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Saturday, October 24, 2009

Better days ahead for condo market

Artist’s impression of 11 Mont’Kiara. The project will be completed in 2011.

The mere mention of Mont’Kiara easily strikes a chord among many Klang Valley folks and property investors as it is a vibrant neighbourhood and is one of the favourite property hotspots in the country.

There are currently close to 10,000 completed condominiums in Mont’Kiara, its neighbouring areas in Sri Hartamas and the newer Dutamas area. Another 6,000 units are expected to come on stream in the next couple of years.

Although transactions almost halted early this year following the global financial crisis, sentiment is gradually recovering since the middle of this year, with more transactions concluded in the secondary market.

Overall, the market had fared quite well although average prices of high-end condominiums in Mont’Kiara have dropped by 10% to 15%. Thanks to the buyers’ tenacity and the more flexible repayment terms offered by financial institutions, there was no fire sale reported so far.

Knight Frank Research, in its latest Real Estate Highlights, says although the market for high-end condominiums is still soft, prices seem to have bottomed out especially for suburban condominiums.

The market is starting to show some signs of recovery as more buying activities are seen in the second half of the year.

However, the report points out that despite the renewed interest, the downside of the sector lies in the incoming supply of new condominiums which will be completed in the second half this year and in 2010.

According to Zerin Properties chief executive officer Previndran Singhe, the asking prices for the older residences range from RM400 to RM650 per sq ft, while the newer projects have price tags from RM450 to RM750 per sq ft.

Rental rates are holding out quite well with the older developments enjoying yields of between 7% and 10% last year.

Previndran says the higher entry cost for the newer projects will push yields down to around 6% this year.

“Prior to this bout of global crisis, most properties in Mont’Kiara have seen substantial increases in prices, averaging gains of at least 50% for most of the completed developments. Moving ahead, we expect prices of apartments to hold,” he adds.

Although there is a short term over-supply issue, Previndran says the situation is expected to reverse as the attractiveness of Mont’Kiara picks up again among investors given its superb amenities, international schools and business activities.

The number of hits in the company’s website,, has picked up from about 3,500 a month early this year to about 8,000 to 9,000 hits a month now. On the ongoing projects, he says projects under construction are still on schedule and some, including MK10, Gateway and Ceriaan Kiara, are almost completed. The launch of some of the planned developments including MK28 and 163 Kiara have been pushed to next year.

“Some of the projects are highly anticipated as there are investors and owner occupiers still looking for newer properties to invest in Mont’Kiara. The bigger units are always in demand by owner occupiers while lower range units are popular among investors,” explains Previndran.

Echoing his positive sentiments, Sunrise Bhd senior manager for branding and community development Anne Tong says the company is seeing a strong return of buying interest for its projects in recent months, notably for 11 Mont’Kiara and the Mont’Kiara Residence bungalows.

“In a space of seven months since March, we have chalked up property sales of RM309mil from just these two projects, of which RM239.3mil have been sales and purchased agreement (SPA)-signed. We also booked in SPA-signed sales of RM31.5mil from the balance of other existing projects such as Mont’Kiara Meridin and Solaris Dutamas,” she adds.

Tong says the company’s projects have average occupancy rate of 80% to 90% for the older projects and 50% to 60% for the newly completed ones.

“This means that more and more people are calling Mont’Kiara home. We are positioning Mont’Kiara as the preferred place to stay in Kuala Lumpur, and differentiating the Sunrise Mont’Kiara community further within the area,” she adds.

Sunrise has widened its product range to suit all market segments – from small units of under 1,000 sq ft for singles and couples, to larger units of 3,500 sq ft for bigger or extended families.

Previndran says Mont’Kiara will continue to be an obvious property hotspot as it has gained the critical mass to continue to prosper.

“Adding to that is the limited supply of land that puts a natural limit on future supply,” he points out.

On some of the “vogue” products that should be considered by developers, he cites projects with more green elements, well designed layouts, strong management, good finishes and security. They should have varying sizes from 600 sq ft to 2000 sq ft.

“As for commercial products, products that will do well include proper service apartments and hotels, and smaller office suites with corporate designs,” he adds.

By The Star

Making right buy can result in big gain

MALAYSIAN property has withstood the test of time quite well and the many economic downturns over the years have failed to weaken its position as an attractive and reliable investment instrument.

Whether it is used as a roof over our head or for capital appreciation and rental income, many Malaysians have benefited from buying property in one way or another.

Astute property investors who have bought the right property, whether residential or commercial, at the right time have reaped attractive capital appreciation or rental yields from their investment.

In fact, there is quite a number of successful investors who have gone on to become multi-millionaires by merely leveraging on property investment.

Those who have made it as successful property investors have sworn by its efficacy as the first step towards achieving one’s financial freedom. The list of the “Who’s Who” and gurus of property investment include Renesial Leong, dubbed the Queen of Properties; Dr Peter Yee; and personal finance trainer Azizi Ali.

The latest global financial crisis has shown that local property, especially landed units, are resilient and have withstood the onslaught of the “value eroding” impact of the economic downturn.

Although prices of high-rise residences in Mont’Kiara have dropped between 10% and 15% while those in the KLCC areas have eroded by up to 20% in the sub-sale market, landed residences have held out quite well.

So, is this the best time to invest in property and start building up one’s portfolio of real estate assets to join the club of property investors?

For those with the financial resources and surplus cash, investing in property is certainly a much better option than stashing one’s cash in a savings or fixed deposit account going by the low interest rates.

Even those who don’t have much ready cash to invest or have low tolerance for risk can afford to build up a comfortable nest of property assets by leveraging on the low cost of funds prevailing today.

Given its reputation as a good hedge against inflation and the possibility of higher inflation setting in when the economic recovery picks up steam down the road, there is a stronger possibility for property prices to strengthen than to depreciate going forward.

Before prices start to climb again, it will be a good time to lock in at the current prices.

It must be noted that the current environment for property buying is very positive given that the entry cost is still at an all time low.

If developers continue to offer their housing packages and allow buyers to sign up for a property with just a 5% to 10% down payment, the low entry cost will continue to make it easy for property ownership.

Coupled with the other perks including the low mortgage rates of 3.2% to 3.5% a year offered by financial institutions, zero mortgage instalment until the property is completed, and free legal fees and stamp duty for sale and purchase agreement and loan documentation, it must be one of the best time to shop around for a house if you have not already done so.

The exemption from real property gains tax (RPGT) for profits made from property sales will also be one of the inducements for more buying and selling activities. (Under Budget 2010, the Government has proposed to reimpose the RPGT next January.)

There’s also the potential wealth creation effect to consider when prices start to appreciate again.

Based on a 13-year property cycle, renowned mapmaker and property researcher, Ho Chin Soon predicts the local property market will peak around 2011 if the economic recovery continues unabated.

He says the last property boom which took place before the Asian financial crisis in late 1997 saw a 70% jump and a 14% compounded growth rate in property prices over a four year period.

Property investment looks like a wise choice. After all, unlike some other intangible investment instruments, property is a tangible asset and its value will not just evaporate overnight unless a major natural disaster struck.

To ensure they make the right purchase, the onus is on property buyers to do the necessary homework of checking out the background of the developer and the project’s feasibility before signing on the dotted lines.

While believing in the tenacity of the local market, deputy news editor Angie Ng cautions against an over-speculative market as unchecked spiralling property prices are prerequisites for potential bubbles.

By The Star (by Angie Ng)

New EPF scheme for home purchase

The government will launch a scheme in January allowing Employees Provident Fund (EPF) contributors to use current and future savings in Account 2 to boost house ownership.

The scheme, announced under the 2010 Budget, will help contributors secure higher financing to buy higher-value or more houses. However, it is limited to the purchase of one house at a time.

"While it is a good idea conceptually as it aligns with the goal of 'every Malaysian will own a home', it remains unclear how the future savings in Account 2 will be calculated," PricewaterhouseCoopers Taxation Services Sdn Bhd executive director Ng Say Guat told Business Times.

She said uncertainties such as unemployment, default in future contributions and amount of future salary could impact the future savings.

Meanwhile, property sellers will be disappointed that the Real Property Gains Tax Act 1976 (RPGTA) has been reintroduced, after it was waived two years ago.
Under the 2010 Budget, disposal of real property will be taxed 5 per cent from January 1 next year.

The tax is collected through a withholding mechanism under which the buyer keeps 2 per cent of the purchase value and pays to the Inland Revenue Board.

Individuals will be given an exemption up to RM10,000 or 10 per cent of the gains, whichever is higher.

However existing exemptions under the RPGTA are retained for gifts between parent and child, husband and wife, grandparent and grandchild.

The exemption also applies for the sale of one residential property for a citizen or permanent resident of Malaysia.

"The re-imposition (of RPGTA) is counterproductive to the efforts to stimulate the property market in these trying times," Real Estate and Housing Developers' Association Malaysia president Datuk Ng Seing Liong said.

By Business Times (by Jeeva Arulampalam)

Property gains tax makes comeback

The Government has proposed to reimpose real property gains tax (RPGT) for gains arising from property disposal.

Based on the Finance Bill, disposal within two years of acquisition will be taxed 30%; in the third year, it will be 20%; in the fourth year 15%, while disposal within five years and beyond will still be subject to 5% tax.

The latest measure, which will come into effect in January next year, has been described as “a knock-out punch” by Deloitte Malaysia country tax leader, Ronnie Lim.

“It was merely four short sentences in the 2010 Budget speech. However, that short reference to RPGT carried a knock-out punch,” Lim said in a statement yesterday.

He pointed out that from the speech itself, many would have thought that a low rate of tax of 5% would apply to most gains arising from disposals of real property.

“Be prepared for a shock – this is not the case and the highest rate of RPGT will be 30%,” he said.

Most rates of RPGT from January 2010 will be restored to those prevailing immediately before its suspension in April 2007.

Lim said one notable difference was that the exemption from tax for disposals after the fifth year of acquisition has been removed.

“Even where a property was purchased over 20 years ago, a gain on disposal from 2010 will attract 5% RPGT (without any indexation of acquisition price to reflect current purchasing power of the ringgit),” he said, adding that a flurry of property transactions could be expected soon.

Concurring with Lim, OCBC Bank Bhd director and chief executive officer Jeffrey Chew described the measure as a counter-productive move in efforts to encourage property investments among local and foreign investors, particularly to attract real estate investment trust investors.

“Furthermore, this would make Malaysia’s property market less attractive compared to other neighbouring countries in the region despite our property prices being among the lowest in the region,” Chew said.

However, Khong & Jaafar Sdn Bhd managing director Elvin Fernandez gave the thumbs up to the RPGT, saying “it shows that Malaysia, like other Asian countries, is not for unfettered speculation.”

“The RPGT is an anti-speculative tool, not a revenue earner for Government coffers,” he added.

To promote home ownership and enhance the people’s quality of life, the Government has also proposed a scheme to allow Employees Provident Fund (EPF) contributors to utilise their current and future savings in Account 2 for home purchase.

Meanwhile, to encourage green technology in the property sector, building owners obtaining Green Building Index (GBI) Certificates from Oct 24 until Dec 31 will be given income tax exemption equivalent to the additional capital expenditure in obtaining such certificates.

Those purchasing buildings with GBI certificates from developers will be given stamp duty exemption on instruments of transfer of ownership.

The exemption amount is equivalent to the additional cost incurred in obtaining the GBI certificates. This exemption is given to buyers who execute the sale and purchase agreement from Oct 24 until Dec 31, 2014.

And to promote rehabilitation of abandoned housing projects, the Government will consider extending appropriate financial assistance to rehabilitate low and medium-cost houses based on the existing project list.

An allocation of RM200mil will be provided under the housing and local government ministry.

Under the Government’s initiative to provide housing facilities for the low and middle-income groups, the National Housing Department will provide 74,000 low-cost houses to be rented in 2010.

By The Star

MBAM: Budget 2010 continues to support industry

KUALA LUMPUR: The Master Builders Association Malaysia (MBAM) said Budget 2010 has continued to support the construction industry through the promotion of public-private partnership initiatives.

President Ng Kee Leen said the construction sector expected a 3.5% growth this year, which would mean the third successive year of positive growth.

“Furthermore, the construction sector is envisaged to expand 3.2% in 2010 and the sector is expected to benefit from economic recovery and ongoing construction activities under the second stimulus package,” he said in a statement.

He said MBAM was appreciative that the Government would focus on the development of the five growth corridors with emphasis on provision of infrastructure and public amenities.

“The industry wishes the Government will ensure the speedy and efficient implementation of the projects,” he said, adding that the MBAM was also supportive of Government’s efforts to support the Green Building Index.

“It was announced that RM1.5bil will be provided as loans to promote green technology and this will also help spur the initiative. The setting up of the National Green Technology Centre will also give further currency and credibility to the Government’s effort to promote Green Building Initiatives,” he said.

Meanwhile, UDA Holdings Bhd, which received a RM30mil contract by the Government to build 300 units of Kedai Desa in rural areas nationwide, said it would strive do an efficient job and deliver the project on time.

“... It shows the Government’s sensitivity to help the people in rural areas on providing business opportunities for them to improve their income. This is the concept of One Malaysia,” said managing director Datuk Jaafar Abu Hassan.

Ho Hup Construction group managing director Lim Ching Choy said the provision of RM4.7bil for road and bridge projects under the budget would boost the construction industry and the company was looking forward to participate in the projects.

“It is a very good initiative by the Government to enhance infrastructure as the impact will not just benefit the construction industry but also other businesses involved directly with the construction sector,” he told StarBizWeek.

Malaysian Resources Corp Bhd group managing director Shahril Ridza Ridzuan told StarBizWeek that the company was looking forward to take part in any project initiated by the Government under the construction budget.“(Our focus) will be on infrastructure and transport infrastructure projects,” he said.

By The Star

RM9bil set aside for construction sector

The construction industry has been given a shot in the arm with a RM9bil allocation next year to finance various infrastructure projects.

Of this, RM4.7bil will be allocated for road and bridge projects and RM2.6bil for water supply and sewerage services.

A provision of RM899mil has been made for rail facilities, RM820mil for ports and sea services and RM276mil for airport projects.

An allocation of RM2.3bil has been made to upgrade infrastructure in rural areas, including RM857mil to construct 510km of rural roads and 316km of village roads.

Among the roads to be constructed are in Kapit, Lawas and Simunjan in Sarawak, as well as Kinabatangan, Kota Belud and Keningau in Sabah.

An allocation of RM530mil will be made for water supply to 16,000 houses, RM825mil for electricity supply to 30,000 homes, and RM88mil to implement 5,356 social amenity projects such as rural clinics, community halls and public recreational areas.

Under its plans to develop Putrajaya and Cyberjaya into more lively and vibrant townships, efforts will be intensified to increase business, commercial and recreational activities there.

Among the projects to be implemented in Putrajaya are the construction of a hypermarket, international school, art gallery, museum, vehicle repair complex and recreational centre.

For Cyberjaya, the projects include affordable houses, hypermarket, business complex, parking lots, recreational centre, schools, and a more efficient public transport system.

The Government also plans to develop wakaf properties throughout the country for charitable purposes.

Initially, an allocation of RM20mil will be provided.

Under this initiative, Yayasan Waqaf Malaysia (YWM) will implement programmes that will focus on economic development, particularly small-scale high-impact projects, as well as education, social and welfare of Muslims.

The main focus of YWM is to eradicate hardcore poverty as well as enhance the socio-economic status of Muslims.

Projects planned include the construction of wakaf rakyat shops at selected mosques and small business bazaars for the public, including the asnaf.

By The Star

RM9b for infrastructure development

The government has allocated RM9 billion to finance infrastructure projects.

More than half of the money, or RM4.7 billion, will go to roads and bridges construction and RM2.6 billion to upgrade water supply and sewerage services.

Another RM899 million is for railway facilities construction, RM820 million for seaports and RM276 million to upgrade airports.

Master Builders Association of Malaysia hopes the government will speed up the project implementation.
"This year, the construction sector is expected to grow 3.5 per cent," said its president Ng Kee Leen.

With the setting up of the National Green Technology Centre, the association looks forward to new guidelines and specifications in the design of sustainable homes, office blocks and structures.

Green buildings can be built via modular system, using renewable building materials, incorporating lighting and air-conditioning systems that are energy efficient and fitted with dual flush toilets.

By Business Times