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Friday, August 8, 2008

Softer market as buyers take cautious stance

Market demand for top-tier luxury condominium and serviced apartment units is expected to soften as purchasers become more selective and discerning while developers become increasingly cautious over over-supply concerns, leading to slower sales.

CH Williams Talhar & Wong Sdn Bhd (WTW) senior executive director P’ng Soo Theng said factors that led to such a weak market could be attributed to the country facing a great deal of uncertainties this year. They include:

P'Ng Soo Theng

·The 12th general election in March which was met with unprecedented results;

·A 41% petrol (63% diesel) price hike in June;

·The consumer price index in June hit a 26-year high of 7.7%

·Rising defaults on subprime mortgages in US which triggered a global crisis leading to a gradual withdrawal of investment funds in the region.

Under such circumstances, affordability is now of great concern as daily living expenses, particularly so for the middle to lower income group, form a larger portion of their disposable income and the sales of “big ticket” items are cautioned.

The KLCC area represents the top-tier condominium and serviced apartment market in the country. In the last two years, prices have doubled breaching the RM2,000 per sq ft benchmark.

Foreigners (from Singapore, Hong Kong, South Korea and the Gulf nations) make up about 30%-40% of purchasers, as prices are still considered affordable by regional standards.

The exemption of real property gains tax and lifting of the need for approval from the Foreign Investment Committee are factors attracting foreign investors.

With the global financial situation still unsettled, the current political climate in the country and imminent key interest rate hike, many are now adopting a “wait and see” attitude.

Possibility is greater that purchasers will refrain from buying rather than cancelling their bookings or purchases.

With the uncertainty from spiralling costs, pressure on building materials and electricity tariff hike, purchasers would probably switch to purchasing units in prime locations as landed properties in prime locations are considered a hedge against inflation.

KLCC condominium properties have not gone up in price in the last two months. There actually have been no new launches within the KLCC area in the first half of 2008.

“We believe that buyers are in a position to 'pick, choose and negotiate' in the current scenario,” advised Png.

“The immediate response to the current scenario has already been observed during the first five months of 2008 where fewer developers are launching residential units.

“Having monitored the daily print media on new residential schemes advertised for sale, our findings reveal that from January to May 2008, some 3,333 residential units were launched in the Klang Valley.

“These include terraced, semi-detached and detached houses as well as town villas and condominiums or apartments in areas extending to Shah Alam, Semenyih, Klang, Sungai Buloh, Bangi, Rawang, Puchong and Putrajaya.

“In contrast, about 10,780 residential units were launched from January to June 2007.”

By The Star

E&O Property to be delisted

KUALA LUMPUR: E & O Property Development Bhd (E&O Prop) will be delisted from the Bursa Malaysia main board today.

Eastern & Oriental Bhd (E&O) said in a statement yesterday the delisting marked the completion of the merger exercise between E&O Prop and E&O.

The enlarged entity would enable the group to consolidate its financial and operational expertise and resources to better seize growth opportunities in the increasingly competitive local property landscape.

By The Star

Steel bar supply in Malaysia adequate

There is no shortage in the supply of steel bars to the local construction industry, says Malaysian Iron and Steel Industry Federation (Misif).

The supply trend is consistent in the local market whereby installed capacity from all mills for steel bars is recorded at 3.5 million metric tonnes and capacity utilisation as at 2007 was only at 56 per cent for steel bar rolling, Misif said.

Although there have been allegations of shortages in the supply of steel bars, steel millers' requests for quantities of requirements for various projects have not been forthcoming and unless steel suppliers have forecasts of customer requirements, manufacturers are forced to make alternative business plans, it said.

"Then the issue arises that since shortages have not been proven, why the need for an export tax or ban?" it asked in a statement issued in Kuala Lumpur yesterday.

It said that as a manufacturing concern, and like any other industry, the steel industry cannot afford to just depend on domestic market and need to expand markets to include exports which will help the industry to be competitive through better utilisation of its capacities.

"Generally, steel prices are dictated by iron ore prices negotiated between the three major world ore suppliers with key users whereby in February 2008, top steelmakers in Asia had agreed to pay 65 per cent more for iron ore, setting a global benchmark for raw material prices.

In Malaysia, steel mills import more than three million tonnes of scrap annually and the prices of which have swung from US$350 (RM1148) per tonne in June 2007 to US$725 (RM2378) per tonne in June 2008.

By Bernama