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Tuesday, March 6, 2012

The fear factor in property purchases

PETALING JAYA: Property developers and consultants from Penang to Johor are generally bullish about the residential property market and do not think there is a bubble.

They are of the view that there are two types of buyers, one who is buying out of need and the other out of fear that prices would go up further. The speculative element which was evident a few years ago has dissipated.

Real Estate and Housing Developers' Association (Rehda, Penang) chairman Datuk Jerry Chan said: “Buyers have money which they would like to park somewhere.

“Sales this year have been better than last year, driven by fear rather than the speculative element,” said Chan who is also group managing director for Penang-based Asas Dunia Bhd.

Chan was commenting on a report Debunking the property bubble myth by CIMB which said that talk of a property bubble was overstated as the sharp rise in residential property prices over the past few years was confined to selected areas.

“Affordability is near its all-time high and prices have to surge 50% to 100% before affordability falls to pre-Asian financial crisis levels,” the report said.

The report said it was surprising that residential prices had not risen at a faster pace as new supply had fallen significantly over the past few years.

Chan said tourism was also very big in Penang and if China and Indian nationals were to buy in Penang, it would “turn the market upside down.”

“So I foresee Penang prices would continue to rise because of inadequate supply of land, not because of inadequate developments,” he said.

In the Klang Valley, Reapfield Properties Sdn Bhd chief executive officer Gerard Kho said domestic demand for residentials was expected to be strong until the middle of this year.

Managing director for the Khong & Jaffar group of companies Elvin Fernandez said “it is not a question of whether there is a bubble or not but whether prices in certain areas are tied in to fundamentals or not.

“And we know in certain hot spots, they are not,” Fernandez said.

In Johor, KGV International Property Consultants Samuel Tan said the state was undergoing a transition because of the Iskandar Malaysia factor.

“New houses entering the market are priced a lot higher than three years ago but the market is accepting it,” he said.

By The Star

Ivory expects nod for RM10b Penang project this week

GEORGE TOWN: Ivory Properties Group Bhd is expecting approval from the Penang Development Corporation (PDC) this week for its proposed RM10 billion “Penang World City” project at Bayan Mutiara.

Executive director Murly Manokharan said yesterday the development was expected to incorporate, among others, medical facilities, Grade-A offices and both high-end and affordable housing units.

“We are open to working with strategic partners for certain components of the development, such as a shopping mall and a medical centre, as opposed to seeking investors for an outright sale of chunks of the land,” he told Business Times after the company’s extraordinary general meeting (EGM).

Present was Ivory’s deputy chairman and executive director Datuk Seri Nazir Ariff Mushir Ariff.
During the EGM, which lasted 40 minutes and saw a shareholder turnout of 62 per cent, the company received unanimous approval from those present for its plan to purchase and develop a 41.02ha site in Bayan Mutiara on Penang island, from the PDC and Chief Minister of Penang (Incorporated).

The land was sold for RM1.07 billion, or RM240 per sq ft, to be paid over five years.
Shareholders also gave their nod for a joint-venture between Ivory and Dijaya Corporation Bhd to develop the land, which is located near the Penang Bridge.

After the execution of the Builder Agreement, Tropicana Ivory Sdn Bhd – which is 55-per cent owned by Dijaya and 45 per cent by Ivory – will develop the RM10-billion Penang World City development. The development will be a mixed-use residential and commercial project.

Murly said the master-planned development, which has been crafted by international firm Design 103 International Ltd, would adhere to any height restrictions imposed by the Department of Civil Aviation, owing to the project’s proximity to the Penang International Airport at Bayan Lepas. Any project sited within 15km from the airport is deemed by the DCA to be in the flight path.

Penang World City, he noted, was expected to be completed in eight years, with work on the first phase commencing at the end of this year.

“Now that we have obtained shareholder approval to enter into the joint-venture with Dijaya and also for the proposed rights issue, we are looking at a RM500 million capitalisation and are in a better financial position to carry out the project,” Murly said.

As the principal builder of the project and turnkey contractor, Ivory will manage and develop the entire project, for which it will be entitled for 48 per cent of the gross development value.

“We are currently engaging with both local and foreign investors who may been keen to partner us in certain phases of the proposed development.

“However, our first obligation is to honour whatever outstanding payments which are being owed and we are looking at settling the RM80 million being owed to the PDC by April 10,” Murly added.

PDC and Chief Minister Inc sealed a deal on November 11 last year to sell the land to Penang-based Ivory Properties Group Bhd for RM1.07 billion, or RM240 per sq ft, to be paid up in five years.

Ivory’s chairman and group chief executive officer Datuk Low Eng Hock was quoted last month saying that the company has paid a RM22.1 million deposit for the land and that the remainder will be paid according to the scheduled progress payment after shareholder approval was obtained at the EGM.

By Business Times

Takaful Malaysia to invest in London properties

KUALA LUMPUR: Takaful Malaysia Bhd is looking at diversifying its investment portfolio by acquiring properties in London this year.

Group managing director Datuk Hassan Kamil said the Islamic insurer has RM200 million in its war chest.

"We are scouting for commercial buildings or offices within a 30km radius of central London," Hassan told Business Times recently.

It is learnt that the company has appointed an adviser to search for properties by the end of this month.

He viewed that a depreciated currency and a devalued market were making London properties a worthy investment.

"It is a good time for investments, both for potential capital gains as well as reaping good yields," he said.

Hassan believed that yields of between 5.5 per cent and 8.5 per cent could be achieved in London's main office and financial district, where demand was hit hard due to the credit crunch.

He said if successful, Takaful Malaysia would be the first fully-owned Malaysian insurer or takaful player to own properties overseas.

Bank Negara Malaysia limits local insurers to invest up to only five per cent of their total assets overseas.

This means that Takaful Malaysia will have about RM250 million for property investment overseas from the total RM4.9 billion investment assets.

Hassan hoped that any potential London investments would be the beginning of its plans to broaden income through properties.

The investment portfolios of takaful operators are similar to their conventional counterparts' and include equity, cash and bonds.

More than 50 per cent of Takaful Malaysia's asset allocation is in sukuk and equity while Government Investment Issue (GII) and properties are its other main assets.

Properties investment currently makes up about five per cent of the company's investment portfolio.

Its largest investment is its headquarters - Dataran Kewangan Darul Takaful building, which it bought in 2005 for RM117.7 million.

By Business Times