Expert: Height doesn’t matter

GEORGE TOWN: Penang hillside geo-technical advisory panel chairman Prof Dr Gue See Sew has raised eyebrows with his opinion that altitude is irrelevant to the safety of hillslope projects.

Dr Gue however said he was speaking solely on the safety aspect of hillslope projects, during a briefing on safety guidelines for hillside development.

“I’m aware that the state imposed restrictions in terms of height above the sea level but what is important when approving these hillside projects is the slope gradients,” said Dr Gue.

For example, he said, there could be a flat land (zero gradient) high above the sea level that could be developed without extra safety measures compared to a hill site with a slope gradient of more than 30 degrees and located only 20m above sea level.

During the briefing held at Komtar yesterday, Dr Gue said there could be secured hillslope development as long as stringent rules were put in place.

Dr Gue, who is an Oxford-trained geo-technical engineer, was asked to give a briefing to local authorities as well as several non-governmental organisations (NGOs).

His statements on altitude being irrelevant to the overall safety of hillside developments drew inquiries from the attendees who were concerned about the environmental impacts of hillslope development taking place high above sea level.

“The guidelines are only applied by the local councils for planning permit applications and are not related to the state’s policy,” explained Dr Gue.

Meanwhile, state Local Government and Traffic Management Committee chairman Chow Kon Yeow who was present at the briefing said the guidelines were prepared for clearer procedures on hillside development for all stakeholders from the developers to the local authorities.

When asked if the state’s policy would be reviewed as Penang is the only state that imposed a 76m above sea level limit for hillslope projects, Chow said there were no plans yet.

“We will definitely adopt the safety guidelines when approving hillside projects,” said Chow when met after the briefing. - The Star

Call for review of low-cost home quota

PETALING JAYA: Property developers are asking the government to review the 30-year old low-cost housing quota and allow them to build affordable houses on public land.

The are also proposing for an auto release mechanism for unsold Bumiputera properties as it is affecting their cash flow.

Real Estate and Housing Developers' Association of Malaysia (Rehda) president Datuk Seri Michael K.C. Yam said developers are suffering as the houses built on subsidies are eating into their profit margins.

The government, in 1982, imposed the 30 per cent low-cost housing quota on private sector developers as a social obligation. Developers have been building low-, low-medium and medium-cost houses, at prices that have been maintained at between RM42,000 and RM99,000 each.

"The government should do research as to how many units are really required. We think there is more than enough low-cost houses here. We understand some are not even occupied, while others own two to three units that are on rental. 

"It shows the lower income group have the purchasing power and can afford better homes. For the hardcore poor, we suggest the government take on the role to do social housing and let developers focus on building medium to high-end houses," Yam said at a media briefing here yesterday.

He said the country's housing stock as at end-2011 was around 4.5 million units, comprising 1.04 million low-cost houses. Bungalows and semi-detached homes accounted for 402,000 and 296,000 units respectively.

Rehda is also requesting the government to establish an auto release mechanism for unsold Bumiputera properties, where the unsold units can be sold to other buyers six months after a project receives Certificate of Fitness.

"If we continue to hold the Bumiputera units, the burden falls on the developer and is passed on to other buyers through higher property prices," he said.

Yam said Rehda has presented the idea to the Ministry of Finance as one of its proposals to be included in the 2013 Budget.

The annual Budget is scheduled to be tabled in Parliament by Prime Minister Datuk Seri Najib Razak on September 28.

Meanwhile, Malaysian Resources Corp Bhd director Che King Tow is suggesting that the government offer incentives to developers to build affordable houses.

"Since the government is giving incentives to foreign companies to come here, why not give developers some tax free incentives to build affordable houses on public land. Developers can build 150 to 200 units," Che said.

"The best located properties are usually government-owned. The government has prime land along Jalan Duta and in Sungai Buloh. These locations are good for mass affordable housing. It is a political decision but it matters a lot to us," he said. - The Star

An alternative to build-then-sell

There's a solution that will solve the problem of abandoned housing once and for all.

AT a time when the Government is looking closely at the property markets to see if a bubble is forming, and examining the question of building more affordable housing, it is only natural that the attention becomes focused on the property sector, especially with the budget just around the corner.

The situation calls for good sense to prevail in a rather fluid property market. A good rule of thumb is that when there is talk of a property bubble, whether arguing that there is one or against, there may well be one forming.

Under such circumstances, it is advisable to take a good hard look at practices in the property market to see if any may be inadvertently contributing to an artificial increase in demand not supported by genuine needs of those who want to occupy the space.

We can argue till the cows come home about many things, but if there is not enough demand to occupy the space, property prices will come down. If the supply outruns demand too much, property prices will eventually collapse. The converse is also true, of course.

Rational owners, developers, financiers and even buyers don't want that and are prepared to accept measures which deflate the balloon without exploding it. The only people who want volatility rather than stability in house prices are speculators, for then they can trade.

So it is in the interest of everyone to rein in excessive speculation in the property market to ensure that supply about matches demand. And if Malaysians are to benefit from Malaysian property, there's nothing wrong with restricting foreign purchases or even disallowing it countries around the world do that and they are none the worse off.

A key factor that could affect supply is the build-then-sell (BTS) concept, which housing developers claim could result in contraction of supply by as much as 80% and result in soaring prices.

Whether that claim is true or not is a moot point but really, there is an alternative to BTS. You can still have BTS but implement a system whereby money does not go to the developer until the certificate of fitness (CF) is issued.

Such a system already operates in countries such as Australia and will effectively solve the problem of abandoned housing schemes once and for all. That we have not solved this problem after all these years is a shame when the solution is so, so simple. It speaks volumes for the strong influence of developers and the poor efficacy of government.

Here's how it works. Developers, as it is now, can come up with their plans and sell based on their plans and specifications. Buyers, if they are convinced, will pay their deposits and pay according to a schedule of completion.

But here's the difference. None of the money the buyer pays will go to the developer. Instead it will go into an interest-bearing trust account. The developer, based on his project viability and the money in the trust account, will get commercial funding to bridge the gap.

Professional architects will be required to be independent and to certify the stage of completion. Banks will then deposit the money into the trust account based on stage of completion. At the end of it all, when CFs are issued and everything is properly certified, the trust account releases the money to the developer.

The Government can facilitate the setting up of such a scheme. Bank Negara can administer it and put the trust money in interest bearing instruments such as government securities and treasury bills.

Banks can give concessional bridging financing to the developers because there is or will be an equal amount in the trust fund upon which the loan is secured. The trust fund could easily pay an interest rate of say 2% a year, which is still below that of fixed deposits, while it is not inconceivable that at current rates, developers can get concessional financing at 4%.

Yes, the financing costs will increase but not by very much. Let's assume the house costs RM300,000. We assume that land costs are half and building costs the other half it will vary but let's use this for simplicity.

Typically developers will make a profit on land costs too, especially if they had obtained agricultural land and then converted it for residential use. So financing would be for construction purposes, or in this case RM150,000.

However, this amount will not be needed immediately but according to the stage of building. We assume it is drawn down uniformly over the period. Thus, if RM150,000 is used over two years, then the full interest on it will apply for about just one year.

If the developer can get financing at a concessional rate of say 4%, and he gets interest on the trust account at 2%, then his final cost will be 2% for one year on RM150,000 or RM3,000. That's a small price (1% of the house price) to pay for total security and even that can be easily recovered by a tiny increase in the profit margin of the developer.

Not only that, if such a scheme is implemented, you don't have to be a giant developer with deep pockets. So long as your scheme and your business practice are sound, you are quite likely to get bridging financing from the banks because of the security of the money in the trust account.

As I said, similar schemes are in place in Australia and it is a mystery why such a scheme has not been implemented here. It will very easily and immediately solve the problem of abandoned houses, which arise because developers have absconded with the money and left unfinished houses behind.

Thousands of buyers not only do not have houses to stay in but have to service a bank loan on top of that a severe double whammy to their lives and the lives of their dependents. They are at their wits end to find a way of making a living.

It is time that all involved get a heart, put their hands together and put to rest this easily solvable problem of abandoned housing once and for all.

> P. Gunasegaram has personal experience of an abandoned housing scheme. The shareholders of this liquidated developer are still doing fine.

Tips on hiring a home contractor

HOME repairs can be expensive but when you lack the knowhow to do it yourself or just don't want to get your hands dirty, getting an expert is a must.

However, we've all heard the horror stories of someone hiring a real bonehead of a workman, or worse a con man contractor that runs off with every penny even before that first brick can be laid!

To help you avoid these situations, the following are some tips to consider when hiring a trusty handyman to work on your house.

Get a licensed contractor

Getting a licensed and insured contractor is considered a “safe bet” in ensuring the repairs you're seeking will be up to standard and professionally done,” says Jamal Aziz, who admits to having done “extensive renovation work” to his house.

“It's also a good gauge to determine if the contractor is properly qualified and knows how to perform the job.

“It's also a big help if the contractor is insured, to cover for any potential damage that might be caused to the house, or if a worker gets injured during the duration of the work,” he says.

Jamal does point out that a licensed and insured contractor can be more expensive.

“Because of their credentials, they can demand top-dollar (ringgit) for their services. That's why a lot of people prefer to get a contractor that might not be licensed (on paper), but is reputable for doing good work at reasonable prices.”

Get good referrals and recommendations

Most times, people tend to hire contractors that have been recommended by a friend or family member.

“The best credential on a contractor's CV is, of course, the good work he's done and the referrals from satisfied customers,” says Frankie Liew, who has been a contractor for over 20 years.

Jamal says it's also important to ask friends or family members how the service was during the repair period.

“Was it professionally done? Were there delays? Was the price reasonable? These are questions you should ask before determining if the contractor is worth hiring.

“However, every job is different. If you can get multiple referrals for one contractor, even better. I have experienced satisfactory work from a particular contractor, but the person I recommended him to did not think too highly of the job that was done.”

Jamal also says if budget is an issue, one could try getting referrals on a few contractors, if possible.

“Some contractors are all-rounders, while others might be good at specific jobs.”

Know what you want

Once you've decided on a suitable contractor, explain to him your terms and conditions.

“You need to be specific on what you want or how you want it done. A contractor might suggest the most expensive items or fittings but if it's not within your budget, you should explain it upfront,” says Tan Chee Meng, who recently renovated his house.

“Also, don't be afraid to ask your contractor any questions that needs clarifying, such as cost, duration of the repairs or if he's done similar jobs in the past. The answers he provides could provide a gauge on the type of contractor he is.”

Have it in black and white

Many people take it for granted that once a contractor has been hired, all the terms and conditions agreed upon would be fulfilled.

“Things can always go awry. Though it can be a hassle for a lot of people, it's sometimes best to have the agreement in writing,” says former legal assistant Sam Cheong.

He says drawing up a contract would help protect both the contractor's and customer's interests.

“The contract should have details such as the tentative duration of the repairs, problems that may arise and how to rectify them. It should also have a clause on what needs to be done if there is a delay that is neither party's fault.”

Get a good deal

The biggest issue that arises when hiring a contractor is cost. The customer wants the lowest possible price while the contractor will try to maximise his profits.

“It's always best to check with friends or people that have done similar jobs to estimate how much it would cost. Obviously, if your contractor is asking for too much or too little, something is wrong somewhere. Unfortunately, most people are happy when it's the latter,” says Cheong.

“If your renovation is unusually cheap, your contractor could be cutting corners,” he warns.

Time of payment can also be an issue. Do you pay your contractor before or after he's completed the work?

“Most contractors usually ask for some kind of a deposit before the work starts. The balance is paid after everything is done. You should not pay everything to him prior to the job,” says Jamal.

“This is because the contractor might end up taking his own sweet time to complete the job or, worst still, run off with your money! I usually pay half before and half after,” he says. - The Star

Making all housing more affordable

WHEN I watched Usain Bolt cross the 100m line in an Olympic record of 9.63 seconds during the recent concluded Olympic Games, I saw a young focused sprinter with only one objective in mind; to cross the finish line in the shortest possible time. He amazed the world with his stunning performance again.

This reminds me of our journey in making all Malaysian housing more affordable. It is a race that requires the same amount of focus from all relevant stakeholders including public sector which is the Government, and private sectors, i.e. the property developers, home buyers and NGOs. Furthermore, like in a race where the sprinters have a sight on the direction and goal, all stakeholders in the housing industry should be aligned to the same goal before starting the race.

To understand what exactly drives up property prices, we need to analyse the various factors that influence the price of a housing development in Malaysia. This may help us identify the root cause and provide us with the correct remedies to make Malaysian housing more affordable and sustainable.

Let's begin by looking at what are the major cost components of a property project. Twenty or 30 years ago, land acquisition was only about 5% to 10% of a project cost, but nowadays, it can take up to a sizable 20% to 30% of the whole development budget before any value-added works are carried out on the land itself.

Land prices are ever rising due to scarcity of urban land especially in the major cities. For example, a piece of land that used to cost RM10 per sq ft in Mont' Kiara during the late 80's now can cost up to RM300 per sq ft. With rising land cost “eating” up a significant portion of the development budget, house prices automatically increase as a result.

The next major cost is the holding cost and construction financing cost of the project. The longer it takes to complete a project, the higher the financing costs of the project which will then increase the price of a home.

I mentioned this before in my earlier articles that property projects are sometimes subjected to one, two or more years of gestation period to obtain all the necessary approvals from the relevant authorities before they can be launched. The lengthy approval period will definitely affect the holding costs, and slow down the supply of housing units. If this approval time is not shortened, the rising demand will only further push the prices up. This is the basic market influence of supply and demand.

Another factor that influences the cost of housing, as highlighted by developers surveyed during the recent Real Estate and Housing Developers' Association (Rehda) media briefing, is the unsold and unreleased Bumiputra units.

According to the latest half-yearly property industry survey by Rehda, the number one reason for unsold properties comes from unreleased bumiputra units and has been so for the past two years.

With the requirement to hold on to the unsold bumiputra units, the additional holding cost is inevitably spread out to all the other house buyers in the form of higher priced units. Unreleased bumiputra units may also create a false impression of supply shortage in the market, and these can cause the prices to increase again. While we recognise the need for a bumiputra housing policy, the various states should agree on a transparent, auto-release mechanism to release bumiputra units if unsold beyond 18 months of launch, to make houses more affordable for everyone.

Apart from land cost, holding, and construction financing costs, another cost component that adds to the price of properties is utilities costs. In the past, utility companies would be expected to build substations and water storage towers as well as lay electrical cables and water pipes. Today, all these are required to be completed by developers themselves.

In a roundtable discussion on housing affordability, Housing Buyers Association secretary-general, Chang Kim Loong highlighted that the privatisation of utility companies have turned them into profit-oriented companies. Taxpayers' monies are no longer utilised to provide the basic necessities that they have paid for. This ends up making houses cost more because home owners end up bearing the cost of the infrastructure for these utility services.

In the illustration mentioned at the start of this article, a sprinter must stay focused on the targeted goal of winning the race without mental and physical disadvantages before and during the sprint. Imagine if Bolt needed to run against a headwind and carried a few pounds on his back all along the race. Would he still able to break the Olympic record and become a legend?

In the race to make the price of all housing units more affordable, the issues of high land cost, lengthy approval period, additional utilities expenditure and unreleased bumiputra lots are the burdens that are holding houses back from becoming more affordable. Solve these dilemmas and we will begin to break records.

● FIABCI Asia-Pacific Regional Secretariat chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please emailfeedback@fiabci-asiapacific.com.

Don: Penang should adopt rubanisation concept

PENANG can be the number one city in Malaysia by incorporating both rural and urban characteristics, said National University of Singapore Department of Architecture adjunct Professor Tay Kheng Soon (pic).

To achieve this, Prof Tay, who is also an architect, said Penang should integrate six elements — work, live, learn, play, farm and heal — from rubanisation, a word coined from the words ‘rural’ and ‘urbanisation’.

“Balik Pulau can become a strategic centre for this movement,” he said.

He was giving a lecture on ‘Rubanisation and Its Relevance to Human Settlement’ in the South-East District and Land Office, Balik Pulau.

He explained that the rubanisation concept could be adopted as there were still countrysides and mountains in the state.

Rubanisation can be defined as the act of rebalancing local production and consumption in which people can work, live, learn, play, farm and heal within 1km from their home.

The public lecture moderated by Balik Pulau MP Yusmadi Yusoff was attended by some 50 people which included Penang Municipal Council members, village leaders and members of the public.

Also present were State Speaker Datuk Abdul Halim Hussein, State Town and Country Planning, Housing and Arts Committee chairman Wong Hon Wai and Pantai Jerejak assemblyman Sim Tze Tsin. - The Star

中低阶级难置业 高收入者独霸槟岛？

根据槟城研究机构(Penang Institute)的一项槟州产业房屋研究报告，槟岛人的“居住权”潜伏被高收入者占领的危机，预料2014年后，中低阶级者或被逼迁离外州，无法在槟岛置业。

去年10月，槟城研究机构(Penang Institute)的城市规划及环境研究主任史托麦丹奴，针对槟岛和威省从2006年至2011年10月的房产资料，进行一项研究和分析报告。

报告内容分两部分，首部分是研究槟房产市场供应和需求，及槟民的住房负担能力进行评估；后部分则研究导致槟州产业价格急速飙升的因素，及槟城未来房屋发展方向。《光华日报》针对摘录报告重点，即日起以文字报道，为槟城的“房事”把脉。

房产暴涨收入却保持

人人都在埋怨，房产价格暴涨的同时收入却没有相对提升，这种失衡状况导致大多数人，工作半辈子只有能力付得起房屋“首期”，一辈子沦为“房奴”。光华

MPPP offers properties

GEORGE TOWN: Seventeen properties and a piece of land belonging to the Penang Municipal Council (MPPP) on the island are to be sold through open tender at a reserved price of RM18.6mil.

State Local Government and Traffic Management Committee chairman Chow Kon Yeow said the land and properties had a total land area of 0.8ha.

The land is a 0.4ha site in Jalan Sultan Azlan Shah, while the rest are three retail lots in Prangin Mall and 14 pre-war landed properties in Jalan Hutton, Lebuh Kimberley, and Jalan C.Y. Choy.

High maintenance cost incurred for the retail and pre-war properties and the need to raise funds for land purchase were among the reasons for the planned sale, said Chow.

“The proceeds from the sale will go towards funds to acquire new land,” he said.

Chow added that MPPP planned to acquire two plots of land in Balik Pulau and Jalan Masjid Negri and a market-cum-hawker complex in Teluk Kumbar and in Batu Ferringhi totaling 7.89ha for RM40mil.

“The 956 sq m land in Balik Pulau is planned for a recreational park, while the 0.8ha site in Jalan Masjid Negri is for a road widening project,” he said.

Chow said seven plots of land in Lebuh Union, Jalan Burmah, Jalan Hamilton, Jalan Kuala Kangsar, Lebuhraya Batu Lanchang, Jalan Cheesemen and Jalan Free School, and two condominium units in Pesiaran Gurney totalling 3.6ha had been sold since 1990 for RM29.4mil.

“Some RM44.1mil has also been spent on acquiring six plots of land totalling 117.6ha on the island for the development of community parks, public markets, landfills, access roads, and car parking bays,” he said.

On state Barisan Nasional Youth chief Oh Tong Keong's recent statement that Penang Chief Minister Lim Guan Eng might one day sell off Komtar and that Penang land was not for cheap sale, Chow said the bulk of Komtar had already been sold off.

Chow said about 60% of the Komtar Urban Redevelopment Project had been sold to private developers since 1983.

Chow said the Penang Development Cor-poration (PDC) still owned 42.95% of Komtar Tower, and 37.59% of the Komtar podium.

“The rest of the Komtar Tower was sold to state and federal government agencies, and the remainder of the podium to retailing businesses.

“PDC also owns the 1.8ha site of Phase 5, which has been designated for the Penang Heritage Square project,” he added. - The Star

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Developers urge Government to bring down cost of doing business

PETALING JAYA: Property players are hoping that Budget 2013 would introduce encouraging policies or tax adjustments that allow businesses to thrive in the current local and global economic environment.

Mah Sing Group Bhd managing director Tan Sri Leong Hoy Kum hopes to see new financial incentives, tax breaks or even infrastructure projects that will directly and indirectly benefit the sector as it is a key growth pillar for the economy due to its impact on more than 140 industries.

“We hope there will not be any policies or requirements which will increase the cost of doing business. At the same time, we hope for measures to reduce compliance cost, ultimately promoting the property market,” he said in a statement.

Leong explained that by reducing compliance cost, it would directly reduce the cost of doing business and the savings passed on to buyers would improve the affordability of the properties.

He suggested some measures to increase affordability such as charging tariff-based utility fees, limiting the requirement of land to be surrendered to improve the efficiency of land use and applying plot ratio instead of density to encourage smaller, more affordable units and at the same time reduce land cost per unit of property.

He also suggested reducing stamp duty so that the cost of property and home ownership could be reduced.

“We propose that the stamp duty be reduced to 0.5% for the first RM300,000, 1% between RM300,000 and RM1mil and 2% in excess of RM1mil,” he said.

He added: “Property is acknowledged as the best hedge against inflation, and people buy properties as a form of wealth preservation and not speculation. We hope that the Government would balance its approach in stimulating the property sector which is an important engine of growth for the country.”

To minimise the Government's loss of income, Leong said that maintaining a favourable real property gains tax regime could potentially increase sales and stronger growth of property and housing industry, which in turn bring in higher stamp duties due to higher transactions.

To further stimulate the property sector, Leong recommended a tax relief extended to all interest incurred on end financing for the first home.

“Alternatively, the Government could consider providing grants of up to 10% of the purchase price of affordable properties, to first-time home owners,” he said.

Leong also hoped that the Government would further ease policies to encourage foreigners to buy properties in Malaysia.

“As foreign purchasers account for only 2% of property transactions in Malaysia, this will not be a big cost to bear, and at the same time, can project a pro-investment image to the world at large,” he said.

On another note, Leong said that with the escalating pressure of higher cost of goods, the Government could consider reducing the personal income tax rate or increase personal income tax relief to raise disposable income.

“As a business friendly measure to encourage economic growth and to be in line with regional practices, we hope to see a reduction in corporate income tax as well,” he said.

It was also reported that property and plantations group Tradewinds Corp Bhd had hoped for measures to sustain domestic economic growth in the wake of the uncertain world economy.

Chairman Tan Sri Megat Najmuddin Megat Khas said concerted efforts were needed for Malaysia's economy to continue to expand in order to cushion the impact of the current sluggish global economy.

He noted the bearish European economy and slowing growth in China has rubbed off on the local economy.

“We've to find our own solutions (to our own problems). We should not merely rely on other countries. Unfortunately, our country is still dependent on imported goods. Hence, we should improve on our competitiveness to produce more competitive products,” he said. - The Star