Uncertain times for property

The property outlook in Malaysia remains uncertain with industry players giving mixed feedback.

The Malaysian Institute of Estate Agents (MIEA) president K. Soma Sundram believes the local real estate industry is still resilient.



“Based on the feedback from our members, they are still doing business as usual, in fact some of them are doing much better. We are not in recession yet, the only thing that is happening now is that investors are adapting a wait-and-see attitude,” he said.

“Though the market around KLCC area is expected to go down by 15% to 20%, other places such as Bangsar, Subang Jaya and Damansara Heights are still maintaining their prices,” he added.

People with cash were still on the lookout for properties, Soma noted.

“First-time buyers for example, are still looking for affordable properties to buy or invest in and real estate agents need to adapt to tap this market and offer suitable locations for them to close more deals,” he said.

Soma said with developers giving out more incentives and doing more promotions, there were still plenty of jobs for real estate agents.

Zerin Properties executive Lalitha Anandarajah, who has been covering sales and leasing of office space in the past few months, said there had been an increase in demand for office spaces, and almost 70% of the enquiries were businesses looking to shift to more competitive rentals.

“There has also been an increase in demand for furnished offices to defray costs on renovation,” she said.

But at Venture Properties, senior negotiator Gary Lee is beginning to feel the impact of the economic slowdown.

“The number of cases has reduced since three to four months ago as the result of the slowdown in the global economy and this include local and foreign parties,” he said.

A real estate agent covering both office and residential sales/lease said the market had made a turn for the worse.

“Some of my clients aborted plans to secure new premises. It is not a good sign. Even expatriates looking for houses to rent are looking for more short-term agreements,” she said.

Another real estate agent said the market was extremely slow especially for the high-end residential units.

She said there were still expatriates coming in but their budget was now much lower.

“Honestly speaking, I don’t see many European expatriates coming in to the country compared with the previous years.

“Right now, I have to change my strategy by expanding my network and focusing on condominiums with much lower rent,” she said.

By The Star (by Edy Sarif)

Bina Puri bids for RM2b jobs in UAE

DUBAI: Construction group Bina Puri Holdings Bhd is bidding for RM2 billion worth of jobs in the United Arab Emirates (UAE).

Bina Puri general manager (projects) Lee Seng Fong said projects include villas and high-rise buildings in Dubai as well as Abu Dhabi, which will be a good platform for the company to capture the Gulf of Corporation Council countries.

They are Saudi Arabia, UAE, Qatar, Oman, Bahrain and Kuwait.

"We are also eyeing projects in Syria, but will venture cautiously due to the unpredictable movement of building material prices," Lee told reporters at the sidelines of the Malaysia Services Exhibition 2009.
Bina Puri is fresh from bagging a RM693 million project in Brunei earlier this month to build 2,000 homes for the Brunei Economic Development Board.

The firm, which currently has an order book of RM2.7 billion, has completed roads, highways, bridgeworks, airport works, water works, residential and offices, hotels, government complexes and hospitals in six countries.

By Business Times (by Zaidi Isham Ismail)

Bina Puri eyes RM2bil worth of projects in UAE

CONSTRUCTION company Bina Puri Holdings Bhd is aggressively pursuing projects in the Middle East with the group bidding for about RM2bil worth of potential projects in the United Arab Emirates (UAE).

Projects general manager Lee Seng Fong said despite the global economic slowdown, prospects in the Middle East were still good although one must be more cautious when expanding in the region.

“Currently, we are present in Dubai, Abu Dhabi, Oman, Bahrian and Syria,” Lee told reporters during the Malaysia Services Exhibition 2009 which ended here last Thursday.

Currently, the group has a total order book worth RM2.7bil.

By Bernama

MPI to rev up overseas roadshows

MALAYSIA Property Inc (MPI) will be ramping up its overseas roadshows and programmes in the coming months to promote Malaysia as an international real estate destination.

The primary markets targeted include Singapore, Britain, Japan, Hong Kong, Indonesia and the Gulf Cooperation Council countries, while the secondary markets are China, India, Pakistan and Bangladesh.

It will be taking part in the “A Place In The Sun” property exhibition in London from April 3 to 5, followed by a four-day roadshow that covers London and Manchester in July.

Following the success of its first roadshow in Tokyo last December, a second roadshow will be in Osaka on April 17-18, and in Tokyo on April 25-26.

Over 1,000 participants turned up for the seminars and talks in Tokyo.

MPI chairman Datuk Richard Fong said the challenge was to convince international investors that Malaysian property offered better value than other subprime properties elsewhere and the country’s economy was expected to remain steady despite the uncertainties in the global economy today.

‘’Malaysia has much to offer real estate investors. Foreigners can buy an unlimited number of properties; register them in their names; and there is no real property gains tax, inheritance and transfer tax, unlike the many restrictions on foreign buyers in the other countries.

“We are going on a two-pronged approach to promote local property as an attractive and high return investment destination and as a value-for-money second home choice,” Fong told StarBiz.

The activities lined up include having continuous introductory and follow-up briefings for the target groups; an online presence via the MPI website with hyperlinks to websites of supporting developers; online property databank; encouraging developers to meet international standards in quality and workmanship; working with the media; and raising awarEness through advertisements, brochures and newsletters.

At MPI’s maiden roadshow in Tokyo, the team realised that not many Japanese knew about Malaysia. Plans are afoot to invite journalists from Japan to visit and write about Malaysia.

Before promoting Malaysia’s properties, MPI would be working with Tourism Malaysia to promote the country first, said MPI director Yeow Thit Sang.

“Our focus is to brand the country as a preferred real estate and second home destination in the international arena. Potentially it will have a significant impact to promote foreign direct investment in real estate,” he added.

MPI expects to spend RM3.5mil to RM4mil a year over the next five years for its brand-building exercise.

Yeow said while Singapore had successfully attracted many high net-worth investors with 25% of its properties sold in the last few years to foreigners, Malaysia’s sales to foreigners only made up 3% of the total RM2.5bil industry sales last year.

“Our target is to attract at least 10,000 foreigners to buy at least RM1mil worth of property each,” he said.

By The Star (by Angie Ng)

Looking for a bargain?

Some of the completed houses at Setia Alam.

Developers and banks are offering attractive mortgage plans for home buyers.

For several months, a friend was checking out old double-storey terraces in Petaling Jaya. With a budget of about RM350,000, it was difficult to make a decision, as she would probably need to incur another RM80,000 for renovation.

She came across Setia Alam in Shah Alam, liked the open space and quiet surroundings, and signed on the dotted line. What made her excited was the 5/95 campaign.

“I pay 5% downpayment and will not need to start mortgage payments until the property is completed. The developer will bear all legal fees, stamp duty on the sale and purchase agreement, loan agreement, and memorandum of transfer. They will also service the interest during the construction period,” she says.

Banks and developers today are working very closely to design mortgage plans for home buyers. The leanings seem to be towards developers with large landbanks, offering bread-and-butter housing like double-storey terraces.

There are one or two tie-ups with developers offering high-end condominiums, but generally, these schemes do not come across as attractive as those offering normal housing.

As the year unwinds, more developers are expected to come up with such packages. Probably because of their large landbanks and a wider market audience, developers of bread-and-butter housing are quick to work something out with their bank partners.

SP Setia Bhd tweaked its marketing strategy after the fall of Lehman Brothers in September last year. Its 5/95 payment scheme, to run for three months from January 19, has so far generated about RM300mil sales in Selangor, Penang and Johor just five weeks into the campaign.

The company has a sales target of RM1.1bil. For its 2008 financial year, it had RM1.4bil sales, with progress billings of unbilled sales at RM1.2bil.The company has a land bank of 4,000 acres.

Sime Darby Bhd’s property division, which started its campaign since the middle of last year, is now on its third campaign. The campaign, which ends June 15, has so far generated about RM160mil sales since its launch on March 6.

The campaign includes an interest rate of base lending rate minus 2.3% and the developer absorbs the interest during the construction period. Its first campaign generated RM246mil in nine days, while the second campaign achieved more than RM146mil sales.

The speed at which market surveys were done by developers in the last quarter of 2008 and the strategies put in place in January, underscores the urgency developers view the situation.

Whether it is to clear old stocks or to complement new launches, something has to give to lift the current sentiments.

Says an analyst: “There is no bubble in the mass housing market. It is more a case of job insecurity and buyers holding out for bargains. Capital values are holding quite well, unlike in KLCC and Mont’Kiara. There are genuine buyers of bread-and-butter housing out there and given the current spate of incentives by banks and developers, why not make a decision now?”

He adds that: “Never before have developers absorbed the interest. In the past, developers priced in the interest in the higher selling price, but now it is different. These are the units which could not move, so developers would rather lose out 2% to 3% margin based on the interest cost and stamp duties”.

Whether these incentives are sustainable until year-end depends on how things pan out in the local and global economy, he says. He also cautioned that a lot of sales numbers given by developers may be just bookings, which have yet to convert into sales and purchase agreements.

“We expect demand to remain weak notwithstanding the campaigns. The fact that there are such campaigns show that developers are in jeopardy.

“A condominium developer had virtually no sales in the last quarter of 2008 and a large-scale developer had sales of only RM70mil in the last quarter, compared to RM300mil a year ago. So the incentives to buy must be there,” the analyst says.

Another analyst opines that the larger boys offering mass housing may have a better survival rate. Those offering homes that costs millions may have problems this year. It all depends on their stock of these million ringgit homes.

“(Demand for) luxury condominiums will only come back in 2010. More home buyers will return in the third and fourth quarters. We expect more creative approaches in the second quarter, but these incentives will also cut into the costs,” he says.

The way things have turned out for developers and banks underscore the cooperation needed by both to tie over the period.

A source from Mah Sing Group Bhd says sentiments are indeed very poor.

“Banks have to do a lot of packaging if sales are to continue. If you are buying for own stay, now is the time. The fact that the second stimulus package allows banks to defer mortgage payments for one year indicates how concerned the Government is,” he says.

“When there is job insecurity, people will not buy. Most developers will think twice about increasing prices. But developers in the right market and the right location will hold strong,” he adds.

The company has achieved sales of about RM140mil following its 5/95 sales campaign for all properties. It has a sales target of RM450mil for 2009, a 13% increase over the previous year’s of RM397mil. About 88% of the sales are from the Klang Valley, with nearly half from commercial properties.

Mah Sing’s campaign ends March 31. There may be plans to extend or tweak the current package. Sunway City Bhd had two schemes, one for completed projects and the other for those under construction. Both ended Feb 28 and generated about RM60mil during the schemes’ two-week duration.

By The Star (by Thean Lee Cheng)

Attractive offers to turn around mortgage business

BUYING a property and getting a housing loan to finance it is a major commitment for most consumers, as they need to ensure that they can sustain the payments over the next 15 to 30 years.

It does not help that the current economic downturn is putting more pressure on consumers’ job stability, finances, and confidence resulting in most consumers putting off making such huge investments.

Bank Negara statistics seem to reflect the weaker consumer sentiment, with the mortgage segment experiencing an 8% decline in loans approved in January versus December last year.

Nevertheless, the recent reduction in banks’ base lending rate (BLR) to 5.55% per annum, as well as attractive promotions and packages offered by developers and banks, have raised some hopes that the tide will turn somewhat for the mortgage business.


Thoo Mee Ling

OCBC Bank (M) Bhd head of secured lending Thoo Mee Ling says although OCBC’s mortgage business was reflective of the industry’s in January, the bank’s monthly loans applications rose markedly by 27% in February compared with the previous month, with monthly loans approved increasing by 35%.

“Indications are that the decline in BLR has indeed helped to bring in more business as suggested by the increase in loan applications and approvals last month.

“However, these are still early days, and we will need to monitor trends over a longer period to adequately assess the impact that the BLR revision has had on the business,” Thoo says.

Banks have reduced their BLR and base financing rate to 5.55% per annum recently, following Bank Negara’s cut in its overnight policy rate to 2% effective March 1.

Thoo believes that perks and incentives to make loans more attractive are often only short-term measures to stimulate the business.

“In the long run, we believe that we should further attune ourselves to meeting customers’ needs through tailor-made products and services that meet their specific requirements. We have a range of innovative products that cater to the various, complex, needs of individuals,” she says.

For example, OCBC’s HomeXtra package provides additional financing of up to 100% the loan amount for customers to meet their financial commitments.

In addition, the bank’s LVS (legal, valuation and stamping fees) financing package allows customers to finance their entry costs, and at the same time enjoy lower interest rates. Entry costs represent legal fees, valuation fees and stamp duty on loan documentation incurred when the customer wishes to finance his or her housing loan.

“Traditionally, customers prefer the fees-absorbed-by-the-bank packages, whereby they do not need to pay any entry fees; and this is despite the fact that such packages tend to be made available at slightly higher interest rates.

“Still, with the recent introduction of the LVS package, we see a shift taking place – where lower interest rates are being valued more than other attractive fee-related benefits,” Thoo says.

CIMB Bank expects to see a decline in the number of new loans booked as consumers adopt a wait and see attitude, and is projecting a lower target for 2009.

Head of retail banking Peter England is optimistic the bank’s mortgage business will grow at least 13% this year. CIMB Bank’s mortgage business grew over 25% last year versus 2007.


Peter England

“The lower BLR is very attractive for people looking to buy properties. It is probably one of the lowest rates for the past few years,” he points out.

CIMB Bank recently rolled out its Islamic Flexi Home Financing-i, which is linked to a special current account to enable customers to offset their outstanding principal with deposits.

England says the home loan has contributed significantly to the growth in the bank’s mortgage sales, with RM200mil sold in the first month after the launch.

“We are looking at rolling out another innovative product in the second quarter that will further strengthen our market share in Islamic property financing,” England says.

At present, one-third of the total mortgage facilities booked by customers come from CIMB Islamic’s range of products.

TA Securities senior analyst Wong Li Hsia notes that banks are still keen on loans growth and are very competitive especially in the mortgage segment.

“To grow loans, banks tend to focus on two main areas - mortgage and loans to small and medium enterprises. The lower BLR could help to encourage borrowing,” she says.

Wong expects mortgage loans to grow at a slower pace this year, as demand drops and banks are more cautious about who they lend to. “We are looking at a low single digit growth for mortgage this year,” she adds.

By The Star (by Elaine Ang)

Overall occupancy of malls in Kuala Lumpur and the Klang Valley is still high

The retail and office property market is looking stable at the moment despite some softening in certain locations due to the global economic slowdown.

“The overall occupancy of most malls in Kuala Lumpur and the Klang Valley is still high, suggesting the market at this point is still remarkably resilient, compared with markets in other countries in the region,” says real estate agency Regroup Associates managing director Allan Soo.

Based on the average occupancy tracked by the company for the whole of 2008, which includes 43 shopping centres, he says the overall occupancy for all the malls is holding well at 92.7%.

He says that despite the overwhelmingly negative sentiment in the industry, the retail market displayed mixed results last year, with food and beverage and basic necessities like groceries showing positive growth trends, even in the gloom of the second half of 2008.

However, this year, with the global credit crunch affecting the country, Soo says discretionary spending will be curtailed even more. He expects fashion outlets to be the most affected. Even so, he is still optimistic.

“All the hypermarket chains are still expanding and gaining market share, with a few more outlets slated to open this year. Demand is still strong for traders in the convenience, family, household, and food and beverage categories. Our leasing efforts for our two main shopping centres, CITTA in Saujana and Festival City in Setapak, which are still under construction, have drawn positive response from tenants,” he says.

Strategic locations

Naturally, retailers that are already situated in strategic locations would choose to remain there, while those that are not will want to open shop in such areas.

As such, Soo points out that malls like Suria KLCC and Mid Valley Megamall, which are still attracting strong sales, albeit slightly less than last year’s, will continue to maintain full occupancy in the next couple of years.

Sunway Pyramid Sdn Bhd marketing and leasing general manager Kevin Tan Gar Peng says there is a misconception that malls are performing dismally due to the downturn.

“Every day, we are reading news that say shopping malls are facing gloomy days. Actually, it is not that bad. Sunway Pyramid is doing well and retailers are enjoying good sales,” he says.

The sales during Christmas last year and Chinese New Year this year had in fact fared much better than in 2007.

“We are very optimistic. Our target market is medium to high-end shoppers, who are less affected by the downturn,” he says, adding that for the past six years, Sunway Pyramid has been enjoying full occupancy with an average rental rate of about RM9 per sq ft.

“We are very selective with our tenants. Some retailers may move out due to poor sales, but it may be because their products don’t suit the market and not because the market is bad,” he explains.

Sunway Pyramid has raised its marketing budget by 30% this year to woo more shoppers. And apart from seasonal sales, it will have promotions for certain departments every month.



Oversupply situation?

Kuala Lumpur Pavilion Sdn Bhd leasing and marketing director Joyce Yap says Pavilion’s occupancy rate is 100% and, as tenants have signed a three-year leasing arrangement, it is not likely to change in the near term. Yap says that in this challenging time, malls need to do more promotions to attract shoppers and boost sales.

Hall Chadwick Asia Sdn Bhd chairman Kumar Tharmalingam says the domestic office rental rates will hold as KL is not a financial centre like Singapore.

“International banks (in Malaysia) are smaller and I don’t think they will retrench workers, while the local banks are not in trouble. In the last seven years, not many new office buildings have been erected. During that period, there was only one new building in the golden triangle, Menara Bumiputra-Commerce in Jalan Raja Laut, but businesses have expanded,” he says.

He opines that the office market outside the KLCC vicinity, such as Petaling Jaya and Damansara Heights, are also stable.

On a report that an additional eight million sq ft of office space will hit the KL market in three years, he says developers are more likely to defer the projects, which means there will unlikely be a scenario of oversupply.

On average, he says, the take-up rate for new tenancy office space in KL is about 1.5 million sq ft per year. Among all the segments of the commercial property market, he says the office rental market is the most stable at this point.

Old tenants, new tenants

Regroup Associates Sdn Bhd executive director Paul Khong says the office market is still fairly strong, as renewal of existing leases are on the rise. However, he says new tenants may resist paying premium rates, or commit to new spaces, until economic conditions improve.

As such, he expects office rental yields for buildings in secondary locations, or newly-completed office space that are struggling to draw tenants, to taper off by 5%-15%.

“Unless they see a bargain, they won’t be willing to part with their cash yet. There may be one or two desperate sellers, but it should not bring down the entire market substantially,” he says.

“As part of cost-cutting measures for back-end offices or data centres, there could be demand for office space from multinational corporations looking to relocate from more expensive countries like Singapore or Hong Kong to Malaysia,” he says, adding that the general occupancy rates for grade A offices are above 90% and about 40% of the new supply of office space coming in are already pre-let.

By The Star (by Edy Sarif And K.C.Law)

Cash registers still ringing in malls

WHETHER it is foreign or local shoppers who are spending, the cash registers of the Klang Valley’s super high-end malls continue to ring.

It may not ring as frequently as during buoyant times, but malls like Starhill, The Gardens and Pavilion continue to enjoy fairly good overall sales, says Regroup Associates and Henry Butcher Retail Sdn Bhd.

Henry Butcher Retail says low shopping traffic in some malls does not mean they are not doing well. “High-end brands do not need high traffic to remain profitable because they have high profit margins,” says its managing director Tan Hai Hsin.

“The Gardens and Pavilion are very different from ordinary malls like 1 Utama and Mid Valley Megamall. They are of a different class, offering a different set of products and services,” he says.

Over at Regroup, managing director Allan Soo says it is the foreigners who are buying, not the locals. “How many rich (people) do we actually have? Will they not go to London, Milan or Singapore?” Soo asks.

He says a third of shoppers at KLCC are foreigners. Over at Pavilion, 40% of the shoppers are foreigners, while The Gardens will need a lot of time to adjust to the environment.

It does seem rather unfair to tie the current low-traffic scenario at The Gardens and Starhill to the global crisis. Starhill has generally lacked the masses seen at KLCC or Mid Valley Megamall. The Gardens is fairly new and its prices are rather prohibitive.

But this does not mean there is no market for it. It is, after all, pandering to the whims of a small group of people, whose pockets are well lined.

“The current purchasing power of Malaysians is still not high enough to support these upmarket malls at the moment. But with time, they will be fine. The other issue is market saturation,” Soo says.

Both Soo and Tan agree that there are too many malls in the Klang Valley. Ideally, there should be between 30 and 40 malls compared with the 120 big and small ones today.

Says Soo: “Many of us are creatures of habit. We tend to like and enjoy certain malls and we make it a point to go to these places to shop. However, for the day-to-day needs, we would probably hop over to the community malls close by.”

Because of the different categories of malls, the downturn is affecting different players in different ways. By and large, retail sales are not as bad today compared with the Asian financial crisis in 1997/98, both of them say.

At the upper end of the retail spectrum, some top brands are still enjoying good sales due to customer loyalty.

Although sales of some high-profile international brands have dipped between 10% and 40%, it started to happen even before the crisis hit in late September.

“It is market saturation more than anything else,” says Tan, who categorises malls such as The Gardens, Pavilion, Starhill, Bangsar Shopping Centre, and Bangsar Village as attracting mostly upper-income Malaysians and tourists.

The AEON shopping centres are mostly located in residential areas and cater to the community they are located in, regardless of income group. Tesco, Carrefour, Giant and Mydin hypermarkets, meanwhile, offer grocery shopping which attracts families.

By The Star (by Thean Lee Cheng)

Rehda: Govt should build low-cost houses

The Real Estate and Housing Developers Association (Rehda) yesterday suggested that the government take over the building of low-cost houses, now a compulsory thing for private developers.

Its president Datuk Ng Seing Liong said the step will be effective in helping the private real estate and housing sector tide through the rough times.

“We also hope the government will offer more incentives to stimulate this sector,” he said after opening the Mapex exhibition Kota Baru yesterday.

By Bernama

Setia Haruman confident of achieving RM500mil target this year

CYBERJAYA: The master developer of Cyberjaya, Setia Haruman Sdn Bhd, is confident of selling RM500mil worth of land there this year amid the economic slowdown, said chief operating officer Lao Chok Keang.


Lao Chok Keang

“We think we can easily sell another RM500mil worth of land,” Lao told StarBiz. “In the last two months, we sold about RM200mil worth of land, so achieving the target of RM500mil this year should not be a problem.”

The company had also sold about RM500mil worth of land in Cyberjaya in the last three years, making land sale its largest source of income.

Setia Haruman had paid more than RM1bil for over 2,800ha in Cyberjaya.

The company is selling various categories of land in Cyberjaya, with commercial land for the building of offices and shops going for RM60 to RM65 per sq ft.

Commercial land for the building of hypermarkets, warehouses and shoplots is selling for RM90 to RM100 per sq ft.

Residential land with ready infrastructure is going for between RM80 and RM125 per sq ft, while raw residential land is priced at RM30 per sq ft.

Besides selling land, Setia Haruman is also working on its latest commercial development, CBD Perdana 2, set to be unveiled in the second quarter.

Lao expects sales for CBD Perdana 2 to be good as many buyers of CBD Perdana 1 had managed to lease out their properties with an average 8% rental yield.

“They have comfortable (profit) margins and a lot of them have enquired on when we are going to launch (CBD Perdana 2),” he said.

CBD Perdana 2 is a RM210mil project comprising 32 retail outlets and 92 corporate office suites, and will be launched in two phases.

The second phase will be launched next year.

Office units at CBD Perdana 2 are selling for RM300 per sq ft and retail units for RM600 per sq ft.

Lao targets to achieve 100% sales for both phases.

Setia Haruman is 75% owned by EMKAY Group while UEM Land Bhd holds the remaining 25%.

By The Star (by K.C.Law)

SP Setia Q1 net drops 36pc on slower sales

PROPERTY developer SP Setia Bhd posted a 35.6 per cent lower net profit of RM31.2 million for the first quarter ended January 31 2009, due to slower property sales as a result of the global economic crisis.

"Sales during the first quarter was very weak due to the extreme caution exercised by potential purchasers in the light of the unending flow of bad economic and financial news," the group said in a statement to Bursa Malaysia.

SP Setia acknowledged that 2009 will be a challenging year for the company in view of the ongoing global financial turmoil, although it is in a strong financial position with RM572 million cash in hand.

As part of its effort to drive sales, the property developer introduced the SP Setia 5/95 Home Loan Package, where buyers only pay 5 per cent upon signing the sales and purchase agreement and nothing more until completion.
Since its launch on January 19, the group has made RM300 million in sales and is optimistic that the package will continue to spur sales during the three-month promotional period.

Meanwhile, revenue for the first quarter dropped to RM259.9 million against RM303.7 million posted during the same period a year ago.

By Business Times

AGB may sue Penang govt over heritage project halt

The developer of a RM400 million heritage restoration project in Penang may sue the Penang Municipal Council and the state government, claiming that it's being prevented from continuing work.

Kuala Lumpur-based Asian Global Business Sdn Bhd (AGB) also alleges the state authorities didn't tell of a height restriction affecting its project when planning permission was given in 2007.

"We have been led up the garden path and were not told of a supposed height restriction of 18m for the area when they gave us planning permission in 2007 to build at 51.7m," AGB chairman Kate Lim told selected media at a briefing in Penang.

"We are now considering legal redress because millions have been spent by us since no caveats were placed when approval was given.

"We are now a victim of circumstances," she added.

The "Pier Hub @ Weld Quay" project, located along the island's old waterfront, involves conserving six existing 19th century buildings and adding new residential and commercial properties, among others. It was slated for completion by 2011.

AGB said the municipal council is not renewing their lapsed planning permission and is withholding the building plan.

It submitted a renewal application last November and payment was acknowledged but the council has not responded in writing as to why an extension is still not granted.

Last year, AGB and three other developers - Boustead Holdings Sdn Bhd, E&O Bhd and the Low Yat Group - came under the spotlight when their projects were singled out for allegedly breaching height restrictions.

The rules were imposed by the United Nations Educational, Scientific and Cultural Organisation (Unesco) that placed George Town on its World Heritage List in July last year.

The four projects were approved prior to George Town's entry into the list. They are AGB's "Pier Hub @ Weld Quay" and the Boustead Royale Bintang Hotel project behind the general post office in Lebuh Downing, both lying in the heritage core zone.

The other two are E&O Hotel's extension and a 23-storey hotel in Jalan Sultan Ahmad Shah by the Low Yat Group in the buffer zone, both of which were reported to be 84.4m high.

By Business Times (by Marina Emmanuel)

Cement demand to fall for first time in 25 years

PETALING JAYA: The world’s biggest cement maker Lafarge SA is forecasting a contraction in demand for cement globally this year – the first in 25 years – due to the global financial crisis and economic slowdown.

Chairman and chief executive officer Bruno Lafont expects cement consumption worldwide to drop by up to 3% this year as the economic slowdown takes a toll on construction and infrastructure activities globally.


Lafarge SA chairman and chief executive officer Bruno Lafont - Starpic by Brian Moh

“However, to be conservative, we did not take much into account the economic stimulus packages that have been announced by various countries, not because they will not have an influence on cement demand as they all have an infrastructure component, but because we do not know when they will start to take effect.

“So there could be upsides depending on the effectiveness of the implementation of the stimulus packages. It should have a positive material impact on demand this year,” he told StarBiz in an interview during his two-day visit to Malaysia to meet key stakeholders.

According to Lafont, the global demand for cement has been growing at an average 5% annually for the past 25 years until 2007, with strong growth in emerging markets and more limited growth in developed countries.

He said global cement demand had started to shrink last year mainly due to the economic slowdown in developed countries such as the United States, Britain and Spain.

“Demand still grew to 2% last year boosted by good growth in most emerging markets,” he added.

Lafont also foresees a slowdown in cement demand in the country this year.

“We are not extremely optimistic this year but the stimulus package will help,” he said.

The country’s cement demand grew 7% to about 17 million tonnes last year versus 2007.

Lafarge’s Malaysian operations, Lafarge Malayan Cement Bhd, is one of the group’s largest business units globally and is the second largest in Asia, after China in terms of production.

Lafarge Malayan Cement has a production capacity of 12.95 million tonnes of cement annually.

To Lafont, Malaysia remains one of the 20 more important countries for the Lafarge group in terms of production capacity, profits, number of employees and so forth.

Its other 19 important countries include France, Canada, Britain, Spain, US, India, China, Egypt, Algeria, South Korea and Nigeria.

Lafont aims to turn the Malaysian operations into the best business unit of the group and best competitor in the Asian region.

“To be the best competitor means having the lowest cost, highest quality and most innovative products among others and this is what we are working towards,” he said.

The Lafarge group, which has a presence in some 80 countries, recorded a 2.2% growth in operating profit to 3.36 billion euros for the year ended Dec 31, 2008 versus 2007 while revenue improved by 8% to 19.03 billion euros.

By The Star (by Elaine Ang)

Bina Puri bids for RM2b Mideast projects

DUBAI: Malaysian construction company, Bina Puri Holdings Bhd, is aggressively pursuing projects in the Middle East with the group bidding for about RM2 billion worth of potential projects in the United Arab Emirates (UAE).

Its general manager of projects, Lee Seng Fong, said despite the global economic slowdown, prospects in the Middle East were still good although one must be more cautious when expanding in the region.

“Currently we are present in Dubai, Abu Dhabi, Oman, Bahrain and Syria,” Lee told reporters during the Malaysia Services Exhibition 2009 which ended here yesterday.

The group now has a total order book worth RM2.7 billion.

Among its most prestigious projects are the three major highways in India, luxurious five-star hotel in Kathmandu, Nepal, the Malaysian Embassy and Ambassador’s Residence building in Beijing, China and an access road for the new Bangkok International Airport project in Bangkok, Thailand.

Its signature projects in Malaysia include the Kota Kinabalu-Sulaman coastal road, two blocks of government buildings for Putrajaya Administration Centre, Putrajaya and the East West Road (Kupang-Gerik).

He said government support is vital for Malaysian companies intending to venture overseas.

“The Malaysia Services Exhibition in Dubai (MSE) spearheaded by the national trade promotion agency, Malaysia External Trade Development Corporation (Matrade) is timely as it shows that Malaysian construction companies are still present in this part of the Middle East region,” he said.

The MSE Dubai from March 17-19, showcased Malaysia's services sector ranging from the various fields. The services sector is expected to drive economic growth within the Middle East and African nation.

Bina Puri was one of the exhibitors at the event.

Lee said there was a lot of interest shown for Bina Puri during the MSE 2009 with visitors from the Middle East expressing their interest in forming joint ventures with the company.

By Bernama

‘Persistent weakness’ in property sector this year

KUALA LUMPUR: The Malaysian property sector will likely see “persistent weakness” for the rest of this year, according to panellists for the discussion on Capitalising on Property and REITs.

Property consultancy Regroup Associates executive chairman Chris Boyd said the country’s property sector had peaked late last year.


Chris Boyd

“We are likely to see a persistent weakness in the market this year. It will be very difficult to buy,” he said, adding that the mid-range segment was “relatively safe” at present.

“The middle class has grown in the past 25 to 30 years, with relatively decent job security that should still sustain the middle market,” he said.

Boyd proposed that “any time this year is a good time to buy” property, but Ho Chin Soon Research Sdn Bhd managing director Ho Chin Soon advised caution.

“I would not ask people to jump in the market just yet. What is the rush? Look around and wait a little longer,” he said. Ho also said that there was no evidence of a property bubble in Malaysia.

Average property prices in major urban areas of Kuala Lumpur, Penang, Selangor and Johor had not seen a sudden surge that indicated a bubble, he noted.

“In fact, Johor has even seen prices weaken (over the past four years). If it were a bubble, there should be a lot of cheap land to buy now, but there is none,” Ho said.

By The Star

SP Setia 1Q net profit at RM31.17m

KUALA LUMPUR: SP Setia Bhd posted net profit of RM31.17 million in the first quarter ended Jan 31 (1QFY09), which was 35% lower than the RM48.52 million a year ago where there was an inclusion of RM26 million from land sale.

It said on March 19 that revenue fell 14.4% to RM259.92 million from RM303.65 million. Earnings per share was 3.07 sen compared with 4.81 sen.

“The group’s profit and revenue were mainly derived from its property development activities carried out in the Klang Valley, Johor Bahru and Penang,” it said.

Ongoing projects which contributed to the Group’s profit and revenue include Setia Alam and Setia Eco-Park at Shah Alam, SetiaHills at Bukit Indah Ampang, Bukit Indah, Setia Indah, Setia Tropika and Setia Eco Gardens in Johor Bahru and Setia Pearl Island in Penang.

On the lower earnings in 1QFY09, it said this was mainly due to the inclusion of profit from the disposal of land in Ulu Kelang Aeon Co. (M) Bhd for RM26 million in 1QFY08.

SP Setia also said the lower profit before tax of RM44.5 million for 1QFY09 was RM58 million lower than the 4QFY08 ended Oct 31, 2008.
This is mainly due to the profit recognition of RM26.9 million on the disposal of the 25.07% interest held in Loh & Loh Corporation Berhad in the preceding quarter and lower profit contribution from property development due to the global financial crisis which negatively impacted sentiments beginning from September 2008 last year.

“Property development segmental margins are also lower at 15.7% this quarter compared to 17.9% in the preceding quarter,” it said.

SP Setia said this was mainly due to lower margins achieved by the initial phases of Setia Eco Gardens and several phases in other ongoing projects which were launched during 1Q and 2Q of FY2008.

“For these phases, building contracts had to be awarded at the height of the construction price increase in order to enable the 24 month delivery period to purchasers to be met,” it said.

Whilst cost pressures had to a large extent abated, the group’s profit margins in the months ahead would also be impacted by the structural shift in its product mix.

“This is because integrated commercial and high rise development projects such as the Setia Walk project typically carry lower margins as compared to landed residential properties. However, due to the much higher density of such projects, the overall yield per acre of land should nevertheless be better,” it said.

By The EDGE Malaysia (by Joe Chin)

Quill Capita falls 9.4% on downgrade

KUALA LUMPUR: Quill Capita share price fell 9.4% 8.5 sen to 81.5 sen in late morning trade on March 19 after a local research house said its valuations appeared demanding relative to other Malaysian REITS in terms of yield.

At 11.32am, it was down 8.5 sen to 81.5 sen. There were 30,000 units done.

RHB Research said on Quill Capita‘s valuation appeared demanding relative to other Malaysian REITs players in terms of yield as its share price rebounded to 90 after the plunge in February.

“We believe the current price level is unsustainable in view of rising concerns on the sustainability and stability of earnings. Chief among the risks faced by the company are occupancy risk where about 25% of total net lettable area (NLA) is up for renewal in 2009;

“Secondly, potential downward pressure on rental rates in view of current economic downturn and increasing office supply. Thirdly, potential devaluation in investment properties which could lead to higher gearing ratio,” it said.

However, RHB Research said QuillCapita’s gearing ratio remained manageable at 0.37 times in 4Q08. The company had low short term debt-to-total debt ratio of 0.23 times, which suggests lower refinancing risk in the near term.

“We expect gearing to improve to 0.35 times in FY09 as we do not expect any new asset injection in the near term,” it said.

The research house said softening in office rental rates due to the current economic slowdown as well as increasing supply did not bode well for Quill Capita.

RHB Research said the company would likely face bigger challenges in achieving higher rental rates for its office buildings.

"Meanwhile, despite the challenging retail outlook in the near term, we believe the long-term lease agreements (for Plaza Mont Kiara and Tesco Hypermarket in Penang) would help to mitigate the negative impact from the slowdown in the retail sector," it said.

By The EDGE Malaysia (by Joe Chin)

Depreciating high-end condos

Property prices in KLCC and Mont’Kiara areas could stabilise if economy recovers

PETALING JAYA: Property values of high-end condominiums in Kuala Lumpur City Centre (KLCC) and Mont’Kiara are expected to retrace by up to 20% to 2006 levels by the first half of next year, according to Kenanga Research.

The average capital values of KLCC and Mont’Kiara in 2006 were RM943 and RM466 per sq ft respectively, compared with RM1,128 and RM564 psf respectively currently.

If the Kenanga Research projection is right, this would mean the luxury residential segment in these prime locations could fall by as much as 16% to 20% over the next year, on top of a 6% to 10% depreciation since their peak.

Average prices in KLCC peaked at RM1,291 psf in the first half of last year; for Mont’Kiara it was at RM598 psf in 2007.

However, the research house in its report on Monday said property prices in these locations could stabilise if the economy recovered earlier and/or investors had strong holding power.

The research house also expected selling pressure to accelerate when an additional 11,000 condominium units are completed in the next two years, with 60% of these units in the KLCC area.

It should be noted that the number of people putting up their properties for sale should not be used as a measure of actual transactions.

“With the rental opportunities and capital values in a downtrend, property investors will be pressured to unlock their cash to fund other investments,” it said.

Khong & Jaafar Sdn Bhd managing director Elvin Fernandez said due to the economic downturn, property values at Mont’Kiara and KLCC could return to levels that may be sustained by rental returns.

“How low they will go and whether they will overshoot on the downside will depend on the severity of the downturn, going forward,” he told StarBiz in an e-mail.

Fernandez noted that prices in these locations had appreciated steeply between 2005 and 2007, and to sustain these high prices, the rentals had gone up in tandem.

“But there was a constraint in the charging of rentals simply because the expatriate community was not about to pay or couldn’t afford such rentals,” he said.

OSK Research analyst Mervin Chow expected at least a 20% downside risk and prices to bottom in 2010.

“About 30% and 40% downside (in property value) is a reasonable expectation,” he told StarBiz.

He said KLCC and Mont’Kiara condominium prices had already come off by 10% to 20% since late last year. Some properties in these areas, however, still enjoy capital values close to their peaks last year.

By The Star (by K.C.Law)

Sime Darby unit achieves RM161mil property sales

KUALA LUMPUR: Sime Darby Bhd’s property division has, as of Sunday, generated RM161mil in sales, exceeding the expectation of the company since the Parade of Homes campaign was launched on March 6.

Attributing the surge in sales to the benefits given to home buyers, Sime Darby Property Bhd said the impressive sales haul was also a sign of a resilient property market.

In a statement, Sime Darby Property managing director Datuk Tunku Putra Badlishah said the main factors contributing to the strong sales were the Parade of Homes’ exclusive benefits, which included an interest rate of base lending rate minus 2.3%, special downpayment scheme, and no interest charged during the construction period.

“In addition to the very attractive financial packages offered, we are also very pleased to note that our customers are buying because of our good track record, quality products, reputation as a reliable developer, and most importantly the trust and confidence in the Sime Darby property brand name,” said Tunku Putra Badlishah.

The Parade of Homes campaign is being held in conjunction with MAPEX 2009 and continues until June 15, covering both residential and commercial properties in Sime Darby’s 10 townships.

Sime Darby Property’s first Parade of Homes campaign was launched in June 2008 and generated sales of RM246mil in nine days. The second campaign in November 2008 generated over RM146mil in sales.

Sime Darby’s freehold properties range from affordable homes to high-end residences in townships in Subang Jaya, Bukit Jelutong, USJ Heights, Bandar Bukit Raja, Ara Damansara, Denai Alam, Melawati, Nilai Impian, Planters’ Haven and Putra Heights.

Sime Darby Property is also organising a property showcase from April 3-12 at the Sime Darby Convention Centre.

By The Star

PNB confirms property merger being finalised

Permodalan Nasional Bhd (PNB) has confirmed it is finalising a merger to create a large property group and says it may undertake an initial public offering when the stock market recovers.

Business Times had reported that PNB was combining Island & Peninsular Bhd, Pelangi Bhd and Petaling Garden Bhd under one roof to squeeze more profits from them.

The three firms were taken off the stock market by PNB a few years ago, allowing the merger to be done out of investors’ sights.

President and group chief executive Tan Sri Hamad Kama Piah Che Othman said the move by PNB to make its companies more efficient is an ongoing exercise.

“Not only these counters, but many counters also. We have to keep on looking at things so that we can improve from time to time,” he said at a briefing in Kuala Lumpur yesterday.

As for raising money from an IPO of the merged entity, Hamad Kama Piah said: “It is possible … we have to make sure the right time and so on”.

Based on information from the Companies Commission of Malaysia, the merged entity would have a revenue of RM1.31 billion for 2007.

This means that it could rival SP Setia Bhd, Malaysia’s most valuable property developer, which made RM1.33 billion revenue in financial year 2008.

The property merger is due to be completed next month. It would probably be the second mega mer-ger under the PNB group of companies.

In 2007, the state-run fund manager completed the merger between Sime Darby Bhd, Golden Hope Plantations Bhd and Kumpulan Guthrie Bhd to create the world’s largest listed plantation group.

By Business Times (by Hamisah Hamid)