Property bubble still growing

The property buying frenzy has cooled down, but elements of a bubble brewing are very much intact.

So far, none of the major property projects have been shelved or delayed in Kuala Lumpur and Johor Baru, suggesting that developers are confident of a successful take-up despite statistics showing that there is a slowdown in demand.

According to Bank Negara, the evidence of a slowdown in the property market is obvious, backing the claim with statistics.

It says the Malaysian House Price Index has declined to 9.6% in the fourth quarter of 2013, the first time it has dipped below 10% since the third quarter of 2011. The dip was recorded across most states and most dwellings.

Sales and new property launches slowed towards the end of last year, while borrowers with three or more outstanding housing loans declined to about 4% from a peak of 15.8% before the implementation of the macro-prudential measures to cool down the property market in 2010.

According to the central bank, borrowers with three or more property loans outstanding account for only 3% of total borrowers, and some 84% of housing loan borrowers have only one outstanding loan.

Banks are also seeing an improvement in their buffer against any possible slide in property prices, as the proportion of outstanding housing loans with a loan-to-value ratio of above 70% had declined to 46.6% towards the end of last year compared with 50.1% in 2012.

However, a slowing property market is not equivalent to it not being a danger to the financial system.

The signs of slowing down are there due to the macro-prudential measures that have been put in place since 2010.

A severe blow came about during the budget last year when the Government imposed a 30% real property gains tax (RPGT) on property sold within the first three years of purchase.

This effectively quelled speculation to a large degree. The 30% RPGT ruling effectively shaved off the profit margins of those wanting to offload the property as soon as they received the keys.

However, what’s perplexing is that while the macro-prudential measures seem to have an impact, there does not seem to be any stopping the over-building situation in Kuala Lumpur and Johor Baru.

In the city, the continued building of commercial space is a cause for concern, while in Johor Baru, the massive launches of apartments by developers from China have gotten even government agencies worried.

What’s worse is that the bulk of the over-building of commercial space in the city is coming from government-owned developers.

The Tun Razak Exchange (TRX), a project by the government-sponsored 1Malaysia Development Bhd, is going ahead, thanks to the cheap land it managed to get on a silver platter.

According to property consultants, the first phase of development is slated to kick off with some six million square feet of commercial space coming into the market over the next four to five years.

This is bigger than the commercial space that came into the market from the KLCC project in the late 1990s.

The TRX project is a 15-year development, and eventually, some 30 million square feet of commercial space will be coming into the market. This is based on the present planning approvals. As the years progress, the authorities may get generous with plot ratios, allowing for more building of commercial space.

Apart from the TRX, there is also the 100-storey Menara Warisan that is being built by Permodalan Nasional Bhd, and the Bandar Malaysia project that is being planned on the 495 acres that presently house the air force base in Sungai Besi, Kuala Lumpur.

Over in the south, Johor Baru is expected to see a massive supply of commercial and residential space in the next few years, with the carpet-bombing style of development undertaken by the big guys from China.

Country Garden Holdings Ltd launched 9,000 units of apartments one to two years ago and sold 6,000 units. So far, there is little news on whether the rest of the units have been taken up.

Country Garden is the first of the developers from China to flock to Johor Baru. Many more are coming, with one developer said to be looking at launching some 30,000 units of apartments in Johor Baru.

Existing developers in Johor Baru and Iskandar Malaysia are worried, with good reason too.

It has prompted a government strategic investment arm to undertake a study, which revealed that the number of apartments and commercial space coming into Johor Baru in the next few years is 30 times that of Mont Kiara.

Obviously, the macro-prudential measures have not stopped developers from building.

The macro-prudential measures taken by the Government and Bank Negara are only measures to delay a property bubble. They help to reduce the overwhelming optimism and prop-up demand when the overall environment is sober. It helps smoothen out the boom-to-bust cycle.

Such measures have been taken by central banks from Asia in the last four years to help reduce speculative demand and over-building.

However, questions remain on how effective these measures are in curbing property bubbles.

Many a time, developers and speculators exploit loopholes in the system. For instance, the Government had put in measures earlier this year to stop developers from offering retail buyers with schemes that allow them to reduce their down-payments for purchases.

But it was not effective because speculators had established property clubs to buy property in bulk and circumvent the ruling.

The ruling on a 30% RPGT for the first three years of disposal that came into effect at the beginning of this year has had an impact. But for how long it will be effective remains to be seen.

Over the last four years, central bankers all over the world have been grappling with containing the asset inflation due to ample liquidity without having to raise interest rates.

They have been able to cool off demand on a short-term basis. But the over-building persists and is fuelling a property bubble.

This suggests that macro-prudential measures are no replacement for conventional tools such as tightening monetary policy to curb speculation.

Focus on Iskandar flagship zones

Iskandar Malaysia has always been the influencing factor in Johor property, but Klang Valley-based developer MCT Consortium Bhd believes it’s time buyers and investors zoomed into the different flagship zones and look at what each has to offer.

Iskandar Malaysia has five flagship zones, two of which are now inundated with upcoming property developments and catalytic government plans to develop the regional socio-economic hub.

“When people think of the projects in Iskandar Malaysia, they do not usually think in terms of the flagship zones, which have different selling points,” executive director Datuk Soo Kai Chee says.

He says although Iskandar Malaysia is a market of its own, differentiated from the surrounding areas not marked for metropolitan development, within itself are flagship zones with different master-plans at different progress levels.

“Perhaps because Iskandar Malaysia property projects have been largely marketed to attract Singaporeans, hence many Malaysians are less familiar with the masterplans for each zones and perceive Iskandar Malaysia as a singular property market,” he says.

Soo drew attention to Nusajaya in Flagship B, where the company is managing 8.42-acre mixed development in Nusajaya called d’Pristine @ Medini. The project is sited on the northern corner of Medini, the area designated to be the central business district (CBD) of Nusajaya.

“If you visit Medini now, there is not a single completed project.

“However, the Government has planned Nusajaya very well; they started with the non-property industries,” he says of the under-served residential property market.

There are six service and light industries – creative arts and entertainment, medical facilities, educational institutions, tourism, biotechnology and hi-tech manufacturing.

Now that some of the projects like the EduCity, Pinewood Iskandar Malaysia Studios, some healthcare components and theme parks have started operating, Soo notes that the Iskandar Regional Development Authority has created a great demand for property, most of which will be ready in a couple of years.

According to Iskandar Malaysia’s website, Nusajaya has 24,000 acres of contiguous development-ready land, and is one of the largest property development in South-East Asia.

Flagship B will be a major new growth centre of Iskandar Malaysia where most of the catalyst projects will be developed. The projected population size for this area by 2025 is 500,000, according to the website.

In Nusajaya itself, job opportunities should hit 88,430 within the next five to eight years, according to data compiled by MCT.

This is bolstered by other major developments in Nusajaya, such as the Southern Industrial & Logistics Cluster, Motorsports City @ Gerbang Nusajaya, Huawei Data Hosting and Logistic Centre, UEM Group’s China Wholesale Mall @ Asian Trade Centre, Puteri Harbour, Afiat Healthpark and Kota Iskandar.

“Now, most employees in the new service industries have to stay further away in Bukit Indah. Many of them come from other states or are expatriates, and we know that they, especially the foreigners, prefer to stay in higher-end residentials within the CBD,” Soo says.

He says Bukit Indah’s Klang Valley counterpart would be Puchong or Cheras.

On whether he feels competition from Chinese developers coming into Johor, Soo says they were not competing within the same flagship zone as most of them are in Johor Baru, which is Flagship A.

MCT in Nusajaya

MCT’s development in Medini is a near replica of the third phase in its flagship mixed development in USJ Subang called OneCity.

Like that phase, d’Pristine @ Medini will integrate two blocks of small office flexible offices (SoFos), an office block, a hotel and a mall as the base of all these components.

With a gross development value of RM850mil, d’Pristine is strategically sited across the road from the entrance of the Legoland theme park, and will be a stone’s throw away from other facilities under construction, like Gleneagles, Afiniti urban wellness centre by Khazanah Nasional Bhd and Singapore’s Temasek Holdings (Pvt) Ltd, and a transportation hub which is being planned.

At the back of the project is a lake and linear park that will be managed by the authorities.

The SoFos are already 70% sold, with 60% of the buyers from Singapore and some from Taiwan and Japan.

“We have plans to manage the SoFos as well, to help our investors, especially those overseas, manage their units here,” he says.

About 1,265 SoFo units in d’Pristine are priced between RM600 and RM800 per sq ft. In the Flagship A property market, similar properties are going at over RM1,000 per sq ft.

The units range from one-room at 644 sq ft to 3+1 rooms at 1,416 sq ft.

As for the 32-storey Grade A offices, the group is considering selling en bloc or floor by floor, depending on the demand.

“Many Singaporean companies or multinationals are prepared to relocate their back-end offices to Medini, while still having their headquarters in Singapore for the address.

MCT will retain the mall and four-star hotel for ownership and recurring income. “We want to show our buyers our commitment by maintaining our ownership so that we will have a say in the whole project,” Soo says.

The three-storey mall will have about 460,000 sq ft of net lettable space while the hotel is designed with 300 rooms.

Although plans for the hotel are not finalised, Soo says it would likely be managed by MCT.

Target for completion of the d’Pristine project will be in late-2017 or early 2018.

MCT will be listed via a reverse take-over of GW Plastics Holdings Bhd. The property group is in the process of finalising its audited interim financials for the purpose of inclusion into the circular for the proposed regularisation plan, which it had resubmitted to the Securities Commission last week.

The corporate exercise could be completed by the last quarter this year.

Closing in on Bukit Puchong

The transformation of Puchong from a rubber estate and tin-mining town in the 1960s to the currently robust mix of private residential, commercial, industrial properties and public facilities has significantly boosted property price growth and rental yield in the area.

Catering to a wide range of target market, the township has attracted many savvy property buyers. From middle to high-income households who have generated a strong demand, these affluent classes are expected to be the driving force of the market.

Professional singles and young families, who have joined the workforce in the area, are seeking out affordable housing while the entrepreneurs are looking for business opportunities.

As seen on Propwall, Bukit Puchong is one of the areas that is showing up on property investors' radar. Recognising its potential of having further success, Bukit Hitam Development Sdn Bhd (BHDSB), a member of TAHPS Group, has recently introduced a new residential development, Foreston in Bukit Puchong.

It is built as part of BP: Newton, a modern integrated city centre development that comprises retail, commercial and residential units.

Foreston will consist of 20 units of semi-detached houses, 20 units of link bungalows and 6 units of bungalows in a lush greenery setting. These freehold luxury houses is a guarded community with facilities offered to include barbecue area, jogging track, star gazing deck and playground.

With built-up area starting from 4,400 square feet and double-volume ceiling height, Foreston promises three different designs of spacious homes with plenty of natural lights for discerning home buyers.

Many are convinced that Bukit Puchong has emerged as the new growth centre for Puchong and that BP: Newtown is a genuinely viable investment opportunity. Its close proximity to amenities and conveniences such as Tesco and Taylor's International School aspire to attract keen property buyers who appreciate the value of developments in the area.

With excellent accessibility via the Lebuhraya Damansara Puchong (LDP), Bukit Puchong and its vicinity
is attracting residential projects and commercial properties - retail, corporate, technology and manufacturing alike.

Price for Foreston starts from RM2.8mil.

Ivory plans RM1.4bil projects, developing 80-acre land bank in Penang

Ivory Properties Group Bhd plans to develop high-end residential properties with a gross development value (GDV) of RM1.4bil to RM2bil on its 80-acre land bank in Penang over the next couple of years.

Group chief executive officer Datuk Low Eng Hock said the new projects were planned for the group’s land bank in Tanjung Tokong, Batu Ferringhi, Jesselton and other parts of the Penang island.

“In Jesselton, we have 53 acres while some 17 acres are in the Tanjung Tokong and Batu Ferringhi, and the remainder in other parts of the island,” he said after Ivory AGM.

“In Jesselton, we plan to develop high-rise condominiums and boutique bungalows while in Tanjung Tokong and Batu Ferringhi, the plan is to build high-rise residential properties.”

For the fiscal year 2014, the group aims to generate about RM180mil in revenue from new and ongoing projects such as The Latitude, Taman Bukit Erskine, City Mall & City Residences, and The Wave on the island.

“About RM30mil will be generated from the sales of completed projects in Penang. The remaining RM150mil will be from new launches,” he added.

On the Plaza Rakyat development, Low said the company was in the process of procuring an extension for the conditional acquisition and rehabilitation agreement (ARA) with Plaza Rakyat Sdn Bhd to acquire the leases and development right of the project land.

“The last extension ends on June 4 and we need more time to meet the conditions precedent stated in the ARA.

“Our proposal to Datuk Bandar Kuala Lumpur has given special attention to the interest of the end purchasers, whose deposit money has been tied up by the project during their purchase from the previous developer and we hope to help solve their woes soon,” he said.

Moving forward, Low said the group would expand its business down south after successfully becoming a household name in the northern region, in particular in Penang.

“We are in discussions with several land owners in Kuala Lumpur and Johor and the outcome has been very positive. We will announce in due course once we reach a final conclusion. We are interested in joint-venture projects with the landowners,” he said.

On Tropicana Ivory Sdn Bhd, a joint-venture company between Ivory and Tropicana Corp Bhd, Low said it would roll out Phase 3A of the Penang WorldCity development by the end of the year, following the success of Phase 1A.

“We manage to achieve over 90% sales for Phase 1A, so we’ve decided to release the next phase to cater to the increasing market demand,” he said.

R&F plans to expand beyond Iskandar

 The Princess Cove project in Tanjung Puteri will be Hong Kong-based R&F Properties Co Ltd’s maiden property development in Malaysia. However, general director of sales and marketing Fairus Cheung said the company was looking beyond Iskandar Malaysia to be involved in other development projects in the country.

He added that at the moment, R&F Properties would be focusing on ensuring that the Princess Cove project becomes a new landmark not only in Johor but also Malaysia.

“We do have plans to invest in other parts of the country, but for now, Johor Baru is our main priority,” he said during the opening of the Princess Cove sales gallery here recently.

He pointed out that the project, to be built on 46.5ha in Tanjung Puteri, would be divided into four phases and is expected to be completed within the next eight years.

“At the moment, we will only be building 3,000 units of luxury apartments in the first phase of the project.

The tallest building in the country will also be constructed in the first phase of the project,” he said.

Asked if it was planning to build 30,000 homes in that area, Cheung declined to comment. R&F Properties had bought the land, which was previously the site of the Royal Malaysian Customs Department, for RM4.5bil in a deal involving the Johor royalty late last year.

On a per sq ft basis, the prime land values at more than RM890, making it the second most highly priced land in the city, trailing closely behind another China-based firm that had bought 37 acres of land in Danga Bay for RM991 per sq ft. Cheung also said the first phase would see the construction of 15 blocks of luxury apartments, a shopping mall and a building which houses a five-star hotel and an office tower.

“The first phase will be completed by 2017, depending on the launch date, which is expected to take place by early next month.

“Our main focus is on locals and Singaporeans, as the location is just a stone’s throw away from the causeway,” he said.

Cheung added that with the economic boom due to the development of Iskandar Malaysa and other projects in the state, there would be more demand for properties among local and foreign investors. However, declined to comment on whether R&F Properties would be building 300,000 units of luxury apartments in the project.

Cheung also declined to elaborate on the construction of the tallest building, as the details would be available during the grand opening of Princess Cove soon.

R&F Properties, listed on the Hong Kong stock exchange, has a series of iconic developments in its portfolio, mostly in China with Malaysia as its first foreign project.

The company, with over 20 years of experience in property development, has been involved in the building of classical bungalows, grade-A office towers and five-star hotels.

Call for ‘fair’ house pricing in Malaysia

A property consultant said sustained measures to minimise property bubbles were to ensure efficient flow of information on the sector’s fundamentals to help the people make informed decisions.

Khong & Jaafar managing director Elvin Fernandez said an efficient market should be the priority for all, especially policy makers.

“An important element of an efficient market is the free and greater flow of information into the market, which will allow stakeholders in the property market to make better decisions and help the market become more efficient in allocating scarce resources,” he said in response to questions on recent data indicating that house prices were moderating.

Fernandez pointed out that it was not the function of developers to reward or not reward previous purchasers.

“They should not be allowed to do that. Just price the product fairly based on the current levels of demand and supply. If the market is going down, sell at lower prices and not hide the lower price through artificial means such as incentives. If when the market is going up prices are fixed upwards, then it should follow that when the market is going down, prices should be fixed downwards.”

The regulators must continue to watch for prices veering away from fundamentals, he said, adding that more up-to-date information on district-by-district statistics on household income was needed. The information available now is on a state-by-state basis and only up till 2012.

Data released by Bank Negara last week revealed signs of possible moderation in overall house prices, with growth in the Malaysian House Price Index (MHPI) declining to 9.6% in the fourth quarter of 2013, compared with 12.2% a year earlier. This is the first time since the third quarter of 2011 that the MHPI was below 10% and recorded across most states and most types of dwelling.

Fernandez said arresting the upward climb in prices that were inconsistent with underlying fundamentals, such as household income and rental returns, was an important policy decision.

“Policy at the highest level should ensure that prices are always based on current levels of demand and supply – current prices. Ensuring steady price levels in the housing market is very important because most household wealth resides there.

“In the housing market, it is ideal to steer the market through well-designed policy measures, towards four to five times annual household income and a 3%-5% net yield, depending on the property type,” Fernandez pointed out.

He said there were still elements of a property bubble in selected areas of the housing market, where house prices were higher than 10% and 15% of the average annual household income. For any given locality and any given stratum of society, a percentage of more than five times annual household income can be considered a bubble.

Bubbles can subsist temporarily and may ease when incomes rise or prices come down, but when the disparity grows and in a sustained manner and remains unchecked, they can be dangerous, Fernandez added.

RAM Ratings Head of Agribusiness, Real Estate and Construction Ratings Thong Mun Wai said developers were cognizant of the strong demand for more affordable houses, and there had been more launches of smaller-sized units in the last year that translated into a more palatable absolute house price.

“In addition, we have seen more developers establishing townships further from the city centre such as Rawang, Semenyih and Cyberjaya. We are also of the view that developers’ decision to launch higher-priced units is partly attributable to the rising cost of land and building materials, which discourages the selling of more affordable properties, given the adverse effects on their profitability. As it is, we note that profit margins of large developers have not been rising sharply in tandem with property prices,” he observed.

Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias said the high house prices were not broad-based but confined to a few places such as the Klang Valley, Johor and Penang.

He said there was unlikely to be a hard landing for the housing market, given that the demand structure for housing in the country remained strong with a sizeable young population of an average age of below 30 years, household financial assets at a comfortable level of 2.2 times in relation to the borrower’s debt amount, a stable labour market with unemployment at around 3%, and a strong capital position of banks to absorb losses should the number of defaulters rise.

EPF to be part of consortium to redevelop former Pudu jail site

The stalled redevelopment of the former Pudu jail site (pic) located in Kuala Lumpur is set to take off, with heavyweights such as the Employees Provident Fund (EPF) being part of a consortium undertaking the job.

The EPF will join hands with Uda Holdings Bhd, which is the landowner, and fast-growing Eco World Development Group Bhd to develop the 7.85-ha site into a development dubbed the Bukit Bintang City Centre with a gross development value of RM7bil.

The plan is to build, among others, a massive retail mall similar to that of Suria KLCC, which Uda Holdings will own and manage for recurring income.

Both Uda Holdings and Eco World will hold a 40% equity stake each in a special-purpose vehicle (SPV), while the EPF will hold the remaining 20%.

The deal to include Eco World and the EPF was decided recently, even though Uda Holdings had called for a tender inviting interested parties, both locally and abroad, to participate in the redevelopment in September last year.

“What we are doing now is that we will be establishing an SPV to undertake the redevelopment. We are now in the midst of fine-tuning the (shareholder’s) agreement terms and we expect to firm up in one to two weeks’ time. The SPV will be developing the land at Pudu jail,” said Uda Holdings chairman Datuk Johari Abdul Ghani (pic).

Once that is done, the SPV will submit the plans to the authorities for a development order, which might take up to six months.

“We expect work to start at the beginning of next year,” Johari told StarBiz yesterday.

Johari rebutted speculation that the deal involved the sale of parcels of the land.

“Let me be very clear that we are not selling the land. Uda Holdings will continue to own the land. It is our land and we have decided that we will jointly develop the land with Eco World and the EPF,” Johari stressed.

The plan is to turn the Pudu jail land into a mixed development comprising seven blocks of buildings for commercial and residential use, office towers, a hotel and a retail mall. The retail mall will have one million sq ft of rentable space, similar to Suria KLCC.

“Once fully developed, the mall will be the biggest. We are also including a grand bazaar similar to the one in Turkey for start-ups to do business,’’ Johari said.

To generate recurring income, the retail mall and some office buildings will be managed by Uda Holdings.

The site used to house Kuala Lumpur’s main prison, the 101-year-old Pudu jail, which was shut down officially in 1996.

In the past, there have been efforts to redevelop it, but nothing materialised. There were even efforts to get players from China involved, but the Finance Ministry rejected it. Uda Holdings is owned by the Finance Ministry.

Although Uda Holdings will set up an SPV, its biggest challenge would be to get tenants, especially for the retail mall, given the history associated with the jail. The jail had housed some of the most notorious criminals in the country. Johari, however, is unperturbed by this.

“I don’t think that will be an issue, and since we have partners like Eco World and the EPF, we will be able to create a new destination in Kuala Lumpur,’’ he said.

Johari said the players would opt for project financing, but added that the land could not be charged for the financing.

Eco World might be a new player but it has property magnate Tan Sri Liew Kee Sin as a director. Liew, who started S P Setia Bhd, had turned the company into one of the most profitable property companies around. He has since left S P Setia.

As for Uda Holdings, it operates several malls in the Klang Valley, Johor and Penang, namely, Bukit Bintang Plaza, Pertama Complex, Plaza Warisan, Pudu Sentral and Plaza Angsana.

The Pudu jail redevelopment is part of the Economic Transformation Programme under the New Economic Model to turn the Klang Valley into the Greater Kuala Lumpur economic district and Malaysia into a high-income nation by 2020.

Making waves with H20

Inspired by the beauty of water, Titijaya’s H2O (Home 2 Own) mixed-use development project in the township of Ara Damansara, Petaling Jaya is a new residential concept that features modern contemporary aqua features.

The water-inspired project includes an aquatic gymnasium fitted with a skateboarding facility for its residents to enjoy, and simulated marine life in the swimming pool equipped with an LCD screen.

The H2O Residences, a freehold project with a gross development value (GDV) of RM750mil is also huge on green features.

The project consists of 1,357 units with two different types of property for buyers to choose from, namely the serviced apartments and the SoHo (Small Office home Office).

The serviced apartments come with built-up areas ranging from 750 sq ft to 1,500 sq ft, while the SoHo units range in built-up areas between 450 sq ft and 1,057 sq ft.

Getting into the green scene

“The H2O Residences has been designed to promote urban living with a focus on efficiency of resource use while improving the quality of life and that of the environment,” Lim said.

The development is spread across a six-acre (2.43 hectares) freehold land with an abundance of greenery, plants and trees surrounding the area offering a sense of serenity for the residents.

The development will also be surrounded by various facilities and amenities for the benefit of the residents.

H2O’s in-house facilities include a swimming pool with marine life display, an aquatic gymnasium, floating platform for yoga or meditation, golf putting green, barbeque pavilion, reading area, children’s playground and many more.

The development is nearby a Tesco hypermarket, Citta Mall, Saujana Golf & Country Club, Sime Darby Medical Centre, Japanese International School, Subang Airport and the Oasis Business Centre.

Residents will also find themselves close to food and beverage (F&B) outlets, banks, shopping centres and an upcoming light rail transit (LRT) station.

The development is accessible via the six-lane dual carriageway old Subang Airport expressway and through the North Klang Valley Expressway (NKVE) tunnel to the Damansara-Puchong Expressway (LDP).

Cool environment

H2O’s architecture comes in a modern contemporary aquatic design with defining lifestyle elements. It is surrounded by a cool aquatic environment and adjacent to a complete range of urban amenities. The development is cleverly designed to provide future residents with a comprehensive yet convenient lifestyle, adorned with a wide display of facilities.

Petaling Jaya’s City Council (MBPJ)’s PJ Cycleways City Network Project at Ara Damansara is also directly connected to H2O, giving residents the opportunity to exercise. This is an additional extension of green living at its best.

Besides the features above, H2O is equipped with various facilities for friends and families to congregate and enjoy each other’s company such as the barbeque pavilion, clubhouse and walking pathways for reflexology purposes.

“There are not many freehold developments in this area. We are comparatively affordable and prominently located,” said Titijaya executive director Charmaine Lim Puay Fung.

The unit prices start from RM760 per sq ft and the project is scheduled to be launched in July 2014.

“We are targeting the new generation and genuine homebuyers looking for upgrades, hence the concept and extensive facilities we are providing for lifestyle living,” added Lim.

Smart security is total security

H2O Residences is equipped with a three-tier security system to provide a secure living environment for the residents.

The security features include a vehicle barrier system, anti-climb fencing, security patrols, surveillance cameras, access card system and multiple layers of security control systems aimed at overcoming security risks related to personal property and safety.

“The vehicle access entrance will be installed with a dual-car barrier system along the anti-climb fencing to prevent intruders from breaking into the premises.

Visitors would be requested to leave an identification document to receive a limited access card to gain access to the main lobby door,” pointed out Lim regarding the safety and security features of the project.

Security checks for visitors and residents will be carried out at various points of the development.

Additionally, for in-house mobility, residents will be assigned an access card which will provide them with the convenience of lift accessibility to their respective units, car access entrance and to the various facilities within the development.

Bangi evolved

Crowned as the “Knowledge City”, Bandar Baru Bangi has found itself attracting a rising number of students and intellectuals who are now making this their neighbourhood.

Over nine higher education institutions besides primary and secondary schools can be found within this district of Hulu Langat in Selangor which is situated between Kajang and Putrajaya and is located approximately 25km away from the Kuala Lumpur city centre.

Having identified the future viability and potential of the strategic location, PKNS-Andaman Development Sdn Bhd – a joint venture between Andaman Property Management Sdn Bhd (Andaman) and Perbadanan Kemajuan Negeri Selangor (PKNS) – launched its latest project called Evo Soho Suites.

Evo Soho Suites is set to be the last piece of the jigsaw puzzle, complementing and adding value to all existing facilities and amenities in Bandar Baru Bangi.

Promising to add vibrancy and self-sufficiency to the town centre, this project, which will be developed in over three years comes with a gross development value (GDV) of RM220mil. It will be the first of its kind in the township.

“We recognise the potential of Bandar Baru Bangi as a bustling district, and spearheaded the first high-rise building development in the town,” said Andaman Property Management Sdn Bhd managing director Datuk Seri Dr. Vincent Tiew.

The development comprises two blocks of SoHo (Small office Home office) suites and a four-storey shopping mall built on 4.4 acres (1.78 hectares) of land which would be the largest in the entire Bangi region. The mixed-use development consists of four different components:- a shopping mall, office spaces, retail shops and the SoHo units.

“Evo will feature two towers that comprise 704 SoHo units and 200 shoplots. Out of the 704 units, 616 will be intermediate units with a built-up area of 454 sq ft.

Meanwhile, there will be 88 duplex or corner units with a larger built-up area ranging from 1,217 sq ft to 1,352 sq ft,” he said.

Evo Soho Suites will be located in the heart of the established commercial centre of Bandar Baru Bangi with more than 300 units of full occupied shops showcasing a diversity of businesses such as banks, food and beverage outlets, boutiques, convenience stores, supermarkets, clinics, hotels and so on.

“Given the current emphasis on affordable housing, our development is indeed timely, especially in a thriving town like Bandar Baru Bangi,” he said. A fully furnished SoHo unit with built-in quality furniture and modern interiors is priced from about RM240,000.

The average price of each unit ranges between RM490 and RM590 per sq ft.

Safety in every stride

“We emphasise on the security and safety of our residents. Each of our residents will be identified by an access card limited to the individual. Each resident will have to go through an electronic access control system upon entering and exiting the suites,” Tiew said.

The development is equipped with a state-of-the-art security system to ensure the safety of its residents. The three-tiered security comes with security patrols, operational security and system security.

Working together, the security control room, surveillance cameras, security patrols, intruder detection systems, smoke and fire detection systems and intercom systems ensure the safety of the residents.

Only authorised residents will be granted access into their suites and no one else can enter without prior clearance and an appropriate escort.

Conveniently connected

Bandar Baru Bangi is easily accessible via two highways; namely the North-South Expressway (NSE) and the Kajang Dispersal Link Expressway (SILK) connecting other highways and major townships.

“Both highways are linked to other major townships such as Cyberjaya, Putrajaya, Puchong, Nilai, Kajang, Cheras and Kuala Lumpur,” Tiew explained.

From the SILK Highway, it takes roughly 25 minutes to reach Cyberjaya through the South Klang Valley Expressway (SKVE) from Bandar Baru Bangi, while Putrajaya only takes less than 20 minutes from the same expressway. Bandar Baru Bangi is only a 10 minute drive away from the Sungai Besi toll.

Direct access to facilities

“The Evo Soho Suites sit atop four storeys of the most prestigious and high-end shopping mall in Bangi with a Japanese supermarket as its anchor tenant,” he stated.

There is a comprehensive range of amenities and facilities including bowling centre, boutiques, branded outlets, street mall promenade, not forgetting the building’s swimming pool, Jacuzzi, poolside deck, wading pool, water cascade, gymnasium, children’s play area and multipurpose rooms.

The space in-between the shops and the Evo Shopping Centre will see a street mall promenade incorporating the much-awaited Bangi Walk. This will represent the central heart of recreational, leisure and entertainment activities – making this the lifestyle hub of Bangi. The comprehensive commercial centre will be the first modern shopping centre in Bangi that will create a conducive environment for people to live, work, shop and play in.

Living, the Evo way

“Evo Soho Suites will be a good investment opportunity for all. We would strongly recommend young working adults to invest in the units, whether it is for investment purposes or for their own occupancy,” Tiew advised.

“Hypothetically speaking, after buying at an affordable price of RM240,000, buyers can easily resell a unit at RM340,000 (when it appreciates) three years later. Even at this price, it will still be an affordable and attractive price to subsale buyers,” he added saying that the completion of the Evo Mall will only serve to generate even stronger demand and rental yield.

Located right in the middle of the Bandar Baru Bangi town centre, Evo Soho Suites will be surrounded by by many facilities and amenities.

There are nine higher educational institutions and a government training centre including Universiti Kebangsaan Malaysia (UKM), Maktab Perguruan Islam (MPI), Kolej Polytech MARA (KPTM) and Universiti Tenaga Nasional (UNITEN). Evo Soho Suites is unique as there are no other similar developments within the district.

Its suites has already recorded a 90% take-up rate at the end of the second quarter of this year.

Evo Soho Suites offers the convenience of a multitude of retail, dining and leisure options right at the residents’ doorsteps.

“The convenience offered by the location and the comprehensive range of facilities and amenities will surely attract young working professionals and university students who are looking for a comfortable place to stay in a strategic location,” Tiew opined.

Home prices under pressure

Malaysia is seeing signs of a possible moderation in overall house prices, data from the central bank show.

The growth in the Malaysian House Price Index (MHPI) declined to 9.6% in the fourth quarter of 2013, compared with 12.2% a year earlier, according to Bank Negara.

This was the first time since the third quarter of 2011 that the MHPI was below 10%, and the improvements were recorded across most states and most types of dwelling.

It said sales and new launches slowed in the last quarter of 2013, possibly due to the various measures imposed to cool down the housing sector since 2010.

“It’s possibly due to the wait-and-see attitude of some developers and buyers following the prohibition on developer interest-bearing schemes in November last year, further increases in real property gains tax in January this year, higher minimum purchase price for houses by foreigners, and uncertainties regarding the potential impact of the goods and services tax,” Bank Negara said.

The central bank pointed out that there was no conclusive evidence of a housing bubble in the country. It added that analysts, rating agencies and international organisations, such as the International Monetary Fund, had lauded the pre-emptive and concerted measures taken by the Government and Bank Negara since November 2010 to curb excessive speculative activities in the domestic property market and promote a sustainable housing market. (See table)

It also said that the bulk of home purchases continued to be for own occupation or medium to long-term investment.

“This was corroborated by data that showed 84% of home loan borrowers only had one outstanding housing loan account,” it said in an email response to StarBiz.

The central bank said borrowers were less inclined to dispose of their properties in response to a downward movement in property prices as their loan repayment capacities were not depend on the home equity value or expected capital gains. This was considering the medium to long-term nature of their ownership and investment horizon.

This scenario could limit the potential for a sharp increase in default incidences and credit losses to banks in the event of a price correction in the property market.

Based on a single factor sensitivity analysis on the housing loan portfolio of banks with a stressed probability of default (PD) of up to 10% (about four times the current PD) and adverse correction in house prices of 40%, banks’ excess capital buffers stood at more than five times the estimated expected losses.

Bank Negara said although the MHPI had expanded annually by between 10% and 12% since 2011, outpacing income and rental growth, the rate of growth in house prices remained significantly below those observed in some neighbouring economies.

It pointed out that while elements and pockets of speculative activities were present, the upward pressure on house prices was largely explained by structural factors.

“Demand continues to outpace new supply of houses by a large margin, particularly in the low to medium-priced segments and in major employment centres,” it said.

Demographic factors, given Malaysia’s relatively young population and labour force, increasing urbanisation, and general inclination to own a house, are expected to sustain strong demand for affordable residential properties in major urban centres, likely outstripping supply over the near and medium-term.

“Part of the mismatch in the market was due to rising land prices and construction costs that increased the incentive for developers to build high-end properties where the margins are higher,” the central bank said.

On the part of the Government, a number of schemes have been introduced to increase the supply of and access to financing for the purchase of affordable housing via PR1MA, MyHome and My First Home schemes.

In addition, the National Housing Council was set up in 2014 to develop strategies and action plans in a holistic manner, coordinate legal aspects and property price mechanism, and ensure provision of homes in a more efficient and expeditious manner.

Bank Negara said the earlier Government measures had also resulted in reduced credit-fuelled speculative purchases of residential properties where the annual growth in the number of borrowers with three or more outstanding housing loans has declined substantially to about 4%, from a peak of 15.8% prior to the implementation of the measures, to account for only 3% of housing loan borrowers.

There are also improvements in banks’ housing loan portfolio quality and underwriting standards with impaired housing loans remaining low and stable at 1.4% of total bank loans to households (2013: 1.5%; 2012: 1.9%; 2011: 2.3%).

A similar trend was observed in the gross amount of impaired housing loans, which declined further to RM4.7bil from RM5bil at end-2013 (2012: RM5.4bil; 2011: RM6bil).

It said the proportion of outstanding housing loans with loan-to-value (LTV) ratio above 70% tapered to 46.6% (2012: 50.1%), providing a comfortable buffer for banks against a decline in the value of the underlying collateral relative to the outstanding amount of a housing loan in the event of defaults.

Banks have also demonstrated an increased rigour in the assessment of factors which support property valuations, such as the level of development in a specific location, population density, status of overhang, existing and potential demand, and the number and value of turnover of properties within the surrounding areas.

It was also observed that the lower margin of financing was applied by banks on new housing loans for properties in locations where price increases have been stronger. In the more recent period, valuations used for this purpose have excluded values inflated by incentives offered by developers to house purchasers, which can increase house prices by between 10% and 30% above the intrinsic values.

To invest or not to invest abroad?

Peter a Malaysian living Kuala Lumpur, purchased his third apartment in London a couple of years ago. Because of his background, he has a deeper insight into the real estate sector than most people.

He has no issues finding tenants for all three of his properties, which he purchased at different times.

All three properties were tenanted within a month or two. With the exception of one located in a university town, the other two are located in London. Peter says the lettings market is strong but this depends on location.

“It does not mean every project will be occupied immediately upon completion. University towns offer strong areas.”

Peter describes himself as “conservative.” He saw a £250,000 (RM1.4mil) apartment years ago but was “too conservative”.

“That apartment has quadrupled.” He was emboldened by that “loss”. That was when the subsequent three purchases came.

“In London, in the last two years, you can buy anything and the price would have gone up,” he says.

Last month, Singapore’s central bank warned Singaporeans of the risks attached to buying properties overseas, after data showed a surge in their investment in real estate abroad.

The Monetary Authority of Singapore (MAS) said local real estate agencies had handled overseas property deals worth S$2bil last year – a 43% rise since 2012, AFP reported.

MAS reminded potential investors “to be mindful” of foreign exchange and interest rate risks, among other risks.

Last week, the International Monetary Fund (IMF) warned that the overall acceleration of global house prices from already high levels has emerged as one of the largest threats to economic stability, with countries making limited progress in keeping them under control. IMF deputy managing director Min Zhu said house prices “remain well above the historical averages for a majority of countries” in relation to incomes and rents.

It is this low interest rates environment, the flush of liquidity that is pushing Malaysians to invest in properties abroad and/or buy several properties at home.

Since 2009, Malaysians have joined the trail of Singaporean and Hong Kong buyers. Bank Negara does not have the total amount of investments for overseas properties investment. “Loans for this purpose is not significant,” a Bank Negara source says in an email.

In any case, “banks do require proper credit assessment,” the source says.

Two reasons underpin the London interest. Property prices plunged between 30% and 35% in 2008/2009. Secondly, the pound had weakened, trading at around RM5 to a pound, compared to about RM7 prior to the fall of Lehman Brothers in the last quarter of 2008.

It has since bounced back to hover around RM5.50.

With Britain’s economy on the road to recovery, the pound on the rise, and talks of interest rates rising, should those who have not entered the market stay out?

Waning interest

While interest in London continues, its intensity seems to have somewhat dissipated, at least in Malaysia.

Savills Rahim & Co managing director Robert Ang says exhibitors are offering their fare in Singapore and Hong Kong but skipping Malaysia. “The markets there are much deeper. Malaysians with RM3.5mil to spend on a property have a lot of choices. In Singapore and Hong Kong, they may not. Although we have a bigger population, the wealth numbers here are not that big,” says Ang.

Ang says a London apartment may be £700,000 (RM3.5mil). That is equivalent to about S$1.3mil-S$1.4mil; your choices may be limited in Singapore. But you can get 500 sq ft one bedder in London and you will be diversifying your portfolio.

“In that sense, British developers and house builders find it difficult to push their products here,” says Ang.

The London market is attractive because one pays only 10% to 20% buying off-plan and the rest when the property is completed. Among Malaysian agencies, Henry Butcher has been the most aggressive in promoting London properties since early 2009. Director Lim Eng Chong declines to say the value of transactions undertaken by the company since 2009.

“The years between 2011 and 2013 were equally strong in the sales,” he says.

Lim says it is still seeing a healthy level of interest, predominantly for those priced between £250,000 (RM1.4mil) and £800,000 RM4.4mil). “However, due to strong recovery for the past three years, some investors especially those who have bought before, are more selective with their purchases. But there are constantly new investors,” he says.

Lim is also seeing a growth in re-sale market transaction. Investors who bought in 2009 are now offering their units for sale to local London buyers.

“With the fast pick up of local London market activities, there is a strong appetite for this segment, apart from new sales/launches,” Lim says.

Foreign exchange, a driver?

BNP Paribas Real Estate’s UK development and residential agency director Julian Sedgwick says in an email that the rising pound should not be a key decision driver.

“The currency will have an impact on entry point for investors but, equally over recent years, acquisitions of real estate on rising pound have added to the returns which an investor may see on exit,” he says.

Sedgwick says historic long-term data underpins the consistent returns and maturity of the (property) market outperforming other asset classes including government bonds, gilts and gold over a 30-year period.

“With the shortage of supply, a recovering economy and a mature market, now is a good time to enter the market,” he says.

Sedgwick says the London residential market is different from other UK cities and has historically seen minimal corrections.

“This variance between demand and supply underpins the market and is the reason why there is not, in our view, a bubble,” says Sedgwick.

London, with a population of about 14 million, needs about 50,000 new homes annually. Only about 21,000 are being delivered, he says. Added to this shortage is the British government’s “Help to Buy” programme, introduced last year. This has stimulated building in the broader UK market.

Within London itself, he says infrastructure projects including Crossrail are also creating new markets and opportunities around the improved transport hubs from the west to the east of London. On a long-term basis, there is predicted growth, he says.

Slow change in interest rates

Jones Lang LaSalle MD (Singapore and South-East Asia) Christopher Fossick says although there has been talks that interest rates will be moving up, “it will be a slow change”.

“If you bought three years ago in London, you will feel better (with today’s increasing prices). Prices have gone up 20% to 30% today and current growth would be less,” Fossick says.

The overall London story, however, has not changed, he says. It remains a city of growth. The pound remains relatively weak and it will be a while before it goes back to pre-Lehman Brothers days (Lehman fell in October 2008), particularly in respect of the Singapore dollar and London will continue to be a safe haven for capital around the world.

In the last five years, there has been a balance between Asians, Europeans, Middle Eastern and Eastern European investors looking to put their money into the residential sector.

Fossick says the interest in properties as an asset class is not specific to London, but is a global interest spurred on by the low interest rate environment.

“We are seeing more debt going into the property market, whether it is Asian or US, residential or commercial,” says Fossick. He was speaking to StarBizWeek after having acquired 49% of YY Property Solutions Sdn Bhd, which will now trade as JLL Property Services (Malaysia) Sdn Bhd.

Fossick says the acquisition was in alignment with JLL’s global commitment to expand its service to its clients in the “rapidly expanding” Malaysian and regional markets. JLL Malaysia, headed by Y.Y. Lau and formerly managing director of YY Property Solutions, will focus on commercial leasing and buying and selling of real estate locally and globally.

Property consultants: Address structural issues

Structural issues in the local housing market need to be addressed if the market is to advance into a more well balanced and sustainable one, property consultants concur.

A double-digit jump in the prices of houses of between 15% and 20% in the last two years and a spiralling cost of living has caused a widening gap between income level and price levels, and a resultant mismatch between disposable income and house purchase affordability. As a general rule of thumb, mortgage repayment should not exceed 28% of gross monthly income, but for many house buyers, they have no choice but to contend with much higher repayment amount leaving them with very little disposable income.

One of the obvious structural issues is the mismatch in the housing products being launched that comprise a higher percentage of higher priced housing products, even though the supply of affordable and medium-priced housing is still grossly inadequate to meet the high demand.

Chartered surveyor and registered valuer Dr Ernest Cheong says a holistic solution to ensure a more equitable and sustainable housing market for Malaysians is certainly in order.

“The only holistic approach to the provision (or lack of provision) of affordable housing in the form of low-cost and medium-cost houses is for the Federal and state governments to assume the role and responsibility to perform their rightful public duty and responsibility of providing for these housing units. They have at their disposal land reserves and the financial resources to implement the mammoth task of providing affordable housing to the millions of Malaysians who need these housing.

“The private sector developers, being profit-motivated, will not build low-cost and medium-cost houses and sell them at prices they consider to be unattractive or even below their costs,” Cheong says.

Agreeing with him, DTZ Nawawi Tie Leung executive director Brian Koh says the Government has to play a larger role not just in the low-cost but middle segment of the market that is ignored by private developers, and cites the case of Singapore where the city-state has its Housing Development Board building affordable housing projects that make up a high percentage of the total housing stock.

“Meanwhile, at the higher end segment of the market, although there is substantial investment demand, yields and rental demand are too low and insufficient. The property market can do with some tweaking in product offering by the developers to ensure more medium-range housing units are being built to meet the high demand,” Koh points out.

VPC Alliance Malaysia Sdn Bhd managing director James Wong says the main reason why developers are still launching more high-priced products and not enough of the affordable projects is because land prices in the Greater Klang Valley, Johor, and Penang have risen and it will not be feasible for developers to develop affordable housing.

To release more land for affordable housing, the various government institutions have to step in to release the land and do joint ventures with private developers to develop affordable housing, particularly in the Klang Valley, Penang and Johor.

The Government can also absorb some of the infrastructure costs from the private developers so that they can sell at lower prices. It will also help if affordable housing and housing for the low income group are built to be rented out as an alternative to buy.

He adds that speedier and more transparent planning guidelines and approvals of development projects which indicate the actual zoning, density and maximum height for each lot to be developed will also help matters for the lower income group. National House Buyers Association (HBA) honorary secretary-general Chang Kim Loong says HBA has alerted the Government of the sprouting up of a “homeless generation” where the younger generation of Malaysians will not be able to afford their own homes. Also, for single parents and those from the lower income groups, buying a property is getting more and more difficult and may soon “be impossible”.

“We are glad that the Government has finally taken some action in Budget 2014 to address this issue such as increasing real property gains tax and to outlaw Developer Interest Bearing Scheme. Bank Negara has also imposed a loan to value ratio cap of 70% for the third mortgage to reduce speculation and these measures have cooled down the market,” Chang says.

Knight Frank Malaysia managing director Sarkunan Subramaniam calls on developers, bankers and other stakeholders to play more responsible roles to ensure the gap between supply and demand is manageable, and to be more socially responsible by building communities instead of just being profit-driven.

“In these challenging times, developers have to be more balanced in terms of their pricing strategies, by not overpricing their products and provide purchasers a chance to enjoy potential price appreciation when the products are completed,” he says.

Engaging a real estate agent

Buying and selling property can be a tedious process. Engaging a real estate agent, however, can help alleviate the burden.

But before you run out to find one, consider the following factors when deciding if that property agent can provide the services you’re looking for.

Is he or she registered?

Malaysia Institute of Estate Agents (MIEA) president Siva Shanker believes that this is the most important question to ask before engaging a real estate agent.

“There are a whole lot of individuals out there who aren’t registered – but pretend to be,” he tells StarBizweek.

Siva admits that such “bogus” property negotiators are a menace to the industry.

“Educating the public is important. If you’re sick, would you go to a sick doctor? You wouldn’t, would you?

“Unfortunately, the enforcement against bogus agents is poor, which is why they are still thriving,” he says.

However, Siva points out that from June 25, all registered realtors will be given a “special tag” by the Board of Valuers, Appraisers and Estate Agents Malaysia to certify that they are legitimate.

“So the next time you want to engage an estate agent, ask them for their tag!

“In the last eight months, about 10,000 property negotiators have been given a special tag to wear,” he says.

The Board of Valuers, Appraisers and Estate Agents was set up in 1981 under the purview of the Ministry of Finance.

Its main function is to regulate the valuers, appraisers and estate agents practising in Malaysia.

Where to find an estate agent

According Zerin Properties, a simple way to find an agent is by asking family, friends and co-workers whom they have engaged.

“Check your local newspapers and homes magazines. An agent with a number of advertisements most likely has a fairly extensive marketing budget and experience.

“Be certain, though, that the agent does not have too many listings to service the sale of your home effectively,” Zerin Properties says on its website.

Questions to ask

According to Zerin Properties, among the questions one can and should ask a potential negotiator include whether that agent is practising full time; years of experience; familiarity with the area / location; number of transactions handled over the past year; names of existing clients for quality reference; specific marketing plans for the property in question and modes of keeping clients informed on the progress of the sale of the property.

Picking the right agent

SK Brothers Realty Sdn Bhd general manager Chan Ai Cheng points out that it would always be best to select an estate agent that is “familiar” with the location where the property is situated.

“It’s always best to engage someone who is an area specialist. Malaysia is big!

“No one agent is good in all areas, so it’s best to find someone who’s familiar with where the property is located,” she says.

Siva concurs that some negotiators are experts in certain areas.

“Estate agents tend to specialise based on location or category (for example residential, commercial or industrial properties).

“So, when you’re looking for a home, ensure that the realtor knows the area well. If not, it will end up being a learning curve for both of you.” In some cases, an estate agent, especially one who’s experienced, might be able to provid added value to the transaction, says Siva.

“Some estate agents may be able help you find a banker to secure your loan or lawyer to assist you with the conveyancing procedure. Some might even know contractors that can aid you with your renovations or interior design plans.

“Because some of these agents have been in the business for a while, they have better contacts than the average man on the street. In fact, these realtors actually end up being one-stop service providers for clients.”

IMF triggers house alarm

The International Monetary Fund (IMF) has sounded the alarm of another potentially devastating housing crash given that house prices are still well above their historical average in many countries in relation to incomes and rentals. The world financial body says the situation has emerged as one of the biggest threats to economic stability.

Indisputably, the many trillions in quantitative easing (QE) money launched by the United States in recent years and record low interest rates are among the contributors for the sharp hikes in property prices in many parts of the world today.

Is Malaysia faced with a risk of a housing market bubble and should we be worried of a potentially damaging burst of the bubble given that the inflated property prices seen in the last two years may not be sustainable?

Borrowing the definition of a property bubble from the internet site, Investopedia which is dedicated to investment education, National House Buyers Association (HBA) honorary secretary-general Chang Kim Loong says there is a risk of a property bubble in Malaysia as property prices have increased rapidly in the past four to five years, and excessive speculation in the property market has driven property prices to “its current artificially high level.”

According to Investopedia, a property bubble is a situation that shows a run-up in housing prices fueled by demand, speculation and the belief that recent history is an infallible forecast of the future.

Chang says in the event borrowers could not afford to pay their mortgage instalments and the banks are forced to auction off their properties, “there is a risk a property bubble in Malaysia can burst, just like what happened during the sub-prime crisis in the US.”

“Skyrocketing house prices have forced house buyers to take back-breaking mortgages which have left many borrowers with little or no savings after deducting the monthly instalments and other basic necessities. Many borrowers need to combine their income in order to qualify for a mortgage, and this has placed the family at risk as the family could fall into a deficit situation if any sudden emergencies happen to either of the borrowers,” he points out.

However, Chang qualifies his outlook by saying that as long as Malaysia’s economy holds and there is no downturn, the bubble will not burst.

“Malaysia is still a young country with high demand for housing and coupled with urban migration, there is still a strong demand. But the question is whether this group of genuine buyers can afford the properties that they want.

“Although the frenzied escalation of house prices have somewhat slowed down, overall house prices have not gone down,” Chang observes.

DTZ Nawawi Tie Leung executive director Brian Koh says the fact that housing prices have jumped 15%-20% in the last two years are actually emerging signs of a housing market bubble, but he acknowledges the fact that “a property bubble can only be recognised and confirmed as one after it has happened.”

However, Knight Frank Malaysia managing director Sarkunan Subramaniam believes the property market is still resilient and with the market cooling measures introduced by the Government, “there will not be a property bubble like a massive property price correction but only a mild price correction of the property market.”

Sarkunan says Malaysia and the other South-East Asia countries have been the bright spots for economic growth and investment returns, and in the aftermath of the global financial crisis, they have attracted encouraging levels of investments that have also boosted their property markets leading to sharp hikes in prices.

“The governments in these countries have acted responsibly by implementing various measures to cool their property markets, averting potential property bubbles.

Despite the recent scale-back in quantitative easing by the US (leading to large reversals of capital flows), Malaysia’s economy is expected to remain fairly resilient supported by a strong banking system.”

Sarkunan says if there is a property bubble, “it is not brewing across the board but only in selected regions or locations, and in certain property segment, category and type, where there are more speculative activities and over-building.”

“A property bubble is akin to having an elephant in the room. We really need to acknowledge that in some areas, the elephant is getting bigger. But the market appears to be self-correcting. Developers are holding back their launches amid weaker market sentiment and revisiting their development plans to cater to current market demand and trend,” he adds.

Concurring with Sarkunan, CB Richard Ellis Malaysia executive director Paul Khong does not envisage any serious bubble in the market, especially this year, and further expects the market to continue to march ahead towards the second half of the year.

“The first half of 2014 has been relatively quiet as predicted earlier, as the property market has been absorbing the market cooling measures silently hoping for some good news. We currently see the secondary market becoming slightly active and prices in select locations are now looking relatively attractive,” Khong says.

Luxury township of Spanish-style coming up in Semenyih

Country Garden’s Diamond City in Semenyih, Selangor could be the answer to your dream luxury home.

The development has a total of 450 Spanish-style units comprising 120 units of linked houses, 272 bungalows, and 23 mansions.

Country Garden Properties Sdn Bhd sales supervisor Ken Teng said the development in the area would be completed by May 2016.

The linked houses, which have a built-up area of 2,385 sq ft and 2,650 sq ft, are price from RM900,000 and above.

As for the bungalows that have a built-up areas of 3,333 sq ft and 3,657 sq ft, the buildings are being sold between RM1.3mil and RM1.4mil.

The mansions, 20 the size of 5,560 sq ft and three the size of 8,681 sq ft, are priced between RM3.9mil and RM5.5mil respectively.

Besides, residential areas, a commercial lot comprise of 33 shops, one clubhouse with 18 facilities including, a cinema, a spa, tennis courts, a swimming pool, a multi-purpose hall and a children’s playground will be built within the development.

The developer, a China-based property developer that had been developing properties in Malaysia since 2012, is also working with the government to built a primary school near the area.

The residential area is located next to the University of Nottingham, Malaysia campus and near Broga Hill

The project is located approximately 40 minutes away from Kuala Lumpur city centre.

Teng said the development consisted of two phases.

Work on the second phase will be announced on a later date.

Besides Diamond City, the developer has built luxury service apartments, commercial, leisure and entertainment amenities, spanning 23 hectares of freehold land in Danga Bay, Iskandar, Johor.

It has magnificent coastal view overlooking the stunning Singapore skyline.

The issue of funding

Large banners the size of multi-storey buildings and hoardings herald the coming launch of a Chinese mainland developer Guangzhou R&F Properties. Since 2012, it has made its presence felt buying up tracks of land.

Says a 50-something Johorean: “The Chinese developers did things in a big way. They imported grown trees for their projects and spend millions on landscaping. The effect of growns trees on the project was immediate. This impressed many Johoreans.”

The economic spin-offs were massive. But things began to change.

“We have enjoyed the land that fronts the Johor Straits, formerly Lido Beach. That is a public area. Today it is known as Danga Bay and it has become private property.”

The Danga Bay project, a joint venture between Iskandar Waterfront Holdings Sdn Bhd and Country Garden Properties (M) Sdn Bhd, a unit of China-based Country Garden Holdings, is the Chinese developer’s first foray abroad.

The mainland Chinese also irked local developers who quietly voiced their discontent. They pay premium prices for land.

The last two years, Malaysia has become the darling of Chinese developers. According to real estate consultancy Savills, Greenland Group announced in March a US$3.3bil deal in two residential and hotel projects here.

It joins smaller peers Country Garden Holdings Co Ltd, Guangzhou R&F Properties Co Ltd and Agile Property Holdings Ltd, which have invested a combined US$2.7bil in Malaysia.

In 2013, Chinese institutional and retail investors invested a total of US$1.9bil into real estate in Malaysia, exceeding the US$867mil invested in Hong Kong and US$1.8bil invested in Singapore.

“Malaysia is the cheapest in the region in terms of capital city pricing,” says IP Global chief executive of property investment consultant and underwriter Tim Murphy told Reuters in March. He likes Malaysia also because of the “strong foreign ownership level and because you can borrow money. Lenders are friendly.”

Shadow banking is a huge issue currently in China. How Chinese developers fund their projects is haunting the overall Chinese economy because a collapse in the property sector will have far reaching effects on the broader Chinese economy. The contagion effect on Malaysia would be massive.

Shadow banking, the use of funds from non-bank sources, funded most of the development in second and third-tier cities in China. Most of these projects continue to remain empty years after completion. Credit Suisse analyst Victor Wang in a May 9 report says China banks have limited direct loan exposure to the property sector but a total 54% of their loans are collateralised lending. Dropping asset (property) prices and a prolonged weak construction activity would “impact” loan quality.

“Bank of China and Industrial and Commercial Bank of China... are relatively safer banks from this angle as 7.0% and 7.7% of their 2013 loans (respectively) were lent to developers,” says Wang. Exposure of lenders to the sector may be far greater due to off-balance sheet fund raising.

While foreigners are barred from buying homes in China, they are exposed to the sector when they lend to real estate companies via bond investments.

Financial Times had reported that since 2010, foreign investors had lent Chinese real estate companies almost US$50bil and US$6bil in yuan-denominated debt, citing Dealogic. Developers accounted for a fifth or 20% of all non-financial dollar bonds sold by companies across Asia (excluding Japan) in 2013, and more than 40% of new issuance this year.

Developers also use offshore entities to borrow foreign currency using a variety of structures that link onshore and offshore companies to avoid a myriad of restrictions on capital flows. These entities may be based in Cayman Islands or the British Virgin Islands.

Last month, Country Garden postponed the launch of a US dollar bond issue, and this was perceived as yet another sign of growing concern. The Hong Kong-listed company met with investors to gauge appetite for a deal but did not press ahead with it, the Financial Times reported. A number of Chinese developers have suffered in the equity market this year.

Country Garden was planning to use funds from the proposed deal to refinance existing debt. Chinese developers have been active in the bond markets over the past two years, driving issuance in Asia.

On the local home front, Malaysia’s relatively easy laws have also attracted a considerable number of Chinese individual buyers.

The lost of flight MH370, however, has scuttled some of these deals, property consultants said. New investment instruments have resulted in the Chinese going for quick sales if sentiments turn weak or if they see unattractive returns from their property investments.

In Malaysia, Country Garden has come under scrutiny, not over funding, but its plan to reclaim 2,023 ha on the Johor Straits.

According to a source, Country Garden has been called to a meeting with the Department of Environment in the capital last week. Country Garden’s regional president Kayson Yuen said yesterday he has returned to China for a meeting.

A source said detailed studies of the site are on-going. “Country Garden is making efforts in terms of environmental management and in getting the planning right.”

The source said the layout has not been finalised although the land has been reclaimed.