Race to let out office space

Colliers International says office investment yields are likely to remain stable at between 6 per cent and 6.5 per cent

Competition among lessors of office space in Kuala Lumpur is expected to intensify this year, with average rental of office space in the business district projected to remain unchanged at US$24.31 (US$1 = RM3.05) per sq ft a year.

Global real estate firm Colliers International said office investment yields are likely to remain stable at between 6 per cent and 6.5 per cent.

It said landlords will compete to secure tenants as vacancy rate is set to rise this year.

"Despite the improvement on the nett take-up, average vacancy rate is expected to increase towards the end of 2011," Colliers said in its Asia Pacific Office Market Overview for the fourth quarter 2010.

The publication, made available to Business Times, states that the office market in Kuala Lumpur will see an increase in fresh supply in the second half of 2011.

However, it said if completion schedules are deferred, prime office rentals are set to stay firm over the near term.

According to Colliers, over three million sq ft of new supply of office space in Kuala Lumpur business district is expected this year compared with 677,000 sq ft new office space last year.

This brings the total stock of office space in the area to 31.1 million sq ft compared with 28.1 million sq ft in 2010.

The take-up rate is likely to rise to 1.6 million sq ft, up from 1.2 million sq ft last year.

Colliers said the average vacancy is set to widen by nearly two-thirds to 15.5 per cent, from 9.7 per cent last year.

"One of the latest market trends is that tenants are increasingly focusing on 'green' office buildings for their present needs," it said.

In neighbouring countries, the supply of new office space in the central business district of Singapore, Bangkok and Ho Chi Minh City is also expected to rise this year. In Jakarta, the new office supply in its central business district is likely to drop, while there is no new supply in Manila's Makati.

While the average rental space in Kuala Lumpur is projected to be stagnant, the rental in the neighbouring countries is anticipated to increase.

In Singapore, the average rental of office space is set to grow from US$73.69 to US$88.85 per sq ft a year. Similarly, in Bangkok, the rate is projected to rise to US$25.14 from US$24.37 per sq ft a year.

In Jakarta, the rate is expected to grow to US$20.20 from US$19.28 per sq ft a year, while in Makati, it is projected to rise to US$19.33 from US$16.89 per sq ft a year.

However, in Ho Chi Minh City, the rate is projected to fall to US$41.20 from US$46.82 per sq ft a year.

On the regional outlook, Colliers said the office market in Asia Pacific will continue its recovery in anticipation of a further pick-up in demand this year.

"Despite the challenge of forthcoming supply cycles in individual centres, the overall absorption rate is predicted to increase, amid further enhancement of market sentiment largely spilling over from the buoyant asset markets in the region," it said.

By Business Times

MRT to have big impact on property prices

Those within 500-metre radius from station to appreciate the most

PETALING JAYA: Property valuers and developers expect the Klang Valley Mass Rapid Transit (MRT) project to have significant impact on the prices of residential and commercial properties along the MRT route.

Eric Oii, a member of the board of valuers, appraisers and estate agents said property prices - commercial and residential - along the MRT route could appreciate by 15% to 25% depending on the location of the property to the stations.

“We expect generally properties within a 500-metre radius of the MRT stations to have the most appreciation in value,” he told StarBiz yesterday.

Oii, who is also managing director of property consultancy firm Knight Frank Ooi said MRT linked to a network of lines integrated with the LRT, monorail, KTM Komuter and intra-intercity buses city would help ease traffic congestion and cut the cost of travelling.

However, Oii said in the short term, especially when the MRT was being built, it might cause inconvenience to some people especially those living or working close to the stations.

“The impact of building the MRT is expected to be more physiological to the community,” he said, adding that any major structural developments were expected to impact a certain group of individuals negatively.

There was an outcry by some residents in some suburbs (where the MRT stations are earmarked to be built) including those in Taman Tun Dr Ismail, who had criticised the development, claiming that the MRT station would cause traffic congestion, and possibly lower the value of their properties.

Ho Chin Soon Research Sdn Bhd director Ho Chin Soon concurred with Oii that there would be some disgruntled individuals who opposed the MRT project but in the long run it would benefit the majority of people, especially the lower income group that depended on public transport.

Ho Chin Soon Research is a local mapping and property research based company.

Based on the company's compilation of data on MRT stations in various countries, it can be concluded that they would help raise property prices.

“Properties close to the MRT stations can expect better appreciation once the station is built. And those very close to the station are likely to benefit also. In certain circumstances, some properties very close to the station may be impacted too resulting in a fall in prices,” he said, adding that such cases would be an exception rather than a rule.

Ho also said it would be reasonable to conclude that properties around a 500-meter radius to a MRT station would appreciate value once the station was built.

“Those within walking distance would still appreciate from its proximity to the station. Our tropical climate makes it not very conducive to walk longer than 10 minutes to a station,” he noted.

Ho also said a 15% to 25% upside in property prices (depending on locations) was be a reasonable level of appreciation for properties close to the MRT route, especially to the stations.

“We can also expect the MRT integration with other trasports lines like the LRT to further enhance the property prices of those especially in the Kuala Lumpur Golden Triangle as it would improve inner city connectivity.

An established property developer said many developers were looking to strategically build properties. especially condominiums close to the MRT stations.

“We want our property projects to be located within walking distance from a MRT station as we believe it would be a a major factor to potential home buyers. It is also easier to rent a property that is close to a station. All these factors should help boost the property value,” said the developer.

Information on the first stretch of the MRT route that connects Sungai Buloh to Kajang is available to the public at six designated location from Feb 14 to May 14.

They are Dewan Bandaraya Kuala Lumpur, Bangsar LRT Station, Majlis Bandaraya Petaling Jaya, Majlis Bandaraya Shah Alam, Majlis Perbandaran Kajang, Majlis Perbandaran Selayang and Suruhanjaya Pengangkutan Awam Darat.

The Sungai Buloh to Kajang MRT line is a 51km, of which 9.5km is underground.

The line will have 35 stations and is expected to have a ridership of over 400,000 passengers per day when completed.

Work on the line is targeted to commence in July and is expected to be completed in 2016.

By The Star

Malaysia ranks 'average' in Green City survey

SINGAPORE is Asia's greenest city, while Kuala Lumpur ranks average in a green city survey, together with the likes of Bangkok, Jakarta, Beijing, Shanghai and Delhi.

This was the finding of the Asian Green City Index survey carried out by the independent Economist Intelligence Unit.

The EIU examines the environmental performance of 22 major Asian cities in eight categories - energy and CO2 (carbon dioxide), land use and buildings, transport, waste, water, sanitation, air quality and environmental governance.

Singapore stands out in particular for its ambitious environmental targets and efficient approach towards achieving them.

"Overall, the index is a good reflection of where Kuala Lumpur stands in terms of its sustainability.

"Ranking average overall is a great start for Kuala Lumpur and this index is a stepping stone for us to move forward to improve our city's livability factor," Siemens Malaysia Sdn Bhd president and chief executive officer Prakash Chandran said in a statement.

Kuala Lumpur scores well for better-than-average levels of sulphur dioxide, nitrogen dioxide and suspended particulate matter. Average daily sulphur dioxide emissions are particularly low here at 6 micrograms per cubic metre.

Kuala Lumpur also ranks average in terms of environmental governance, land use and buildings. With 44 sq m of green space per person, the city is above the index average of 39 sq m.

According to the study, energy and CO2 are among the biggest challenges facing Kuala Lumpur's environmental condition.

"Automobiles have driven annual CO2 emissions per capita past the index average of 4.6 tonnes to an estimated 7.2 tonnes," according to the statement.

Sanitation is also another issue where only an estimated 70 per cent of the city's population has access to sanitation, while a significant number of households are still served by primary sewage treatment plants, such as septic tanks.

Meanwhile, the city centre's waste generation is 816 kg per capita per year, more than double the index average of 375 kg.

Rapid population growth and relatively poor waste collection and disposal played a major factor in determining the scores for the city in this category.

The study also found that Kuala Lumpur was well below average in the water category, due to a combination of relatively high water consumption and one of the highest leakage rates in index, with water leakages running at an estimated 37 per cent, compared with the index average of 22 per cent.

By Business Times

Encouraging sales in second half of 2010 likely to continue, says Johor Rehda

A view of the clubhouse in Horizon Hills in Nusajaya. Nusajaya has become a property hotspot in Iskandar Malaysia.

JOHOR BARU: Property developers in Johor can look forward to a better year ahead as the industry in the state is beginning to show signs of recovery.

The chairman of the Johor chapter of the Real Estate and Housing Developers Association (Rehda) Simon Heng said a majority of its members reported encouraging sales in the second half of 2010.

“Our members are upbeat that the momentum is likely to continue this year and probably until the first quarter of 2012, provided there are no unforeseen circumstances in the economy,'' he told StarBiz.

Heng noted that in the last Malaysia Property Expo (Mapex) held here in November, the 33 developers which took part in the four-day event raked in RM300mil in sales over a one-month period compared with RM140mil recorded in April.

He said the 30-day period starting from the first day of Mapex was the benchmark used by Rehda to determine the value of sales by participating developers.

Heng said the RM300mil was the highest figure recorded in the history of Mapex Johor in many years and attributed the jump in sales to factors such as the improvement in the regional economy after the 2008-2009 global recession, and an increase in the number of first time buyers and “upgraders” in the local property market.

“Many first-time house buyers and upgraders bought their properties in the second half of 2010, as they anticipated that prices of properties were going to increase further this year,'' Heng said, adding that prices of residential properties in Johor had increased by 10% in the second half of last year, and would increase further between 5% and 10% within the next six months.

Heng said commercial properties and industrial buildings had recorded even higher price increases of between 20% and 30% as demand for these properties increased in the recent years.

Driving factor

Higher prices of buildings materials as well as labour woes, especially a shortage of Indonesian workers, who form much of the workforce in the construction industry, have also contributed to rising property prices, according to Heng.

“Iskandar Malaysia will continue to be the driving factor in boosting demand for properties in the southern-most part of Johor, especially the high end residential properties,'' he said.

SP Setia Bhd executive vice president Datuk Chang Khim Wah said property buyers had accepted that an increase in the prices of properties in Johor was inevitable, as the same was happening in other parts of the country.

Despite that, buyers were coming back to the market, especially first-time house buyers and upgraders, on anticipation that propety prices would continue to rise, he noted.

Chang said there was an equal division between first timers and upgraders in its four ongoing projects in Johor namely Bukit Indah, Setia Tropika, Setia Indah and Setia Eco Gardens.

He said the completion of several major ongoing road projects in Iskandar Malaysia such as the New Coastal Highway, Eastern Dispersal Link Expressway and Senai-Pasir Gudang Desaru Expressway in the next one to two years would improve connectivity in the southern-most part of Johor.

“We also see the demand for strata-title properties in the Johor Baru market going up in the recent years and we are going to tap on this growing segment,'' said Chang.

He said buyers for the strata-title properties were mostly young professionals, newly married couples, expatriates working in Iskandar and Malaysian professionals working in Singapopre.

Chang said prospective buyers in the Johor Baru property market were now becoming more selective and demanding and wanted more than just roofs above their heads unlike 10 to 15 years ago.

He said they were willing to pay more for their properties and had high expectations, including better designs, layout, amenities, nice landscaping and safety and security features.

Country View Bhd marketing manager Andrew Tan said 2010 was generally a bullish year for developers in Johor compared with 2008 and 2009, which was considered “slow years ” for many developers due to the global economic recession.

Tan said landed properties remained the most sought after in the Johor Baru property market but strata-title properties were also gaining popularity, especially among young people.

He said strata-title properties, especially those located nearer to the Johor Baru city centre and the Customs, Immigration and Quarantine complex in Bukit Chagar, were popular because of the close proximity to Singapore.

Tan said the 9,712.45ha Nusajaya area was currently the property hotspot in Iskandar, overtaking the Tebrau area which has established housing schemes.

The completed projects in Nusajaya are the phase one of the Johor State New Administrative Centre, Kota Iskandar Complex and Puteri Harbour, while the ongoing projects include Asia's first Legoland Theme Park, Newcastle University Medical Malaysia, New Coastal Highway and Indoor Theme Park @ Puteri Harbour.

Country View is currently developing the 121.4ha Nusa Sentral project in Nusajaya which will keep the company busy for eight years.

It is also building 12 bungalow units priced between RM3.6mil and RM6.5mil each at Johor Baru's most sought after address Jalan Straits View.

“Demand for properties in Nusajaya is set to rise in the future,'' said Tan.

By The Star

Is it more viable to buy or rent a house?

In today's environment of rising home prices, is it more advantageous to buy a house or rent a house?

While most people unanimously agree that owning a home is better, the financial situation of the individual is important in assessing whether he or she can afford the home.


James Wong ... ‘It’s better to buy than rent as the loan you pay to the bank is equivalent to the rental you are forking out.’

VPC Alliance (KL) Sdn Bhd managing director James Wong says it is always better to own a home. But one's financial ability will play a big part in the choice of a house, he adds.

“Of course, it's better to buy than rent as the loan you pay to the bank is equivalent to the rental you are forking out,” says the boss of the property consultant firm.

Young people are advised to look into their finances and ensure their existing debt ratios are not too high before buying a house. They also need to consider the stability of their jobs to ensure they will be able to make the monthly loan instalments, Wong says.

“If a person's debt ratio in relation to his salary is already close to 50%, chances are banks will not qualify the loan. If a person's salary is too low, meaning that the mortgage amount to be paid is more than 50% of a person's salary, the bank may also hesitate and require more documentation to approve the loan.

“These days, with the easy payment packages by banks and the ability to withdraw from one's Employees Provident Fund (EPF) savings, owning a house has become more affordable,” says Wong.

Certainly, potential house buyers can now tap on their EPF account 2 to purchase a property. First-time house buyers can still qualify for loans of up to 90%

During Budget 2011, the Government said it will introduce Skim Rumah Pertamaku through Cagamas Bhd, which will provide a guarantee on the downpayment of 10% for houses below RM220,000.

This scheme is for first-time house buyers with household income of less than RM3,000 per month. In other words, the buyers will obtain a 100% loan without having to pay the 10% downpayment.

First-time house buyers will also be given a stamp duty exemption of 50% on instruments of transfer on house prices not exceeding RM350,000. The Government also proposed that a stamp duty exemption of 50% be given on loan agreement instruments to finance such first-time purchase of houses.

“If you rent a home, especially in today's environment of rising prices, you will never benefit from the increase of the property value. Furthermore, even if the value of the home does not increase over time, the mortgage balance decreases and equity builds,” says another property consultant.

“With the problem of inflation creeping up, the more you delay buying a house, the more expensive it becomes over time. Buying property is one way to fight inflation,” he adds.

In terms of disadvantages in owning a house, there are many variable costs involved, for example the house assessment, service or maintenance fees and fire insurance among others.

“Selling the house may also not be as quick as, say, selling your investments in shares. The whole process of selling, along with documentation by lawyers can take up to a year, depending on the location of the home. If there is already a potential house buyer, the process can be sped up to 3 months,” says the property consultant.

Khong & Jaafar managing director Elvin Fernandez gives a quantitative example between buying and renting a property.

If a typical middle class 2-storey terrace house in Kuala Lumpur is RM400,000 and the rent is RM1,500 a month, the nett yield is RM3.8%.

“This is a reasonable return from such a landed property,” he says.

Assuming that the household income is about RM7,000 a month, this means that the ratio of the household income per annum to the house price is 4.76 times.

“To buy this house based on 90% financing at a fixed interest loan for 30 years, you would have to pay a 5% interest, which means a monthly expense of about RM1,900 a month. At this point of the exercise, it is clearly better to rent than buy,” he elaborates.

Still, he adds: “This analysis is based on what I consider the typical housing unit. Different considerations may apply for different types of housing units in different areas.”

Another powerful motivation in favour of buying rather than renting is the social imperative to own a home.

“Owning a house also allows you to raise credit as and when it is needed, for family expenses and for business purposes, and this is a powerful motivation for ownership,” says Fernandez.

By The Star