim Guan Eng came under heavy criticism for selling a 41.6-ha land in Bayan Mutiara at a low price.

Kota Belud MP Abdul Rahman Dahlan said Lim must explain why the state sold the land for RM1.07bil.

“The price is not derived from open tender, it was negotiated,” said the Umno politician.

Abdul Rahman, who is Barisan Backbenchers Club vice-chairman, said he would bring the matter up at the next Parliament session.

He said Lim’s CAT (Competency, Accountability, and Transparency) policy was a mere political gimmick.

He said the land was sold at RM240 per sq feet to Ivory Properties Group Berhad.

“It is a lot cheaper than the surrounding land which is priced at RM420 per sq feet,’’ he said.

Abdul Rahman said Lim must explain to Malaysians why he sold the piece of land to a private developer at 50% lower than the market value. -

Yesterday, Lim defended the sale of the land, saying that it was done via an open tender.

He said the state government had set a reserve price at RM200 per sq ft – an amount that was above the official valuation for the land.

In the end, it fetched RM240, with the total sale at RM1.1bil.

In GEORGE TOWN, Penang Gerakan vice-chairman Wong Mun Hoeaccused the state government of selling the Bayan Mutiara land to reap short-term gains.

He said selling the land might bring in quick cash but the money would run out.

“If the state had held on to the land, it could generate income for generations.

“The land could earn the state government more in the long run because there will be a steady flow of cash coming in,” he said.

Wong said the possible rationale for selling the land was to use the money for a “political fund”.

“I won’t be surprised if the money is used to give out goodies to the people,” he said yesterday.

Real Estate and Housing Developers’ Association (Penang) chairman Datuk Jerry Chan said the sale of the land at RM240 per sq ft “at the time” was a good price.

“We cannot say that it was too low nor can we say that it was too high.” - The Star

Robert Bosch still committed to solar panel project

PETALING JAYA: German-based technology company Robert Bosch GmbH is delaying the construction of its RM2.2bil solar panel manufacturing plant in Batu Kawan, Penang while evaluating the most technologically advantageous direction for the plant.

Robert Bosch (SEA) Pte Ltd president and managing director as well as managing director of Robert Bosch Sdn Bhd Martin Hayes said in a statement that the company remained committed to the construction of the plant in Penang.

“The new facility would be an essential part of our globalisation target to further reduce costs and increase energy yields,” he said, adding that the company was postponing the construction to a later time this year as it evaluates the best direction for the plant in terms of technology implementation.

Construction of the plant was scheduled for the end of last year with production to start by the end of 2013.

Hayes said the company was convinced that photovoltaics has long-term business potential and “will play a major part in the progressive move to new sources of energy”.

Robert Bosch head of solar Siegfried Dais was quoted by the German daily Frankfurter Allgemeine Zeitung on Tuesday as saying that construction of the plant was delayed to ensure it would be built to the most modern specifications.

According to the report, the company's solar operations posted revenue of 800 million euros last year, failing to meet the year's target of more than one billion euros.

Nevertheless, Hayes said “Bosch is pushing ahead on the path for internationalisation of photovoltaics, despite the current difficult market environment”.

Meanwhile, investPenang general manager Loo Lee Lian told StarBizthe state government would do its best to expedite the solar panel manufacturing project for Bosch Solar Energy AG, the publicly-listed unit of Robert Bosch that would be undertaking the project.

She said the company had started to make payments to fulfill the terms and conditions of the sale for the 80-acre site in Batu Kawan.

“We were recently informed by the company that due to its re-orientation to the most advantageous technology in view of global over-capacity and massive slowdown in global solar consumption, there might be possible delays in implementing the solar project in Batu Kawan,” Loo said.

When completed, the Batu Kawan plant would have an annual capacity of 800 megawatts peak (MWp) for wafers and 620MWp peak for cells. This would be on top of producing solar power plants with a total output of 640MWp and module production lines of 150MWp. - The Star

Swiss firm to open new plant in Penang

GEORGE TOWN: A Swiss semiconductor company has chosen Penang to open its first manufacturing plant in Asia.

VAT Manufacturing Malaysia Sdn Bhd will be built on a 3.035ha in Batu Kawan and is expected to commence production by December this year.

VAT executive vice-president Quality and Procurement Andreas Scheibe said it was a big step for VAT to open its first branch in Asia.

“A lot of our customers in the United States have moved to Asia, so we decided to move as well to be able to better serve our customers,” said Andreas.

An artist’s impression of the proposed VAT plant in Penang.

“After surveying several Asian countries, we chose Penang because it is the only one that meets our requirements,” he said.

VAT is the world's leading supplier of vacuum valves for state-of-the-art applications in the semiconductor industry, for manufacturing flat screens and solar panels, as well as for coating optical systems and tools.

Penang Chief Minister Lim Guan Eng said that he was delighted that VAT had chosen Penang over China, Japan, South Korea, Singapore, Taiwan, Thailand and Vietnam.

“We are proud that our human resources, suppliers in mechanical and electronic components, infrastructure and logistics support as well cost of living comply with the requirements of VAT,” he said.

Lim was speaking at the sale and purchase signing ceremony between VAT and Penang Development Corp at his office at Komtar yesterday.

He added that the new facility, with investments totalling US$25mil (RM75mil) was expected to generate 100 new jobs. - The Star

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Bosch freezes Penang solar plant

KUALA LUMPUR, Feb 8 — Leading German engineering firm Robert Bosch GmbH postponed its €520 million (RM2.05 billion) Penang solar panel plant’s construction, which would have been the company’s largest, due to cost pressures.

Solar energy division chief Siegfried Dais told the Frankfurter Allgemeine Zeitung yesterday that the company will need to “reorient” itself technically as it wanted to be among those making a profit from the industry.

“If you invest too early, you run the risk of possibly settling for a less advantageous technology path,” the German national daily quoted him as saying in an advance interview excerpt.

Construction of the plant in Batu Kawan, Penang, which has a capacity of 640MW per year, was scheduled to begin at the end of last year, with production to start in 2013.

Bosch’s decision to hold off on the fully-integrated manufacturing plant, which would have served its ASEAN operations, comes after the firm missed profitability targets last year as special charges ate into earnings.

This was despite an 8.8 per cent rise in full-year revenue to €51.4 billion (RM 202.63 billion).

Franz Fehrenbach, chief executive of the Stuttgart-based company, said last month Bosch booked an earnings charge of around €1 billion (RM3.94 billion) in 2011 due to up-front costs for its push into the fields of electric mobility and renewable energy, as well as currency fluctuations.

He also said that Bosch will streamline its cost base and lower its break-even point enough to offset any potential slump in revenue in the face of lingering global economic uncertainty.

Photovoltaic manufacturers such as Q-Cells, First Solar and Solarworld have been moving production to Asia for cost efficiency and to tap into the region’s growing market, which is expected to expand by 30 per cent annually.

However, prices for solar panels and raw materials fell last year as manufacturers in China ramped up production, leading to excess capacity after European governments cut back on subsidies.

Malaysia ranks fifth in the world in terms of solar megawatt output and the sector has been identified as a major growth area under the government’s Economic Transformation Programme (ETP).

Earmarked entry point projects (EPP) for the solar energy industry are expected to provide a gross national income (GNI) of RM13.9 billion and create 55,000 jobs. - The Malaysian Insider