MALAYSIAN developers expect housing to cost up to 20 per cent more in the second half of this year, as raw material prices increase and supply tightens in popular areas.

The price of landed property in particular is expected to rise in two hot spots – the Klang Valley and Penang, where recent launches have drawn strong interest and set new price benchmarks.

Mid-year launches of terraced and semi-detached houses and bungalows have sparked huge turnouts.

For example, at the launch of the latest phase of Desa Parkcity – a new township development in the Klang Valley about 35 minutes from central Kuala Lumpur – all 147 units were snapped up in just five hours despite record prices of RM1.7 million (S$731,100) to RM2.1 million for two and three-storey link homes.

More than 650 registrants were reportedly present for the balloting exercise – each armed with a bank draft of RM50,000 to RM100,000.

Developers ramped up the supply of landed homes in the first half of the year. Launches of terraced houses were unchanged at about 35 per cent of all launches. But there was a 9 per cent jump in the number of semi-detached and bungalow launches compared with H2 last year, according to the Real Estate & Housing Developers Association (Rehda).

Even so, most homes are in the low to middle cost segment, with those priced between RM25,000 and RM250,000 accounting for 80 per cent of all units.

Rehda says homes will cost more for several reasons, including ample liquidity, reasonable mortgage rates, appreciating land prices, continuous population growth, urbanisation and demand for a better lifestyle.

However, it rates inflationary pressure, rising raw material costs and the removal of subsidies as major reasons for price increases.

About 40 per cent of Rehda members expect prices to rise as much as 10 per cent in the current half year – and a similar number project a 10-20 per cent rise.

As the population of the Klang Valley and Penang continues to grow – mainly because of inter-state migration – land is costing more. For example, Singapore’s City Developments Ltd is reportedly looking to dispose of a parcel plot in Kuala Lumpur’s golden triangle for RM3,000 per square foot, or 15 per cent more than the last transacted price in the area.

In comparison with Singapore and UK developers, Rehda says Malaysian developers make an average profit of only 15 per cent. It says land accounts for a mere 15 per cent of total costs in Malaysia, while construction costs make up a whopping 70 per cent.

Rehda pegs the average profit of Singapore developers at 20 per cent, with land and construction costs each accounting for 40 per cent of total costs.

Because the Malaysian authorities require local developers to meet various obligations – such as building a percentage of low-cost houses and providing sewerage and roads – overall construction costs are high.

On top of this, mandatory discounts of 5-15 per cent for bumiputra buyers further bump up costs.

Source: Business Times, 11 Aug 2010

Bright future prospects, says Real Estate Association

(KUALA LUMPUR) The Real Estate and Housing Developers’Association Malaysia (Rehda) is optimistic of the future prospects of the property market in Malaysia.

‘For the first half of this year, the Rehda Property Industry Survey for first half 2010 showed that 62 per cent of the developers were more optimistic of the market conditions compared with 43 per cent for the second half of last year,’ said Rehda president, Datuk Michael KC Yam, at a media briefing jointly held by Rehda and RAM Ratings Services Bhd here yesterday.

The survey showed that 58 per cent of the respondents had launched new projects in the first half of this year, a significant increase compared with 31 per cent in the previous half, Yam said.

He said with the current favourable market conditions, the survey showed that 69 per cent of the respondents would launch new products in the second half of this year.

‘The majority of the developers also anticipated prices to rise in the next six months.

‘About 41 per cent said their properties will increase in value by less than ten per cent, while another 40 per cent of the developers expect their property prices to increase from 10 to 20 per cent,’ he said.

On the opportunities in the housing industry, Yam said the financial sector has been accommodative.

‘The banking sector is liquid, credit for construction players has improved and housing non-performing loans have declined,’ he said.

Yam said the regeneration of brownfield sites and the improvement in government policies had also been lauded for contributing to the favourable market conditions.

He said although the business has gained momentum, the industry still faced challenges like the increase in the base lending rate, removal of subsidies and the high production cost.

Mr Yam said the current state of the housing industry was simmering and not boiling.

‘It is still business as usual, but it needs continuous goverment support and accomodative policies to ensure its stability,’ he said.

RAM Ratings chief economist, Dr Yeah Kim Leng, said the current monetary and financial conditions were conducive for sustainable growth.

‘Following a 10.1 per cent gross domestic product growth in the first quarter of this year, and with second quarter growth estimated at 8.8 per cent, Malaysia’s first-half GDP growth will likely hit 9.4 per cent year-on- year,’ Mr Yeah said.

The Rehda survey is conducted twice a year to assess the current housing industry conditions faced by its members. — Bernama

Source: Business Times, 10 Aug 2010

AN OVERSUPPLY of high-end condominiums in Kuala Lumpur’s most popular residential spots notwithstanding, developers are taking heart from strong uptake in recent launches and new benchmark prices.

While prices for landed residential property in the Klang Valley have remained robust, the interest in luxury condos, or rather those with a unique selling point, has been a surprise.

In June, Malaysia recorded what is believed to be its biggest condo transaction – that of a super penthouse in The Binjai On The Park for RM38 million (S$16 million). One of only two, the 14,300 sq ft triplex was sold at about the equivalent of RM2,660 psf to an unidentified corporate chieftain who owns properties worldwide, yet loved the unobstructed views of the Kuala Lumpur Convention Centre (KLCC) skyline afforded by the penthouse.

In nearby Mont Kiara, private developer Bukit Kiara Properties (BKP) has also been creating waves. Last month, it sold about four-fifths of the 200 plus units of its fourth and final block in the development called Verve Suites, at an average RM1,200 psf. Although the apartments come with fittings and furnishings, the cost per sq ft of the ‘designer units’ is close to prices in many developments in the Kuala Lumpur city centre.

Interestingly, secondary transactions have been much slower, a point that realtors attribute to BKP’s easy financing scheme. A buyer need only pay 2.5 per cent in down-payment – or as little as RM20,000 – because of the developer’s 5 per cent rebate and bank financing of up to 92.5 per cent. The developer also absorbs interest charges during the construction period as well as the legal fees for the sales and purchase and loan agreements.

Easy terms are a factor, but Verve Suites is very different from others in the market, BKP maintains. As with its previous blocks, the company ‘sacrificed’ the highest floor, which commands a premium, to build a common area for the use and enjoyment of residents. In its latest called the Vox Tower, the main pull is a sky beach, 37 storeys above ground ‘with the magnificent view of the Kuala Lumpur skyline as the backdrop’.

Could buyers be planning to flip the property in three years when it is completed? BKP sales manager Jenny Phui tells BT with a shrug: ‘I have a customer – just retired – who bought a unit in all four blocks. That’s why he said he doesn’t want to come here – because he will get tempted.’

The loyal customer would have purchased a unit in the first block at an average RM560 psf in 2006, rising to RM750 for the second block and to RM950 for the third.

Most of the purchasers, however, are yuppies aged 30-45 years keen on the lifestyle concept.

With liquidity swirling and yields on fixed deposits a mere 2.6-3.6 per cent, many prefer to invest in property despite supply outstripping demand in areas such as Mont Kiara, in which average occupancy has been pegged at about 75 per cent.

Increasing land scarcity notwithstanding, developers continue to maximise space by building more condominiums, perhaps buoyed by such sentiment.

Over the next few months, developer Mah Sing Properties will officially launch Icon Residence Mont Kiara, a 260-unit development whose modular design the company says is inspired by the Greek island of Santorini.

Despite indicative prices of RM1,100-RM1,200 psf, some 6,000 applicants – and counting – have registered their interest, drawn perhaps to the landscape and water features which hint of a ‘Mediterranean feel’.

Source: Business Times, 5 Aug 2010

Land for high-end condo project could top RM3,000 psf

(KUALA LUMPUR) Singapore property tycoon Kwek Leng Beng is in talks to sell a parcel of land in Jalan Bukit Bintang, Kuala Lumpur, which could possibly fetch a record price for a land deal, says a report in Malaysia’s Business Times.

It is understood that the selling price for the land, owned by Mr Kwek’s City Developments Ltd (CDL), is being negotiated for more than RM3,000 (S$1,282) per sq ft.

To date, the most expensive land deal reported has been Sunrise Bhd’s acquisition of Wisma Angkasa Raya in Jalan Ampang, Kuala Lumpur, for RM2,588 per sq ft. In May this year, FFM Bhd and Kuok Brothers Sdn Bhd sold a piece of land in Jalan Perak, Kuala Lumpur, for RM2,200 per sq ft.

CDL’s land in Jalan Bukit Bintang is about 32,000 sq ft. At RM3,000 per sq ft, the deal could fetch RM96 million.

The land sits between the Grand Millennium Kuala Lumpur hotel and the Pavilion Kuala Lumpur shopping centre. CDL, which is part of Singapore’s Hong Leong Group, also owns the Grand Millennium hotel.

Contenders for the land are believed to be the owner of Pavilion Kuala Lumpur and the YTL group, both of which have sizeable assets along Jalan Bukit Bintang.

Sources told Malaysia’s Business Times that the RM500 million Millennium Residences project originally planned for the site and launched in 2007 had been aborted and that the land was being negotiated for sale.

A quick check at the site revealed that the project signage and hoarding had been removed. Some work on the 42-storey high-end condominium with an additional 15-storey crown started in 2008, but has since stalled.

In late March, a spokesperson for Singapore’s Hong Leong said that the Millennium Residences would be launched later this year.

However, replying to a follow-up question from MBT last week, the spokesperson said: ‘There are no details on the Millennium Residences available at this point.’

When asked if the project had been scrapped and the land was being negotiated for sale, the spokesperson said: ‘We have no comment at this stage.’

Pavilion Kuala Lumpur is wholly owned by Urusharta Cemerlang Sdn Bhd, which in turn is 51 per cent owned by Urusharta Cemerlang Development Sdn Bhd and 49 per cent by the Qatar Investment Authority (QIA).

Pavilion Kuala Lumpur will be managing the new Fahrenheit 88 shopping centre, previously known as KL Plaza. It belongs to Makna Mujur Sdn Bhd, which is owned by Pavilion International Development Fund Ltd, of which the principal is the QIA.

YTL owns the Starhill Gallery and Lot 10 shopping centres and the JW Marriott hotel in the vicinity.

Source: Business Times, 5 Aug 2010

WHEN the two Prime Ministers of Singapore and Malaysia announced recently, and rather unexpectedly, a resolution to the long-standing issue of Malaysian railway land, there was a quiet sense of relief on both sides. But for none more so than among the backers of Iskandar Malaysia, an ambitious concept mooted in 2006 by the Malaysian government with the vision of transforming greenfield clusters in Johor into a sustainable and prosperous metropolis by 2025.

Singapore’s initial response to the mega development plan was lukewarm. Singapore businesses viewed warily the rosy forecast of lucrative investment opportunities in waterfront projects and building and operating educational institutions and theme parks. The onslaught of the global financial crisis in 2008 did not help matters and Iskandar developments appeared to be moving slowly.

However, to the credit of the project’s planners and managers, and the commitment of the Malaysian government, hundreds of millions of dollars have been sunk into developing the necessary infrastructure. Roads and highways were built, rivers cleaned up, and water and energy services to the area upgraded. In short, Malaysia’s planners spared no effort and now the development is ripe for takeoff.

Private investments have been picking up. The catalytic driver of investments for the area, Iskandar Investments, signed on some major projects and achieved its own target for joint ventures. Indeed, Iskandar Malaysia is reported to have gone beyond its target of achieving US$13.2 billion in investments by 2010. However, there can be no denying that Singapore investors have been by and large in ‘wait and see’ mode.

Several business delegations have gone across from Singapore over the past two years to take a look at the region and see developments for themselves. But except for a few small investors, there was no notable commitment from a Singapore party – until recently, when the Management Development Institute of Singapore (MDIS) announced one of its biggest forays overseas, a $128 million investment to set up a 30-acre campus in an area within Iskandar’s EduCity. The new facility will be about five times bigger than its Singapore campus.

Now that political reassurances have been made, and basic infrastructure is in place, will potential investors from Singapore take the plunge? Already Temasek Holdings is eyeing some 200 hectares of land in the development zone for a medical and wellness centre. This must be the clearest signal that the Malaysian project has got that it is ready to fly.

But while government assurances and commitments are necessary, nothing can replace the hard-nosed approach of business people, who base their decisions purely on investment returns. How much, and how quickly, private investment flows into Iskandar Malaysia will be the real test. But it must be said that the prospects now look better than at any time since the project’s launch.

Source: Business Times, 29 Jul 2010

Malaysia’s southern economic region Iskandar expects strong investment flow from neighbouring Singapore, despite an expected economic slowdown in the second half of the year.

In an interview with Channel NewsAsia, the CEO of Iskandar Investment, Arlida Ariff, said she hopes to ride on improved bilateral ties to woo Singapore investments.

Spanning over 2,200 square kilometres, the Iskandar economic region located in southern Johor is three times the size of Singapore.

Since its inception at the end of 2006, Iskandar has attracted more than 60 billion ringgit worth of investment from both local and foreign investors, surpassing its own target of 47 billion.

Singapore is currently the third largest investor in Iskandar, with 3.03 billion ringgit worth of investments committed so far.

They are mainly in electrical and electronics, manufacturing and education.

But according to the CEO of the economic region, Iskandar offers plenty of synergistic opportunities especially in leisure tourism.

CEO Arlida Ariff said: “This is an area Singaporeans as visitors have taken advantage of. But for businessmen (and) investors, this is certainly an area we see potential and opportunities… those are the areas we would like to invite interest from Singapore.”

To boost tourism, Iskandar is opening up two more hotels, a marina, retail malls, an indoor family theme park including Asia’s first Legoland in 2012.

It also plans to add another 5.5 million square feet of commercial and residential space later this year.

CEO Arlida Ariff said: “Very frankly, most long-haul visitors look for location that justifies a stay of 4-5 nights.

“I think, singly, Johor and Singapore do not provide the long-stay conditions. We don’t have enough attractions to justify a long stay.

“(But) working together in collaboration, we can develop packages. It’s a win-win situation, we actually create a bigger market.”

Malaysia expects its tourist arrivals to exceed 18 million this year while Singapore is forecasting 12 million.

Combined, analysts say, both countries stand to reap more from an increased number of tourists who stay longer and spend more.

Source: Channel News Asia, 13 Jul 2010

(DUBAI, United Arab Emirates) A property arm of struggling state conglomerate Dubai World is backing out of a plan to build luxury homes in Malaysia as it looks to shore up its finances.

The cash-strapped company’s Limitless division is selling off its stake in a partnership with Malaysia’s Bandar Raya Developments to develop waterfront land in the southern city of Nusajaya.

Limitless will generate about US$23.8 million in the deal, according to a regulatory filing on Malaysia’s stock exchange. It said in a statement yesterday that it continues ‘to review our business activity to reflect market conditions’. The company’s parent Dubai World needs cash as it works to pay back US$23.5 billion in debt. — AP

Source: Business Times, 12 Jul 2010

Residents, politicians oppose govt plan to redevelop 110 years old settlement in KL

THE enormous potential of the enclave notwithstanding, the proposed redevelopment of a Malay settlement located in the shadows of the Petronas Twin Towers in Kuala Lumpur may take a while to materialise as the settlement has become another political football.

The redevelopment of the 90ha Kampung Baru enclave has been mooted on numerous occasions over the past two to three decades, with Prime Minister Najib Razak being the latest to do so in February.

The total land value could exceed RM20 billion (S$8.6 billion) if its potential were to be fully realised, he said of the 110-year-old settlement where land transacts at an estimated RM350 per square foot (psf).

The desire to unlock its value is understandable given that it is a mere 10-15 minutes’ walk to the iconic twin towers, where the surrounding real estate sells for RM1,500 to RM2,000 psf.

That it remains unchanged is due to various reasons, the main one being the fragmented and complex ownership brought about by syariah inheritance laws, which has resulted in many small subdivided plots.

Putrajaya plans to establish a special body run by a government trustee, which together with state-linked corporations such as national asset management firm Permodalan Nasional and the pilgrims’ fund, will build a mix of skyscrapers, shopping malls, condominiums and residential units in the enclave.

Getting the 1,000-plus owners to agree on a development model was already proving a challenge. (Even within families, members disagree on the action needed.) Attempts by the Selangor Pakatan Rakyat (PR) coalition state government to offer an alternative redevelopment plan could make it even more difficult.

Barisan Nasional (BN) politicians have accused the federal opposition coalition of trying to hijack Kampung Baru to score political points with the Malays. The BN’s Federal Territories (FT) Minister, Raja Nong Chik Zainal Abidin, has asked Selangor Chief Minister Khalid Ibrahim not to interfere as the enclave lies within the FT.

Notwithstanding the political wrangling, talks between the residents and the FT minister appear to be yielding little. In one instance, Nong Chik proposed allowing non-Malays to lease the commercial buildings on a 40:60 ratio with the Malays. Even though Malays would continue to own the land outright, his proposal was shot down by the residents, despite arguing it would enhance values.

Non-Malays should be allowed to lease the commercial properties for practical reasons – they have greater purchasing power, Pulai member of Parliament Nur Jazlan Mohamed told BT. Recently appointed Urban Development Authority chairman Nur Jazlan said the area has the potential to be immediately successful ‘provided we have the right mix’.

He suggested the government use the Land Acquisition Act to overcome the stalemate. Although there are political risks, he is of the view that the residents will come round to the idea provided they can see progress and benefit from it.

In any event, KL-ites are arguably already opposition-i nclined as in the last general election, 10 out of 11 parliamentary seats fell to PR candidates. ‘You should not give up value for politics,’ he remarked.

Based on a conservative plot ratio of five, CH Williams Talhar & Wong director Foo Gee Jen estimates the land could yield up to 50 million sq ft of gross lettable area of office space.

Even so, the property consultant is not holding his breath. ‘It will take years and I doubt it will be a straightforward case because of the socio-politico constraints.’

Source: Business Times, 7 Jul 2010

It believes focus on premium properties will place it ahead of competition

(KUALA LUMPUR) Sunway City Bhd (Suncity), developer of the Sunway Integrated Resort City in Bandar Sunway, expects prices at its property launches to increase by 20 per cent this year from 2008.

Its managing director of property development in Malaysia, Ho Hon Sang, said this was in line with the current market trend.

‘Suncity’s launches for this year will mainly be in the Klang Valley with a gross development value of RM1.5 billion (S$651 million),’ he told Bernama in an interview.

Suncity, Mr Ho said, believes that its premium pricing strategy of focusing on properties with ‘green initiatives’ that promote quality of life will place it well ahead of competitors.

‘Our property prices are usually 10 to 20 per cent above the competitors,’ he said.

According to Mr Ho, the Malaysian property market is not expected to enter a bubble stage despite rising prices due to the limited supply of land in prime areas, and availability of liquidity at the banks and institutions such as the Employees Provident Fund (EPF).

‘Malaysian property prices are still lower compared to Singapore,’ he said.

Suncity began its green journey back during its Sunway Integrated Resort City in Bandar Sunway, an iconic project which encompasses a township of medical, university, shopping and retail mall as well as resort and hotels.

‘We have also emphasised on security with the implementation of CCTV within strategic roads and location and auxiliary police to ensure proper surveillance,’ Mr Ho said. ‘Sustainable construction is certainly here to stay as Malaysians are becoming more environmentally conscious. Moreover, it is widely practised by other developers overseas,’ he said.

He also said that Lafarge Malayan Cement Bhd’s cement products such as the Phoenix complemented the group’s objective to promote sustainable construction.

The group’s efforts in going green were given recognition when the Sunway Palazzio development in Sri Hartamas, Kuala Lumpur, was awarded the Gold Award in High Rise Residential Development by Singapore’s Building and Construction Authority Green Mark Scheme.

Sunway Palazzio is the first high-rise residential development in Malaysia to receive the coveted award based on five criteria – energy efficiency, water efficiency, site/project development and management, good indoor environmental quality and environmental protection, and innovation. — Bernama

Source: Business Times, 6 Jul 2010

CMA to grant CMMT right of first refusal to acquire Gurney Plaza Extension

METRO Holdings has announced that it exercised its put option to require CapitaRetail Gurney to acquire its interest in the 134,549-sq-ft retail property Gurney Plaza Extension in Penang for RM215 million ($92.9 million).

In 2007, CapitaLand acquired the 700,000-sq-ft Gurney Plaza for $336.8 million. At the time, it said it would form the seed assets for its proposed Malaysian retail real estate investment trust (Reit).

Metro Holdings said the consideration for the disposal of Gurney Plaza Extension was arrived at by negotiations on a willing seller, willing buyer basis and is to be wholly satisfied in cash.

Metro Holdings said that net proceeds of the divestment will be added to the working capital of the group and used to build on the group’s presence and investment in the region.

Gurney Plaza Extension is a nine-storey retail block located along Gurney Drive in Penang. It is part of the Gurney Park development.

Separately, CapitaMalls Asia (CMA) said yesterday that it will be granting CapitaMalls Malaysia Trust (CMMT) a right of first refusal to acquire Gurney Plaza Extension after the finalisation of all the terms and conditions of the acquisition.

CMA announced in June that it would make an RM848 million initial public offering (IPO) for Malaysia’s largest ‘pure-play’ shopping mall Reit.

CMA said that CMMT is still in the midst of its IPO and is likely to make a decision on whether to acquire Gurney Plaza Extension only after its listing on Bursa Malaysia Securities Berhad, the securities exchange of Malaysia.

The units for CMMT are tentatively priced at RM1.08 each, although the final price could change as it will be determined only after a book-building exercise undertaken by the listing’s joint global coordinators, CIMB and JPMorgan.

CMMT’s prospectus expects the trust to be the largest Reit on the Kuala Lumpur stock exchange with a market capitalisation of RM1.46 billion on an asset base of RM2.13 billion. It will also be the most liquid with a free float of up to 67 per cent.

Metro Holdings said that the divestment is not expected to have any significant impact on the consolidated net tangible asset per share and the consolidated earnings per share of the Metro Group for the year ending March 31, 2011.

Source: Business Times, 6 Jul 2010