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Saturday, July 31, 2010

Property market to stay vibrant

Malaysia's property market is due to stay vibrant in 2010 due to low borrowing costs, easier foreign ownership rules and a new home purchase scheme by the nation's biggest pension fund.

Last year, there was a 0.7 per cent drop in the total number of property transactions but the number of unsold properties fell by 13 per cent for residential units.

"This shows that the property market in Malaysia is more resilient and stable, especially in demand locations such as in the Klang Valley," said Housing and Local Government Minister Datuk Wira Chor Chee Heung.

He spoke at the opening of a three-day property fair organised by in Kuala Lumpur yesterday.

The total number of property transactions dropped 0.7 per cent to 337,859 in 2009 from 340,240 in 2008. The bulk of it came from the housing market, making up 63 per cent of the total deals and 52 per cent in terms of value.

"The total number of launches reduced only slightly from 48,830 units to 45,909 units in 2009, possibly due to some cautiousness among some developers. Selangor and Johor remains the leading states with 8,430 units and 7,099 units respectively," he said.

Speaking to reporters later, Chor lauded the Employees Provident Fund's (EPF) latest move, which would boost the local housing industry.

From August 1, EPF will launch a flexible withdrawal scheme for higher-end houses.

The scheme is open to contributors who have not made withdrawals under the existing scheme to buy a house or reduce their housing loans.

According to the EPF, the main difference of the new scheme is that it is designed to give qualifying members, who initially were not eligible for a higher loan, a better chance to boost their loan eligibility.

By Business Times

Empire mall sets RM350m revenue goal

MAMMOTH Empire Holdings Sdn Bhd expects to rake in RM350 million revenue a year from its newly opened Empire Shopping Gallery (ESG) in Subang Jaya, Selangor.

The five-storey lifestyle and contemporary mall features 180 retail stores, with anchor tenants like Tangs, Fitness First Platinum and Jaya Grocer.

ESG is part of the freehold Empire Subang commercial development, which includes the 10-storey, 210-unit Empire SoHo (small office/home office); 12-storey Empire Tower; and 13-storey, 199-room Empire Suites Hotel, a boutique hotel.

The RM450 million development is located next to the KTM station.

Datuk Sean Ng, managing director of Mammoth Empire, said that 90 per cent of the mall has been leased at between RM10 and RM25 a sq ft.

"We expect to lease the balance 10 per cent within the next two to three months. We are selective on the tenant mix as we want to maintain a certain quality," Ng told reporters after the official mall opening yesterday.

Mammoth Empire group executive director Danny J.Y. Cheah said it was looking to build its hotel business.

The Empire Suites Hotel is the first property to be managed and operated by the group.

The group is also developing Empire Damansara in Damansara Perdana, Petaling Jaya, which will feature residential units, SoHo, retail shops, offices and a hotel.

According to Cheah, Mammoth Empire is planning to launch an integrated development and a medium- to high-end gated residential project in Damansara Perdana by the year-end.

The integrated development will comprise SoHo, an office and residential tower, and a third hotel for the group.

Cheah said the master plan and value of the two projects are still being finalised.

"We believe there is a good growth story in Damansara Perdana for hotel, commercial and retail (developments). Early this year, we launched Empire Damansara and it was fully sold in two months," he said.

Cheah added that the group was talking to international operators to manage its hotels in Damansara Perdana.

By Business Times

Redeveloping Kampung Kerinchi

David Khor says Bangsar South City is changing the landscape of the area.

The rapid development of Bangsar South City in Kampung Kerinchi by UOA Group is now changing the landscape of the area that used to be a slum with squatters.

UOA Holdings Sdn Bhd general manager David Khor says the group is braving itself with the challenges and is optimistic of successfully developing the project within a few years.

“We are trying to lift the image of Kampung Kerinchi and along the way, contribute back to the people here by providing new amenities, jobs and upgrading the access roads,” Khor tells StarBizWeek in an interview recently.

The group, he says, is lucky in the sense that when it bought the land in 2005, the squatters had already been assisted by the Kuala Lumpur City Hall (DBKL) to be relocated to the nearby flats.

“Our task that time was to help DBKL to revive the delayed flats and complete them within three months and we did,” he says.

Spanning 60 acres with gross development value of RM4.5bil, the development of Bangsar South is set to be fully completed in the next five to seven years.

“The plan is to have an equal 50:50 ratio of commercial and residential component. About 20% of the development is already completed,” he says.

The development is called Bangsar South City because it shares the same postcode with Bangsar even though the location is in Kampung Kerinchi, says Khor.

Khor says the group is now working together with Kampung Kerinchi residents, with the help from non-governmental organisations, to aid single mothers in need of assistance and provide tuition classes for children as part of its corporate social responsibility.

“We want to uplift the image of Kampung Kerinchi to become the place of choice to live,” he says.

In fact, Khor says this is why the name of Jalan Kerinchi is still used as the address of Bangsar South City.

Before starting the development, Khor admitted that when the project was fully completed, traffic problems might arise as more people come to live and work.

“The result showed that the access roads are still sustainable to handle traffic. However, we do have plans to build new access roads when the time comes,” he says.

Touching on the outlook of property market last year and this year and its impact to the development, Khor says, despite the property market been affected by the economic crisis, the progress of Bangsar South City development has not been impacted at all and there are no delays.

“We believe this year, the outlook will be more positive and promising. Our sales are doing well based on the responds we received for our residential and commercial properties,” he says.

UOA is building grade A offices, retail avenues, boutique condominiums, service suites and a clubhouse. Two blocks of condominium called Acacia and Begonia which are now completed and enjoying 80% sales and in two months, the group will launch the service suites.

On the commercial side, its boutique offices have attracted some of the prominent local and international companies.

“The selling and rental rates for our residential and commercial properties are still competitive as compared to our neighbour, Bangsar, where the price for residential is around RM450 to RM500 per sq ft while the rental rate for our commercial side is around RM5.50 psf,” he says.

Khor says most of the buyers for the residences are local, with many of them being UOA followers over the past 20 years.

In January, Bangsar South City was awarded the MSC Malaysia Cybercentre status by the Government.

The group is now able to attract more MSC-status companies and by 2013, they expect to host some 200 information and communications technology (ICT) companies.

“Our focus is to become an important node in the local telehealth segment in collaboration with key figures in the health ICT industry,” Khor says.

The group has established a 24/7 Cybercentre management office and a one stop centre on its journey to help create, nurture and grow a vigorous ICT in tandem with the MSC Malaysia agenda.

Bangsar South City’s close proximity to Universiti Malaya also ensures availability of qualified graduates to man the demand of Bangsar South’s ICT tenants.

Elaborating further, Khor says the group has set up The Advanced Informatics and Management Centre (AIMaC), aiming to pioneer and become a regional hub for growing eHealth industry, spurring concurrent local development and attracting/fostering local talents.

“At the same time, we are supporting the green technology initiated by the Government by building more environmental friendly buildings that use less energy and planting more trees for a greener landscape,” he says.

For the future plans for the group, Khor says they are looking to buy strategic lands with focus location in the Klang Valley to add up to their existing 100 acres of land banks.

By The Star

Upbeat Crescendo lines up industrial property launches

CRESCENDO Corp Bhd, a property developer based in Johor, plans to launch RM230 million of industrial properties over the next 18 months as improved economy and growing ties with Singapore help boost demand for its industrial properties.

The company is also optimistic on its growth prospects over the next few years.

"We believe this year will be better than last year," said managing director Gooi Seong Lim after Crescendo's annual general meeting in Petaling Jaya, Selangor, yesterday.

The company, whose net profit grew for two consecutive years previously, saw its net profit declining 43 per cent for the year ended January 31 2010.

Its industrial properties, under the Nusa Cemerlang Industrial Park (NCIP) project, were launched about two years ago. To date, it has launched 157 units of industrial properties with a gross development value of RM460 million.

"So far, the response for our properties has been overwhelming. We have sold all the industrial properties that we built," Gooi said.

The NCIP is still at the early stages of development.

"So far, less than 100 acres of the 520 acres have been developed. We are still at Phase 1 of the development. I'm not sure when the NCIP will be fully developed as it is based on demand. But our past experience tells us it will likely take about 10 years for it to be fully developed," he said.

The company is also planning to launch its Bandar Cemerlang township by the end of next year.

Gooi said the decision to launch Bandar Cemerlang, a 1,390-acre mixed-development township, was mainly driven by two factors.

One is the availability of key infrastructure such as an interchange that connects the township as well as the expansion of a highway there from two lanes to four. They are expected to be ready in the second half of 2011.

The other factor relates to the supply issue, which Crescendo expects to taper off sometimes next year.

Gooi said the company will remain focused on developing properties in Johor in the near term.

"We have a landbank of more than 3,000 acres that should keep us busy for sometime," he said.

By Business Times

Building homes for different budgets

The rising cost of living, especially for city dwellers, mean they now have lower disposable income and may need to watch their spending even more closely.

Most Malaysians are trying their best to make ends meet. It is not uncommon these days to find folks juggling multiple jobs to feed their family.

But despite the trying times, more houses and other consumer products are being sold. Strong domestic consumption is a good thing as it can contribute towards a more resilient economy.

Prices of homes have escalated in the past one to 1½ years, and many people who have yet to buy their dream home are now in a quandary as they have to cough up at least 15% to 20% more due to the rise in house prices.

Serious home buyers say it is becoming increasingly difficult to buy landed property in a relatively decent location that is priced between RM300,000 and RM500,000 – which is what the average buyer can afford.

Buyers are somewhat bewildered that property prices have “gone through the roof” within such a relatively short time after the world’s worst financial crisis.

Comments like the following are common, “Unless it is in a really secluded area, nothing is less than RM500,000 these days, even for a double-storey terrace house of just about 20 ft by 70 ft.” Even projects in the suburban and “further away” areas have shot up in prices.

Good landed residential products, especially in mature neighbourhoods with readily available amenities and facilities, are hard to come by these days.

Instead of building more high-rise residences that are already facing an over supply situation, developers should tweak their products wherever possible and offer more landed housing projects.

This will be a good time for developers with sizeable land bank to move forward their project launches. Having the right product type is important as there are various needs to cater to.

Instead of just offering houses that are of one standard size, developers should consider offering a wider range of built-up space to meet the different affordability levels of buyers.

Inflationary pressure could be one of the reasons for the rise in property prices. Of course, market forces play an important role and the latest price hike shows that demand far surpasses supply.

The appetite for house purchases can be attributed to growing confidence among buyers and investors that property is a tangible investment instrument that has proven to be more reliable than other forms of investments.

The relatively sluggish equity market and low bank savings interest rates have also made property investment one of the more viable investment alternatives for Malaysians.

While there are rich Malaysians who will not even bat their eyes over a RM1mil or higher price tag for a typical intermediate terrace house, more than half of the Malaysian population are not “in that league” yet.

They have to turn to bank loans to finance their purchases and have to be prudent about their financial commitments.

After all, buying a property is a big ticket item, more so with the appreciated prices.

While it may sound good to belong to an exclusive residential community, such as a gated and guarded project in a sought after address, buyers have to be prudent and ensure they do not over commit themselves.

The norm is to keep the maximum monthly loan repayment to about a third of one’s take home pay.

Deputy news editor Angie Ng hopes developers will offer more “tailor made” housing products instead of the typical barrack-style houses that are being offered today.

By The Star (by Angie Ng)

K-Euro banks on income from Talam projects

KUMPULAN Europlus Bhd (K-Euro) is banking on residential construction jobs from its associate Talam Corp Bhd for income while waiting for its two major projects - the Canal City and the West Coast Expressway (WEC) - to take off.

The debt-laden firm hopes that its 26.51 per cent unit Talam, would be able to complete its stalled housing projects this year to be able to start selling houses in 2011.

"This financial year we won't lose money," said the company's president and chief executive officer Tan Sri Chan Ah Chye.

He said Talam has another 3,000 units of the total 13,000 units of stalled houses to finish by the end of this year.

Talam which is undergoing a restructuring exercise plans to launch properties as much as RM1 billion by the second half of next year.

"If there are no activities we are going to run at a loss again. So we are going to have activities," Chan told pressmen after the company's annual general meeting in Kuala Lumpur yesterday.

Last year, K-Euro posted a net loss of RM33.1 million. In the first quarter ended April 30 2010, its net loss was RM3.4 million.

Both the RM10 billion Canal City project and the RM3.5 billion West Coast Expressway has been snagged with delays.

K-Euro is hoping to pen a supplementary agreement with the Selangor State Government soon to commence the Canal City project located near Kota Kemuning and Putra Heights in Selangor.

K-Euro is still in negotiations with the the federal government to extend the WEC concession agreement and for changes to be made to the terms and conditions to ensure the project is fundable.

By Business Times

Ibraco to acquire land in Kuching

IBRACO Bhd, a property group, has signed a conditional deal to buy 2.63ha of land in Kuching, Sarawak, from Datuk Wee Song Ching for RM16 million in shares.

Wee, who now holds 4 per cent of Ibraco, will end up with 17.32 per cent of the group after completing the deal.

Ibraco plans to build a shopping mall on the land for RM28 million and construction will start in August this year and finish in July 2011.

It has a letter of intent from GCH (Malaysia) Sdn Bhd, operator of Giant Hypermarket, to become an anchor tenant for up to 30 years.

By Business Times

Fortunes diverge for UK house prices and economy

LONDON: After marching to the same tune for the past decade, Britain’s property market and its economy are going separate ways, and further house price falls look likely into 2011 even if the recovery broadens.

In the three months to June, Britain’s economy grew by 1.1%, its biggest quarterly bounce in four years.

Yet UK house prices, which had become a major economic driver in the boom years, fell in every single month of that quarter according to the Halifax index.

Whilst the economy is expected to continue growing, albeit modestly, the outlook for house prices is grim.

Bank of England data on Thursday showed mortgage approvals slipped in June while lending recorded one of its weakest outturns in the series’ history.

Historically, house prices and GDP growth have had a tight correlation because factors such as credit availability, wage growth and consumer confidence have tended to pull in the same direction.

During the credit boom of the Noughties, that correlation was intensified by home owners borrowing and spending against the rising value of their homes.

But things got out of whack in the spring of 2009 when recession prompted the Bank of England to unleash a wave of monetary stimulus and slash interest rates to 0.5%.

The consequence was that mortgage affordability for those already on the property ladder rose to its highest in a generation, allowing prices to rise even though price/earnings ratios - the traditional valuation yardstick - were at uncomfortably high levels.

While property prices and economic growth are likely to synchronise over the longer term, the divergence could persist over the next few years, particularly if interest rates rise.

“My biggest worry for house prices is in the medium term, when the Bank of England raises interest rates,” said Ray Boulger at mortgage broker John Charcol. “The more people get used to low interest rates, the more of a shock it will be.”

House prices in Britain began their rebound in the spring of 2009, when the country was mired in recession, and rose to within 10% of their late 2007 peak earlier this year.

It is likely, however, that low interest rates have just have postponed an inevitable fall to more affordable levels.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said the ending of the emergency stimulus measures posed a big risk for the property market.

“The stronger the economy, the more likely it is that interest rates will rise and that transitional arrangements after the ending of liquidity support measures won’t be put in place,” he said.

British banks need to refinance almost 800 billion pounds of short term funds by the end of 2012.

This will sap their willingness to lend to homebuyers, particularly when prices are falling and capital buffers need to be rebuilt.

At just over 166,000 pounds, the average price of a home is nearly seven times the average annual UK salary, well above the long term average multiple of 3.7.

Record low interest rates have pushed the cost of servicing mortgage payments to its lowest in 35 years, according to the Council of Mortgage Lenders, but that is little comfort for first-time buyers unable to raise the chunky deposit lenders now require.

Economists, almost all of whom were wrongfooted by the pace of the rebound last year, are growing increasingly bold in forecasting house price falls.

Howard Archer at IHS Global Insight reckons prices will fall 3% to 5% in the second half of this year, with a further drop of 5% to 10% in 2011.

By Reuters