Publika, Solaris Dutamas

Publika the country’s first creative retail centre, integrating arts and culture with urban shopping and dining will see Ben's
Independent Grocer (BIG) supermarket as its anchor tenant.

Publika is part of the 17.1-acre Solaris Dutamas in Kuala Lumpur, an integrated commercial and residential development that consists of office suites, a Grade A office tower and serviced apartments. It has more than 4,000 parking bays.

"BIG supermarket will occupy 49,000 sq ft and the opening of the supermarket is expected to benefit an on-site population of residents, office tenants and daytime crowd of about 21,000 as well as the residential catchment of 330,000 people within a 10-minute drive," said Anne Tong, assistant GM for branding and community development for developer Sunrise Bhd.

Besides grocery shopping, the supermarket will also organise in-house activities and cooking classes for shoppers.

Publika has a gross floor area of 800,000 sq ft, and a net lettable area of 320,000 sq ft located within the RM1.5 billion Solaris Dutamas. It was
officially opened on mid-2011, and was the first shopping gallery to have BIG as anchor tenant. Among its other tenants are British India, Caring Pharmacy, Rakuzen and Monocle. There is also a 26,000 sq ft Shanghai-inspired food village - Food Culture.

Sunrise has set aside about a third of the net lettable space of Publika for the promotion of arts and cultural activities. The art and cultural theme to the project is MAP, or Making Art Public, offering public spaces for activities such as art exhibitions, performances, lectures, seminars and workshops throughout the year.

The various projects in Solaris Dutamas have been fully sold except for Publika, which is retained for recurring income.

Greater Kuala Lumpur property outlook bright

In Greater Kuala Lumpur, the residential and commercial property markets are expected to see healthy growth, while the region’s industrial property markets will likely lag behind in terms of new supply this year, says property consultant CBRE Group.

In its latest MarketView report, CBRE said new residential project launches, albeit coming up at a slower pace than last year, were expected to increase the total existing supply of residential properties at about 1.79 million units in Greater KL, which encompasses Kuala Lumpur, Selangor and Putrajaya.

“Anecdotal evidence shows that some developers have been putting on hold some projects since the beginning of the year.

“But this may somehow lead to an increase in demand in the near future and further drive activity once launches resume,” it added.

CBRE said it expected to see greater interest in both the primary and secondary residential property markets, especially for units in good locations, in 2014. It, however, noted that a recent survey had shown that most Malaysians (68%) were not willing to spend more than RM500,000 for a property.

Meanwhile, in the commercial property space, CBRE said that Greater KL should see 6.1 million sq ft of new office space and 3.6 million sq ft of retail space added to the market by end-2014.

The office space additions would be supported by the completion of significant projects such as IB Tower and Menara Hap Seng 2, while new retail space would come from the 12 malls scheduled for completion this year such as IOI City Mall, Atria Shopping Gallery and Encorp Strand Mall.

On the hospitality front, an additional 401 rooms from new hotels such as Allson Capital Hotel and Holiday Villa were expected to add to the existing stock of 27,162 rooms in Greater KL, while 1,040 serviced apartments would be added to the existing stock of 6,196 units by the end of 2014, thanks to the completion of three new developments, including The One @ Bukit Ceylon and Fraser Residence.

The industrial property segment, on the other hand, was expected to continue seeing negligible growth in new supply, a trend observed since 2011.

As for the rental market in Greater KL, CBRE said office space and industrial properties would likely see improvement in rates, while rates for retail and residential spaces would likely remain muted this year.

In the first quarter of 2014, the average rental rates per sq ft for office space stood at RM7.64, up slightly from RM7.61 in the preceding quarter, while that for industrial space stood at RM1.62.

“Anecdotal evidence shows an increased interest for warehouse facilities that may possibly incur price increases in Greater KL,” CBRE noted.

In the first quarter of 2014, prime rents for retail space remained unchanged since the second quarter of 2013 at RM55 per sq ft and RM31 per sq ft in KL suburban areas.

Average monthly rentals in the KL city centre were RM3.96 per sq ft, while the monthly rents in Bangsar and Mont’Kiara stood at RM3.27 per sq ft and RM2.93 per sq ft during the first quarter of the year.

Homebuyer due diligence

A commercial transaction normally commences with due diligence being conducted prior to much consideration being put into the written agreement. This measure has two effects – it prevents the parties from sealing a detrimental deal and also time wastage over unfruitful discussions.

Essentially, this is an important process to ensure the parties get what they exactly bargained for. The same is applicable in the purchase of new residential properties from developers.

While there have been incidents of abandoned housing projects all over Malaysia that impacted the homebuyers who spent their hard-earned money but did not get their dream home in return, generally the housing authorities had been successful in protecting the interest of house buyers.

Many of these projects were abandoned by illegal developers who did not possess any valid licences to commence the development in the first place.

The Urban Wellbeing, Housing and Local Government Ministry’s website showed there were 82 developers without licence and 116 developers who have abandoned their projects as of June 30, 2014.

The question that remains is how could the homebuying public be so ignorant that they are incapable of doing the basic due diligence when making the biggest life-long investment of buying a dream home.

Under the Housing Development (Control and Licensing) Act 1966 (HDA), any developer who constructs and sells more than four units of housing accommodation comes under the purview of the HDA.

Section 18 of the HDA states that any housing developer who carries out housing development without having been duly licensed shall be guilty of an offence and shall, on conviction, be liable to a fine which shall not be less than RM250,000 but not exceeding RM500,000 or jailed not more than five years or both.

Thus, it is compulsory for a developer, prior to developing a housing project, to fulfill the following:

·Obtain the necessary approvals from the relevant authorities such as development order and building plan;
·Apply a developer licence from the Controller of Housing whereby the Controller has the discretion to grant with or without further conditions or to refuse granting the licence;
·Deposit a sum of not less than RM200,000 with the Controller for the grant of the licence which is refundable upon the completion and expiry of the defect liability period of the project (there is an amendment to adjust the deposit sum in line with the gross development cost in 2013 but it has yet to come into force); and
·Apply for a sales and advertisement permit to start selling the units of the development.

Thus, a licensed developer would pass the first stage, with checks by the relevant authorities. A unlicensed development would mean these authorities are out of the picture and that development had not been discovered for breach yet.

As such, the next level of due diligence will be significant: the homebuyer himself.

With the advancement in wireless technology today, we “google” for everything for which we need clarification and information. The same applies for home purchasing. You will be amazed over the amount of information available online: ranging from the developer’s own website, property reviews to forums started by other homebuyers on the same development.

While it is not advisable to believe everything from the world wide web, it serves as a good starting point to know better the product you are buying before signing the sales and purchase agreement.

A minor website checklist is as follow:

·Google
·Developer’s website
·News websites
·Ministry of Urban Wellbeing, Housing and Local Government
·Real Estate and Housing Developers’ Association (Rehda) and
·National House Buyers Association.

In addition to that, you may personally pay a visit to the development itself and make your own observation. If possible, asking around for details would also build up the confidence in buying the right home.

Normally, at the entrance, there will be a white signboard feeding you details of the construction such as the details of the development, landowner, developer, contractor and completion date.

Your lawyer or banker also serve as another filter of due diligence. Before you sign any agreement, it is advisable to ask them on any doubt that you are suspicious about and to be comfortable with what you sign.

Even if you have questions on the credibility of the lawyers, the Bar Council has a website for you to do the checks or even its friendly help desk in its office.

The above due diligence process does not guarantee a 100% smooth property transaction but it minimises the risk of buying a project which could be abandoned. Besides conducting a detailed research, the purchase of a house from reputable developers may diminish your homebuying risk further.

And for any of you who think you might be a victim of unlicensed developer, it is time to call your lawyer and banker for clarification.

Owning a house is a lifetime commitment; its protection starts with you.

Moody’s: Malaysia housing market may be peaking

Moody’s Investors Service expects an uptick in non-performing loans (NPLs), particularly in the household segment, in the South-East Asian banking system.

Moody’s assistant vice president and analyst Simon Chen said on Thursday that in Asean, the Malaysian and Thai banking systems were the most exposed to increased asset-quality pressure in the household segment when rates rise.

“This is primarily because the ability of households in these countries to service their debt in a rising interest-rate environment will be negatively affected by consumers’ high leverage at a time when the housing market in Malaysia may be peaking and Thailand faces elevated political risk,” he said in reference to Moody’s just-released report “Rising household leverage poses risks to Asean banks as the economic cycle shifts”.

Moody’s said the long positive credit cycle that has benefited banks in Asean might be on the verge of peaking. These would pose challenges for the lenders as pockets of asset-quality risk emerge due to tighter global monetary conditions.

“Our central scenario is that banking systems in Asean will be broadly resilient to the financial impact of a shift in interest rates, but we expect an uptick in NPLs, particularly in the household segment,” said Chen.

Moody’s report showed household debt has risen significantly in Asean in the past several years, with growth in bank loans to households outpacing loan growth to other borrowers.

Household leverage as a percentage of GDP was at historically high levels in Malaysia (A3 positive) (87% at end-2013) and Thailand (Baa1 stable) (82% at end-2013), and close to its five-year high in Singapore (Aaa stable) (75% at end-2013).

Although household debt has also risen significantly in Indonesia (Baa3 stable) and the Philippines (Baa3 positive), the growth in these countries was from a low base.

However, the report pointed out Asean bank asset-quality risk from residential property price corrections was mitigated by legal frameworks that support bank creditors.

Unlike in the US, banks in Asean have legal recourse to the borrowers on their debt obligations, beyond the underlying property assets mortgaged to the banks.

This feature provides greater creditor protection to banks, removes the incentive for borrowers to default on their mortgage obligations, and alleviates risks that housing NPLs will spike when property prices fall significantly.

Additionally, Moody’s report notes that Asean banks have responded to regulatory measures aimed at curbing further increases in excessive household leverage.

Banks in Thailand, Malaysia, and Singapore had tightened their underwriting standards on household loans, which was positive for banks’ asset quality over the longer term.

The banks also have strong buffers to withstand asset-quality shocks in the household segment, Moody’s said.

Bandar Puteri Bangi (2)

The town of Bangi in Selangor will soon see a new development that is set to be a major commercial hub and vibrant residential township in the southern corridor of the Klang Valley.

Bandar Puteri Bangi, an integrated mixed development by IOI Properties Group Bhd, sits on 370 acres of prime freehold land near the state border between Bandar Baru Bangi and Nilai, Negri Sembilan, with direct access from the North-South Expressway.

“We are committed to creating the ultimate township living experience with an emphasis on sustainability and individuality,” said IOI Properties Group Bhd chief executive officer Lee Yeow Seng

“A 148-acre site – approximately 40% of the land – will be earmarked for the development of a vibrant commercial hub that will offer outdoor dining, street cafes, quaint boutiques and flashy showrooms,” said Lee.

He added that another 40% of the 370 acres will be developed as residential precincts consisting of both landed and high-rise property while the remaining 20% will be allocated for landscaping, parkland and public amenities.

At a gross development value of approximately RM4bil, the entire site will be transformed into a fully integrated modern township over the next eight to ten years.

The lifestyle concept for Bandar Puteri Bangi is evident in its plans for a green and stylish boulevard landscape concept on a network of streets collectively called the ‘Streets of Dreams’.

These streets follow unique themes such as “California Street”, “Tropical Street” and “Art Street”, and they reconnect the urban population with the natural landscape through a system of parks, paths and open public spaces.

“Residents can also reconnect with nature at our large green space, the ecoOasis Parkland, or relax and wind down with the arenaOasis Clubhouse at their doorstep,” Lee added.

Its strategic location in the southern corridor also enjoys a wide range of amenities in the existing neighbouring townships, which include universities, shopping destinations, hospitals, hotels, popular recreational spots and public transportation.

According to property director Teh Chin Guan, the first phase of shop-office blocks are set to be launched as early as next month while the first phase of landed superlink houses will be launched in November.

With the market price of link houses in a neighbouring township set at about RM600,000, Teh says that their much larger superlink homes, with built-up areas starting from 2,700 sq ft, will likely sell for no less.

“We also have our first phase of serviced apartments in the works – about 669 units, expected to launch early next year,” he added.

Other types of residential property in Bandar Puteri Bangi to be launched in future phases include terrace houses, townhouses, affordable apartments and condominiums.

Malaysia’s residential property sector enters cooling phase

The residential property segment, a sub-sector of the overall property market, appears to have entered “a cooling phase” in the first two quarters with sales expected to stay “moderate” for the coming third quarter, according to the Malaysian Institute of Economic Research (Mier).

“The macro-prudential measures implemented by Bank Negara to cool down the property market since 2010 look likely to have played a role here,” Mier said.

Mier based its conclusion after doing a residential property survey designed to be an indicator of economic activity in the property sector.

Its Residential Property Index fell for the second quarter to 109.9 points, slipping 1.3 points from the first quarter, and 28.3 points from a year ago.

The survey also showed that total unsold new residential properties have accumulated faster than sales in recent months.

More than a quarter of house builders reported bigger stocks in hand, which is at a three-year high.

The Mier report said that given the built-up in total unsold new units, those surveyed have decided to keep creeping prices at bay by maintaining them at current levels.

But in the months ahead, prices “are likely to escalate again” more than half of those surveyed said while the remainder said they will “neither raise nor slash theirs (their prices) for now.”

Fewer of them increased prices in the second quarter compared with the first and some even offered price cuts, the survey found.

Moving forward, about half of those surveyed expect sales for the current third quarter to remain the same while more than a third of those surveyed foresee higher sales as “home buyers bought ahead of the Goods and Services Tax” which will come into effect next April.

Property prices are envisaged to rise due to higher input costs after that.

Double-storey houses continued to be the most popular while none of those surveyed seem to have sold any bungalows during this same period.

The survey concluded that affordability issues may continue to haunt the market if property prices outpaced income growth and interest rates edged up.

“Housing demand may eventually lose ground,” Mier said.

Bandar Puteri Bangi

IOI Properties will soon unveil its Bandar Puteri Bangi Township, a 370-acre freehold integrated project with a gross development value of RM4 billion.

Out of its total area, 40 percent will be allocated for residential precincts, a similar number for the commercial hub, which consists of a hypermarket, three- to four-storey shophouses, as well as retail and lifestyle units. The remaining 20 percent will be set aside for parklands, public amenities and landscaped areas.

Its 167 acre commercial hub is also touted as one of the biggest business centres within Klang Valley’s Southern corridor, which covers Nilai, Bangi, Kajang and Semenyih.

To be built over the next ten years, the town also feature three themed streets. Inspired by the Sunset Boulevard in the US, the tree-lined California Street allows residents to enjoy a ‘surfer-like’ lifestyle. Here, teenagers and professionals can ‘surf’ the lane with bikes or skates.

Commuter will also enjoy travelling through Tropical Street in an open-top or convertible car thanks to the giant natural umbrellas formed by huge rain trees, while Art Street is dotted with sculptures and other quirky masterpieces.

Moreover, the township’s ecoOasis Parkland is a perfect place to unwind or hold a picnic, while the lakeside arenaOasis Clubhouse comes with an outdoor amphitheatre with terrace-style seating.

With direct access to the North-South Highway via Putera Mahkota Interchange, Bandar Puteri Bangi is surrounded by many amenities. Apart from its proximity to a KTM commuter station, the township is also close to many educational institutions like UKM, KUIS and Uniten.

The Nilai Medical Centre, An-Nur Specialist Hospital and KPJ Kajang Specialist hospital are also nearby, likewise for shopping centres such as Bangi Gateway and the Nilai 3 Wholesale Centre. The Bangi Golf Resort and Palm Garden Golf Club are within easy reach as well.

According to the company’s press release: “The spectrum of properties to be launched soon will include gated & guarded terrace houses, townhouses, serviced apartments, condominiums, shop-offices and low-cost apartments.”

Interested buyers may register at www.ioiproperties.com.my/puteribangi or call 03-8947-8899.

Escalating land cost in KL and PJ driving developers south of Klang Valley

More developers are choosing to relocate their developments towards the south of the Klang Valley due to escalating land prices in and around Petaling Jaya and Kuala Lumpur.

“Escalating land prices within Greater KL have reduced the supply of affordable landed properties, which remain in demand,” said AllianceDBS Research in a report yesterday.

“The mass rapid transit (MRT) connectivity at Kajang (ready by 2017) and the ready infrastructure with several highways have made Kajang/Semenyih the natural choice for developers to expand township developments.”

The research house said this was supported by the availability of large tracts of land and these districts recording among the strongest population growth in Selangor.

“The close proximity to KLCC and the Putrajaya federal administrative centre will ensure KL South continues to thrive.”

AllianceDBS Research noted, however, that Greater KL and the Klang Valley remain the core of the Government’s Economic Transformation Programme.

“The Government wants to grow the Greater KL population to 10 million by 2020 from an estimated seven million currently. This means the Greater KL population has to grow by 5.2% per annum on average, much higher than the national average of 1.4%.

“If the goal materialises, then this would translate into stronger demand for housing of 80,000 units per annum in Greater KL alone vis-à-vis 78,000 units completed for the whole country in 2013.”

AllianceDBS Research said the housing demand in Greater KL is likely to remain healthy going forward, adding, however, that buyers would be picky because of the steep pricing, no thanks to a slew of cost-push factors, including inflationary pressure, subsidy rationalisation and the implementation of minimum wages.

“Faced with the risk of margin compression, property developers will naturally look to landbank in areas where land cost is relatively low and there is ready infrastructure and a growing population.”

SYF Resources inks deals for RM160m Cheras property project

SYF Resources Bhd is teaming up with two landowners to develop 8.09 acres of freehold land in Sungai Long, Cheras into a residential project with a gross development value (GDV) of RM160mil.

It said on Monday its unit SYF Development Sdn Bhd had signed joint venture agreements with Luxmark View Sdn Bhd and Sheeco Properties Sdn Bhd to develop the land.

SYF added SYF Development would carry out a residential project comprising of condominiums and Rumah Selangorku on the site.

It added Luxmar would be entitled to RM16.2mil and Sheeco RM14.88 million for the land.

"The total landowners' entitlement of RM31.08mi has been arrived at on a negotiated basis and taking into account the expected gross development value of a minimum of RM160mil," it said.

"Such entitlement will be paid progressively from the collection of sales proceeds arising from the future development of the land," it said.

SYF Resources said the JV agreements were subject to a condition precedent of a minimum allowed density of 60 units per acre when the building plans are approved.

Cooling measures reduces property transactions but prices keep uptrend

The measures to cool the property market may have weeded out a large part of speculative activities but they have not succeeded in curbing rising prices, says Malaysian Institute of Estate Agents (MIEA) president Siva Shanker.

“The number of transactions has come down but prices continue to rise steadily,” he said at the Property Investment Convention 2014.

Siva said the number of transactions between 2011 and 2012 dropped by 0.67% but their value increased by 3.61% while between 2012 and 2013, the volume dropped 10.85% while the value rose by 6.7%.

“A drop of 10.85% is substantial but you have the value of transactions moving up 6.7%. That means prices of properties are continuing to rise,” he said.

The measures included the removal of developers’ interest scheme (DIBS), hike in real property gains tax (RPGT) rates and for mortgage loans to be based on the net price of the property. Siva said that rebates offered by developers such as “free” legal fees and stamp duty contributed to the rise in property prices. During the same event held last weekend, a property developer openly offered an 18% discount. The gross selling price of the unit was reduced from RM900,000 to RM711,000 as a result of freebies.

“When a property price is artificially inflated this way, the gross price is stated in the sales and purchase agreement. This gives the developer the opportunity to price his next launch at a higher price, which explains why prices are going up indiscriminately.

“The developer gets a great take-up rate during his launches and the first batch of buyers are happy but the overall market suffers in the longer term,” he said, adding that the secondary market was obviously gaining interest.

Siva said another issue he was concerned about was the the existence of investor clubs.

“Although these clubs are less active today, they are still there. The minute the market turns, they will come back. The authorities should outlaw these clubs today or regulate them. The market cannot afford to wait two to three more years before doing something about these clubs,” said Siva.

Raine & Horne Malaysia (Penang) senior partner Michael Geh said during a panel discussion that the Government should say that over a 20-year cycle, property prices have moved up by as much as 45% on a national basis after an economic crisis but dropped by a fifth in each recession.

“In the 1986 recession, prices dropped 20% over a two-year period but during a seven-year upturn, prices went up 45%. During the 1997/98 Asian financial crisis, prices went down 20% but rose by much as 45% after that for another seven years or so.

“Between 2008 and 2010, the market was down by another 20% but from 2009/2010 onwards, it has been rising. It is still rising today. But salaries have not risen in tandem,” said Geh.

Geh added Malaysian car prices were among the top three highest in the world and there was no light rail transit in Penang, Sabah and Sarawak while Johor was promising.

“We need to prick a little hole and release a bit of pressure in terms of affordability, transportation and jobs. We are in a pressure cooker,” said Geh.

RM152mil TREC in KL to be completed by end-2015

TREC, a RM152mil lifestyle and entertainment development at Jalan Tun Razak here, is expected to be completed by the end of next year.

The project which is developed by Avant City Sdn Bhd, a company 35%-owned by Modern Falcon Sdn Bhd, which is led by Cher Ng, the founder and managing director of TREC and the co-founder and owner of Zouk KL, 35% by the Daman Group and 30% by Berjaya Assets Bhd.

The seven-acre lifestyle and entertainment hub located across the Tun Razak will be similar to Hong Kong’s Lan Kwai Fong, China’s Xin Tian Di in Shanghai and Singapore’s Clark Quay. It will be built on land owned by the Royal Selangor Golf Club that has a lease tenure of 34 years.

TREC will have among others fine dining outlets, indie cafés, pubs, clubs and lounges to attract both local and international patrons.

According to Ng, a 70% tenant mix had been secured so far and that the company was still actively courting other tenants. “We are talking to tenants from as far as the United Kingdom, Singapore, Indonesia, and Thailand. But a large number of them are from homegrown brands,” Ng said at a press conference on Monday.

The project which is listed by the Tourism Ministry as an entry point project under the Tourism National Key Economic Areas aims to attract a minimum of 1,000 tourists per day.

“This will also be a place for tourists to come as an entertainment centre. Zouk KL, will relocate from Jalan Ampang to TREC in the beginning of next year,” Ng said.

IOI City Mall

TESCO Hypermarket, HomePro and AEON Index Living Mall have recently signed lease agreements to become the anchor tenants of IOI City Mall.

The retailers are set to take up approximately 4,000sq m, 9290.3sq m, and 6038.7sq m of the mall, respectively.

IOI City Mall has retail nett lettable area of 1.35mil sq ft (125419.104sq m).

Speaking at the signing ceremony, IOI Properties Group Bhd chief executive director Lee Yeow Seng said that the company is heartened by the keen interests shown by the retailers who have chosen to come on board.

Signing on behalf of Tesco Stores (Malaysia) Sdn Bhd, chief executive officer Georg Fischer expressed delight for the hypermarket to be part of the mall.

“We are very excited that Tesco is joining the development, having been in talks for more than three years,” said Fischer.

Fischer said that the outlet will be Tesco’s 52nd.

However, he said that the outlet would not take after the usual big-box hypermarket concept that includes non-food products.

“This outlet will mainly focus on food products, providing a fresh experience that will fit the upmarket customer profile,” said Fischer.

Thailand’s Home-improvement brand, HomePro, will make its first appearance in Malaysia in IOI City Mall.

Home Product Center (Malaysia) Sdn Bhd managing director Anuchar Jitjaturunt said that the home-improvement center aspires to become a one-stop location for homes improvements in the country and in Asean.

The outlet in IOI Mall hopes to draw customers with 35,000 products through three concept categories, including “Build It” for basic home building and designing, “Improve It” for home improving and maintenance, as well as “Live It” for home enhancements and decorations.

Aeon Index Living will also be opening its first location in IOI Mall.

The home and interior furnishing store is run by AEON Co (M) Bhd’s subsidiary, Aeon Index Living Sdn Bhd.

Aeon Index Living is a joint venture between AEON and Index Living Mall Co Ltd, a Thai furniture company that has more than 40 years of history under its belt.

“We are proud to be making Index Living Mall’s first presence in IOI City Mall.

“With a strong design and sourcing base, the brand will cater affordable home lifestyle luxuries for today’s modernised living,” said Aeon Index Living Sdn Bhd director Nur Qamarina Chew Abdullah.

With the signing on of the three establishments, the mall has fulfilled 85% of the tenant occupancy rate.

“Now that the key tenants have been secured, the mall will concentrate on getting in specialty shops,” said IOI Properties’ Lee.

He added that more tenancy negotiations are underway.

The mall is slated for completion on Nov 10 this year.

The mall is part of IOI Resort City, joining existing components including Putrajaya Marriott Hotel and Spa, Palm Garden Hotel, two office towers and the golf course in the integrated retail, commercial and residential development.

The 320-acre site where the resort city sits will also be the location of future developments such as the IOI City Hotel, IOI City Office Towers, as well as other high-rise office towers, lakefront and park offices, villas, condominiums, serviced apartments and townhouses.

‘New OPR will have little impact’

An increase of 0.25% in the overnight policy rate (OPR) will not have a significant impact on borrowers for low-cost and affordable housing priced between RM45,000 and RM450,000, according to a senior executive of a real estate agency.

VPC Realtors (KL) Sdn Bhd director James Wong said there would only be an estimated marginal increase of RM5 to RM53 per month in loan repayment compared to the previous interest rate for a 30-year tenure with a 20:80 margin (see chart).

“As for high-end residential properties, most buyers are either cash buyers or they buy with a minimum loan margin. Hence, an increase of 0.25% per annum will be insignificant,” he added.

Bank Negara has raised the benchmark overnight policy rate by 0.25% to 3.25%, the first rate hike since June 2011.

Mortgage rates are based on the base lending rate (BLR) which in turn is correlated to the central bank’s OPR.

Wong felt that speculators would be hit the most.

“If they are unable to service the loan, they will be forced to sell. But it will not be as easy as before due to the real property gains tax,” he said.

Wong did not expect rental rates to be impacted by the increase in interest rate as the rental market was primarily determined by demand and supply.

Property consultants expect fewer transactions as mortgage rates will rise in tandem with the interest rate.

Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector president Siders Sittampalam said: “With the interest rate hike, we expect a gradual fall in volume.”

That said, property prices will still be driven by demand and supply.

Bank of England governor’s solution for affordable housing

HOW do we make housing more affordable? It is a million-dollar question that many are still searching. Housing the nation, especially providing affordable homes, is a global challenge.

Two months ago, Bank of England (BoE) governor Mark Carney said the only long-term way to effectively bring down home prices was to build more homes. This may well be one of the most practical ways to address the issue.

Before we take his suggestion as final, let’s look at some statistics to understand the root cause of why we are lacking behind in terms of affordable housing. According to National Property Information Centre (Napic), we have a total of 4.7 million homes as at the fourth quarter of 2013. As Napic does not track rural houses, the assumption is only urbanites stay in these houses. This alone accounts for 70% or 21 million people, and therefore 4.4 persons per house in the cities.

Australia, which has a population of 21.5 million in 2013, has 9.1 million occupied houses or 2.4 persons per household. In the United Kingdom, there are about 63.8 million people staying in 26.4 million homes in 2012, which also works out to about 2.4 persons per house.

What do these figures tell us? In terms of ratio of people to number of homes, we have so much to catch up with countries like Australia and the United Kingdom.

The basic economic principle says, when demand is higher than supply, prices will go up. Equilibrium is met when demand equals supply. And when supply exceeds demand, prices will go down.

Looking at the above examples, we are lacking behind in terms of number of houses available. If a mature economy such as the UK thinks that building more houses is the way to go to achieve affordable housing, should we not consider this approach as well?

To keep pace with Australia and the UK of 2.4 persons in a house, we need 8.75 million homes to house our urban population of 21 million people. This literally means that we need to build an additional 4.05 million houses in order to be on par with them. Based on our statistics for the last three years, we only managed to build and complete 73,000 residential units per year. As such, we have many years to catch up. And that is also provided that the existing number of urban population is maintained.

The Napic report also shows that, out of the 246,225 residential properties transacted in primary and secondary markets last year, only 10% was made up of RM50,000 and below, 15% was between RM50,000 to RM100,000 and 12% was between RM100,000 to RM150,000. That shows the transactions of affordable houses were limited.

So, what can we do to improve the situation?

The Housing Ministry, various local authorities and government bodies set up specially to provide affordable housing, should work and pool resources together to build more houses, especially affordable ones.

The key factor to affordable housing is affordable land. The Government should focus on opening up large tracts of government land for housing. This will assist private developers greatly as they are currently facing the challenge to lower the price of their houses due to high land cost. The expectation that developers can cross-subsidise affordable housing with the sale of other private homes has instead burdened the people. In reality they ended up paying more for their private homes.

Apart from the ability to free up state land for housing, the authority can also expedite the approval process to supply more houses to the market. Once this process is enhanced, private developers will have the incentive to launch more units as unproductive waiting time and holding cost are reduced.

On the other hand, the Government should also review the existing policy of setting the price of low-cost homes at RM42,000. The authority may revise the pricing higher to perhaps RM100,000 to RM150,000, to encourage small and medium sized developers to build more affordable houses for the market.

In Malaysia, small and medium enterprises (SMEs) constitutes 99.2% of total business establishments. However, this does not reflect the scene in the property industry as the requirement of building 30% low-cost homes at RM42,000 is a challenge for small developers to stay in business.

When we look at how to make housing more affordable, we should really scrutinise the reasons why we lag behind. With the current limited supply we have in our housing market, house prices will continue to rise due to genuine demand from urbanisation and a growing population.

This vicious cycle will only be alleviated when more land is released for affordable housing, and expedite approval process to allow both the public and private sectors to build more homes.

With ample supply in the market, people would have more choices of homes that meet their financial requirement and demand at different stages of life.

Homing in on the real house price

AND so the much-anticipated increase in the overnight policy rate (OPR) of 0.25% came. And with this increase, so will the base lending rate (BLR) on which mortgage rates are based, moving from the previous 6.6% to 6.85%. But this week’s increase in the BLR is not the only issue affecting the current property market.

There are other concerns, starting with the most recent. According to an informal poll with four property professionals, this increase of 0.25% is “marginal and will not impact mortgage payments significantly.”

Nevertheless, it is best not let our guard down because any increase, however small, impacts one way or another. The OPR resembles a set of tentacles that reach far into the nooks and corners of the economy – and our pockets. The OPR is the rate at which banks lend to each other.

Changes in the OPR invariably and inevitably are passed to consumers through a series of changes in the BLR of commercial banks and financial institutions, be it personal loans, mortgages and, hopefully, in the fixed deposit rates.

Henry Butcher Marketing Sdn Bhd chief operating officer Tang Chee Meng, on the current round of increase, says the Government will “not want to spook the market.”

Another round?

So the increase will be “gradual”, he says.

“Whether there will be another round later on depends on the economy,” Tang adds.

To really comprehend the significance of this round of increase on the property market, it is pertinent to consider the various anti-speculation measures imposed this year. These various measures work together to impact the market.

As it is, the various anti-speculation measures have already taken effect, as seen in the slower sales today.

Savills Rahim & Co managing director Robert Ang says: “Sales have been slow since this year. This increase in BLR will make property investors think twice. It will be translated into a higher investment cost.”

Ang says this marginal increase is “psychological”. There may be another round of increase before the end of the year, he adds.

Insignificant an increase of 0.25% may be, a total increase of 0.5% over the longer term will be significant.

Says a 40-year-old home buyer who is mulling a purchase: “I am not so bothered by this increase in BLR. I am more concerned about the goods and services tax (GST) which comes into effect next year. That will be far more painful for me, which is why I am thinking of buying now.”

Tax consultants are already holding interviews and talks on the effects of the GST on the economy. Although the residential segment of the property market is GST-exempt, there are concerns about its impact.

Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector president Siders Sittampalam advises caution.

Net and gross price

“It will have an impact on prices and value. The GST is imposed on construction materials. The whole value chain has to bear it. When the price of the final product is calculated, for example in a developer’s launch, the developer will factor in the GST that he has paid into the launching price. There is no way a developer will absorb the GST that he has paid. He will not take a hair cut.”

Siders says he expects developers to put launches on hold, which reduces supply. With the drop in supply and demand remaining the same, the price goes up.

Besides the BLR and the GST, another current issue besetting the housing market are the marketing strategies developers employ which invariably raises the price of housing over the longer term.

A property consultant who wants to remain anonymous says a package which comes with air-conditioners, electrical products like washing machines, refrigerators and “free” legal fees increases the overall house price.

“This happens in the primary market when a buyer buys from the developer. The selling price is a package comprising a discount, electrical products and legal fees. The buyer thinks the legal fees are being absorbed by the developer. In reality, all these products and fees have already been factored into the price of the house,” he says.

Based on two different examples, a condominium and a double-storey landed unit, the source says a closer examination of both reveals that the extras tend to push up prices (see chart).

“Buyers are happy when they are given a discount. But this discount is actually factored into the price of the house. In the sale and purchase agreement, the price of the house is stated as RM800,000, the gross price. He gets a loan based on this gross selling price. He will be paying less if the loan were to be based on the net selling price,” he says.

Consider scenario 1 for a double-storey house. The house is sold for RM800,000. If the free stuff and discount were to be removed, the net price is actually RM756,500, a difference of RM43,500.

The monthly mortgage payment under a BLR of 6.6%-2.4% is RM3,369. Under the new rates, it is RM3,762, a difference of RM393.

If one were to take a loan based on net selling price under the new rates, he will be paying RM206 less, that is RM3,556.

Under scenario 2, the net selling price of the house is RM797,100, a reduction of RM43,900 from its launching price of RM841,000. The monthly mortgage payment is a difference of RM207. Over a 35-year loan tenure, these differences in BLR and gross/net selling price calculations will be considerable.

The basis of selling a house based on gross price, instead of the net price, results in the next launch being priced higher. It has a snow-balling effect for subsequent launches.

UDA to redevelop Kompleks Niaga

UDA Holdings Bhd will demolish Kompleks Niaga Utama (KNU) in Bangsar, here, and redevelop the site into a luxury residential tower with a gross development value (GDV) of more than RM250 million.

This will be the second residential tower that UDA will develop in Bangsar.

In 2008, UDA launched Gaya Bangsar, which is a 34-storey luxury condominium tower comprising 285 residential units with a RM157 million GDV, next to Dataran Maybank.

The national property development agency sold 95 per cent of Gaya Bangsar within a week of its pre-launch.

The units, ranging from 671 to 1,610 sq ft, were priced between RM350,000 and RM900,000 each.

They were taken up mostly by locals, while expatriates bought less than 10 per cent of the units.

UDA had achieved the Bumiputera sales quota of 40 per cent for the property.

“We plan to demolish KNU and redevelop the site into a luxury residential tower. We are focusing on encouraging Bumiputera ownership in real estate.

“We hope to start the project next year, once all the building plans are approved,” said UDA chairman Datuk Johari Abdul Ghani in an interview, here, recently.

There is an urgent need to redevelop KNU because it is aging and will cost UDA more than what it can collect from rentals.

The property has been operating since 1986.

It was initially built as a parking facility, but due to the transfer of squatter settlements, UDA provided 68 shop lots for squatters to do businesses.

Johari said after 28 years, only about 15 lots are still in operations.
UDA charges the traders less than RM3 per sq ft in rent, much lower than KNU’s neighbouring towers.

“We are talking to the traders to relocate their businesses, either to Pudu Sentral or Pertama Complex. We have given them notice to move.

“The land is worth around RM27 million and it is not fair for a property that is worth that much to have only around 15 operating traders,” Johari said.

Idyllic retreat

PETER Chan has an eye for detail and takes pride in his creations.

Most of all, he has a knack for turning his dreams into a reality.

The Haven Sdn Bhd chief executive officer also never once let negativity gets in his way.

The 26-storey The Haven Lakeside Residences condominium development in Tambun, Ipoh is testament to all this.

Launched in January 2011, some 90% of its 497 units in three blocks were sold by the time they were completed last year.

This is no small accomplishment as the luxury highrise was the first of its kind in Ipoh, a city where most of its people still preferred landed property.

Chan said 40% of the buyers were from Ipoh, another 40% from Kuala Lumpur and Penang and the rest from overseas.

He said he would expect the current selling price of RM668 per sq ft to rise further.

While the multiple-award winning project needs no introduction by now, its owners are also set to discover how every effort has been taken to provide them a conducive living environment.

And nothing seems too small for Chan’s attention when it comes to quality living.

During a tour of The Haven Lakeside Residences recently, he explained how the water outlets inside the units could keep insects away.

He also explained how the design of the units were such that occupants were able to enjoy the cool natural surroundings of limestone hills, a lake and greenery, while maintaining privacy at the same time.

Managed by Best Western International, The Haven Lakeside Residences is a five-star condominium offering the luxury of resort living.

Its wide range of facilities include a private helipad.

Chan, 64, who has two decades of experience working with a development company in Australia, said he was first captivated by the 280 million-year-old limestone hills fronting a lake in Tambun in Ipoh, which is now the icon of The Haven Lakeside Residences.

After clinching 12 awards, locally and abroad, including ‘the best value condo in the world’, Chan reckoned the fact that there would be challenges to live up to the project’s image and expectations of its owners and guests alike.

“The price of a well-managed property will go up and vice-versa,” he noted.

Chan said the trend of having a holiday home was increasingly popular among the rich in particular and The Haven Lakeside Residences, being strategically located, fits the bill.

“It is just a five-minute drive to the interchange of the North-South Expressway,” he said, adding that it was only a two-hour drive from Kuala Lumpur or one and half hours from Penang, making it an ideal place for retreat over the weekend or holidays.

“Important facilities like a private hospital is just 10 minutes away,” he added.

As an investment, he said the project offered owners a guaranteed rental at 6 % per annum for five years.

Some 100 units, he added, were condotels.

Chan said it was about RM400 per night for a two to three bedroom unit of between 1,000sq ft and 1,600sq ft.

Drawing a comparison, he said the minimum cost per night for a similar unit in China (where the serenity of its surroundings is comparable to that of The Haven Lakeside Residences) was RM1,920 (USD600).

Chan said Tambun has good potential for development, envisaging a town that is famed for art, music and tourism, including a university to attract the talents from abroad.

He reckoned that the slower pace of life in this part of Ipoh and its natural surroundings were conducive for such pursuits.

“It is about enhancing the existing good points,” he said, confident of another big leap for Tambun in the next five years, depending on efforts to bring out the best in the area.

And his brainchild — The Haven Lakeside Residences — is a good example that anything is possible with a willing heart and mind.

An oversupply of homes in Iskandar?

The Iskandar region in Johor, built to attract investment from neighbouring Singapore, may be facing an oversupply of properties, a problem complicated by  a lack of data, according to the Singapore Straits Times.

With thousands of properties being built, there are fears of a glut in supply. Complicating the situation, there is a dearth of data about Iskandar’s property sector, a report in the paper said yesterday.

“Basic data such as the volume and value of home sales, average transaction prices and average rentals are not easily available. Neither is information on the homes being built, launched or completed in Iskandar alone,” the paper said.

Additionally, there is a dire need for more public and timely data on the market situation, it said, Citing Malaysian government data. The paper said as at the fourth quarter of last year, there were 118,191 homes under construction in Johor state, where Iskandar is located, and another 168,371 planned, according to the Malaysian government.

It also cited various property developments in the area made by mainland Chinese firms as evidence of an oversupply.

“Units being built now will be ready in about three to five years’ time. But investments that create jobs may take years longer. Who will live in the homes then?” the paper asked.

“Current projects also face falling demand in the wake of property cooling measures introduced by the Malaysian government last year. The curbs include property gains taxes as well as minimum purchase amounts and stamp duties for foreign buyers.” it added.

“Unlike in Singapore, property developers in Iskandar are not required to disclose sales or rental updates. Often, they simply refuse to reveal how many units they have sold at their launches, so it can be hard to estimate the success of their projects,” according to the report.

Worries over luxury condos, number of upcoming units ‘frightening’

- 5,000 to 6,000 units coming in within the next six to nine months in the Klang Valley

- the cumulative supply of luxury condominium in Kuala Lumpur increased from 25,796 units in the second quarter of 2013 to a total of 26,163 units in the third quarter of 2013, contributed by 147 projects.

An oversupply of new luxury condominiums in the Klang Valley this year is expected to create pressure on rentals and even result in a “price war” on new and existing units.

Property consultant CH Williams Talhar & Wong Sdn Bhd (WTW) managing director Foo Gee Jen said the number of new units expected to come in over the next few months was “frightening.”

“We expect some 5,000 to 6,000 units coming in within the next six to nine months in the Klang Valley,” he said, adding that he was “mixed” on the outlook for high end condominiums ranging between RM1,000 per sq ft and RM1,500 per sq ft.

Malaysia Institute of Estate Agents (MIEA) president Siva Shanker said he expected a “price war” to erupt amongst owners looking to find the best rental rates for their condominiums.

“A lot of people would have bought these upcoming properties to flip (sell at a higher price). But at such prices, they may have problems finding a buyer. So the next thing they will do is try to rent out the unit.

“Again, to try and get the most out of the situation, they will want to rent out the property at the highest possible price. But because there’s an oversupply situation, there will be competition from other owners.

“So a price war will begin as they start lowering prices (to be able to secure a tenant).”

Siva said he expects units ranging between RM600,000 and RM1.5mil to face this problem.

“However, units that I call super luxury units, ranging over RM3,000 per sq ft, are unlikely to face this problem as they are quite niche and are unlikely to face much competition,” he said.

According to WTW in its report on the luxury condominium sector for the third quarter of 2013, the cumulative supply of luxury condominium in Kuala Lumpur increased from 25,796 units in the second quarter of 2013 to a total of 26,163 units in the third quarter of 2013, contributed by 147 projects.

The bulk of supply was concentrated in KLCC area with a total of 11,181 units or 43% of total cumulative supply in Kuala Lumpur.

“Prices were generally stable in all areas where in KLCC and Mont’ Kiara/Sri hartamas area, prices ranged between RM850 and RM1,400 per sq ft while for the remaining areas, prices were between RM700 to RM1,200 per sq ft.

“In terms of gross asking rentals, rentals in KLCC area indicated stable rates at a range of RM4.50 to RM6.50 per sq ft while the remaining areas ranged from RM3.50 to RM5.50 per sq ft,” said WTW.

How GST Will Impact Home Prices & The Property Market

With the coming implementation of Goods & Service Tax (GST) in April 2015, many Malaysians are concerned with what this bodes for prices in general. It is inevitable that home prices will also be affected. In this article, we explain how home and property prices will be affected moving forward.

To properly appreciate how GST will affect home prices, it is necessary to first understand how GST works. (Click here for a detailed but simple-to-understand explanation of how GST in Malaysia works).

Aside from GST, one must also have an understanding of the Sales Tax, which is the existing tax scheme affecting the property sector. GST will supplant the Sales Tax come April 2015.

Tax Scheme on Residential Property – The Similarities

In comparing both tax schemes, we have to first identify their similarities.

One similarity between GST and the existing Sales Tax scheme is that no taxes are charged or will be charged to the consumer on the purchase of a home / residential property. For GST, residential properties fall under the “Exempt Rated” basket of goods. (But do take note that GST will be charged to the consumer for commercial property purchases as commercial properties are “Standard Rated”).

However, during the creation of the final product (also known as the input stage in tax parlance), under both tax schemes, developers would incur taxes during procurement of their inputs and materials. And this is where the differences start to become apparent between both tax schemes. The tax rate for inputs and materials vary between GST and Sales Tax.

Sales Tax VS GST for Residential Properties – The Differences

Based on the Sales Tax Act of 1972, basic building materials such as bricks, cement and floor tiles fall inside First Schedule Goods, in which all the goods in this category will not be subjected to sales tax. Meanwhile, other building materials fall inside Second Schedule Goods, in which all the goods in this category will only be charged sales tax of 5%.

Under the new GST implementation, all building materials and services (E.g. Contractors, engineers) will be subject to GST with a standard rate of 6%. This will invariably raise the production cost for developers.

If you understand how GST works, you will notice that in most cases, the additional tax cost is simply passed on to the final consumer (Standard-Rated goods), or is claimed back from the government (Zero-Rated goods). But in this case (Exempt-Rated), the additional tax cost is borne by the party before the final consumer – The developer.

The developer does not have a next “victim” in the supply chain.

This seems like good news for home buyers as they do not have to pay GST when purchasing a home. However, one should not be too happy about this. It is no stretch of the imagination to think that developers would try to build in the additional tax costs into the final sale price implicitly.

Before & After GST – A Comparison

The tables below show a comparison between the cost of a new property before and after GST. Certain taxes and costs leading up to the sale to the final consumer have been simplified for this purpose.

Also, an assumption is made that developers are able to transfer 100% of all incurred tax costs over to the consumer via the sale price.

The example above shows a price increase of 3.41% for new residential properties post-GST implementation. But there is a plus point to this.

Overall, new residential properties may register a lower overall increase in tax burden compared to Commercial Properties that are Standard-Rated. This is because there still is the chance that developers may only transfer some and not all of their tax cost increases into the final retail price.

The downside to this is that where pricing for new commercial properties will be cleaner (Sales Price + GST), pricing for new residential homes would look inflated. This, in turn, will undoubtedly have a knock on effect on prices in the secondary house market.

Conclusion

As a home buyer, it pays to know what the implementation of GST might bode for home prices moving forward. If you skipped the entire article, here are all the key insights in a nutshell:

1)      With GST, there should be a once-off increase in property prices across the board

2)      While developers may not bill home buyers for GST, they could transfer the costs implicitly via the sale price

3)      The overall price increase for new residential properties could be marginally lower than that for new commercial properties

4)      The secondary home market should see a knock on effect in prices

Armed with this knowledge, you can make a better decision on when to purchase your home.

Ten reasons why you should invest in Iskandar

Iskandar Malaysia, officially launched in 2006, covers an area of 2,217 sq km (roughly three times the size of Singapore). Upon launching its total population was 1,350,000 habitants, of which total work force was 610,000 heads.

Khazanah Nasional has drawn a 25-year Comprehensive Development Plan (CDP, available on line at the IRDA web site) covering all the multifaceted aspects of developing a new economic growth region. As at December 2013 the Iskandar Malaysia population showed a head count of 1,880,000, of which 750,000 was the total workforce.

Here are the 10 reasons to buy the Iskandar Malaysia Economic Development idea:

1) The CDP has been defining all the possible aspects of economic development and acts as a master plan of the whole economic development. The manufacturing and services sectors are the drivers justifying the population growth projection (3,000,000 by 2025 with 1,500,000 work force)

2) Economic development has been given the priority as without FDI and local manufacturing/services investment, there cannot be future development of the region. As at December 2013, IRDA has achieved RM133bil, of which 45% is already realised.

3) The nine pre-defined economic clusters are all respecting the given timetable and some of them are even anticipating it.

4) Federal and State Government and authorities have been completing a general improvement and upgrading of all the infrastructures (road, water reticulation, power distribution and so on) before the actual property development even started.

5) Singapore needs future expansion for its manufacturing and productive sectors, and Iskandar Malaysia is the perfect location for it. Drivers for the Singaporean decision to invest in Iskandar Malaysia are the low cost of industrial space, both rented and built, low cost of labour, low cost of properties in general, ease of accessibility (two bridges are offering alternative routes to access Iskandar Malaysia), friendly “doing business” environment, and the willingness to improve on the Malaysian side.

6) Even though Singapore can be looked at as one of the main driver for the Iskandar Malaysia  economic development success, local investment still represents the greatest part (65%) of the total RM133bil of committed investment as at December 2014.

7) Johor has been seeing the highest increase of the per capita income during the last four years (2009-2012 = +33%) compared to the rest of Malaysia. This is raising the average value of affordable houses by almost 25%, and the projection is for it to be on par with Selangor in the range of RM38,000/40,000 average per capita income by or before the next three years.

8) Malaysia is the only country in the whole SEA region where foreigners are allowed to buy freehold real estate properties (residential, commercial, industrial and land) without particular restrictions (currently there is only a RM1,000,000 threshold and a consent letter to be released by the local authorities).

9) Even though valid for Malaysia as a whole, we are still a country where properties have the lowest cost compared to all our regional neighbours.

10) Iskandar Malaysia is one of the Malaysian states where the current demand of houses with values between RM250 and RM600 psf is mostly unsatisfied.   

Battersea project a boon for London regeneration

The three parties involved in the development of the 39-acre Battersea Power Station project in London can expect to recover their land cost post-phase 3 which is expected to be launched at the end of this year, Battersea Power Station Development Company Ltd says.

The consortium comprising S P Setia Bhd, Sime Darby Bhd and the Employees Provident Fund purchased the site in 2012 for £400mil.

Battersea Power Station chairman Datuk Teow Leong Seng says land cost has gone up about three times since. At 5% of its gross development value (GDV) of £8bil, this is considered “low”.

Generally, land cost to GDV is generally between 20% and 25% for high-rise development in Malaysia, 50% in Singapore and 65% of GDV in Hong Kong. Although this is a mixed commercial development, at 5% of GDV this is low by any standards.

The consortium has also contributed £200mil towards infrastructure, which involves the Northern Line extension and the building of a train station. The three parties have also invested £100mil towards the refurbishment and restoration of the external facade of the four-chimney building.

“If we are looking at £700mil, we have to sell a bit of phase 3 in order to breakeven,” says Teow.

Phase 2 sales (GDV: £770mil) was sold at an average of £2,360 per sq ft with prices ranging between £1,400 and £4,000 plus. About 95% of it was sold in the first week of its launch, 75% to UK dwellers. This constrasts with phase 1 sales; 70% purchased by Asians and 30% UK dwellers with price averaging about £1,100. Off-plan sales involve a downpayment of between 10% and 20% and the rest on completion in UK.

The strong sales in phase 2 is an indication “that the British are returning to the market” after the debilitating slowdown which saw prices plunge as much as 30% to 35% in some areas post-2008 crisis in London.

The highlight of phase 3 are two projects by renowned architects Sir Norman Foster and Frank Gehry. They will add premium to the development, says Teow. Comprising 1,300 units of residential units, the plan is to have a partial launch of both in order to facilitate the development of the train station. Half of the site will be tied up for construction for the next four years, he says.

“When we finish part of phase 3, our land will be ‘free’. This will give us flexibilility to price subsequent developments. We will not be constrained anymore (in terms of pricing),” says Teow. Phase 3a is expected to be completed 2017/18 and 3b in 2019, in align with the opening and running of the underground.

Teow says there will be no piling needed for phase 2 as the building is already there. The consortium is also developing a walkway over the Thames to link the development with Chelsea.

BPS, to have a zone 1 address, is separated by Chelsea, London’s most high-end area by Chelsea River Thames. The closest underground to the power station site today is Sloan Square, a brisk 20-minute walk away.

Teow says there are several positives about BPS which seem to have been overlooked by many. There will be a town centre with a one-acre Malaysia Square located behind the iconic BPS building while the main entrance fronts an open space and river. A boulevard with retail on both sides will lead pedesterians from the tube station to Malaysia Square.

The project fronts the Thames. There is a 200-acre park and there is an iconic building, says Teow. These are the factors that will work towards building a destination. On its plans for the power station itself, Teow says there will be three levels of retail, a single basement car park and a large concourse area where the famed London fashion week will be held one day, he says. On both sides of the building will be offices and apartment units.

“The retail and office portion will be not be sold in order to continue with the vision for the town centre. The moment we sell, we will lose control,” says Teow.

While modernity reigns on the inside, the external industrial facade will be preserved to retain the history and legacy of the place.

There are plans to install a lift car in one of the chimneys to take passengers to the top, a height of about 30-storeys the likes of the elevator ride in Burj Khalifa in Dubai, the tallest man-made structure in the world.

He says the development of the 39 acres is much looked forward to by the locals. “The fact that it is finally happening is something they are very happy about. The BPS is under-loved,” says Teow. The development of BPS, the relocation of the US, Chinese and Dutch embassies in the swathe of land fronting the Thames and the overall interest by different groups in the regeneration of the area is expected to boost the one-time industrial area which has remained rather dilapidated for decades.

The company has also purchased a piece of land earlier this year near the site to fast track the construction of affordable housing.

The development of the BPS will help to create jobs for its entire 12-year duration besides contributing billions to the UK construction industry.

E&O buys land for RM1.5bil project

Property developer Eastern & Oriental Bhd (E&O) is acquiring 55ha of freehold land in Elmina West, part of the City of Elmina, from Sime Darby Property Bhd, the unlisted property arm of Sime Darby Bhd, in a deal worth RM239.8mil.

The deal would see E&O develop the land into a “wellness and livable city” with an estimated baseline gross development value (GDV) of RM1.5bil.

As part of the agreement, the company would share 20% of the proceeds with Sime Darby should the value exceed the baseline GDV.

Sime Darby group chief operating officer Datuk Seri Wahab Maskan said in a joint press release that E&O had the expertise and capability to create a niche development with a distinct wellness characteristic that would enhance the 2,023ha City of Elmina near Shah Alam.

“What’s more, this mutually beneficial decision shows that both parties are committed to collaborate on good prospects to develop distinctive products based on our unique strengths,” he added.

E&O group managing director Datuk Terry Tham said that the deal represented an excellent opportunity for the company to leverage on its “experience and expertise in developing premier properties and to tap on the increasing interest, heightened aspirations and growing demand for wellness to be incorporated into our lifestyles”.

Elmina West fringes a 1,093ha forest reserve on its western border and the 121ha Elmina Central Park in the south.

Both parties had in September 2013 signed a memorandum of agreement to facilitate the negotiation on the terms of the agreement.

The Elmina City Centre (ECC), which will be the main commercial hub, Wellness Cluster and shopping destination of the City of Elmina, intersects with E&O’s proposed development.

The ECC is expected to be a catalyst for economic growth along the Guthrie Corridor Expressway, fuelled by the local business and residential communities within the City of Elmina as well as the existing population in the neighbouring residential areas of Denai Alam and Bukit Subang.

The City of Elmina will enjoy excellent connectivity and is easily accessible via several major highways.

Connectivity to this area will be further enhanced with the proposed new Damansara-Shah Alam Elevated Expressway that will provide linkages to areas such as Subang, Kota Damansara and Mutiara Damansara, which is expected to be completed in 2019.

Closing the housing affordability gap

The sharp jump in the prices of houses in the last two years has created a generation of Malaysians who cannot afford to buy their own property and the situation can potentially worsen if nothing is being done to close the housing affordability gap.

Property consultancy Knight Frank Malaysia managing director Sarkunan Subramaniam says the impending implementation of the Goods and Services Tax (GST) from April 2015 is causing a lot of uncertainties in the property market. Although residential properties that are for sale, purchase and rental will be GST-exempt, he says the higher development costs may be passed onto purchasers in terms of higher selling prices.

“While the slew of cooling measures have moderated the price growth of houses, the GST will further widen the gap between affordability and price.

The rise in prices is possibly going to be higher than the actual GST of 6% due to the uncertainties surrounding its impending implementation,” Sarkunan warns. Another barb in the market is the potential hike in the overnight policy rate which will further dampen the market, particularly among the low and middle-income earners who will be affected by a drop in their purchasing power.

Pointing out the plight of these “homeless generation” of Malaysians, the National House Buyers Association (HBA) urged the Government to play a more proactive role to help these disadvantaged Malaysians to afford their own home.

HBA secretary-general Chang Kim Loong says the Government needs to implement a holistic housing programme to build more affordable homes to help close the gap of inadequate supply of such housing units.

”Where supply of affordable housing is concerned, the Government has to play a proactive role to build affordable medium-range housing on its vast land bank instead of using them for high-end lifestyle projects and commercial projects like what is happening now.”

Chang says although the Government has set up PR1MA as the agency for this purpose, “HBA wishes to express its deep disappointment with PR1MA as it has deviated from its original noble intention to provide affordable housing by going into lifestyle properties and commercial projects.”

“We were told that PR1MA has entered into joint ventures with private developers (which are obviously profit-driven) where we understand that only 40% of the land bank is alienated for affordable properties with the balance 60% for commercial and high-end residential properties,” he points out.

Chang says PRIMA and the other federal and state agencies should stay dedicated to principally meeting the affordable housing needs of the people instead of venturing into lifestyle high-end projects.

Towards this end, a holistic housing solution that will ensure a more equitable and sustainable housing market for Malaysians needs to be adopted to ensure a sustainable and orderly housing market in the country, Chang stresses.

Concurring with Chang, DTZ Nawawi Tie Leung Sdn Bhd executive director Brian Koh says the Govenment has to play a larger role not just in the low cost but middle segment of the housing market that is ignored by private developers, such as in Singapore where the housing units build by the city state’s Housing Development Board comprise a high percentage of the total housing stock.

Knight Frank’s Sarkunan says that during the current challenging times, developers need to be more balanced in terms of their pricing strategies by not overpricing their products and to provide purchasers a scope to enjoy potential price appreciation when the property projects are completed.

Planning controls

“There should also be better planning controls where project approvals and launches need to be monitored to ensure there will be no over-building, particularly among foreign developers who are less well-versed with the local market.”

Sarkunan cites the example of Iskandar Malaysia where the launch of large-scale apartment developments by foreign developers there are unprecedented in Malaysia, adding that the completion of this huge incoming supply in the short to medium term is expected to put further pressure on the secondary sales and rental market of condominiums in Iskandar Malaysia due to high-level of foreign ownership and weak occupational demand.

He reminds developers, bankers and other stakeholders to play more responsible roles to ensure that the gap between supply and demand is manageable, to be socially responsible, and to build communities instead of just being profit-driven.

Khong & Jaafar Sdn Bhd managing director Elvin Fernandez says the model of insisting on low-cost housing in township developments has produced up to 30% of housing being low cost, “notwithstanding the inequity because the cross subsidy for such housing was from the higher end house purchasers from that same scheme.”

“But in many instances the built units are poorly managed and this needs to be urgently addressed. There is certainly a need for more affordable houses to cater for new households but to put together the land at the right prices and to execute such projects are not easily accomplished. A continuously refined national plan and one which is highly transparent and that focuses on the interests of all stakeholders and translate plans to reality is needed,” he says.

On the role private developers can play, Fernandez says developers should be allowed to do what they do best which is to identify opportunites, buy the land at the right prices, assemble and maintain a good development team, read the market as accurately as possible, shoulder all risks and deliver the products to the consumer.

“Imposing undue conditions and onerous burdens on developers is not the way forward. This does not mean that an overall policy should not be made and be effectively implemented to ensure that, for example, excessive speculation that was engendered under the developer interest bearing scheme could not take permanent root, pricing that was clouded by incentives and that were not transparently computed be shown to buyers and investors, and lending institutions do not misdirect the market, and there is always equal and fair access to all buyers,” he adds.

CB Richard Ellis Malaysia executive director Paul Khong says developers, in their approved development orders, have to abide by the condition for medium cost (affordable) category developments which they are required to build.

“The authorities may want to accelerate the construction of these affordable housing units to fill the demand, rather than looking for new measures to implement,” he notes.

Sunway Vivaldi

Eco World expands landbank in Semenyih

Eco World Development Group Bhd will acquire 493 acres of freehold land in Semenyih, Selangor for RM225.3mil, (RM456998 per acre, RM10.49 psf) increasing the group’s landbank in the fast growing area to almost 1,500 acres.

The new parcel has a gross development value of RM3.5bil, the company said in a statement yesterday.

“With two sizeable projects in this fast-growing development corridor, Eco World is well-positioned to serve a broad range of customers and we intend to come up with exciting and innovative product offerings that will appeal strongly to the mass, upgrader and luxury homes market,” president and CEO Datuk Chang Khim Wah said.

A recent launch at nearby EcoMajestic project, a 1,073-acre development currently undertaken by the group, reported a 95% take-up rate for the first phase of 612 units of two-storey terraced houses.

The latest acquisition will be undertaken by wholly-owned subsidiary Majestic Blossom Sdn Bhd, the same entity acquiring the development rights to build EcoMajestic.

Eco World is planning to develop a mixed residential township development to complement its overall master development strategy for EcoMajestic.

The landbank expansion in Semenyih came a day after it was reported that Eco World had won a tender to develop 470 acres in Batu Kawan, Penang.

The company, which is helmed by former executives of S P Setia Bhd, had in recent months increased its total land bank from 1,326.6 acres to some 4,433 acres, with extra land in the Klang Valley, Iskandar Malaysia in Johor and Penang.

Its projects included newly-revamped EcoTropics, Eco Business Park II and Eco Business Park III in Iskandar, as well as EcoMeadows in Seberang Prai. Recent proposed land acquisitions included 308.72 acres south of Kota Kemuning in the Klang Valley, which is said to be developed into a luxurious eco-themed mixed residential and commercial project called EcoSanctuary as well as 70 acres in Bukit Tambun, Penang.

Property demand under pressure from rising prices, GST, cooling measures

Question marks remain over the sustainability of property demand in Malaysia, with property prices outpacing income growth, interest rates inching up and the upcoming GST expected to affect prices, according to Maybank IB Research.

“Already, the affordability index has been trending down since 2009 after the hikes in the BLR (to 6.6%, from 5.6% over 2009-2011) and higher property prices (+12.5% CAGR vs income growth of +6% between 2010-2013). This would impact investment decisions for new purchases and could eventually lead to a decline in property sales.

“Also, higher interest rates – we expect a 25-50bp rise in the benchmark OPR in the second half of 2014 – and the GST implementation in April 2015 will hit on affordability.

“We remain cautious on the sustainability of property demand,” the research house stressed.

“Our discussions with the bankers also revealed that the loan rejection rate has been as high as 40-50% nowadays (depending on product types; affordable housing dominated by first-time buyers has lower loan rejection rate) compared to 10-20% a year ago,” it noted.

Maybank IB Research also pointed out that household debt had reached a high of 86.8% of nominal GDP at the end of 2013, and could possibly climb to 88% by the end of this year.

It said a survey it carried out a recent property fair showed 64% of respondents already had at least one property in hand and were looking to buy new properties for investment. And this was despite the cooling measures introduced during Budget 2014 in October last year.

“As such, there is a risk that Bank Negara may further rein in household debt expansion and curb speculative demand. With many potential buyers still looking to buy properties for investment purposes, further tightening measures could negatively hit demand, and in greater force,” it warned.

According to the research house, demands for landed property under RM1mil remained firm but pointed out that discussions with property agents revealed a significant slowdown in demand for high-rise luxury properties.

It cited as example WCT’s Skyz Jelutong in Shah Alam (RM650 psf) which has only sold 40% since its preview in Nov 2013, as well as Guocoland’s DC Residency in Damansara Heights RM1,600-1,700psf), which has only been 30-40% booked since its private preview in mid-2013.

Maybank IB Research said it remained Neutral on the property sector, saying key risks included further tightening measures, interest rate hikes.

“We are more upbeat on developers who are offering well-priced products in well connected locations that would continue to sell well. Our top pick is Eco World. Another Buy is Glomac,” it said.