FOR some, the sooner the general election is done with, the better.
“We have been waiting for nearly a year for some projects to come through but it looks like everything has slowed down for the general election,” says a foreign consultant in frustration. His firm has been bidding on a couple of high-profile property projects.
Now expected to happen in March after Chinese New Year and during the school holidays, the suspense will end soon enough. If a repeat of the 2008 results happen, however, the consultant fears that the business he needs may go down the drain.
Several investment analysts also believe that property development has slowed down due to the impending elections.
However, the property market should “come back” after the general elections are over, Hong Leong Investment Bank said in a recent analyst report.
Some even say that the country’s economy will go up or down depending on the outcome.
“A two-thirds majority win by BN would ensure political stability, accelerate private and foreign direct investment and enable the execution of proposed projects announced under the economic transformation programmes,” said JP Morgan’s MorganMarkets Malaysia strategy report. A win by Pakatan Rakyat, however, would lead to policy changes and breed uncertainty for at least nine to 12 months, it stated.
Talk to most key people in the industry, however, and they believe the election has very little impact.
“I’ve not seen any major change in property transactions and prices before and after any side winning,” says former Valuation and Property Services Department director-general Datuk Mani Usilappan.
“If there was any major movement, it was because of the Asian financial crisis in 1997 and 1998, not because it was an election year,” Mani says.
“Residential property is the bread and butter of the industry,” says Real Estate and Housing Developers’ Assocation Malaysia (Rehda) president Datuk Seri Michael Yam.
“It is not proven that political uncertainties will necessarily seriously impact or lead to catastrophic collapse of prices, particularly of residential homes. For the average guy on the street, they still need to eat and clothe themselves, and have a roof over their head,” Yam says.
What really affects the market is pure supply and demand, he insists.
“Based on Government numbers, there were about 200,000 marriages in 2011. However, the completion of houses in 2009, 2010, and 2011 had been about 110,000 each year. There’s not enough houses to meet demand.”
The public should not fear that pre-election goodies such as infrastructure and affordable housing projects will vanish if the government changes hands, suggest industry leaders.
“With regards to the MRT, the government of the day has made contracts with certain entities and any incoming government has to continue with them, they have no choice” says Fiabci (International Real Estate Federation) president Yeow Thit Sang.
“But if the Opposition wins, they may tighten the screws, make sure there are no leaks. Like when they took over Selangor in 2008, they maintained the Alam Flora contract, but scrutinised their work carefully. When it was up, the state government took it back and did it themselves.”
“Any government that comes in will be equally committed to extensive infrastructure development because we need it,” agrees valuer Mani.
“If any party tries to curtail it, they will not be very popular.
“I am quite certain the incumbent will try to increase the amount of expenditure on infrastructure to improve the economy.”
Developments to benefit from proposed MRT 2 and MRT 3 lines and KL-Singapore high-speed railway are KL Metropolis and the ex-Unilever government land project, as well as SP Setia’s KL Eco City and Setia Federal Hill projects, says Maybank IB’s research paper Property Developers: Pain First, Gain Later.
Then there are YTL Land’s Sentul projects, MRCB’s Sentral project, UEM Land’s Mont Kiara projects and Mah Sing’s M City project.
Property companies to benefit from Barisan Nasional doing well would be IJM Land Bhd, and Umno-linked companies like UEM Land Holdings Bhd, MMC Corp Bhd and Malaysian Resources Corp Bhd (MRCB), according to JP Morgan’s report.
Government-linked companies such as MRCB, UEM Land and SP Setia will most likely get plum jobs in government land developments such as the prime Sg Buloh RRIM land, added Maybank IB’s paper.
“However, we believe other developers with strong track records like Mah Sing, Glomac, IJM Land and YTL Land also stand a good chance of securing bids.”
Some projects however, have fallen through because of a regime change. An engineer who worked with a high-end residential project in Langkawi complained that the project stalled after the Kedah state government was taken over by Pakatan Rakyat.
“Some approvals were promised but did not make it before the government changed,” he said. The engineer has now come to Kuala Lumpur to work on another project.
Other projects were resurrected after a change in government. After being “put off” by previous state leadership, Berjaya Land Bhd returned to developing in Penang after the 2008 elections, its group chairman Tan Sri Vincent Tan has said.
Utlimately, the property business is a pragmatic one, suggests a property developer who wishes to remain unnamed.
“Look at Syed Mokhtar’s DRB-Hicom developing all that land in Kedah,” he said (the company may develop Rebak Island, off Langkawi, to become an exclusive Hamptons-like summer retreat, according to a recent report).
“Do you think they care that it’s an Opposition state now?”
“I don’t think it matters who takes over, there will be a couple of months of flux, but I think after a while, it will stabilise,” says Fiabci president Yeow.
Rehda’s Yam agrees: “Penang, Selangor, Kedah and Kelantan after 2008 have not seen prices come down.
“In fact, after the initial settling in, capital values were on an uptrend. Sure, after the formation of the new state governments, developers faced some problems because their normal routines were affected. The new Government wanted to review policies and look at procedures which led to approvals being delayed.
“But in general pragmatism sets in and most states recognise that property contributes a multiplier effect and is an engine of growth. If you look at the accounts of these state government, a substantial amount comes from property related activities. It’s business as usual.”
Whoever wins will have to tackle prices being out of step of incomes.
“There are a lot of people who think that there’s a need to curb speculation with a higher real property gains tax,” adds Mani.
Zerin Properties CEO, Previndran Singhe, hopes that political will, will be maintained for affordable housing on the ex-RRIM land in Sungai Buloh “by going vertical and having three MRT stations on the site”.
“This is perfect for the government to provide affordable housing instead of just using government land for luxury or commercial development.”
At ground level, senior real estate negotiator Lena Ching believes that the most important factor is interest rate.
“But neither party will raise this anytime soon,” she says.
“And if they were to do anything about crime and transportation, that would boost the property market!”
In the long run, Fiabci’s Yeow likens the government to property managers who maintain the common areas of a property.
“If there’s good governance and infrastructure, properties will appreciate,” he said.
Ultimately, while individual players and companies may vanish or suffer throughout the elections, it will hopefully bring about a competition of ideas and abilities which will result in a better environment for us all. In that spirit then, let the games begin. - The Star
Read the full story at www.starproperty.my, a next-generation portal that provides all the necessary information for buyers to find their ideal properties. It is offering free real estate listings until Feb 28.
