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Saturday, October 30, 2010

Most Malaysians cannot afford the high price of property

With prices of terraced houses in the Klang Valley and Penang having appreciated beyond the regular RM300,000 to RM600,000 range to close to and some even surpassing RM1mil, it is not surprising to find many average Malaysians who are rather hapless or even lost as to what and where to buy their house.

There are really not many choices available to them unless they don’t mind moving further away to other suburban addresses where they would have to travel longer distances. But if they still choose to stay near the conveniences close to the city centre, most of them will have to settle for much smaller units or apartments with the price that they can afford.

To maximise their land use, developers have resorted to building high-rise dwellings instead of landed houses which account for the short supply of such housing these days.

A shortage of land available for development can be singled out as one of the factors for the sharp increase in land cost and property prices.

Whatever large tracts of land available have already been snapped up and what’s left are mostly smaller plots.

In Kuala Lumpur, land prices have appreciated even more sharply and the recent sale of a piece of land for over RM7,000 per sq ft has raised alarm among some consumer groups and industry players.

They worry that the high price transacted for the land will be used as the bargaining power for other land owners to push their land prices upwards in the surrounding areas.

This will inevitably be an unhealthy prelude to an overheating in the property market as land is the basic commodity in a property development process. When the price paid for a piece of land escalates way beyond the market norm or the last transacted price, it has actually moved ahead of market fundamentals.

The question is who then will have to bear the high cost at the end of the day. Certainly it will not be the developers as they will factor into their total project costing and recoup the cost by pricing the property they build higher.

And if the property is not for sale but for leasing, the rental rates can also be expected to be higher. Although property buyers are not directly or immediately affected by the high land cost, they will also have to share part of the burden when the prices of goods and services are fixed higher (as the business operators who rent the space will factor the high rent into their pricing.)

If we are worried of a potential property bubble, it is important to keep a close watch on the availability of land supply to keep prices of land in check.

Opening up new corridors of land for development is an effective and speedy measure to ensure adequate land supply.

The other option is to encourage redevelopment of dilapidated parts of the city or old buildings and add value to them.

The Government’s plan to redevelop the 160ha Sungei Besi airport and the 1,320ha Rubber Research Institute land in Sungei Buloh should help to ease the land-scarcity problem.

The initiative should be accorded a top priority and, if possible, a dedicated agency is set up to oversee the whole planning and development process for these large parcels of land, taking into account the real needs of the people.

This will ensure better integration of public transport services and other infrastructure, housing and other commercial property needs that are more long-term and sustainable.

Given the huge need for more affordable housing in the Klang Valley, especially homes priced between RM200,000 and RM350,000, this will be the golden opportunity to plan for such housing projects. Hopefully at least 30% of the land for housing development will be allocated to affordable housing for all eligible Malaysians.

It is indisputable that real estate is an important economic sector, accounting for 50% of the country’s wealth. But the cap on the sector’s growth could be the relatively lower earning and purchasing power of Malaysians compared with those in other high income countries. For the industry to leapfrog to another level of growth, the people’s purchasing power has to grow faster or at least in tandem with the rising property prices as we will need investors who can afford to pay for the high-end properties that are to be built.

The Government’s iniatitives to turn Malaysia into a high income economy will create the platform for the people to earn higher per capital income to support their higher purchasing power.

Expanding the pool of buyers who have the means to absorb the high-end property that are being churned out by developers now will hopefully create a more sustainable property market – one where demand matches supply.

Otherwise the market will have to depend on foreign buyers who can afford to pay for the high-end property.

Deputy news editor Angie Ng believes developers, especially those who own large tracts of land and are involved in major township development, have a moral responsibility to offer a more balanced portfolio of different range of housing projects, to help cool the market from overheating.

By The Star

Mayland sees demand for city condominiums

Hong Kong-based property developer Malaysia Land Properties Sdn Bhd (Mayland) is very bullish about demand for high-rise condominiums in the city.

Based on the positive take-up rates of their properties so far, director Andrew Chiu says the interest in certain categories of city condominiums is expected to remain sustainable this year and next.

He says interest will be on properties of about 1,000 sq ft and below. More than half of its Royal Regent development in Jalan Kuching is sold. The only ones left are the bigger units with a built-up of 1,500 sq ft and above. The smaller units ranging from 900 sq ft to 1,200 sq ft have been sold.

“Even before we launched, our previous buyers have taken up the smaller units,” he says. A typical Mayland investor will have two to three projects already and these buyers bought nearly 70% of Royal Regent, with some of them buying two or three units at a time, he says.

Royal Regent is the third project in the Jalan Kuching location. The other projects in that 20-acre site includes Sri Putramas 1, Sri Putramas II and Royal Domain.

Sri Putramas I was the first project to be launched in that location in 2002. The units, with a standard size of about 1,000 sq ft, had prices starting at RM140,000.

Mayland subsequently launched Royal Domain at about RM200 per sq ft with units priced at about RM240,000. Today, Royal Domain, is selling at about RM320 per sq ft.

Its latest launch, Royal Regent, is priced at about RM400 per sq ft, says Chiu, adding that the location will have a total of about 3,500 units, with the completion of phase four. Royal Regent. which is phase three, is expected to be completed in 2013.

Mayland is also building Regalia@Jalan Sultan Ismail with Bina Puri Holdings Bhd, one of the largest construction groups in the country. The 38-storey has a gross development value of about RM600mil. It is scheduled for completion by early 2011.

“We are positive about demand for units located in the Golden Triangle. Land is a scarce commodity and if the Malaysian government can get the public transport system off the ground, this will add further value to the projects in the city,” Chiu says.

He says property development has become so sophisticated in his home country in Hong Kong that even with a 2,300 sq ft piece of land, it is possible to put up a 40-storey building with no car parks.

Buoyed by demand, Mayland is also embarking on another high-rise project in Ampang, just behind Ampang Point shopping centre. Known as The Elements@Ampang, the freehold service apartment project will have a gross development value of RM650mil. It sits on 2.6 acres adjacent to another high-rise project known as GBC.

The Elements will be developed by Land & General Bhd (L&G). Mayland is the largest shareholder in L&G. Besides Ampang Point shopping centre, the other closest mall is Great Eastern Mall.

The Elements will be competing with Mah Sing group’s M Suites and Brunsfield’s EmbassyView. While The Elements is located a little way off Jalan Ampang, M Suites and EmbassyView are located on Jalan Ampang itself.

L&G MD Low Gay Teck says there are several international schools in the vicinity of The Elements. These are Fairview International School, Sayfol International School, International School of Kuala Lumpur and Mutiara International School.

It will be served by Gleneagles Intan Medical Centre, Ampang Puteri Specialist Centre, Pantai Indah Hospital, Hospital Ampang, Ampang Medical Centre and Prince Court Medical Centre.

Prices at The Elements begin at RM350,000 for units with a build-up of 625 sq ft. The largest built-up is 1,550sq ft.

Low says the company is looking to buy land for residential developments with plans to sell the units at RM400 per sq ft and above.

“Cost of construction and inflation will only go up. As the Government moves along in their plans to remove subsidies, cost of construction, building materials and labour will only go up. Land prices will not be coming down. so prices will just have to keep adjusting upwards,” says Low, adding that there is a demand for land in light of expected future increase in prices.

He says the demand for certain types of properties have also led some developers to price their units at RM5mil in a RM2mil-a-unit area.

As for Mayland and companies within the group, Mayland advertising and promotions manager Ian Tay says the group together with L&G have a good following of buyers.

“Both The Elements and Royal Regent will appeal to different categories of investors. Most of those who buy into Royal Regent are upgraders. They have probably units in Sri Putramas I and II, and maybe even Royal Domain and they see the opportunity to buy into Royal Regent at RM400 per sq ft because they know the city will continue to expand. The development in the Matrade area by the Naza group is after all just a few minutes drive away,” says Tay.

Over at Elements, with prices beginning at around RM700 to RM750 per sq ft, most buyers would be investors. Tay says many may not be able to afford to stay in the city but they will want somewhere close to the city. “Ampang is not too far away from the KLCC City Centre, so the appeal is there,” he says.

By The Star

Growing Sunrise’s earnings

An artist impression of the oasis in the Quintet project.

KUALA LUMPUR: Sunrise Bhd is expected to launch at least four major property projects with gross development value (GDV) totalling RM2.7 billion next year and anticipates to register better results for FY2011 ending June 30, given its large unbilled sales of RM1.2 billion.

Its executive chairman Datuk Tong Kooi Ong said among those slated to be launched would be the ‘MK20’ mixed development project in mid-2011 with GDV of about RM1 billion, stressing that the project nestled in Mont’Kiara would be multi-phased, offering different kinds of products.

“MK20 will meet the demands of the market,” he told a press conference after the group’s AGM yesterday when asked to elaborate on the project.

Tong also said Sunrise would likely launch the Menara Solaris office buildings in the city centre early next year and that it was deliberating on whether the project with a GDV of RM480 million would be sold en-bloc or in the market.

“We are also very sensitive to market perception at the moment, especially for commercial properties after the recent 2011 budget,” said the executive chairman, while not ruling out that Menara Solaris could take off sooner.

Menara Solaris is a commercial development with 587,000 sq ft of net saleable area of strata office space and 20,000 sq ft of retail space. It is located off Jalan Sultan Ismail, behind the Renaissance hotel.

Tong says the success of Sunrise Bhd’s Canada project marks the start of the developer’s Stage 3 growth.

According to Tong, Sunrise was also hoping to launch its landed and gated residential development in Kajang before end-2011. The project, located near The Mines Resort, is situated on 58 acres of land and is expected to generate GDV of RM500 million.

On developments in Canada, Tong pointed out it was expected to launch the second phase of its ‘Quintet’ development in Richmond, which would contribute about 60% of the project’s total GDV of C$400 million (about RM1.2 billion).

He said the take-up rate for Quintet’s phase 1 was much faster than expected with nearly 300 units “literally all sold out” following its launch last month.

“We are basically rushing to launch the the second phase sometime in February or March 2011. The second phase is slightly bigger, closer to 450 units,” he said, adding that Sunrise currently had total unbilled sales of RM1.2 billion.

Based on the concept of an “urban oasis”, the majority of the units in Quintet are one and two-bedrooms with sizes ranging from 500 sq ft for a one-bedroom unit to over 1,500 sq ft for penthouses and townhouses.

Commenting on the outlook for the property market, Tong said he explained to shareholders there was no overbuilding per se in terms of the total number of units in Mont’Kiara, but acknowledged there could be some overbuilding in the type of units that cater more to the general segments of the population.

“There is an oversupply in certain types of condos, but there is no oversupply overall,” he said.

“Clearly, Malaysia is a growing population with a lot of young people who need homes. They move out from their parents’ homes when they get married. It is a question of affordability. It is the type of properties that the market demands,” he elaborated.

A property observer said that smaller-sized condominium units in general have fared well in the recent property upturn, due to affordability issues and rising demand from young families. The observer noted that prices of small-sized condominium units at Sunrise’s Solaris Dutamas have risen to around RM620 psf, compared to RM380-RM400 psf when they were first launched in 2006.

On its financial performance, Tong said the group was confident of registering sustainable revenue and profit for FY2011 and would “probably do better” than the results in FY2010. Sunrise posted a net profit of RM133.95 million on the back of revenue of RM590.74 million for FY2010.

“We have a basket of products and plans coming that will sustain us,” noted Tong.

He also said Sunrise could have strong returns riding on “Stage 3” of its growth development plans starting 2010, where it offered multiple-products and multiple-locations with a focus expanding beyond Mont’Kiara.

Sunrise’s share price yesterday added five sen to close at RM2.24 with 1.35 million shares traded. The counter has risen 8.74% year-to-date.

By The EDGE Malaysia (Posted on 29Oct2010)

Budget hotels urged to shape up to thrive

Malaysia's budget hotels will not have much of a future if they do not improve their facilities and services as foreign rivals are about to make their presence felt.

Come 2012, foreigners are expected to be allowed to operate budget hotels in the country, said Malaysian Budget Hotel Association (MBHA) vice-president for training and research Mohamed Hassan Hamzah.

"Our local budget hotel owners need to be more innovative in terms of marketing and promotion to ensure their survival," he said.

Mohamed Hassan cited the proposed liberalisation of services trade tabled in the middle of last year during the Asean Framework Agreement on Services.

Under the proposal, foreigners will be able to own up to 30 per cent of a budget hotel in the country by 2012 and 49 per cent in 2015. It involves one-and two-star hotels. However, this has yet to be decided.

There are about 6,000 budget hotels in Malaysia.

"Currently, only 1,500 budget hotels are registered with MBHA, and the number ought to rise," Mohamed Hassan told reporters at a press conference in Shah Alam recently.

The budget hotel business here has huge growth potential as Malaysia is a major tourism destination in the world.

Under the Economic Transformation Programme, the government has big plans to develop the industry further.

"If we want tourists to come to Malaysia and stay at our budget hotels, owners can help by providing good facilities and services."

Mohamed Hassan observed that budget hotels here are normally 50 per cent to 60 per cent full during weekdays and could be fully occupied on weekends. Although occupancy rates have risen, many will not survive if they do not upgrade their services.

Tourism is the country's second highest earner, after manufacturing, accounting for 12.3 per cent of the economy last year.

By Business Times

Budget for KLIA 2 increased

Malaysia Airports' board of directors has mandated RM2.5 billion for the overall construction cost of Kuala Lumpur International Airport 2.

Malaysia Airports Holdings Bhd (MAHB) is ready to spend some RM500 million more than the earlier budgeted RM2 billion for total construction cost of Kuala Lumpur International Airport 2 (KLIA 2).

Prime Minister Datuk Seri Najib Razak had said in his second stimulus package announcement in March last year that the new permanent low-cost carrier terminal (LCCT) would cost RM2 billion.

The airport operator said yesterday that its board of directors had mandated a sum of RM2.5 billion for the overall construction cost of KLIA 2.

MAHB chief financial officer Faizal Mansor, however, stressed that the RM2.5 billion budget was not final.
"While we will try to keep it below the budget, it is important to us to get the terminal completed well," he said at a briefing to announce the group's third quarter results in Sepang, Selangor.

While some big contracts have been dished out, Faizal declined to reveal how many more would be awarded.

KLIA 2 is now being planned to have double the initial size of 120,000 sq m.

While the new terminal is only half the size of KLIA's main terminal building, it is designed to have more than double the commercial space of the main terminal building.

After the recent completion of a retail optimisation plan at the KLIA main terminal building, about 7 per cent of the building is now commercial space compared to KLIA 2, which is expected to have about 20 per cent commercial space.

"What this means is that while the cost of running KLIA 2 will be half that of the main terminal building, it will be more viable, more sexy," Faizal said.

On its results for the third quarter ended September 30 2010, MAHB said net profit was down by almost 26 per cent. This was largely due to accounting losses it had to recognise in that period because of the adoption of the Financial Reporting Standard (FRS) 139.

MAHB made RM61.8 million net profit compared with RM83.4 million a year ago. The loss arising from adopting FRS 139 was about RM30 million.

Part of this loss came from recognising concessions payable at fair value for the Sabiha Gokcen International Airport in Istanbul, Turkey.

Year to date, the group recognised RM54 million accounting losses from the associate. MAHB has projected that the full-year figure will touch RM80 million.

Group operating profit in the period reviewed was up 12 per cent to RM128.3 million compared with RM114.4 million in the previous corresponding period.

By Business Times