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Friday, December 25, 2009

LOOKING AHEAD TO 2010: Property players upbeat on signs of economic recovery

PROPERTY developers are upbeat about their business outlook for 2010 as the Malaysian economy is set to recover.

The economy is expected to contract by 3 per cent this year but has been forecast to expand by up to 3 per cent in 2010. Prime Minister Datuk Seri Najib Razak has said he wants to do better and aim for a 5 per cent growth.

Ireka Development Management Sdn Bhd president and chief executive officer Lai Voon Hon thinks the sector could be in for a "mini boom" if the global economy stabilises.

But the availability of attractive mortgage rates and a low-entry cost to home ownership will be key for the sector in 2010.
"Signs of recovery are beginning to surface, albeit slowly. Buyers or investors who were sitting on the side, waiting for prices to bottom out or looking for distressed opportunities, are now returning to the market," Lai told Business Times.

The implementation of a 4 per cent Goods and Services Tax in mid-2011 could also benefit the sector as people may want to buy before houses cost more with the tax.

YTL Land & Development Bhd executive director Datuk Yeoh Seok Kian said having survived 2009, developers would be more bullish about 2010, with many anxious to move forward with their plans.

This means buyers can expect more launches in the Klang Valley, Penang, Johor and Sabah, featuring medium to high-end landed properties and high-rise residential and commercial towers.

But as the market regains confidence, developers may scale back incentives like discounts on downpayments.

Developers were also worried about the Real Property Gains Tax (RPGT) taking effect from January but this is no longer a concern as the policy has been reversed.

Now, only those who sell property within five years of purchase will pay the tax, as announced by Najib on December 23.

TA Global Bhd spokesperson Datin Alicia Tiah said developers will be more creative and innovative next year and develop products with a unique selling point to move sales.

Mah Sing Group Bhd group managing director cum group chief executive Tan Sri Datuk Sri Leong Hoy Kum said he expects strong recovery in demand for mid-tier to high-end landed properties.

He also expects appetite for commercial properties to improve.

A new scheme that allows Employees Provident Fund contributors to withdraw more from their Account 2 saving to buy their first house would also help the market.

However, the EPF has yet to announce details of this new scheme.

By Business Times (by Sharen Kaur)

Revision of property gains tax 'a perfect Christmas gift"

PETALING JAYA: The amendment to the real property gains tax (RPGT), which will be reimposed next year at 5% but now applicable only to transactions involving properties sold within five years from their purchase, is “a perfect Christmas gift” which will lift the local property market, analysts said.

Prime Minister Datuk Seri Najib Tun Razak announced the amendment to the RPGT on Wednesday, where the 5% tax would now only be imposed on properties sold within five years of the date of purchase.

The Government had previously wanted to impose the RPGT across the board, irrespective of the number of years of ownership, as announced in Budget 2010.

The premier had said the decision would cause the Government to lose about RM200mil in revenue, but the move was made following appeals from the Federation of Chinese Associations of Malaysia (Hua Zong) and the business sector.

The Government wanted to see stronger growth in the property sector next year in making the amendment, according to Najib.

Kenanga Research said the move to limit the RPGT to the five-year ownership ruling was definitely good news, adding that it would spare non-speculators from being penalised.

It noted that this would allow those holding properties for more than five years to sell their homes and recognise 100% of the capital gains.

“In turn, this spurs genuine property activities, which are supported by the country’s fundamentals, as opposed to speculative activities,” the research house said in a report.

Analyst Mervin Chow of OSK Research agrees that the amendment to the RPGT has ensured a much fairer policy as the 11th hour change in policy will benefit long-term property investors.

“(The amendment to the RPGT) is reflective of the main objective of having the RPGT in the first place, which is to rein in excessive speculation in the property sector,” he said.

ECM Libra Investment Research said the move was a “perfect Christmas gift for the property sector.”

“This will provide a much needed relief for the property sector as it sends an affirmative signal that the Government will adopt an accommodative stance to support growth in the property sector,” it said.

With the relaxation of the RPGT, ECM said buying interest might pick up, especially among those looking to upgrade their property ownship.

Real Estate and Housing Developers’ Association Malaysia (Rehda) president Datuk Ng Seing Liong said the property market would benefit from the amendment, and that it would have “a very significant stimulating effect” on property investments by both foreign and local investors.

“This can be acknowledged by the fact that the market reacted positively to the RPGT waiver in 2007 where increased sales and enquires were recorded,” Bernama quoted Ng as saying.

Propery player Naza TTDI also supported the amendment to the RPGT.

“With this new RPGT measure, we are confident the market will respond positively and this will help propel Malaysia’s property market among the other countries in the region,” Bernard Yong, a senior marketing manager with Naza TTDI, told StarBiz in an email reply.

Deloitte Malaysia country tax leader Ronnie Lim said the Government had done the right thing in imposing the RGPT only on properties sold within five years from the date of purchase.

“Prices of some property development companies’ shares have risen as the market showed its approval,” he noted in a statement.

But not everyone is excited about the RPGT amendment, with Regroup Associates Sdn Bhd executive director Paul Khong saying if there were any impact at all, it would be quite nominal. He noted that the move would basically encourage long-term investments in the sector.

“The RPGT has already served its original purpose of curbing speculation by holding to a five-year period. This is a long time and many short-term investors will continue to shy away from the market accordingly or weigh this into their purchase consideration,” he told StarBiz in an email reply.

The re-imposition of the RPGT has resulted in “the Malaysian property sector becoming slightly less attractive regionally as investors still have much choice locations to invest their money,” Khong said.

He reckoned that investors, especially foreign investors, would like to see a longer term and more consistent property policy, adding that recent policy changes pertaining to the property sector were short term and too sudden.

“Ever since Budget 2010 was announced, some property owners had been working feverishly to dispose of properties before Jan 1, 2010, the date when (the original) RPGT would be re-activated with tax levied on gains on disposals irrespective of the period of ownership,” he said.

A property buyer, who declined to be named, agreed, saying he had reaped the benefit of the RPGT before it was amended, as sellers were willing to sell at lower prices on the assumption that the RPGT would be implemented in full.

“I managed to buy an old aparment for RM160,000 although the market price was RM180,000 because the seller wanted to sell it fast, before the reimposition of the (original) RPGT on Jan 1,” he said.

By The Star (by Edy Sarif)

Higher, led by property stocks

Share prices on Bursa Malaysia closed firmer across the board yesterday, led by property-related stocks.

The benchmark FTSE Bursa Malaysia (FBM) Kuala Lumpur Composite Index reversed the morning's easier trend to finish 3.41 points higher at 1,263.94. It had opened 0.52 point lower at 1,260.0.

The revision of the real property gains tax policy bolstered renewed confidence in property counters and was described as the "perfect Christmas gift" for the sector.

"It provides a much needed relief to the sector as it sends an affirmative signal that the government will adopt an accommodative stance to support the property sector," said ECM Libra Investment Research in its research note yesterday.

The FBM Emas Index added 27.95 points to 8,421.43, the FBM Top 100 Index increased 25.48 points to 8,239.03, the FBM 70 Index advanced 38.15 points to 8,151.53 but the FBM ACE Index eased 17.99 points to 4,200.53.
The Finance Index rose 25.44 points to 10,905.94 prompted by Maybank which rose 3 sen to RM6.80 and CIMB Group which gained 2 sen to RM12.84.

Plantation stock PPB Group rose 30 sen to RM16.00 and Kuala Lumpur Kepong gained 2 sen to RM16.08.

Dealers said trading was moderate ahead of the long weekend amid positive sentiment buoyed by advances in regional markets.

The local bourse will be closed today for Christmas.

Gainers led losers 340 to 208 while 268 other stocks were unchanged.

AAG Consolidated was the most actively traded stocks but it eased 1/2 sen to 17 sen with 17.098 million shares changing hands.

Next on the actives list was Affin Holdings Warrants which also shed half-a-sen to 27 sen and Green Packet Warrants added 1/2 sen to 67 sen.

Among other actives, DSC Solutions fell 1.5 sen to 31 sen and Axiata Group was flat at RM3.02.

In heavyweights, Sime Darby fell 2 sen to RM8.97, Maxis added 1 sen to RM5.40 but Tenaga Nasional was flat at RM8.32.

Meanwhile, FBM KLCI futures on Bursa Malaysia Derivatives closed higher yesterday amid firmer underlying cash market, said dealers.

December 2009 rose 0.5 point to 1,264.0, January 2010 inched up 0.5 point to 1,265.0, March 2010 added 1.0 point to 1,265.0 and June 2010 went up 1.5 points to 1,265.5.

Total volume improved to 7,508 lots from 6,809 lots on Wednesday while open interest increased to 19,858 contracts from 17,561 previously.

By Bernama

Property stocks surge on gains tax move

PROPERTY stocks rose yesterday as investors bet developers would benefit from amendments to the real property gains tax (RPGT).

The tax, which comes into force next year, now only applies to those who sell properties within five years of purchase.

Shares of SP Setia Bhd, the country's biggest developer, rose 1.6 per cent to RM3.74, while those of United Malayan Land Bhd rose 4.5 per cent to close at RM1.40.

Shares of Glomac Bhd improved 4 sen to RM1.25, while IGB Corp Bhd ended up 3 sen to close at RM2.04.
Some analysts have upgraded the sector from neutral to overweight due to better property demand and the RPGT review.

The government had re-introduced the RPGT in the 2010 Budget announced in October. Under that announcement, the RPGT would be imposed on all properties sold from January 1 2010, regardless of the year of purchase.

But this was changed when on December 23, Prime Minister Datuk Seri Najib Razak said the RPGT will only be applicable to properties sold within five years from its purchase.

Real Estate and Housing Developers' Association (Rehda) chairman Datuk Michael K.C. Yam described the move as a New Year bonus for all.

"From equity point of view, economic sentiment and growth of the industry, it is a good move. A lot of people were aggrieved when the RPGT was announced and that anxiety has now been removed," Yam told Business Times via telephone.

But Yam said there should be clarity and certainty on the RPGT so foreign investors won't shy away.

Lingering concerns include whether the RPGT will exceed 5 per cent in future years.

Kenanga Research in a research report said the new rule would curbs speculative activities, mainly seen in the KLCC vicinity, Mont' Kiara/Hartamas and some areas on Penang island.

It would also allow those holding properties for over five years to sell their homes and recognise 100 per cent of the capital gains.

But the amendments to the RPGT also illustrates uncertainties in policy making, which may shake foreign investors' confidence, it said.

By Business Times (by Sharen Kaur)

Mah Sing to sell office building for RM226m

PETALING JAYA: Mah Sing Group Bhd has proposed en bloc sale of 278,182 sq ft of the 20-storey grade A commercial building, including 301 units of car park bays in the east wing of the Icon@Tun Razak, to T.S. Law Realty Sdn Bhd for RM226.5mil cash.

In a filing with Bursa Malaysia yesterday, Mah Sing said the Icon@Tun Razak was a freehold purpose-built office building by owned its subsidiary, Star Residence Sdn Bhd.

“The group pursued the proposed en bloc sale to ensure that it will be able to maintain its earnings, net assets and cashflow.

“And Star Residence offers to take up the tenancy of the Icon@Tun Razak for a period of three years commencing from the actual vacant possession date which shall correspond with the date of the sales and purchase agreement.

“Star Residence intends to lease the sale property for rental income in order to offset rental payable to the purchaser,” it said.

With the proposed en bloc sale, the Icon @ Tun Razak is fully sold.

In another statement to the exchange, Mah Sing said it had obtained the approval of Bank Negara for shareholder’s advance to its wholly-owned subsidiary, Mah Sing International (HK) Ltd, to subscribe to shares in its newly incorporated wholly-owned subsidiary, Mah Sing Property Consulting (Changzhou) Pte Ltd.

Mah Sing said it had remitted US$29.8mil on behalf of Mah Sing International for the subscription of the registered capital of Mah Sing Changzhou.

The intended business activities of Mah Sing Changzhou are property consulting and business consulting.

By The Star

Property JV to contribute RM66m to Sunway

PETALING JAYA: Sunway Holdings Bhd’s latest joint property development project in Singapore with Hoi Hup Realty Pte Ltd is expected to contribute earnings of about RM66mil over the project period, RHB Research Institute Sdn Bhd said.

The research house is assuming a profit before tax margin of about 20%.

In a filing with Bursa Malaysia on Wednesday, Sunway had said the 30:70 joint venture was expected to generate a gross development value (GDV) of S$420mil (RM1.03bil).

“The proposed joint venture is not expected to have any immediate material effect on the earnings per share, net assets per share and gearing of Sunway for the current financial period ending Dec 31 but is expected to contribute positively to the future earnings of Sunway group,” the group said in the statement.

The project, expected to be launched in mid-2010, features eight blocks of 12-storey residential flats (totalling about 500 units) with a clubhouse, multi-tiered basement car park, roof terrace and swimming pool.

The joint venture was signed between Sunway’s wholly-owned subsidiary Sunway Developments Pte Ltd and Hoi Hup Realty Pte Ltd and Hoi Hup JV Development Pte Ltd, to set up the joint venture company, Hoi Hup Sunway Property Pte Ltd.

RHB said the latest project was Sunway’s third partnership with Hoi Hup Realty and the first two ventures, also based on the same 30:70 equity structure, had been a great success.

The research house is also positive on the latest development in Sunway.

It said the project would help sustain Sunway’s property profits from Singapore beyond the next two to three years, upon the completion of the first two.

RHB has forecast that the first two property projects by Sunway in Singapore would contribute 21% and 28% to the developer’s total profit before tax.

Analysts said Sunway had been pretty aggressive in bidding for contracts locally and overseas.

It was reported that the group was bidding for foreign and local contracts worth about US$5.7bil.

Sunway is said to have an outstanding orderbook of about RM2.5bil. It has also been awarded a spate of jobs recently.

Early this month, the group was awarded a RM23.4mil job by Damansara Assets Sdn Bhd for piling and substructure works in Johor.

By The Star (by Leong Hung Yee)

Insas plans to buy more properties

INSAS Bhd is looking to buy more properties that can provide the group with sustainable earnings in the future.

In July this year, Insas together with a UK property group had bought a residential-cum-commercial property in London for RM128 million.

Director Wong Gian Kui said the new property will provide the group with an annual recurring income of STG1 million (RM5.5 million) each year from a 5 per cent rental yield.

The Chantery House Belgravia property comprises 29 apartments measuring 29,140 sq ft, with commercial space of 8,065 sq ft.
Insas bought the building close to the bottom of the London property market this year and believes that the investment will do well eventually.

Insas, which also deals in information technology, retail and stockbroking businesses, is financially healthy, with cash flow standing at close to RM500,000.

Its 2009 annual report stated that the group has RM430.6 million in bank deposits and RM30 million in cash.

In the current financial year ending June 30 2010, Insas has obtained a licence to carry out advisory and submission work in corporate finances activities.

"We have been successful in securing a number of advisory mandates. This new source of fee-based income will broaden our earnings base, increase our corporate client base and generate new sources of broking revenue," said Insas executive deputy chairman Datuk Thong Kok Khee.

The relaxation of capital controls for foreign investments has also opened up new opportunities for Internet broking.

"We are tying up with foreign stockbroking firms to access their global internet platform to enable our clients to buy and sell foreign securities. This will provide value-added services to our clients and further enhance our stockbroking revenue," he said.

Stockbroking business accounts for 15 per cent of Insas' revenue.

For the financial year ended June 30 2009, Insas' net profit almost tripled to RM57.1 million from RM20.8 million a year before. Revenue was up marginally to RM241.8 million from RM233.5 million.

By Business Times (by Rupinder Singh)

KFH aborts deal to buy The Icon

Kuwait Finance House (Malaysia) Bhd (KFHMB) has pulled out of a RM237 million deal to buy recently-completed The Icon, Jalan Tun Razak (East Wing) from Mah Sing Group Bhd.

The failed deal was announced by Mah Sing yesterday, which means that the RM42.67 million, being an 18 per cent upfront cost KFHMB paid earlier, has been forfeited.

Mah Sing also said that it has found a new buyer for the property in the form of T.S. Law Realty Sdn Bhd.

This is the second property deal that KFHMB has pulled out from. Last week, it had aborted its pact with YNH Property Bhd to buy the proposed 45-storey Menara YNH for RM920 million.

The property, which is yet to be built, is located on Jalan Sultan Ismail, Kuala Lumpur.
YNH had said that it was seeking legal recourse against KFHMB for backing out of the deal but the latter refuted, saying that their pact "was not legally binding".

Mah Sing, in its filing to Bursa Malaysia, said the deal was terminated after Prompt Symphony Sdn Bhd, a special purpose vehicle (SPV) set up by KFHMB and an Australian firm, failed to pay the balance of the agreed price.

Mah Sing, through wholly-owned Star Residence Sdn Bhd, had signed the sale and purchase agrement with Prompt Symphony in late November 2007.

Prompt Symphony is an 80:20 SPV set up by KFHMB unit and Autron Corp Ltd. It originally planned to buy The Icon, which measures 278,182 sq ft and will have 301 car park bays.

Prompt Symphony also signed with Maxim Heights Sdn Bhd, another Mah Sing subsidiary, to buy The Icon Mont' Kiara for RM285.4 million.

Mah Sing said that T.S Law Realty will pay RM226 million for The Icon Jalan Tun Razak's 20-storey East Wing.

"The Icon Jalan Tun Razak is the first purpose built grade 'A' office building in the vicinity of Kuala Lumpur City Centre to be completed with certificate for occupancy issued in 2009," it said.

Overall, the office building has more than 500,000 sq ft of lettable office space.

By Business Times (by Zuraimi Abdullah)

US home sales remain weak

BOSTON: The unexpected sharp drop in new home sales in the United States last month, coupled with rising mortgage delinquency rates, illustrates the delicacy of the current economic recovery after a brutal downturn.

The bursting of the housing bubble, which had been inflated by a lax credit environment, set off the worst US recession since the Great Depression of the 1930s.

While the economy shows signs of bottoming out, the surprise 11.3% drop in new home sales in November suggested Americans were still treading cautiously around major purchases, with recovery still tied to government money, analysts and investors said on Wednesday.

“Many people are looking at the rally in the stock market as a typical V-shaped recovery, that what worked before is going to work again,” said Keith Springer, president of Capital Financial Advisory Services, a money manager in Sacramento, California.

“They are not taking into account the demographic cycle that is changing. The biggest thing going on is you have an aging demographic turning from net spenders to net savers.”

Retirement-age Americans, many of whom have seen the value of their savings decimated by the drop in stock and house prices, are selling the large homes they raised their families in and buying smaller, more affordable dwellings.

By Reuters