Growing appetite for investments

Medini is a mixed-development comprising three clusters – lifestyle and leisure, cultural and Iskandar financial district in Iskandar Malaysia, Johor. The three clusters are pivotal to the whole development of Nusajaya City.

Investors still committed to Iskandar Malaysia despite downturn, says Millennium Development

MILLENNIUM Development chairman Oussama Kabbani, whose company is involved in the development of Iskandar Malaysia, says the success of the growth corridor is its proximity to Singapore.


Oussama Kabbani ... ‘We are in a position to make the best of this recovery.’

Once the bullet train to Singapore becomes a reality, it will be possible to time one's journey to the city state. Even if it is delayed, it will happen. And the same goes for Medini, says Harvard-trained urban planner Oussama who was in Kuala Lumpur recently.

Medini is a mixed-development comprising three important clusters namely lifestyle and leisure, cultural and Iskandar financial district in Iskandar Malaysia, Johor. The three clusters are pivotal to the whole development of Nusajaya City.

When we first came three years ago, there was no housing, no Kota Iskandar, no shopping centres. In the last three years, the change has been unbelievable. Now there is warehousing and industries. Despite what the world economy has gone through, commitment from investors is still there. The world's appetite for investment is rising. We are in a position to make the best of this recovery, says Oussama.

Millennium Development is a member of Saraya Holdings, a Middle Eastern real estate development company. Its expertise is in development management services.

The company undertakes work on behalf of developers and investors in real estate. Essentially, they set up the development strategy and undertake all the work done by a developer.

The only difference is the investment does not come from Millennium Development but from the investors, which can be the Government or private sector.

Oussama says Millennium Development offers clients a portfolio of services which includes business development, urban planning, architecture, finance, marketing, legal and construction management.

We are only the catalyst. If you go through the check list, all the right factors are there, the location and the government support, among them.

How demand is created from abroad is a question of influence, he says.

Many projects sank during the recent economic crisis but Medini grew greater. The fundamentals are there. In a year or two, things will be coming up. LegoLand, the housing community, he said.

Oussama said credit goes to the investors and public-private initiatives, adding that where there is population and growth in wealth, there will be increasing aspiration for better social infrastructure and this is where Millennium Development adds value.

Southeast Asia is ripe for that. There is demand and big apirations but these aspirations are not limited to this region alone. The same is happening in China, the Middle East and Africa.

On the various development projects that are being undertaken around Kuala Lumpur by the Government in various public-private enterprises, Oussama said when one builds, one has to bear in mind that one is building for generations.

You have to be careful and creative about many things; the timelessness, a place of different incomes, all of which are timeless factors that make cities what they are. And they must be memorable.

By The Star

Flux in world economy affects everyone

These are interesting times. This has been said before, and will be said again at each fall and rise of the economic cycle.

But the enigma today is not so much whether it is a fall or a rise in the economy, but in the rebalancing of economies around the world. One may ask, how would that affect us in Malaysia? Lots.

Whether it is a 30-something looking for his first home, or a middle-aged person planning for retirement, the flux in which the world economy is in today affects everyone.

Let's go into the big decisions, not the details of how much your cup of coffee costs today. A 30-year-old looking to own his first property will wonder whether it is time to buy. The low interest rates are in his favour, but spiralling house high prices are not.

In the stock market, there stock prices are trending upwards. To place all of one's money in the bank seems folly at this point. Or is it, really? Let's lay some cards on the table to better gauge the situation.

The West is on capital preservation mode, while we in the East, are on growth. The United States and Britain are embarking on printing more money to help lift their economies and reduce unemployment.

But in Asia, the property markets of Hong Kong, China, Singapore are so hot that the respective governments are putting measures to chill these markets.

Bank Negara did the same recently when it imposed a 70% loan-to-value cap for third and subsequent housing loans. These measures will, in all likelihood, work only partially.

> Asia is the place to be in at this point in time. With the United States embarking on a second round of quatitative easing effectively flooding the economy with more dollars this flow of funds are expected to arrive on Asian shores to benefit from Asia's vibrancy and growth. The first round was its various stimulus packages after the fall of Lehman Brothers in late 2008.

This means by next year, there may be huge flow of funds into Asian economies, effectively pushing up stocks and properties. We may be seeing the tiny seeds of that exuberance germinating today.

It started with the property market in the last quarter of 2009 and now stocks are also trending upwards. Are valuations fair? If it is the beginning of a bull run a huge IF then maybe.

> Get your cash ready. You may want to cash in on the uncertainty ahead.

So despite the volatility, consider the accelearation, be it both stocks and properties. That does not mean there are no challenges ahead. If anything, with the rebalancing of the economies in the different regions, massive uncertainty exists.

In fact, fund managers and bankers are very cautious about what's around the corner and also about next year, despite the strong performances in Asian stocks and the property market today.

The various capital controls and measures by governments in this region all point to these uncertainties and challenges ahead.

Given these trends, volatility is expected. The same for uncertainties. That does not mean stock valuations are not fair. Or that houses are over-priced.

In some locations, it is over-priced. The funny thing is, there is demand for it, particularly for certain types of properties.

Don't throw caution to the wind and don't follow the herd instinct. Whatever goes up very fast, also comes down very fast, particularly if prices are pushed up by inflows from the West. They enter a region quickly and exit just as fast.

> Consider how much you are ready to lose, not how much you can make.

You are tired of renting and there is a real need for that house. First, choose where you want to stay. That's the location. Secondly, what type of residential units will you be comfortable in.

If your financial position allows you to get your dream home, then you may want to work towards that. You may have to forgo changing your car. A property is a long term purchase.

> Be it a house or stocks, buy on value, and need. Nobody knows how long this state of uncertainty this rebalancing of economies is going to last. Or when the fragile situation in Western economies will take a turn for the worst and affect the exuberance that exists in Asia today.

As property professionals and economists generally say: You don't know a bubble exists until it bursts. Until then, it's a bull run. Hang on to the safety bar when you go on the roller coaster. These are interesting times.

Assistant news editor Thean Lee Cheng thinks there's something to be made and to be lost in the coming days.

By The Star

Rising building material, labour and hidden costs main concern for Johor developers

JOHOR BARU: Escalating prices of building materials, higher manpower costs due to shortage of labour as well as hidden costs are among the main concerns of property developers in Johor.

KSL Holdings Bhd executive director Ku Hwa Seng said these problems did not just apply to Johor. He believes that developers nationwide also faced similar predicament.

He said the infrastructure projects outlined in the 10th Malaysia Plan (10MP) and Budget 2011 would further push up prices of building materials and labour costs in the next five years.

“The demand for residential properties in Johor, especially in the Johor Baru district, has improved as the economy gets better but developers might have problems kicking off new launches,’’ Ku told StarBiz.


Ku Hwa Seng says infrastructure projects outlined in 10MP and Budget 2011 would further push up prices of building materials and labour costs in the next five years.

He said building materials prices had increased between 10% and 15% in the last 12 months while labour costs had risen by 50%, compared with two or three years ago.

Ku said that shortage of labour was still the main problem for construction companies.

Mahabuilders Bhd group chairman Mustapha Hassan said while the increase in the prices of building materials was relatively stabilised, the same could not be said for the labour costs.

“Like it or not, we still need foreigners to work at project our sites, locals are not interested or else many projects will be delayed not only the ones by the private sector but also by the public sector,’’ he said.

Mahabuilders is among the few in Malaysia specialising in acquiring and reviving abandoned property projects and labeled as a white knight the construction industry.

Among the company’s revived projects to date include Taman Baiduri Johor Baru, Skudai Villa, Indera Wangsa Larkin, Senai industrial park and Pandan City Johor Baru.

By The Star

More restrictions to ease property bubble?

The rising prices of houses is still one of the hot topics among average Malaysians as the threat of higher inflation is growing by the day.

The fact that Bank Negara had early this month imposed a lower loan-to-value ratio (LVR) for those taking up their third and subsequent mortgage loan shows the central bank also considers the situation quite worrying. Effective from Nov 3, house buyers who have already signed up for two mortgages and are applying for their third loan will only be eligible to get financing of up to 70% of the value of their house.

Although it is largely seen as a timely pre-emptive measure to avert unhealthy speculative activities, some quarters voiced their reservation that the measure is too mild and are asking for "stiffer" measures to rein in rising prices.

Their argument is that people who can afford the higher downpayment for their property purchases will not be affected by the lower LVR although the measure may be effective on those who need financing assistance.

The LVR should be further reduced for those applying for subsequent loans. Those applying for their fourth loan should only be granted up to 60% and fifth loan up to 50%, and so forth.

Since the LVR is now used as the basis to decide on the quantum of mortgage loan that house buyers can sign up for, some properties with "unrealistic" price tags are finding it hard to get financing unless their values are adjusted accordingly. Hopefully, this situation will make developers uphold their responsibility properly and price their project according to the fair value of the property.

Just because there is strong demand for landed houses these days, developers should not take advantage of the situation by pricing their property a few notches higher and burden buyers unnecessarily.

Like some parts of the Klang Valley, the situation is also quite apparent in Penang where basic intermediate terraced houses are being priced close to or beyond RM1mil each. With house prices shooting off the roof, banks should also play a more responsible role and should not over-push their housing loans. The "war" between banks is still evident with some banks trying to outdo their competitors by offering "aggressive" interest rates of up to 2.5% below base lending rate.

In fact, banks are still aggressively pushing their credit facilities to consumers.

Although the market situation may still seem to be under control, it is important for all stakeholders to be vigilant and take note of any fast changing signs of overheating.

Like one observer says: "Bank Negara's LVR curb is not just about the restriction per se, but more importantly it is about the SIGNAL that Bank Negara has send out, and that is, the central bank is keeping a wary eye on things and more measures could be introduced if the market does become frothy."

Hence, the psychological impact of such a move is more important in that it will remind developers, potential borrowers, and bankers to be more judicious with their actions, and that is good for the market in the long run.

Otherwise, the central bank may have to impose further tightening measures if the market heats up further.

In fact, various Asian governments are already looking to impose capital controls to curb growing risk of asset bubbles in the region, signalling that the red flag has been raised on the havoc that can be wreaked by the inflow of hot foreign money into the region.

The measures underscore concerns over the US Federal Reserve's second quantitative easing (QE2) – the printing of money to buy US$600bil long-term government bonds – amid an ‘'extended period'' of super-low interest rates to support its weak economy.

The side-effect of depressing the US dollar and keeping borrowing costs near zero will cause speculative capital inflow to Asia as investors seek higher yields in emerging markets.

Hence, the environment is highly conducive for asset prices to spiral further leading to asset bubbles. Besides the high liquidity in the system, the low interest rates and inflow of foreign funds are bound to send asset prices soaring if left unchecked. And when these hot money pulls out, it will result in financial destability and a meltdown in the assets market.

Even without the threat posed by these hot-money, governments in Singapore, China and Hong Kong have already imposed a number of restrictions to dampen the rise in property prices and curtail speculative activities in the property sector.

So it won't come as a surprise if Malaysia also have to resort to more restrictions to ensure the financial and property markets continue to be sustainable.

Deputy news editor Angie Ng hopes industry players are aware that the average Malaysian is still not a high income earner and that they will dedicate some of their projects for well planned affordable housing projects as part of their corporate responsibility.

By The Star (by Angie Ng)

CapitaMalls to buy Gurney Plaza block

PETALING JAYA: The manager of Capitamalls Malaysia Trust, CapitaMalls Malaysia REIT Management Sdn Bhd, proposed to acquire a retail extension block of Gurney Plaza and parking lots at the complex in Penang for RM215mil.

A filing with Bursa Malaysia showed that CapitaMalls Malaysia REIT had entered into a conditional sale and purchase agreement with Gurney Plaza Sdn Bhd for the acquisition of a nine-storey retail extension block adjoining Gurney Plaza with a net lettable area of about 139,964 sq ft as at Sept 30, comprising four levels of retail space and car parking bays. The deal also includes another 129 parking bays at Gurney Plaza itself.

“The proposed acquisition is in line with the manager’s investment strategy to provide unitholders with long-term and sustainable distribution of income and potential capital growth,” it said, adding that the building has a forecast property yield of about 7.1% for 2011.

As at Nov 1, Capitamalls Malaysia Trust is the largest “pure-play” shopping mall real estate investment trust by property asset value in Malaysia and the proposed acquisition will further strengthen its position. Following the completion of the proposed acquisition, its property asset value is expected to increase from about RM2.13bil as at Sep 30 to about RM2.36bil.

By The Star