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Wednesday, April 4, 2012

Property sector continues to be on solid ground

Looking good: Lim reading the property market report. With him is Valuation and Property Services Department director-general Datuk Abdullah Thalith Md Thani.

KUALA LUMPUR: The property market would continue to be active this year, supported by various government initiatives under the 10th Malaysia Plan and Budget 2012, said Deputy Finance Minister Datuk Donald Lim.

“Last year, in terms of construction activities, the higher number of new unit starts and building plan approvals signified the confidence of developers and investors,” said Lim at the launch of Malaysia’s Property Market Report 2011.

According to the report, the performance of the residential sub-sector would be sustained, while vacant space in the office and retail sub-sectors is expected to be absorbed as more space is taken up during the progress of the country’s Economic Transformation Programme.

However, Lim also pointed out that the Government was worried about the emergence of a real estate bubble.

“We do not want a United States subprime mortgage crisis in Malaysia. We noted that a lot of foreigners from the Middle East and China are keen on buying properties here,” he said.

Lim said the Government would intervene when property prices were seen to have “shot up too high.”

“As such, measures such as the implementation of the maximum loan-to-value ratio of 70% for the third home and Bank Negara’s responsible lending guidelines were taken.”

According to data on Bank Negara’s website, the amount of loans applied for purchases of residential property increased by 17% year-on-year in the first two months of 2012 to RM26.7bil.

The amount of residential property loans approved during the period was RM12.25bil, which was 2.7% higher compared to a year earlier.

Last year, the property market performed strongly with the value of transactions rising 28.3% to RM137.8bil. Volume rose 14.3% to 430,403 transactions.

The report stated that market activity was led by the residential sub-sector, which had a double-digit expansion of 18.9%.

This was followed by the development land (14.7%), commercial (9.7%), industrial (6.5%) and agricultural (4.6%) sub-sectors.

In terms of value, all sub-sectors registered double-digit growth with two sub-sectors surpassing 50%, namely agricultural (65.4%) and development land (54.8%).

Despite more units launched, the performance of the residential market improved last year. In 2011, there were 49,290 units of new launches which achieved sales of 46.3%, compared with 47,698 units with 45.7% sales in 2010.

Selangor, Johor and Perak offered the most number (51.2% or 25,216 units combined) of new launches in the country.

In terms of market share, the residential sub-sector dominated with 62.7%, followed by the agricultural (19.7%), commercial (10.1%), development land (5.0%) and industrial (2.4%) sub-sectors.

The residential sub-sector also took up a 44.9% share of the transaction value in the market. Last year, there were 269,789 residential property transactions worth RM61.83bil, which was the highest recorded in the last five years.

Selangor retained the lion’s share by capturing 27.9% (75,344 transactions) of the country’s total transactions.

The demand for high-end units priced above RM500,000 had increased, with 21,905 transactions last year (compared with 16,782 transactions in 2010).

“This could be attributed to the increase in affordability level and supported by the ease in borrowing as well as attractive loan packages offered by financial institutions.”

By property type, terraced houses captured 36.6% (98,597 units) of residential transactions, of which about one-third were transacted in Selangor.

As at the end of 2011, there were 4.51 million existing residential units with 584,546 units in the incoming supply.

According to the report, the Malaysian All House Price Index had surged to 156.9 points in the fourth quarter of last year, compared with 147.2 points a year earlier.

By The Star

Malaysia moves to avoid property bubble

Malaysia registers an average 6.6 per cent jump in home prices in the fourth quarter of last year, an official says

KUALA LUMPUR: Malaysia is taking "strict measures" to avoid a US-style subprime mortgage lending crisis, after reporting an average 6.6 per cent jump in home prices in the fourth quarter of last year, an official says.

"The government is worried about property prices causing a bubble, and we don't want banks to over-lend to the property sector," Deputy Finance Minister Datuk Donald Lim said here yesterday.

"We are seeing a lot of foreigners from Middle East and China keen to buy properties in Malaysia."

Housing loan applications jumped 46 per cent in February from a year earlier to RM14.96 billion, according to data on Bank Negara Malaysia (BNM)'s website.

BNM last tightened mortgage lending rules in November, limiting the loan-to-value ratio for people taking third mortgages to buy homes.

Hong Kong and Singapore have also taken steps to rein in the housing markets to tame inflation.

Malaysia has no plans to require banks to hold more capital to support housing loans to reduce risk, BNM governor Tan Sri Dr Zeti Akhtar Aziz said on March 9, when the central bank left borrowing costs unchanged at 3 per cent.

BNM tightened credit card lending rules on March 18, capping limits for lower-income earners as a pre-emptive move to ensure household debts remain "resilient", its deputy governor Nor Shamsiah Mohd Yunus said at the time.

By Bloomberg

MRCB hopes to sell back expressway to Govt

KUALA LUMPUR: Malaysian Resources Corp Bhd (MRCB) is open to selling its Eastern Dispersal Link (EDL) expressway back to the Government following the latter’s decision to review the company’s toll concession mooted in 2008.

“I’m sure the Government have many options to consider, and one of them is to impose a levy on Singaporean vehicles, and the other option, hopefully from our point of view is to buy the EDL off us at market value,” said MRCB chairman Tan Sri Azlan Zainol in a briefing after the company AGM.

He said the cost of the EDL was estimated at around RM1.4bil, and hoped a decision to be made in May.

“We leave the decision to the Government, and we are in constant touch with the authorities to consult and advice,” he said.

Fielding questions: Razeek (left) and Azlan at the briefing.

The 8.1km EDL links the North-South Expressway to the Johor Customs, Immigration and Quarantine Complex, and into Singapore directly at an effective toll rate of RM6.20 per travel.

Based on MRCB’s internal projections of about 60,000 vehicles utilisation rate daily for the EDL, it would generate about RM135.7mil in cash annually for the company with increases in toll charges every few years under the old concession agreement.

“We hope that this will be resolved soon as it will impact the company and collections. We had budgeted to start tolling in May,” he said, adding that the EDL had experienced good traffic response since it opened on Sunday.

Recently, the EDL had drawn controversy when it was reported that MRCB would require motorists travelling to Singapore via the Johor Causeway to pay about five times more than the current toll rate of RM2.90.

On Monday, the Malaysian Highway Authority director-general Datuk Ismail Salleh said vehicles would not be charged toll for now as the Government was still finalising the details.

On company’s prospects this year, Azlan said that it would be a challenging year while trying to maintain its profit at its current level.

“For 2013 onwards, we think our profit would be much better as a lot of the projects that we are currently doing would be completed in 2013. We are also steering the company’s direction towards property development,” he said.

He said the property development business offered better profits compared with construction and engineering. Currently property development contributes about 75% to the company’s profit and 40% to the group’s total revenue.

“We have about RM2.7bil in borrowings based on project financing, and we are prepared to try and chew at what we can.,” he said.

Azlan said MRCB would concentrate in the Klang Valley, as it still deemed the area with growth potential, while also looking at land in Johor and Penang.

Meanwhile chief executive officer Datuk Mohamed Razeek Hussain said the company had three mega projects which would keep it busy for the next three to four years.

“We have at the moment five acres in Brickfields worth RM1.8bil in gross development value (GDV), 27 acres in Setapak worth RM1.7bil in GDV and Penang Sentral, along with a small parcel near Jalan Kia Peng worth RM350mil in GDV,” he said.

By The Star

PNB pulls RM1.3bil bid for London property

LONDON: Investment fund Permodalan Nasional Bhd’s (PNB) plan to buy a London office building let to German bank WestLB for £265mil (RM1.3bil) has fallen through at the eleventh hour.

The 350,000 sq ft Woolgate Exchange building in the City of London financial district was put up for sale after the owner of the property Irish investment manager D2 Private failed to pay a £270mil loan last year.

“Following discussions between the receivers and the purchaser, an agreement to sell and purchase the property was not reached,” Capita Asset Services, which is handling the sale, said in a filing to the Irish stock exchange.

PNB, one of an number of cash-rich overseas investors which have stepped up their pursuit of top quality London properties over the past year, entered exclusive talks for the site in February, a source familiar with the situation told Reuters.

D2 Private bought Woolgate Exchange in 2006 for £325mil. Debt financing was provided by Anglo Irish Bank Corp, now Irish Bank Resolution Corp. Credit Suisse bought the senior tranche of the debt and this is now part of a commercial mortgage backed security known as Cornerstone Titan 20061.

Ratings agency Standard & Poor’s, which rates the Cornerstone CMBS, said on Monday that it understood “the borrower (D2 Private) had recently accepted a purchase offer.”

WestLB, once Germany’s third-largest landesbank, is being wound down after it received billions of euros in state aid during the financial crisis, and has been looking for buyers for its businesses before a June 30 break up deadline. Woolgate Exchange is the bank’s London headquarters.

Overseas investors like PNB have been attracted by the UK capital’s safe haven status against an uncertain global economic outlook. PNB has bought three London office properties since the start of the year, two of which were acquired from German fund KanAm for about £570mil.

By Reuters