Malaysia’s Optimistic outlook for 2010

*** From Property Report Asia - Dec 09***

From a growth in the GDP to increase in the sales of transactions for high-end properties, Malaysia has a positive outlook for the year ahead.

by Pete Wong

Developers will be happy to see the crisis-filled year coming to a close and hoping to get back into the swing of things in 2010 and ahead. There could be a temporary lull period during the traditional Lunar New Year festive season in mid-Feb 2010 when the market will be quiet but the pace is expected to pick up right after. Market confidence is returning and all indicators seem to point to a recovery to a certain extent.

The Malaysian government has estimated a Gross Domestic Product (GDP) growth of 3.2 per cent for 2010 and most analysts agree this is achievable. Malaysian Rating Corp Bhd (MARC) has given its own 3.6 per cent GDP growth prediction after taking into account some of the expected weaknesses in the US economy, which will affect Malaysia’s trade performance.

But is it too early to pop the champagne? During the recent Asia-Pacific Economic Cooperation forum (Apec), ministers who attended the meeting mostly agreed that the global economic crisis was far from over and the expected upturn was just a respite rather than a recovery.

Confidence returning
Despite the uncertainties, there is a lot of optimism, especially among local investors. "Market sentiment is on the rebound. There is good liquidity in terms of transactions and this should augur well for the property market next year," said Andy Khoo, Sunwaymas Sdn Bhd’s executive director.

"The economy is set to climb back on the growth path which will work well for property demand. We expect to see more sales activities and transactions over the next 18 to 24 months, as Malaysia’s GDP is expected to rise to 6 per cent in 2012," said Lai Voon Hon, Ireka Development Management’s president and CEO.

When YTL Land launched their Lake Edge Pavilion Terraces last month, all 30 units of the double-storey homes were snapped up within hours. Buyers were seen streaming in at 6 am and by mid-morning, the developer was ready to close the shutters. The units were priced from RM780,000 and ready for completion by end-2011. Sales were, of course, helped by the fact that the developer has a reputation in offering award-winning designs and a history of looking after the community’s well-being even after the units are delivered.

Over at Mont Kiara, the upscale One Kiara condominium project continues to attract attention despite the fact that there is no official launch yet. "We had a 70 per cent take-up for Phase One and we are now talking to an institutional investor to take up the bulk of our available units. Once that is finalised, we should have a few more units available for the public. Our selling price starts at between RM600 to RM650 per sq ft and early birds need to pay only 10 percent and not have to worry about the rest until delivery," said Chris Low, Monday-Off Development’s managing director and project owner.

No mad rush
Property prices in Malaysia, especially within the prime Kuala Lumpur area, are unlikely to see a huge jump in values like what is happening in land-scarce Singapore and Hong Kong recently. Malaysia has more than enough landbanks for developments. At a recent media briefing, Sunrise Bhd’s executive chairman, Tong Kooi Ong said: “It’s a myth to say there is insufficient development land in the Klang Valley (Kuala Lumpur)." The company itself has about RM1.5 billion worth of property projects to launch in the near- to mid-term and about 40 acres of land in the Mont Kiara area alone. "Our current landbank is sufficient to last us eight more years," he added.

Sunrise Bhd plans to launch another three projects in Kuala Lumpur within the next few months starting with the MK28 project in Mont Kiara. MK28 comprise 460 condominium units ranging in size from 2,000 to 3,000 sq ft.

Even if there is a surge in speculative buying, the ample supply of units on the market will put on a check on rising values. Within the Kuala Lumpur City Centre (KLCC) area alone, there is an existing supply of 5,700 units and a further 5,800 units are expected to come onstream within the next few years. "It is clear that there will be an oversupply as the year comes to an end and 2010 rounds the corner," said Robert Ang, Savills Rahim & Co’s managing director.

RPGT
What came as a surprise for many, however, was the government’s recent announcement to re-impose a Real Property Gains Tax (RPGT) with effect from January 1 next year. Although the tax amount of five percent is not huge, many in the industry thought that the move was ill-timed as it may hinder the market’s recovery from the economic crisis. "It may dampen property investors’ sentiment and curb some level of speculative buying," said Tong.

"It came as a surprise to us, as the government had suspended RPGT merely two and half years ago to give the property sector a boost and attract foreign purchasers. The re-imposition of RPGT could have a dampening effect on the property development sector, reflecting fears by international property buyers of more RPGT increases in future years or frequent changes in real estate policies in Malaysia," said Lai.

An irate property owner even wrote to the press asking, "How are we to be taken as a serious place for investment when policies keep changing at the whims and fancies of the powers-that-be?"

Some feel that the five percent tax may just be the beginning for more surprises in future. Prior to the exemption of the RPGT in April 2007, tax on gains from property transactions was on a progressive basis from zero to 30 percent depending on the holding period of the property. "We think that in the long term, the original scale rates of 30, 20, 15 per cent and so on, will be coming back," said Dr Veerinderjeet Singh, managing director of Taxand Malaysia.

"It is too early to see the impact of that five percent tax but it is a psychological barrier, particularly for those who entered the market in 2006/7 when market was at its peak," said Paul Khong, Regroup Asociates’ executive director. "Some of them will not be making money and they are already upset. With this flip-flop policy, they may just take their money and go elsewhere to get a better return," he added.

But not everyone is worried about the tax. "The government needs to have its source of revenue and I think the five percent tax will not have a huge impact. Property owners will just have to adjust their selling prices to cover the tax. However, it may have a bigger impact on lower-end properties where margins are already squeezed," said Low.

From a wider perspective, Malaysia may need a few more years to fully recover. As for property values, Kuala Lumpur may never be on the same level with Singapore or Hong Kong for several reasons. The average monthly take-home income of a Malaysian worker is much lower by comparison. Crime, poor public transportation and haphazard city planning, are perpetual issues crying for a solution. No matter how high-tech, environment-friendly or great-looking a building is, its property value is still determined by its location and living environment. Factors like how safe is it to walk the streets at night or how easy is it to take a taxi home are still important questions that the discerning foreign property investor will ask. The Malaysian government still has a lot of work to do in order to create the right environment for property values to appreciate and for foreign property investors to come in.

----------------------------
Projects update

For those looking for an upscale freehold condominium unit, Kenny Heights Sanctuary, located about 15 minutes’ drive from Mont Kiara, may be the answer. The developer, KH Land, will be throwing in signature gardens by an award-winning landscape designer, a sky lounge, clubhouse facilities and even a private spa, among other amenities. There will be 599 units ranging in size from 1,859 sq ft to 3,748 sq ft and priced between RM1.3 to RM5 million.

Those who prefer privacy in a low-density freehold condominium project might be interested in Lumina Kiara. Located at Mont Kiara, the development offers only 104 units within a split-tower of 23 and 29 storeys. Each floor has between four and six units only. Another cluster of 12 semi-detached, three-storey houses are connected to the condominium. The developer, ECH Development is currently selling the units at between 650 and 750 per sq ft. They are also dangling a ’10/90’ sweetener which means you pay only 10 per cent downpayment and zero-interest for the remaining 24 months. Construction work began in 2007 and the project is expected to be completed by end-2010.

Meanwhile in the leafy Taman Melawati suburb at the north-end of Kuala Lumpur city, developer Mutiara Goodyear Development plans to launch Melawati Nadayu, a high-end residential township comprising 142 bungalow units and 46 superlink units in 2010. The project sits on a 32ha site on a scenic hill area and the developer has already spent RM70 million to prepare the site.

HAVE WE BOUNCE OFF THE BOTTOM OF THE PROPERTY CYCLE?

Have we bounced off the bottom of the property cycle?

It was barely a year ago that property prices were plummeting.

Since then, the world’s central banks have flooded the markets with an unprecedented liquidity tsunami that has lifted prices of assets like stocks and property. Liquidity comes in many forms, the most evident and tangible is lower interest rates, which immediately lower mortgage costs and allow potential borrowers to borrow more with the same level of disposable income.

It also reduces the returns on deposits which make it more attractive for depositors to redeploy their funds into higher yielding and more speculative assets like shares and property. Other forms of less tangible liquidity measures involve providing cheap funding for banks and printing money.

In China, the liquidity came in the form of generous lending by state-owned banks which boosted lending in the first half of 2009 by 7.37 trillion yuan (RM3.8 trillion) – 2.3 times the amount of loans issued during the same period last year.

Some would argue that policymakers are creating a bigger bubble to counter the effects of the one that just burst. It was the bursting of the property and debt bubble in the United States that precipitated the global financial crisis.

The global liquidity tsunami appears to have succeeded in arresting the fall in global property prices. The mother of all property indices, the Case Shiller Composite 20 Home Index – which measures property prices in 20 US metropolitan cities – saw its first month-on-month rise in May 2009 after falling 33% from a peak in July 2006. The peaking of US house prices was followed by the global financial crisis two years later, so hopefully a bottoming of US house prices is a lead indicator of better economic times. Home prices in the United States are less overvalued after the price correction but are not particularly cheap as they have risen more than the inflation. Nevertheless, the affordability of the homes has improved as interest rates have declined.

The stabilisation of the US housing market is crucial as it means household wealth will also stabilise. Higher household wealth, closely tied to property and stock prices, will boost consumer sentiment. This in turn could boost US consumer spending and, hence, Asian exports. It would also boost the US economy as consumer spending accounts for 70% of the US economy.

However, it would appear that any recovery is likely to be muted as unemployment remains high and households are still deleveraging from high debt levels.

Ironically, a weak recovery and the deflationary effects of excess capacity will allow policymakers to keep interest rates low for a long time. After all, policymakers are unlikely to want to raise interest rates prematurely and be blamed for tipping the economy back into recession. Property prices and transactions in Asian countries like China, Hong Kong, Singapore, Taiwan and South Korea have risen from depressed levels in the first quarter of 2009.

In fact, the prices for the Housing Development Board (HBD) units, in which the majority of Singaporeans live, are at an all-time high. Low mortgage rates of less than 2% in Singapore have helped boost property prices. This is good news for property owners but bad news if you are a new graduate aspiring to own a property.

In Malaysia, lower interest rates, a buoyant stock market and better consumer sentiment have combined to boost demand for properties. Bargain hunters queued for properties launched by Island & Peninsular in Bandar Kinrara and Glenmarie and IJM Land in Jelutong, Penang.

Property companies are generally seeing better demand for property, and property agents are seeing renewed interest from home buyers.

Ironically, the rental market is not improving due to the ample supply of new property at a time when economic activity remains weak. The new supply of high-end condominiums and office space in KL is arising at a time when some multinational companies are downsizing. Higher supply and weak demand are likely to translate into lower rentals but not necessarily lower property prices as the alternative is to invest in deposits yielding only 2%.

This phenomenon has been observed in many countries like Hong Kong, Singapore and Taiwan where rental yields are at only 2% as deposit rates in those countries are at 1% or less. In the end, the effect of this liquidity is to punish the savers and reward borrowers with high risk-taking behaviour. Nothing much has changed despite all the touted reforms and we are on the way to creating a new bubble which would hopefully compensate for the current downturn before it eventually bursts.

In the meantime, property prices and property stocks are likely to rise in the liquidity-induced asset price inflation. The prices of property stocks have risen sharply from their lows in March 2009. The larger property stocks in Malaysia and the region are priced more than one times book. Many smaller property stocks are still trading at below one times book and offer more attractive valuations.

The party is on, the participants are intoxicated with liquidity but when the music stops, make sure you are not the player caught without a chair in a game of musical chairs.

● Choong Khuat Hock is head of research at Kumpulan Sentiasa Cemerlang Sdn Bhd. Readers’ feedback is welcome. Please email to starbiz@thestar.com.my

By The Star (by Choong Khuat Hock)

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At Pavillion Residences you are papered from the moment you step into the grand lobby and are welcomed by the concierge. Wrap yourself in the serenity of the Sky Garden, a calm oasis where you can indulge in swimming, tennis and a dip in the jacuzzi. Stay energised atthe gymnasium and aerobics studio, or find your zen at the sunken yoga courtyard. For the little ones, there is a wading pool and ample space to play in safety.

Location :	Jalan Bukit Bintang
Tenure :	LEASEHOLD SERVICE RESIDENCE
Total Units :	368 UNITS
Completion :	Completed 2Q 2009
Price (Sale):	from RM1200psf onwards
Rental:	RM6,000 onwards
Built-Up :	1,234sf-7,174sf
Available units :	For SALE, 1509sf,2 rooms, from RM1220 psf 2645sf, 3 rooms, Hi Floor, RM1300psf 1300sf, 2 rooms, very hi Floor, RM1500psf 1234sf, 2 rooms, RM1300psf 680sf, 1 rooms, RM1490psf neg Rental also available. Do inquire. For inquiry please email us for details cklee@megaharta.com. Click here for more photo and floor plan --> Floor Plans

A great location within the famous Bukit Bintang retail and hotel development. Easily acees to Bukit Bintang Shopping area and many prime offices. Accessible from both LRT and Monorial Station.
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AVARE - Floor Plan, Site Plan & Units for sales

THE AVARE.

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Location :	Jalan Mayang (opposite KLCC Suria)
Tenure :	FREEHOLD
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Tenure :	FREEHOLD
Total Units :	170 UNITS
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Location Map :

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Property News

Saturday, March 7, 2009
Property market the first to be hit by downturn and the last to recover




Malaysia’s property market is set to enter tougher months ahead, as the negative sentiment from global real estate market hits the nation’s shore.

That is the overall view shared by industry players at the recently-held Rahim & Co seminar 2009.

The one-day event covered a wide range of topics on the domestic economy and property market and included prominent speakers such as economists, former government servants, valuers and property consultants.

Malaysian Institute of Economic Research (MIER) projects Malaysia will have 50% chance of full-year recession this year and is quite certain that the country will dip into technical recession in the first half of this year.

MIER executive director Prof Datuk Mohamed Ariff Abdul Kareem expects the domestic economy to return to normalcy only in two to five years.

He opines the world may witness further economy deterioration, as he sees more companies will collapse within six months times.

He says that typically the property market is the first to feel the strain during an economic crisis and, unfortunately, the last to recover.




Prices trending downwards

As an open economy, Malaysia is not spared from the global financial crisis as well as property market meltdown. Since late last year, the domestic property market has started to show signs of weakening.

Rahim & Co executive chairman Datuk Abdul Rahim Rahman says Kuala Lumpur City Centre’s (KLCC) high-end condominium is heading towards a 15%-20% price depreciation in two to three months.

He says buyers are looking for more realistic pricing, reflecting the current conditions. In a worst-case scenario, he is projecting up to 30% drop in prices over that period.

Average price stands at RM1,500 per sq ft in KLCC presently. In other suburbs such as Bangsar, Damansara Heights and Cheras, he predicts a 10%-15% decline.

Abdul Rahim tells StarBizWeek that rental of office space in KL should not be affected at least until the end of the year but he expects prices to come down after that.

“If I am in the KLCC area, I want to save a little bit of money due to the downturn. I will downgrade my office, which I will reduce from RM8 to RM6 per sq ft. So, the KLCC landlord may have no choice but to reduce by 10% to 15% (to prevent the tenant moving out). But at this time, the rental rates are maintained,” he elaborates.

There will be additional 8 million sq ft of office floor in KL by 2011 or 2012. Currently, the rental rates at KLCC and the KL vicinity are between RM6 and RM8 per sq ft and between RM4 and RM6 per sq ft respectively.

Retail scene

On the retail sector, he says Malaysia is fortunate as there are not many retail centres being planned now or coming on stream. Thus, he says retail space is mostly occupied and rental rates have been maintained. However, he points out that the segment may witness a downtrend should the unemployment rate rise.

Abdul Rahim says the commercial sector is least affected now, but in the long-term, affordable housing will be the least affected by the crisis, as people still need a house to stay in.

Ho Chin Soon Research Sdn Bhd managing director Ho Chin Soon advises developers not to be unduly concerned about the external factors such as interest rates and global economy but instead concentrate on their branding.

No matter what the economic cycle is, there are always buyers out there, he says, citing SP Setia Bhd’s recent RM300mil sales which it had chalked up in less than two months largely owing to its financing package promotion.

He concurs with most of the consultants that KLCC high-end properties are seeing a correction now.

“I saw this notice on the sale of a KLCC Marc Residence – “Financial crisis, desperate seller, asking price RM960 per sq ft”, but assuming he sold at RM900 or RM850 per sq ft, he still makes profits if he had bought from the developer for RM650 per sq ft. But the ones who bought at RM1,000 per sq ft and sold at RM800 per sq ft, will be making losses,” he says.

However, he notes that the number of such transactions are few and far between and that the real picture will be revealed by the National Properties Information Centre in a report scheduled to be released in April this year.

The United States’ economy is the backbone of world economic stability.

As such, consumer confidence of the property market will only be restored once the US stabilises.

“The US is in recession but once it stabilises, it will be good news,” says Ho.

Meanwhile, Real Estate and Housing Developers’ Association Malaysia president Datuk Ng Seing Liong concurs that the current world economic crisis will certainly affect the property market.

He expects the sector to trend downwards by 5% to 10% this year.

“There will be definitely a drop in terms of demand and prices but the situation in the country is still under control,” he tells StarBizWeek.

Good time to buy

Ng says this is a good time to buy houses as property is always a good investment.

“We hope that the next stimulus package will bring some goodies to this sector to spur sales and generate economic growth,” he says.

International Real Estate Federation Asia Pacific executive director Yu Kee Su says generally, the prospects of the property market is not so bright but compared to other countries, it is holding steady in terms of pricing.

“Certain areas like Bandar Utama for example is still stable and there has been no drop in prices,” he says.

He feels many developers will scale down their launches as he expects the slowdown to last up until 2010.

By The Star (by K.C.Law & Edy Sarif)

KLCC Property News, March 2009

Will this help to boost up the KLCC market?
Be bold and courages, buys when everyone sell, sells when everyone buy,
this one interesting ... BUILD when everyone hesitate to.
I have spoken to some developers with loads of cash and not burden by the current economic situation, commented this : " Now , it is the best time to build, low labour cost, low building cost."
But I'm truly impressed that they will have all unit SOLD at the high price tag despite of current soft market situation.
Check this out ....

Tallest Four Seasons coming up in KL
Friday, March 13, 2009


TWO tycoons and a royalty will go ahead and build the RM2.5 billion Four Seasons Place in Kuala Lumpur although a global economic crisis threatens to hurt demand for expensive hotels and apartments.

The much awaited property, located next to the Petronas Twin Towers, will be ready in 2012, says its developer Tan Sri Syed Yusof Syed Nasir.

It comprises a hotel, apartments and a mall, and will be the world's tallest Four Seasons development.

Four Seasons Place is being built by Venus Assets Sdn Bhd, a firm controlled by Ipoh-born tycoon Ong Beng Seng, Syed Yusof and the Sultan of Selangor.

"We are committed to the project even during the downturn as it has a huge multiplier effect," Venus Assets chairman Syed Yusof told Business Times in a rare interview.

It expects to hire contractors for the building in the third quarter of the year.

Venus Assets bought the prime 1.05ha site for RM90 million in 2003 from the estate of the late Khoo Teck Puat, the former major shareholder of Standard Chartered plc, a British bank.

"We received the development order (last December) and we are now evaluating various proposals from the contractors to do the job. We have completed piling works, he said.

Piling work for the building, located between Wisma Central and Menara Maxis, started in 2007, two years after the project was announced.

"There was a pause in the project only because we were redesigning the building in terms of positioning and the composition.

"Previously, the Four Seasons was supposed to encompass two towers, but now it will all be a single 65-storey tower," Syed Yusof said.

The redesigning meant a new proposal had to be submitted to the authorities for approvals and it took time to obtain the green light.

The building, described as futuristic and sleek, will complement the Twin Towers and enhance the Kuala Lumpur skyline.

"We have included a 150,000 sq ft of retail component into the tower. The hotel will have 250 keys of which 150 are hotel rooms and 100 serviced apartments.

"There will also be 140 units of apartments which will be sold," Syed Yusof said.

The entire component will be ready simultaneously and will be managed by Four Seasons.

The apartments, which start from 3,000 sq ft per unit, will be sold for about RM2,500 per sq ft.

"The cost of construction for all components including land and interior design is RM1.4 billion and the estimated gross development value of the project is RM2.5 billion," Syed Yusof said.

When asked what kind of average room rate the hotel may fetch when ready, he said, "Four Seasons is a rate leader with rates which are usually 20 per cent to 30 per cent higher that the existing rate leaders," he said.

The rate leader in Kuala Lumpur City Centre currently garners between RM600 to RM700 in ARR. This means that Four Seasons may lift the bar to between RM800 and RM900 per night.

By Business Times (by Vasantha Ganesan)