*** 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.
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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.
