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Monday, July 11, 2011

Property trends – where are we heading to?

There have been many speculation (and subsequent refuting by various parties) of a property bubble. Year 2009 marked an economic slowdown due to the global financial crisis, while year 2010’s economic recovery was largely boosted by the government’s economic stimulus package.

Some attributed the astronomical price increases in hot areas to the suppressed demand of year 2009. In that year, it was common for developers to offer 5% downpayment and 0% interest until upon completion of a development. Similarly, banks offered attractive rates, where the interest rates were at approximately the high 3% or low 4%.

Escalating prices
2011 came and property investors had to rethink their investment strategies. Prices of properties have surpassed the levels recorded before the crisis and in the first half of 2010 itself, prices of landed houses in some popular areas in the Klang Valley, Penang and Johor have appreciated by 10% to 30%. Bank Negara Malaysia (BNM), in its “Financial Stability and Payment Systems Report 2010”, stated that house prices in selected locations within and surrounding urban areas had increased to four times higher than the national house price index.

BNM has been staying on the pulse of the market’s movements and implemented a loan to value ratio of 70% for third mortgage borrowers. However, crafty property buyers have resorted to using their spouse or relatives’ names when applying for loans. Some have opted to take the commercial route, as the required downpayment is at an average of 80% (as opposed to 70% if the buyer has more than two residential properties currently). Plus, the capital gains and rental yield are relatively higher than residential properties. Hence, some buyers have changed their strategy by investing in commercial properties.

Proceed with caution
In early May 2011, BNM raised the overnight policy rate (OPR) by 25 basis points to 3% and increased the statutory reserve requirement (SRR) by one percentage point to 3%, and as such, banks have raised their base lending rates (BLR) and base financing rates (BFR) by 30 basis points to 6.60% respectively. Banks that offer BLR minus 2%, means that effective interest rates are still below 5%.

However, property investors should look at the slight rate hike with caution. It is imperative that property buyers make decisions based on repayment capability, and also factor in expected rental yields.

New developments continues to mushroom especially in the Klang Valley and Greater Kuala Lumpur and reports have indicated that investors are still very much active, with investors snapping up units during property launches, despite the price increase. Analysts have indicated that it is still too early to measure the impact of current regulations.

Property Investment Convention 2011 (PIC 2011)
If current property trends and regulations are at the top of your mind, join the Property Investment Convention where current topics of interest will be analysed and shared by various speakers.

The convention will mainly be about movement in the property market, the current and future trends based on the MRT, how to purchase as regulations change, how to tweak your strategies in view of the changing regulations, managing your portfolio, diversifying into REITS, and many more.

The speakers include:
- Best-selling author and property investment coach, Milan Doshi
- Location researcher and map maker, Ho Chin Soon
- The master of lead generator and co-author of the first ‘Lease Options’ book in the UK, Vincent Wong
- International property investment trainer and co-founder of Wealth Dragon in the UK, John Lee

The Property Investment Convention is scheduled to be held on 6 and 7 August 2011 at The Gardens Ballroom, Mid Valley City. Register now at

By The Star

'UEM Land to gain most from Nusajaya'

UEM Land Holdings Bhd is expected to be the biggest beneficiary if Singaporean investments surge as a result of the recent swap of the Tanjong Pagar railway station land with Singapore, says HwangDBS Vickers Research.

Malaysia agreed to swap the railway land, which it owned, in exchange for six parcels of land with a permitted gross floor area of up to 501,020 square meters.

UEM owns 4,208.7 hectares of land in Nusajaya, a key component of Iskandar Malaysia.

In a note today, it said the completion of major catalyst developments such as the Coastal Highway, Legoland, Newcastle University and Johor Premium Outlet by next year would transform Nusajaya into a hive of activity.

"We expect Eastern & Oriental Bhd's 85 hectare Resort Wellness development in Medini Central to do well given its strategic location near the second link.

"Singapore's stamp of approval should see strong interest from Singapore buyers," it said.

Hwang DBS also said Genting Plantation Bhd's land bank of 2,226 hectares in Kulai, Johor, was poised to ride on Nusajaya's success.

"The increased activities in Johor will benefit MMC Corp Bhd, a premier utilities and infrastructure company.

"This could take the form of more investments at its land in Tanjung Bin and Senai, more passenger travel and cargo movements at Senai Airport, higher throughput in Port of Tanjung Pelepas and Johor Port and expansion of Tanjung Bin's power plant by 1,000 megawatt," Hwang said.

The developments at Nusajaya would also be driven by the partnership between WCT Construction Sdn Bhd, a construction and property development company, with Iskandar Investment Bhd to develop 1Medini.

The first phase will consist of 300 units of condominiums slated for launch in 2013.

"We understand that Iskandar Investment is in talks with several local and foreign investors to build a three-star resort hotel, four-star business hotel, a retail mall and a high-rise tower in Medini worth RM1 billion," it added.

By Bernama

Ivory surges on hope of land award

Kuala Lumpur: Ivory Properties Group Bhd's share price has surged on anticipation that the Penang state government will decide this week if it is to award the company the rights to help develop 40ha of land in Bayan Mutiara.

The Penang-based developer's share price has appreciated by slightly more than 20 per cent this month, after slumping to a 52-week low of 90 sen on June 23 this year.

Last Friday, Ivory shares closed 2 sen higher to RM1.16 a share, after having reached an intraday high of RM1.19 a share.

Business Times understands that the Penang Development Corp's (PDC) board of directors are scheduled to meet early this week to decide on the matter.

The meeting will be chaired by Chief Minister Lim Guan Eng.

Apart from Ivory, SP Setia Bhd had also put in a bid to develop the landbank. The cost of developing the land surpasses the RM1 billion mark.

The Bayan Mutiara tender is part of the state government's efforts to unlock the value of the land it owns in selected areas.

The reserve price for the tender is believed to be in the RM200-per- sq-ft range.

The Bayan Mutiara area is considered prime land for hotels and resorts as it is located south of the Penang Bridge, overlooking Pulau Jerejak.

Early this year, the Penang state government had asked for a request for proposal (RFP) via PDC to develop an initial 24.8ha.

The RFP comes with the potential to develop an additional 14ha via a future reclamation after the development of the initial 24.8ha.

The property developer, listed barely a year ago, last month confirmed that it had indeed submitted a bid to help develop the land.

"I can confirm that we have submitted a bid by responding to the Penang government's request for proposal to develop the land and are now awaiting word from the state authorities," the company's deputy chairman and executive director Datuk Seri Nazir Ariff Mushir Ariff told Business Times about a month ago.

By Business Times