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Saturday, February 28, 2009

A long and tedious road ahead

It’s the results season again and the numbers rolled out by property companies are rather disappointing and point to poor take-up and an overall gloomy backdrop for developers.

Most of the companies recorded a huge drop in sales, some by more than 50%, in their latest financial quarter compared with the same period in the previous year.

The results are at least 5% below street estimates despite them having downgraded the sales and earnings expectations of property companies for the last two quarters since the middle of last year. Delays in construction works and slow sales are among the main culprits for the weak numbers.

While potential buyers are taking longer to decide or even deferring their decision to commit to any major purchase, including buying a house for now, given the prevailing gloomy outlook in the economic front, most developers are also holding back project launches as they worry about low take-up rate.

The extent of the adverse impact on developers depends on a few factors - size of unbilled sales carried forward from previous years, financial strength, creativity and product mix in their portfolio.

Although the high unbilled sales, especially from record sales in 2007, are still contributing to the financial books of developers this year, they will be depleted soon if sales continues to slow.

This year and to a certain extent 2010, property companies are still expected to turn in decent earnings due to the large unbilled sales brought forward from the last two years.

However, if launches continue to be deferred and plummeting sales do not bottom out, earnings contraction post-2010 could kick in.

Unless developers become more proactive and creative by adding more value and tweaking their product offerings to meet the changing market conditions, they will be in for many more quarters of underperforming results.

Special promotions and easier payment packages by some developers have proved to be effective so far and contributed to higher sales for them. The right product mix is also important. Developers that are catering to the mass market and building more affordable housing are still recording quite decent sales while those with more high-end products are not as lucky this time.

While Malaysia has been spared a hard landing unlike most of the developed economies which were hit almost instantaneously by the US-led global financial crisis, the poor financial results being unveiled show that the widening impact of the global financial crisis is already at Malaysia’s doorstep.

Going by the extent of damages reported across the length and breadth of the globe, it will be a long and tedious road ahead for Malaysians.

As one CEO puts it, it is now a question of survival for most companies and not about how much profit they are going to make.

Companies have either drastically cut down on dividend payment or are not declaring dividend at all, in their quest to conserve cash for more rainy days ahead.

Whether the prevailing low interest rates will be effective in reining in the slide in domestic demand and economy is left to be seen, especially when prices of food and fuel are still high, while the people’s confidence is at its ebb.

Besides providing a lifeline to the various business sectors, the Government’s second stimulus package, or mini budget, to be unveiled on March 10, should focus on offering some direct benefits to the people to tide over their dire straits caused by the global financial upheavals.

The focus should be to reach out to the people, especially the lower income group, including those who have recently lost their jobs due to companies that have downsized or ceased operations.

To promote home ownership among the people, it will be most beneficial if the Government is able to meet the request by the Real Estate and Housing Developers Association to give a RM10,000 grant to first-time house buyers of property priced below RM300,000. Granting full stamp duty exemption for property transactions will also be another effective measure to lower transaction cost for the people.

·Deputy news editor Angie Ng hopes that by casting the stimulus net as wide as possible to reach the needy business sectors and the common folk, the Government’s money will be well spent when all Malaysians rally and work together for a fast track recovery of the economy. And the funds have to be disbursed quickly to be effective.

By The Star (by Angie Ng)

Brisk auctioning since downturn

Licensed auctioneer and auction firm Ng Chan Mau & Co Sdn Bhd general manager Foong Chon Wai’s schedule has been pretty tight since the beginning of the year and he is expecting to be even busier in the coming months.

“The number of properties up for auction has increased by 5% to 10% since September last year mainly due to foreclosures and we expect more to come as banks’ non-performing loans increase,” he says.

This could be the scenario going forward for the property auction business as the current economic downturn takes a toll on the ability of property owners to service their mortgages, resulting in more properties going under the hammer.

A sale by public auction is a way by which properties are put up for sale by their beneficial owners, usually a financial institution.

Prospective buyers for the properties will gather at the auction venue and put in their bids or offers for the properties that they are interested in.

The bidding will stop when the highest price is called out three times by the auctioneer when no further bids are made. The person who submits the highest bid will be declared the buyer for the property.

Foong, who has some 20 years’ experience in the auction business, expects to see an increase in lower-end properties (RM50,000 and below) coming up for auction in the coming months as the lower income group is the most affected by the economic downturn.

Leong Auctioneer Agency has also experienced an increase of 10% to 20% in the number of properties going for auction since October last year.

Owner and licensed auctioneer Leong Wye Hoong says more high-end condominiums, in the range of RM250,000, in the Kuala Lumpur city centre (KLCC) have been going under the hammer since the beginning of the year.

Many of the owners of the properties are expatriates who are looking to get rid of their properties while the prices are still high, he adds.

Condominiums in the KLCC vicinity are currently selling for RM1,200 to RM1,500 per sq ft versus RM700 to RM800 some three years ago.

“Prices for such properties have gone down by 10% to 20%. We have a handful of condominiums in the KLCC area up for auction next month and more may be coming up as borrowers default,” Leong cautions.

He foresees prices going down by as much as 30% for the condominiums, going forward, as supply currently exceeds demand and prices need to be low enough to attract bidders.

Nevertheless, Foong does not expect the price of certain properties such as landed residential properties, commercial properties such as shoplots and industrial properties, including factories and agricultural land, to come down as demand for such properties is still strong.

Properties which are not in demand in places such as Bukit Beruntung, Nilai, Rawang, Mantin and Bangi could see prices pushed down further, he notes.

“In the past two months, people have become more cautious when buying property. They do not simply buy properties anymore and will normally wait for the properties to hit below market price first.

“This year we expect properties which are not in demand, especially due to their locations, to go through two or three auctions before they start attracting bidders,” he says.

Properties going for first auction will have a reserve price that is the market value of the property but the price will decrease by about 10% in every subsequent auction if there are no takers.

“There are opportunities for buyers looking to pick up properties in an auction, especially in such bad times, as they may find a rare property which will not be auctioned in better times.

“Such properties will attract lots of bidders but if a buyer does not mind paying a bit more than the market price, he should be able to snap it up,” Foong says.

Leong concurs that not all auctioned properties would be priced below market value. “It all depends on the type of property and location. For example, a shoplot in SS2 Damansara could be snapped up at a higher price.”

Some auctions that Leong had handled recently even made quite a bit of profit for their owners – a shoplot in Bangsar generated a surplus of over RM300,000 from an auction while a piece of industrial land in Gombak made a surplus of over RM700,000.

Auctions have also become popular as people are more aware of the benefits of buying auctioned properties.

Foong believes that property buyers can get pretty good deals in terms of pricing via property auctions.

“Auctions also enable the transaction to be done in the open and in a very transparent manner,” he points out.

Leong says auctioneers are now more innovative in their marketing efforts to attract bidders to their auctions.

“We do not just put up notices in the surrounding areas of the properties but also distribute flyers, put up the property details on our website and even have roadshows to inform potential buyers of when and where a certain auction will take place,” he says.

A PUBLIC auction could be a way for property buyers to snap up properties at a bargain but the auctioneers’ advice is for buyers to do their homework first before buying an auctioned property.

Some of the factors to take note are:

Legal advice

Obtain a copy of the condition of sale and seek independent legal advice on it.

Property inspection

Prospective buyers should inspect the property they are interested in by looking at the external facade and location first. The property interior may not be available for viewing.

Vacant possession

It is not a requirement for auctioned properties to come with vacant possession.

Bank loans

Prospective buyers should consult banks on the loans available for the auctioned property to ensure that financing will not be a problem.

Title search

An official individual title search at the relevant Land Office or other relevant authorities should be conducted on the property to ensure that an individual/strata title has been issued and that there are no caveats attached.

Enquiries with developer

Make the necessary enquiries with the developer, proprietors and other relevant parties to confirm the terms and conditions of the sale such as whether the sale is open to all races or to Malaysian citizens who are bumiputras only.

By The Star

Malaysia to review taxes to help builders

The Housing and Local Government Ministry will think of ways to provide more incentives for developers to ensure that the construction industry remain resilient despite the faltering economy.

Its minister, Datuk Seri Ong Ka Chuan, said the ministry would review the stamp duty and taxes to ease the burden of the developers in building more houses.

The ministry will monitor the situation and find ways to stimulate the construction industry, he told reporters after presenting the keys to the owners of Milan condominium in Damansara Perdana in Petaling Jaya today.

"Besides allocating RM100 million for the Housing Credit Guarantee Scheme this year to enable those without proof (statements) of income to obtain ahousing loan, we will think of other incentives," he said.
Ong said housing developers should build more low- and medium-cost houses to help keep the construction sector buoyant while those, who had completed their projects to price the houses at reasonable prices.

He said the ministry would continue to promote the ''Malaysia My Second Home''programme by enticing foreigners to buy houses priced above RM250,000.

Ong said it is important that the construction industry remain resilient to avoid retrenchment in the sector.

By Bernama

Technology leading the trend in office space

ADRIAN Symons, director of M Moser Associates Sdn Bhd, a creator and designer of office space, has his desk by the window. It is a space he shares with 10-odd staff, with desks next to each other. There is no room for confidential chats on the phone line.

If there is anything private and confidential to be said, there is always the meeting room.

Although Symons is heading the office, he believes that the room for the boss with the huge desk in the centre is more hierarchical than anything.

“The office has gone egalitarian. The pantry is a space to encourage people to meet and chat over coffee and exchange information, not so much as a place where people take time off work. A client, with a three-storey building, did not want a lift. They wanted people to meet on the stairs. Barriers are being removed to encourage interaction between co-workers and between management and workers,” says Symons.

In some offices, the pantry is located at the front to create a sense of warmth, that this is a friendly place to be in. A lot of information can be exchanged over coffee, not to mention relationships are being formed which promotes the general office environment. Increasingly, barriers are being removed in the office environment.

“Contributing to this exchange of information is the use of technology in the work place. And technology will lead the way,” he says.

Some offices have strings of meetings rooms which are not used, or may have huge meeting rooms.

“How many people meet? How many meetings and their duration? These factors should be considered to determine what is needed. In some cases where two companies share a floor, is it possible to share the meeting rooms and free up space?

“Most trends in the office space environment is led by technology. A person goes to the space for a function. In some offices, there is no designated space for people, just space to perform a function.

People, or the software, and technology will have to meet and housing both of these is the building, which is part of the hardware.

“Generally, clients have already pre-determined a building before they seek our services. They benefit more if they speak to us before they commit to a building. We also help with the pre-leasing stage, says Symons.

In Malaysia, where offices can be located in a two-storey shoplot or a more sophisticated office tower, there has to be a certain degree of efficiency in terms of space, taking into account how people work today and the evolving office technology. Besides the laptop and mobile phone, there is a plethora of office gadgets to help us communicate.

“How we use space and technology depends to a great extent on how IT, human resources and accommodation (the building we occupy) come together. But of late, a new trichotomy has emerged and this comprises security, marketing and branding and corporate identity.

Huge amounts are spent on branding to keep a service or product in the minds of customers, but many in top management have forgotten that the space a company occupies can itself be part of the branding process. And this is where strategic planning of a building comes in.

“Different buildings have different efficiency, with some being more suitable for some industries than others. How an office is designed or how space and colours are used are part of the branding process,” says Symons.

Build the building inside out. Let the interior drive the architecture. The outside of the building is not used but it is the interior that is used. That is what is meant by a purpose-built building, a structure designed and laid out according to the needs and requirements of the client, says Symons.

A German chicken feed company bought two pieces of land. They wanted to build an office and storehouse/warehouse. We build the building inside out; three-storey on a rectangular piece of land at the end of which is the warehouse. The interior drove the architecture. They did not want lifts because they wanted the staff to mix and meet on the stairs and on the floor, says Symons.

Besides contributing to the branding and image of the company, a well-designed and cheerful office can also be a significant factor in retaining existing staff and attracting new ones.

While it may sometimes be impossible to change what is already bought or leased, it is, in most instances, possible to make the best of what’s available.

“Not all buildings are equal. Some may be more suitable for certain industries compared to others. Fitting out a building is a costly affair. So by a process of elimination, you arrive at the best option or you work with the architect,” he adds.

By The Star (by Thean Lee Cheng)