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Saturday, December 20, 2008

SunCity riding on cashflow management

Sunway South Quay is promoting a new international metropolis in the Klang Valley

SUNWAY City Bhd’s (SunCity) sound cashflow management and strong balance sheet will see the company through the challenging property market conditions brought about by the global financial crisis.

Its portfolio of niche developments and property investment assets, as well as its increasing foray into the international property market will help cushion the company from the adverse impact of the crisis.

With RM560mil in cash reserve, it is looking to pick up some good distressed assets, including land, that will come in handy when the market bounces back.

SunCity managing director for property development Ngian Siew Siong says that in the past six months, the company had gone ahead with the launch of the South Quay project in Bandar Sunway and Vivaldi condominiums in Kiara Hills.

“We are going full swing with our best-selling projects in prime locations that have a large international community and expatriates. These include Sunway Palazzio luxury condominiums in Sri Hartamas, BayRocks Garden Waterfront Villas in Sunway South Quay, Villa Manja semi-detached houses in Sunway SPK Damansara, and Challis Damansara in Sunway Damansara,” he says.

Going forward, there will not be any new project startups except for sub-phases in ongoing projects.

The company still has RM1bil worth of projects in the pipeline from recent launches which will keep it busy for the next one year.

Ngian says SunCity’s strong unbilled sales of RM1bil will sustain the company’s bottom line over the financial years ending June 30, 2009 and 2010.

The company is also cushioned against the difficult market conditions by its exposure to investment property which contributes about 50% to its bottom line. Besides a good spread of medium to high-end residential projects in multiple locations, SunCity also has a portfolio of high-yield investment assets that provide steady recurrent income streams that are also more recession-proof.

To take advantage of the prevailing low construction costs and ride on the market recovery in the next three years, it will focus on high yielding projects next year, including a new corporate office building located beside Menara Sunway. Another is a small office home office cum retail project, called Sunway Pyramid 3, which will be the extension of the Sunway Pyramid shopping mall.

“We see the current situation as a good opportunity to prevent an overheated and over-competitive market. This is the time for us to focus on re-engineering some of our strategies, our processes and human resources, as well as improve customer services and loyalty programmes.

“SunCity’s growth these one to two years will be primarily driven by its ongoing and planned projects in the Klang Valley, Ipoh and Penang, as well as those located in India, China, Cambodia and Vietnam. With more than 12 active projects in Malaysia and overseas, we look forward to tread steadily despite the challenging market conditions,” Ngian says.

Having survived three market downturns, its ability to ride out those difficult times is testimony to its hardiness and competitiveness to stay ahead of the pack.

“It is a challenging time for developers as they need to deliver world-class products without compromising on product quality and specifications. As construction costs have came off their peak around June, it is now up to the developer to either maintain the property prices at current levels or pass on the cost advantage to the customers.

“It is prudent for industry players to weigh the market demand and supply situation before deciding on the price of their products,” Ngian points out.

By The Star

Ten tips for buying property

If you are looking for a property here are ten tips.

1. Location: Fundamental to your wellbeing and will determine potential value.

2. Ability to repay: You have to service your loan for many years to come and should buy within your means.

3. Rental or occupation: Establishing your objective to buy will ensure that look for the right property at the price.

4. Quality: Find out the materials used, finishes and project maintenance standards to ensure that you get value for money.

5. Developer’s reputation: Buying from a reputable developer will ensure a project will be completed on time will not be abandoned during difficulyt times.

6. Neighbourhood: The surrounding neighbourhood will determine safety and wellbeing of you and family.

7. Facilities: Good amenities and facilities will ensure convenience and comfort.

8. Accessibility: Having good road connectivity will ensure easy travel and accessibility.

9. Resale value: The property should potentially provide good capital appreciation in the future.

10. Financing: Choosing the best loan package will protect your interest the long term.

By The Star

Developers targeting the middle markets for new launches

The spreading global financial crisis has wrapped its tentacles around the domestic property market, causing loss of confidence and apprehension, and forcing developers to rethink their development plans and launches.

The indications are the property market is stable despite a downturn in some areas where prices had previously appreciated sharply, largely because of foreign buying which has slowed in more recent times.

Having staved off the challenges posed by escalating material prices that inflated construction costs by about 30%, particularly during the first half this year, developers are now faced with the softening property market.

As consumers’ purchasing power is affected by rising costs and inflationary pressures, developers have not been able to increase prices and instead, have had to absorb the cost increase and contend with lower profit margins.

Although the escalating costs have since subsided, the prices of cement and cement aggregates, sand and steel are still about 10% to 20% higher compared with the same time last year.

The protracted US financial crisis continues to have an adverse impact on the economies of many countries. In Malaysia, it has dampened sentiment in the local property scene which was more noticeable in the second half this year.

The residential property market is getting more attention from developers these days as they need to monitor the market very closely before embarking on any new project, while striving to complete ongoing projects.

The retail and office market may also be affected if the negative impact of the global financial crisis causes a drop in the occupancy and rental rates for commercial space. As for the industrial property sector, it has been quiet for the past decade as a result of an overbuilt situation.

New housing project launches saw a significant drop as developers opted to stay liquid in anticipation of a prolonged slump and to ensure their capability of moving ongoing projects when the market recovers.

Developers are adopting a wait-and-see attitude with their launches. To play it safe, they have decided to defer their projects to ensure that they are better received when they are finally ready for launch and also to avoid having to suffer any price cuts.

Those that have boldly decided to push ahead, are doing so in smaller numbers through pre-launch previews to gauge the take-up rate.

Given the prospect of further deterioration in the global economy and the uncertainties ahead, property developers are expected to remain cautious. Property sales are expected to slow further next year as the full impact of the global financial meltdown and the credit crunch is felt.

Even the main players in the property scene such as SP Setia Bhd, Sunrise Bhd and E&O Property are deferring their projects.

But it’s not all doom and gloom. According to research house ECM Libra Investment Research, property developers are in a strong financial position to withstand a downturn. It points to a financial system flush with liquidity and an all-time low average lending rate, adding that there is also no widespread mortgage default and property foreclosure to drive prices sharply lower.

“Developers are exercising greater financial prudence and have lower borrowings. The average net debt/equity ratio of developers now is around 28.1% which is about half of the 58.4% level seen in 1998,” says a senior analyst at ECM Libra.

Having said so, the slowdown and project deferments in 2008, which are expected to spill over into 2009, will likely affect the financial performance of property developers.

While the volume of residential properties transacted contracted by 35% during the last Asian financial crisis and took two years to regain ground, the analyst does not expect sales of residential units this time around to fall to such an extent. On the other hand, he expects a recovery in sales growth in 2010.

Fortunately, for many developers, their large unbilled sales from the record sales registered in 2007 and earlier this year will tide them over and contribute to their bottom lines over the next two years. Developers with recurring property investment earnings will do better than those who rely solely on property development.

As such, companies with sizeable exposure to property investment assets such as KLCC Property and Sunway City can look forward to more resilient earnings from property investment.

This is because the occupancy and rental rates for quality office and retail space in Kuala Lumpur and the Klang Valley are holding out quite well and will provide a steady stream of earnings to these companies.

Demand for luxury condominiums is on a downward spiral as this segment has been driven by speculative buying. Secondary prices for luxury condominiums in the KLCC and Mont’Kiara areas have fallen by 15% to 20% over the past six months. With more stocks coming onstream next year, coupled with the slowdown in foreign buying interest, there is a risk of further price correction come 2009.

Going forward, developers may go back to basics and launch more mass housing projects, deemed more resilient as the target market is the middle-income group who buy these properties for own occupation. Even SP Setia is looking to focus on mass housing products for the middle-income segment where demand fundamentals are still strong and less speculative.

“Those with large residential land-bank and different product range in diversified locations such as SP Setia and Mah Sing will be less affected. With their large land-bank at cheap land costs, these developers will have more flexibility to modify their planned launches to cater to the current demand during a downturn.

“Come 2009, it is all about cash conservation and minimising the risk of low take-up rates. Developers are expected to be pragmatic in terms of pricing and scale. They will also be cautious in launching projects which require substantial upfront outlay. So there won’t be many new large-scale greenfield projects to look forward to in the near term,” he adds.

With the total supply of residential properties having dropped sharply since the beginning of the year and the lower margin that developers have had to contend with, what is the way forward for home prices?

While property markets around the globe including New York, London, Singapore, Hong Kong and Sydney, have taken a severe beating with price erosions of between 20% and 50% so far, the local market has been lucky as there has been no panic selling to drive prices down.

Most developers feel that the prices of houses are expected to hold out over the next one year as local property prices have maintained fairly reasonable rates and are not over-priced as in other countries.

Glomac Bhd managing director Datuk FD Iskandar says local property prices are expected to remain stable in the next one year “as the market’s growth has always been organic without any over-pricing.”

Mah Sing Group Bhd president Datuk Seri Leong Hoy Kum expects the medium to high-end landed residential property prices to remain stable.

“The medium to high-end landed property segment will continue to yield decent long-term positive capital appreciation going forward in the foreseeable future.

“There will still be transactions, albeit at a slower pace, as this property segment has a pool of buyers who are higher income earners and they tend to hedge their wealth in such properties during uncertain times.

“These people have a wider savings to expense ratio, and generally look to invest their excess funds in properties as there are limited investment options right now,” he says.

Leong says developers need to understand what buyers want when planning products and undertake due diligence and feasibility studies to ensure that there is no product mismatch.

“Good concepts, right pricing and prime locations will still help sell our products. Any downward pressure may only be felt for undesirable locations, or when there is a surplus supply of properties on offer,” Leong adds.

Maintaining a more positive outlook that house prices will appreciate next year is Zerin Properties chief executive officer Previndran Singhe, who says demand and prices for well-located residential properties are expected to go up following the easing inflationary pressures and lower lending rates.

Whichever way the market heads, developers should adopt the best practices of ensuring due market diligence is undertaken before proceeding with a project’s launch.

Ultimately, the value of a property is dependent on supply and demand, location, quality of workmanship, design and concept, as well as the reputation and brand premium commanded by the developer.

As with most things these days, it is back to basics.

By The Star (by Angie Ng)

Demand will lean towards landed properties

As the New Year rounds the corner and plans are made for the coming year, house buyers may find less variety in terms of geographical location and market segments. This is to be expected as the next two years are expected to be challenging, even for the most robust of property developers owing to the current global financial turmoil.

What is certain today is that developers are rather uncertain about how things will pan out and prefer to take a wait-and-see attitude.

The larger ones have already started their series of market studies and are in the midst of re-strategising and changing their product mix. Others are waiting to see what the big boys are going to do while they keep a low profile.

It is disconcerting, to say the least. Bracing for the worst, some developers have deferred their launches, particularly those offering high-rise condominiums as they tend to be rather speculative. Other developers and property consultants say landed properties will be more popular, in terms of both demand and price.

Says Rahim & Co managing director Robert Ang: “There will be a demand for landed properties. Their prices will hold up better.”

At Colliers, deputy managing director Lee Vun Tsir says landed properties in prime locations like Bangsar, Damansara Heights, Kenny Hills and Bukit Tunku will continue to be alluring.

Lee Vun-Tsir

“As security becomes an issue, gated and guarded projects will generate new interest among home buyers. We are seeing enquiries for these projects among the oil and gas boys.

“After all, there are not many of these gated and guarded developments; Duta Nusantara, Duta Tropika in Sri Hartamas, Flora Murni, Aman Kiara in Mont’Kiara and Seri Beringin and Idamansara in Damansara Heights,” says Lee.

Rentals at Seri Beringin are expected to be about RM12,000 and RM15,000 and Idamansara between RM17,000 and RM18,000.

Because Colliers is leaning towards higher-end projects – RM2mil and above – Lee declines to comment on mass housing.

“We have clients asking for fire-sale properties. We have not seen these yet, but we are seeing more lelong signs for Mont’Kiara condominiums,” he says.

Lee says 2009 will be an interesting year for the property market. If all the stimulus packages announced around the world works, just as our own RM7bil package, the market will turn around very fast. Prime development at the right price will always have buyers, especially today.

Many are waiting with cash, which is why cash is king today, but we will not see the dizzying prices of last year, says Lee.

There will be the YTLs buying from the Eng Lians, says Lee, referring to YTL’s purchase of a one-acre plot in Jalan Stonor from the Eng Lian group.

As for house buyers, Lee says they are unlikely to go wrong with landed properties or those with low density.

“Places like KLCC and Mont’Kiara are highly speculative. So be wise. The signs are there. One of which is developers giving 10:90 deals, pay 10% and the rest after the completion of the project. Or they may include interior decor in the price of the house.These are good deals, but always go for reputable developers in good locations. That means access.

“Developers who have sold between 70% and 80% of their projects are on their way home; they are safe. It is the developers with many units, with less than 20% sales, who may encounter problems,” he says.

Among the larger property companies, SP Setia Bhd says it will ride out the next two years fairly well. (See story on SP Setia)

“What is certain is demand has shrunk, competition is intense and every developer will have to find market share. Other developers are watching us, to see what steps we take, being one of the larger ones with a land-bank of over 4,000 acres in the Klang Valley, Penang and Johor,’’ group managing director and chief executive officer Tan Sri Liew Kee Sin.

“Developers in a single location with a single product will be in trouble. The KLCC vicinity and Mont’Kiara will be very speculative while Damansara Heights, Bangsar, Kenny Hills and Bukit Tunku will hold their ground. Taman Tun Dr Ismail will remain a comfortable area to live, while Bandar Utama and Subang Jaya will be congested,” he says.

Bandar Raya Developments Bhd (BRDB) chief executive officer Datuk Jagan Sabapathy says the company’s properties will hold their price. It is developing One Menerung, The Troika at KLCC and Capital Square.

Datuk Jagan Sabapathy

Jagan declines to say how prices will go, saying only the company’s buyers have not deferred payments. About three-quarters of the group’s revenue for 2009 will come from the property division arising from unbilled sales of The Troika, One Menerung and CapSquare Office Tower 2.

“I have friends asking me if there are any fire-sales. I tell them there will be none, not in the type of properties we are offering. We have not seen any decline in the prices for The Troika and One Menerung. While we recognise that the prices of our developments are dependent on market conditions, both these projects occupy a premium space in the luxury property market,” says Jagan.

On the second phase of CapSquare Residences, he says this will be deferred due to the current economic situation and the weaker market sentiment.

“While the continuing uncertainty over the length and depth of the economic downturn makes accurate predictions impossible, BRDB has the financial flexibility to weather the current meltdown. We have not seen an erosion in our collections and we are well-supported by RM1bil in unbilled sales and RM400mil in value of unsold properties in prime locations,” Jagan says.

By The Star (by Thean Lee Cheng)

Good location will save the day for YNH

IPOH-BASED YNH Property Bhd believes it can still benefit from the global economic slowdown by focusing on developments that are located in good and prime locations.

As cliche as it may sound, adhering to the old adage of “location, location, location” speaks volumes for YNH head of corporate services Daniel Chan.

Daniel Chan

“While the Malaysian property market should experience a slowdown next year, we feel that properties in good, prime locations will still be able to generate good demand,” he says, adding that the company is not scaling down or deferring any of its ongoing projects despite the current economic downturn.

“All of our projects are on track and we are going full swing,” he says.

Two primary developments that YNH has in the pipeline are its Kiara 163 mixed development project in Mont’Kiara and a township development in Manjung, Perak, both of which Chan says are situated in “good locations”.

He says the Kiara 163 project is targeted at both local buyers and expatriates and that YNH plans to launch the project in the first quarter of 2009.

The Manjung development is still under construction and is targeted at primarily government employees.

“Civil servants earn consistent salaries and they are least likely to be retrenched,” he says.

Chan says Malaysia’s property market is still resilient compared with many Asian and developed countries.

“Property in Malaysia is still very affordable compared to countries like Hong Kong and Singapore,” he says, adding that the recent interest rate reduction by Bank Negara is a good move to promote spending.

“Lower interest rates means it would be cheaper to borrow money and easier to repay your loan,” Chan says.

By The Star (by Eugene Mahalingam)

Mah Sing counts on quick turnaround time

Mah Sing Group Bhd plans to leverage on its quick project turnaround time and strong branding to strengthen its position as a premier medium to high-end developer of landed and niche residential developments in the Klang Valley, Penang and Johor Baru.

The company has an impressive track record for building quality semi-detached residences and bungalows at competitive prices.

“The supply of semi-detached and detached houses is expected to make up only less than 10% of total houses built by 2010. We believe our tested model of selling semi-detached houses at the price of terrace houses and bungalows at semi-detached prices will place our products in good stead,” says Mah Sing president Datuk Seri Leong Hoy Kum.

Being market-driven, the developer has enough projects planned for launch next year to meet the demand.

“We will have approximately nine parcels of projects in this segment for launch next year, including our garden bungalows in Hijauan Residence, One Residence, Kemuning Residence, StarParc Point and Southgate Commercial Centre in the Klang Valley; Sierra Perdana and Sri Pulai Perdana 2 in Johor Baru; and Residence@Southbay and Legenda@Southbay in Penang. This segment could potentially be a natural hedge against a downcycle as there are limited investment options available now,” Leong says.

Mah Sing’s propensity to grow will come from its existing projects and locked-in sales, as well as pre-constructed projects in Kemuning Residence and Aman Perdana in the Klang Valley, and Sierra Perdana in Johor Baru.

It had purchased substantial land in 2007, with potential gross development value (GDV) exceeding RM2bil which will last the company for some time.

According to Leong, the company had RM143mil in cash as at Sept 30 and will be receiving RM213mil next year when the sale of The Icon Jalan Tun Razak is completed by June. It still has about RM3.9bil in remaining project GDV and unbilled sales that will last for the next five years. Of this, RM282mil comprised pre-constructed products locked in at old construction costs.

“We have experienced quite decent sales because of our right product mix targeting the right group of house buyers who are the medium to high-income earners in their 40s and above,” he notes.

In the first nine months this year, Mah Sing chalked up RM367mil in sales against its target of RM450mil for the whole of 2008. During the same period, it launched RM399mil worth of projects against a launch target of RM484mil for the year.

The advantage of having projects with strong product differentiation and in prime locations has also contributed to the strong take-up. Its commercial project, Southgate has done well, with 90% of Vivo and 80% of Vox & Vertex blocks sold at approximately RM1,100 per sq ft for the retail space and RM550 per sq ft for the office suites.

Leong says: “We are going to move ahead with existing projects although we will be very careful. Our projects have been designed to ride the wave of demand for medium to high-end landed residential properties, especially semi-detached homes and bungalows, where demand still exceeds supply.”

By The Star (by Angie Ng)

YTL Land goes ahead with projects

YTL Land & Development Bhd, the property arm of YTL Corp Bhd, has no intention of deferring any of its projects despite the current economic downturn.

Executive director Datuk Yeoh Seok Kian says the company’s plans are on track despite the weaker market sentiment.

“We are not isolated from the effects of the current credit crunch but neither are we scaling back or deferring any of our projects.

“In fact, we have gone ahead with both our Malaysian and Singapore property launches with the confidence that residential properties in prime locations or in well-populated catchment areas will continue to enjoy good appreciation and attract investors,” he says.

An exterior shot of the Waterville Homes, part of the Lake Edge residential project in Puchong.

YTL Land is currently focusing on its Lake Edge development located in Puchong, where it has just launched its latest phase of landed homes. Called Waterville, the development comprises 50 units of 2½-storey semi-detached houses.

Apart from its Waterville homes, which have already secured a 30% take-up rate, YTL Land will also launch its Parkville homes (also in Lake Edge), which comprises a collection of eight bungalows and eight semi-detached homes.

“We are optimistic of achieving the RM120mil GDV (gross development value) target set for both our Waterville and Parkville launches by our financial year end in June 2009,” Yeoh says.

Despite the weaker economic climate, Yeoh says YTL Land would not be revising the prices of its ongoing projects downwards.“We will not devalue any one of our projects, primarily because most of the acquisition of our land-bank has been the result of smart partnerships, resulting in lower upfront investment costs. This gives us room to pace ourselves against market conditions,” he says.

YTL Land is cautiously optimistic about the economic climate ahead.

“Although consumer sentiment has been dampened by the current economic situation, there are many buyers who are still on the lookout for good buys that can provide returns over the long term,’’ Yeoh says, adding that the company is working with banks and other relevant parties to ensure buyers’ needs are taken care of.

Yeoh believes that Malaysia remains an attractive market for foreigners as properties are still very affordable compared to neighbouring countries. The Government’s continued push of the Malaysia Property Inc (MPI) and “Malaysia My 2nd Home” programme has opened up opportunities for the country.

“The abolishment of the Real Property Gains Tax and the limit on the number of residential property loans obtained by foreigners has also added to Malaysia’s appeal as a property haven,” he adds.

By The Star (by Eugene Mahalingam)

Depth and spread will stand SP Setia in good stead

Single storey show house in Setia Eco Gardens, Johor

SP Setia group managing director and chief executive officer Tan Sri Liew Kee Sin is a picture of confidence. “You just take a look at this,” he says, referring to the scene outside the window from his room. Pockets of green with roof tops dotting the horizon makes a pretty picture against the blue sky. He is very proud of what he has done at Setia Eco Park, about 30 minutes by car from Petaling Jaya.

“I prefer visitors to come here. They will be able to see what we have done. Eco Park is unlike any other development, with a good measure of greens, parks and lakes,” says Liew.

Several years old, Eco Park is yet to be completed but he is confident the demand for bungalows and semi-detached will be there.

“We have depth, in terms of market segments, and spread, in terms of locations. These factors alone will stand us in good stead in the next two years as the financial meltdown unwinds and we will be ahead of our peers,” he says.

Liew is reluctant to be specific about the type of products he will be offering for the coming year. “We will finalise our market plans after December, having undertaken intensive studies to change the product mix. What is certain is demand has shrunk, competition is intense and every developer will have to find market share. Other developers will see what steps we take, being one of the larger ones with a land-bank of over 4,000 acres,” he says.

The company is aiming for an internal sales target of RM1.1bil for the financial year ending October 2009, 21% lower than the RM1.4bil achieved in FY08. It also has set a minimum net profit target of RM214mil for FY09, similar to what was achieved in FY08. As of October 2008, it had unbilled sales of RM1.1bil.

“We at SP Setia will go back to basics. We have paid for all our infrastructure, we will drop non-core divisions and focus on longer term cash-generative projects,” he says.

He says the company will focus on the local middle-income group, which traditionally has been supportive. More than 90% of the company’s income are locally generated and this will remain the same, he says, although the company has work in Vietnam.

“That means our demand is from locals and from those who have made Malaysia their second home, unlike developments which are more dependent on foreign buyers,” says Liew.

The company will continue to focus on three major areas: the Klang Valley, Penang and Johor. “How we are going to shift and strategise, I don’t know yet. The next two to three months will be crucial as we chart our course,” he says, adding that the company has about 4,800 acres of undeveloped land.

He says SP Setia’s land is fully paid for. Likewise, the infrastructure. “We have no heavy capital expenditure, which means our policy today is cash preservation. If the land comes in cheap, we will buy,” he says, adding: “If there is anything to build, now is the time, with the drop in construction materials.”

By The Star (by Thean Lee Cheng)

It’s business as usual for condominium developer Sunrise

Sunrise Bhd general manager (branding and corporate communications) Joachim Ng says it will be business as usual for the condominium developer in Mont’Kiara.

Although the global financial crisis has affected sentiment, Ng says its projects have been almost fully sold, except for some bumiputra-reserved units and the newly launched Mont’Kiara Residence.

“We have been through many cycles and will continue to be prudent in controlling costs and monitoring cashflows. But as we said earlier, we are fortunate to have a large pool of unbilled sales that will tide us through this period.

“We will also continue building on our brand proposition and creating value for all stakeholders. After this crisis, we think buyers will gravitate towards time-tested and proven developers in the next upcycle,” Ng says. They will also be watching for opportunities to make good asset purchases at favourable prices, he says.

On the large number of high-rise developments in Mont’Kiara and scepticism among analysts and property consultants that prices and yield will hold, Ng says the reality is there is an irreversible trend towards high-rise living in Kuala Lumpur.

“Increasingly, locals are opting for condo living because of security, facilities, landscaping and lifestyle,” he says.

Ng says 15 years ago, locals made up only 10% of the condo population in Mont’Kiara. Now they comprise 35% in Sunrise-built developments.

As of Sept 30 this year, the company’s unbilled sales amounted to RM1.37bil, equivalent to 2.6 times its average annual revenue over the past three years, Ng says.

With 82 acres left besides Seri Kembangan and Mersing, Ng says the company is constantly on the lookout for opportunities that may come its way.

Its existing land-bank in Mont‘Kiara will see it through at least another decade. Most of its projects are on three to eight acres.

He says Mont’Kiara Residence, comprising 19 fully completed bungalows priced at RM6.5mil upwards, was launched in mid-November at the height of the global financial crisis.

He says the company has secured strong interest for nine units. Sunrise has four other ongoing projects – 10 Mont’Kiara (90% sold), 11 Mont’Kiara (80% sold), Mont’Kiara Meridin (90% sold) and Solaris Dutamas.

“These will be completed in the next two years. We have several other projects pending approvals and will wait for better market conditions,” Ng says.

Mont’Kiara Meridin is expected to be completed in the beginning of next year, and the 17-acre Solaris Dutamas by the end of next year. Completion of the 10 Mont’Kiara and 11 Mont’Kiara is expected at end-2009 and 2011 respectively.

“From now till next year, we will focus on marketing Mont’Kiara Residence bungalows. MK28 in Mont’Kiara will be launched when sentiment improves.

By The Star (by Thean Lee Cheng)

BLand's world-class resort

BERJAYA Land Bhd’s (BLand) whopping US$1.8bil joint-venture project – Berjaya Jeju Resort – on Jeju Island is the largest investment undertaken by a foreign developer in South Korea’s tourism industry.

The resort-type residential complex will serve as a residential area with low-rise buildings and villa equipped with hospitals, care centres and other modern facilities.

Jeju Special Self-Governing Province Investment Environment (JIE) representative Woo Jin Cha says the world-class project will take Jeju to greater heights and serve as a turning point in Jeju’s rebirth as a global destination for recreation and tourism.

Jeju also known as the “Hawaii of the Orient” and “Gods’ Island” is developed by Jeju Free International City Development Centre (JDC), Woo said in a briefing to a group of foreign journalists recently. JIE is a unit of JDC.

Jeju attracts some 5.8 million tourists annually and has drawn an estimated US$3bil of foreign direct investments to date.

Woo says JDC is currently “designing” Jeju to be a free international city via six core projects.

They are the Jeju Science Park, Myth and History Theme Park, Seogwipo Tourism Port, Resort-type Residential Complex, Healthcare Town and English Education City.

By 2011, when the first phase of Jeju Free International City international project is completed, about one million foreign tourists will visit South Korea annually while domestic tourists are set to double to 9.4 million yearly.

By The Star

Breather for property market

As the adverse impact of the global financial crisis widens to the other economic sectors such as trading, manufacturing, retail and services, many expect the residential and commercial property sector to also take a hit.

This is because when businesses are affected by the crisis and turn in poorer than expected financial results, there is the risk of downsizing and slower output. Some of the affected companies will take the opportunity to scale down their manpower or relocate to lower-cost countries. Already, some multinational corporations in Penang have announced plans to downsize their staff strength due to the poor demand outlook over the next one to two years.

The flagging consumer confidence and worries over job security will severely affect demand for durable goods, especially big-ticket items, including property and cars. The phrase “cash is king” is becoming more widely heard as consumers hold back unnecessary spending and save for rainy days ahead. Meanwhile, rentals of commercial property including office, retail and industrial space will also come under downward pressure should the occupancy of these property be affected by the downsizing of businesses in the coming months.

However, we can take comfort in the fact that the current market downturn will not fall into a crash mode like the 1998 Asian financial crisis. The fundamentals of the country’s financial system and the economy are stronger now and the current downturn should be more moderate, pending any further surprises in the external front.

The gloomy market sentiment is expected to prolong over the next two to three quarters at least and developers have reduced their launches significantly to minimise the risk of having to go ahead with building projects despite a low take-up rate, or to drop prices. This is a smart move on the developers’ part to avoid unneccesary holding cost and the need to lower profit margins should prices of their property need to be lowered.

However, developers with good projects in the right locations and the financial means to support construction costs should consider completing their projects before offering them for sale. This will be in line with the Housing and Local Government Ministry’s policy of promoting the build-and-sell strategy among developers to avoid the risk of abandoned projects. The See Hoy Chan group had used this method of development in its Bandar Utama project with great success.

Nevertheless, the risks of slow sales and poor take-up are real under current conditions and it is not surprising to hear developers deferring launches. Last week, news reports highlighted a few deferments in Penang. Hunza Properties Bhd deferred its RM400mil Gurney Paragon Mall which was earlier scheduled to start in September, while Eastern & Oriental will delay the launch of the first phase of the Seri Tanjung Pinang condominiums with gross development value of RM1bil. These condominiums were scheduled for launch in the current financial year ending March 31, 2009, but have now been pushed to the third quarter of next year. With lower launches, developers are currently concentrating on selling existing unsold stocks as well as executing ongoing projects to realise the huge unbilled sales locked-in prior to the economic downturn.

In a way, the current slowdown is a “breather” for the property market to build on a more comfortable pace and avoid a potential overheated and overbuilt situation. Developers should use this time to focus on product development and market research to put together better quality products for customers when a recovery sets in.

As for property buyers, those with surplus cash and the ability to leverage on their investment, should shop around for the right property as it is better to invest in these fixed physical assets than the more volatile equities.Those with a penchant for high-rise apartments can look around the Kuala Lumpur City Centre and Mont’Kiara areas as the prices in the secondary market have come down by 15% to 20% in recent months.

No doubt, there will be good upside potential for local real estate when the market bounces back.

# Deputy news editor Angie Ng thinks this is a good time to buy property for those who are cash rich

By The Star (by Angie Ng)

Glomac Q2 net profit drops to RM7.7m

PROPERTY developer Glomac Bhd says its second-quarter net profit fell by 24 per cent, due partly to less work done by the construction division.

Net profit fell to RM7.7 million during the quarter to October 31 against RM10.22 million in the same period last year. For the first half, its net profit declined by 27 per cent to RM15.5 million.

However, the company managed to grow its quarterly revenue by eight per cent to RM91 million, while six-month sales rose marginally to RM170.55 million, against RM166 million in the first half of last year.

"Our performance in the first half of this year was satisfactory, considering the difficult operating environment," said group executive chairman Tan Sri FD Mansor in a statement.

Higher sales were partly due to the recently completed Suria Stonor, as well as its township development Bandar Saujana Utama.
"We believe our sales in affordable township products will sustain. Nonetheless, in view of the current challenging market conditions, we will be more selective in considering new launches.

"Although Glomac has earmarked more than RM1 billion worth of new projects to be launched, we will most likely assess and launch these new projects when the economy recovers and when market sentiment improves," he said.

By Business Times