KL and Selangor ink water assets pact

The Federal Government and Selangor finally found common ground on terms that will facilitate the implementation of the Langat 2 water treatment plant project and the takeover of water assets in the state.

Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili and Selangor Mentri Besar Tan Sri Khalid Ibrahim signed a memorandum of understanding (MoU) that effectively breaks a five-year impasse that has stalled the implementation of water projects in the country’s most industrialised state.

Prime Minister Datuk Seri Najib Tun Razak and Deputy Prime Minister Tan Sri Muhyiddin Yassin witnessed the signing – a signal that the MoU has the blessing of the top leadership of the Federal Govern­ment.

Some PKR leaders were caught unawares by the signing of the MoU, and it is unclear if Khalid has the backing of the top Pakatan Rakyat leaders to agree on the terms.

The price tag offered to the four concessionaires in the state remains at RM9.65bil.

This is the first time that the state and federal governments have firmed up an agreement to work out the mechanics of the consolidation of the water assets in Selangor since the exercise started in 2009.

An integral part of the MoU is the Selangor Government giving an undertaking to facilitate the implementation of Langat 2.

The state has agreed to issue the Development Order and facilitate land acquisition for the construction of Langat 2 that has stalled since 2009.

The water treatment plant is an integral part of the RM8.65bil Pahang-Selangor Raw Water Trans­fer project that entails the transfer of water from Pahang to the Klang Valley.

The Pahang portion of the project that has been awarded to a consortium led by Japanese companies is almost done. But the Selangor side of the job has yet to take off.

The treatment plant can process 1,130 million litres per day and is anticipated to meet the needs of Selangor, Kuala Lumpur and Putrajaya until 2025.

Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili represented the Federal Government while Mentri Besar Tan Sri Khalid Ibrahim signed for the Selangor Government.

In return for facilitating the implementation of Langat 2, the Federal Government will allocate RM2bil to the state to be used in the acquisition of the four water concessionaires operating in Selangor.

The four are Puncak Niaga Sdn Bhd, Syarikat Bekalan Air Selangor Sdn Bhd, Syarikat Pengeluar Air Selangor Sdn Bhd and Konsortium ABASS Sdn Bhd.

The Federal Government through the Pengurusan Aset Air Bhd (PAAB) has also allocated RM900mil for water mitigation initiatives in Selangor as an interim relief until Langat 2 is completed.

Khalid said the funds would be use to build a water catchment facility at Bestari Jaya in Kuala Selangor.

He also said the state government expected to complete the takeover of the four concessionaires within three months, including share acquisition.

He said the state’s offer of RM9.65bil as compensation to the four companies still stood and they had until March 10 to revert.

“A special purpose vehicle company will be set up under the state-owned Kumpulan Darul Ehsan Berhad to manage the water supply industry.

“The compensation offer starts now and we hope to get the reply from the concessionaires in two weeks,” he said.

Khalid assured staff of the four companies that they would be retained, saying the takeover only involved the acquisition of their equities.

Dr Ongkili said tenders for various jobs in Langat 2 would be awarded soon.

“We think the construction work can begin within 30 days with the entire project taking three years to complete.”

Asked whether the current water crisis had prompted both parties to speed up the restructuring exercise, Dr Ongkili said they had been discussing the issue since last year.

“We have worked hard for more than seven months to reach a consensus and hope water concessionaires in the state will give full cooperation to ensure the success of the restructuring initiative,” he said.

Property deals drop, value of transactions rise, prices may rise

Property transactions dropped in the first nine months of last year, said the Valuation and Property Services Department, confirming observations by real estate professionals that the market is slowing down.

Although the number of transactions was lower, there was an upward trajectory in value, an indication of rising prices.

The department’s deputy director-general Faizan Abdul Rahman said the residential sub-sector, which accounted for about 64% of the total property transactions, saw a 14% drop from a year earlier, with average house prices exceeding RM300,000.

Faizan was speaking at the 7th Malaysian Property Summit 2014 organised by the Association of Valuers, Property Managers, Estate Agents and Property Consultants yesterday.

Faizan said the commercial sub-sector saw a drop of 22.3%, compared with the previous year.

The industrial, agricultural and development sub-sectors saw reductions of about 20%, 13.6% and 8.3%, respectively.

The total number of transactions for the first nine months fell to 280,820 valued at almost RM106bil, compared with 328,692 in 2012 worth RM107bil.

Transactions in 2010 surpassed the RM100bil mark as a result of an extremely buoyant market, which started in 2009. It has been on an upward trajectory since then.

On the effect of the various tightening measures, organising chairman Choy Yue Kwong said they would curb excessive speculation.

Choy, who is Rahim and Co (Selangor) Sdn Bhd managing director, said the measures would discourage speculators from using bank loans to finance their purchases.

“The curbs are slowly taking effect. The measures will have a significant impact on speculation, especially speculators who depend on bank loans,” he said.

Choy added that the real property gains tax (RPGT), however, will have little effect on curbing speculative activities in the market.

He said the RPGT should have been introduced earlier when house prices were lowerand prices had appreciated faster, resulting in higher profit margins.

Prices had skyrocketed now, squeezing profit margins and rendering the RPGT less effective, he added.

CH Williams Talhar & Wong Sdn Bhd managing director Foo Gee Jen, meanwhile, said there was a mismatch between the demand for real estate and supply.

“There is an oversupply of high-end residential property in the market. Prices have gone up too much over the last few years. What people really need is affordably priced lower-to-mid-range housing,” said Foo.

“Developers will be pressured to cater to this market segment that is most in need. Having said that, the bright side is that the market is expected to stabilise with more realistic prices over the year.”

Oversupply of real estate in Malaysia short-term situation

The oversupply of real estate in the country is only a short-term situation, which will clear over time, says Malaysian Institute of Estate Agents president Siva Shanker.

As long as the local economy is healthy and not in a tailspin, the property market will withstand the pressures of speculation and the curbs imposed by Budget 2014, he said.

“Mont Kiara (excluding the surrounding Segambut areas) has in the last 20 years built an estimated 20,000 units. Iskandar Malaysia, on the other hand, has built some 40,000 units in the last three years. All this has created a lot of pressure on supply and the market has already adjusted by staying away,” he told a press conference.

“In the short term, this oversupply will continue to run its course. Many units that will be placed in the market won’t sell. But in the second half following this period of consolidation, people will come to terms with the market, so 2015 will see an upturn in the property sector, which will continue into 2016. Even in the medium term, much of the oversupply will sort itself out,” Siva said.

He added that the country’s relatively low exposure to the “international economic ups and downs” compared with Singapore was an advantage to Malaysia.

“There’s also the trickle down effect from large infrastructure projects as more industries benefit from them,” he said.

Siva said buyers were not keen on the secondary market although it made up 80% to 85% of the local property market transactions in the last three years, but as high-rise property prices surged, buyers would be forced to look elsewhere for more affordable landed property – and it will be found in the secondary market.

Siva forecast that property prices around the KLCC area will reach RM5,000 per sq ft within the next three to five years. “As it is, Four Seasons Place in Ampang is going at RM3,500 per sq ft.

“They realise that there are better deals in the secondary market. A very clear third strata will form now, which are properties that were completed in the last two years but flipped into the market. Those properties will face the most selling and renting pressure because they were purchased for sale on the day of completion.”

Residential property launches being delayed

The residential sub-segment of the property market is expected to go through a period of consolidation with developers withholding launches, with interest expected to return in the second half of the year, said managing director Elvin Fernandez from valuers Khong & Jaafar group of companies.

“With the speculators weeded out, there will be a slow down in terms of sales, resulting in a drop in the mortgage market. But this situation will consolidate. When we move into the second half of the year, there will be a GST-effect (goods and services tax),” said Elvin. He was commenting on the HwangDBS report “Rocky Road Ahead”. “People will want to buy before the GST sets in. In Australia, people bought pre-GST but post-GST, it was like a property recession,” said Elvin. “We will go sideways for first half and in the second half of the year, any possible weaknesses in the market will be ameliorated by the GST in the second half,” he said.

As for the commercial market, there will be an oversupply in the office market. “That market will bleed quietly,” Elvin says.

The main thrust of the report was the possible increase in interest rates.

The Consumer Price Index, which measures the rate of inflation rose to 3.2% for the month of December while the overnight policy rate, a key benchmark interest mark, remains at 3%.

This means that the inflation rate is higher than the savings rate, bringing about a negative interest rate situation. Sunway REIT Management Sdn Bhd said they have already factored in a possible 50 basis points (bps) increase in their business plan.

“If it (interest rates) does not move, it will be savings for us,” said Sunway REIT chief executive officer Datuk Jeffrey Ng. He is of the view that the interest rates will not impact the overall property market as much as the availability of credit.

“The loan margins provided by the banks are more impactful than the interest rate increase on the sector, especially in the residential segment.

“Up to a certain point, with continual employment and salary increases, buyers will be able to absorb the interest rate increase, up to a point,” he said. C H Williams, Talhar & Wong managing director Foo Jee Gen said 2014 will be a “crucial year”, particular for high-rise shoebox-sized units commonly known as small office, home office (SoHos) or variances of it.

Foo said there were about 4,000 such units in the Klang Valley with a built-up of about 500 sq ft.

“Are you going to find 8,000 people, on the ratio of two to a unit, to occupy these 4,000 units?” he asked, adding that there might be a “war on rental”.

And even if there is rental, will it be enough to pay the instalment as many of these units were sold with just 5% or 10% downpayment. This means a loan of 95% or 90% of the unit price.

Johor chokes on property (Part 2)

“The sprouting of Chinese investors in Malaysia is in tandem with the Government’s initiative to make Malaysia an international real estate investment destination. Chinese developers have been investing in blue chip locations of New York, Los Angeles, London, Sydney, Singapore and their presence in Malaysia bodes well for the market,” says Zerin Properties chief executive officer Previn Singhe.

Previn is unperturbed on the potential flooding of homes in the future as the supply coming in will be spread over a couple of years. “Once all the catalytic projects are in place, there would be requirements for new homes to accommodate migrations,” he says.

Although rumour has it that Country Garden has been offering its Chinese buyers a deal that packages a unit in Iskandar together with a purchase of their property in China, it is insignificant to pushing up prices in the area, says V. Sivadas, executive director of PA International Property Consultants Sdn Bhd.

As local and foreign developers grapple and challenge for customers when launching projects in Iskandar Malaysia, the surge in supply coming in has been startling.

The slew of houses slated to be built together with a market that is taking a breather after seeing a uprush in prices and cooling measures starting to bite has seen takeup rates of new developments almost grind to a halt.

Post Budget 2014, take-up rates have come in poorly with developers like UEM Sunrise Bhd recording only 20% in bookings for its latest project Almas Suites – a small office home office development in Puteri Harbour.

The project, which comprises 526 units, has reportedly only completed a measly four sale and purchase agreements.

“In any case, competition in a growing market such as Iskandar Malaysia, is a good thing – it keeps all of us on our toes and ensures that property buyers have a wide variety of products to choose from.

As we all strive to improve, greater value will be created for our customers, investors and end users,” says Eco World Development Group Bhd chief executive officer Datuk Chang Khim Wah in an email reply.

However, this year could look bleak for developers as they are bogged down with a decline in sentiment brought about by the cooling measures such as the increase in real property gains tax, as well as the abolishment of the developers interest bearing scheme, introduced in the latest budget.

Also, policies such as the change of the weekend differing from Kuala Lumpur and Singapore has caused a negative knee-jerk reaction, resulting in many developers and buyers adopting a wait-and-see attitude.

While many still believe in the Iskandar story, the success of it will largely depend on the movement of international businesses setting up shop in the area, which is reliant on how fast infrastructure there improves, which experts say has not really kicked off as yet.

As for now, demand for high-end condominiums remain largely speculative as Iskandar Malaysia still lacks critical mass, Hwang-DBS says.

Guangzhou R&F Properties Co Ltd

Hong Kong-listed Guangzhou R&F Properties Co Ltd, which recently bought 116 acres in Johor Baru from the Sultan of Johor for RM4.5bil. Market talk is that a 19-block development is in the blueprint.

But according to its filing to the Hong Kong exchange, Guangzhou R&F plans to develop high-rise residential units, low-density housing, retail properties, offices, hotel and a shopping mall, all of which will be on a saleable floor area of about 3.5 million sq m. That’s almost 10 times the floor space of the Petronas Twin Towers in Kuala Lumpur.

Also, Hao Yuan Investment Pte Ltd, which is believed to be a China-linked company registered in Singapore, is entering into a joint venture with Iskandar Waterfront Holdings to develop 15ha in Danga Bay.

Country Garden Holdings Co Ltd

The grand entrance of China-based Country Garden Holdings Co Ltd surprised many with the launch of 9,000 apartment units at one go, causing local players to keep a close watch on how they will impact the market there.

Koh believes the magnitude and scale of such launches could lead to a property bubble if foreign developers are given a free hand in their development projects.

Rehda is hoping for the state government to possibly impose regulations that limit the number of units built within a year to match the market’s demands, says Koh.

Hwang-DBS Vickers Research says Country Garden’s 9,000 units launch at-one-go in Danga Bay alone could cause a glut, although delivery could be challenging given tight building material and labour supply over the next three to four years.

Analysts are concerned that these developers would replicate the ghost towns in China and if overbuilding does occur in Iskandar, that can be detrimental to the overall physical market in the mid-term.

However, some property experts say the extra supply would not pose an issue if foreign developers were attracting foreign buyers, rather than targeting only domestic buyers.

Country Garden, which has impressively sold about 70% of its Danga Bay maiden project in Malaysia, launched in August, told StarBizWeek in an email reply that some 3,000 units were snapped up by Malaysians.

Meanwhile, about 50% of its foreign buyers are Singaporean and 45% are Chinese.

Most of its units were snapped up within a month.

Johor chokes on property

The property market in Johor, particularly Iskandar Malaysia, might be a case of too much too soon.

Red flags are showing in the state where launches of projects and high prices are common place but the pace of launches, which now includes “carpet building” by China developers, is flooding the market with more houses than what could be sustainable.

“We welcome foreign developers including those from China, but flooding the market with massive supply of properties could create property overhang,” says Johor Real Estate and Housing Developers Association (Rehda) chairman Koh Moo Hing.

Latest data by the National Property Information Centre (Napic) indicate the amount of new homes being built in the near future is equivalent to 42% of the stock of 702,101 houses in the state.

Almost 300,000 near homes are being built or in the planning stage at a time when the market in Johor has hit a soft patch.

Napic data shows that at the third quarter of last year, construction for 116,859 homes had already started while the building of 162,579 homes have yet to start.

Meanwhile, 16,168 homes had been approved for construction in Johor in that quarter alone.

Analysts say the new supply does not include new launches by Iskandar Waterfront Holdings Bhd, which is expected to increase three-fold to more than 4,000 units and is expected to remain elevated up to 2017.

The supply of new homes does not seem to be putting a lid on the escalation of home prices in the state. As the new launches are priced thereabouts or even higher than what is being sold in the more established Klang Valley, the new supply of homes and their higher prices have had a telling impact on prices in the state.

The average residential value for Johor property has risen some 45% over the past five years to RM197,147 in 2012 from RM136,034 in 2009. Comparatively, the country’s average residential value has only gone up by 30% in the same period to RM248,515.

Research house Hwang-DBS Vickers Research notes that recent launches in Nusajaya, Medini, Danga Bay and Johor Baru are in the range of RM600-RM1,000 per sq ft, with prime units hitting RM1,500 per sq ft.

Given there is going to be an oversupply of homes in Johor, a slew of launches by China-based developers recently has got some worried.

產业今年3大逆风

大马產业市场將在2014年面对3大逆风，包括需求疲软、供应增加及利率正常化，预计打击购兴，產业销售量將下跌5至10%，惟屋价仍將高企不下，料將升高3%。

销售料跌5至10%
屋价料增3%

隨著產业市场走软，目前已出现过热现象的伊斯干达高档共管公寓、吉隆坡办公楼和小型混合型单位，將浮现更高的风险。

黄氏唯高达研究指出，儘管屋价因成本推动而企稳，今年屋价应可按年成长3%（和通膨率一致），但需求放缓和游资紧缩，以及更多新供应流入市场，產业市场的逆风正在加强。

第一道逆风是2014至2015年新產业供应將加速。这是由於在2011至2012年有大量新盘推介活动，尤其是高楼住宅/综合发展计划，导致接下来的新供应量大增。自2011年以来，建筑动工活动已强劲反弹，如今开始有更多產业竣工。

第二道逆风则是需求放缓。拜政府近期的打房措施加上人民可支配收入减少所赐，国內產业需求深受影响。在补贴合理化计划、明年推出消费税、落实最低薪金制和马幣疲软，將引爆通膨，令人民负担加重，购屋能力隨之降低。

回顾在2005至2006年和2008年汽油售价大涨时，住宅销售萎缩3至5%，交易量大减7至8%。

银行或同步升息

第三道逆风则是利率正常化將打击购屋情绪。

大马国家银行可能调升隔夜政策利率以抑制通膨，虽然推动经济成长仍是只最优先考量。虽然银行平均贷款利率不一定追隨隔夜政策利率，但由於房屋利率净息差（NIM）目前收窄至约1%，因此银行將可能同步升息。

“我们估计利率每上升50个基点，將令可负担能力降低1.6%，虽然衝击可能很小，但至少在最初阶段將会打击购屋情绪。”

黄氏唯高达指出，大型基建不断推展，原料和劳力需求增加，可能进一步推高成本。建筑公司拥有庞大合约订单，並可能获颁更多合约，加上2014至2015年將有更多產业供应，而政府近期取缔外劳將令建筑业劳工问题恶化。

据瞭解新建筑合约投標价格已提高10%，补贴合理化和消费税將令成本进一步上涨，令发展商赚幅受侵蚀，因市场疲软，难以转0嫁成本给购屋者。

3產业次领域过热

黄氏唯高达指出，3个產业次领域正出现过热现象，令风险升高。

吉隆坡办公楼：

根据莱坊房地產公司（Knight Frank），吉隆坡新办公楼面积在2016年杪將增加21%或1千400万方尺，由於每年平均吸纳率只有300万方尺，显示有潜在过剩的风险。旧的办公楼可能流失租户给更新、更现代化和更大楼面的建筑大楼。大型政府重建计划（如100层楼的独立遗產大厦、吉隆坡国际金融区、大马城和武吉免登商业中心）將令局势更为恶化。

混合型高楼（SOHO/SOVO/SOFO）：

这类產业日益普遍，因属於商业產业，不受国行打房措施影响，同时面积较小（低於1千方尺），令其价格处可负担水平。但是不少这类產业是位於市郊，办公空间的需求偏低。估计未来3至4年將至少有1万5千个混合单位建竣，其中大部份是在2014至2015年。

伊斯干达高档共管公寓：

近期在努沙再也、Medini、金海湾和新出推介的新盘，售价为每方尺600至1千令吉（热门產业更高达每方尺1千500令吉），和吉隆坡不遑多让。

2014年伊斯干达特区新增供应量料增加3倍至逾4千间，预料將不断增高直至2017年（尚未包括伊斯干达浮城的新盘），中国碧桂园在金海湾推出的9千间房屋將令供应过量（已售出70%，主要为外国买家），但未来3至4年建材和劳工供应紧缩的问题將带来挑战。

目前伊斯干达特区的高档共管公寓的需求主要是投机性质，缺乏广大民眾参与，政府近期提高外国人购买產业的门槛將打击外资购兴，大幅参与伊斯干达特区高档共管公寓的发展商如伊斯干达浮城/地不佬稳固（TEBRAU，1589，主板產业组）和丽阳机构（TROP，5401，主板產业组將容易受创，从事有地大眾房屋的公司则有稳健需求，而大量涉足该特区的產业公司可能也受需求（尤其是外国需求）放缓的影响。

Supply of Property in Klang Vally

Top 10 Condos around KLCC

Alam Impian

KL South Property

Jade Hills - 384 acres
Kajang 2 - 270 acres
Setia Ecohill - 753 acres
Southville City - 428acre
Tropicana Heights - 199 acres

Jade Hills is built on total 384.3-acres and 260 acres are reserved for residential developement of bungalows, link bungalows and garden terraces.  There will be 793 units to be built in 12 phases with a low density of 3 units per acre in 12 precincts over 8 to 10 years.

Bridge of opportunity for Eco World

Developer shows interest to bid for 190ha in Batu Kawan in mainland Penang, says source

The Second Penang Bridge opening is likely to see the entry of Eco World Development Group Bhd in Penang as the company looks to emerge as the biggest landowner in Batu Kawan.

Business Times learnt that Eco World is participating in a request for proposal (RFP) by Penang Development Corporation (PDC) to buy 190 hectares on a hillock close to the landing point of the new crossing between Batu Kawan in Seberang Prai and Batu Maung on the island.

It is further learnt that the winning bidder will have to develop a golf course on 60ha of the total 190ha plot.

“Eco World is currently the only company that has shown interest in bidding for the land, for which the bid is expected to open at RM45 per sq ft,” a source said.

If Eco World succeeds in its bid, the source added, an affordable housing component will also feature on mainland Penang, where the company has already acquired some land in Seberang Prai Selatan.

Property analysts have also speculated that if Eco World, with nationwide landbank of 1,200ha (of which about 40ha are in Penang), wins, its chief operating officer Datuk S.Rajoo will be making a comeback to Penang to oversee the development of the mammoth project.

Rajoo was formerly SP Setia Bhd’s northern region general manager.

The RFP is for an international theme park and golf resort development at Bandar Cassia in Batu Kawan.

The PDC is said to be inviting local and foreign firms to bid for the purchase and development of 87ha for the international theme park, and the 190ha, which Eco World is making a bid for, is meant for a golf resort development.

The requirement for interested bidders is a minimum paid-up capital of RM5 million with accumulated profit during the last five years.

Applications to purchase the RFP document were sold at a non-refundable RM2,000.

The RFP, which was advertised on August 14 last year, listed October 31 2013 as its closing date. No official word, however, is out on the status of the successful bidders.

Last month, Penang-based property developer Aspen Vision Sdn Bhd announced that it had formed a partnership with Ikano Pte Ltd
– the regional franchaise holder for Swedish home furnishing store Ikea.

Aspen-Ikano Sdn Bhd is to carry out a mixed development project comprising offices and residences over a 99ha site.

The land, which is strategically located at the landing point of the Second Penang Bridge, is set to be developed over 10 years.

It will include 12.1ha for the development of an Ikea store and the first phase of a shopping mall development (due to break ground next year and will take five years to complete), 18.2ha for the development of the shopping mall’s second phase, and 68.7ha for mixed development.

Eco World’s share price has risen from below RM1 some six months. It closed down two sen at RM4.40 yesterday.