Friday 20 April 2012

Tower atop LRT station

(Published in StarBiz 12th April 2012, pages 1 & 2)

By JOHN LOH 

Project to be developed by joint venture
PETALING JAYA: In what may be Syarikat Prasarana Negara Bhd's most ambitious project yet to unlock value from its real estate, the national public transport operator is partnering with a developer to build a billion-ringgit tower atop its Dang Wangi light rail transit (LRT) station.
The project, won by Crest Builder Holdings Bhd and its 49% joint-venture (JV) partner Detik Utuh Sdn Bhd two weeks ago, is for the construction of a single-block mixed development fronting Jalan Ampang with a gross development value (GDV) of RM1.04bil.
It will be a herculean task for low-profile Crest Builder, not least because the proposed building would tower over the neighbourhood at 40 storeys.
Nonetheless, executive director Eric Yong is excited about its prospects.
The LRT below is really the key selling point. If this was just bare land, we probably couldn't have got this value and concept.
“The main thing here is that you already have 8,000 to 10,000 people passing through the station everyday,” he told StarBiz in an interview.
The yet-to-be-named project, which will be built on 2.72 acres, marks the Petaling Jaya-based developer's maiden foray into high-end properties since announcing the move last year.
The plan, for now, is to build a tower cut into four segments: a mall at the bottom, small office flexible office (sofo) units, upscale serviced residences, and on the highest floors, a five-star hotel.
To monetise the view at the top, the building could feature a Skylounge with a pool facing KL City Centre as well as a Skygym or Skydeck, Yong said.
He pointed out that they were still deliberating whether to add a layer of office suites, in which case the hotel would be done away with.
The tower would have 50 floors to accommodate eight to nine levels of duplex sofo units.
Its planned total gross floor area measures 1.1 million sq ft while net floor area is close to 830,000 sq ft.
Following the agreement with Prasarana, the LRT owner and operator will receive 21.2% of the project's GDV as payment for land rights, which translates into RM220mil, or about RM1,857 per sq ft.
When contacted, its media affairs manager Azhar Ghazali said the funds would be used to part-finance its operations.
Prasarana will only provide the land; the rest of the development cost is to be borne by Crest Builder-Detik Utuh.
“Some may say (the land cost) is expensive but we're not looking at the market right now. It will be completed in 2017. By then, I think the market would have tumbled a little, corrected a little and maybe even shot up two-fold.
“It is expected that in the next six to nine months, the property sector will be under pressure from the tighter lending regulations but the market will evolve. Malaysian properties are still cheap compared with Singapore or Hong Kong,” Yong said.
Physical works for the project is expected to begin in early 2013 and the launch could be sometime after the middle of that year.
“Plus, we think completing it early may not be beneficial. We could fall into the lower part of the property cycle. Right now, the yield seems to be stabilising downwards.
“We do not know how long this will last, but my guess is (the cycle) will take six to nine months to pick up again,” he added.
Yong believes new record prices for property could emerge in 2017-2018. “The market takes three or so years to recover before it booms. We should see new benchmark prices then,” he enthused.
Asked about Prasarana's intent for the project, he said the state agency had wanted to maximise the potential of its assets.
“They have land in various locations but in this case (Dang Wangi), it was airspace. And because of the LRT, they also want to increase the number of pedestrians.
“If I add this development, assuming that an extra 4,000 to 5,000 people live here and half of them take LRT, we would have added 2,500 people to the system,” he said.
According to Yong, the tower's target customers would include the young and affluent in the banking, finance and marketing sectors.
“Those who can afford premium condominiums but can't buy bungalows yet, and they want to be in the heart of the city with all its lifestyle attractions,” he explained.
With the project being right next to the Klang River, Crest Builder is also readying a proposal for the project delivery partners of the River of Life (ROL).
ROL, a project under the Economic Transformation Programme, involves the beautification and development of a 10.7km stretch of the river within the city centre. Its project delivery partners are Ekovest Bhd andMalaysian Resources Corp Bhd.
“We have not officially approached them yet but we're looking at how ROL can enhance our development in this immediate stretch,” Yong said.

Thursday 19 April 2012

RM1mil floor price?

(Published in StarBiz 10th April 2012, page 1)

By DANIEL KHOO 

Govt may double minimum price of houses foreigners can buy

KUALA LUMPUR: The Government is considering raising the minimum floor prices of houses foreigners are allowed to buy to RM1mil from the current RM500,000 in an effort to control the rise in property prices, sources said.
They said such a decision was “in the pipeline” and the implementation would be made by the economic planning unit (EPU) under the Prime Minister's Department currently headed by Minister Tan Sri Nor Mohamed Yakcop.
“From what I understand, these revised guidelines have been discussed at the ministerial level and should this be enforced, it will mean that foreigners will only be allowed to buy properties priced above RM1mil. For now, the base price is set at RM500,000 for foreigners. This base price is a bit low looking at present circumstances,” a government source who requested anonymity said.
“The current trend in the property market indicates that prices are still continuing to climb despite measures by Bank Negara to curb property prices from spiralling out of control. We need to act before it goes further out of hand,” the Putrajaya source added.
Another source said the revised guidelines would also consider a slightly lower base price threshold of RM800,000 for residential properties in selected economic corridors such as Johor's Iskandar Malaysia to ensure the development and success of these corridor hotspots.
“This base price will also be subject to reviews by the Government from time to time depending on the inflationary situation of the economy and to keep overall inflation in check,” the source said.
Deputy Finance Minister Datuk Donald Lim had recently told the press that the Government would take “strict measures” to avoid a US subprime mortgage financial crisis after average house prices jumped almost 7% in the fourth quarter of last year despite measures announced by Bank Negara to rein in property prices.
“The Government is worried about property prices causing a bubble and we don't want banks to overlend to the property sector,” Lim said.
Industry sources surveyed by StarBiz said foreigners that tend to buy properties in Malaysia were those from South Korea, Japan, China and Singapore.
“This move will give an advantage to locals, especially those in the middle-income category as locals will not need to compete with foreigners. I am not surprised by this move, but our agency has so far seen mostly people from China and Singapore buying properties above RM1mil anyway,” a KL-based licensed real estate negotiator who did not want to be named said.
“However, we may see fewer transactions from the Koreans and Japanese. Westerners such as those from the United States and Europe won't usually buy. They prefer to rent instead,” the real estate negotiator added.
Meanwhile, the implementation of the higher floor price is expected to have a minimal impact on the property market in Malaysia as official statistics show that only 2.4% (worth RM1.45bil) of transactions conducted in the residential sector last year were worth RM1mil and more.
The Finance Ministry's Valuation and Property Services Department Property Market Report 2011 released last week showed there were 269,789 residential property transactions worth RM61.83bil transacted last year, the highest recorded in the last five years.
“Both volume and value recorded double-digit growth of 18.9% and 22.1% respectively. The All House Price Index surged to 156.9 points in the fourth quarter (Q4) of 2011 against 147.2 points registered in Q4 2010,” the report said.
The report said that landed housing was on a “general upward trend” in Malaysia and also attributed the rise in property prices to the Sungai Buloh-Kajang My Rapid Transit project.
“Across the board, terraced houses in KL recorded increases of 8%-13%. Increased prices of landed houses on Penang island were apparent. The highest transacted price of two- and three-storey detached (houses) were at RM2.05mil and RM5.15mil respectively,” the report said.

Thursday 12 April 2012

The unfair advantage

(Published in the Star BizWeek 7th April 2012, page 27)

Living Matters
By ANGIE NG

Foreigners, with their higher currency exchange, are competing with the locals in the landed housing market.
THE hike in property prices of the last two years should be a good enough reason to pull out all the plugs that have stifled home ownership among the people.
House prices in the property hot spots of Kuala Lumpur, Petaling Jaya and Penang have way surpassed the affordability level of the average Malaysians and more proactive measures are needed to extend a helping hand to them.
The latest statistics contained in the Property Market Report 2011 by the National Property Information Centre showed that average house prices climbed 6.6% in the fourth quarter of 2011.
Deputy Finance Minister Datuk Donald Lim rightly pointed out that the Government was worried of the emergence of a real estate bubble and did not want a United States sub-prime mortgage crisis in Malaysia.
The situation has to be addressed urgently before the high property prices cause more hardship to the people. Any further hike in housing prices will aggravate the climbing cost of living and derail efforts to promote home ownership.
Bank Negara's measures to rein in rising property prices and deter speculative property buying, including a maximum loan-to-value ratio of 70% for third-time mortgage borrowers and using net personal income calculation instead of gross income to decide on the quantum of loan approved, are showing results.
Banks should be prudent in their lending practices and if the speculative buying persist, tighter lending measures, like a further lowering of the LVR for multiple mortgage borrowers, should be implemented to nip property speculation in the bud.
However, first-time house buyers should be made a priority sector and they should be granted full financing if they met the lending conditions.
To ensure the home ownership programme will be a success, the efforts have to be undertaken holistically with the ultimate objective of making it easy and affordable for all households to own at least a home each.
The programme needs a masterplan that looks into the overall supply and demand scenario in the property market, and should not be undertaken on a piecemeal basis.
Given the importance of the family unit to the well-being of the country's social fabric, ensuring that every household has at least a house of their own will have many spillover benefits for the overall good of the country.
To address the supply side, sufficient land should be allocated to be developed into affordable housing townships that offer well-planned housing units priced between RM200,000 and RM400,000.
Instead of having different authorities or agencies, a dedicated umbrella body in the like of a National Housing Board should be responsible for all the Government's affordable housing initiatives to plan and execute projects for the 1Malaysia Housing Scheme and My First Home Scheme.
A closer scrutiny on the demand side points to the fact that besides strong buying interest by local purchasers, there has been an influx of foreign buyers, including from the Middle East and China, who have been snapping up local properties, thus contributing to the sharp spike in prices.
The situation is further compounded by the market cooling measures undertaken by governments in Singapore, China and Hong Kong to stem price hikes in their property markets.
Besides making it difficult and costly for their own nationals to buy multiple properties, strict conditions have been meted out on foreign buyers.
Last December, Singapore imposed a 10% stamp duty on foreign buyers to control the high number of foreign purchases.
The aim is to prevent property prices from boiling over which may lead to mayhem in the market should a property bubble happen.
Having seen the effect of the spiralling property prices in raising the cost of living,
I believe the holistic measures to contain property prices in our country should include some form of curbs on purchases by foreigners.
In view of the strong interest for landed housing units and sharp price hikes in this product segment, foreign purchasers should be disallowed from buying landed residential properties, except the super high-end ones.
Like in Singapore, landed housing projects, except the super high-end projects on Sentosa island, is made a critical sector that is only exclusive to the local buyers.
Foreigners should only be allowed to buy high-rise properties that are priced at more than RM1mil and multi million ringgit landed housing.
With these measures, the foreigners with their higher foreign exchange advantage will not be competing with the locals in the high demand landed housing sector which is one of the reasons driving prices to the current high levels today.

Deputy news editor Angie Ng subscribes to the age-old wisdom of “charity begins at home” and hopes all Malaysians will live as a big happy and supportive family.

Prices, rentals stabilising

(Published in the Star BizWeek 7th April 2012, page 26)

By THOMAS HUONG 

Buyers are more cautious while banks have new guidelines

Prices and rentals for residential properties in the Klang Valley should stabilise this year due to credit-tightening measures by banks and investors' cautious sentiment after prices of houses rose by 6.6% last year, according to property consultants.
However, they point out that property developments in selected locations, especially in areas where the proposed Klang Valley My Rapid Transit (MRT) and Light Rail Transit (LRT) stations are, would still perform well in terms of capital appreciation.
Property consultancy CB Richard Ellis (M) executive director Paul Khongsays price increases in the Klang Valley residential market had slowed down slightly in the last two quarters.
“Property developers are offering more incentives and freebies to push sales, ranging from free SPA (sales and purchase agreement), stamp duty, free air-conditioners to even trips to Hong Kong,” he says.
Khong says that this year, buyers are more cautious as prices are currently toppish.
“Loans are now getting difficult to secure. Larger numbers of buyers especially investors, have now taken a more conservative stand.”
Some heat has been taken out of the speculative end of the property market in recent months, says property consultancy Khong and Jaafarmanaging director Elvin Fernandez.
“Speculation is an accepted and needed element in any market, excessive speculation is not,” says Fernandez.
One property research analyst says the residential property market is set to take a breather, and prices should be flat in 2012 and 2013.
“Last year was a sterling period when property prices went up a lot, especially for new development launches.
“So, we are coming off from a very high base set in 2011. Can the market maintain this kind of momentum?
“We do not think so as there are no major catalysts and banks are cooling down the residential property sector,” he says.
The property analyst also says a lot of residential properties launched in 2010 would be completed this year.
“Many owners will try to flip' their units. So, there will be affordability issues if prices keep going up.”
Tighter financing
According to data on Bank Negara's website, the number of loans applied for purchases of residential property increased by 17% year-on-year in the first two months of 2012 to RM26.7bil.
The amount of residential property loans approved during the period was RM12.25bil, which was 2.7% higher compared with a year earlier.
Meanwhile, the amount of loans applied for purchases of non-residential property increased by 15.3% year-on-year in the first two months of 2012 to RM13.83bil.
The amount of non-residential property loans approved during the period was RM6.83bil, which was 8.4% higher compared with a year earlier.
Another property research analyst says the central bank's data shows that credit-tightening measures are working to cool down the property sector. “This year to date, demand is still very strong, and has in fact increased substantially, especially for residential properties.
However, the amount of loans approved was not substantially higher compared with the same period last year,” he says.
Fernandez says there is evidence that the run-up in prices for the various “hot spots” of housing in the Klang Valley and in Penang, have been arrested due to cooling measures undertaken by Bank Negara and the tightening on housing loans by banks.
Effective this year, banks have started using net income instead of gross income to calculate the debt service ratio for loans.
Fernandez also points out that coming out of the holiday season this year, there was a distinct slowdown in enquiries for mortgage valuations and house purchases in the secondary market.
“The Government has said it was serious about preventing a property asset bubble. So, even if banks start to loosen the lending guidelines in the later part of the year, how much can property prices go up before measures such as increasing the real property gains tax (RPGT) are imposed?”
The 2011 property market report, compiled by the Finance Ministry's Valuation and Property Services Department, says the Malaysian All House Price Index had surged to 156.9 points in the fourth quarter of last year compared with 147.2 points a year earlier.
The report also says the demand for high-end units priced above RM500,000 had increased in the country, with 21,905 transactions last year (compared with 16,782 in 2010).
“This could be attributed to the increase in affordability level and supported by the ease in borrowing as well as attractive loan packages offered by the financial institutions,” says the report.
Khong says this is also largely due to the fact that there is a substantial increase in the number of units priced above RM500,000 in recent times within the Klang Valley.
“Many residential properties have gone beyond this price level. So, a lot of sales done would largely be in this category now.”
Khong points out that nowadays, it is virtually impossible to buy a landed property at RM500,000 or below in good locations in Petaling Jaya and Kuala Lumpur.
“A terrace house in Taman Sri Hartamas is already above RM1mil and even one in SS2, Petaling Jaya or Bandar Setia Alam, Shah Alam has also moved up above this RM500,000 range.”
The report noted that last year, prices of houses continued to consolidate, with landed housing in general on an upward trend.
Across the board, terraced houses in Kuala Lumpur recorded price increase of 8% to 13%.
For example, the prices of single-storey terraced houses in Lucky Garden, Taynton View and Salak South Garden rose by 8.1% to 11.9% while double-storey terraced houses in Bandar Tasek Selatan saw price increases of 11.7%.
However, the prices of high-rise developments in Kuala Lumpur showed mixed trends.
Low-cost flats in Taman Batu Permai recorded price increases of 11% due to strong demand while the prices of low-cost flats in Bandar Baru Sri Petaling dropped by 5% due to competition from other stratified buildings in the area.
Apart from that, the prices of condominiums at Casa Kiara II and Mont Kiara Pines rose by 12.8% and 13.3% respectively.
Residential housing prices in Selangor were also influenced by projects such as the MRT and Light Rail Transit, with single and double-storey terraced houses in locations such as Petaling Jaya, Subang Jaya and Bandar Utama registering double-digit increases of 14% to 34.3%.
In the high-rise segment, it is noted that apartment units in Bandar Puchong Jaya and Taman Puteri Impian recorded price increases of 3.3% and 21.5% respectively.
Meanwhile, in Putrajaya, prices of residential properties also recorded strong growth.
Prices of double-storey terraced units in Precinct 11 increased by 18%, with the highest price registering at RM430,000 (against RM370,000 in 2010) while prices of low-cost flats in Precinct 9 rose by 10%.
The report also points out that the 55km Sungai Buloh-Kajang MRT alignment, which is expected to be completed in 2017, could result in an appreciation in property values within the areas served by the project such as Taman Tun Dr Ismail and Phoenix Plaza.
“Those who have parcels of developed or undeveloped land along the alignment are poised to enjoy the spillover effects of the rise in property values.”
Residential rentals
Across the board in the country, the rental rate of both landed and stratified residential properties is stable.
However, there are exceptions particularly in the Klang Valley.
In Bandar Utama, Selangor, rental of two and two-and-a-half storey terrace houses grew by 30% and 36.4% respectively with rental ranging from RM1,900 to RM2,900 per month.
Rentals for single-storey medium cost terrace houses at Bandar Sri Damansara increased strongly by 35%.
Meanwhile, in Kajang, single-storey terrace houses in Taman Cheras Jaya and Taman Bukit Mewah showed rental growth of 9.1% and 5.3% respectively due to their strategic location near the exit to SILK Highway.
Increases in rentals are also seen in low-cost flats and apartments in Damansara Damai, Bandar Puchong Jaya and Taman Kinrara.
Double-digit rental growth is seen in condominiums at Bandar Baru Ampang, Taman Pandan Mewah, One Ampang Avenue and Pelangi Damansara.
In Kuala Lumpur, rental increase of 4% to 13% is seen for single and double-storey terrace houses in Danau Kota, Happy Garden, OUG and Salak South Garden.
Rental of apartment units were generally stable, except for certain high-rise developments in Kuala Lumpur, the Petaling district and Ampang which increased by 5.5% to 18.2%.
However, Fernandez says rental yields for ubiquitous two-storey terrace houses in selected areas in the Klang Valley are getting lower.
The trend has been towards lower returns, slipping below the critical 3% benchmark. Below 3% is a cause for concern as houses should return between 3% and 6% (all risks net return) depending on house type, and whether it is landed or strata.”
One property analyst also says it is getting tougher for residential property buyers to obtain decent rental yields.
Rentals will always be area specific. But generally, how many people in the Klang Valley can afford to pay rental of RM2,000 a month with the exception of foreigners. Typically, young professionals and couples are paying rentals in the range of RM1,000 to RM1,500 a month.”
Boom for shops
In Kuala Lumpur as well as the Petaling and Batu districts, prices of shops increased by 2.9% to 21.4%.
Those in Taman Alam Damai (Damai Niaga) recorded the highest average price change, from a range of RM895,000 to RM910,000 in 2010 to a range of RM1.1mil to RM1.2mil last year.
Notable price increases for shops are also seen in Happy Garden (8%) and Salak South Garden (11%).
In Selangor, shop prices increased by 18% and 42.4% in the central town prime areas in Subang Jaya and Kota Damansara respectively as positive expectation from the proposed MRT and LRT projects spurred the commercial segments.
Meanwhile, rentals for commercial shops showed optimistic performance last year.
Rental of ground floor shops in Jalan Masjid India, Kuala Lumpur continued to be the highest at RM20,000 to RM25,000 per month.
Ground floor shops rental that showed double-digit increases include Kuchai Entrepreneurs Park and Taman Connaught at 16.6% and 11% respectively.
For Selangor, good areas in Petaling Jaya recorded rental increases of 13.3%.
Khong says shop rentals will continue to escalate slightly this year, reflecting the high prices that investors paid for such shops.
“In areas where commercial activities are bustling, rents will be good as well. Rents may not fairly match the capital values in many cases.”
However, he points out that shophouse rents will depend largely on the actual commercial performance of the individual centre.
One property analyst says shop owners in new housing projects where there is population growth will benefit.
“Remember, there are limited supply of shop lots. And, those who buy shop lots tend to have holding power, so they can afford to wait for better times.”
Other states doing well
Johor's property market performed well last year, with 52,946 transactions worth RM17.1bil.
Compared with 2010, Johor's property market volume and value increased by 9.1% and 44.6% respectively.
The report says Johor's residential property prices are generally stable with instances of mixed performance.
Single-storey terraced houses within areas in Johor such as Taman Puteri Wangsa, Taman Ungku Tun Aminah, Taman Bukit Indah and Taman Perling see price increases of 2.9% to 11.1%, with prices ranging from RM125,000 to RM220,000.
Houses in areas within Nusajaya such as Taman Nusa Idaman and Horizon Hills record price increases of 6.4% to 9.1%, with prices ranging from RM392,000 to RM448,000.
In Johor's high-rise residential segment, developments such as Straits View Condominium in Bandar Baru Permas Jaya saw price increases of 5.2%, with transactions done at RM470,000 to RM570,000 while Taman Perling Apartments registered the highest price increase of 23.3%, with transactions done at around RM220,000.
However, prices in Tanjung Puteri Apartment declined by 12.6%.
Property analysts are confident that the property sector in the Iskandar Malaysia economic growth corridor will perform well.
“The boom area will be Iskandar Malaysia. Lately, many major property developers have made forays there.
This is what happened with areas like Cyberjaya and Puchong, Selangor in the past,” they say.
Meanwhile, Penang's property market had an outstanding year with 39,415 transactions worth RM13.1bil, thus registering growth of 51.7% and 39.5% respectively compared with 2010.
It is noted that Penang's residential property prices are also on an upward trend, due to the scarcity of land on the island.
For example, double-storey terrace and semi-detached houses at Island Park see price increases of 13.4% to 30.8%, as the area is buttressed by neighbourhood developments such as Tesco hypermarket, Queensbay Mall, hospitals and schools.
As for Sabah, the property market improved slightly last year, with 10,321 transactions worth RM4.43bil, thus registering growths of 1.4% and 12.8% respectively compared with 2010.
In Sabah, prices of residential properties were generally unchanged, with a few exceptions.
For example, double-storey terrace houses in Seri Millenium Kingfisher, Kota Kinabalu are transacted at higher prices of RM400,000 to RM450,000 due to the area's proximity to the city centre.
In Sandakan, similar property in Taman Indah Jaya and Taman Fajar witnessed 20% and 14.6% price increases respectively.
The high-rise segment in the state also recorded price increases, and highlights included condominium units in Grace Ville and One Borneo Tower A in Kota Kinabalu, where prices increased by 17.9% and 10.8% respectively.

Wednesday 11 April 2012

L&G unscathed by new ruling

(Published in StarBiz 6th April 2012, page 8)

By WONG WEI-SHEN 


Developer continues to rake in sales despite Bank Negara’s lending guidelines
KUALA LUMPUR: Land & General Bhd (L&G) has been recording encouraging sales numbers despite Bank Negara's move to implement responsible lending to contain surging household debt.
L&G currently has three ongoing projects, two of which are residential projects Elements@Ampang and Damansara Foresta. The other is 8trium, a commercial project.
Managing director Low Gay Teck said that for the months of February and March 2012, 100 units of Elements@Ampang had been booked and sold. The project has a total of 1,040 units and is currently selling for RM850 per sq ft. The bookings and sales for February and March 2012 have amounted to about RM60mil.
Its residential development Damansara Foresta in Sri Damansara has recorded almost a 100% sell rate in both Tower A and Tower B. In Tower D, more than 15% have been sold. Tower D has not been officially launched yet. The buyers were either from the company's database or have registered with the company.
L&G looked to officially launch Tower D in two months, said executive director Ferdaus Mahmood. “We hope we can launch Tower C with Tower D. It depends on the market.”
The Damansara Foresta units, which range from 1,400 to 1,600 sq ft each, are currently selling for about RM600 per sq ft from RM500 to RM550 per sq ft. The project is due for completion by end-2014.
The 8trium project, which is also located in Sri Damansara, is expected to be completed in two months. The project has had a sell-rate of about 93%.
At the company EGM yesterday, the proposal for L&G to provide further financial assistance of RM43.86mil to its subsidiary Elite Forward Sdn Bhd was approved by the shareholders.
Elite Forward, which has a 50.01% stake in Elements@Ampang, is undertaking a joint venture with the Mayland group. The project, which has a gross development value of RM700mil and will cost RM460mil to build, is due for completion in June, 2014.
L&G was also exploring land acquisitions to expand its land bank in Johor Baru, Penang, and the Klang Valley in the next six months, Low said.

Stamp duty charge may affect wealthy property owners in UK

(Published in StarBiz 6th April 2012, page 7)

By THEAN LEE CHENG 

Kuala Lumpur: A couple of changes in UK's property tax structures announced in late March may affect wealthy Malaysians who have bought into that property market.
On March 21, Chancellor of the Exchequer George Osborne introduced a new 15% stamp duty rate, three times the previous level for residential properties over £2mil (RM9.8mil) bought in the name of companies.
Property consultancy Savills said while it needed to look at details of the anti-avoidance provisions, the 15% stamp duty “marks the end of the use of corporate vehicles to avoid stamp duty.”
It added that a 15% stamp duty charge for such transactions was probably a sufficient deterrent.
“The big question is whether there will be an opportunity for those who have used this route to undo it without being hit by the proposed capital gains tax charge,” said Savills in its research report.
“We'll also need to look at whether transfer from corporate to personal ownership triggers a stamp duty charge at 7%,” Savills said.
Savills said the move could impact on London's attractiveness to such buyers.
“However, much depends on the detail,” the report said.
Zahid Alauddin, senior partner at Kingfields (Singapore), said there were two reasons why a corporate vehicle was used when buying property. The first may be to circumvent the hefty 40% inheritance tax. The second may be that wealthy individuals want to protect their privacy.
“The 15% rate for investors usingcompanies to hold UK properties will be hard-hitting and may deter people to hold properties using such structures.”
A further sting in the tail came from changes in capital gains tax rules for overseas companies, said Zahid.
The British government imposed a real property gains tax of 28% on properties of £2mil and above. There was no capital gains tax on real estate for foreign buyers prior to the budget.
The charge of capital gains tax is to be extended to gains realised on disposal by “non-resident non-natural persons” of UK residential property.
“Non-natural persons” would include companies, collective investment schemes (including unit trusts) and partnerships in which the non-natural person was a partner, said Zahid. These changes will apply from April 6, 2013.
“Only time will tell the impact of these measures,” said Zahid.
Since 2009, the demand from overseas investors for London's prime real estate has resulted in double-digit price increases in prime London areas. The global financial crisis had sent prices into a trough in 2008.
Henry Butcher group said the move would have no effect as most Malaysians bought below £1.5mil.

Tuesday 10 April 2012

Groundwork for everlasting ties

(Published in the StarBiz 5th April 2012, page 10)


Chinese Premier, Najib pledge fullest support to make QIP a world-class development

NANNING: There's an ancient Chinese saying that “drinking the water of a well, one should never forget who dug it.”
So, when Malaysia and China on Sunday launched their first joint industrial park in southern China's Guangxi Zhuang autonomous region, Chinese Premier Wen Jiabao flashbacked Malaysia's second prime minister, the late Tun Abdul Razak Hussein's visit to China, 38 years ago.
That historic visit by Abdul Razak to establish friendly Sino-Malaysian relations has yielded many fruitful results throughout the years, including the current joint venture to develop the 55 sq km China-Malaysia Qinzhou Industrial Park (QIP) over 15 years.
As the curtain was brought down to unveil the monument-like structure bearing the name of the industrial park, with the iconic Petronas Twin Towers also on the backdrop, Wen and Prime Minister Datuk Seri Najib Tun Razak engaged in a warm handshake symbolising the close friendly ties that the two nations have enjoyed since the era of Abdul Razak, Najib's father.
In his speech, Wen said he fully subscribed to Najib's view that the foundation of China-Malaysia ties must be based on mutual trust, adding that “the people of both countries should carry forward the long-standing friendship.” Later, both leaders jointly planted the “friendship tree” at the project site.
To ensure smooth implementation of the development, the Chinese Government has accorded “national status” to the project. Both governments have pledged to give their fullest support to make QIP a world-class development.
The China-Malaysia Qinzhou Industrial Park, about 150km from here, is located near the Qinzhou free port which is China's closest port to Asean countries.
The park, a government-to-government initiative, will focus on the development of manufacturing, IT and service industries. It will be developed in three phases, with the first phase covering 15 sq km expected to be completed by 2015.
QIP has the Liujing-Qinzhou Port expressway and Qinzhou-Sandun railway to its east, and to its south are the coastal highway from Qinzhou to Fangchenggang and Beihei, Qinzhou Port-Dalanping railway and the railway between Dalanping and the Free Trade Port Area.
In the joint venture, the Malaysian side will be spearheaded by SP Setia Bhd and Rimbunan Hijau Group while the Chinese will be represented byQinzhou Jingu Investment Co Ltd.
In his speech, Najib offered to China a joint venture to establish a sister park in Malaysia.
Speaking to Malaysian journalists at Nanning airport before flying home, the prime minister said the sister park would be developed on about 600ha in Gebeng near Kuantan, Pahang, and his offer was received positively by Wen.
Najib said Kuantan was chosen because its port faced the South China Sea which could provide a direct link to the Qinzhou free port.
Najib's special envoy to China, Tan Sri Ong Ka Ting, will coordinate the implementation of the project, including working out the details with the Pahang Government.
Najib also told reporters that the Chinese government had agreed to allow budget carrier AirAsia Bhd to fly to Nanning.
During the launch, Najib said he was impressed with the speedy approval and progress of work on the project, and remarked that it was going ahead at “Qinzhou speed.”
“Today, I learnt a new term, that is Qinzhou speed. So, when I want a project to be completed fast, I will say that it must be implemented at Qinzhou speed,” he said.
The QIP project, and its proposed sister park, signifies the long-term collaboration between Malaysia and China, and Najib, in his speech, quoted a Chinese proverb to describe that: “One generation plants the trees; another gets the shade.”
After the ceremony, both prime ministers left in a motorcade, passing by a roadside billboard which aptly described the moment and the years to come: May China-Malaysia Friendship be Everlasting. Bernama

Construction sector set for boom

(Published in the StarBiz 4th April 2012, page 10)
By OSK RESEARCH



CONSTRUCTION SECTOR
Overweight (maintain)
FIRST quarter 2012's domestic contracts soared 100% year-on-year and quarter-on-quarter to RM13.3bil, boosted by the progressive roll-out of contracts from the Klang Valley My Rapid Transit Sungai Buloh-Kajang (KV MRT SBK) line, which is expected to be completed by July 2017. We see the same factor fuelling the jobs flow for the remainder of 2012, as six out of the total eight packages for the elevated portion of the SBK line worth a combined RM5bil-RM6bil have yet to be awarded.
We maintain “overweight” on the sector as the deluge of positive news in the next few months is likely to fire up the sector this year, with Gamuda(buy, fair value at RM4.58) and Kimlun (buy, fair value at RM2.37) as our high conviction top buys.
From a compilation of Bursa announcements, the total value of contracts awarded in the first quarter amounted to RM16bil. These comprise RM13bil in local awards, with the KV MRT SBK line making up a sizeable RM10.1bil while foreign contracts made up the remaining RM2.9bil.
Excluding the SBK-related jobs, local jobs made up RM2.9bil of the total, rising 4.9% year-on-year and 27.8% quarter-on-quarter, although their share of the total value of contracts was down 43.6 percentage points year-on-year and 11.2 percentage points quarter-on-quarter to 49.5%, partly due to Scomi Engineering clinching a RM2.6bil contract to develop a monorail system in Manaus in Brazil with three consortium partners.
During the first quarter, a sizeable RM10.1bil worth of contracts was dished out in relation to the KV MRT SBK line. Being the first of the three lines under the massive KV MRT project, the SBK line is targeted to be fully operational by mid-2017.
To date, 27 works packages have been awarded to public-listed and unlisted contractors, while tenders and awards for the remaining 63 packages are expected to be mostly completed by the fourth quarter. Some of the key packages that have been awarded include Package v5 to IJM (trading buy, fair value at RM6.55), Package v6 to AZRB (neutral, fair value at 91 sen), supply of segmental box girders from v1 to v4 to Kimlun, as well as the RM8.2bil underground portion which went to MMC-Gamuda.
Going into the second quarter 2012, we understand at least three more packages, i.e. v1, v2 and v7 of the KV MRT SBK line each worth an estimated RM1bil will be awarded, with the tunnel lining segment also likely to be given out. We also expect more news on the 1,400 MW gas-fired Prai Power Plant, for which the Energy Commission has shortlisted nine consortiums as potential candidates as independent power producers, as well as some new jobs in the Sarawak Corridor of Renewable Energy with the forthcoming general election within sight.
By Kenanga Reserach
Underperform (maintain)
Target price: RM4.26
MMHE finally announced that it had completed its purchase of the Sime Darby fabrication project on Monday.
We understand that it will also take control of the Kebabangan project. However, we believe it will charge rental for the Oil & Natural Gas Corp (ONGC) project, which we understand has yet to be completed. We are upgrading our FY12-13 earnings estimates by 5.3% and 9.7% respectively to RM349.5mil and RM413mil. We retain our “underperform” call on the stock with a higher target price of RM4.26 (from RM4.04 previously) based on an unchanged CY12 PE ratio of 19.5 times.
The company's Sime Darby yard acquisition, purported to be worth RM393.4mil, was announced in May 2011 but had remained uncompleted due to unclear reasons until now.
The company also mentioned that it had taken over control of the Kebabangan Topsides project worth RM1.15bil that was awarded to Sime Darby Engineering in April 2011. Recall that we have previously mentioned (in our last note) that there is the possibility of this happening. We estimate that the new project will boost MMHE's order book to RM4.2bil (from RM3.1bil currently).
Assuming the contract has not started and will still take around 29 months for completion, and assuming a commencement date of mid-2012, we estimate the contract could add around RM237.9mil, RM475.9mil and RM436.2mil to MMHE's FY12-14's revenue respectively and boost the net earnings by 5.3%, 9.7% and 11% respectively.
We, however, note that MMHE has not assumed control of the ONGC project, but is likely to charge the company rental for the space that the project will take up. There was no guidance on the rental fee that could be charged.
We are upgrading our FY12-13 earnings estimates by 5.3% and 9.7% respectively to RM349.5mil and RM413mil, as we assume the Kebabangan project will kick off by mid-year. As mentioned above, this is based on the project hitting FY12-14 revenue of RM237.9mil, RM475.9mil and RM436.2mil respectively.
We maintain “underperform” but upgrade target price to RM4.26 (RM4.04 previously) based on unchanged 19.5 times CY12 PE ratio (a premium to the sector average of 15 times due to its Petronas-patronage status) due to the increase in our earnings forecasts. While this is a positive turnout for the company, we are still cautious on the stock. As long as Sime Darby has not completed the ONGC contract, the company will still not have full access to the new yard.
By Maybank IB Research
Hold (maintain)
Target price: RM3.93
WE are “neutral” on SP Setia Bhd's latest joint venture (JV) in China. Whilst the backing by both governments will lower the overall project risk, we remain concerned on the challenging Chinese property market. We maintain our earnings forecasts and RM3.93 target price. The latest development reaffirms our view that SP Setia is likely to benefit from future government land developments/projects, backed by its proven track record, sound management and government-linked status.
Through its 45%-owned Qinzhou Development (M) Consortium Sdn Bhd (QDMC), SP Setia has entered into a JV framework agreement with QinZhou Jingu Investment (QJI), controlled by Qinzhou City Development and Investment Group, to establish a JV company (49%-owned by QDMC), China-Malaysia Qinzhou Industrial Park Investment (QIPIC), to undertake the development, construction and operation of the 13,590.5-acre Qinzhou Industrial Park (QIP).
The immediate development focus of QIP is the 1,945-acre “start-up” district. QJI will seek approval for swapping up to 30% of the commercial and residential land in the star-up district for another piece of commercial and residential land (with the same land value) in the more established Binhai New Town. Binhai is designed to be an industrial service centre, seaside tourist resort and high-end residential district with an expected future population of 500,000 upon completion.
We see relatively moderate project risk since the JV project is backed by both governments. It will be the third industrial park in China with government-to-government collaboration after Suzhou Industrial Park and Tianjin Eco City. And we remain cautious on the challenging Chinese property market and do not expect significant contributions from the project over the short term.
Also, the approval processes take time (the launching of Sunway's Tianjin Eco City has been postponed for two years due to the delay in approvals).
The immediate cash outlay will be the RM193.6mil or 22% effective stake of RM878mil registered capital for QIPIC. This could raise SP Setia's net gearing to 0.14 times, from 0.08 times as at January 2012, and still healthy.
INFRASTRUCTURE SECTOR
By AmResearch
Overweight
PRESS Metal's new aluminium smelting plant would be the first user of electricity from the Bakun Dam. The facility at the Samalaju Industrial Park would start taking in power from Sarawak Energy Bhd (SEB) from this month onwards.
SEB CEO Torstein Dale Sjotveit was quoted in a report as saying that the 275kV transmission line linking SEB's Samalaju power station and Press Metal's new plant had been energised last Thursday. Under the deal, Sjotveit added that Press Metal was to purchase some 480 MW of power to kick-off commercial operations at its new smelter by June (our assumptions are by the third quarter).
The 480 MW of power is to run Press Metal's new Samalaju smelter, which has a capacity of 240,000 MW. Its existing 120,000-tonne Mukah smelter which is taking in some 200 MW of power is already running at full capacity.
Apart from Press Metal, progress for the other three pioneer investors at Samalaju is also fast taking shape and would commence operations in stages within the next two years. Tokuyama's polycrystalline silicon plant (phase II) is scheduled to be operational by the second quarter 2014 following the commencement of phase 1 in September next year.
Asia Mineral Ltd, which has signed a long-term power supply of 270 MW with SEB, is scheduled to commence its manganese and ferro alloy smelting plant in June or July 2013.
OM Material's Sarawak RM1.5bil plant (80:20 JV between OM Holdingsand the CMS group), which would produce similar products as AML, would start power consumption and production testing from the second half next year.
As such, we gather that SEB is set to construct three new transmission lines to connect power to these three new facilities at Samalaju, in addition to Press Metal's. One line would be for 132kV, while the other two remaining lines are for 275kV.
We believe Sarawak Cable would be favourably positioned to bid for these new transmission line projects, as it is currently constructing both the 132kV Samalaju-Tokuyama (RM6mil) and 265kV Samalaju-Press Metal (RM8mil) lines and also supplied the power cables for the 275kV Bakun-Samalaju transmission lines.
Taken together, these latest developments should solidify Sarawak Cable's chances to secure works for Sarawak's RM3bil 500kV backbone transmission line system (transmission portion: RM2bil), whereby it is one of five parties (and the only local outfit) which has been pre-qualified for this massive job.
From an end-user's standpoint, Press Metal's long-term power supply agreement with SEB (25 years) should help strengthen its grip as the leading integrated aluminium player within Asean.
where capacity should triple to 360,000 tonnes when the Samalaju facility is fully commissioned by the first half next year.