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Wednesday, May 27, 2009

Low property purchases by MM2H participants

GEORGE TOWN: If each of the 11,738 participants of the Malaysia My Second Home (MM2H) programme between 2002 and 2008 were to invest in a residential property, the country would have recorded RM7.8bil worth of sales from them. But the actual sales amounted to RM407mil as only 510 of them bought houses during this period.

Tang Chee Meng ...Foreign real estate investors are more likely to invest in countries that they are familiar with

“If each of the MM2H applicants were to buy just one property, there would have been 1,676 properties sold a year, with an estimated gross sales value of RM7.84bil or RM1.12bil a year,” Henry Butcher Malaysia chief operating officer Tang Chee Meng told StarBiz.

Tang was speaking on the sideline at the recent Penang Real Estate Conference, organised by investPenang and the Socio-Economic & Environmental Research Institute, which was officiated by Penang Chief Minister Lim Guan Eng.

Henry Butcher Malaysia (Penang) was the technical advisor for the conference.

“According to the National Property Information Centre (Napic), foreign purchases comprised only 0.62% of the 756,000 housing units sold between 2003 and 2008.

“The most sought after properties by foreigners are those priced between RM250,000 and RM500,000,” Tang said.

The seven states surveyed by Napic are the Federal Territory, Selangor, Penang, Kedah, Johor, Sabah and Selangor. The top MM2H buyers were from China, Britain, Iran and Japan.

Tang said the global recession presented new challenges to Malaysia’s MM2H market.

“Distressed properties in the other countries like the United States, Britain and Singapore offer attractive opportunities to international investors as property prices and exchange rates in those countries have dropped. The challenge now is to convince international investors that Malaysian properties offer better value than sub-prime properties elsewhere and that property values will hold steady despite the uncertain economic environment,” he said.

Tang said there was also great potential in the tourism market.

“Foreign real estate investors are more likely to invest in countries that they are familiar with.

“In 2008, Malaysia saw a record 22 million tourist arrivals from Singapore, Thailand, Indonesia, Brunei, China, India, Japan and Britain.

“If we can convince just 0.01% of these tourists to invest in property in the country, it will translate into 2,200 properties sold.

“At an average of RM668,000 a property, it will bring in some RM1.5bil sales,” Tang said.

To enhance Malaysia’s competitive edge as a MM2H destination, Tang said the property industry should take part in Malaysia Property Inc’s (MPI) roadshows.

MPI is an initiative of the Federal government to promote and brand Malaysia as an international property investment destination.

The target markets include Singapore, South Korea, Britain, Japan, Hong Kong and Indonesia.

Tang said industry players should collaborate with organisations with high net worth database to promote Malaysian property.

“They could look into hosting events with publications such as MillionaireAsia and 100 Thousand Club magazine to tap high net worth individuals in key Asian countries,” he said.

By The Star (by David Tan)

E&O posts loss on lower property contribution

KUALA LUMPUR: Niche property developer Eastern & Oriental Bhd (E&O) has posted a RM44.6mil net loss for its fourth quarter ended March 31 compared with a net profit of RM9.27mil a year ago.

For the full year, the group saw a RM37.7mil net loss versus a RM128.9mil net profit in FY08, while revenue also fell to RM302.6mil against RM516.4mil previously.

A lower contribution from the property division, as well as provision for impairment loss on investments of RM10.24mil and loss of RM19.976mil on disposal of 50% stake and preference shares in associate Puncak Madu Sdn Bhd to Selangor Properties Bhd were the reasons for the lower full-year earnings, the group said in a statement. The property division accounted for more than 80% of total revenue in FY09.

While the company slipped into the red in FY09, it is looking at strengthening its balance sheet and reducing its gearing with a rights issue that is expected to raise RM200mil.

E&O executive director Eric Chan told StarBiz the severity and suddenness of the economic downturn in 2008 necessitated “pre-emptive balance sheet management strategies”.

E&O announced yesterday a renounceable rights issue of irredeemable convertible secured loan stocks (ICSLS) 2009/2019 on the basis of one new ICSLS for every two shares held. The nominal value 10-year ICSLS of 65 sen each come with a coupon of 8% per annum.

E&O has the option to call for conversion of the ICSLS into new E&O shares after two years of issuance and if its share price exceeds RM1.

E&O’s share price has been penalised since its merger with and delisting in July/August last year of E&O Property Development Bhd which left it with high gearing.

Chan said the rights issue was only part of a two-pronged approach to address the gearing concerns and funding needs.

In total, the group aims to raise RM500mil. In addition to the RM200mil from the ICSLS issue, E&O is raising another RM300mil from the disposal of non-strategic landbank.

“This programme started in January. To-date, we have raised just under RM100mil from our asset disposal including from the unwinding of the joint venture with Selangor Properties,” Chan said.

At present, E&O’s gearing is high at 0.8 times but the group’s loans are not due immediately having been extended to 2014.

According to Chan, with the RM200mil from the ICSLS scheme, E&O’s gearing falls to 0.46 times.

A further RM300mil from the disposal of non-strategic landbanks would bring gearing to a low 0.16 times.

Together with new property launches that would generate even more cashflow, gearing would be slashed to a negligible level in two to three years, said Chan.

By The Star (by Loong Tse Min)

US home prices fall 19.1% in Q1, biggest fall in 21 years

NEW YORK: U.S. home prices are at levels not seen since the end of 2002, but a closer look at data released Tuesday shows the worst may be over for some metropolitan areas.

The Standard & Poor's/Case-Shiller National Home Price index reported home prices tumbled by 19.1 percent in the first quarter compared to the first quarter last year, the largest drop in its 21-year history.

Home prices have fallen 32.2 percent since peaking in the second quarter of 2006.

In cities across the country home prices varied dramatically, depending on affordability, foreclosure activity and the local economy.

The bottom may be in sight in some markets, but nationally home values are expected to decline - though at a slower pace - for the rest of the year.

"We continue to believe that it is unlikely that we are anywhere near a bottom in nationwide home prices," according to Joshua Shapiro, chief U.S. economist for MFR Inc.

It's hard to believe it could get much worse for homeowners in the Detroit area. Homes there are worth what they sold for in 1995.

And while that's good news for homebuyers, the implosion of the auto industry and economic fallout means fewer buyers have the money to qualify for a mortgage.

"I feel like houses here are free," said Detroit area real estate agent Rose Marie Jouan with Re/Max Showcase Homes.

Her house that she sold in 2004 for $200,000 is on the sales block, bank-owned, for $86,000.

In Phoenix and Las Vegas, where prices have plunged by half since their peaks, home values have receded to levels not seen since the beginning of the real estate boom. Phoenix prices are at early 2001 levels and Las Vegas values hover at mid-2002 prices.

Home values in Charlotte, North Carolina, Portland, Oregon, and Seattle are steady at 2005 prices, the best showing of all 20 cities in the Case-Shiller report.

All three were some of the last to fall into the housing slump.

The Case-Shiller report offered other hopeful signs the worst may be over for some cities.

Denver prices posted an increase over February, while Dallas prices were flat. Separately, Case Shiller said its 20-city index of home prices fell by 18.7 percent from the year before, and the 10-city index lost 18.6 percent.

However, the rates of decline slowed in March, the second straight month they didn't set record price drops.

Still, there are no signs home prices nationally have hit bottom.

"We see no evidence that a recovery in home prices has begun," said David M. Blitzer, chairman of the S&P index committee.

All 20 cities showed monthly and annual price declines, with nine setting annual records.

Fifteen cities posted double-digit drops and Phoenix, Las Vegas and San Francisco recorded declines of more than 30 percent.

Minneapolis posted a 6.1 percent decline from February to March, the biggest monthly drop on record for any metros in the indexes.

Ron Peltier, chairman and chief executive of HomeServices of America, attributed the drop to a jump in distressed sales in March.

Economists will get a look at April housing data Wednesday when the National Association of Realtors releases sales data for previously owned homes, and on Thursday when the Commerce Department puts out numbers for sales of newly built homes.

Economists surveyed by Thomson Reuters expect existing home sales to rise 2 percent from March to April, while new home sales are forecast to rise by 1.1 percent.