Concept paper on BLR replacement likely to be out this week

THE EDGE WEEKLY ISSUE#997

THE WEEK OF JANUARY 13 – JANUARY 19, 2014

By: ADELINE PAUL RAJ

Bank Negara Malaysia (BNM) is expected to issue a concept paper this month, possibly as early as this week, on a new reference rate framework for banks in the country to price their retail loans.

Currently, banks use the base lending rate (BLR) as the basis to price such loans, particularly mortgages.  BNM governor Tan Sri Zeti Akhtar Aziz, during a speech last month, said it no longer seemed relevant to use the BLR as a reference.

“The BLR has ……. Become less meaningful as a basis for pricing of loans, as the retail lending rates on new loans being offered by the industry are at a substantial discount to the BLR,” she said.

Hence, the central bank is proposing a more relevant reference rate framework in its upcoming concept paper, which banks a expected to examine and give their feedback on.  Implementation of the new framework will likely take place later this year, Zeti had said last month.

Bankers that The Edge spoke to, on condition of anonymity, agree that the BLR is no longer relevant as a reference rate.

“By definition, it’s a benchmark base rate.  This means that the bank’s lending rate to the customer should not be lower than the BLR.  But today – and it has been the trend for some 10 years now – the lending rate is minus-BLR.  The renders the BLR meaningless,” says one of them.

As it stands, all eight local banking groups, from the largest to the smallest, have a BLR of 6.6%.  Each bank makes known its lending rate by stating that it is BLR minus (a certain percentage)”.  For example, (Maybank)’s MaxiHome loan financing rate stands at BLR minus 2.2%, which means the actual lending rate to the customer is 4.4%.

The prevailing lending rate by banks today for home loans is between 4.2% to 5%, which is way below the BLR.  The rate for automotive loans is slightly higher, at between 5% and 6%, notes a banker.  But most automotive loans tend to be pegged to a fixed rate that banks set, rather than the floating rate.

“It also gets a bit confusing for the customer to know what the actual lending rate is when you use BLR as the reference.  It should just be stated outright,” notes another banker.

Banks set their respective BLR based on a formula that takes into consideration the overnight policy rate (OPR), their cost structure – which includes their cost of funds – and business strategies.  Banks have been allowed to announce their own BLR since April 2004.

However, banks have tended to have a similar BLR rate in order to stay competitive.

By right, the BLR should be different for each bank given that the costs they incur are different.  This again points to the irrelevance of the BLR.  The cost of funds for most banks is between 3% and 4%, says a banker.

Some of the foreign banks in Malaysia also have a BLR of 6.6% but most have set it lower.  The lowest at the moment is 6.25%.

What then will be the next best reference rate that the industry moves to?  “The new framework will be more related to the funding cost, especially the marginal funding cost, which is actually how banks are pricing their loans,” Zeti told reporters last month.

She said that the new reference rate would have to fulfil three roles: “First, it needs to allow banks to vary the floating costs.  Second, the reference rate need to also reflect changes in monetary policy.  And third, the reference rate should be a basis for the pricing of retail loans.”

Bankers speculate the new reference rate could be the KLIBOR (Kuala Lumpur Interbank Offered Rate), which would be more reflective of banks’ cost of funds.

KLIBOR is based on the interest rate at which banks offer to lend unsecured funds to each other in the interbank market.  It defines their cost of funds and also the interest rate for fixed deposits.

KLIBOR is determined by a daily poll carried out on behalf of the Finance Markets Association of Malaysia.

Using the KLIBOR as a basis could mean that banks would state their lending rate as “KLIBOR plus (a spread)”.

Will that mean more expensive loans to the consumer?  Bankers don’t think so.  “The absolute lending rate will likely work out to be the same as the BLR0minus rate,” opines one banker.

Banks in Singapore and Hong Kong, for example, adopt their version of the KLIBOR as the basis for setting their mortgage rates.  Singapore uses the SIBOR (Singapore Interbank Offered Rate), while Hong Kong uses the HIBOR (Hong Kong Interbank Offered Rate).

Just last month, (BNM) came out with a risk-informed pricing policy document, which calls for banks to price their loans more in line with the risks they take.  The document sets out some requirements for banks to comply with by March 17.  It states that the pricing of retail loans should be based on a risk-informed approach.

“(BNM)’s rhetoric in the document seems to suggest that it thinks banks are pricing household loans, especially mortgages, too low ….. in the sense that they are underpricing the risks they take.  They want to see more sensible pricing while letting the banks maintain ultimate discretion over pricing,” observes another banker.

This comes amid on-going moves by Malaysia to cool household debt, which some quarters view as being worryingly high.  Malaysia’s household debt stands at about 83% of (our GDP).                                                                       E

How to buy quality housing

Focus MALAYSIA WEEKLY ISSUE 058

THE WEEK OF JANUARY 11, 2014 – JANUARY 17, 2014

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Value from the largest investment of one's life is critically important

IN the current Malaysian housing market, where the price of houses has risen beyond the reach of many middle-income families, getting value from the largest investment of one’s life has become critically important.

With the expected increase of building materials, electricity and fuel prices in 2014 and the still-known (GST) impact in 2015, the cost of construction is projected to rise significantly.  Squeezed between this construction cost increase and the ceiling of affordability for Malaysian households, developers are likely to reduce floor areas and downgrade quality as well as launch fewer projects, reduce their sizes or develop in phases.

Our concern is not with the downgrading of quality through reduced specifications but through the downgrading of “not-contracted” quality and the squeezing of the price of contractors and sub-contractors, resulting in lower-quality finished housing.  How do housebuyers protect their investment against this type of quality downgrade?  Below is a list of basic criteria housebuyers should look out for when evaluating their purchase.

The best option is, of course, to buy smart.  By this we mean buying only completed housing, whether through build-then-sell new houses or buying second-hand houses.  This is where what you see is what you get.  If, however, you are not technically competent, it is advisable to engage a professional to inspect and verify the house is in good condition and to point out patent and latent defects before purchase.  This is no different than getting a friendly mechanic to inspect a second-hand car before you buy it.  One source of such professionals is www.architectcentre.com.my, operated by the Malaysian Institute of Architects and the Australian Institute of Architects.

Another option is to buy only from a reputable developer.  These are usually developers who are registered members of the Real Esate Housing Developers’ Association of Malaysia (Rehda).  Check out the website, www.rehda.com, to see if they are listed.  These are developers who have a long record of completed, quality projects delivered on time; they are less likely to short-change on the quality of the completed housing as they have their reputation to protect.

The second factor to look out for is certification of projects.  Look out for projects with Construction Industry Development Board QLASSIC or CIS7 (Construction Industry Standard 7:2006), or Singapore equivalent Conquas, and check in the sales brochure for the confirmed standard, which should ideally be more than 75.  Another certification to look out for is the Industrialised Building System (IBS) score of the project, which reflects the extent to which the project is factory manufactured and assembled onsite, leading to higher and more consistent quality.  The IBS score should be better than 60.  This score usually correlates with the QLASSIC score, the higher IBS score usually meaning a better QLASSIC score.

Another certification is the Green Building Index (GBI) rating, which incorporates both QLASSIC an IBS ratings.  The projects should have a minimum GBI rating of silver but GBI gold is preferred and should incorporate both the above criteria in their design assessment (DAA) certifications.  DA is the assessment of the project based on its design specifications.  Look out for GBI score of 76 or better and you can be assured of a cooler, brighter and healthier home.  If you have any doubts regarding this certification, contact GBI at www.greenbuildingindex.org.

The third factor is the International Organization for Standardisation (ISO) certification of the project developer, contractor, architect and engineer.  Responsible, reputable and reliable companies usually go for certification by independent, third party bodies such as Sirim or its equivalent.  This assures customers they have proper systems and processes with which to check the quality of their design and implementation of their work, resulting in more reliable and consistent quality.  Check the websites of these companies for ISO9001 and ISO1400, which usually come with certification number.

Finally, above all, common sense must prevail.  If the offer is too good to be true it probably is.  Do not put down your hard-earned money – not even an earnest deposit – for projects not registered with the Ministry of Urban Wellbeing, Housing and Local Government.  Check that the project has a developer’s licence.  You can easily do this at the website www.kpkt.gov.my.

Finally, the house-buying public can get free advice from architects, engineers and other professionals about how to purchase their houses and problems they encounter every frist Saturday of the month at Pertubuhan Akitek Malaysia (PAM), where there is an architect-meets-the-public open house.  Check this out at our website, www.pam.org.my, under the PAM events calendar.  FocusM

A&M Realty's unexpected gold mine

Focus MALAYSIA WEEKLY ISSUE 058

THE WEEK OF JANUARY 11, 2014 – JANUARY 17, 2014

mainstream

Carey Island land to deliver windfall

FOR more than two decades, property developer A&M Realty Bhd has been sitting on a 775.2ha parcel on remote Carey Island in Jugra, Sleangor.  The land, purchased by the company in 1990, had been left idle with no development.

Now, the property has become a gold mine with the completion of the Carey Island access interchange of the South Klang Valley Expressway (SKVE) expected in 2015, and A&M stands to reap a windfall.

Plans are afoot to undertake a RM10 bil (GDV) integrated property development know as Amverton Cove, comprising a golf course, homestead, bungalows, service apartments, hotels and them parks.

The land had been held by A&M founder and controlling shareholder Datuk Ng Thian Hock, before he sold 60% of his stake in Profail Sdn Bhd, which holds the property, to A&M in 1990.

Profail Padu, incorporated on Jan 17, 1989, has total assets of RM20.86 mil as of Dec 31, 2012.  It reported a lower net profit of RM1.77 mil for the financial year ended Dec 31, 2012 compared with RM2.15 mil the previous year.

A&M’s net asset value has always been higher than its share price.

“There are many companies with land banks that don’t reflect their current value; so many gems in old companies.  But take note that the accounting standards don’t allow the revaluation of a land bank into their books if it’s held for development,” says an accountant.

Ng has been reported as saying the Carey Island land was purchased more than 30 years ago for less than RM1 psf.  Ng, at the time a Selangor state executive councillor and state assemblyman, is believed to have acquired the land for a song and sold it to A&M at a much higher price several years later.

This probably explains why the company was worth RM1.70 per share when it was listed in 1995.  A&M undertook a bonus issue and share-split exercise in 2007, which resulted in an ex-date share price of 43 sen per share.

News of the proposed RM10 bil integrated property development has excited shareholders, causing the share price to reach a year’s high of RM1.26 on July 22, 2013 from a low of 46 sen on Feb 7 last year.  However, the run-jp was unsustainable and the share price is lately hovering just above RM1.  The counter closed at RM1.03 on Jan 8.  As of Sept 30, 2013, A&M’s net asset value was RM1.47 per share.

According to news report then, the land was valued at more than RM50 psf or RM4.2 bil, valuing A&M at about RM11.50 per share.

But the valuation may be of the high side as the land is still classified as agricultural and will need to undergo lengthy approval processes for status conversion.  Its lease expires only in 2105.  According to an accountant, agricultural land can be re-valued as long as it is not classified for future conversion and development.

A&M’s Carey Island land has a net book value of RM1.23 mil, significantly below the current value.  For instance, KSL Holdings Bhd paid Rm156.5 mil or RM8 psf in 2009 to acquire 178.4ha of freehold land on the Blackwater Estate, about 8KM from Carey Island.  According to KSL management, the land has a current market value of RM35 psf.

However, Permodalan Nasional Bhd (PNB), which held a 5.8% stake in A&M in 2009, may not be excited by the prospects of the company, as it ceased to be a substantial shareholder at the end of 2011.

That said, things may be changing, as A&M shareholders may be in for an unexpected boost once the Carey Island access interchange is ready next year.

“The completion of the Carey Island interchange will boost the value of properties in the surrounding areas, as accessibility will be greatly enhanced.  The SKVE, which connects Carey Island to Puchong, will help expedite housing development in the nearby townships and will inevitably lead to a spillover effect in property demand on Carey Island,” says an analyst.

For example, Kumpulan Hartanah Selangor Bhd plans to develop an integrated township on a 478.4ha parcel on Pulau Indah, Selangor, with an estimated GDV of between RM6 bil and RM8 bil.  This development is on the east of Pulau Indah, neighbouring Carey Island.  It is reported that the first phase of the project is slated for completion this year and the land is worth about RM1 mil per acre or RM23 psf.

The analyst adds A&M is a beneficiary of the rising trend of suburban living with its Amverton Cove project, which is able to provide spacious and higher-end properties at attractive prices.

“A&M’s low entry cost of less than RM1 psf will enable it to earn superior margins compared with the average 15% to 20% net profit margin enjoyed by property-development companies,” the analyst says.

A&M’s RM10 bil flagship development, Amverton Cove, will be built over at least 15 years.  Its maiden project, the Amverton Cove Golf & Island Resort, is already in operation.

The resort is said to be 20 minutes from Klang via the Kesas Highway and 30 minutes from Subang and Puchong via SKVE, which was completed last year.

The focus for Ng, who with his family controls 71.56% of A&M, will be on building the resort and hotel business.  Also, in the pipeline is the launch of 50 homesteads on 0.4ha each.

The houses will be priced at around RM2.8 mil per unit, implying a property price of RM64 psf.

A&M also has an 8ha plot in Bukit Kemuning, Shah Alam, 72ha in Morib, Selangor and 1.2ha in Mont’ Kiara.  All its recent projects carry the Amverton brand.

It is expected to launch 20 units of bungalows worth RM50-60 mil as well as 700 units of high-rise apartments with a GDV of RM315 mil this year, in Amverton Park in Bukit Kemuning.

A&M has another high-rise project in Mont’ Kiara called Amverton Rise in the pipeline but with no timeline.

The company is expected to see a significant growth in earnings on the back of planned launches.  A&M’s current unbilled sales stand at RM45 mil.

For the nine months ended Sept 30, 2013, its net profit was higher at RM19.33 mil compared with RM17.05 mil a year earlier, though revenue fell to RM96.39 mil from RM101.13 mil.

Positioned for more land buys

A&M is one of the few established property companies sitting on a huge land bank, whose value is waiting to be unlocked by property infrastructure.  It is also one that has a relatively good cash position and little debt.

With cash and cash equivalents of RM84.4 mil as of Sept 30, 2013, the company is in prime position to acquire more land.

Based on an estimated net gearing of 0.5 times, it would be able to raise some RM340 mil via borrowings.  The company has a negligible debt of RM66,000 in total borrowings as of Sept 30, 2013.  FocusM

GRR schemes making a comeback

Focus MALAYSIA WEEKLY ISSUE 056

THE WEEK OF DECEMBER 28, 2013 – JANUARY 3, 2014

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By: V. Sanjugtha

Likely return of scheme with longer guarantee periods of 10-25 years

MARKET players are predicting the return of the notorious guaranteed rental return (GRR) scheme next year to lure in property investors, with longer guarantee periods of 10 to 25 years.

A source at a prominent real estate company, tells FocusM that the GRR will regain popularity and other similar schemes will surface next year as developers seek creative ways to increase the appeal of their property to investors after the government banned …. (DIBS), which were instrumental in aiding them to reach out to a larger portion of the market.

He explains that over the past two years many GRR schemes were offered, some by up to 25 years and the concern is whether the developer will be financially capable of honouring it.

“They will most likely meet the payments in the first year, but the real test will be the second and thereafter, whether they will have sufficient cash flow to meet the payment.  A lot of GRR schemes are already in trouble but it (the issue) is being played down to avoid raising an alarm,” he adds.

He opines that the incentive schemes offered by developers are an issue that should have been dealt with but Budget 2014 looked only into DIBS, leaving out the GRR, the issue of developers picking up the stamp duty and legal fees and the 100% loan offered to buyers.

When purchasing units with GRR, he advises buyers to thoroughly read the fine print and pull out immediately if they find certain clauses that are not to their advantage.

Paul Khong, executive director of CB Richard Ellis (Malaysia) Sdn. Bhd., too believes that developers will think up new incentive packages to attract buyers to their showrooms following the removal of DIBS.  He believes that GRR would be one of such incentives while more hybrid variations will eventually surface.

“Investors will be more eager to invest in property without worrying about repayments during the GRR term.  So it will obviously trigger sales,” Khong predicts.

GRRs, also known as leasebacks, buy-to-let, cash back or own-for-free are resultant of developers’ creativity in wooing investors with a GRR on yet-to-be-built properties.  According to the plan, developers will agree to pay buyers rentals ranging from 8% to 12% gross or net returns of the purchase price or a proportion of the purchase price for a stipulated period.

At housing loan rates of about 4.3% per annum (BLR-2.3%), such schemes appear attractive to the undiscerning investor  seeking a worthwhile investment.

He cautions the investors that the structure of the incentives such as the GRR scheme should be clearly understood, for example, buyers should find out the actual legal entity that is extending the guarantee and the credibility rating of the guarantor.  He advises a thorough analysis of the developer or the party giving he GRR, to ensure it is reputable and demonstrates the ability to withstand a continuous payment of guaranteed rentals over agreed periods.

Khong reminds buyers that over the years, many small players have defaulted in such GRR schemes.  He, too, stresses the importance of reading the fine print in the terms and conditions, especially the termination and renewal clauses to ensure buyers are not shortchanged.

Chang Kim Loong, secretary-general of the National House Buyers Association (HBA), echoes his fear of GRR schemes, warning that such agreements are not regulated by law.  He adds they contain a clause that allows the developer the right to terminate the GRR agreement by providing a written notice to the purchaser.

He advises buyers to also conduct a survey of rental rates in the vicinity to get a fair idea of the state of the local market.  If market prices are lower than the guaranteed rental, incentives and discounts being offered to woo the buyers are issues to be considered.

If the guarantees of rentals are higher than the existing market rate, then a rent decline after the end of the guarantee period is likely and buyers need to brace themselves for this as it indicates a potential drop in the value of the property.

Developers risk not fulfilling promised rental returns

Raising capital value compresses yields

Generally, yields in the current market conditions are compressed, owing to the rising capital value.  Khong says with a proper GRR scheme in place, it will make investors excited but there must also be real rental demand to substantiate this scheme or it will not be able to last through the entire term, especially if the units remain empty.

As such, industry players are worried the GRR scheme, should it return in force as an incentive to woo purchasers, could prove disastrous when developers face difficulty filling up the units to fulfil their promised rental returns.

However, market experts have expressed concern over the rising number of untenanted units due to compressed yields.  Many report that owners prefer to leave their property untenanted due to low rental rates and difficulty in obtaining tenants.

Property expert Ho Chin Soon, director of Ho Chin Soon Research Sdn. Bhd., cautions investors that the mismatch between supply and demand in the property market is expected to pressure yields further downwards.  Yields have been compressed for the past two to three years, especially in areas experiencing a high supply of residential property flooding the market in a short period, such as Mont’ Kiara and KLCC.

These are also the areas that have been reportedly experiencing low occupancy rates, with owners opting to let their property go untenanted.

Siva Shanker, president of Malaysian Institute of Estate Agents, says investors in the primary market are largely driven by the premise that the capital value of their property will appreciate exponentially upon completion with a buyer readily available or that rental income is higher or equal to the loan repayment and tenants are also readily available.

“Rental rates are not moving upwards.  With yields as low as 3-4%, some owners tell me they rather leave their units empty than go through the hassle of seeking suitable tenants,” Siva observes.

He adds that capital value is rising at a higher pace of about 10-15% on average and 20-30% in certain areas.

Allworth Real Estate Sdn. Bhd. principal and director Ong Goon Hong says rental rates are largely based on affordability, trending closely to factors like salary hikes and disposable income.  The prices of houses, on the other hand, have risen sharply due to inflation, mainly rising cost of material and labour.

Citing an example of a one-bedroom unit in Mont’ Kiara that would have cost about RM700 psf three years ago, today transacts for RM850 psf, signifying a 20% hike in price.  Rental, on the other hand, rose a marginal RM500 per unit over the three-year period.

Similarly in the prime city centre areas such as KLCC, Ong says there is a yield compression as prices of property rise more significantly than the rental rates.  A good location like V-Pod, for example, launched at RM900 psf three years ago with developers predicting rental could fetch circa RM4,000, translating to a yield of about 5-6%.

Today, prices have risen to about RM1,500 psf and the developer’s rental estimates hold, but the rising price tag on the property compresses yield at about 2.5%.  FocusM

Market to consolidate in 2014.10

THE EDGE WEEKLY ISSUE#995

THE WEEK OF DECEMBER 30, 2013 – JANUARY 5, 2014

City & Country Section

LOCAL CONSULTANTS’ POLL: By THE CITY & COUNTRY TEAM

KH CHEN
MANAGING DIRECTOR
LANDSERVE SDN. BHD.

Outlook

We believe the Malaysian economy will remain resilient, although rising household debt and inflation can be a concern.  Thus, we expect the property market to soften in 2014 in response to the new cooling measures.

Nonetheless, such measures will not deter genuine homebuyers and investors with a long-term view.  We have clients making transactions even in December, some of which are at record prices.  Genuine property investors may be more cautious but they will never leave the property market.

As projects under the (ETP) gain traction in 2015 and 2016, prices in hot areas are expected to rise sharply.  That is why 2014 is the year to start looking and pick whatever “looks” good.  But always be well-informed.  Consult your property consultants or estate agents.

We still like landed homes in the secondary market because it has not been influenced by undue speculation, unlike the primary market.

In the Klang Valley, we like houses or strata homes in established schemes near any of the proposed MRT stations such as those in Petaling Jaya, Bangsar, Cheras, Kajang and Sungai Buloh.  Outside of Klang Valley, we like landed homes in major cities and towns like Rawang, Kajang, Bangi, Seremban and Melaka.  Towns that will have station on the proposed high-speed rail between KL and Singapore are expected to benefit.

In Penang, Tanjung Tokong, Pulau Tikus, Jelutong, Bayan Baru, relau and Sg. Ara are good areas.  For Sabah, Lintas, Kepayan, Tanjung Lipat, Luyang, Bundusan and Kolombong are our top picks.  In Johor, we like established schemes in Molek, Tebrau, Bukit Indah and parts of Nusajaya.

We hope the economy will stay resilient on the back of rising exports, foreign direct investment into the country and strong domestic activities.  Upgrading our country’s credit rating will be a plus.  While we expect inflation to increase in 2014 following the subsidy cuts and the electricity tariff hike, hopefully, it will be contained below 3.5% so that there will be no major hikes in interest rates.

Wish list

• Our banks to continue to be supportive in funding property ownership;
• Unemployment rate will stay below 3% and there will be no massive lay-offs;
• Foreign investors to return in a big way as Malaysia transforms into a developed nation by 2020; and
• Affordable homes under PR1MA and other initiatives by the government can be rolled out as soon as possible to help the low-to medium-income groups, with priority being given to first-time homebuyers.

Market to consolidate in 2014.9

THE EDGE WEEKLY ISSUE#995

THE WEEK OF DECEMBER 30, 2013 – JANUARY 5, 2014

City & Country Section

LOCAL CONSULTANTS’ POLL: By THE CITY & COUNTRY TEAM

MICHAEL GEH
DIRECTOR
RAINE & HORNE (PENANG)

Outlook

We see a continued contraction in the market due to declining transaction volumes and a tightening of credit.  If you need to buy your first house or sell your house to upgrade or downgrade, do so.  The secondary property market, which has a 70% share of total transactions in Malaysia, will be prominent in 2014.

Wish list

• More clearly defined key terms in real estate investment.  For example, we must distinguish between first-time homebuyers, speculators and flippers.  They should all not be lumped together under the term property investor!

Market to consolidate in 2014.8

THE EDGE WEEKLY ISSUE#995

THE WEEK OF DECEMBER 30, 2013 – JANUARY 5, 2014

City & Country Section

LOCAL CONSULTANTS’ POLL: By THE CITY & COUNTRY TEAM

Outlook

Landed properties in choice locations will remain positive.  However, there will be fewer transactions in the secondary market because of the (RPGT).  We may see an increase in transaction volume, as vendors would want to avoid the GST, which will be implemented in 2015.

Borrowing costs should not be raised too much or it will affect sales, and financing should not be too restrictive to have a vibrant 2014.  interest will still be on Medini Iskandar because of the incentives.  I also predict that interest will widen to non-residential, industrial and land.

If the Eastern Dispersal Link is tolled, there will be some effects on properties in the Tebrau region, although it will not be significant.  I also expect developers to innovate with new marketing techniques.

Investors should look at landed properties in popular locations, properties near the rapid transit system site that is to be announced soon, development lands outside the developed areas and projects by reputable developers, who will be building in phases, in order to enjoy the appreciation created by the developers.

Wish list

• Stable local and global financial markets;
• Consistent and long-term beneficial housing policies;
• The authorities should consult with stakeholders prior to the announcement or implementation of any policies; and
• Iskandar to continue to grow at a sustainable and healthy pace.

Market to consolidate in 2014.7

THE EDGE WEEKLY ISSUE#995

THE WEEK OF DECEMBER 30, 2013 – JANUARY 5, 2014

City & Country Section

LOCAL CONSULTANTS’ POLL: By THE CITY & COUNTRY TEAM

BRIAN KOH
DIRECTOR
DTZ MALAYSIA

Outlook

It is likely to be a challenging year for the property market, foreshadowed by the end of quantitative easing in the US, potentially rising interest rate, tighter credit, and pending completion of properties across the various sectors.  A significant number of these properties may have been purchased on a speculative basis. 

Neighbourhoods with proposed MRT station and residential projects targeting owner-occupiers that are priced competitively should be able to hold their value in the long term.

Wish list

• An acceleration of the supply of more affordable houses by both private developers, especially government-linked companies that have large land banks inherited from their plantation days, Perumahan Rakyat 1Malaysia (PR1MA).

Market to consolidate in 2014.6

THE EDGE WEEKLY ISSUE#995

THE WEEK OF DECEMBER 30, 2013 – JANUARY 5, 2014

City & Country Section

LOCAL CONSULTANTS’ POLL: By THE CITY & COUNTRY TEAM

NABEEL HUSSAIN
ASSOCIATE DIRECTOR
CB RICHARD ELLIS MALAYSIA
SDN. BHD.

Outlook

We expect activity in the residential market to slow in 2014 in response to the cooling measures introduced in Budget 2014.  projects that will perform well will be those located near new infrastructure projects such as MRT lines and those that are targeted at true occupancy demand.

The city centre office market should fare well, boosted by limited new completions between now and 2017.

Competition in the suburban retail market will continue to be strong, as a number of projects are scheduled to be completed over the next two years, and there will be pressure on discretionary income from the recent petrol and electricity price hikes as well as other subsidy rollbacks.

Within Greater KL, well-located and well-conceived residential developments around new infrastructure projects (not just MRT / LRT extensions, but also new roads and highways) may be a wise bet.  With the proposed restrictions on primary market sales, it is also likely that we will see greater activity in the secondary market, and this may be a good time to snap up undervalued existing properties.

Outside Greater KL, Iskandar Malaysia remains popular destination, although it remains to be seen exactly what measures or changes the state government has in mind.

Wish list

• An MSC-type designation for new hotels in Malaysia, giving tax breaks, automatic visit passes (work permits) for approved migrant workers, and lower utility costs; and
• A genuine concerted effort to clamp down on unlicensed and unregistered agents with a few showcase prosecutions.  This would involve widespread education of the public, the press and local authorities, with a special unit to be set up in the Commercial Crime Division.