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Sunday, May 25, 2008

Where land is as good as gold

For many more years to come, the Klang Valley is likely to remain the country's top growth area despite the launch of the Iskandar Malaysia blueprint in late 2006 and the unveiling of the Northern Corridor Economic Region blueprint last July, says Ho Chin Soon, master mapmaker and director of Ho Chin Soon Research Sdn Bhd.

"Kuala Lumpur's Golden Triangle is the undisputed No 1 hot spot and people are still looking to buy land there. And when developers buy land, they buy into the future, so the optimism is there," he adds.

Ho was one of the speakers at the The Edge Investment Forum on Real Estate 2008. He was also a speaker at the inaugural forum held in October last year.

Land is scarce in the Kuala Lumpur City Centre and everyone wants to know who owns what, says Ho. His research reveals that some of the prime lots surrounding the KLCC have been transacted. The market is still talking about the record RM2,000 psf that the YTL Group paid for a tract of land in Jalan Stonor, he adds. A residential development is planned for the 0.4ha plot.

Many foreigners are also buying land in the KLCC and big funds are looking for properties there because of the subprime crisis in the US and related problems in Europe.

"Just last week, a South Korean investor walked into my office and bought a Golden Triangle map. I found out that he had purchased a plot of land near the KLCC for RM1,400 psf," says Ho, who also notes that Suasana Simfoni Sdn Bhd, a company that is partly owned by Singaporeans, has bought two adjoining plots of land for RM172.1 million in Jalan Conlay and plans to develop luxurious residential serviced apartments there.

"The Hakka Restaurant in Jalan Kia Peng has also been sold to Fabulous Circuit Sdn Bhd. A lot of people say the plot of land where the Bok House used to be has been sold, but I am unable to find out who the owner is in a title search. The land beside the Pakistan Embassy in Jalan Ampang is also rumoured to have changed hands, but after a check, I found the owner is still Ng Shin Chiu & Sons Rubber Estates Sdn Bhd," says Ho.

"The world has changed and economic power has moved from the west to the east. People are saying that it is either you go to Mumbai, Dubai or it's goodbye. Three out of the 10 biggest banks in the world are Chinese banks. Thus, we need to restructure our economy to capture foreign direct investment interest. The people in Malaysia are ready for change. If the politicians are not ready, then let us change the politicians," he adds.

During the forum, Ho told the 500 participants that some new developments will be coming up in Kenny Hills in KL because the largest landowner there, Tenaga Nasional Bhd, is inviting tenders for its land.

"There are a lot of transactions going on there as Tenaga is selling its land. Why should civil servants or employees of government-linked companies stay in nice bungalows when the prime land is worth millions? Companies such as S P Setia and Sunway Bhd own land there as do private companies. Seven Stars Sdn Bhd own 15 parcels of land in Kenny Hills," he says.

Ho adds that the future of property development in the greater Klang Valley or areas out of the second tier (a concept he popularised in his Locational Centre of Gravity theory) would largely belong to Sime Darby Bhd. The Locational Centre of Gravity is centred around Petaling Jaya New Town and areas within a 15km radius of it are deemed to be in the first tier, while locations 25km off are in the second tier.

"Last year's Synergy Drive merger between Golden Hope Plantations Bhd, Kumpulan Guthrie Bhd and Sime Darby Bhd resulted in Sime Darby being the developer with the largest landbank in the country. The red colour (refer to map) is the plantation and property development landbank that they own and a large amount is in the second tier. The future action would be Sime Darby's and their land would be ripe for development in 15 to 20 years," Ho says.

Asked about the outlook for Cheras in KL and Kajang in Selangor during the question and answer session, Ho says he is optimistic about those two locations.

"A lot of developers are making money in Cheras, targeting the upgrader market, and the semidees and bungalows there are quite expensive. While Kajang is just outside the first tier, it is doing well and should have no problem growing further," he adds.

By The EDGE Malaysia - (Article from The EDGE Investment Forum On Real Estate 2008)

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