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Saturday, May 28, 2011

Quality of housing stock already makes KL a global city

The Binjai Residency in Kuala Lumpur.

In a recent report from the UK, it was stated that the quality of a city's housing stock plays an important role in boosting its attraction and making it more competitive in global terms. Malaysia has slipped in global competitiveness according to both The Institute of Management Development and World Economic Forum but does this mean the quality of housing stock is still not of global standards?

It is arguable that London is one of the top global cities and it has recently been reported that the housing stock in London continues to sell well and at prices equal to, or even above, pre-recession levels. This may be testament to the quality of homes in central London they are so desirable because of the quality of design, finishing and of course location in a vibrant city.

Kuala Lumpur is not a global city yet but there are examples of high quality housing stock that should be contributing to its global competitiveness. For example, The Troika is designed by British firm Foster & Partners in cooperation with local firm GDP and such a building in London, New York and Paris would be five or six times more expensive to buy or rent. Probably the most expensive apartment transaction in the country was at a price of RM2,657 per sq ft for a penthouse unit at Binjai On The Park and the next closest in value would be The Troika.

The buyer is a corporate figure who has been on Forbes magazine's list of wealthiest people. On June 22, 2010, he bought the triplex penthouse, measuring 14,300 sq ft, on the 42nd floor of Binjai's Tower B. The price tag of RM38mil meant the penthouse was sold for almost RM2,660 per sq ft. At the time, the marketing and sales manager was quoted in The Star as saying “The buyer bought the penthouse to stay. He fell in love with the 360-degree unobstructed view of the KLCC skyline right at his doorstep” similar to views offered by the likes of London's One Hyde Park. “Binjai On The Park was just like one of his other homes around the globe,” said Terri Har, marketing and sales manager of Layar Intan Sdn Bhd, the developer.

The “Global Cities Review” published by Savills in the UK compares prices of residential units bought by CEO level executives in London, New York, Moscow and Hong Kong, and KL pricing is still 50% more affordable than in New York which was the only city not to show any price gains over the last five years. Indeed, the value of a CEO's home in New York last year was still down 7% on 2005 prices.

London's wealthy residents, whether they own or rent, are likely to live in a house and it is “landed property” in Malaysia that is still the most sought after and valuable in the country. The so-called “bungalow in the sky” concept for some KLCC apartments has sold well and make wonderful accommodation for owner occupiers but investors have found it difficult to let at rents that would give acceptable returns.

Only 40% of 5mil plus purchases in London were made by British buyers in 2010 and this is exactly what Malaysia needs more foreign buyers of residential accommodation and more foreign tenants from multinational corporations. The quality of the housing stock is present and getting better all the time and we look forward to more liberalisation of the business sector and the attraction of more foreign investment to boost the luxury housing market and improve the country's competitiveness.

London is the world's largest financial centre alongside New York and there are more overseas banks in London than any other international city. Obviously the attempt to base an Islamic “mega bank” in Kuala Lumpur is welcome and may make Kuala Lumpur the global centre for Islamic finance. Life in London is very busy with Heathrow being the world's busiest airport and London having more than 300 languages spoken. Malaysia has embraced multiculturalism and so this is not likely to hinder progress towards being a global city.

Just like London, the hunting grounds for wealthy families to live in large houses in KL are well established residential areas characterised by wide roads and plenty of parks or trees Areas in London for houses like Belgravia, Holland Park, Regent's Park, Chelsea and Mayfair are the equivalent of our Bukit Tunku, Ampang Hilir, Bangsar and Damansara Heights. Well-planned new townships like Desa Park City may well become the equivalent of Chiswick in West London one day and will undoubtedly help Kuala Lumpur become a global city!

Senator Datuk Abdul Rahim Rahman is the executive chairman of Rahim & Co group of companies

By The Star

Glenmarie plans RM1b projects over next 5 years

SHAH ALAM: DRB-HICOM Bhd's property subsidiary, Glenmarie Properties Sdn Bhd (GPSB), aims to launch projects with a total gross development value (GDV) of about RM1 billion over the next five years.

"We're going to launch about 3,500 units of commercial/residential developments over 3,300 acres of land. That's the projection for the next five years," said Siti Mariam Mohd Desa, group director for property, asset and construction.

GPSB, formerly known as HICOM Properties Sdn Bhd, is known for its riverside and gated resort-style development here in Glenmarie, near the Subang airport.

It still has a balance of 200 acres in Glenmarie that can be developed, she said.

Siti Mariam spoke to reporters here yesterday after GPSB and Bank Muamalat Malaysia Bhd, another DRB-HICOM subsidiary, formalised an agreement to develop a home-financing package.

The package, available at selected Bank Muamalat branches in the Klang Valley, is designed for potential buyers of two of GPSB's developments, namely Glenmarie Gardens and Laman Glenmarie.

Glenmarie Gardens consists of 70 units of bungalows that will be launched in three phases. The first phase is fully sold, while the second phase is expected to be launched next week and the final phase, in 2012.

Laman Glenmarie comprises 385 units of two-storey link houses covering 70 acres of land at Section U1A here.

"Competitive financing rates, convenience of online repayment and a longer financing tenure of up to 70 years of age, or maximum financing duration of 40 years, are some of the package's attractive selling points," Bank Muamalat's chief executive officer Datuk Mohd Redza Abdul Wahid said.

He said buyers could be eligible for funding of up to 95 per cent of the home value.

Bank Muamalat has a financing portfolio of over RM8 billion, of which half is in consumer loans.

Mortgages make up "at least 50 per cent to 60 per cent" of its consumer loans, he said.

Mohd Redza said the bank's consumer loans are expected to grow by up to a fifth this year.

By Business Times

Tower of sustainability

An artist’s impression of Menara Binjai.

When the idea was conceptualised to develop a 35-storey grade-A office building along Jalan Binjai in Kuala Lumpur, the plan was to construct a “tower of sustainability” rather than a mere “structure with windows”.

“We wanted to build something that was tall, striking and beautiful with lots of glass, not a building with small windows,” says Khor Joo Saik Sdn Bhd director Jackie Chua.

The office tower that the company is building is Menara Binjai, which is scheduled for completion by the fourth quarter of this year.

Fellow company director Chua Guan Hock says a lot of thought has gone into making it “as green as possible”.

“Going green was not an afterthought. It was planned from the beginning. By doing this (going green), we felt that we would be able to improve the quality of the working environment for potential tenants.

“Construction began in 2008 but it has been on the drawing board since 2004,” he says.

According to Guan Hock, Menara Binjai complies with strict environmental regulations that comprise reducing the impact of its construction on the surrounding area and adopting a low carbon footprint approach.

Key green features of the building include low-E double-glazed windows for optimum heat and sound insulation, energy-saving air conditioning (which uses a centralised water-chilled air conditioning system), destination-based lifts (which allows customised floor selection to minimise waiting and stopping times, with drive motors that enable up to 30% savings in electricity consumption) and energy-saving lighting.

Guan Hock adds that incorporating green features into the building allows the company to be more “disciplined”. “It made us more aware on the impact that we had on the environment, so this made us (more conscious) in saving water and reduce unnecessary wastage of raw materials used.”

According to the company's brochure, the host of green features at Menara Binjai permits sustainable, energy-efficient operation with up to 25% savings on electricity and air-conditioning consumption.

From left: Khor Joo Saik project manager David Hong, Jackie Chua and Chua Guan Hock.

The building has also received the Green Mark Gold Certification (Provisional) from the Singapore Building and Construction Authority as well as provisional certification from Malaysia's Green Building Index, making it the first dedicated office tower in the country to receive both awards.

Multimedia Super Corridor-status accreditation for Menara Binjai is pending, according to Guan Hock.

The building, which has a gross development value of RM180mil, will be targeted mainly at tenants in the oil and gas, financial, services and trading sectors.

Strategically located at the junctions of Jalan Binjai, Jalan Tun Razak and Jalan Ampang, Menara Binjai will comprise four levels of basement parking and another four levels of podium parking.

The office floors, which have a net lettable area of 12,000 to 13,000 sq ft, start from level six. Project manager David Hong says the company has also invested in a centrally-located data centre on the fifth floor of the building.

“Instead of having our tenants set up their own server rooms, we felt that it made business sense to have them park their facilities in one common data centre,” he says.

Menara Binjai today stands on the site where the family home of the late physician Dr Chua Boon Teck used to be. Boon Teck's father was Chua Cheng Tuan, one of the co-founders of Cycle & Carriage Co, now known as Cycle & Carriage Bintang Bhd.

The old Chua family home used to sit where Menara Binjai now stands.

Boon Teck's wife, the late madam Khor Joo Saik (whom the company is named after), was said to be a formidable nyonya businesswoman who acquired substantial plantation and property plots for the Chua family, including heritage sites where the Coliseum Cinema and Coliseum Cafe are located.

Guan Hock and Jackie, who are descendants of the Chua family, says they have no plans to sell Menara Binjai.

“We don't intend to sell the building. It's for the long term,” says Jackie, adding that since they own the land, they are able to provide a competitive rate of RM7.50 per sq ft for their would-be tenants.

“The land is a legacy of the family,” she says.

By The Star

Housing for average income earner

REAL estate industry players are asking the authorities to step in to control the spike in housing. International Real Estate Federation (Fiabci) Malaysia president Yeow Thit Sang says it is time the authorities look into the matter.

“Home prices have gone up so much that it has reached a ceiling to the point that high-end housing developers must give a 20% rebate in the condominium segment or there will be no sales,” says Yeow.

House prices have gone up many times beyond the average household income.

Yeow...‘We are in a situation where people are using the property market to gamble.’

Yeow says the scenario of low-occupancy and falling prices can be found in KL City Centre and Mont'Kiara. “Overall, developers need to slow down,” he says, adding that KL Sentral is another area where office and retail properties are undergoing continuous development.

Yeow says the Housing and Local Government Ministry and the relevant authorities can play a greater role in controlling prices. They can do this by studying the needs of the market the take-up rate, the number of people entering the Klang Valley to seek employment, the number of expatriate entering or leaving the country, and which type of housing is facing a shortage.

“They can approve or not approve applications by developers. For example, there are too many condominiums in the KLCC area which cost millions of ringgit,” says Yeow.

He says expatriates are the ones who mainly occupy these units. Many who bought into that location are local and foreign investors who expect a certain yield. When they do not get the yield they want, they may decide to sell it instead of holding on. When this happens, there is always the possibility of prices coming down.

In London, Hong Kong, Singapore, China and Australia, the authorities will study the housing needs of cities. “We must do the same,” says Yeow. Currently, this is being done on a five-yearly basis, which is far from the ideal, says Fiabci Asia-Pacific executive director Yu Kee Su.

The people need medium-range housing priced around RM300,000, says Yeow.

Khong & Jaafar managing director Elvin Fernandez says some form of measures targeted at the property sector should be put in place.

“It would be difficult for the authorities to know when to apply the brakes and when to lift the foot off the pedal if we are to use demand and supply to control prices. A better measure would be to bring back the real property gains tax on a graduated level to help curb speculation.

“A second measure would be to extend the 30% downpayment requirement for second property instead of the third and subsequent residential purchase,” says Fernandez.

Last November, Bank Negara required buyers of third and subsequent residential properties to pay a minimum downpayment of up to 30% while the remaining 70% constitutes a loan. Analysts say this is just a temporary setback.

Fernandez also suggests doing away with mortgage brokers.

“Banks want to increase their share of property loans and engage mortgage brokers, who are not bank staff. These brokers' interests are not aligned with the long-term interest of the banks. They only want their commission.

“The services of mortgage brokers is something that came out of the United States. Are these mortgage brokers doing a service or a disservice to our banking system and to the house buyers?”

Yeow reiterated the need for housing to be priced in the medium range of about RM300,000 because this is what the average wage earner can afford even in the Klang Valley.

However, he notes that it is difficult to find houses with this price in the Klang Valley or Penang and this is worrying. Yeow says that the most pressing issue now is escalating prices and the question of affordability among the ordinary wage earners.

His concerns are very real. House prices have moved far ahead of wages. Yeow says the average monthly household income is about RM7,500 while Fernandez puts it at close to RM6,000. He is quoting a private survey done for the Klang Valley this year.

RAM Holdings Bhd economist Jason Fong says that at the national level, the average monthly household income in 2009 was RM4,025. Putrajaya has the highest monthly average wage of RM6,747 while Kelantan has the lowest at RM2,536.

On a sectoral basis, Fong says the average wage for manufacturing sector (March 2011) is RM2,240 while for wholesale and retail (fourth quarter 2010) is RM2,219 and for rubber plantation (March 2011) is RM826.

Kuala Lumpur has the highest average transacted property price at RM488,536 last year, says Fong. This is the least affordable relative to income levels in Malaysia in 2009.

In the east coast, the lowest transacted price in Terengganu was RM74,063 while in Kelantan was RM82,337 both were relatively affordable.

Fernandez says there is a need to look at housing from the perspective of the ordinary wage earner with an average income of about RM6,000 or less because of the relatively low wages in the country. “We cannot look at housing from the perspective of those earning RM15,000 or more a month. In 2008, only 1.7% of the entire population drew a monthly income exceeding RM15,000, and only 5.2% earned more than RM10,000.

“In the Klang Valley, only about 3% earn more than RM15,000. This means there are not many rich people in Malaysia,” says Fernandez.

He points out two fundamental factors that drive house prices household income and rental returns.

House prices, as against annual household income, is normally calculated at three to four times. For example, if a household monthly income is about RM6,000, which is what the average Malaysian household earns, at four times, the price of the house should be about RM300,000 (6,000 x 12 = 72,000 x 4 = 288,000).

In the Klang Valley, this has gone up to 15 to 20 times. In places like Kajang, house prices against annual household income is about four times. “Such areas are relatively untouched by the rapidly rising prices in other parts of the Klang Valley. Their yield is, therefore, higher, at 3%.”

While housing prices have gone up, rental has not.

A double-storey house in Petaling Jaya was priced at about RM500,000 about two years ago while rental was between RM1,500 and RM1,700.

Today, that same house is priced at about RM800,000 but the rental is only RM1,800 to RM2,000. So although house prices have gone up, rental rates do not reflect that rise.

Condominiums used to have yields of about 8% while landed housing about 4%. Both have fallen to about 4% and 2% respectively today.

RAM Rating Services Bhd head of real estate and construction ratings Shahina Azura Halip says the affordability issue is expected to persist as prices of residential properties, especially landed units, are likely to increase this year but at a much slower pace than last year.

This is fuelled by the keen demand, higher land prices and construction costs, as well as the scarcity of landed properties in prime locations.

“Bank Negara's 70% cap on the loan-to-value ratio for buyers' third residential property mortgages will deter speculation to some extent particularly in the high-end segment although the impact is not expected to be as significant in the long run, given the strong fundamentals supporting demand for homes,” she says.

Meanwhile, Shahina says, the Government's recent announcement on the My First Home Scheme, which will enable those earning less than RM3,000 per month to obtain 100% financing for the purchase of their first house costing RM100,000 to RM220,000, is a positive move for the market.

“The main consideration, however, is the availability of either landed or strata-titled units in this price range, especially in Kuala Lumpur, Selangor, Penang and Johor,” she says.

Both Yeow and Fernandez are of the view that, at the rate house prices are moving now, those who have not bought their houses will not be able to afford one because salaries are not growing in tandem with inflationary pressures.

Says Yeow: “We are in a situation where people are using the property market to gamble.

“It is purely to flip. This is bad because it will only drive prices higher. This deprives the average wage earner of buying his own house.

“The Government is trying to stem the bubble with various measures,” Yeow adds.

By The Star

Sharp property price hike puts a damper on affordability

The fact that the average salaried workers are ready to buy into properties many times their annual income is food for thought.

LONG-TERM sustainable house prices ought to be determined by two key fundamentals household income and rental returns. The relationship between household average annual income and property prices is an important one as it measures affordability levels.

If the average annual household income in the Klang Valley is RM72,000, this means the family can afford a house that is three to four times the annual income; that is, a property priced between RM216,000 and RM288,000.

This is just a rough guide. If commitments are high in other areas, they may not be able afford a property priced within this range.

For a long while in Malaysia, this number hovered between three and four times. In the United States, it was about eight times in many of the overpriced cities just before the financial crisis hit the property market.

Last year, certain parts within Petaling Jaya began to inch up to five and six times. This means households had to fork out more in order to buy properties priced between RM360,000 and RM432,000.

At that time, the property consultant who did the study said that at five to six times, this was still managebale and was not a cause for concern.

About two months ago, another study was done by the same consultant. This time, more areas within the Klang Valley were included. It was during the course of this study when it was found that within the Klang Valley itself, the prices of certain locations have gone up far ahead of others. This is not something new, all of us know that. But what is startling is that property prices that used to be five to six times a household's annual average income has gone up to 11 times about two months ago.

While Kajang continues to have a household income/property price ratio of 4 times, in other parts of the Klang Valley, this has gone up to as high as between 17 and 20 times in some areas. There is a caveat: all of this is viewing house prices from an average household income of RM6,000 a month or RM72,000 a year.

As with the use of any statistics, there is always a margin of error. The prices of properties are for all to see in the classifieds. The question is: What is the average income in the Klang Valley?

The company which did the study used RM6,000 as an average monthly income in the Klang Valley. Another property-related professional said it is about RM7,500 a month, while an economist says it is slightly more than RM4,000. The figure varies even more for different states (see table Monthly average household income by state on page 24).

The fact that we, the average salaried workers, are ready to buy into properties that are many times our annual income is food for thought and cause for concern.

The other fundamental governing house prices is rental returns. In most of the areas that were included in this analysis between house prices and household income and rental returns, the trend is clear over the last 10 years, the returns are dropping.

In many of the areas where prices have increased, the rental returns of the typical terrace house have dropped below 3% net. In some areas, it is about 2% net.

With the situation the way it is today, real estate professionals are calling for the authorities to put in place greater measures.

In China and Singapore, various measures have been put in place to cool prices the past year or so. Since last year, the Chinese government has introduced a series of policy measures to cool the market. This includes raising interest rates, raising down-payment requirements, directly restricting home purchases, imposing price control targets in Beijing and Shanghai and finally charging a real estate tax, albeit on a trial basis, in Shanghai. Nevertheless, prices remain stubbornly high.

Early this year, the Singapore government required those who buy, and sell, residential properties within four years to pay a stamp duty, up from the previous requirement of three years. Other measures include making it mandatory for individual buyers, who are still servicing an existing loan, to borrow only up to 60 % of the new property's value, down from 70% previously. For corporate investors, the loan-to-value limit has been cut to 50%.

What is emerging today is Chinese developers and owners of malls are now offering investors their assets. According to a fund which is on an acquisition trail in Asia, the company is looking at commercial properties at a “flow rate” of one property a day, which, according to the source, is very high.

These developers and owners essentially want to make their exit. In the commercial segment in Malaysia, developers here are also beating a path to the same fund to sell their assets. Thankfully, not at a flow rate of one per day.

Assistant news editor Thean Lee Cheng is wondering what it takes to douse this madness.

By The Star (by Thean Lee Cheng)

Dijaya plans RM3.5bil projects

PETALING JAYA: Dijaya Corp Bhd will launch property projects worth RM3.5bil over the next two years.

The projects include W Hotel and Residences Kuala Lumpur, serviced apartments in Tropicana Danga Bay, Tropicana Gardens commercial centre, Tropicana Avenue business and retail centre, Tropicana Bayou mixed development and Tropicana Cheras bungalows, semi-dees and linked houses.

“With all these projects in the pipeline, the company is poised for growth,” said managing director Datuk Tong Kien Onn in a statement yesterday.

Meanwhile, for its first quarter ended March 31, Dijaya's net profit surged to RM18.14mil from RM464,000 previously.

The improvement is attributable mainly to higher profit margin contributed by its new property launches such as Tropicana Grande condominiums, Casa Tropicana Block E condominiums, and Pool Villas.

However, revenue fell to RM57.68mil from RM58.37mil previously.

By The Star

OSK Property receives takeover offer

PETALING JAYA: OSK Property Holdings Bhd executive director Ong Leong Huat and Land Management Sdn Bhd have offered to buy up the remaining OSK Property shares they do not own for RM119.56mil.

In a filing with Bursa Malaysia yesterday, the company said both Ong and Land Management collectively owned 49.96 million shares of RM1 in OSK Property, representing a 26.66% stake, and was looking to buy up the remaining 137.42 shares in the company for 87 sen per share.

They are also looking to buy 47.81 million warrants not owned by them for some 6 sen per warrant.

Ong is also a substantial shareholder and director of OSK Investment Bank and OSK Holdings Bhd as well as a director of Bursa Malaysia.

The shareholders of Land Management Khor Chai Moi, Ong Yin Suen, Ong Yee Ching, Ong Ju Yan, Ong Yee Min and Ong Ju Xing also held direct stakes in OSK Property amounting to 5.43%. Yin Suen, Yee Ching and Ju Xing are also directors of Land Management.

OSK Property's share price gained 7.5 sen within the day to end at 87 sen yesterday on news of the proposed takeover. Based on Thursday's closing of 79.5 sen, the offer price provides a 9% premium but that premium was wiped out yesterday when the company saw its share price end at the offer price of 87 sen.

For the financial year ended Dec 31, 2010 (FY10), the company posted a revenue of RM144.9mil against RM125.8mil a year ago. Net profit for FY10 was RM11.9mil against RM5.1mil in FY09.

As at the end of FY10, OSK Property's cash and cash equivalents stood at RM53.2mil.

The company currently trades at 11.25 times price/earnings ratio and has a market capitalisation of RM163.02mil.

Properties under the group's stable include luxury homes, townships and The Atria Shopping Complex in Damansara Jaya.

Proposed privatisation of smaller property companies seems to be picking up steam following an announcement earlier this year that Low Chuan Holdings Sdn Bhd, owned by the founding family of the Low Yat Group, was looking to privatise Asia Pacific Land Bhd.

The Low Yat Group had offered 45 sen per AP Land share, pricing the stock at 0.43 times its book value of RM1.05.

By The Star

Genting plans to build ‘Resorts World’ in Florida

PETALING JAYA: Genting Malaysia Bhd plans to build “Resorts World Miami” in Florida after buying a 13.9-acre land for some US$236mil from a US newspaper publisher, The McClatchy Co.

The company told Bursa Malaysia yesterday that its subsidiary, Bayfront 2011 Property LLC purchased the land, which includes a building currently housing The Miami Herald Media Co and an adjacent parking lot, with plans of building a mixed-use development.

Genting Malaysia said it was working towards developing a comprehensive master plan for the project called “Resorts World Miami”, which will include hotel, convention, entertainment, restaurant, retail, residential and commercial facilities.

The project aims to capitalise on Miami’s standing as one of the world’s leading tourism hubs.

“The acquisition involves large prime freehold waterfront properties facing the scenic Biscayne Bay. Located in downtown Miami, the properties are close to commercial, residential and shopping areas and are bordered by an extensive road network linking to Miami International Airport and South Beach, one of the world’s top beach destinations,” the company said.

The land is located directly across the street from the Adrienne Arsht Center for the Performing Arts of Miami-Dade County, which is among America’s largest performing arts centres. Miami’s new Museum Park development, the future home of Miami Art Museum and Miami Science Museum, is located immediately to the south.

Genting Malaysia is looking to fund the purchase through bank borrowings and internally-generated funds. It said that bank borrowings of US$200mil to partly fund the purchase, Genting Malaysia’s consolidated gearing ratio of 8.3% as at Dec 31 will increase to 12.4%, on a proforma basis.

“Resorts World Miami will be a landmark mixed-use development for Miami, Florida and the United States,” Genting Malaysia chairman and chief executive Tan Sri Lim Kok Thay said.

“Downtown Miami has experienced dramatic residential and commercial growth in recent years, and we believe the addition of a large-scale mixed-use and entertainment complex will be a welcomed addition, further elevating the area’s status as a global destination.”

Genting Malaysia said it was seeking to expand internationally in the leisure, hospitality and entertainment industry. The envisioned Resorts World Miami represents Genting Malaysia’s second venture in the US, after Resorts World New York at the historic Aqueduct Racetrack in the City of New York.

The seller of the land is the third-largest newspaper publisher in the US and is listed on the New York Stock Exchange. It is also the parent company of Miami Herald.

An analyst said based on the little information provided from the announcement said he was netural on the deal.

“It seems cheap, considering that they are buying at a property down cycle in the US and that this is prime property.”

However, he added, that it is not clear if Genting would be issued with a gaming licence. “If a casino is in the plans, then the move is a good one, considering that Miami is a top tourist site. But let’s see the details.”

By The Star