TK Residence: Video

Hello PPtizers!

Our long awaited video of TK Residence is finally out!!

You can also find our other videos here:

http://www.youtube.com/user/ThePropertizer

thanks to Red Tomato for the editing and Luffy for the camera shooting!

Please feel free to contact us for further enquires

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2nd Penang Bridge Ahead Schedule

2nd Penang Bridge Ahead Schedule

Construction of the second Penang bridge is likely to be completed two months ahead of its projected November 2013 schedule.

Subject to weather conditions and other considerations, it was likely that work on the new bridge will achieve 70 per cent progress by the end of this year, Works Minister Datuk Seri Shaziman Abu Mansor said yesterday.

The bridge connecting Batu Kawan on Penang mainland and Batu Maung on the island will be the longest in Southeast Asia at 16.9km. Total estimated construction cost is RM4.5 billion.

"The dedication by the project contractors in seeing to the smooth running of the project may see it completed two months ahead of its scheduled completion," Shaziman told reporters after visiting the project site.

Work on the bridge, which will serve as the third link between the island and the mainland (after the ferry service and first Penang bridge) and set to provide better connectivity and accessibility to and from the island, began in November 2008.

It comprises a two-lane dual carriageway with shoulders and a dedicated motorcycle lane. Its design is depicted as a 375m cable-stayed bridge with a main span of 240m over the southern channel with a 30m height clearance.

The bridge is a joint-venture project between China Harbour Engineering Company Ltd and UEM Builders Bhd, with Jambatan Kedua Sdn Bhd (JKSB) appointed as the concession holder.

JKSB, which is wholly owned by the Minister of Finance Incorporated, is responsible for the construction, management, operation and maintenance of the bridge and has been given a 45-year concession for the project. - By Marina Emmanuel

'Give foreigners more property mart info'

Malaysia should put in more effort to disseminate information on the local property market overseas to attract investments in high-end projects in the country.

Malaysia Property Inc chief executive officer, Kumar Tharmalingam, said if foreign buying were to increase by three per cent, it would contribute up to RM20 billion in sales to the country's property market.

"We have all the system in place. All we need is publicity on what real estate is about in the country," he told reporters after the launch of Asia-Pacific Real Estate Association's (APREA) Malaysia Chapter today.

Last year, total property transactions in the country amounted to RM107.44 billion, of which overseas investors made up 11 per cent.

He said the lack of information was because not many international property research houses were set up in the country due to legal hindrance.

"The more international property research houses we have, the more exposed the market will be and the higher the chances they (foreign buyers) will come here," he said.

Kumar said despite more foreign investors buying local properties, the country was not expected to face housing shortage as the current infrastructure could host 50 million people compared to the country's population of about 28 million.

"Foreigners buy high-end projects which cost over RM1 million each and this does not affect the middle- and low-income buyers," he said.

The Malaysia Chapter was set up as part of APREA's strategy to operate on a decentralised basis with local identities in all key markets in the region.

It will disseminate information on the opportunities in Malaysia to the international investors and provide the local community with an expanded network.

By Bernama

Developers see stable property mart

KUALA LUMPUR: The Real Estate & Housing Developers' Association Malaysia (REHDA) is confident the property market can be stable amid the gloomy global economic outlook.

Its chairman of finance and investment committee, Datuk Ng Seing Liong, said the market would probably take a breather after having been quite bullish in 2010 and the first half of 2011.

"So far, the property market is not too bad, except for the past few weeks when the stock market was down.

"Looking at the market situation, we will definitely see a slight slowdown, but the undercurrents are still quite strong," he told a media briefing on the coming Malaysia Property Exposition 2011 (MAPEX 2011) here today.

Ng said REHDA hoped the government would not introduce new tax policies and impose more stringent rules for securing property loans in the 2012 Budget.

"It is important to be consistent so that the property market can be sustained," he said.

REHDA, he said, has generally asked for stability and consistency in terms of policy whether it's tax or other things.

Meanwhile, chairman for REHDA Wilayah Persekutuan, NK Tong, said the challenge for the country, especially the Greater Klang Valley, was the provision of more new good quality houses, especially with the increase in the population.

"We're facing very unusual time now all over the world. Not only the moods are dampened, we also find the costs are rising, therefore people are not buying.

"That will slowdown the building of new homes and in 10 years there will be a shortage of homes and this will escalate prices," he said.

Ng said MAPEX was open to participation from overseas.

"We cannot be static anymore. Many Malaysians are investing in overseas properties and vice-versa. We also want the foreigners to come and buy our properties," he said.

REHDA has received interests from Shanghai, Hong Kong, Guangzhou (China) as well as Australia, London and Dubai, he said.

He said MAPEX was expected to generate sales of about RM300 million, the same amount be recorded last year.

"We are more concerned about generating awareness. Sales don't have to be transacted within the three days," Ng said.

MAPEX 2011 will be held from Oct 21-23 at Mid Valley Exhibition centre.

It attracts 60,000 visitors each year.

By Bernama

Seoul’s residential market

I visited South Korea recently in connection with a valuer (called appraiser there) meeting and although this was not my first visit, I was nonetheless impressed with the generally high level of efficiency in the country. Hassel free, from the well organised public transport, to the high service levels in the hotel and retail sectors.

The smooth and efficient bullet train ride from Seoul to Gyeongju, covering about 400 kilometres in two and a half hours was also impressive.

Not so efficient, in my opinion however, is the housing market in Seoul. Possibly a bubble that will burst, if it does not deflate quietly (which is unlikely), or one that risks growing bigger and then bursting or deflating. Astute policy nudging and/or more in-depth, knowledge-based decision making by market participants are key to a smooth “landing”.

Greater Seoul has 20 million inhabitants and that is 40% of the population of the country, a rather high percentage for a capital city. The Korean Peninsula is mountainous.

The per capita GDP of the country is about RM60,000 (based on a conversion of 1:3) as compared with Malaysia's, which is about RM21,000. The average monthly household income in Seoul is RM12,000. In Greater Kuala Lumpur it is about RM6,000.

The average house price in Seoul is about RM1.4mil and this means that on average the house price is close to 10 times household income, and this is viewed with some consternation by Koreans. About 10 years ago the average house price was 6 times household income, also slightly elevated as measured based on a global long term benchmark for developed countries at three times.

Kuala Lumpur typically has house prices at a long term relationship of around 4 to 4.5 times annual household income, but in many hot spots, in the past few years, there has been a run up to more than 10 to 15 times when viewed from an average household. And it may surprise many, that despite frequent comparisons with high-end condominiums in Singapore, HDB flats in Singapore, that house the majority of households in Singapore, the relationship is only about three times.

Japan which neighbours Korea had a property bubble in the late 1980's and prices soared to close to 20 times annual household income, only to come down crashing, and 20 years later, most of the medium sized cities in Japan have a corrected and stable relationship of about five to six times but with the Tokyo suburbs closer to 10 times.

Net yields, the second driving fundamental in the housing market, in Seoul are nothing much to speak about, being about 2% per annum. In Kuala Lumpur yields have slipped below the 3% benchmark for the ubiquitous double story terrace house. This figure of 3%, in the hierarchy of property yields, is generally acceptable when capital appreciation possibilities are a possibility but when such possibilities dim then a higher return should be the order of the day.

My Valuer friends in Seoul opine that much has to do with “Chonsei” system in Korea that has led to the high house prices in Seoul, apart from a long, inordinate support for the construction industry that has now resulted in construction being a high 20% of GDP, and the other usual culprits of easy money and exceptionally low interest rates.

This system of owning houses for owner occupation and investment is predicated on rising house prices. Landlords, for example, rent out houses by getting the tenant to set aside in a finance company or bank a lump sum for rent over two years and take the interest as rent.

Interest, which in the past, and due to artificial constructs was high, has come down as the economy irons out these constructs as it modernises further. The landlords in the past were happy with this because their focus was on capital appreciation, which was sustained and high.

But of late, especially since the middle of the last decade, house prices have stopped rising. The market is now normalising and rents that drive values are taking hold and tying values to more normal returns. The process will continue further as the Koreans move inexorably towards a market where house prices are tied to household incomes and driven by rental returns.

The housing market in any modern economy is an important pillar. It is a store of household wealth and when it stalls or falls it has an impact, sometimes an outsized impact, on the economy.

In the United States, house prices went up (and was allowed to go up by design or mistaken notions) against governing fundamentals and are now on a downward trajectory to the detriment of the economy at large and the global economy. A recent article in the Wall Street Journal shows the pre-bubble average house price increase from 1988 to 2000 to be 3.6% per annum and it shot up to 10.4% per annum between 2000 and 2007, outstripping average household income increase.

The US Bureau recently revealed that median household income in the United States in 2010 fell to US$49,445, the lowest in more than a decade. In Malaysia, our country-wide compounded annual average house-price increase in the period 2000 to 2009 was about 5%, running neck to neck with household-income increases.

Regulators are obliged to cast a watchful eye on the housing market and know the driving fundamentals, and where and when needed, nudge the market through astute policy intervention.

Post 2008 Global Financial Crisis, most countries in the region, including ours, have taken policy measures targeted at the housing market as against mainly broad brush monetary policy measures of the past, to stamp out excessive speculation and keep the market tied or running not too far from underlying fundamentals. This no doubt requires constant monitoring of the market, and in particular, before and after any policy implementation.

On a broader perspective, the market should be allowed to function as a free market and any intervention kept to a minimum and only to iron out free market imperfections.

Elvin Fernandez believes in the free market and timely nudging by policy makers and key market participants to iron out any, and only where needed, imperfections in the system.

By The Star (by Elvin Fernandez)

Measures proposed to prop up housing sector

The Government has announced a slew of measures related to the property sector. While the real property gains tax (RPGT) was uppermost on the minds of both developers, consultants and property buyers, Prime Minister Datuk Seri Najib Tun Razak also proposed other measures to keep the momentum going for the sector.

Under the My First Home Scheme (MFHS) announced earlier this year, Najib proposed that the cap of houses for young working adults of aged 18 to 35 be raised from RM220,000 to RM400,000.

Najib, who is also the Finance Minister, also promoted the 1Malaysia People's Housing (PR1MA) scheme. While the MFHS is for those with a monthly salary of RM3,000 and below, the PR1MA scheme also comes under the broad category of affordable social housing.

“PR1MA will be the sole agency to develop and maintain affordable and quality houses, specifically for the middle-income group. It will be the developer for projects on land owned by the Government,” he said.

Several plots of government-owned land around Sungai Besi and Sungai Buloh will be used for this purpose. The Government will also identify areas in the vicinity of MRT, LRT and other public transport system to be developed by PR1MA for housing projects.

“PR1MA also welcomes the cooperation with the private sector to develop similar projects. In this respect, several private developers responded to the Government's call to provide affordable and quality housing. PR1MA will play a main role in ensuring that the distribution of the housing units be transparent and fair through an open balloting system,” he said.

Although much has been said about the build-and-sell concept, Najib brought this up once again in the budget.

To protect buyers from delay and abandoned project, the Government will encourage the construction of more houses using the build-then-sell concept.

Real Estate and Housing Developers Association Malaysia president Datuk Seri Michael Yam and Rehda national council member and branch chairman for Federal Territory N.K. Tong said the measures announced in the budget proposals encouraged homeownership among the poor and young working adults but discouraged speculation.

Yam said the slew of measures to promote ownership and to spearhead investment was heartening and showed that the Government was serious in keeping the healthy property market on an even keel.

“The measures announced is in line with the Economic Transformation Programme (ETP). Under the ETP, the Government wants to raise the population of the Greater KL/Klang Valley from the current 6 million to 10 million. In order to do that, there is a need for housing,” Tong said.

“It will be difficult for private land owners to provide land for social housing in the city, or close to the city. It is good that the Government is providing land for this cause and, at the same time, having them located near the proposed new public rail transport.

“In this respect I would said that the budget is two-prong when it comes to home ownership helping people to have a roof over their heads, and to save for their future.”

Yam said the slew of measures to promote ownership and to spearhead investment was heartening and showed that the Government was serious in keeping the healthy property market on an even keel.

By The Star

RPGT increased to 10%

Under Budget 2012, it was proposed that a real property gains tax (RPGT) of 10% be applied to properties held and disposed of within two years.

Meanwhile a rate of 5% will be maintained for properties sold within the third, fourth and fifth years after purchase.

The current RPGT, imposed after Budget 2010, is 5% for all properties sold within the first five years of purchase.

However, consultants and analysts said the 5% increase in the RPGT, for units sold within the first two years after purchase, would have little impact on speculative activities in the property market and escalating house prices.

Property consultant CB Richard Ellis (M) Sdn Bhd executive director Paul Khong said speculative activities in the property market would only be slightly curbed by the RPGT increase.

“This latest RPGT increase is a small negative point to investors but not detrimental. Investors will be more cautious in doing their profit calculations.”

Khong hoped that there would be no more negative changes in the RPGT quantum within the next few years, and pointed out that many investors would be rushing to liquidate their positions prior to Jan 1, 2012 in order to enjoy the current 5% RPGT this year.

HwangDBS Investment Management Bhd head of equities Gan Eng Peng also agreed that the latest RPGT increase was not an effective measure to curb speculative activities.

“To curb speculation, the RPGT should be higher than 10%,” Gan said.

Henry Butcher Marketing Sdn Bhd chief operating officer Tang Chee Meng also did not think that the latest RPGT increase would have a major impact on property sales.

“The Government is sending a message that it is serious in preventing an asset bubble and wants the property market to be more orderly. If the market is hot, an RPGT increase to 10%, for the first two years after purchase, will not really curb speculation,” said Tang.

A property analyst said the quantum of the RPGT increase was quite gentle.

“It is obvious that the Government does not want to dampen the property market. The marginal increase in RPGT is considered to be friendly and accomodative towards growth in the property sector,” he said.

Another research analyst concurred, and said the latest RPGT increase would help to slightly “cool off” demand in the property market.

“It would make investors think twice before “flipping” their properties within a short period after buying them,” she said.

“Our outlook for the property market next year is that of flat demand year-on-year. Rather than this gentle RPGT increase, investors should look at the central bank's policy on liquidity and ease of getting housing loans.”

KPMG Tax Services Sdn Bhd executive director Tai Lai Kok opined that the Government's move was fair.

“Any upside in tax revenue from the RPGT increase would be marginal. So, rather than to increase tax revenue, the Government's move is very focused towards curbing speculation in the property market,” said Tai.

Meanwhile, House Buyers Association (HBA) vice-president Brig-Gen (R) Datuk Goh Seng Toh said the latest RPGT increase was negligible.

“We think there will hardly be any effect in curbing escalating house prices. Certain developers do not allow buyers to sell within the first two years, when the house is still under construction. Also, many buyers only sell after the first two years, when their properties are completed.”

Goh added that the Government should not have a “one size fits all” RPGT rate. “The RPGT should be applied differently based on the type and price of the property.”

Meanwhile, Budget 2012 also proposed to increase the maximum price ceiling for houses under the My First Home (MFH) scheme to RM400,000.

Also, this improved scheme will be available to house buyers through the joint loans of both husband and wife beginning January 2012. Under the present MFH scheme, houses are priced within the RM100,000 to RM220,000 range.

The scheme is opened to private sector employees aged between 18-years old and 35 years old; drawing a monthly salary of not more than RM3,000. Property consultants said the Government's objectives under Budget 2012 were clearly to curb excessive property speculation and boost house ownership for lower-income groups.

Goh said while the improved MFH scheme would made it easier for those who qualify to obtain loans for properties priced at RM400,000 and below, it might also add pressure on the disposable household income of lower-income groups.

“Our household debt-to-income ratio is already high. Also, this might make it easier for property developers to increase the prices of their units from a lower price range to RM400,000 and buyers might actually end up paying more.”

Another property analyst pointed out that developers in the Klang Valley would still find it tough to cater to the RM400,000 and below price segment due to land and construction costs. “Nowadays, there are not many property launches at this (level of) pricing in the Klang Valley,” the analyst noted.

However, Mah Sing Group Bhd group managing director Tan Sri Leong Hoy Kum welcomed the improved MFH scheme and said that property prices in reasonably well-located townships are currently in this price range.

“For example, we intend to offer beginner homes priced from RM390,000 onwards in our latest township M Residence@Rawang in the first half of 2012. For this price, buyers can get a 22ft x 70ft home with a 2,000 sq ft built-up in a location that is less than 30 minutes from Kuala Lumpur,” said Leong.

By The Star

Enjoy more with less for the sake of sustainable development

Imagine stepping into the shoes of a city planner. If given the opportunity, how would you accommodate 150,000 families on an island of 10,000 acres which is fully covered with primary rainforest?

Perhaps the first thing that comes to your mind is a proper plan to house the 150,000 families and at the same time, build enough infrastructure and facilities to make the island a lovely place to live in.

Let's dwell further and imagine two extreme options available.

The first option is to accommodate all 150,000 families in terrace houses at a tight 15 units per acre. This basically means the entire rainforest in the island needs to be chopped down to give way to 150,000 homes.

As the houses are spread all across the island, there will be a need to build extensive network of roads to connect them. Obviously, this would use up more land, creating traffic jams and leading to an inefficient public transportation system.

The second option is to accommodate all the families in a higher density development or vertical development by developing an average of 100 units per acre. With this option, 1,500 acres of the island will be covered with 150,000 high rise homes, leaving 8,500 acres of primary rainforest untouched.

With such a huge land reserve, you can turn some of the land into recreational parks and public amenities where dwellers can enjoy and lead healthier lifestyles. In addition, commercial centres built within residential vicinities would be able to enjoy greater business opportunities and economies of scale brought in by the high density development. Even if you took an additional 500 acres from this, it would still leave you with 8,000 acres of rainforest.

The two scenarios above do resemble a real life situation. So, as a city planner, what would be your choice and how would you plan your city?

As the population continues to rise and land for development becomes scarce, growing a city vertically as opposed to horizontally makes more sense since more housing units and facilities can be built using less land. The efficiency of vertical developments allows more land to be preserved for future usage, which will become precious resources for the future generations.

In a vertical development, it is common to have facilities which are not viable in a horizontal development. These include swimming pools, sport centres and landscaped and recreational areas. These facilities create an ideal living environment for residents to enjoy a more balanced lifestyle as their homes are not just confined to the size of their units, but extend to all facilities in the common areas.

People who stay in high rise developments can also utilise a combination of vertical (lifts) and horizontal (MRT, buses and taxis) facilities and transportation to move from one place to another. There will be fewer roads and cars as more people take public transportation, which are more cost effective, efficient and environmentally friendly due to increased densities.

From an architectural point of view, vertical development does not only improve the quality of life, but also contributes to the attractiveness of a city as high rise buildings do create interesting landscapes.

Hong Kong, which is known as the “Pearl of the Orient”, is one of the best examples of a city formed by skyscrapers. The beautiful composition of Hong Kong happens naturally as the city grows. Singapore also has a very successful lineup of skyscrapers, efficient mass transit system and green resources in the heart of the island.

Last year, at the WCSC 2010 (World Class Sustainable Cities) Conference organised by REHDA KL, MIP & PAM, the city of Curitiba, Brazil was featured. This has to be one of the benchmarks for sustainable cities.

What is amazing is that the transformation has only taken place in the last 40 years. Today, skyscrapers line the city on either side of dedicated bus only highways, pushing up public transport ridership to a phenomenal 80% to 90%! In the meantime, residents enjoy around 50 square metre of greenery and parkland, more than double the global average and more than three times the KL average.

I have encountered many foreign visitors who tell me that KL is a beautiful city. This is because our capital city is located in a valley where the land is not flat, and there are many tall buildings with different heights forming an appealing city skyline. Besides, suburbs such as Bangsar and Mont'Kiara which house plenty of high-rise developments have also became attractive residential areas for the local and international community due to the interesting skyline.

If a city solely focused on horizontal developments, it would end up with a dull and flat skyline. All you can see are rooftops if you were to look down from high altitude.

Many years ago, a prominent national architect voiced out that low density developments contribute to “future slums”. He believed that houses could not last forever perhaps 50 years and they would be demolished to make way for tall buildings.

If we focussed on landed property development, the pace of development may not be as fast as the nation aspires it to be as there are too many individual owners to coordinate with in terms a new development plan.

Now, imagine you are one of the 150,000 families mentioned. Which would you prefer? Occupy a terrace house in cramped streets, facing limitations in terms of daily activities and future growth of your country, or opt for a high rise building with efficient traffic-free public transportation and ample parks in order to enjoy a more efficient and balanced lifestyle?

The choice is yours now.

Datuk Alan Tong is the group chairman of Bukit Kiara Properties. He was the FIABCI world president in 2005-2006 and was recently named Property Man of The Year 2010 by FIABCI Malaysia.

By The Star (by Datuk Alan Tong)

Opportunities in secondary market

OPPORTUNITY may present itself for house buyers looking for properties in the secondary market especially in prime areas, with the property market going through a soft patch, dampening sentiments of speculators.

“We have not detected any downward trend in prices yet, in fact prices are still on an upward trend. However, sentiment may have been dampened by the anticipation of measures that the Government may take to curb speculative buying on properties,” property valuer, KGV-Lambert Smith Hampton (M) Sdn Bhd director Anthony Chua tells StarBizWeek.

He notes that the property sector has already seen a downturn in 2008, triggered by the United States subprime mortgage crisis following the 10-year cyclical nature of the global economy.



He, however, says house prices in Malaysia were not impacted extensively at that time.

“I would be more inclined to say that prices appreciation in the near future would be moderate. However, I think there will be a technical correction by next year. If you read the signs now, there might be a correction coming soon,” he said.

“Its about time for a correction. Hopefully we will not experience a drastic correction this time as sales data of new properties built by prominent developers are still enjoying brisk sales. The demand for houses and the savings of people are still there,” he says.

Chua says property prices in the secondary market is still stable especially in established areas and mature townships like Petaling Jaya, while properties outside the vicinity of Klang Valley have not seen any significant uptrend in price, excluding prominent locations like Bukit Tinggi and Penang.

Speculation is rife that the authorities may end the stiff competition seen among banks by maintaining a certain margin for banks, putting a stop to interest-rate slashing by banks to attract more customers for their banking loans.

A local research-house analyst says that although this may be beneficial for banks, ultimately it would squeeze the pockets of consumers in the interest of banks.

He adds that Bank Negara was also keeping a close eye on mortgage loans to see whether a cap on the loan to value ratio (LVR) for second mortgages is necessary.



“Any raise in the LVR would further dampen demand for properties, and right now its exceptionally hard to predict what the authorities are going to do next to further regulate the property market, as these speculated actions are all double-edged swords that the authorities need to carefully play around with,” he says.

Meanwhile, Henry Butcher Malaysia Sdn Bhd chief operating officer Tang Chee Meng expects property prices to hold firm for the next six months but that all depends on how external factors like the eurozone crisis and the faltering US economy will fare in the near term.

“The market has softened a bit with demand weakening since April, and it would be an additional concern for the property market if loans are given based on an individual's net income compared with the currently used gross income standard,” he says.

“People are just concerned and everyone is adopting the wait and see stance before acting. Buyers are more cautious and selective to make sure that the properties they buy are priced reasonably,” he says.
According to data provided by the National Property Information Centre, the country recorded more than 134,000 transactions in the residential property sector during the first half of 2011, an increase from 108,000 transactions recorded in the previous corresponding quarter.

More than 929,000 property transactions worth RM253.19bil were recorded in the market from 2009 till now, including 214,000 transactions worth RM64.75bil for the first half of the year.

Recently, research houses have also started to downgrade the property market, with the most recent being RHB Research which says that the positive catalysts for the sector is scarce.

It expects the property market to continue underperforming the broad market with the weakening ringgit and lower expected returns from properties, coupled with a less bullish sales target next year as the research house sees further downside risk to gross domestic product growth.

“On the physical market, although foreign buyer content in the Malaysian property sector is small, the weakening ringgit does suggest that the expected return from property investment is getting lower from the foreign perspective. This will diminish the relative attractiveness of Malaysian properties to foreigners,” it says.

It says more bargaining opportunities can be found in other countries such as Hong Kong and Singapore as property prices have start to retrace.

By The Star

Real property gains tax: Gradual impact

The existing rate is not effective in curbing speculation and could jeopardise the ability of the low- and middle-income groups to buy houses, says Najib

Kuala Lumpur: The impact from the real property gains tax (RPGT) hike, a move to curb speculation in the property market, will be gradual.

RPGT is a tax on properties sold less than five years after they are bought. Only the profit from the sale of a property is subject to RPGT.

It has been doubled to 10 per cent for the first two years and will remain at the previous level of 5 per cent in the third, fourth and fifth year. There will be no tax on gains after the fifth year.

RPGT exemption on a residential property is given to both husband and wife on one residential property each, once in a lifetime.

Yesterday, Prime Minister Datuk Seri Najib Razak in his 2012 Budget speech said that the existing rate of 5 per cent is not effective in curbing speculative activities and could jeopardise the ability of the low- and middle-income groups to buy houses.

These changes, he said, are low enough not to affect genuine property owners and will curb speculative activities.

Chairman of the Property Management, Valuation and Estate Agency Division of the Royal Institution of Surveyors Malaysia Adzman Shah Mohd Ariffin said that the move will deter future sales of property within two years of purchase. With prices stabilising and should they sell fast, they will not be able to make a killing.

"But, for those who bought a property three years ago, the price appreciation would have been much higher than the 10 per cent RPGT imposed," Adzman said, adding that this category of buyers will continue to make a profit.

According to him, properties can appreciate by 20 per cent or more once completed.

Real Estate and Housing Developers' Association Malaysia president Datuk Seri Michael Yam welcomed the move.

"The fact that there is no drastic change to the ruling on RPGT encourages long-term ownership of property which also helps the owner with capital appreciation and wealth creation as they will hold on to the property longer," said Yam.

He added that the first two years are effectively a 100 per cent increase, thus it will help discourage short-term speculation.

"It is a gentle/soft landing which will avoid a dip in the supply and demand of property," Yam told Business Times.

"The increase in this instance is not unreasonable, given that there are no speculative activities in the entire country but only confined to pockets of urban areas like Kuala Lumpur and Penang. These pockets of activities are insignificant compared with the total supply and demand for housing in Malaysia," he added.

However, real estate agent Rahim & Co's managing director Robert Ang said the 10 per cent increase is not an effective measure to try and curb speculation activities.

"If you want to curb speculation, why not something higher?" he said.

By Business Times

Developers drawn to ‘less prime’ locations

With the supply of land-bank getting scarce in the Klang Valley, it's not surprising to see developers expanding their presence in “not-so-prime” locations.

This was evidenced as recently as last week, when SP Setia announced it was acquiring a RM381.2mil plot of land in Rinching, located mid-way between Semenyih and Bangi old town, to be followed soon after by Mah Sing Group Bhd's purchase in Rawang for RM92mil.

“Granted, it is often developers with prime land-bank in Kuala Lumpur and Penang that stand to benefit more from rising property prices,” says an industry observer.

“But property conglomerates such as SP Setia and Mah Sing are well-known brand names with a proven track record. They can probably attract buyers and chalk up sales even if they bought land in Timbuktu,” he adds in jest.

A huge boost to the land acquired by SP Setia and Mah Sing is that they are both well connected. Malaysia Equity Research in a report pointed out that the former's Rinching land is located within 15 minutes from the proposed Bandar Kajang MRT station. “(It is) near the terminal station for the approved MRT Blue Line (Sungai Buloh-Kajang) and 25km south of KLCC (which is 40 minutes via existing highways).”

The report also says SP Setia is planning to replicate the success of its twin flagship Setia Alam and Setia Eco-Park development, including investing in infrastructure to improve connectivity.

An analyst at a local bank-backed brokerage says investing in infrastructure is “part of the package” when developing land that is considered “less prime”.

Similarly, analysts are also positive about the connectivity for Mah Sing's Rawang land. The developer has proposed to develop a mixed township, M Residence@Rawang, that includes beginner homes on 90.3ha.

“M Residence@Rawang is directly accessible from the North-South Highway, being only 10km from the exit point at the Rawang toll via Jalan Batu Arang. The Kuala Lumpur-Kuala Selangor Expressway (formerly known as Latar Highway) was opened in June,” says UOB KayHian in its research report.

“The Rawang KTM Station is also a short drive away, within 12km from the land, according to the management,” it adds.

According to Mah Sing, the M Residence@Rawang township has an estimated gross development value of about RM948mil and preliminary plans include two-storey link homes, townhouses, semi-detached homes, three-storey shops and various facilities and amenities.

“M Residence@Rawang is expected be developed over three to four years and the group is also actively scouting for more well-located mega township land that fit the group's business model of quick turnaround and allow for value enhancement,” the company says.

The first launch is slated for the first half of next year for the mass market, in line with the Government's call for private developers to build more affordable housing.

The move to provide affordable homes has been praised by analysts and industry observers and considered a good way to attract buyers in less prime land within the Klang Valley.

“With absorbitant property prices today, especially in the Klang Valley, it is becoming increasingly difficult for first-time home buyers to even place a downpayment for a house,” says one industry observer.

On the proposed Mah Sing development, UOB KayHian says: “The price tag for a two-storey link house (built-up of about 2,000 sq ft) is indicatively priced from RM390,000 onwards, or RM195 per sq ft. Ground checks indicate that selling prices for a two-storey link house in nearby developments such as The Emerald and Bandar Country Homes range from RM150 per sq ft to RM250 per sq ft.

“We believe the township concept should be able to attract buyers given the decent selling prices.”

Macquarie Research in its recent report says Mah Sing's project could see good demand with the significant rise in property prices in Kuala Lumpur and Klang Valley in the past year.

“As a comparison, Kuala Lumpur Kepong Bhd (KLK) launched its link houses in June this year in Bandar Seri Coalfields with prices ranging from RM328,000 to RM368,000. We understand from KLK that the sales for the launch were very strong with over 90% sales achieved, primarily due to upgrader demand.

“Mah Sing's new land is further up north of KLK's project, but has good connectivity with the KL-Kuala Selangor Expressway and is 20km from Rawang city centre.”

By The Star

New condo? No, it’s an office block

SINGAPORE: With their swimming pools, gyms and immaculate rooftop gardens, they could almost be mistaken for executive condominiums.

In fact, they are office buildings in industrial estates – part of a new breed of developments designed to provide a stylish workplace for young entrepreneurs keen to get the creative juices flowing.

Gone are the days when their firms had to settle for space in staid grey blocks alongside small factories. Instead, developers say they are concentrating on aesthetics and recreational facilities, which help them to attract tenants such as start-ups run by bosses who want somewhere “cool” to do business.

Take Bizhub 28 @ Chai Chee. Due to be completed in 2013, it will have a pool, barbecue pits and a gym. Seah Yam Seng, the property agent in charge of selling the office space, said it was attracting mainly foreign firms and new tech businesses.

“It’s the lifestyle,” he said. “Some local companies may be happy with just an office space to work in but, nowadays, tenants do demand a little more.”

Oxley BizHub is another trendy development, this time aimed at light industry companies or those that produce small consumer goods. The developer of the Ubi Road 1 project, which is due to be completed in 2013, said it was not interested in slapping together a simple design.

Oxley Rising chief executive Ching Chiat Kwong said: “We believe that injecting a bit of ‘lifestyle’ into our projects encourages people to be more productive at work. It helps to have a lot of greenery and a nice area to work in.”

He added that the concept was likely to catch on fast with developers who realised their customers expected modern features.

Oxley paid S$158.1mil, or S$169 per sq ft (psf), for the Oxley BizHub 60-year leasehold plot in August last year. Since its launch, the property has sold its 728 units at an average S$677 psf. Prices there are said to be higher than those at other 60-year leasehold properties in the area, which go up to slightly over S$400 psf.

While the building’s design sets it apart from others in the neighbourhood, property agent Benson Koh said prices at the project depended just as much on the economy.

“Whether or not the price can be justified will depend on market demand,” he said. “The recent cooling measures on residential property have driven a lot of investors to buy units in industrial projects, so demand is very high right now.”

The move to add more frills to office buildings is also catching on in downtown developments. Asia Square, in the Central Business District, will have a 32,300-sq-ft gym and a fully sheltered landscaped plaza where tenants can relax, socialise or hold corporate events.

Existing office buildings equipped with facilities like these include Capital Tower and One George Street, both of which have pools managed by Fitness First. Capital Tower even has an indoor golf club on its ground floor. CapitaLand, which developed both buildings, said it wanted to provide its tenants with a balanced environment for work and play.

When IT consultancy Acian Technologies decided to set up its new office at the futuristic Fusionopolis in Buona Vista in 2007, the building’s design, gym and roof garden were a major draw. “It’s great for the employees to visit the garden, and it helps us when we are recruiting staff,” said chief executive Julien Arnaud, 33. “I’m a member of the gym, and I usually drop by in the morning or after work.”

Wesley Oxenham, director of design at technological firm Peekspy, said he planned to move his office somewhere “cooler”. Right now, his company is based in an older industrial building.

“I visited the Google offices in Singapore a few years ago, and I was quite inspired by the way they did the place up,” said the 28-year-old. “It’d be nice if the office building and the interior were well designed. It could help us think in a more innovative way.”

By Straits Times Singapore

Chor sees no property asset bubble

PETALING JAYA: Malaysia does not foresee a property asset bubble in the near future unlike China, Hong Kong and Singapore, which have such concerns.

Chor: ‘Increase in RPGT among measures to curb speculation.’

Housing and Local Government Minister Datuk Chor Chee Heung said that many local developers were still rushing to submit their applications for various projects.

“No, I don't think so because we have not reached that stage. If you think this (slower property sales) is the sign, then why are developers jumping in to continue to build?” he said after the opening of the 19th International Real Estate Federation Asia-Pacific Real Estate Congress 2011.

On another note, Chor said the increase in the real property gains tax (RPGT) was among the measures taken by the Government to curb speculation.

The Budget 2012 proposed that the RPGT on properties held and disposed of within two years be raised to 10% from 5%.

Chor said although the additional 5% was not too much of a deterrence, it would not give much room for speculators to buy property and flip it shortly, adding that the additional tax would not affect genuine home buyers.

Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah, in his speech at the congress, said the real estate and business services sector was projected to expand by 6.8% and 5.7% respectively in 2011 and 2012.

“As we move forward, we cannot abandon the underprivileged and the poor. In this respect, we have put in place numerous measures to ensure that there is adequate supply of affordable homes. In March this year, the Government launched the My First Home Scheme.

“Under Budget 2012, the ceiling selling price of these homes has been raised to RM400,000 from RM220,000. The new ceiling would allow a greater number of aspiring homeowners to take advantage of the 100% financing scheme by participating financial institutions,” Husni said.

He also said unique public-private partnerships would be forming, where the Government would provide the land on which private property developers could build homes for the less fortunate group.

By The Star

Shopping around – places to go if you want to invest in property

If you were looking to invest in property somewhere outside Malaysia, where would you go? First, let us set some parameters. We are not looking for something in the mega rich category but it must be located in a decent neighbourhood and within the city limits. Taking into consideration all these conditions, how much would it cost you? How much can you rent it out for, and what would be the rate of return?

For the benefit of our discussion, let us look at cities closer to home our Asean neighbours. Singapore would spring to mind as the most expensive city in South-East Asia, followed perhaps by Bangkok and Jakarta, even Kuala Lumpur.

But are our assumptions accurate?

They are, but only to a point. A quick look at the Global Property Guide, which is available on the Internet, has yielded some interesting numbers. For the sake of consistency, the prices and rentals quoted are for an apartment of 120 square metres located within the city limits. However, they are not likely to be premium properties.

According to the guide, the most expensive place in South-East Asia to invest in is Singapore. The city state also makes the No. 5 spot on the world's most expensive property list, ahead of Tokyo that only makes the No. 7 spot.

Going by the numbers contained in the Global Property Guide, the average market price of property in the city state is US$16,727 (RM52,555) per sq m. For an apartment of 120 sq m, you will have to fork out just over US$2mil (RM6.28mil).

From here on, our original assumption proves inaccurate. Phnom Penh, the capital of Cambodia, it turns out, is more expensive than Jakarta or Manila. It makes the No. 2 spot in the South-East Asia list of the most expensive cities.

In Phnom Penh, real estate can cost as much as US$3,750 (RM11,782) per sq m. That means our apartment could cost about US$450,000 (RM1.4mil). Phnom Penh makes the global list of most expensive cities at No. 44, just ahead of Auckland, New Zealand.

The third most expensive city in South-East Asia, among the six covered by the Global Property Guide, is Bangkok, a city of 11 million people currently threatened by widespread floods in the north, northeast and central plains of Thailand.

Property in this city goes for an average of US$3,300 (RM10,362) per sq m, so a 120 sq m apartment will set us back US$396,000 (RM1.24mil). Bangkok is at No. 48 on the global list, just behind Cape Town in South Africa.

Metro Manila makes the South-East Asia list at No. 4. The average price of real estate in the Philippine capital is US$2,407 (RM7,558) per sq m. So our apartment there will cost us US$288,840 (RM906,973). Manila is at No. 64 on the global list.

Jakarta, the Indonesian capital, and the most populous city in the archipelago, is the fifth most expensive city in South-East Asia. Property in this city goes for an average of US$1,781 (RM5,592) per sq m. That means a 120 sq m apartment will cost US$213,720 (RM671,092). Jakarta is No. 77 on the world expensive cities list.

Bringing up the rear in the South-East Asia list is Kuala Lumpur. The Global Property Guide estimates that the average price of property in this city is US$1,546 (RM4,854) per sq m. Our apartment will therefore cost US$185,520 (RM582,543). This puts Kuala Lumpur at No. 81 on the global list.

After making these investments, how much yield can one expect?

According to the guide again, Jakarta is the city that is most friendly to property investors one can charge up to US$1,819 (RM5,711) a month to rent out the apartment, thus offering a gross rental yield of 10.21%. This also makes it the third most profitable city in the world in terms of rental returns.

Metro Manila is No. 2 on the South-East Asia list in terms of yield. Here, our apartment can be rented out for US$1,836 (RM5,765), thus offering a yield of 7.63%. The rental rate is higher than in Jakarta, but the investment is also much higher, hence the returns are not as good as in the Indonesian capital. Manila is No. 11 on the global list.

In Kuala Lumpur, our apartment can fetch a rental of US$1,072 (RM3,366) a month, thus giving us a return of 6.93%, putting the city at No. 3 in the South-East Asia list and No. 22 on the global list.

Bangkok comes in next with a yield of 6.49% followed by Phnom Penh with a 3.26% yield and finally Singapore with a return of 2.94%. On the global list, Bangkok is at No. 25, Phnom Penh at No. 73 and Singapore at No. 77.

Of course, it is most advisable to be cautious when investing. These examples are not meant to be an advisory on where is best to invest in property. This is merely meant to show that data such as this can throw up some surprises which, all the more, emphasise the need for more research and professional advice when one is considering such investments.

So, before you catch the next flight to Jakarta or Manila, talk to your investment advisor first.

Teh Lip Kim is the MD of SDB Properties Sdn Bhd, a lifestyle property company. Bouquets and brickbats are welcomed. Send by email to md@sdb.com.my

By The Star

More affordable homes for all

RISING price pressures amid a low or no growth environment is bound to cause worries among many quarters. This seems to be the situation faced by many countries in different continents of the world today.

From Europe to the Middle East and Asia, much of the world is still embroiled in this unenviable situation.

During such times, more affirmative actions and policies need to be undertaken by governments to help the people tide over the difficult and challenging times. And these should include long-term policies that address livelihood issues such as the high cost of living and its inverse effect on the people's standard and quality of living in general. Rising prices are evident in the property market. In less than a decade, especially in the last two years, property prices have shot up a number of folds to levels that are out of the reach of the common people.

In Hong Kong, the high housing and rental costs brought tens of thousands of demonstrators to march in the streets on July 1.

Many common folks are still caught in a quandary as the steep housing prices and rising cost of living have caused much worry and discontent.

This is further exacerbated by the gloomy global economic outlook that shows the much-feared second dip is quite likely to happen. The road ahead will get even more daunting before things get any better.

It is no wonder that public housing is fast becoming an important social agenda needing urgent government attention if societies are to continue to be functional and sustainable.

It is encouraging to note that the Malaysian Government is looking into providing more affordable and medium-cost public housing to cater to the needs of the people.

To ensure this noble measure gets off on the right footing, it should be planned based on a long-term and holistic approach. But it should not take too long as the country's public housing policy is in a state of disarray and in need of an urgent overhaul if it is to serve the needy. If well planned and executed, the affordable-housing and public housing schemes will turn out to be among the best efforts in improving the quality of life and encouraging home ownership among the middle- and lower-income groups.

While pricing the property affordably is one of the main objectives of the public housing initiative, there should not be any compromise on the quality of these projects.

It is also vital to ensure that these projects are accessible to good public transportation facilities and are close to public amenities like local grocer, convenient stores, and medical and education facilities. The lower-income group is most dependant on these amenities to improve their standard of living.

The implementation of the selling process has to be transparent and fair to ensure the projects will benefit all deserving and needy Malaysians.

The decision to raise the limit of house prices under the My First Home Scheme from RM220,000 to RM400,000 beginning January 2012 has brought some cheers as it will give more young people wider choices of property to choose from.

In view of the rising house prices in the urban areas, it will widen the opportunity for first-time home owners to buy bigger and better houses.

Despite the higher price margin, buyers should know their limitations and should refrain from committing carelessly. Buying a more expensive unit will mean they will have to commit to higher mortgage loan which will lower their household disposable income.

To keep the frothy property market in check and rein in price hikes, more impactful measures need to be implemented. One of the effective ways to nip speculative buying in the bud is to tighten the mortgage loan requirement and to discontinue the easy housing packages .

The relatively easy credit facilities provided by the banking sector will mean that property prices look set to remain on their upward trend in the near term.

Banks should be reminded of their duty to help to promote a balanced and sustainable property market, and should not give out loans easily if home prices shoot up artificially.

Meanwhile, developers should look into building more value into their projects rather than merely hyping up the concepts and designs. During challenging times, it is meaningful to go back to the basics of having simple but practical and occupant-friendly designs, while some of the frills can be provided as options to lower the property price.

Developers should look into more practical and functional designs and layouts, such as offering houses with bigger floor space. That way, two generations from the same family can be the joint owners to share out the cost. Although they may be living under the same roof, the design of the house will ensure privacy and individual space for the inhabitants.

This is also one practical way of keeping our traditional “extended family” practice alive.

Deputy news editor Angie Ng believes having empathy and a willingness to provide for those left behind will promote greater understanding and harmony in our society.

By The Star (by Angie Ng)

Affordability vs yields

Balancing the need for affordable housing with property market speculation

SHANKAR, a 27-year old law degree holder, works as a paralegal with a law firm in Kuala Lumpur and earns below RM2,000 a month. He is currently studying part-time for his Certificate in Legal Practice (CLP).

Shankar and his fiancee, a kindergarten teacher, hope to be able to buy a home by the time they get married later next year. He admits that with both their salaries combined, affording a home in the Klang Valley is indeed a tall order.

Shankar is hopeful that once he is a qualified lawyer (after completing his CLP and once he has been called to the Bar) and earning a better salary, both his wife and him will be able to afford a nice place in the city.

“It is our dream to have our own house,” Shankar says. Both his fiancee and him currently live in their respective parents’ houses, some 50km apart.

Here’s the irony. Once he completes his CLP, but before he can be called to the Bar, Shankar has to do nine months of chambering (pupilage). During that nine months, his salary would actually drop (because he would be hired as a student instead of an employee)!

“It’s how the (legal) industry works, sadly. It does not help that property prices are also very high in the Klang Valley. Sometimes I wonder if we would even realise our dream of buying our own house,” laments Shankar.

Shankar’s plight is shared by many Malaysians with low salaries who, while struggling to make ends meet, are also hopeful of having a permanent roof over their heads – one that they can proudly declare their own.

The residential property market in 2012

It does not help that residential property prices are constantly on the uptrend.

“Property is unique, in the sense that they’re big ticket items that are virtually recession-proof. Today, it’s at one price, tomorrow it will definitely be higher,” says one industry observer.

According to data by the National Property Information Centre (Napic), the price of the “average house” in Malaysia reached RM206,513 in the first quarter (Q1) of 2011. The price increased steadily from the previous four quarters; RM189,604 (Q1 2010), RM194,286 (Q2 2010), RM199,085 (Q3 2010) and RM203,903 (Q4 2010).

“The highest prices were recorded in Kuala Lumpur at RM438,150, Sabah at RM325,676 and Selangor at RM307,586. Johor registered the price at RM147,441 while the lowest prices were noted in Perak at RM127,096, Kedah at RM126,940 and Perlis at RM115,072.

“In Q2 2011, the price of the “average house” in Malaysia increased marginally by 1.1% to RM208,725. Kuala Lumpur continued to record the highest of all house prices at RM442,864,” said JPPH.

Next year, property price increases are expected to continue in Malaysia, albeit at a lower rate, due to rising inflation and slower economic growth.

Citigroup in a recent report says global economic growth (at current exchange rates) is expected to slow from 4% last year to 3% this year to 2.9% next year. This was a downward revision from its forecast last month of a 3.1% growth for this year and 3.2% for next.

Property consultancy DTZ Nawawi Tie Leung Sdn Bhd executive director Brian Koh reckons that housing prices could increase 4% to 5% “across the board” next year.

“We expect a soft landing of property prices next year due to rising inflation. Furthermore, people are more cautious (about their spending),” he says.

“After strong increases in property in the last two years, especially within the Kuala Lumpur area, we expect price increase to be more gradual next year,” Koh adds.

Property consultancy, VPC Alliance (KL) Sdn Bhd managing director James Wong says he does not expect the outlook for the local housing sector next year to be as vibrant as it is this year.

“The economy is facing a slight slowdown and disposable income will be less. This explains developers’ push to launch as many projects as possible.

“Next year, we are expecting less recorded transactions and launches within the primary housing market.”

With fewer launches in the primary housing market, many buyers will look to the secondary market, Wong says.

Real Estate and Housing Developers’ Association Malaysia (Rehda) in a recent briefing says it is “cautiously optimistic” of the housing market outlook in the first half of next year despite a marked increase in building material and labour costs as well as a slowdown in economic activity.

Respondents to a Rehda survey reveal that developers are more optimistic about the second half of this year than the first half of next year. Most respondents said prices would likely rise by up to 20% in the second half of this year, with 47% of respondents planning to increase selling prices by at least 15%. The survey showed that launches in the period were equally split between strata-titled and landed properties.

At the briefing, Rehda president Datuk Seri Michael Yam reportedly said the industry was concerned about how the local economy would be affected by external forces including the pressure on the sovereign debt ratings of Malaysia’s developed market trading partners.

Research houses, meanwhile, have started to downgrade the property market.

HwangDBS Vickers Research in its recent research report says there are signs of property sales slowing down, due to less mortgage applications and approvals (due to banks becoming stricter with financing margins), developers delaying launches and buyers cancelling bookings.

“Mortgage approvals and applications eased from July to August 2011, after hitting record highs in June,” it said. However, for the first eight months of 2011, mortgage approvals and applications grew 25% and 10% respectively year-on-year, which was still ahead of the total banking sector average of 20% and 4% year-on-year respectively.

The research house also says it sees a risk to Malaysia’s economic growth amid the current global financial malaise.

“As property sales correlate strongly with GDP (gross domestic product) growth, demand will likely weaken going forward, which could dampen property prices. If there is a recession (in 2012) property sales could drop by 10% year-on-year on lower volume sales and average transacted prices.”

The need for more affordable housing

With rising inflation and spending power being curbed, the chances of people like Shankar are a little bleak. Fortunately for people like him, there is the My First Home Scheme (MFHS). Launched by the Prime Minister in March, the scheme allows 100% financing for first-time house buyers earning less than RM3,000 a month to purchase homes below RM220,000.

The limit was increased to RM400,000 by Budget 2012, with joint loans between spouses. This comes into effect next January.

“Increasing the amount will allow both of us to apply for our dream home,” says Shankar, who is happy with the Government’s recent budget announcement.

According to reports, seven areas within the Klang Valley have been identified under the scheme, namely Damansara, Cyberjaya, Putrajaya, Shah Alam, Puchong, Rawang and Klang.

“The MFHS is a good move, so is the move to increase the price of the homes to RM400,000 from the previous cap of RM220,000,” says VPC’s Wong.

According to Napic, more than 214,000 transactions took place in the property market in the first half year of this year. Of that number, the majority (66% or 142,600 transactions) was made up of properties priced below RM200,000. Just 10% (or 22,500 transactions) were properties priced at more than RM500,000.

“With the bulk of transactions below RM200,000, the MFHS is timely,” says one industry observer. The scheme has also received criticism – opponents have argued that RM400,000 is deemed too high to be considered as “affordable housing.”

“RM400,000 is too high for a first-time buyer. We need affordable housing at sustainable prices. The scheme doesn’t send out the correct message,” one industry observer says, while another analyst says he is supportive of the move to increase the limit to RM400,000.

“It would encourage more developers, especially renowned ones, to build properties for first-time buyers. They may be put off from buying homes worth RM220,000 and below, especially with higher raw material prices.”

Some developers have, however, expressed intention to develope mass housing projects. Mah Sing Group Bhd earlier this month announced plans to launch linked beginner homes, with prices estimated to begin from RM390,000 in Rawang by as early as the first half of next year.

Earlier this year, SP Setia Bhd also proposed to purchase 1,010.5 acres in Ulu Langat, Selangor to build starter homes priced from RM300,000.

Curbing speculative prices

Budget 2012 also proposed that a real property gains tax (RPGT) of 10% be applied to properties held and disposed of within two years. Meanwhile, the rate of 5% will be maintained for properties sold within the third, fourth and fifth years after purchase.

The current RPGT, imposed after Budget 2010, is 5% for all properties sold within the first five years of purchase. Following the budget announcement, industry observers opined that the 5% increase in the RPGT, for units sold within the first two years after purchase, would have little impact on speculative activities in the property market and escalating house prices.

“The minimal increase is unlikely to curb speculation,” says an analyst.

Wong concurs: “The 10% imposed is not much as it is only imposed on the gains and is a manageable quantum.”

By The Star (by Eugene Mahalingam)

Property pointers

Here are some pointers for those considering a property investment in the near term:

Elvin Fernandez
Valuer and managing director of Khong & Jaafar Elvin Fernandez

“The global environment is changing. Strictly speaking, an upgrader sells the old house to buy the new. If he is going to hang on to the old, he will have to consider the rental market where yields are falling. He has to consider whether the market has peaked in the areas he wants to buy and whether it can go further and that may be unlikely in many areas. Value has gone above the normal governing fundamentals of price versus household income, and price versus rental returns.

“Although Malaysia is rapidly developing and we have a young population and we have seen more years of prices running up than going down, this may not be replicated as sentiments may be poor as a result of what is happening in Europe.

“As for commercial properties, the retail market looks stronger than the office market as there is an oversupply in this sub-segment.

“As for first time buyers, we have a whole range of housing from the low cost to the high-end. But many of the properties that young people may be able to afford are poorly maintained and because of this, these properties are not desirable. The authories should have more stringent legislation for people who default on their service charges. It makes good sense to seek professional property management instead of doing it on a piecemeal basis. Taking care of the maintenance issue is more logical step than building more, only to have the maintenance issue cropping up again later on.”


Charles Wong
Tetap Tiara Sdn Bhd executive director (Jaya One) Charles Wong

“Prices will have to stabilise. When considering buying the larger residential units for investment, the question to ask is, Can you rent it out? Smaller units will be more feasible. But having said that, we are seeing a huge number of 400 sq ft units of service apartments being built. While these may be affordable, buyers must consider rentability. Access, connectivity and proximity to amenities are important. And if there are so many of these units, you may need to take a longer period to rent and to re-sell in the secondary market in today's uncertain climate.

“In the retail market, rental rates have been coming down and are softer than two to three years ago. For landed properties, the rental are expected to drop from 3%-4% to sometimes 1% or 2% and condominium yield from 7% to 8% to 4%-5%.”


Tan Sri Leong Hoy Kum
Mah Sing group managing director/chief executive Tan Sri Leong Hoy Kum

“The demand will be for smaller units, and for mid-end housing, instead of the high-end ones. If it is a location they want, for example KLCC area, people will buy a little further away like in Jalan Ampang where prices are lower.”

GV International managing director Samuel Tan


Samuel Tan
“In Johor, price increase is expected to be gradual. Areas with good connectivity will be popular. In the last several years, the emphasis on infrastructures like highways has helped to spur interest and prices. The western coastal highway from Skudai to Bukit Indah has made travelling a breeze and prices have moved 10% or more. Developers are expected to report good sales in the near future although September was a soft month, as a result of the US downgrade in August. Iskandar Malaysia will become more visible and is expected to generate interest from the Japanese, South Koreans and Singaporeans.”

Real Estate Housing Developers' Association (Penang) chairman Datuk Jerry Chan


Datuk Jerry Chan
“Demand for landed units on the mainland and Penang island will continue but yield on the island is expected to be low, at 1% or 2%. The price movement for this year has been greater than last year. We continue to see land prices going up. For the lower to mid-end, prices are still moving. Demand is expected to remain firm for properties priced RM600,000-RM700,000 and below. For those between RM800 and RM1,000 per sq ft or about RM1mil, people will have adopted a wait-and-see attitude.

“Currently, prices on the mainland is a quarter or a fifth of those on the island. Penang people are beginning to find it too expensive on the island and are moving to the mainland.”

By The Star

The global effect on property

The signs of the times are here, and they are not unique to Malaysia. The concerns about the global economy are real. Whether one is an avid property watcher or a young person considering a downpayment on one's first home, there are certain things to take into account.

Says property consultant and valuer Elvin Fernandez of the Khong & Jaafar group of companies: “It is clear and becoming clearer by the day that the growth will slow down because it cannot keep up with just continuous stimulus around the world. Whether this state of affairs will continue depends on how sales fare as we complete this year and move into next. It is also clear that volatility will continue into the new year, which explains why developers are revamping their plans and changing strategies.”

Analysts have downgraded the property sector or had a negative outlook on it after they noted that average take-up rates of launches by property developers dropped from 80%-90% a year ago to a forecast 50%-65% in the second half of this year.

To understand what is going on in our current property market and to get some pointers about its future direction, we need to look back a little.

When property prices began to inch upwards in the second half of 2009, in the wake of the fall of Lehman Brothers in September 2008, there was cheer all round. But as prices continue to escalate into the first half of 2010 and then the second half, property watchers and buyers began to take note of the ballooning values in the landed property sector. The momentum shifted to high-rise, although to a lesser degree.

In response, developers fast-tracked their launch programmes. Some were quick enough to launch products in the second half of 2010, while many of the rest were able to do so this year.

Housing Buyers Association vice-president Brig-Gen (R) Datuk Goh Seng Toh said: “People bought in anticipation of higher prices later on.”

This situation of “buying before price goes up further” is evident not only in the Klang Valley but was especially so on Penang island.

Says Real Estate & Housing Developers' Association (Penang) chairman Datuk Jerry Chan: “Because of land scarcity and worries that prices will go even further, people bought. Why? Because it was anybody's guess what was the ceiling. Is it too much to pay? That was difficult to answer because prices seem to have gone beyond what people expected.”

It was this frenzy of buying in selected locations that fed the worries about a bubble, coupled with the easy credit and low interest-rate regime. This double whammy of easy credit and low interest was not just evident in Malaysia. It has also played out in China, Singapore and other countries in the region.

Banking on property

What is interesting is that the United States has gone through this situation a couple of times.

Says Fernandez: “The United States in the 1950s and 1960s were idyllic. After World War II, there was a certain amount of stability but there was this belief that a little inflation will boost the economic engine in exchange for more jobs.”

It worked and the US economy flourished. Inflation inched up and as it did so, workers demanded wage increases to keep up with higher prices, companies raised prices to compensate for the rising wages, and it became an upward spiral. Recession was the only thing that can break the cycle, and it came in the mid-1980s.

That, both Fernandez and Chan agrees, is what is happening in the United States and then Europe today. In the 1990s, the then US Fed chief Alan Greenspan also kept interest rates too low for too long, which led to a speculative bubble in real estate.

“We are ignoring the dangers of the twin combination of easy credit-low interest and a speculative property market,” warns Fernandez.

The prices of stocks and homes are every bit as vulnerable to inflation as chicken and sawi. He adds: “This notion that one will always make money on property investments is made popular by people who have speculated and gained from such activities, and their success stories are told time and again. We are now seeing in Europe, the United States and previously in Japan, that one can lose with property investment.”

He says although the property market has some distinctive factors, like any other market, it still runs on demand and supply and underlying fundamentals. “Because it is a market that has no shorting mechanism, it has a tendecy to rise rather than fall, unless the fundamentals pulling it down are strong,” Fernandez points out.

In Malaysia, this enchantment with properties the last two years has intensified because of a lack of alternative investment options, the availability of easy credit and as an hedge against inflation.

The government moves are a factor as well. Last year, the Government announced seven mega development projects to spur the economy. Two of these were mentioned in Budget 2012 the development of government-owned land around Sungai Buloh and the KL International Financial District (KLIFD). Both are expected to take off in the second half of next year. The Government has invited some developers to participate.

The finance sector has also profited from the property boom, with property loans being the main driver of growth for the banking industry, accounting for 40.6% of the overall credit expansion. The residential segment accounted for 27% of total loans. Analysts expect property loans to remain the key driver of credit expansion this year and in the near future. Although there was a slowdown in loan applications for residential mortgages after the implementation of the 70% loan-to-value cap on the third and subsequent house financing, the momentum has picked up again since March.

Making a mark in new territories

The sovereign debt problems brewing in Europe and the United States can impact consumer sentiment in property purchases, said RAM Ratings head of financial institution ratings Promod Dass. “The fact is, property is a cornerstone of any economy, and there is a property angle in just about any major venture. Even the proposed my rapid transit (MRT) system is known as “a property-and-rail play.”

Says Fernandez: “Many of the country's plans are property-dependent. We may not be able to live up to that expectation. It is like a father having too many children, and all of them want to spend his salary.”

The demand for property is driven by many factors. In today's prevailing uncertainty, demand is driven by job security, sentiment and affordability, says Tan Sri Leong Hoy Kum, managing director and group chief executive of developer Mah Sing Group Bhd.

“We have a relatively young population, which means there will be a demand for starter homes. Whether for landed units or condominiums, the demand for larger units and high-end housing will definitely be slow. So we are changing our strategy,” he adds.

“Instead of concentrating on high-end housing, we will do mid- to high-end on fast-turnaround basis. We will launch three to nine months from the day we buy the land. If semi-detached units, it will be RM1.4mil and below. If it is a landed strata, it will be priced lower, and if it is high-rise, the built-up area will be smaller. Our focus will be on affordability.

“The high-end sector will definitely soften in terms of sales in the next 12 month or so. Houses in the RM5mil and above range will be difficult to sell. The same goes for big units. The European crisis may be prolonged but we are hoping for a soft landing.”

About two weeks ago, Mah Sing announced that it has purchased 90ha in Rawang. The move to less-prime locations will be another strategy to aid affordability and to overcome land scarcity in the popular areas. The company is the second top developer to recently signal this move to less-prime locations.

SP Setia Bhd is the other; it bought 673 acres in Rinching, located mid-way between Semenyih and the Bangi old town.

As the woes in Europe and United States cast a pall over global economy, what will be ahead for locations around the iconic Petronas Twin Towers in the Kuala Lumpur City Centre, often regarded as the pinnacle of Malaysian property?

Signs of slowing?

Henry Butcher Marketing Sdn Bhd chief operating officer Tang Chee Meng says developers have noted the signs of an imminent slowing of the market. “Developers are today revamping their sizes. They are taking their projects to Singapore, China and Britain to sell. Or they work with banks to provide innovate mortgage packages. Some developers are also having friend-bring-friend commission in order to move sales.

In a buoyant market, this will not happen. The larger units completed a couple of years ago in the KLCC market may continue to remain vacant with pressure on rentals.

“Today, the majority of the sales are from developers, the primary market. In the secondary market, property agents are not getting many calls. The situation with huge leaps in prices is not as serious as last year or in the first half of this year. It is only certain type of properties in selective locations.”

“The European woes are weighing on investors. In that sense, the market is correcting itself. Developers may say these external global situations do not impact us. But there are many discerning people out there and they take note of what is going on in the US and in Europe,” says Tang.

A real estate agent specialising in properties in Mont'Kiara, another location that is closely watched, says the Sunrise MK28 has reduced its original price of about RM680 to RM700 per sq ft to RM590 to RM600 per sq ft. In Desa ParkCity, where prices of landed units have gone up by as much 300% or even more, the larger units of some of its latest launches are still available.

Comparing prices

About a decade ago, especially when the interest in KLCC-Petronas Twin Towers began, and in tandem with the proliferation of high-end landed and high-rise residentials, developers and property professionals took great pride comparing property prices in Malaysia with regional countries and concluded that the prices of Malaysian properties were far below those of China, Hong Kong, Singapore and Thailand. Projects around the Petronas Twin Towers were compared with London's Hyde Park and New York's Central Park. Today, such comparison continues to be made.

Says Fernandez: “This comparison has not stood the test of time. This suggests that our properties are not open to such comparisons and that such comparisons are not an appropriate measure. The drop in prices of between 20% and 25% soon after the 2008 crisis show that the market is mainly driven by our own governing fundamentals.

“The KLCC market, until today, has not rebounded to their original levels. The second point is that location is driven by a large expatriate community, which we do not have.”

Which is another sign of the times we are living in today.

By The Star