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Monday, January 19, 2009

Local property market still attractive and sustainable

Ireka Corp Bhd executive director Lai Voon Ho expects downward adjustment in property prices

What is your outlook on the domestic property market in 2009?

The property market is likely to soften in 2009 unless the global economy is able to recover swiftly. There is an expected downward adjustment in property prices in general, but I believe prices in prime locations will hold out relatively well.

A rational property buyer with a long-term perspective would believe that Malaysia’s properties are still at an attractive and sustainable (price), as opposed to a lot of the other cities in the world.

The Malaysian property market is much more resilient as financial institutions have been more prudent in project lending.

Property companies today are also better capitalised, as stringent regulations are in place by both financial institutions and regulatory bodies, reducing the risk of widespread abandoned projects.

The other stabilisation factor has been the strong mortgage market, largely driven by domestic consumption and the young population. The local mortgage market remains resilient, thus maintaining access to relatively cheap home financing, ensuring the property market remains attractive.

With strong macroeconomic fundamentals, ample domestic liquidity and relatively robust job market, the belief that Malaysia will avoid ‘property price crash’, in my opinion, would hold true.

When do you think the domestic demand for property will pick up?

It is difficult to be certain when the property market will pick up again. However, I am optimistic it will ride out this uncertainty over the next two to three years and may return to a ‘boom market’ in the next four to five years.

Lessons learned from the current economic turmoil?

We can draw two important lessons. The first is the immutable fact that we are becoming a ‘globalised’ nation. At Ireka, we have always acknowledged the importance of thinking global in whatever we do, venturing into Vietnam while staying focused in Malaysia.

We will monitor the market very closely throughout 2009 and undertake in-depth feasibility studies, especially before embarking on new product launches.

We now have Mont’ Kiara as our i-ZEN branding showcase, providing us with the necessary experience and expertise to expand to new locations, such as Vietnam.

We will take a cautious yet opportunistic approach so that we will be in an advantageous position when the market recovers.

The second lesson is the vitality of ‘change’. ‘Change’ will be the guiding principle for the world economy in 2009 as we start to redesign the entire global financial architecture and change the way most financial businesses operate.

Our mantra for 2009 will be to ‘Embrace Change.’ It is no longer adequate for us to undertake tasks in a conventional manner – be it business decisions, branding platforms, marketing and sales strategies or product innovations.

The slowing economy has made it harder for consumers to part with their cash. However, our partnership with reputable property players such as CapitaLand of Singapore as well as leveraging on our i-ZEN brand of properties have provided greater value for each development and encouraged repeat buyers for our projects.

Business strategies for Ireka in the next two to three years?

Ireka will focus on its two main core businesses – construction and property development.

Over the next two to three years, Ireka will focus on completing its four construction projects in Malaysia with a total order book of RM1.14bil, which will help the group maintaining a healthy revenue inflow up to 2011. Ireka will continue to focus on providing integrated design-and-build services.

With an experienced team, Ireka is able to ensure cost and resources are optimised. With prudent cost management, the group hopes to achieve healthy margins while delivering completed projects in a timely manner.

On the property development front, Ireka will continue to earn a management fee from Aseana Properties Ltd (Ireka holds a 19.6% investment stake in Aseana) as its exclusive development manager. We will focus on completing projects like Tiffani by i-ZEN by the third quarter of this year.

For new projects, it is important for us to continue undertaking detailed market studies on the specific target markets. Innovative, targeted marketing strategy and branding initiatives are important steps to ensure that we focus on reaching the right audience.

By The Star

Analysts upbeat on REIT market

ANALYSTS remain upbeat on the real estate investment trust (REIT) market, with Axis REIT being one of the more favoured stocks.

The company is expected to release its full year results this Thursday for FY08 ended Dec 31.

An analyst with HwangDBS Vickers Research said Axis REIT was expected to deliver dividend per unit of 14.3 sen, or 12% gross yield, compared with 11% industry average in FY08.

Despite the weaker property market, it was anticipated that there was little risk of asset devaluation and tenancy non-renewals for Axis REIT given its diverse tenant mix, where only 19% of leases will expire in FY09 forecast.

“However, we have trimmed our FY09 and FY10 forecast net distribution by 8% and 9% respectively to reflect flat rental growth and one percentage point increase in interest cost, but maintain a “buy” call on Axis REIT for its strong operating cashflow and attractive 12% yield,” the analyst said.

“We believe Axis REIT’s RM1.65 net asset value per unit is intact despite the current weak sentiment, as demand for office and warehousing space in prime locations remains stable, and foreign direct investments have not dropped significantly in recent months.”

He said Axis REIT’s tenant mix comprised of 55% of properties in Petaling Jaya, 21% in Johor, 15% in Shah Alam and 5% each in Klang and Kedah.

“About 75% of Axis REIT’s properties are offices and warehouses, and the locations and tenant mix should cushion the REIT against a slowdown in demand in any one particular market segment or location,” he said.

The analyst said Axis REIT’s properties achieved 11% average gross property yield for 2008 and only about 19% of its leases were due for renewal in FY09.

“The tenancy renewal risk is low,” he said.

On the company’s expansion plans, the analyst said Axis REIT was unlikely to proceed with its planned placement of up to 120 million new units in the near term due to the weak market sentiment.

“Given its 33% gearing against the maximum allowable limit of 50%, we conservatively assumed that there will not be any acquisition for Axis REIT in FY09 to FY10. Management will only consider new purchases if they are accretive to unitholders,” he said.

On financing issues, the analyst said Malaysian banks were unlikely to pull back credit lines for properties with secured long-term tenants.

“But interest rates could rise slightly because of higher risk premium as a result of the global financial crisis,” he said, adding that the research unit estimated that for every one percentage point increase in interest rate, it will reduce Axis REIT’s FY09 forecast distribution by 5.4%.”

By The Star (by Danny Yap)

New loan plan to drive SP Setia home sales

Property developer SP Setia Bhd is confident of securing more sales this year with the introduction of its new 5:95 home loan package, its group managing director and chief executive officer Tan Sri Liew Kee Sin said today.

The package is expected to attract more buyers despite the economic slowdown as it offers a build-and-sell concept, Liew said.

“We had the soft launch last two weeks ago and the response was very encouraging,” he said.

Speaking to reporters after the launch of the package in Shah Alam, Liew said the concept required buyers to pay only five per cent of the purchase price and the remaining 95 per cent after completion of the property.
Legal fees, and stamp duty are also waived for the consumers under the new loan package, he said.

He added that the loan package will be applicable to all residential properties in the Klang Valley, Johor and Penang for three months starting today.

By Bernama