KUALA LUMPUR: The country’s real estate cycle is expected to peak in late 2008 as the pace of rental increases begin to lag price increases, particularly in the high-end property segment in the vicinity of Kuala Lumpur City Centre. OSK Investment Bank said compression of rental yields from high-end condominiums could prompt existing owners to lock in capital gains in anticipation of more new luxury units hitting the market at a time when the real estate cycle was peaking. Its latest property market outlook report indicated that additional supply of condominiums in KLCC would make it more difficult for investors to rent out their residential units. “If most buyers are mere speculators and investors, risk of a potential bubble burst in KLCC condos will be rather high by late 2008,” OSK said, adding that the current upward trend in the local real estate cycle may begin to taper off in 2009 when more properties hit the market. It was reported in February that prices of upmarket condominiums may reach a new high of RM3,000 a sq ft this year as new products hit a niche market driven mainly by foreign demand for local luxury units which are deemed one of the cheapest in the region. According to property consultancy Knight, Frank, Ooi and Zaharin Sdn Bhd, residential properties in KLCC had fetched between RM1,300 a sq ft and RM2,000 a sq ft last year (2007) while rentals ranged between RM5.50 a sq ft and RM6.50 a sq ft. The rising prices of these top notch homes, essentially, translates into lower rental yields as prices advance at a quicker pace than rental hikes. Meanwhile, foreign demand for high-end real estate here may dip on investors’ cautious sentiments surrounding the country’s new political landscape following the recent general elections. But the slower take-up rate for luxury properties should not be viewed as an across-the-board phenomenon as foreign individual buyers, experts said, were still scouting for local assets. A downside in demand for larger transactions like en bloc commercial property acquisitions by overseas institutional buyers is, however, possible as investors adopt a wait-and-see attitude to safeguard their portfolios. “Foreign direct investment is going to be sustained but definitely there will be a wait-and-see attitude in certain industries especially on the bigger ticket purchase items like en-bloc sales. “Foreign individual investors are still coming in,” real estate consultancy Zerin Properties chief executive officer Previndran Singhe told The Edge on the sidelines of a forum discussing the impact of the recent national elections on the country’s real estate sector. The forum was organised by the Malaysian chapter of the International Real Estate Federation or better known as Fiabci. Speaking at the event earlier, Asian Strategy & Leadership Institute chief executive officer and director Datuk Dr Michael Yeoh said foreign investors were still deliberating on the Malaysia’s investment climate following the unprecedented outcome of the recent elections. “We cannot exclude any possibility,” Yeoh said. By The EDGE Malaysia (by Chong Jin Hun)
Friday, April 4, 2008
Real estate cycle seen peaking this year
Thursday, April 3, 2008
High-end properties still attracting foreigners
However, the foreign investors are bound to adopt a “wait and see” attitude for now until the political scenario is much more clearer, he said.
The wait-and-see attitude is more likely to affect the high end properties that depend on foreign purchases like those in the KLCC areas or those above RM2,000 per sq ft.
Presenting a talk in Kuala Lumpur yesterday on the “Impact of The Recent General Election on the Real Estate Industry”, organised by the International Real Estate Federation Malaysia (FIABCI-Malaysia), Yeoh said a more clearer political picture was expected after the UMNO General Assembly in December and this will result in a relatively more stable property market.
He, nevertheless added there was no sign yet of a slowdown in the foreign investments.
Whatever the changes, the basic policies are expected to remain same, he said, adding that the local property market will continue to be boosted by domestic demand.
“I dont think domestic demand would slow down, I think that would continue to be strong,” he added.
Yeoh also said a more influencing factor was the global economic situation rather than Malaysian politics as the US subprime crisis was far from over and that it may have impact on global liquidity.
On a positive side, he said Malaysian economy was well preserved by domestic consumption which was robust.
ASLI has forecast a gross domestic product growth of between 5.8 per cent and 6.2 per cent this year amid robust domestic demand, and exports of its oil and gas and palm oil.
Meanwhile, Glomac Bhd’s group executive vice chairman, Datuk Richard Fong, was also upbeat on the high-end property market. He said: “I think the property sector will remain stable and we will see a surge of foreign investments for properties especially in the high-end market, mainly from the Middle East.”
Bukit Kiara Properties Sdn Bhd’s group chairman Datuk Alan Tong Kok Mau meanwhile said there was still a lot of growth potential for the high-end property market, saying that Malaysia’s property prices still remained very competitive.
“There is still a niche market for the high-end segment and we would focus on that. Towards the year, we would see demand mainly from the Middle East and China,” he said.
By Bernama
Monday, March 24, 2008
Going for community building concept
INSTEAD of merely building properties, developers should embrace the concept of building communities by envisioning the process from a “community builder’s” viewpoint.
According to Abbey Woods Sdn Bhd chairman and managing director Datuk Wong Choon Kee, this is a more holistic approach to building as the builder evaluates how the development could impact people’s lives as he constructs.
“Every developer must optimise construction standards by offering quality facilities, better security measures and higher standard of living, because they are part of the process of building a nation.
“Sustainable property development must be practised as we move forward, as we should remember that building is always about the future, and the future is something we borrow from our children.
“Developers must start looking seriously into eco-friendly designs and buyers and investors and buyers can support this by making educated purchases,” Wong said.
He reminded developers that they have to do their best to provide property buyers with the best value they can possibly enjoy.
“The new generation of homebuyers is extremely savvy and hands-on on real estate matters; demanding good craftsmanship, quality designs, prime locations and the best value for every ringgit spent.
“As a property developer, I would like to see more innovations in the property projects developed in the country in terms of architecture and design, and emphasis given to quality,” Wong said.
He observed that the country would continue to face strong competition “as every other country is racing to pull in foreign real estate investors.”
“We have to raise the country's rating in various aspects, including quality of life index and international-standard property offerings. We have to capitalize on our advantages, including having one of the lowest property prices in the region, a comparable cost of living and transparent land and property ownership laws.”
On the market outlook, Wong said the local property market would continue to offer attractive durable dynamics, especially in the residential property sector, which would continue to dominate the volume of transactions in the market.
Malaysia is experiencing major development and economic growth, giving rise to an upturn in its tourist, residential and commercial property markets.
“Many international real estate investors are considering Malaysia as a highly lucrative option for three main reasons – well-priced properties, strong economy for sustainable growth and yields over the medium to long term.
“Property development in Malaysia has been encouraged by political, economic and geographical stability and it is one of the safest countries to live in.” Wong said.
Its modern lifestyles with exposure to western culture, great healthcare and infrastructure facilities, as well as a technology savvy society, make the country an attractive investment destination.
Wong said the Government’s My Second Home Programme and recent relaxations for foreign investment had made it easier for foreigners to purchase property and get financing locally.
“Malaysia also has a young age profile where 60% of the population is below 30 and the size of the average household is still largely at 4.3 persons per home. As the population matures, it should drive increased household formation, which will spur property demand.
The feel-good strategies, including the exemption of the real property gains tax, the lifting of Foreign Investment Committee (FIC) approval and removal of the limit of the number of property loans allowed for non-residents, will also help stimulate the property sector,” he added.
By The Star
Wednesday, March 12, 2008
Foreign investors may wait and see
However, they said investments in the property sector and in other sectors would improve in the long run if there are signs of better corporate governance and transparency in doing business here.
Zerin Properties CEO Previndran Singhe expects an overall positive impact as real estate is a long-term investment.
"The outcome of the elections proved that the country is democratic and its citizens, politically matured. I do not foresee any negative affect on foreign investments, as investors will notice that
Malaysia is democratic and practises good corporate governance," he said.
“The public should be made to understand that with a simple majority, the federal government can continue to implement its policies and amend legislations, except the constitution.” However, Previndran added that certain projects could be affected in terms of timing, as they may require state approvals.
City Valuers & Consultants Sdn Bhd general manager CY Lim also expects the election results to have a general positive impact on the property sector. He said foreign investments would continue to remain positive, as investors would expect a more transparent administration.
“We also hope that the new state governments will clean up red tape and delays at the land office in Selangor,” said Lim.
Real Estate and Housing Developers Association (Rehda) president Ng Seing Liong said the dip in the Kuala Lumpur Composite Index (KLCI) on Monday was inevitable as people were shocked at the unexpected outcome of the election. The KLCI took a dive to close 9.55% or 123.11 points lower, to 1,173.22 on Monday.
“We do not expect much changes in policies as the federal government is intact but we foresee that whatever changes there may be, would be for the better,” said Ng.
He hopes that Selangor, now under a coalition led by Parti Keadilan Rakyat (PKR), will be more proactive in creating a conducive business environment including implementing development-friendly policies.
"There will be heightened expectations on both incumbents and newcomers to improve the nation's competitiveness by enhancing the delivery system and efficiency, and the efforts will benefit the economy and image of Malaysia as an investment destination for foreign investors," said Ng.
He added that the local governments should not forget their social responsibility and that building affordable houses for the hardcore poor irrespective of race is essential.
Commenting on whether the economic development corridors such as the Northern Corridor Economic Region (NCER) would be affected, Ng said that while the development corridors may be temporarily affected, he foresees medium and long-term positive effect.
By theSun (by Rosalynn Poh)
Friday, March 7, 2008
Malaysian property mart outlook 'very bright'
The commercial sector, however, is set to become increasingly important as property trusts actively look to expand and foreign property funds continue to show keen interest here.
As usual, the Klang Valley is expected to lead the market, but things are also looking good in places like Johor Baru (Johor) and Butterworth (Penang).
"Overall, the outlook is very bright. Property prices haven't peaked. Foreign interest is helping drive the market, but there's also a lot of local interest," WTW managing director Goh Tian Sui said yesterday at the launch of its property market and CEO opinion survey for 2008.
Concerns over the impact of the US subprime crisis remain a downside risk, but it has so far not affected the local property market, he said.
"Foreign investors are still actively looking for spots to buy Malaysian assets. People who come to us are prepared to pay top dollar. There's so much capital chasing too few buildings," he remarked.
He predicts that Malaysia, in line with markets elsewhere, will see yields of less than six per cent this year in the Klang Valley, compared with between 6.25 per cent and seven per cent now.
Malaysia's residential sector, which typically accounts for about 60 per cent of total property transactions, has been the best-performing of all sectors since 1997.
Current hotspots include the Kuala Lumpur city centre, KL Sentral, Melawati-Ulu Kelang, Mutiara Damansara, Mont Kiara/Segambut, Kota Damansara and Menjalara/Kepong.
Boutique developments, rather than townships, are expected to do better and are set to be the trend this year.
By New Straits Times (by Adeline Paul Raj)
Property market to keep drawing foreigners
KUALA LUMPUR: The property market will continue to attract strong foreign interest, says international property consultant CH Williams Talhar & Wong Sdn Bhd (WTW).
Managing director Goh Tian Sui said the economic slowdown in the US and Britain had drawn investors to Malaysia due to the higher dividend yield compared with its regional peers.
The exemption of the real property gains tax (RPGT) announced in Budget 2008 was also another pulling factor, he told reporters at the release of the WTW Property Market Outlook for 2008 & CEO Opinion Survey yesterday.
According to the survey results, 90% of respondents said the RPGT exemption would have a positive impact on the local property industry, while 96% thought the exercise would increase the volume of transactions in the industry.
It also showed 76% of respondents felt the flexible monthly withdrawal by Employees Provident Fund contributors would drive up the local property market.
Last year, integrated mall KL Pavilion, which is 49% owned by Singapore-based Pacific Star group, together with The Gardens@MidValley and Sunway Pyramid 2 contributed 63% of new local retail space, said Goh.
He added that local retail space grew by 14.5% to 36.87 million sq ft last year from 2006.
“We expect another seven retail centres in the Klang Valley to be completed this year,” he said.
Meanwhile, the residential market – principally in the KL City Centre area – remained the “star performer” in the property sector.
In the industrial sector, foreign investments rose 57% to RM21.8bil for the first nine months ended Sept 30, 2007 from RM13.9bil in the previous corresponding period, while domestic investment slipped 17%.
Goh said the top three foreign investors for the period were from Japan, Iran and Singapore.
“We expect the healthy demand for investment-grade properties to continue this year,” he said.
In the hospitality sector, WTW predicted hotel occupancy rate in the country to continue to be over 70% this year.
Last year, tourist arrivals increased to 20.97 million from 17.5 million in 2006.
By The Star
Friday, February 29, 2008
Tourism, office and retail properties look good for 2008
Zerin Properties chief executive officer Previndran Singhe said the country’s hotels and resorts will soon be experiencing new trends that have been taking place on the international front.
Previndran: Hotels and resorts will soon be experiencing new trends
“For example, limited service and branded budget hotels [like the Tune brand] are very popular overseas and these are managed by well-known hotel brands including Holiday Inn and Marriott.
Serviced apartments are also another type of limited-service offering,” he stated. Previndran was presenting his paper on the hotel and resort market performance for 2007 and the outlook for 2008 at the recently concluded First Malaysian Property Summit 2008 in Kuala Lumpur.
Other trends that would benefit the local hospitality sector include spa resorts and Syariah compliant hotels. “Foreigners will enjoy the spa-themed resorts, which are considerably more affordable here.
There is also a big market for ethnic-based hotels with Islamic architecture here and in the Middle East, there are about 26 Syariah compliant hotels,” he added. According to data from Zerin Properties, foreign investments in hotels grew by 64% to RM878 million in 2006, while the total investments by locals only amounted to RM153 million. Last year, 62% of the total value of hotel transactions, which amounted to RM756 million, was by foreigners.
Hotel funds as well as foreign investment funds, said Previndran, are the main drivers of demand for properties here. “While Malaysia is still perceived as a value-for-money destination, the growth in our tourism market is also driven by low-cost carriers like AirAsia. So allowing the open-sky policy will actually be beneficial to us.”
Some 20.7 million tourist arrivals were recorded in 2007 and tourism receipts amounted to RM45.7 billion, which is the second largest foreign exchange earner for the country.
The property summit was organised by the Association of Valuers & Property Consultants in Private Practice Malaysia and more than 100 participants attended the one-day seminar.
On the office market segment, CH Williams Talhar & Wong Sdn Bhd managing director Goh Tian Sui said that the segment’s benchmark selling price would be boosted to a new level above that
of RM1,230 psf recorded by the upcoming Menara YNH along Jalan Sultan Ismail.
Goh: The benchmark selling price would be boosted to a new level
In his paper on the office market’s performance for 2007 and outlook for 2008, Goh said capital values would be “quite bullish” and foreign buyers’ enthusiasm in Malaysia in the sector would continue to grow.
“Interest from foreign investors and institutions continue to remain strong… it depends on how much yield they can accept. But we are facing more competition from Singapore, Australia and the Middle East,” said Goh.
For the investment and retail market’s performance for 2007 and outlook for 2008, executive chairman of Regroup Associates Christopher Boyd feels confident that the rental rates in shopping centers in the Klang Valley have the potential to reach RM100 psf.
Boyd: Klang Valley shopping centers rental rates could reach RM100 psf
“This is likely to happen over the next three years because of the continuous growth of new retail space in the market.
Top rentals in the Klang Valley are about RM80 psf at Suria KLCC while the recently opened Pavilion KL is already charging as much as RM45 psf and has the potential of catching up quickly,” said Boyd.
On retail space transactions, Boyd expects that prices will surpass the RM1,500 psf mark from the current RM1,100 psf following growing demand from foreign buyers.
“Buyers outnumber sellers here by a very large margin and in the last two years, we have experienced investor interest from Europe, Australia, Singapore. Hong Kong and the Middle East,” he added.
By theSun (by Loo Pik Kwan)
Thursday, February 28, 2008
Promising yet cautious property market for 2008
“The government’s move to allow EPF contributors to make monthly withdrawals from the balance in Account 2 for the financing of one house (effective 1 Jan, 2008) as well as the establishment of one-stop-centres (OSC) are expected to give a positive effect,” said Datuk Abdullah Thalith Md Thani, directorgeneral of the Valuation and Property Services Department, Ministry of Finance.
Abdullah was presenting an overview of the Malaysian property market at the 1st Malaysian Property Summit 2008 organised by the Association of Valuers & Property Consultants in Private Practice Malaysia (PEPS) yesterday.
Other topics presented at the conference included the performance of Malaysian real estate investment trusts (REITS) and the high-end condominium market for 2007 and their outlook for 2008.
On Malaysian REITS, chartered surveyor Datuk Mani Usilappan said the market is expected to be aggressive in acquisitions this year, with additional injections of assets.
“Aside from this, some REITs have review of rents coming up this year and next year. So these REITs are expected to perform better,” he said. There are 13 REITs with a total capitalisation of RM6.5 billion as of 31 Dec, last year.
Where high-end condominiums were concerned, Knight Frank Malaysia’s managing director Eric Ooi (pix) said the completion for high-end condos in Kuala Lumpur is expected to be higher this year.
“Last year, there were 1,400 newly completed high-end condominiums and the expected completion this year is 4,370 — more than half are located in KL city. We are also expecting branded residences such as Four Seasons Place, St Regis Residences and The Binjai to set a new benchmark in pricing of RM2,000 to RM3,000 per sq ft,” Ooi said. Last year, high-end condos within the Kuala Lumpur City Centre were selling for RM1,300 to RM2,000 per sq ft.
The rental market is also expected to be competitive this year due to the higher completion of units. Rentals may increase but there would be yield compression, as the increase in prices is faster and higher than the rental increase.
“We have seen very strong foreign interest to buy properties in Malaysia, about 40% to 50% are foreign purchasers, and we expect this percentage to remain this year,” Ooi said, adding that buyers from the UK, Australia and Europe found the property prices here to be very affordable.
Ooi explained that there might be concerns of oversupply in high-end condos but it would depend on two segments – whether it is for investment purposes or owner occupation. He said there is still demand for high-end condos and among some of the key demand drivers are competitive pricing, location, quality and lifestyle.
By theSun (by Rosalynn Poh)
Monday, February 25, 2008
Malaysia's first property summit
The conference will feature eight speakers from the Malaysian property industry: Datuk Abdullah Thalith Md Thani, Datuk Mani Usilappan, Dr Ting Kien Hwa, Eric Ooi, Christopher Boyd, Allan Soo, Goh Tian Sui and Previndran Singhe.
According to Eric Ooi, managing director of Knight Frank Malaysia, a total of up to 200 registrants are expected to participate in the conference. “It has always been at the back of our minds to organise an event like this and we hope to turn it into an annual event,” said Ooi.
The conference will begin with an overview of the Malaysian property market in 2007, followed by a series of topics, including: REITS Performance for 2007 & Outlook for 2008, High-end Condominium Market Performance for 2007 & Outlook for 2008, and Investment & Retail Market Performance for 2007 & Outlook for 2008.
“The objective of the conference is for people who are in touch with the market to share their knowledge, opinions and views of future trends with industry players and the public. At the end of the day, it is important for everyone involved to plan for their future, and this knowledge would assist them,” said Ooi.
The participation fee is RM988 per person and RM950 per person for members of PEPS. The conference begins at 8.30am and ends at 5.30pm. For enquiries and registration, call the PEPS Secretariat at 03-2145 0952.
By theSun (by Yeong Ee-Wah)
Thursday, February 21, 2008
Retail round-up
Industry pundits expect 2008 to be a good year for the retail industry in Asia despite the possible slowdown in the US economy
THE Year of the Rat is expected to be an optimistic one for Asia’s retail market, with expansion activities being a main growth driver. Based on retail consultants Jones Lang LaSalle’s fourth annual Retailer Sentiment Survey released last month, three key factors are behind the anticipated double-digit retail growth – consumer spending, the economic climate and tourism.
While India and Greater China are among the most bullish in the region, 76% of the 150 retailers from various trades in eight key Asian markets polled anticipated higher growth turnover in 2008.
Jones Lang LaSalle Asia Pacific head of research Dr Jane Murray said in the report that 2007 had been a bumper year for retailers in Asia. According to Murray, continued strong, real-income growth has buoyed consumption levels and purchasing power. Murray feels Asia has emerged relatively unscathed from the credit crunch; markets in the region continue to be attractive to investors, developers and retailers.
Meanwhile, retail sales in Hong Kong also rose 19.3% in December last year following an improved labour market and lower interest rates, which encouraged consumers to spend more on food, clothes and electronics. A Bloomberg report last month quoted MasterCard Inc estimating that Hong Kong’s retail sales may grow 10.5% in the first half of this year from a year earlier after gaining 8% in all of 2007.
However, there seems to be mixed sentiment on home ground. MasterCard Worldwide expects retail sales to rise by 6.7% year-on-year in the first half of 2008, to RM40.5 billion on the back of strong consumer confidence. According to its Master-Index of Retail forecast released recently, increased attention by the government on infrastructure and development reforms would aid economic activity although Malaysia’s real gross domestic product growth would slow to 4.8% this year.
Local consultant, Retail Group Malaysia Sdn Bhd however is not so optimistic. The company, which tabulates quarterly retail data for the Malaysian Retailers Association cut its sales growth projection to 7% from 8% earlier. This cut could result in total sales for the year coming in at RM68 billion, a RM610 million shortfall. The reasons for this include higher living costs and stagnant salaries that are weighing down consumer confidence. Retail Group Malaysia’s managing director Tan Hai Hsin feels retailers are preparing for slower consumer spending this year as they are concerned about Malaysia’s rising cost of living more so than a slowdown in US economy.
Business as usual
However, despite the threats of inflation, the retail scene continues to look exciting for shoppers who are spoilt for choice when it comes to shopping destinations in the Klang Valley. The opening of two new malls, The Gardens Galleria and Pavilion Kuala Lumpur coupled with the extension of Sunway Pyramid last year, saw new international brands such as Massimo Dutti, Ted Baker and GAP, being introduced. Tan, who is also managing director of Henry Butcher Retail observed large shopping crowds during the festive period at the end of last year.
“While consumers remain cautious in spending following expectations of price increases in petrol prices, the shopping managers went all out to attract shoppers and big boys like Pavilion Kuala Lumpur, Suria KLCC, 1 Utama and the Curve also organised regular promotional activities at their main concourses,” Tan told PropertyPlus.
However, Tan cautions that there are not enough shoppers and purchasing power to cope with the increasing shopping centre supply in the Klang Valley. Some shopping centers are going to
be forced to close down due to poor occupancy and low visitation in the near future, he said.
According to the Ministry of Finance’s Valuation and Property Services department latest report in 3Q2007, total retail space within shopping centers stood at 66,887,886.55 sq ft nationwide housed in 353 shopping centers, of which, about 77.1% is occupied. Not surprisingly, Kuala Lumpur leads in market share at 23.4% (50 shopping complexes with 15,619,457 sq ft retail space and 81.9% occupancy), followed closely by Selangor (19.2% or 40 shopping complexes with 12,837,449 sq ft retail space and 86.8% occupancy), Johor (13.8%) and Pulau Pinang (13.0%).
A check with some shopping malls revealed that visitation and sales results last year improved compared to 2006. Take the example of 1 Utama – thanks to its constant reinvention and finetuning of offerings and presentation to entice discerning shoppers, approximately 25 million shoppers visited the mall last year.
Shopping centre director of 1 Utama, Datuk Teo Chiang Kok said, “We follow trends closely and strive to introduce new and exciting facilities in line with shoppers’ experiences and expectations that are always changing. In fact, our 2007 year-end sales results improved on average by 15% against the previous year.”
Teo: We follow trends closely
Meanwhile, Sunway Pyramid Sdn Bhd senior general manager HC Chan expects the newly extended mall to see it gather full momentum within the next six to 12 months. “With a total of 1.7 million sq ft of net lettable area, we are enjoying 98% occupancy and visitation levels have doubled, with 2.5 million visitors monthly,” he said.
Centre manager of the Curve, Adele D Flores said that a majority of its fashion and food-andbeverage tenants achieved their sales target for the year, resulting in a direct positive impact on the mall. “One of our key efforts was a branding exercise for Mutiara Damansara, which integrates the Curve, Cineleisure, Ikea/Ikano and Tesco as a one-stop destination for shoppers. Our visitorship increased by 30% last year compared to 2006,” said Flores.
Despite being in business only since the fourth quarter of last year, Pavilion Kuala Lumpur experienced monthly visitation of between 65,000 and 70,000 people. Leasing and marketing director for Pavilion Kuala Lumpur Sdn Bhd, Joyce Yap, also said that December was a successful month for the mall.
Yap: We did well in the festive period
“We did quite well during the festive period and business was three times that of October and November. From the feedback gathered from our tenants, the number of tourist visitors at their outlets in Pavilion is higher,” added Yap.
Competitive marketplace
Pavilion’s Yap, who is also president of the Association for Shopping Complex and High-rise Management (PPK), feels that the existing malls are not competing for the same retail pie and that only 10% to 15% of the market is cannibalised.
“Competition is good for the industry because it will see an increase in investment by the mall managers to step up promotional efforts and fit-outs,” she added.
PPK vice-president MK Foong concurs, believing that competition is a method to gauge a mall’s strengths and capabilities, and to keep on improving itself.
Foong: Competition is a method to gauge strength
Foong, who is also Sungei Wang Sdn Bhd’s general manager, said, “Despite the emergence of new players, Sungei Wang continues to retain its identity, strengthen its retail and promotional activities. We also generate continual publicity in the relevant media, introduce new concepts/floors to attract shoppers.”
Another player that places emphasis on advertising and promotion is Mid Valley Megamall, which spends in excess of RM5 million annually, said Mid Valley City Sdn Bhd executive director Daniel Yong.
“We aim to provide valueadded services and create a feelgood factor for our customers. Despite the new competition, our key indicators such as visitation and spend have continued to grow. In fact, our sales growth for 2007 was met and in many cases, exceeded expectations,” Yong added.
However, Sunway Pyramid’s Chan, who is also PPK vicepresident, expects mall players to experience a competitive squeeze on margins and market share as a result of the opening of the new malls.
“With approximately four million sq ft of retail space created by these new malls, there is an oversupply of mall retail space and the market size is not increasing as fast as the supply,” he explained.
Henry Butcher’s Tan agrees with Chan, saying that it is a survival of the fittest with such intense competition in the marketplace.
“This dilution has been happening since 2004 where newer and larger malls have been facing problems filling up space and bringing in shoppers,” said Tan.
While no major retail space with over one million sq ft of net floor area is expected this year, there are still many shopping centres being planned, said Tan.
Tan: Dilution has been happening since 2004
“Major ones that have yet to be opened in the Klang Valley include Suria KLCC phase two, Vision City, Plaza Rakyat, Bukit Bintang City Centre [Pudu Jail], KL Sentral’s Lot G, Bangsar Shopping Centre phase three, Subang Parade phase two, Harbour Place and Tropicana Mall.”
VMY 2007
Following the government’s extension of the Visit Malaysia Year 2007 campaign by an additional eight months in conjunction with the country’s 50th year of independence, the retail boys are not resting on their laurels.
Ongoing efforts are being made to up the ante in efforts to get a slice of the Tourism Ministry’s targeted tourist revenue pie worth some RM50 billion this year against the RM44.5 billion set last year.
PPK’s Yap believes there must be a concerted effort between the government and the private sector to promote the country as a shopping destination. “The latest malls have caused some excitement on the local retail scene and certainly increased our standards to compete on the foreign front,” she said.
Foreseeing the market to be a competitive one, both locally and internationally, Yap said that Malaysia remains known as a shopping holiday destination.
“With no limit to the potential revenue from tourists and shopping, our neighbours are also competing for shopping dollars. For instance, Singapore’s new attractions are F1 and casinos, Thailand has huge malls with breadth and depth like Siam Paragon, and malls in Indonesia are catching up in size,” she said.
According to 1 Utama’s Teo, the retail scene in Malaysia still trails countries like Hong Kong, Singapore and Bangkok where shopping accounts for some 60% of tourist spending, while Malaysia only recorded 25%.
By theSun - PropertyPlus (by Loo Pik Kwan)
Tuesday, February 19, 2008
Striding Confidently into 2008
"...Malaysia will not be overly affected by the downturn in the US"
WHILE last year was generally good for properties in Malaysia, particularly at the top end of the market, news of the credit crunch in the US stemming from the subprime mortgage crisis had become troubling by year-end.
Still, we tend to remain optimistic about the prospects for Malaysian property. The government had put various measures in place for the property market and announced a series of liberalisations, financial incentives, and system enhancements even before the news of the credit crunch reached our shores.
These included changes changes to Employee Provident Fund (EPF) withdrawals. Effective this Jan 1, EPF members will be allowed to make a withdrawal every month from Account 2 of their accounts to finance their housing loans. Previously, EPF withdrawals for housing purposes were permitted only once every three years, and subsequently, once a year.
If all 5.4 million EPF members take advantage of this initiative, about RM9.6bil is expected to be released for home purchases, which will surely give the real estate market a nudge in the right direction.
Drawing on the experience of our neighbour down South, home ownership in Malaysia, currently at 67%, is likely to increase with this new monthly withdrawal scheme. In 1980, when Singapore allowed its Central Provident Fund (CPF) members to use their CPF money for paying off monthly mortgages, home ownership was 59%. By 2000, according to the Singapore Census, home ownership had risen to 92%.
Early last year, we saw the removal of real property gains tax, or RPGT for short – a move meant to stimulate the real estate market in Malaysia and in the words of our Prime Minister “inject more excitement and dynamism into the property sector”. In truth, this was something that the industry had been expecting for some time prior to its enactment.
Before this piece of welcome news, the government had already relaxed foreign ownership rules so foreigners could buy residential properties worth more than RM250,000 without having to go through the time-consuming Foreign Investor Committee (FIC) approval process. In addition, foreign home buyers could purchase as many properties as they wanted and they could buy them for investment purposes. These two incentives caused a marked increase in property purchases by foreigners.
Collectively, all these efforts have made Malaysian properties more attractive. Together with the prospect of a strengthening ringgit and low per square foot prices vis-à-vis our regional neighbours, Malaysia may well become the property hub that our government has envisioned.
We hope that all these incentives and measures that have been put in place, will be here to stay. Previously, we would see guidelines on foreign ownership implemented for only short periods of time. As a result, each time a new measure was implemented, there were doubts as to whether it would last.
In order to further stimulate property transactions, quota for the sale of properties to foreigners could be relaxed. In Singapore, for example, as long as one unit in a housing project is bought by a Singaporean, the rest of the development can be sold to foreign purchasers. This type of liberalisation would certainly give the property market in Malaysia a big boost.
Still, despite efforts at pushing the growth of the industry, consumer sentiment based on economic trends can be unpredictable. While it showed an uptrend in the third quarter of last year, it is often not that easy to gauge which way it will swing if we are to be assailed by more unpleasant news from the US.
We have seen that Malaysia, too, is somewhat dependent on the good health of the US economy as the recent tumble of our share market has proved.
However, I am confident that Malaysia will not be overly affected by the downturn in the US. There are now “new” investors from emerging markets such as China, India, Korea and the Middle East and we are no longer relying on the traditional group of investors from the US and Europe.
Investors are always looking for safe and stable havens. We are already seeing a “shift” of foreign funds to this region. This means that Malaysia, with its currently undervalued property market would be an ideal place to invest. Let’s ensure we are ready to tap onto this opportunity.
Article posted by The Star Newspaper
Monday, February 4, 2008
Groundbreaking incentives put sector on firmer footing
How will the property sector perform going forward? Are the measures taken by the Government and the private sector sufficient to boost the sector especially in such a challenging environment globally?
The property sector has witnessed a slew of groundbreaking developments last year, which had placed the sector on a more competitive footing going forward, especially in terms of government policies.
For instance, in the residential sector, foreigners are now allowed to buy properties costing above RM250,000 without Foreign Investment Committee (FIC) approval and they benefit from the exemption of real property gains tax (RPGT).
Moreover, the authorities allowed the set up of one-stop centres to streamline procedures to hasten approval process.
Tan Chee Meng
Contributors of the Employees Provident Fund can now make withdrawals to pay for monthly mortgage repayments and a 50% discount on stamp duty for properties valued below RM250,000.
Furthermore, there's a special fund set up to guarantee housing loans for those without fixed regular income.
These proactive measures, coupled with the Government’s setting up of various growth zones such as the Iskandar Development Region, Northern Corridor Economic Region, Eastern Corridor Economic Region and Sabah Development Corridor, augur well for the growth of the property sector.
But there's always room for improvement, and we feel the speed of delivery of the mega projects under the Ninth Malaysia Plan (9MP) would help support the property sector cushion an acute recession in the US.
Can you be more specific to show the buoyancy of the property sector by market segment?
For the office sector, the year was marked by the continued strong interest from institutional buyers for prime office buildings. This resulted in capital values of offices hitting new benchmark prices. After hovering around the RM500 to RM650 per sq ft (psf) level for the past few years, capital values of offices rose above RM700 psf for the first time, with Mah Sing achieving a landmark price of RM715 psf for the first wing of its Icon office tower at Jalan Tun Razak.
Just when the market was wondering whether the price would go up, Glomac was reported to have received an offer for its office tower near KLCC for RM1,150 psf
Mah Sing also announced that the second wing of its Icon at Tun Razak was sold at an even higher price of RM969 psf.
It was also reported that Mah Sing had managed to sell its Icon Mont' Kiara office tower for RM802 psf. Even in Bangsar, it was reported that UOA Bangsar was asking for RM600 to RM 900 psf for the office space in the building whilst the asking rental is RM5 psf.
The upward trend has continued with YNH announcing that it had sold half of its new office development along Jalan Sultan Ismail for a record price of RM1,250 psf, while TTDI announced the sale of its office tower at Platinum Park near KLCC for RM929 psf.
These transactions have certainly set new benchmarks for the office sector, and it is perhaps a clear indication that there is currently a lack of good quality, grade A office buildings in Kuala Lumpur, and as such, investors are prepared to snap up available buildings even off the plan in anticipation that capital values will rise further in the years ahead.
At the same time, office rentals have moved up to between RM5 and RM8 psf for grade A office buildings located within the vicinity of KLCC, while office occupancy rates in KL have moved up to around 83%.
Nevertheless, older office buildings located even in the prime spots in the city centre which have not carried out any refurbishment exercises have not enjoyed the same level of occupancies and rentals as tenants have a choice to shift to newer buildings with better quality infrastructure and facilities.
In line with the trend started a few years ago, companies are also more willing to relocate to areas outside the traditional office centres like the Golden Triangle and central business district. Areas like KL Sentral, Damansara Heights and PJ have become popular choices for companies and in line with the increased demand, rentals have moved up and this has attracted more developers to embark on the building of new office buildings in these areas, especially PJ.
As for the retail sector, the excitement was in the opening of three new shopping centres in the Klang Valley, one after another, within a period of a month (two are expansions of existing shopping centres - The Gardens and Sunway Pyramid - while the third is a new shopping centre, Pavilion). Shoppers now not only have more choices, and are able to enjoy better class shopping centres that can rival the best in the region.
These new shopping centres are now going through the normal initial teething problems and have yet to see the expected crowds, but it should only be a matter of time before they build up a regular following. For example, 1 Utama Phase 2 is now much more well patronised compared to when it first opened.
Most property analysts say Malaysian properties generally are undervalued or very attractive in terms of valuation, especially commercial properties. Is that true?
The most expensive condo unit in Malaysia is likely to be at the KLCC area, which is only about one fifth or one sixth of the price of the most expensive condos in Singapore.
Also, Malaysian properties in recent years have attracted many foreigners.
Traditionally they came from Singapore, Hong Kong and Indonesia but this time round we see the entry of investors from the Middle East, South Korea, Britain and the US, and they came in to buy condos on an en bloc basis.
In fact, the strong interest resulted in the condo benchmark price hitting above the RM2,000 psf mark, setting a precedent for that segment.
It is also interesting to note that, bucking tradition, in some cases residential prices were higher than the value of commercial properties such as offices.
However, the low medium and medium-cost segments of the residential sector remain stable but not as exciting as buyers in the condo category as they are quite cautious in view of the rising cost of living.
The rise in toll rates, cost of food items and transportation would likely eat into the disposable income of this group of purchasers and many are less willing to commit on big ticket items like property.
By The Star - StarBiz
Sunday, January 27, 2008
Most expensive cities in 2008
LONDON, New York and Moscow are now the world’s most expensive cities for residential apartment buyers, according a survey by the Global Property Guide (www.globalpropertyguide.
com), an international property research firm.
Residential apartments in Prime Central London are among the priciest in the world, at US$21,800 to US$36,200 (RM71,235 to RM118,290) per sq m. Prime Central London includes Belgravia, Chelsea, Mayfair, Notting Hill, Knightsbridge, Regent's Park, South Kensington, St John's Wood, and St James.
Prices in other luxurious areas in London such as Wimbledon, Hampstead, Richmond, and Wandsworth range from US$14,142 to US$19,361 per sq m, also among the highest in the world.
New York comes in second place with property prices in Upper Manhattan ranging between US$13,270 and US$22,923. Apartment prices in Lower Manhattan are around US$12,510
– US$20,456.
Moscow comes in third place with central Moscow apartment prices ranging from US$10,764 to
US$20,506.
Other cities in Europe that are among the top 10 most expensive cities for condominium buyers
are Paris, Barcelona, and Geneva. Condominium prices in Paris are around US$12,930 to US$18,070 per sq m.
In Spain, prices of flats in Barcelona are between US$9,160 and US$9,870. Prices of apartments
in Madrid are lower than Barcelona, at US$6,535 – US$ 8,000.
In Switzerland, prices of flats in Geneva are around US$6,870 - US$10,400 per sq m. Prices in
Geneva are higher compared to Zurich, at US$5,900 – US$9,830.
Of the three German cities included in the study, Munich is the most expensive with prices of flats at US$3,485 – US$3,700 per sq m; followed by Frankfurt at US$2,360 – US$3,300 per sq m.
Property prices in Berlin are still relatively subdued at US$1,840 – US$2,600 per sq m.
Residential apartments in Istanbul, Turkey are among the cheapest in Europe, at around US$1,850 to US$2,500 per sq m.
Expensive Asia-Pacific cities
Among the top 10 most expensive cities, four are in Asia, namely, Hong Kong, Tokyo, Singapore, and Mumbai.
Residential apartment prices in Hong Kong range from US$10,490 to 14,780 per sq m, in Tokyo from US$7,600 to US$11,870 per sq m, and in Singapore from US$11,500 to US$13,340 per sq m.
Mumbai is a notable exception among the 10 most expensive cities; it is located in a poor country, albeit rapidly growing. A mix of high population density, archaic land laws, rapid urbanisation and strong economic growth contributes to the surprisingly expensive property prices in Mumbai.
Property prices in Mumbai are around US$8,600 to US$10,300 per sq m. This is significantly higher than New Delhi (prices at US$1,970 – US$3,260 per sq m) or Bangalore. Despite equally rapid economic expansion, property prices in Bangalore are still among the cheapest in the world at US$950 – US$1,900 per sq m.
Compared to Mumbai, Chinese cities are significantly cheaper. Prices of flats in Shanghai are around US$2,870 to US$3,540 per sq m, while those in Beijing are priced at US$2,100 to US$2,330 per sq m.
Properties in Australia are near the top of the scale, with apartment prices in Sydney at around US$6,290 to US$9,690 per sq m. New Zealand is significantly cheaper than Australia, with apartment prices in Wellington at only US$4,360 – US$4,500 per sq m.
In South East Asia, the price of a 120 sq m condo in Jakarta is around US$1,073 per sq m, cheaper than Kuala Lumpur (US$1,400 per sq m), Manila (US$1,969 per sq m) or Bangkok (US$2,819 per sq m).
Americas and the Caribbean
In Canada, properties in Toronto are relatively more expensive than those in Montreal. Apartment prices in Toronto range from US$4,600 to US$6,400 per sq m, while condos in Montreal are priced at around US$3,660 – US$5,200.
In Costa Rica, one of the most favoured locations for American second-home buyers and baby
boomers, flats in San Jose are relatively cheap at US$1,250 – US$2,440 per sq m. Properties
along Costa Rica’s Pacific coast in the provinces of Puntarenas and Guanacaste are relatively more expensive at US$2,120 – US$2,890 per sq m.
Property prices in the Caribbean are generally at par with Western Europe. Prices of flats in Turks and Caicos Islands are around US$5,670 - 8,230 per sq m, in the Bahamas at US$3,860
to US$5,680 per sq m, in Cayman Islands at US$3,660 – US$8,265 per sq m, and in Trinidad and Tobago at US$3,140 – US$3,170 per sq m.
The Middle East and Africa are inexpensive
Properties in the Middle East are among the cheapest in the world. For instance, in Egypt, residential apartment prices in Cairo’s plush Maadi district cost around US$400 to US$900. Properties in Zamalek are a bit higher than Maadi but are still affordable at US$700 – US$1,400 per sq m.
Residential flats measuring 120 sq m in Beirut, Lebanon and Amman, Jordan cost around US$1,250 per sq m. Properties in Tel Aviv and Dubai are among the most expensive in the Middle East. Apartment prices in Tel Aviv are around US$4,560 – US$5,220 per sq m, while those in Dubai range from US$3,590 – US$4,130 per sq m.
In South Africa, the price of a 120 sq m 2-bedroom flat in Cape Town is around US$2,784 per sq m, around twice the prices of similarsized properties in Johannesburg, US$1,376 per sq m.
Renters
London, Moscow and New York are also the most expensive cities for renters. The monthly
rent for a 120 sq m apartment in prime central London is around US$13,000. In other luxurious
areas in London, the monthly rent is around US$7,900 for a similarsized unit.
The rent for 120 sq m flats in Moscow and New York are around US$8,000 per month. Tokyo, Paris and Hong Kong are the next three most expensive cities for renters at around US$5300 — US$5,600 per month for a 120 sq m unit.
Other cities in the top 10 are Sydney (US$4,145 per month for a 120 sq m unit), Geneva (US$3,600), St Petersburg (US$3,400) and Mumbai (US$3,380). Cairo, Egypt, has one of the
lowest rents at around US$455 per month for a 150 sq m unit apartment. Beirut, Lebanon and
San Jose, Costa Rica also have cheap rents at around US$1,150 per month for similar-sized units. — www.globalpropertyguide.com
Article post by theSun
Tuesday, January 22, 2008
Relative returns by asset class - Outlook of REITs market in 2008
(Refer to table) The table clearly depicts the shifts in performance of different asset class. It is a very useful table to decipher the macro developments and how capital is being allocated to chase after various asset classes.
The unlocking of cash also helped charge up the rise and rise of private equity and hedge funds (where most of these excess cash went to). This is the absolute rate of returns year by year for REITs – 2000-31%; 2001-12%; 2002-3.6%; 2003-36%; 2004-33%; 2005-14%; 2006-36% and 2007-17%. Needless to say and it continues to unravel even now, the sub prime mess and the beginning of the property correction in the US contributed to the negative 17% returns for 2007.
Safe to say that there may be quite some distance to go for the excesses to be unwound from the US property market after such a prolonged run. With that, 2008 is expected to post negative returns as well.
Run on commodities
Commodities had a wonderful run with the exception in 2001. The continued weakening of the USD coupled with the new middle class emerging in BRIC (Brazil, Russia, India and China) countries will ensure a more sustained run for commodities. The bull cycle does not appear to be over by any means.
Emerging markets (including Malaysia) were still reeling from the liquidity contraction and correction from the excesses of the 90s from 2000 to 2002 (2000: -32%; 2001: -4.7%; 2002: -8%). However, the last four years were boom time Charlie days for emerging markets (2003: 51%; 2004: 22%; 2005: 30%; 2006: 29%; 2007: 36%). Naturally, if a single emerging market were to post those kinds of returns, we will be looking at a ridiculous compounded growth rate. Though the returns were explosive for emerging markets, there were a lot more rotational plays among them.
Malaysia only got into the groove in 2005-2007 after being largely ignored in 2003-2004. Colombia, China and India were the stars for the last 4 years.
Going forward, we may see investors drifting to Vietnam and some smaller African markets. What is important to note is that despite the massive rotational plays, most emerging markets managed to keep most of their gains even when they were not among the top performers year in year out.
Foreign (non-US) developed markets stocks also shared a similar pattern with emerging markets, in that they posted negative returns from 2000-2003 (2000: -14%; 2001: -21%; 2003: -16%). They posted above average returns from 2004-2007 as they basically obtained great impetus from the enlarged outsourcing into BRIC countries, which helped establish companies to save enormous costs: at the same time the rise of BRIC inhabitants as a new consumption middle class provided plenty of opportunities for all concerned.
It created a wonderful win-win situation and a real positive from the globalisation perspective. It also brought about a high correlation between developed and emerging markets. Save to say, the trend is likely to continue into 2008. Owing to higher volatility, the emerging markets as an asset class usually outperform the developed markets during bullish phases.
Investing paradigm shift
US stocks have largely underperformed the foreign developed markets from 2003-2007 (Foreign/US 2003: 38%/31%; 2004: 20%/12%; 2005: 13%/6%; 2006: 26%/15%; 2007: 11%/5%). This can be explained by the complete shift in investing paradigm and global economics.
One can say that while the US may still be retaining global business leadership, it has had to share out a lot more “equity/economic power” to other developed markets and emerging markets over the last 5 years.
The various bonds asset class' performance over the last 5 years was largely due to the shifts in global currencies realignment. Non-US bonds outperformed US bonds significantly. Can we use the relative returns table to predict 2008 and beyond? Maybe with some confidence for 2008, but beyond that would be difficult as there are too many uncertainties to make any calls with assurance. Emerging markets posted strong returns of 29% and 36% for 2006 and 2007 respectively.
While the economic structure has changed sufficiently to provide a stronger framework for emerging markets going forward, it is unlikely to reap similar returns in 2008. It will be a lot tougher for emerging markets as a whole to end the year on a positive note, not least due to the inflation factor, the weakness in US and the commodities price outlook.
Whither 2008?
REITs is an easy call. As an asset class, it would probably record negative returns in 2008. Of course foreign REITs may experience better returns owing to better fundamentals. However, the sheer size of US REITs is likely to skew the curve.
US stocks will continue to under perform foreign developed markets in 2008 as its returns are now weighted as a significant percentage of foreign markets vibrancy. Owing to the uncertain domestic economy, the US stock markets is likely to stand in the shadows of foreign developed markets in 2008 and even 2009, but that may not be a bad thing.
The best performing asset class for 2008, based on the demand and supply factor, is likely to be commodities (it is not easy to simply increase supply by ramping up production).
The time lag is still in favour of sellers. For example, oil. World consumption will rise to 87.8 million barrels a day this year, 2.1 million more than last year, or about the amount that Nigeria supplies. Demand from China alone will rise 5.7% to 8 million barrels a day as imports expand to support an economy that is likely to grow 10.5% in 2008.
Oil suppliers are straining to increase production. Brazil's Tupi field, the second largest find of the past 20 years, is more than eight kilometres below the ocean surface and will take at least five years to develop. Mexico's state oil monopoly, Petroleos Mexicanos, suffered a three-year 40% decline at its Cantarell field, the world's third largest. Since December 2005, fighting in Nigeria has reduced production 11% to 2.18 million barrels a day.
It's the same for agriculture products. According to Bloomberg, agriculture products were among the best performing commodities for the past 13 months where palm oil has gained 56%, soybean 75% and soybean oil 62%.
Of reality and fairy tale
Once upon a time, the world was an island with a million inhabitants and resources to feed and supply a million people. Suddenly, 300,000 new inhabitants came to the island from nowhere, who were willing to work for a lot less and produce at a higher rate. The 1 million inhabitants enjoyed cost savings and a better life style. Suppliers ramped up production for everything to meet the new demand that arose from the additional 300,000 consumers. Prices rose to rebalance the equation. The council of advisors decided to print more money into the system bringing about simmering inflationary pressures.
The present economic reality is akin to the fairy tale. The commodities upcycle this time may not be all hot air or even just cyclical in nature. Demographics and consumption patterns have changed, owing to globalisation. But how sure are we that this shift will result in a fairy tale outcome a few years down the yellow brick road?
The scourge of inflation
The one big danger which could rein in equity returns in 2008 is inflation. Food prices are 18% higher in China from a year ago, and Beijing fears that runaway inflation could ignite social unrest.
The price of pork, which forms the core of most Chinese diets, was up a staggering 56%. China has become a victim of its own phenomenal success. China's economy expanded at a blistering 11.5% last year, but was plagued with a 7% inflation rate, largely linked to the country's voracious appetite for global commodities. Even with a more subdued growth rate in 2008 of around 10%, the inflationary pressures will take a lot longer to work off.
In the US, producer prices were 7.7% higher in November from a year ago, the highest in 34 years. Consumer prices rose at an annual rate of 4.2% through the first 11-months of 2007, the highest in 17 years due to soaring food and energy prices. The same scene can be replayed in almost all countries, especially in emerging markets.
Having said that, such factors serve to fuel the commodities upcycle.
The sub prime fallout has started a more widespread correction in real estate, and may crimp consumption in the US. In Britain, a similar pattern, albeit less severe, is being played out. The danger is clear as many emerging markets still rely on the US for their exports. A pullback will keep most emerging markets' run up in check in 2008.
The pendulum
The pendulum has swung. Now, emerging markets will have to contend with strong local currency, enlarged capacities, inflationary pressures, higher prices, demanding valuations plus a weakening US economy. The US economy have settled for low growth, some inflation, weak USD (to make their assets more attractive): thus shielding themselves somewhat from excessive money supply growth repercussions, now unwinding right before our very eyes.
The US still have to contend with sliding house prices, a decline in consumer spending, rising credit costs, and a significant slowdown; lowering interest rates may not provide that big a help.
In other words, it’s going to be a difficult 2008.
For perspective, this piece was written on Sunday prior to the correction across most major markets over the week
Investment Scents post by The Star - (by S.Dali)
Wednesday, January 9, 2008
Q&A with UEM Builder MD: Infrastructure projects to shape construction sector
QUESTION: What will be the main challenges for the construction industry in 2008?
Ridza: The main challenges for the construction industry in Malaysia will be to overcome the issues related to the increase in price of construction materials such as bitumen, steel, cement and fuel. The increase of these raw materials is partially due to the global economic environment which, to a certain degree, is caused by the volatility of fuel prices. Another challenge will involve the shortage and loss of human resource/skilled workers in the construction industry to other parts of the world due to more attractive offers especially in the Middle East. These shortages of skilled manpower resources can affect the bottomline of the projects in terms of cost overruns and delays.
RIDZA: Ninth Malaysia projects bode well for the sector
Q: How do you plan to overcome these challenges?
Ridza: As one of the major players in the construction industry in Malaysia and nation-building partner to the government in delivering mega projects such as the PLUS Expressway, Malaysia-Singapore Second Crossing, National Sports Complex and Putra LRT, we have to do our part to contain the situation by reducing the company's construction cost through a more efficient way of conducting and improving operations.
One of the methods is by improvement of systems and processes with the use of information and technology (IT) to enhance efficiency.
As a leader, UEM Builders will endeavour to cascade these efficient methods to all the sub-contractors and suppliers for our projects. There is a critical need to cut red tapes, eliminate unnecessary bureaucracies, make fast decisions, communicate well through paperless methods and technology to execute works on the ground. A good example of innovation and technology in UEM Builders is the use of SMSes for approval and fast decision-making, which can be done anytime and anywhere. Hence, the use of IT in communications to obtain approval and to expedite decision-making processes on the ground with the objective of completing any project within the shortest time possible. This will help to a certain extent to counter the issues of the price increase. The challenges in the construction industry require the co-operation of the major players in the industry. The key players in the industry will also need to come together as a team to draw policies, strengthen and highlight construction issues especially in relation to the increase in material prices. For example, the reinstatement of price fluctuation clauses in the contract will enable the contractor to focus on the completion of the project. This will entail the support of the government as well as private sector in implementing such policies.
Q: What are the trends that can shape the construction industry in 2008?
Ridza: Infrastructure projects will be fundamental in shaping the construction industry in 2008. As such, the growth of this sector will be derived from the implementation of major transport-related infrastructural projects such as the Second Penang Bridge, Penang Monorail, Ipoh-Padang Besar double-tracking rail project and the extension of Ampang and Kelana Jaya light rail transit lines.
Efforts to develop southern Johor, on-going development in the Northern Corridor Economic Region together with the newly-launched East Coast Economic Region stand to add further impetus to the overall growth within the construction sector and many other related industries. However, we will need to overcome the inertia associated with major projects which requires strong commitment and skills of various decision makers, planners and engineers.
Q: What are the future prospects for the industry in 2008?
Ridza: Based on the Economic Report 2007/2008, the Malaysian economy is anticipated to strengthen further to between six per cent and 6.5 per cent, as against six per cent in 2007, with positive contribution from all industry sectors. The construction sector is also poised to strengthen further with a growth of 6.3 per cent (2007: 5.2 per cent). With the announcement of the corridors, there is a strong commitment to make the construction industry as the contributor to the Malaysian economic growth. As such, it is expected the future prospects for the industry in 2008 to be certain and bright, especially in the context of the Ninth Malaysia Plan projects proposed by the government which includes projects such as the Northern, Southern and Eastern Corridors Economic Region. However, there must still be a concerted effort by the government and private sectors to overcome issues, one of which is the escalation of material prices.
Q: How will the industry be affected by the expected rise in fuel and electricity?
Ridza:We foresee that the rise in fuel and electricity will definitely push the price of construction materials. This will have to be addressed by making provisions in the contracts and providing sufficient allowances for the price increase when undertaking the project. UEM Builders' other approach to mitigate the issue is by diversifying and broadening its base. We have plans to diversify into the construction of civil and engineering works for the oil & gas sectors and property development not only in Malaysia but overseas as well. We will use and ride the wave of these sectors to enable us to insulate ourselves from the potential increase of material prices. In addition, we intend to venture into smart partnership basis projects to reduce company's risks especially for oversea markets. Under this scenario, we will be able to manage our risk through a wider distribution of resources and spread our business portfolio into one of which is equitable and not place all the eggs into one basket.
By New Straits Times
Tuesday, January 8, 2008
The only way forward for developers is to open up
"Malaysian need to prepared to face global realities, even if it means we have to go through the paintful adjustment period" << Tan Sri Liew Kee Sin CEO SP Setia
QUESTION: What would be the main challenges for the property industry this year?
ANSWER: Today, Malaysian properties are of world-class calibre and can stand their own against international offerings.
This is attested by the many international awards garnered by local developments in recent times.
In fact, the Malaysian property market is one of the most dynamic and vibrant industries, which is constantly evolving in tandem with global trends.
Ambitious developers have even exported their expertise overseas and met with commercial success.
While local developers do not lack in the ideas departments, their biggest challenge is in terms of quality.
The industry is still plagued by the lack of quality and skilled manpower, and highly dependent on foreign labour.
Now that the market is liberalising and we are targeting foreign buyers who are accustomed to the demanding and exacting standards of developed nations, we need to improve in this aspect.
The entry of foreign developers also presents the challenge of increased competition.
Other general risks include the vagaries of being in a cyclical industry and political upheavals.
Q: How do you plan to overcome these challenges?
A: The oft-cited advantage of Malaysian properties is the fact that we are cheaper compared to regional peers.
But a closer analysis of this would reveal that this could be a function of the poor public transportation network in the country.
An ineffective public transportation system burdens living costs and would keep foreign buyers away.
The fact that other property markets such as Singapore and Hong Kong command higher premiums can be credited in part to the efficiency of the public transportation system anchored by the high-speed rail system.
The accelerated urbanisation in the city areas has caused serious traffic congestion.
Some major business and residential hubs should be built in sub-urban areas to control the pollution level and disperse the increasing traffic problem in the city.
Malaysia's relatively small population means that we need to attract a bigger pool of expatriates to continue to grow the size of the property market.
Hence, it is very important to facilitate entry of foreigners, especially knowledge-based workers.
This will create a strong expatriate community, which will in turn promote a vibrant rental market for residential properties.
Q: What are the trends that could shape the industry this year?
A: The sweeping changes to ease rules on foreign ownership of property and enhance the delivery system have benefited the sector tremendously.
These moves have created the "feel good" sentiment and attracted strong foreign interest in Malaysian real estate especially for high-end properties.
The FIC relaxation of foreign ownership followed by real property gains tax exemption were the most important contributing factors towards the upswing in foreign demand.
Not only that, foreigners are also eyeing the commercial market with many Middle East consortia, purchasing en-bloc office towers and retail centres, or taking equity interests in development companies or projects.
Industry sources show that in 2006, 45 per cent of the value of office transactions was by foreigners compared with 19.3 per cent the year before and 1.9 per cent in 2004.
Q: What are the prospects for the industry this year?
A: Underpinned by GDP (growth domestic product) forecast of six per cent for 2007 and coupled with good financing packages available from banks, the property sector will continue to thrive this year.
But we anticipate the most profound impact to come from the unlocking of RM9 billion worth of funds with the easing of withdrawals from the Employers Providence Fund (EPF) to finance loan repayments.
With higher disposable income, we are confident that more people will be upgrading to better and newer homes.
Moreover, we believe foreigners' appetite for local properties will continue unabated as they want to buy into an under-valued market with significant upside potential.
The success of Visit Malaysia Year 2007 has also enhanced the country's profile. Further, the housing industry will continue to receive support from the government's promotion of the "Malaysia: My Second Home Programme".
The tourist attraction and appeal of the country -- with a stable government and economy - has spawned a secondary holiday or retirement home market, bolstering the long-term prospects of the property market.
Q: How will your industry be affected by the expected rise in fuel and electricity this year?
A: While these efforts are greatly welcomed, the more pressing need to ensure long-term sustainability is to devise a new economic model that completely weans itself off the "subsidy mentality" and "protectionist policies".
Malaysia cannot afford to distance itself from the globalisation wave, or we will fall behind with the rise of new economic stars such as China, India and now Vietnam.
The only way to go forward is to open up, enhance competitiveness and fully integrate Malaysia into the world's free market.
Malaysians need to be prepared to face global realities, even if it means we have to go through the painful adjustment period.
By New Straits Times (by Azlan Abu Bakar)
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