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Monday, February 4, 2008

Groundbreaking incentives put sector on firmer footing

StarBiz talks to property consultant Henry Butcher (M) Sdn Bhd chief operating officer Tang Chee Meng

How will the property sector perform going forward? Are the measures taken by the Government and the private sector sufficient to boost the sector especially in such a challenging environment globally?

The property sector has witnessed a slew of groundbreaking developments last year, which had placed the sector on a more competitive footing going forward, especially in terms of government policies.

For instance, in the residential sector, foreigners are now allowed to buy properties costing above RM250,000 without Foreign Investment Committee (FIC) approval and they benefit from the exemption of real property gains tax (RPGT).

Moreover, the authorities allowed the set up of one-stop centres to streamline procedures to hasten approval process.

Tan Chee Meng

Contributors of the Employees Provident Fund can now make withdrawals to pay for monthly mortgage repayments and a 50% discount on stamp duty for properties valued below RM250,000.

Furthermore, there's a special fund set up to guarantee housing loans for those without fixed regular income.

These proactive measures, coupled with the Government’s setting up of various growth zones such as the Iskandar Development Region, Northern Corridor Economic Region, Eastern Corridor Economic Region and Sabah Development Corridor, augur well for the growth of the property sector.

But there's always room for improvement, and we feel the speed of delivery of the mega projects under the Ninth Malaysia Plan (9MP) would help support the property sector cushion an acute recession in the US.

Can you be more specific to show the buoyancy of the property sector by market segment?

For the office sector, the year was marked by the continued strong interest from institutional buyers for prime office buildings. This resulted in capital values of offices hitting new benchmark prices. After hovering around the RM500 to RM650 per sq ft (psf) level for the past few years, capital values of offices rose above RM700 psf for the first time, with Mah Sing achieving a landmark price of RM715 psf for the first wing of its Icon office tower at Jalan Tun Razak.

Just when the market was wondering whether the price would go up, Glomac was reported to have received an offer for its office tower near KLCC for RM1,150 psf

Mah Sing also announced that the second wing of its Icon at Tun Razak was sold at an even higher price of RM969 psf.

It was also reported that Mah Sing had managed to sell its Icon Mont' Kiara office tower for RM802 psf. Even in Bangsar, it was reported that UOA Bangsar was asking for RM600 to RM 900 psf for the office space in the building whilst the asking rental is RM5 psf.

The upward trend has continued with YNH announcing that it had sold half of its new office development along Jalan Sultan Ismail for a record price of RM1,250 psf, while TTDI announced the sale of its office tower at Platinum Park near KLCC for RM929 psf.

These transactions have certainly set new benchmarks for the office sector, and it is perhaps a clear indication that there is currently a lack of good quality, grade A office buildings in Kuala Lumpur, and as such, investors are prepared to snap up available buildings even off the plan in anticipation that capital values will rise further in the years ahead.

At the same time, office rentals have moved up to between RM5 and RM8 psf for grade A office buildings located within the vicinity of KLCC, while office occupancy rates in KL have moved up to around 83%.

Nevertheless, older office buildings located even in the prime spots in the city centre which have not carried out any refurbishment exercises have not enjoyed the same level of occupancies and rentals as tenants have a choice to shift to newer buildings with better quality infrastructure and facilities.

In line with the trend started a few years ago, companies are also more willing to relocate to areas outside the traditional office centres like the Golden Triangle and central business district. Areas like KL Sentral, Damansara Heights and PJ have become popular choices for companies and in line with the increased demand, rentals have moved up and this has attracted more developers to embark on the building of new office buildings in these areas, especially PJ.

As for the retail sector, the excitement was in the opening of three new shopping centres in the Klang Valley, one after another, within a period of a month (two are expansions of existing shopping centres - The Gardens and Sunway Pyramid - while the third is a new shopping centre, Pavilion). Shoppers now not only have more choices, and are able to enjoy better class shopping centres that can rival the best in the region.

These new shopping centres are now going through the normal initial teething problems and have yet to see the expected crowds, but it should only be a matter of time before they build up a regular following. For example, 1 Utama Phase 2 is now much more well patronised compared to when it first opened.

Most property analysts say Malaysian properties generally are undervalued or very attractive in terms of valuation, especially commercial properties. Is that true?

The most expensive condo unit in Malaysia is likely to be at the KLCC area, which is only about one fifth or one sixth of the price of the most expensive condos in Singapore.

Also, Malaysian properties in recent years have attracted many foreigners.

Traditionally they came from Singapore, Hong Kong and Indonesia but this time round we see the entry of investors from the Middle East, South Korea, Britain and the US, and they came in to buy condos on an en bloc basis.

In fact, the strong interest resulted in the condo benchmark price hitting above the RM2,000 psf mark, setting a precedent for that segment.

It is also interesting to note that, bucking tradition, in some cases residential prices were higher than the value of commercial properties such as offices.

However, the low medium and medium-cost segments of the residential sector remain stable but not as exciting as buyers in the condo category as they are quite cautious in view of the rising cost of living.

The rise in toll rates, cost of food items and transportation would likely eat into the disposable income of this group of purchasers and many are less willing to commit on big ticket items like property.

By The Star - StarBiz

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