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Saturday, May 30, 2009

Developers still getting good sales from new projects

In every storm, there is a silver lining. Despite the current tough economic conditions, property developers are still able to launch new projects and fetch encouraging sales from ongoing projects, thanks to the low interest rates and attractive financing packages offered by property developers.

Based on banking data released in early May, approved loans for residential property surged 49% in March from the previous month.

According to developers, home buyers are not simply opting for cheaper homes due to the slowdown but are looking for good value buys as opposed to just a cheap sticker price.

That is reason enough for some developers to base their launches on their target markets instead of being compelled to switch to cheaper or affordable properties.

Most, if not all, major property firms are offering attractive financing packages to lure property buyers.

SP Setia Bhd launched its 5/95 home loan package in January. Under this programme, it registered sales of over RM500mil to date. It also targets to sell RM300mil worth of properties during the three-month extension of the 5/95 home loan package promotion from April 19 to July 19.

SP Setia president and chief executive officer Tan Sri Liew Kee Sin says the sales figures show that the market is still active.

“Property players in Malaysia are riding out the challenge well. Many have come up with attractive packages to entice buyers,” he tells StarBizWeek.

Another property player, Mah Sing Group Bhd, also launched an easy home ownership programme that has lifted sales to RM170mil in the first quarter for the financial year ending Dec 31 (FY09), compared with RM115mil previously.

In fact, its group managing director and chief executive Datuk Seri Leong Hoy Kum says sales chalked up in the first three months of FY09 already represent 38% of its RM453mil full-year sales target.

“Attractive financing packages and low interest rates are increasing the affordability for buyers. Buyers will also look at various other factors including location, practicality of design, value-added features and branding as well as track records of developers to make their purchase decisions,” he says.

Paramount Corp Bhd managing director Ong Keng Siew says its home ownership scheme, which was launched early this year has helped grow its sales in recent months. He believes that the scheme will continue to help generate sales in the next two years.

The company recently announced that it plans to launch a mixed township development – Bayan Hills in Sungai Petani next year with a gross development value (GDV) of RM1bil.

Paramount has also launched 38 units of two-storey semi-detached industry property in Kota Damansara with GDV of RM120mil, of which 22 units were sold to date.

Mah Sing plans to expand its landbank for commercial and residential projects which fits its business model of quick project turnaround.

It is looking to acquire one to two more pieces of land for integrated commercial developments next year.

Next month, Mah Sing will launch two developments, Starparc Point in Setapak, Kuala Lumpur, a five-acre commercial development with a GDV of RM125mil and the 54-acre residential precinct of Southbay Penang with a GDV of RM518mil.

The Southbay Penang residences comprise 284 super-link homes priced from RM795,000 and 76 bungalows priced from RM3.7mil. Currently, it has five ongoing commercial projects in Kuala Lumpur and Penang worth a total GDV of RM2.2bil. Meanwhile, SP Setia is set to launch a block of Setia Sky Residences with a GDV of about RM220mil and is waiting for one more approval from the authorities.

This is SP Setia’s first high-rise project in the Kuala Lumpur City Centre and it is located in Jalan Tun Razak on 5.96 acres with a total GDV of RM800mil, comprising four 39-storey tower blocks, with each block containing 211 condo units.

When the project was first unveiled, it was priced at an average of RM800 per sq ft. “Now, the price is at an average of RM680 per sq ft as raw material prices have stabilised. We have not reduced any of the unit sizes. Built-ups are still from 800 sq ft onwards,” he continues.

The company also has a few launches in the pipeline in Penang in the coming months. The group is confident of achieving its target of RM180mil in revenue from the sale of its properties in Penang for the financial year ending Oct 31 (FY09).

Liew says the group is on track to achieve total sales of RM1.1bil for FY09.

SP Setia’s products range from link houses for the mass market to luxury bungalows. Prices for its terraced homes in Setia Alam, Shah Alam start from RM300,000.

In Johor, its link homes are priced between RM200,000 and RM250,000. “All our townships are continuously launching in phases,” Liew says.

Paramount’s Ong says luxury developments may take a hit during a slowdown. But there’s no big impact to the mid-range to upper mid-range properties “because Malaysians still like to own properties”.

“Demand is still there, but all depends on the locations and reputation of the developer. People like to buy properties whether for their own use or for investment,” he says.

“Property is the best bet against inflation. Those smart property investors will always look for good properties to invest,” he says.

Mah Sing’s Leong says: “We feel that medium to high-end landed residential property segment will still do well due to the limited investment options for good properties in prime locations”.

According to the National Property Information Centre report for 2008, transaction volume grew by 10% for houses priced above RM500,000 and by 33% for houses priced above RM1mil.

Leong says this probably reflects the supply demand gap for properties in this price range, especially as semi-detached homes and bungalows account for less than 10% of the residential property supply. Mah Sing has met close to 40% of its full-year RM393mil launch target given the continuous strong demand.

“We plan our launches very carefully, and generally, our products enjoy at least 80% sales take up,” Leong continues.

He says “affordable” homes can be from RM200,000 to RM500,000, depending on location and the property.

By The Star (by Rachael Kam)

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