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Tuesday, January 8, 2008

The only way forward for developers is to open up

"Malaysian need to prepared to face global realities, even if it means we have to go through the paintful adjustment period" << Tan Sri Liew Kee Sin CEO SP Setia

QUESTION: What would be the main challenges for the property industry this year?

ANSWER: Today, Malaysian properties are of world-class calibre and can stand their own against international offerings.

This is attested by the many international awards garnered by local developments in recent times.

In fact, the Malaysian property market is one of the most dynamic and vibrant industries, which is constantly evolving in tandem with global trends.

Ambitious developers have even exported their expertise overseas and met with commercial success.

While local developers do not lack in the ideas departments, their biggest challenge is in terms of quality.

The industry is still plagued by the lack of quality and skilled manpower, and highly dependent on foreign labour.

Now that the market is liberalising and we are targeting foreign buyers who are accustomed to the demanding and exacting standards of developed nations, we need to improve in this aspect.

The entry of foreign developers also presents the challenge of increased competition.

Other general risks include the vagaries of being in a cyclical industry and political upheavals.

Q: How do you plan to overcome these challenges?

A: The oft-cited advantage of Malaysian properties is the fact that we are cheaper compared to regional peers.

But a closer analysis of this would reveal that this could be a function of the poor public transportation network in the country.

An ineffective public transportation system burdens living costs and would keep foreign buyers away.

The fact that other property markets such as Singapore and Hong Kong command higher premiums can be credited in part to the efficiency of the public transportation system anchored by the high-speed rail system.

The accelerated urbanisation in the city areas has caused serious traffic congestion.

Some major business and residential hubs should be built in sub-urban areas to control the pollution level and disperse the increasing traffic problem in the city.

Malaysia's relatively small population means that we need to attract a bigger pool of expatriates to continue to grow the size of the property market.

Hence, it is very important to facilitate entry of foreigners, especially knowledge-based workers.

This will create a strong expatriate community, which will in turn promote a vibrant rental market for residential properties.

Q: What are the trends that could shape the industry this year?

A: The sweeping changes to ease rules on foreign ownership of property and enhance the delivery system have benefited the sector tremendously.

These moves have created the "feel good" sentiment and attracted strong foreign interest in Malaysian real estate especially for high-end properties.

The FIC relaxation of foreign ownership followed by real property gains tax exemption were the most important contributing factors towards the upswing in foreign demand.

Not only that, foreigners are also eyeing the commercial market with many Middle East consortia, purchasing en-bloc office towers and retail centres, or taking equity interests in development companies or projects.

Industry sources show that in 2006, 45 per cent of the value of office transactions was by foreigners compared with 19.3 per cent the year before and 1.9 per cent in 2004.

Q: What are the prospects for the industry this year?

A: Underpinned by GDP (growth domestic product) forecast of six per cent for 2007 and coupled with good financing packages available from banks, the property sector will continue to thrive this year.

But we anticipate the most profound impact to come from the unlocking of RM9 billion worth of funds with the easing of withdrawals from the Employers Providence Fund (EPF) to finance loan repayments.

With higher disposable income, we are confident that more people will be upgrading to better and newer homes.

Moreover, we believe foreigners' appetite for local properties will continue unabated as they want to buy into an under-valued market with significant upside potential.

The success of Visit Malaysia Year 2007 has also enhanced the country's profile. Further, the housing industry will continue to receive support from the government's promotion of the "Malaysia: My Second Home Programme".

The tourist attraction and appeal of the country -- with a stable government and economy - has spawned a secondary holiday or retirement home market, bolstering the long-term prospects of the property market.

Q: How will your industry be affected by the expected rise in fuel and electricity this year?

A: While these efforts are greatly welcomed, the more pressing need to ensure long-term sustainability is to devise a new economic model that completely weans itself off the "subsidy mentality" and "protectionist policies".

Malaysia cannot afford to distance itself from the globalisation wave, or we will fall behind with the rise of new economic stars such as China, India and now Vietnam.

The only way to go forward is to open up, enhance competitiveness and fully integrate Malaysia into the world's free market.

Malaysians need to be prepared to face global realities, even if it means we have to go through the painful adjustment period.

By New Straits Times (by Azlan Abu Bakar)

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