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Long term view when investing in uncertain times

KUALA LUMPUR (April 28, 2012): “Investment gurus all say that in uncertain times, invest for the long term,” Zerin Properties CEO Previndran Singhe said at The Edge Investment Forum on Real Estate 2012 on Saturday, April 28 at Sime Darby Convention Centre in Kuala Lumpur. Presenting his talk on the Malaysian property market overview and outlook at the forum themed Investing in uncertain times, Previn foresees moderate growth in the property market in the coming months. “For our outlook for next year, there may be a 15-20% drop in transactions but property prices will hold. We do anticipate a small mini boom in 2013.” “Where to put your money? The key for investments for the next few years would be long term. I do not think there will be short term play," he said. “Long term investments, would be between 3-5 years average post completion. Properties below RM1.5 million will be hot picks. Look at locations such as Nusajaya and Iskandar in Johor and Penang. In the Klang Valley, stick to the usual hot spots, but I am also very bullish about properties in Kajang, Jalan Ipoh and Selayang. Landed properties seem to be the flavour of the day but he does not discount commercial and industrial properties. In 2011, volume of transacted properties recorded an increase of about 14.26% more than 2010, with an emphasis on residential properties. “We saw a lot of activities in urban areas – not necessarily within the city centres but around it. Generally, all sectors did well, but on the ground, we saw a phenomenal pick up for residential landed properties priced below RM2 million in the suburbs of Kuala Lumpur, Penang and Johor Baru,” he said. Penang and Johor experienced the highest growth in property prices while Klang Valley saw a marginally lower growth, as its base price is already high. “Sabah, Sarawak and Melaka also showed growth. Kota Kinabalu is a very vibrant market and still under-served in terms of product offerings while there is also demand from in-migration in Penang,” he explained. Average price of agriculture properties in 2011 saw a growth of 56%, which is in line with the commodity growth globally, followed by 10% growth in industrial, which reflects the foreign direct investment for Malaysia, and 5.5% for commercial. Overall, residential properties saw an average price growth of 2.6%. For longer term real estate investments, Previn picked four locations to look at – Melaka, Penang, Kota Kinabalu and Johor Baru. These locations, he said, hold a lot of promise in term of real estate potential. Commenting on Bank Negara’s move to tighten measures to curb speculative buying and household debt, he said, “I agree with the approach but it would be done in a more gradual manner. We should encourage investment but punish upon exit, even up to 50% or 70% via real property gains tax, for example.” The forum entitled is held annually for readers of The Edge Malaysia. The presenting sponsor is Malaysia Building Society Bhd while the supporting sponsor was Sunway Property. For full coverage of The Edge Investment Forum on Real Estate 2012, read the May 7 issue of City & Country, the property pullout of The Edge weekly.

 

More investment opportunities surrounding major infrastructure projects

KUALA LUMPUR (April 28, 2012): The new major infrastructure projects in Penang, Greater Kuala Lumpur and Iskandar Malaysia, Johor, has presented several investment hotspots for prospective real estate investors, said renowned cartographer Ho Chin Soon.
These infrastructure projects include new highways  in Penang and Iskandar Malaysia, Johor, as well as the mass rapid transit (MRT) project coming up in Greater Kuala Lumpur, the founder and director of Ho Chin Soon Research Sdn Bhd said at The Edge Investment Forum on Real Estate 2012 themedThe Edge Investment Forum on Real Estate this year was themed “Investing in uncertain times”.
In Greater Kuala Lumpur, he pointed out that the MRT green line will go through Pasar Rakyat station in the Imbi area, which is an interchange that is also part of the Kajang-Sungai Buloh line.
“The green line comes from Bandar Baru Selayang, punching through Kampung Baru, then it goes to the interchange here to the Pandan area and then it goes to Putrajaya’s electric rail line station,” he said.
He added that the MRT circle line will go through Sentul, the KL Metropolis project along Jalan Duta, Mont’Kiara, the vicinity of Bukit Kiara Equestrian and Country Resort, Universiti Malaya, Mid Valley City, the Bandar Malaysia township at the old Sungei Besi airport, before connecting with the existing LRT lines to Ampang Point before returning to Sentul.
Ho also pointed out four new highways coming up within Greater KL, namely the Damansara-Shah Alam Highway (Dash), the Kinrara-Damansara Expressway (Kidex), the Serdang-Kinrara-Putrajaya Expressway (Skip), and the Sungei Besi-Ulu Klang Expressway (Suke). Properties in areas served by these new highways would benefit from the better accessibility and connectivity.
In Johor, he named Nusajaya, Danga Bay and their respective vicinities as new hot spots thanks to the new Coastal Highway.
Meanwhile, the newly-opened Eastern Dispersal Link which helps to alleviate congestion is also good news for the eastern corridor’s hospitality projects. In addition, he predicted better prospects for Desaru’s tourism projects due to the Senai-Desaru Expressway due to enhanced connectivity.
Meanwhile for Penang, he said, “In Penang, focus on the island. Maybe, you’d want to look at Seberang Perai and Batu Kawan’s affordable housing.  My dream is to one day go back to Penang, own a beachfront property [because it is growing scarcer] somewhere in Teluk Bahang, Batu Ferringhi.”
The forum was held at Sime Darby Convention Centre and saw 600 attendees turning up to gain insights into the real-estate market. The presenting sponsor was Malaysia Building Society Bhd while the supporting sponsor Sunway Property.
For the full coverage on the forum, read the May 7 issue of City & Country, the property pullout of The Edge Malaysia.

Make purchases based on fundamentals

KUALA LUMPUR (April 28,2012): Now is a good time as any to make selective purchases in the landed homes market, said CB Richard Ellis executive chairman, Christopher Boyd.
Boyd was sharing his views in a panel discussion etitled "Buy now or wait?” at The Edge Investment Forum on Real Estate 2012 themed “Investing in uncertain times”. Landed homes is ideal for investment as the Malaysian economy has experienced good growth, he said.
"If you look at the property market in a more level headed view, landed home prices in the Klang Valley have generally doubled in value within the last 10 years or so," he said. "We have good economic growth as well as the commitment of the federal government to increase the nation's household income."
He cited a typical 2-storey link house in Bandar Utama where between 2004 to 2011, the price has  appreciated over 80% or 10% per annum. Growth over the past three years between 2008 to 2011 has been 63% while growth over the preceding three years  between 2005 to 2008 was 11%. The average annual growth between 2004 to 2008 was just 2.8%.
Boyd explained that there is a way to spot areas that have the potential to experience a growth in its property prices.
"If you can find an area that has not seen an average of 10% per annum growth for the last 10 years, then the indications are that the neighbourhood is ready for a growth spurt and you might try to jump in and catch it."
Boyd also named Gombak and other areas between Melawati and Setapak as choice areas for investment. Data showed that 2-storey terraced home prices in Melawati shot up during 2011, after recording limited price growth during 2004 to 2011. The average annual growth between 2004 to 2010 was 2.9% while growth in 2011 jumped to 39%. The total growth of 2-storey terraced houses in the area over a ten year period between 2001 to 2011 is 66%.
"The growth in Melawati last year could partly be the result of the opening of the DUKE Highway," he said.
Another panelist Datuk Ahmad Zaini Othman, chief executive officer of Malaysia Building Society Bhd (MBSB) said property investors should no longer buy or sell based on perceptions but on the fundamentals in uncertain times,
“Buying and selling on fundamentals means you must observe not only our  economy but also in other parts of the world like Europe, the US and China, and study the trends such as unemployment and production. We are no longer living in a fishbowl economy,” said Ahmad Zaini.
The uncertain global economy and Bank Negara’s guidelines on responsible financing, which dictates banks to assess loan applications based on net disposable  income, can affect the country’s economy in the long-term.
The immediate impact, said Ahmad Zaini, is creating a cautious market where investors may take a wait-and-see approach, which will dampen the market. This in turn will cause developers to be very selective with new launches and projects.
“But the more serious issue is the possible ripple effect. In the long-term, it can affect supporting companies in the property sector and eventually the economy. The property sector is an important sector in the growth of the country’s economy. We have to monitor the ripple effect very closely,” said Ahmad Zaini.
However, he believed the guidelines on responsible financing will also help greatly in the long run by reducing speculation in the market and controlling household debts.
Ahmad Zaini noted that right time for investors to buy is when the market stabilises after the initial market reaction. He advised buyers to buy from established and financially sound developers to avoid being left in a lurch by developers.
“In this environment, only the strong developers will survive. You have to be careful as project failures  can happen,” said Ahmad Zaini.
“If you are buying to invest, you really need to study and know the market. If you’re buying for own use, anytime is a good time,” commented Ahmad Zaini.
Meanwhile, the third panelist Sunway Group COO property development division Daniel Lim said property prices will continue to increase due to lack of availability of land in prime locations, a steady increase in land prices in the recent years and high prices of building materials.
He also cited rising cost of labour, cross-subsidy for low/medium cost housing and strong demand due to the young population as reasons for rising property prices.
In times of uncertainty, he advised investors  to “buy from reliable developers with good record and strong financial standings. Buy properties in growth areas, which are well connected, suburban areas with expressways or public amenities such as light rail transit (LRT) /mass rapid transit (MRT) /bus rapid transit (BRT). Areas such as Puchong South, Cyberjaya, Putrajaya and Seri Kembangan have potential too.
“Look at urban redevelopment areas in the Klang Valley such as the Rubber Research Institute (RRIM) land in Sungai Buloh, former military airport in Sungai Besi, the Kuala Lumpur International Financial District (KLFID) in Jalan Tun Razak, former Pudu jail, as well as Jalan Cochrane and Jalan Peel,” he explained.
Lim does not see a property bubble in the property market. “The property supply is quite constant, about 500,000 units every year, and there is a gap based on demand by the growing population. The next few years, we expect to continue seeing demand exceeding supply of properties so there is no use asking if there’s a bubble or not,” he added.
For the full coverage of the forum, read the May 7, 2012 issue of City & Country, the property pullout of The Edge Malaysia.

UK properties entice Malaysian companies

KUALA LUMPUR (April 30): The low interest rate, weakening pound and near rock bottom prices have wooed property buyers to the UK, including Malaysian developers and asset managers.

Last week, Eastern & Oriental Bhd (E&O) announced the acquisition of an office and retail development in London for RM100.9 million. The property developer wants to establish an office there, as a base to explore business opportunities in the UK.

Permodalan Nasional Bhd (PNB) and the Employees Provident Fund (EPF) have already spent billions buying commercial properties in the UK over the past few years. Other companies such as TA Global Bhd and S P Setia Bhd have shown interest in UK properties.

S P Setia said it would continue to seek ways to "invest, via strategic partnerships and landbanking, in this exciting market" after its failed bid to win a £5.5 billion (RM27.3 billion) project in London.

The British real estate sector has been a target for many international investors, capitalising on its status as a safe haven built on sound risk-adjusted returns and ample liquidity even in times of economic difficulty, said real estate research and consulting firm Cushman & Wakefield.

"With continued ultra-low interest rates, further geo-political unrest and a relatively weak sterling, there is no reason to believe that there will be any let-up in interest from international investors in the central London market," said the consulting firm's head of central London Investment, Clive Bull, earlier this year in a report.

The UK registered a GDP contraction of 0.2% in the first quarter this year after a decline of 0.3% in 4Q11, putting it in a technical recession. The last time that the country had experienced two consecutive quarters of contraction in GDP was in 2009, when the economy fell 4.4%. However, most economists perceive the UK economy as stronger than its European peers.

Despite the economic slowdown, Cushman & Wakefield said property prices in the UK have began to rebound in the past two years, mainly in the office space segment. The firm said London offices earned an average rent of US$163.80 (RM497.95 per sq  ft (psf), the highest rate among 38 key European cities.

Moreover, London's office rentals grew faster in 1Q12 at an annual rate of 5.1% compared with Europe's 1.3%. However, data from real estate analyst Investment Property Databank (IPD) said yields from UK properties fell to 7.3% in March from 12.1% in the previous year. IPD said offices lead with a yield of 8.6%, while the retail and industrial real estate sector registered 6.2% and 7.1%.

The base rate has remained at 0.5% since 2009, and the pound has remained below RM5 since November last year.

"Throughout much of 2011, investment demand at the prime end has been driven by overseas investors and selected UK institutions who have targeted well-let assets in good locations, with long income streams and good covenants," said Cushman & Wakefield. The firm expects the trend to continue this year.

The EPF spent £693.5 million to acquire five properties in the UK, through its special purpose vehicle Kwasa Global (Jersey) Ptd Ltd. The fund presently owns seven properties in the UK. Properties only made up 0.39% or RM1.82 billion of its total assets last year. However, the figure could rise as the EPF recently received a mandate to increase its overseas investments to 23% from the 13.4% last year.

"We have undertaken these acquisitions at a time when property rates overseas have been on the decline. These investments have also presented us with the opportunity to diversify into new and potentially lucrative assets that offer good returns over the long term with strong tenant covenants," said the EPF in its latest annual report.

PNB has spent some RM4.9 billion in the past two years acquiring overseas properties. This includes three offices in London. The fund may shift its investment focus towards the real estate sector moving forward, based on a recent statement by president and chief executive Tan Sri Hamad Kama Piah Che Othman.

"In the past, our focus has definitely been on equity investments but now we are venturing into the real estate sector as it is expected to provide stable returns," he was quoted as saying earlier this month.

The pilgrim fund Tabung Haji, has allocated between £150 million and £200 million to purchase at least one commercial property in the UK this year.

Director and chief executive Tan Sri Abi Musa Asaari Mohamed Nor said earlier this month that the UK had been on its radar for a long time. He added that expanding the fund's scope to include properties in London would provide it an opportunity to earn favourable returns on a fixed income basis. - The Edge Property

市价逾7万元 槟将建1.8万中廉屋

槟城30日讯）槟州政府将盖建的1万8000个“可负担得起房屋”单位，价钱约7万2500令吉，属多数无壳蜗牛族可负担的房屋！
槟州首长林冠英周日宣布，槟民联政府为槟岛人民带来“房屋大礼”，将在槟岛鉴定的16依格作为打造可负担得起房屋，避免槟岛人在屋价飙升上面对逼迁威省窘境，其中在槟岛东北部有10依格地，西南区则有5.84依格地。
多数人可负担得起
槟州房屋委员会主席黄汉伟行政议员受访时说，计划中将建造1万8000个市价7万2500令吉的“可负担房屋”单位，其中1万2000个单位将盖建在威南的峇都加湾，另外6000个单位则盖在槟岛。黄汉伟说，州政府除了拨地盖建1万8000个“可负担房屋”单位，私人发展商也将配合，另外兴建上万个中廉价单位房屋。
他说，在房屋发展条令下，发展商凡兴建150间房屋，其中30%必须是中低廉价房屋，而州政府将积极督促，以贯彻“居者有其屋”的槟岛家园理想。黄汉伟是在今日槟州议会开幕完毕，全体议员拍“合家欢”照后，受《光华日报》记者询及上述消息时，如是回应。- 光华