KLCC Condos – A Good Time to Invest?

Now is a Golden Opportunities Investing Property in Kuala Lumpur City Centre(KLCC) Area?

THE Worst Must be Over?

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It was barely a year ago that property prices were plummeting, economic slowdown and lackluster performance of the stock and property market.

Since then almost every world’s central banks tried to provide huge liquidity by lowering the interest rates.

It also reduces the returns on deposits which make it more attractive for depositors to park their excess funds into higher yielding and more speculative investment assets like shares and property.

This directly has lifted sentiment and prices of assets like stocks and property.

This interview was conducted by theedgeproperty.com Market Talk on “Resurgence in the interest in KLCC”.

Are you still Bullish on KLCC Property?

Feel free to leave a comment below

Market Talk on “Resurgence in the interest in KLCC” Part 1

Market Talk on “Resurgence in the interest in KLCC” Part 2

Good Time To Invest

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PETALING JAYA: The number of condominiums mushrooming within Mont’ Kiara and KLCC may have caused the suppression of market rental yield (net), but this does not necessary indicate bad news from many investors’ point of view, says executive director of Regroup Associates, Paul Khong.

paulkhonh
Khong: A lot of condos are now trading close to developers’ prices…if you could get a 30 to 40% discount on the purchase price, there is a good chance of capital appreciation

“Firstly, investors who purchase the KLCC and Mont’ Kiara condos are more driven towards capital appreciation rather than looking at the fundamental of rental yields; same theory for people who prefer to buy landed properties,” he adds.

Secondly, condo prices have dropped around 10% to 20% and 20 to 30% among luxurious condos within Mont’ Kiara and KLCC respectively as compared to its peak between the second and third quarter in 2008,” says Khong, while noting less price drop of around 10% among condos located in other areas such as Petaling Jaya (PJ).

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Sarkunan: I believe it is the right time to scout around for good buys especially in October and November before prices start picking up at a faster rate

Sarkunan Subramaniam, executive director of Knight Frank Malaysia concurs: “The rental yield performance will not affect much on the buying mood among investors who are keen to buy condos located at both KLCC and Mont’ Kiara areas as majority of them purchase in anticipation for bigger gains in future capital appreciation”.

Regroup’s Khong also says that the slight market rally which started around 3 months ago has seen property prices moving up slowly with less fire sales and availability of good buys as compared to the first quarter of 2009.

“A lot of condos are now trading close to developers’ prices and if you could get a 30 to 40% discount on the purchase price, there is a good chance of capital appreciation.

“It all boils down to your entry price versus the transacted price – if your entry price is high, chances are the capital appreciation will be limited,” Khong notes.

Knight Frank’s Sarkunan adds: “Personally, I think we have reached the bottom somewhere around the second quarter of 2009, and I believe it is the right time to scout around for good buys especially in October and November before prices start picking up at a faster rate.

The prices for the KLCC condos have easily dripped around 30% to 40% since late 2008. Today, condo prices are correcting to a reasonable level. If you are buying 30% to 40% below the peak market price, it is considered a good buy,” says Sarkunan.

Based on Regroup’s research, Khong says the Mont’ Kiara/Sri Hartamas and KLCC areas currently contribute around 50% of the total number of luxurious condominiums (RM350 psf and above) in Klang Valley.

Besides that, he says Regroup’s statistics also show that in the next few years, new condos smacked in Mont’ Kiara/Sri Hartamas and KLCC areas will consist 57% out of total new luxurious condos supply in Klang Valley with 26% and 31% contributed by Mont’ Kiara/Sri Hartamas and KLCC respectively.

“The current supply for luxurious condos totals 7,500 units within Mont’ Kiara and Sri Hartamas, and future supply amounts to 5,800 condos,” says Khong.

In KLCC, Khong says the current supply of luxurious apartments and condos with RM350 psf and above collectively amounts to about 5,700 units while another 5,000 units provided by 18 projects are expected to pour into the market in the next 2 to 3 years.

In terms of rental yield, where its performance for every condo differs, Sarkunan reveals that data from his research suggests condos yield in Klang Valley has generally increased marginally at about 1% higher now as compared to September 2008.

“In good times, yield may be lower as the anticipation of capital appreciation is higher- i.e. many investors are willing to bear with lower rental and yield as they expect high capital appreciation in future. But this situation has somehow reversed as the economy is not as good as compared to those booming days, therefore, we are seeing a marginally higher yield now,” Sarkunan says.

Sarkunan cites condos located in Bangsar currently generates yield at around 4.5% per annum, where as the sub-urban areas such as Cheras, Petaling Jaya (PJ) and Subang are currently generating yield of 5% to 7% per annum.

Meanwhile, in KLCC, condo rents started to decline around 30% since late last year, while its rental yield stands at about 4% per annum, says Sarkunan.

On the other hand, Khong says the current yield for Mont’ Kiara is around 3% to 5% per annum and there are cases where existing tenants have moved out from the older condos to newer ones in Mont’ Kiara, for the same rental.

Khong also notes that substantial supply of condos within an area will eventually cause a lower rental due to stiff competition in the surrounding areas.

“Although some landlords of condos in prime areas have reluctantly slashed their asking rents by 50%, they are still unable to find any tenant. This tactic to attract tenants caused a lower yield in the rental market within that specific area,” says Khong.

From:starproperty.my/PropertyScene/PropertyNews/477/0/0

16 Responses to “KLCC Condos – A Good Time to Invest?”

  1. Property sector may face oversupply next year
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    The property sector may experience an oversupply next year due to a burst of launches from developers that have been held back since the start of the global economic crisis.

    Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector, Malaysia (PEPS) president James Wong said developers would need to come up with “creative ways” to maximise sales.

    “Because there will be a lot of launches next year, there will be a lot of supply, and the success of the take-up rates will depend on the marketing strategies of the developers,” he told a press conference on the 3rd Malaysian Property Summit 2010 yesterday.

    Ho Chin Soon Research Sdn Bhd director Ho Chin Soon concurred, adding that there would be a pent-up from buyers that had been eager to get into the housing market.

    “A lot of developers I have spoken to are preparing to launch in 2010. After over a year of waiting (since the global economic downturn hit), the public is hungry!” he said.

    Wong said property transactions for 2010 were expected to be better than 2009, adding that the residential sector would see the biggest growth.

    “With the recovery of the economy in 2010, the property market will also experience a slow, steady recovery. The residential sector has been quite resilient and should experience faster growth next year.”

    Wong added that the secondary market for upmarket condominiums would remain soft until the second half of 2010 because of existing oversupply and new launches.

    “However, the secondary market for landed residential property remains firm,” he said, adding that the average occupancy of high-end condominiums within the KLCC area was about 60%, with yields hovering at 5% to 6%.

    Wong also said the shopping complex and office building sectors would face “some oversupply.”

    “Many office building projects started two to three years ago are nearing completion and therefore are facing occupancy problems as companies are postponing decisions to relocate to bigger and more expensive premises.

    “Hence the take-up rate of new Grade A office buildings in Kuala lumpur remains slow. Office rents will come down as more supplies (completed units) come in (to the market) by end-2010,” he said, adding that the hotels and industrial sectors should remain flat next year.

    Wong said the hotel occupancy rate in Kuala Lumpur in the third quarter of 2009 was 66%, with average room rates reported at RM277.

    “Owing to competition, many hotels are undergoing rebranding and refurbishment exercises,” he said.

    PEPS will be organising the 3rd Malaysian Property Summit 2010 on Jan 26, 2010 at the Sime Darby Convention Centre.

    from:biz.thestar.com.my/news/story.asp?file=/2009/12/23/business/5353060&sec=business

  2. Real estate outlook for 2010
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    The US market has recovered marginally, however, due to its weak economic fundamentals, many industry players predict that it will perform better in the second half of 2010.

    Meanwhile in the UK, the market has been growing strong with prices still on the rise. However, many property analysts feel that the better investment opportunities for the UK have passed.

    In Europe, France and Germany are expected to have a robust year ahead while other European countries continue to suffer from flat markets where investors remain sidelined.

    The outlook on Asia
    Property sectors in Asia are expected to grow due to its strong economic recovery with China and India leading the pack.

    Singapore is upbeat about its economic outlook in 2010, especially with the soon-to-be-opened casinos and the positive equity market sentiment. It is safe to say that Singapore is set to see an increase in property investment activity in 2010.

    Back home in Malaysia, the economy was not spared from the global recession. In the first quarter of 2009, our export hit an all-time low of 6.2% (year over year). However, the market improved in the second half of 2009 yet remained relatively weak when compared to other regional markets such as Hong Kong and Singapore.

    For 2010, many industrial players feel that Malaysia’s property market will be performing well because:
    1. The interest rate is still very attractive despite its tendency to increase in the near future because of the economy’s improving conditions. Furthermore, finance institutions are moving toward risk-based pricing in determining more sustainable interest rates for the industry.
    2. Due to the population growth in Malaysia, the demand for residential properties will remain strong for years to come.
    3. The removal of the 30% Bumiputra equity quota for companies seeking to list on Bursa Malaysia will encourage more domestic and foreign direct investment, which will further stimulate the property industry.
    4. Developers continue to roll out housing projects with innovative designs, higher quality, 10/90 property financing scheme etc.
    5. As the economic condition improves and the household income gradually increases, Malaysians will be prepared to commit to more capital spending such as buying houses.
    6. As global economy gradually recovers, foreigners are flocking back to Malaysia to buy properties as we have one of the highest quality and cheapest properties to offer in Asia.

    Hopefully, with the government playing a more active role in creating employment opportunities and improving the purchasing power of its citizens, 2010 will be a promising year for property investment.

    fr:starproperty.my/PropertyGuide/Legal/1550/0/0

  3. Demand for high-end condos sustainable, says researcher
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    The demand for highrise residential properties, especially in the in the high-end segment in areas such as Kuala Lumpur’s Mont’Kiara and in the Golden Triangle is sustainable, said Ho Chin Soon Director of Ho Chin Soon Research, a property information company which specializes in land use and ownership maps.

    The demand in these areas is supported by the fact that urban dwellers have resisted going to the outskirts of the Klang Valley as these areas are far from the city centre, Ho told an audience of about 130 people at a property market outlook talk organised by property developer Sunrise Bhd on Saturday Jan 23.

    “Whatever little land left in the city will be used to build high-end high, ,rise residential properties even in areas where land prices are already high,” he said.

    A slowly but surely growing urban population in the city will help fuel demand for these properties as residential space in the heart of the Klang Valley is limited, Ho stressed. Thus, “whatever small growth in population, is all going into the high rise buildings,” he said.

    Despite ample supply of high-end high rise residential properties, “there is no need to fear”, he added, dispelling fears of an oversupply of such property types. “Sometimes you cannot use a strict supply and demand rule to analyse the situation, you got to do (apply) a little bit of ‘freakanomics’ (theory).”

    In their bestseller book – Freakanomics, University of Chicago economist Steven Levitt and New York Times journalist Stephen J. Dubner try to link and explain an economic theory which aren’t covered by traditional existent economic theories, with some real life events that do not totally make up to human logic and sense.

    Ho, who read the book cited for example, “When doctors went on vacation, less people died; but when the doctors came back, more people died. Thus, strictly (speaking) sometimes the demand and supply curve, it doesn’t work out – and something else is happening”.

    Ho also told theedgeproperty.com via a telephone query that “there was a small (price) bubble before (in Mont’Kiara and the Golden Triangle area) but it has already burst and prices have already come down.” He added that prices in these luxury residences are sustainable, despite being sold at high price tags.

    Matured high-end areas such as Bangsar, he cites, gives him enough evidence to support his views and analysis of the latest property market scenario for areas such as Mont Kiara and the Golden Triangle today.

    fr:theedgeproperty.com/news-a-views/1486.html

  4. Someone bought a penthouse for RM38mil in KL!
    By TEE LIN SAY

    * Some property consultants believe it is the Malaysia’s largest condominium transaction

    KUALA LUMPUR: The Binjai On The Park development in Kuala Lumpur City Centre (KLCC) caused a stir in the property market when one of its two super penthouses was sold last month for RM38mil, making it among the most expensive homes to have been sold in Malaysia in recent years.

    Some property consultants, such as Zerin Properties chief executive officer Previndran Singhe, believe that this is the country’s largest condominium transaction, although it has yet to be verified.

    The buyer is a corporate figure who has been on Forbes magazine’s list of wealthiest people. On June 22, he bought the triplex penthouse, measuring 14,300 sq ft, on the 42nd floor of Binjai’s Tower B. The price tag of RM38mil meant the penthouse was sold for almost RM2,660 per sq ft (psf).

    “The buyer bought the penthouse to stay. He fell in love with the 360-degree unobstructed view of the KLCC skyline right at his doorstep, similar to views offered by the likes of London’s One Hyde Park. He said Binjai On The Park was just like one of his other homes around the globe,” said Terri Har, marketing and sales manager of Layar Intan Sdn Bhd, the developer.

    Layar Intan is 100% owned by KLCC (Holdings) Sdn Bhd, which in turn is a wholly-owned subsidiary of Petronas.

    Binjai’s two 45-storey towers have a total of 171 units. To date, the project has recorded sales of more than RM600mil at an average price of RM2,600 psf.

    Over the last six months, three other penthouses have been sold for approximately RM18mil. On a psf basis, the most expensive unit so far was a standard unit on the 38th floor, which was sold for RM2,900 psf or RM10.6mil.

    With Tower B now sold out, what is left are mainly Tower A’s standard units, which offer 3,700 sq ft each. Binjai is the only condominium located on the 50-acre KLCC Park and is part of the KLCC development master plan.

    “Binjai’s key selling point is the fact that every unit has an unobstructed view of the park, along with a spacious balcony,” said HwangDBS Vickers Research analyst Yee Mee Hui.

    Said Har of Layar Intan: “Some 30% of our buyers are from Japan, Hong Kong, Britain and other parts of Europe. Most of our buyers are businessmen and corporate people who already have homes around the world. They appreciate Binjai as the only development in the vicinity with an unblocked view of the KLCC skyline.”

    She added that most of the local purchasers bought Binjai units to live there or as homes for their children, while the foreign buyers treated the units as holiday homes or transit points.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/7/7/business/6617330&sec=business

  5. Property market recovering, but oversupply of condo and office units
    By ANGIE NG

    But high-rise condo and office market still in oversupply

    PETALING JAYA: The residential property market, especially landed residences, is on a recovery mode and prices of houses in some parts of Kuala Lumpur and Petaling Jaya have rebounded by 15% to 25% in the past one year, property realtors and consultants said.

    However, the high-rise condominium and office market is still facing an oversupply situation and will weigh down on the market at least over the next couple of months.

    CB Richard Ellis Sdn Bhd executive director Paul Khong said Malaysians still had money to invest and residential was the hot favourite at the moment.

    “Landed properties have rebounded in all segments across the board while in the strata segment, the high-end ones in KLCC and Mont’Kiara have moved relatively slower due to the current supply situation and the small tenancy market,” Khong added.

    Khong said that although the Klang Valley landed housing market was hot, “it is not a property boom.”

    According to Knight Frank Ooi & Zaharin Sdn Bhd managing director Eric Ooi, the landed residential property market has fared well as it is considered a good time to buy now.

    “The market has certainly picked up due mainly to limited supply, the high liquidity in the system, and growing interest in property as a reliable investment instrument,” Ooi said.

    The affordable entry cost and an all-time low bank interest rates have also contributed to the improved sentiment and rising house prices.

    Ooi said landed residential property prices in some parts of Kuala Lumpur, such as Desa Parkcity, had breached new high and house prices in well-sought-after locations would continue to strengthen.

    “I believe even the commercial sector has seen the worse and although the market is still soft, it is stabilising. If the economy continues to grow steadily, the commercial sector will be next to rebound,” Ooi added.

    Ooi said that besides the good location, the unique concepts and exclusive features of some of the projects were the reasons for the strong demand and prices.

    DTZ Nawawi Tie Leung Sdn Bhd executive director Brian Koh concurred that supply of landed housing property had not caught up with demand as there was a lag in new supply coming onstream after developers held back their project launches in the past two years.

    “The performance is still very location centric and concept driven. Buyers prefer well-established neighbourhoods and those with good concepts. Security has become a top priority and that’s why gated and guarded projects are doing very well,” Koh said.

    He said even some KLCC condominiums were attracting interest again.

    “This time around most of the buyers are well heeled Malaysians who appreciate the exclusivity of the residences in the KLCC area. Having came off from their previous high, there is potential for some price upside. Moreover, prices of residences here are still lower than those in cities in other parts of the region.”

    Koh said there was a need to monitor the impact of potential rise in interest rates on property demand especially in the medium to lower price range.

    “The higher entry cost may affect demand going forward but it could have contributed to buyers locking in at the current low entry cost,” he added.

    Perdana Parkcity Sdn Bhd director of marketing and sales Susan Tan said a combination of factors including a pent up in demand and limited supply were the main causes of the current price rebound in the residential market.

    “There has been no new supply of landed housing in Kuala Lumpur in the past year. A fear that prices will climb further due to an expected rise in the cost of construction is also fuelling demand now.

    “Buyers are willing to pay for the right address, a good overall concept and well landscaped and maintained environment. That’s why some highly sought after projects can fetch quite high price premiums,” Tan said.

    Perdana ParkCity is the developer of the 473-acre Desa ParkCity in Kuala Lumpur which has fetched one of the highest premiums in terms of landed property prices in the capital city.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/7/8/business/6626131&sec=business

  6. Good uptake for serviced units

    By EUGENE MAHALINGAM

    WITH the uptrend in the global economy, managers and operators of serviced apartments in the prime areas of Kuala Lumpur are seeing healthy occupancy rates for their units.

    Frasers Hospitality Pte Ltd, the hospitality arm of Singapore-listed consumer group Fraser and Neave Ltd, is optimistic about the serviced apartments sector in Malaysia, says chief executive officer Choe Peng Sum.

    “With the economy picking up, we expect to see more businesses coming into the country.

    “Many of their personnel tend to remain in the country for long periods, like a year or two, and for them, staying at a serviced apartment is often a more viable option than putting up in a hotel,” he tells StarBizweek.

    In fact, there appears to be a high supply of hotels compared with serviced apartments in Malaysia.

    “As the economy picks up, we expect an increase in the supply of hotel rooms. An oversupply situation is likely to affect occupancy rates. However, the supply of serviced apartments in Malaysia is not very high.”

    Choe estimates that there are some 30,000 hotel rooms available in Malaysia compared with 2,800-3,000 serviced apartments.

    The company is currently in collaboration with Ipoh-based YNH Properties Bhd to set up a second serviced apartment project – Fraser Residence Kuala Lumpur.

    The building is under construction near the Renaissance Hotel and should be operational by 2012.

    Last month, it had a grand opening of its maiden serviced apartments, Fraser Place Kuala Lumpur.

    At the time of opening, Fraser Place had an occupancy rate of 89% and was offering an initial promotional price of RM260 to RM300 per unit per night.

    The units occupy floors nine to 30 of an integrated retail and office complex in Jalan Perak and comprise a total of 215 studios, one and two-bedroom apartments and penthouses.

    On the global level, Frasers Hospitality also has a second brand, Modena, which caters to corporate individuals who are constantly travelling.

    “We call this group of people ‘roadwarriors’. These units are for those looking for something that is a little less pricey but more than a budget hotel. Modena is a step down from our other brand offerings (in terms of price),” Choe adds.

    The company currently has two serviced apartment schemes under the Modena brand in China, and is looking to set up four more projects there.

    It is also looking at serviced apartments under the Modena brand in India, Singapore, Vietnam and Kuala Lumpur.

    Frasers Hospitality currently manages 35 properties in 21 cities.

    Virgin Properties Sdn Bhd, which has been operating the Lanai Gurney Corporate Suites off Jalan Ampang since April 2008, has seen “very good” occupancy rates in the first half of 2010 versus the same period of 2009, says chief operating officer Melissa Ram.

    “We saw an average occupancy rate of 80% in the first six months of the year,” she says, adding that the company has also revised its marketing strategies to cater to short-term tenants.

    “We’re looking at a different segment than what we targeted last year. Shorter stay packages can fit a lot of people’s budgets.”

    Located just 2km from the KLCC area, Lanai Gurney targets mostly expatriates, corporate clients, government agencies, business travellers, filming groups and students. The rates range from RM1,000-RM3,800 per month.

    Based on commercial standards, Ram says the rates of Lanai Gurney may be increased in the near future.

    “Property prices within the vicinity have gone up and we are also planning to offer more services to our tenants in the future. So naturally, we plan to increase our prices.”

    According to Ken Holdings Bhd executive director Sam Tan, the response to its recently launched Ken Bangsar high-end serviced apartments in Bangsar has been overwhelming which he attributes largely to the project’s good location.

    Some 70% of its units have been taken up and the tenants are a mix of locals and expatriates. Ken Bangsar has 80 units that are priced from RM800 to RM1,200 per sq ft.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/7/10/business/6637949&sec=business

  7. When high-end living turns super luxurious

    THE benchmark for luxurious residences in the country has risen in the past few years and it is becoming more common to read about such properties fetching unbelievable prices, at least in this part of the world.

    News that a Malaysian tycoon paid a whopping RM38mil for a triplex penthouse in Binjai On The Park shows that Malaysia has its fair share of affluent people with a penchant for exclusive high-end living.

    Super luxurious residences are mostly located at very exclusive addresses, are very spacious and fitted with the best that money can buy.

    Besides being the only condominium project with undisrupted view of the widely acclaimed KLCC vista and direct access to the sprawling KLCC park, the 14,300-sq-ft Binjai residence is one of only two such units.

    The transaction is certainly a bright spark for industry players with projects in the KLCC vicinity. Afterall, the KLCC market is still relatively slow due to the current oversupply situation and the small tenancy market.

    Things may start to look up again for the market if buyers feel it is the right time to buy to leverage on potential capital appreciation as prices have dropped from their previous pre-crisis high.

    If the trend continues, the luxurious residential market will be huge in the next few years.

    The growing globalisation and cross-border trade and investment will continue to fuel demand for such projects.

    This is because there is an increasing number of “borderless” people who have businesses and homes in various corners of the world, and they will be looking for quality property to buy for investment or as their transit homes.

    With Asia’s economy continuing to power on and proving its resilience, many newly rich Asians who have made it to the Forbes wealthiest list and successful people will be the next big market for these luxurious properties.

    Complementing the super luxurious projects is the elite addresses.

    While the KLCC and Mont’Kiara have the most number of high-rise condominiums in Kuala Lumpur, Bukit Tunku and Kenny Hills are the hot favourites for exclusive landed residential projects.

    A number of projects, which were earlier planned for launch a year or two ago, have been put on hold because of the global financial crisis.

    These include SP Setia Bhd’s Duta Grande, comprising 15 super-luxurious bungalows in Bukit Tunku. The 18,000 to 20,000-sq-ft units will be priced at around RM30mil each.

    Another upmarket project nearby is offering villas of 16,000 to 19,000 sq ft that have price tags of RM20mil.

    At such prices, the buyers can expect only the best including covered garage, car and passenger lifts, walk-in wine cellars, and spa to lap pool and home theatre.

    Luckily for the buyers, the local property market has not gone overboard like in some of the more expensive cities, such as Shanghai in China.

    A super-luxurious villa in the Chinese city recently changed owners for one billion yuan or about RM470mil. The three-storey villa is sited on 20 acres and has a built-up area of more than 40,000 sq ft.

    No wonder the Chinese authorities are worried that the property market has overheated and have put in place various credit tightening measures to cool it down.

    While such luxurious projects will attract the well-heeled and high net-worth investors to our shores and raise the profile of Malaysia’s properties, developers should balance such projects with other more affordable projects to meet the demand of the average buyers.

    Deputy news editor Angie Ng says while things still look pretty much under control for our property market, it pays to remain vigilant and all stakeholders need to contribute towards a balanced and sustainable market.

    fr:starproperty.my/PropertyScene/TheStarOnlineHighlightBox/5772/0/0

  8. KLCCP gets strong interest for Lot C project

    PETALING JAYA: Despite the uncertainty in the global economy, interest in KLCC Property Holdings Bhd’s (KLCCP) Lot C project is strong.

    Lot C will add 140,000 sq ft to the current one million sq ft of retail and office space in Suria KLCC.

    Director Datuk Manharlal Ratilal said the RM1bil development would be seamlessly connected to Suria KLCC.

    “The project will complement Suria KLCC which has attracted about four million visitors annually for the past three years,” he said.

    Of the 4.1 million visitors to Suria KLCC last year, 20% were foreign tourists.

    Manharlal said KLCCP was in discussions with some companies keen to rent units at Lot C.

    “Global uncertainties come and go and when we are managing a property complex as important as this, it is our objective to maintain a position of strength.

    “We will not be too aggressive, (we will) think long term, make sure the project is good and not rush into things. For a complex such as this, we need time to plan,” he added.

    KLCCP is also managing the Petronas Twin Towers and Menara ExxonMobil, both of which are fully tenanted.

    It is planning to upgrade Menara Dayabumi.

    The company also owns Mandarin Oriental Hotel, which is 57% occupied now due to the global economic slowdown.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/7/14/business/6658758&sec=business

  9. KLCCP earnings to get a lift
    By ANGIE NG

    Analysts see higher income streams on completion of retail podium, new office block next year

    PETALING JAYA: KLCC Property Holdings Bhd (KLCCP) can look forward to higher income streams with the completion of the Lot C retail podium and a new office block next year despite the weaker performance of its hotel property business, analysts said.

    Construction of the six-storey retail podium with 160,000 sq ft in net lettable area (NLA) and a 55-storey office block with NLA of 840,000 sq ft is under way.

    The new retail podium is due for completion by the end of the year and should start contributing to the company’s earnings in financial year ending March 31, 2011 (FY11).

    Suria KLCC has a net lettable space of 1 million sq ft now.

    KLCCP’s 55-storey office tower is on track for completion in October 2011.

    According to analysts’ estimates, Lot C could bring in RM147mil in rental income and contribute 21% to KLCCP’s FY13 earnings.

    A senior analyst with a local brokerage said the KLCCP office building was without doubt the most prime office asset in the country.

    “With Petronas as the master lessor for the office building, there is certainty in its rental income whether or not the office space is occupied. But there is also a downside in this arrangement as the company will miss out on the opportunity to review the rental rates should the market improve before the lease expires,” he told StarBiz.

    The 15-year lease for Petronas Twin Towers which have a total NLA of 3.2 million sq ft was from August 1, 1997, while the lease for the 528,000 sq ft Menara Maxis was from June 1, 1998.

    The lease tenure for the 380,000 sq ft-Menara Exxon Mobil was for 12 years until February 2012.

    Hwang DBS Research analyst Yee Mei Hui said in a report yesterday that long term, locked-in rental income from blue-chip tenants would continue to sustain KLCCP’s future earnings.

    The average rental rate of office space at Petronas Twin Towers is about RM9 per sq ft while that of Menara Exxon Mobil and Menara Maxis is RM7.50 per sq ft.

    Suria KLCC retail space is fetching average rental rates of around RM23 per sq ft.

    Yee said for FY10, the retail turnover at Suria KLCC shopping centre had returned to the pre-crisis level of RM2bil, while the number of annual footholds or visitors to the mall was 42 million.

    During the period, KLCCP registered a 21% increase in net profit after minority interests of RM648mil while revenue grew 2% to RM881mil.

    The improved results wermainly attributable to a 3% hike in office rental income and 8% increase in income from retail space.

    She said the higher rental income from KLCCP’s office and retail segments would help mitigate its weaker hotel operations.

    Income from Mandarin Oriental fell 13% as a result of a drop in the hotel’s occupancy rate to 55% in FY10 from an occupancy of 65% in FY09.

    This was despite the average room rate holding stable at RM636. Yee said rental rates for the new retail space should be comparable with Suria KLCC at around RM35 per sq ft (ex-anchor tenants), adding that its occupancy rate could reach 80% in its first year of operation.

    “KLCCP’s net gearing has improved to 27%, equivalent to a net debt of RM1.45bil in FY10 from a high of 130% in FY05. The significantly improved net gearing provides room for more borrowings for future expansion.

    “Given the full repayment of Petronas Twin Towers’ private debt securities by 2012, the company’s net gearing ratio is expected to remain at a healthy level despite the loan drawdown for Lot C,” she pointed out.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/7/20/business/6695370&sec=business

  10. A new class of condos
    By TEE LIN SAY

    Luxury units with spectacular views and top quality designs

    TWO things stand out among the Top 10 freehold condominiums around KLCC – the wide disparity in capital values of those who made it to the ranks (the top 2 are worth more than two to three times than the tenth ranked) while it drives home the point that branding and specific site, even if in the same vicinity, can make a huge difference.

    In June, when it was reported that a tycoon listed on Forbes had purchased a penthouse on The Binjai On The Park for RM38mil, many were agog at the price these new luxury condominiums were fetching.

    In fact, this particular transaction set the record for the highest single residential property ever transacted in Malaysia.

    Even on a per square feet (psf) basis, The Binjai on the Park, developed by KLCC Holdings, has broken the record; one of its standard units on the auspicious 38th floor was sold for RM2,900 psf or RM10.6mil.

    A strong indicator that living in KLCC has become more attractive, says Property consultancy Knight Frank managing director Eric Ooi, is that more tycoons are acquiring penthouses in condominiums in the vicinity.

    6-star living

    Over the past five years, the demand for condominiums in the KLCC area has been geared towards lifestyle condominiums.

    The earlier condominiums emphasized on space, bigger and better facilities. Good examples are Selangor Dredging Bhd’s (SDB) Park Seven and E&O Bhd’s Dua Residency.

    “We were the pioneers of lifestyle condominiums five years ago when the concept was still very new. Now the new opportunity could be in luxury-lifestyle products,” says E&O executive director Eric Chan.

    In the last one year however, demand for luxury condominiums of a different kind have been on the rise. These units offer the most spectacular views, are designed by famous international architects and have top-quality designer finishes and fittings. Examples are The Binjai on the Park and Troika.

    Generally, while prices for real estate are heading north, there seems to be a new pricing phenomenon taking place with certain condominiums around KLCC.

    According to Bandar Raya Developments Bhd chief executive officer Datuk Jagan Sabapathy, one should not use the normal parameters of supply, demand, comparative valuation and yields to explain the pricing power of luxury real-estate products such as The Binjai On The Park and Troika.

    “For these sort of luxury condominiums, there are only about 500 units. These units are catered more for the top five percent of society,” he explains.

    Both The Binjai On The Park and Troika offer 24 hour concierge service, delivery services from the shopping malls and even the booking of flight and concert tickets among many others.

    “We are working with Suria KLCC, Mandarin Oriental and Traders Hotel to continuously improve our residents’ experience of the KLCC lifestyle. For example, residents gets priority treatment from Petronas’s newly operational Prince Court Medical Centre, which is just 5 minutes away, for any healthcare services.” says KLCC Group of Companies Group chief executive officer Hashim Wahir, adding that it is in a class of its own.

    WestMont S.A. Properties senior negotiator Chris Teng says that the price of a condominium in KL depends on address, location and quality of facilities.

    “The closer you are to the KLCC development, the value goes higher. The reason why The Binjai on the Park commands a premium is because it has a permanently unblocked view of the Petronas Twin Towers.

    “We know for sure there will be no developments in front of The Binjai on the Park. A lot of the other condominiums have potential developments that could block their view, so this affects their pricing levels,” he elaborates.

    Zerin Properties chief executive officer Previndran Singhe points out that there is a residential enclave forming in the KLCC area.

    “With the KLCC maturing over the years, the residential enclave seems to be establishing on Persiaran KLCC where The Binjai on the Park is located, across the KLCC Park and not too close to the commercial activities around the Petronas Twin Towers and Suria KLCC.

    Rising owner-occupied units

    “Apart from having the best address ‘Persiaran KLCC’, this side is greener, less congested, quieter and has more commanding views. A residential cluster is a lot more effective in attracting more families, both locals and expats, to shift to KLCC,” he says.

    As it stands now, the take up rates for The Binjai on the Park and Troika are 70% of 171 units and 85% of 229 units launched so far.

    KGV-Lambert Smith Hampton Sdn Bhd director Anthony Chua says these days, condominiums are more owner occupied compared to the past.

    As such, there is more emphasis on quality of finishings and unique features that set them apart from other condominium developments.

    SDB managing director Teh Lip Kee says that Park 7’s success is due to its location and high emphasis on delivering services.

    Park Seven has a occupancy rate of 95% and are mostly expatriates.

    “These are people who walk to work, whether in Shell, Tan & Tan Developments, the Twin Towers or KLCC,” she says.

    Jagan says that while Troika does not have the locational advantage of The Binjai on the Park, it still has a great view of the Twin Towers and the Royal Selangor Golf Club. It is also near the KLCC Park.

    “We knew we had to do something special. We had a great location and branding, but how do we create superior value?

    “So we looked for a superior architect that was iconic and leading, hence we got the number one architect in the world, Norman Foster,”

    “The positioning of Troika is in its enduring value. The Binjai on the Park may have the primest site, but our building has the Wow factor,” says Jagan.

    Previndran says that nowadays, there is a change in lifestyle with “many locals who used to stay in bungalows in Damansara Heights, now they choose to stay in luxury condominiums because they want the security.”

    Chester Properties Sdn Bhd senior negotiator Nathali Tan adds that luxury condominiums are today considered high-class bungalows in the sky because of their size and exclusive features.

    “These condominiums are spacious with built-ups of almost 4,000sf excluding space for pools, tennis courts, gyms and have private lift lobbies, very tight security, concierge services and are well maintained,” she adds.

    Petronas, via KLCC Holdings Sdn Bhd is the developer of the entire KLCC Development, that is today’s Malaysia’s global landmark.

    The KLCC masterplan includes the Kuala Lumpur Convention Centre, Suria KLCC, Mandarin Oriental, Traders Hotel, ExxonMobil, The Binjai On The Park and of course the Petronas Twin Towers.

    The 88 storey Twin Towers designed by renowned world architect Cesar Pelli, has been the iconic skyline landmark of Malaysia since 1997.

    Interestingly, The Binjai on the Park, developed by KLCC Holdings, is the only residential property within the KLCC development masterplan.

    The design of The Binjai on The Park was to give residence of the condominium the most commanding views possible of the iconic Petronas Twin Tower.

    That is why, the condominium was strategically placed diagonally across the towers on a corner lot of the KLCC Park.

    “There are many condominiums around KLCC. But there is only one KLCC condominium, which is The Binjai on the Park,” says KLCC Group of Companies Group chief executive officer Hashim Wahir.

    He says most international top class condominiums can only offer either city skyline views such as the apartments in The Peak, Hong Kong, or be part of an iconic development such as Burj Khalifa in Dubai or Roppongi Hills Residence in Tokyo or those overlooking sizeable parks such as Hyde Park in London or Central Park in Manhattan.

    “From that perspective, The Binjai On The Park is the only one in the world that offers all these three. It has the most commanding views of the Petronas Twin Towers and is located right on the KLCC Park.

    “We have a city within a city,” he says.

    Hashim says there are more developments being developed under the KLCC masterplan over the next seven years.

    “Cesar Pelli, the designer of the Twin Towers will be back in Malaysia to design two more towers which will forever change the skyline of KL.

    “Malaysia is going to have two more iconic towers reshaping the KLCC skyline,” he says.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/9/4/business/6968970&sec=business

  11. Sluggish rental market
    By THEAN LEE CHENG

    EVEN as certain top-end condominium units have been sold at hefty prices, the general rental market in the KLCC vicinity has remained somewhat sluggish.

    Furthermore, given the expected fall in the number of expatriates in the country, real estate consultancy Rahim & Co executive chairman Datuk Abdul Rahim Rahman says the rental market in KLCC may not improve in the next two years while prices could also fall as owners come under pressure from their financiers.

    “This may lead to some of these owners off loading their properties at a discount,” he says.

    However, quality projects in exceptional locations with good branding and developers with strong established records in high-end development will fare better, enjoying strong demand from investors, owner occupiers and tenants.

    Even so, Rahim expects some moderate price appreciation of around 10% yearly, in spite of falling rental yields, as investors are now focused on capital gains.

    “The days of high rental yields are over. This in itself is not necessarily a negative thing. It is a sign of a maturing market,” says Rahim.

    The market in the first half of this year, he says, has been sluggish compared to the heady days of 2006/2007 when prices in the KLCC vicinity rose to hitherto unseen heights.

    Rahim adds however that the market has bottomed out and is now in recovery mode, with asking prices ranging between RM850 to RM1,700 psf. But the rental market is still soft; the average rental is dropping by 13% from RM4.88 psf in December 2008 to RM4.23 psf in June 2010.

    Having said that, Rahim says developers are more optimistic now compared to last year and have started reviewing their development proposals.

    According to him, there are about 7,000 units currently in the KLCC core area bounded by Jalan Ampang, Jalan Pinang, Jalan Kia Peng and Jalan Tun Razak.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/9/4/business/6979792&sec=business

  12. A rising trend for condos
    By TEE LIN SAY

    THERE used to be a time when landed properties, not multi-storied dwellings such as condos, were most sought after homes in Kuala Lumpur. While this may be true still to some extent, increasingly, high end condominiums are becoming the preferred choice for the affluent.

    The first condominium in the country was Tan & Tan Development Bhd’s Desa Kudalari in 1980. Back then, one of Desa Kudalari’s main attractions was that its residents could view the horse race at the nearby Kuala Lumpur racecourse. The racecourse is, of course, today, the KLCC Park.

    The dynamics changed with the arrival of the Twin Towers in 1997 and condominiums started to spring up. First, Stonor Park was developed in 2003, followed by Dua Residency in 2004 and then Park 7 in 2005. Notably, condominiums within close vicinity of KLCC began to fetch high prices.

    Even so, it would be difficult for other projects to fetch similar prices as the units in The Binjai On The Park. Only the planned Four Seasons has the potential to set new benchmarks because it has a strong global brand and is known to have a very aggressive pricing strategy for its properties.

    “New luxury condominiums around KLCC could be launched at RM1,800 to RM2,300psf. But (relatively) “lower-end” products around KLCC range from RM1,000 to RM1,500psf,” says HwangDBS Vickers property analyst Yee Mei Hui.

    SDB managing director Teh Lip Kee says there is no property bubble in sight. Prices are going up simply because cost is going up.

    “Furthermore, most of the demand are coming from the locals. Foreigners are not really buying yet. Also, not all developers are doing well. Only those with branding are doing well,” she says.

    Bandar Raya Developments Bhd chief executive officer Datuk Jagan Sabapathy says that more importantly, the emergence of luxury condominiums marks a shift from the traditional suburban living to condominium living in KL.

    “The condominiums in the city is not just for expat living. There is a huge and growing segment of young people living in the city who are well paid. There are also many well heeled parents who are buying homes for their kids. And they will pay for a luxury condominium,” says Jagan.

    He adds that there is a shift among the young who want to live a ‘happening life’.

    As such, in the coming years, he foresees the heart of the city being the heart of life.

    “People now choose to live in the city because of the convenience and better quality of life. There is no need for them to drive through the nasty traffic daily. Between a RM1mil home in the suburbs compared to a RM2mil condominium in KL, more may choose to live in KL,” he says.

    Apart from the convenience and lifestyle factors, Jagan says there is also the ‘empty nest factor’.

    “These are people whose children have left, so they want security. They don’t want to be bothered with the maintenance of the garden, the pool and the general upkeep of their homes. They want an easier life where they can travel anytime they want. Condominium living actually makes this easier,” he elaborates.

    “When the Government is successful in making downtown KL even more liveable, this trend of living in KLCC will get stronger in the years ahead,” says Jagan.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/9/4/business/6969880&sec=business

  13. Dealing with oversupply

    NOT surprisingly and generally speaking, most realtors concur that there is an oversupply of condominiums in the KLCC vicinity.

    For this reason, property valuation firm, VPC Alliance (M) Sdn Bhd managing director James Wong says he is neutral to negative on the condominium situation in KLCC as he believes the situation could only get worst unless the government jump starts the economy with more foreign direct investments and mega projects.

    Having said that, many say there is still room in the premise for niche products.

    “There are many condominiums coming onstream together. Not all do badly. There is a difference between the developers that are able to sell, and those that are not able to,” he says.

    With that, the new condominium launches that stand a higher chance of securing good take up rates are those that have strong distinguishing features.

    KGV-Lambert Smith Hampton Sdn Bhd director Anthony Chua says there have been no new launches of condominiums in the KLCC area in the last two years due to the global financial crisis and oversupply situation. In fact, in some instances, Chua says condominiums that were bought at RM2,000psf, and are now being sold at RM1,500psf.

    “These units tend to be large with poor layout. The problem was that some of the developers over-marketed and over-priced their condominiums. So sometimes it’s wise to buy completed projects to actually see what you are really buying,” he says, adding that there is more activity in smaller-sized condominiums which are relatively more affordable.

    To buy a good condominium, Wong says to first look at the strength and reputation of the builder to ensure that the developer is financially strong to complete the project even if there is a sudden economic downturn.

    Secondly, ambience is important. Good developments have comfortable surroundings or good themes, and not a busy street with noisy ‘night clubs’ in front of it.

    He added that investors also need to pay attention to the quality of finishings and the facilities offered.

    Even so, CIMB Research head Terence Wong still sees opportunities in condos around KLCC. He explained that prices of condos at Mont Kiara have caught-up with prices of KLCC. But land near KLCC is significantly more expensive and scarce than in Mont Kiara.

    According to DTZ Debenham Tie Leung (M) Sdn Bhd executive director Brian Koh, the issue of oversupply is more prevalent in the rental market. On this note, he says it may be easier to rent out smaller units of less than 2,000 sf as the oversupply involves those between the 2,500 and 3,500 sf range, which rental are generally higher than the housing budget allocations for expatriates.

    Many lament that rental rates for condominiums around KLCC have been stuck at RM4 to RM6psf per month for the past the three to five years.

    Chester Properties Sdn Bhd senior negotiator Nathali Tan says these rates are more applicable for condominiums around KLCC that were launched at RM700 to RM1,000psf levels five years back which are sizable but with basic designs and finishings.

    On the other hand, Terri Har, marketing and sales manager of Layar Intan Sdn Bhd says that the recently-completed The Binjai on the Park has started to pull in tenants at RM7.50 to RM8.50psf per month, setting a new benchmark in the rental market.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/9/4/business/6969886&sec=business

  14. KLCC plans new RM2b properties
    BY THEAN LEE CHENG

    Twin Towers architect Pelli will design two additional towers

    PETALING JAYA: Cesar Pelli, the architect of the Petronas Twin Towers, will once again be casting his magic on the 100-acre Kuala Lumpur City Centre (KLCC) site in a new development that is estimated to cost about RM2bil.

    Pelli is also involved in the design and architecture of retail and office block Lot C, to be completed next October. The 60-storey Lot C will be seamlessly integrated into the retail block of Suria KLCC, next to Mandarin Oriental Hotel.

    In this other development on Lot 185 and Lot 167/K, the world-renowned architect will be designing two additional towers of between 50 and 70 storeys next to the Twin Towers. The two blocks, an office tower and a hotel, will sit on a four-storey podium retail block that will be integrated with the present four-storey retail mall, Suria KLCC.

    Hashim Wahir, the group chief executive officer of the KLCC Group of Companies said the development, sited on three acres, would be built on two adjacent plots.

    The Economic Planning Unit gave its go-ahead for the joint venture a few weeks ago, Hashim said. A detailed planning phase will be the next step and works are expected to begin by mid next year.

    This latest development, Hashim said, would be undertaken by KLCC (Holdings) Sdn Bhd in a 50:50 joint venture with the Qatari Investment Authority via QD Asia Pacific Ltd, a subsidiary of Qatari Diar Real Estate Investment Co, the investment arm of Qatari Investment Authority.

    “Lot C has one million sq ft of commercial space. It is being developed at a cost of RM1bil. This other development on two adjacent plots will have two million sq ft of commercial space. That will indicate how much this latest development will cost,” he said.

    Currently, the 100-acre KLCC development, of which half has been gazetted as the KLCC Park, has about 10 million sq ft of space in the Twin Towers, Suria KLCC, Menara Exxon Mobil, the Mandarin Oriental, Traders Hotel, the KLCC Convention Centre and Menara Maxis. All of them belong to the KLCC group of companies.

    The entire KLCC area is earmarked to have between 20 million and 22 million of commercial space.

    “These latest developments comprising the hotel and office tower blocks will complement and enhance the skyline. It will enhance the view for Binjai On The Park, our only residential development,” Hashim said.

    He said the latest development, together with Lot C, would help give a new shopping experience to the more than four million visitors who throng the Suria KLCC. A plaza connects Suria KLCC with this new retail podium block in Lot 185 and Lot 167.

    “There is a demand from retailers for space,” Hashim said.

    Within the next five to seven years, other developments will be coming up behind Traders Hotel and in other parcels of land on both sides of Binjai On The Park.

    “As we complete these different components that make up the KLCC development, we believe the value of Binjai On the Park will move up because new amenities and conveniences are being added.

    “Binjai is the first residential property on the park. We are working to provide delivery service from the supermarkets from Suria KLCC; our residents have access to all the services that Mandarin Oriental guests enjoy and we also have the Prince Court Medical Centre to provide medical services for residents,” he said.

    More than 95% of Tower B of Binjai On the Park has been sold. What remains are the larger standard units in both towers and the 19,000-sq-ft triplex penthouse in Tower A.

    “As our master plan unfolds, the value of our projects on these 100 acres will continue to be enhanced. One Hyde Park (a high-rise residential development) in London only has the park.

    “We have the park and many other components that have proven to be synergistic both in terms of physical amenities and services, all in one single iconic development, with a commanding skyline,” Hashim said

    fr:biz.thestar.com.my/news/story.asp?file=/2010/9/7/business/6991436&sec=business

  15. What industry players say

    The property sector, be it commercial or residential, has been hogging the limelight in recent months in terms of its direction and outlook. StarBizWeek’s Angie Ng and Eugene Mahalingam obtain the views and thoughts of several industry players on the road ahead for the property scene, the measures currently being considered by regulators to stabilise the market as well as the measures they would like to see incorporated in the soon-to-be tabled Budget 2011.
    Not across the board

    DATUK MICHAEL YAM,
    Real Estate and Housing Developers’ Association president

    The steep increase in property prices is not across the board. A report by RAM stated that elastic supply and normalisation of monetary and financing conditions make a property bubble unlikely to develop and that the tension between over-valuation and affordability will ensure a stable and improving market.

    We believe that the steep price increases are only in scattered locations in KLCC and landed housing units in the Greater Kuala Lumpur area. This does not represent a bubble but a short-term deviation from fundamentals due to isolated speculative activities in the KLCC area for high-end condos.

    In the case of landed houses – single and double-storey terrace houses and semi-detached houses – there is a shortage of supply especially in good locations to meet real demand.

    As a consequence of this inequilibrium, the limited existing stocks are commanding good secondary market prices while new launches are being sought after.

    This is a reflection of actual demand by locals who have to contend with paying a premium for well-located landed properties that are limited in stock and scarce in supply caused by shortage of land particularly in urban areas.

    Except for a few selected apartments sold at premium prices in the KLCC areas presumably due to their unique or iconic features, there is still adequate supply in the market at attractive prices especially for owner occupiers.

    Our view is that despite the uniqueness of KLCC, it is still neither an investment destination for global investors nor for international speculators.

    Capital appreciation except for the short period before the 2008 global financial crises coupled with the Government’s drive to attract investors has been relatively unattractive.

    The perceived inconsistency of policies and knee-jerk reaction to such hearsay (that rocketing prices caused by property speculation particularly foreigners) has exacerbated the lack of interest in our world-class properties. Moving forward, the KLCC area needs an infusion of foreign investment to sustain the present price level.
    It’s sustainable

    TAN SRI LEONG HOY KUM,
    Mah Sing Group Bhd president and group chief executive

    We think the property market is sustainable and the current buying pattern is backed by sound economic fundamentals and genuine purchasers. A steady employment market and low mortgage rates are encouraging more first time homeowners to buy property. The market is flushed with liquidity and government tax incentives have also encouraged home purchases. Low deposit rates will also act as a push factor to drive property demand. All these factors have encouraged healthy demand for properties.

    We do not see a strong risk of a property bubble happening yet and there is no sign of overheating. The price increase in properties has not been broad-based, but demand driven and rather selectively in prime locations.

    The strong demand and price premium reflect a project’s prime location, concepts and exclusive features. To provide for the buyers, there is also cost for research and development activities. Higher construction and land cost are also factors for the premium price charged for some of the projects.

    New launches are concept and lifestyle driven, and have been designed to fit current market needs. For example, residential properties with large built-ups are popular to house three generations under one roof.

    Security has become a top priority and that’s why gated and guarded projects are doing very well. In areas like Mont’ Kiara and downtown Kuala Lumpur, residential suites would be the preferred option for singletons, or investors seeking rental returns.
    Target the speculators

    ELVIN FERNANDEZ,
    Khong & Jaafar Sdn Bhd managing director

    The residential market this year has been fairly stable. However, on account of the unusual financing packages that we have (e.g. 5/95), interest rates are still low and banks are still giving out loans.

    There has been a “run-up in prices” in a few selected areas and this is cause for concern. This is the reason for the lower mortgage loan-to-value ratio (LVR) that’s currently being studied by Bank Negara,

    You need to tame the real estate cycle. (When property prices go up) it is good for the house owner and for the developer. But it is not good for the country when prices run ahead of fundamentals.

    The LVR is a good move. The authorities should be constantly vigilant of house prices running ahead of the fundamentals.

    You need specific mechanisms to control the real estate market. In the past, tools used to tame asset bubbles were only monetary in nature, such as interest rates. But when you raise or reduce interest rates, it has a broad effect (and not just specific to real estate).

    These policy measures must be such that first-time house buyers are not caught by it while the speculators are targeted.
    Looking good for next two years

    CHRIS BOYD,
    CB Richard Ellis Malaysia Sdn Bhd executive chairman

    The property market is going strong this year. There will continue to be challenges, especially in the high-rise residential market because of large supply in some localities. The landed residential sub segment is strong and will continue to remain this way.

    The retail sub segment is stable. The (retail) market successfully digested the supply that came in when the Pavilion mall was completed (in 2007).

    Even hotels are experiencing excellent business at the moment and will continue to do so.

    The property market in general is looking good for the next two years. Finance is still cheap and readily available, which is critical to the residential sub segment.

    Historically, the residential market has shown that its capable of self-regularisation and can easily correct itself without external intervention.

    (On Budget 2011) It would be nice to see more financial incentives for green buildings. It’s on the radar but didn’t get realised in the last budget. It would be nice to see more measurable steps towards sustainability.

    (However) it is a mistake to rely solely on the Government to make the property sector more attractive.
    Still promising

    KUMAR THARMALINGAM,
    Malaysia Property Inc CEO

    The Malaysian property sector is looking promising across the board. The mood is that construction costs are going up and this is spurring people to buy property quickly.

    Banks are also cautious. They always to their due diligence on the buyers. They may only give a 70% loan if they think that is all the purchaser deserves. The industry as a whole is stable. This positive trend will continue for the rest of the year.

    If there is a 0.5 percentage point increase in interest rates, I don’t think it would make a difference to the average consumer.

    We won’t see any impact if the West goes into a double dip recession because our regulatory system and our banks are stable.
    Mini-boom seen

    PREVINDRAN SINGHE,
    Zerin Properties CEO

    The outlook (for the property market) is stable and we expect prices to continue rising. We expect a mini-boom in the second quarter of next year.

    (On the possibility of raising the quantum of real property gains tax) It would defeat the Government’s intention of making Malaysia a real-estate destination. (Hopes for Budget 2011) We’d like to see the removal of taxes for real estate investment trusts and more efficiency in the Government department on the real estate side.
    Banks not holding back loans

    JAMES WONG,
    VPC Alliance (M) Sdn Bhd managing director

    The Malaysian property market in the first half of 2010 has improved significantly compared to the first half of last year. This is because a lot of developers are launching new projects and are offering easy payment schemes, such as 5/95.

    This has attracted a lot of buying interests, especially in places where homes are more affordable.

    We still expect to see a hike in prices for landed residential properties. This is partly because banks are not holding back on their lending policies.

    In countries such as Singapore, Hong Kong and China, their central banks have come up with pre-emptive measures to cool the property market.

    When Bank Negara announced it was studying the LVR, there were a lot of protests, but I feel this a good move for the market. Perhaps they should exclude certain buyers from the cap of 80% (loan), such as first-time buyers or make it applicable for properties above RM500,000 only.
    Make it easier for first-time buyers

    CHANG KIM LOONG,
    National House Buyer’s Association honorary secretary-general

    There are a lot of young professionals (lawyers, architects, engineers) coming into the market today and many of them can’t even afford homes. In Kuala Lumpur, you can’t get a bungalow for RM250,000.

    The rates of houses are increasing by leaps and bounds every year. It is surpassing the average annual income increment. Unless you have a rich father that can pay for you, the affordability of houses is seriously becoming an issue.

    I understand that you have terrace houses within Desa Park City (Kuala Lumpur) that are going for RM1mil. It’s ridiculous! How to afford?

    The Government has to come up with some kind of a price-control mechanism for houses. With prices like these, it’s only the rich that can buy, especially foreigners.

    (On LVR) There should be a threshold to help curb speculation. For first-time buyers, 90% and onwards loans are fine. But for subsequent purchasers, the quantum should be less. Alternatively, a higher loan quantum (90% and above) should be given for homes that cost less than RM500,000.
    No cheap house

    MELISSA RAM,
    Virgin Properties Sdn Bhd chief operating officer

    The local property market is certainly on an uptrend and prices have been escalating. Even when there’s a slight downturn, property prices just don’t seem affected. You just can’t seem to find a cheap house at the moment.

    (On LVR) I think it’s a good move as it will only encourage people that have the means to purchase property to apply for loans. You should only buy a house if you have the funds.

    On the downside, it would mean that poorer people would not be able to afford houses. However, this measure could encourage people to save up before buying a home.

    frbiz.thestar.com.my/news/story.asp?file=/2010/9/18/business/7034294&sec=business

  16. Cooling down the market
    THE REAL ESTATE
    By ANGIE NG

    THE issue of whether an asset bubble is forming has become a hot topic in a number of countries in Asia these days.

    Hong Kong, China and Singapore have sounded the alarm on skyrocketing property prices and are worried that a bubble could be building up and will lead to a market collapse if the north-bound prices are left unchecked.

    When an asset bubble happens, prices for a broad spectrum of properties would have escalated beyond the affordability of many common folks. The price increases are not due to fundamental demand but are being artificially pushed up by speculators.

    This is what is happening in the “hot” property markets in the region today, and their governments are scrambling to cool the market down with tightening measures such as stricter mortgage loan policies and higher deposits for purchasers.

    While some parts of the world, notably the western countries, are still facing the likelihood of a double dip in their economies, Asia has made a notable recovery in the past one year.

    The low interest rate environment, high liquidity and an under performing equity market are fuelling a growing appetite for property investment among Asians who are renowned for their high savings.

    The danger is that when interest rates start to rise and affordability is affected, demand may start to shrink. The bubble will then burst and result in falling asset prices and a market collapse.

    The same issue has been raised about the state of the local property market. Will the run-up in the prices of houses in some parts of the Klang Valley, Penang, and Johor, be a prelude for prices to jump in the other broader property sectors and other parts of the country?

    Although the current price spike is still quite contained within the higher end landed residential sector in sought after areas, some concerned parties have voiced concerns that it may spell trouble for the local market if the situation persist and a contagion effect takes place.

    Those who are pressing the panic button are pointing their fingers at the speculators for the huge price increases through “property flipping” activities. By buying and selling within a short time, the main aim of these speculators is to push prices up and pocket the profits.

    They worry that the bubble will burst when it becomes too big and unsustainable.

    The bursting of the bubble will send prices tumbling and property values will be washed down the drains, causing much unnecessary losses.

    Those who say there is no immediate danger believes the price increases of housing in the country are not across the board but are contained in only the “hot” areas.

    To them, some degree of speculation is actually quite healthy and will not harm the market.

    Although there is no confirmed figure on the exact percentage of speculative buying in the local market, the prevailing low interest rates and easy financing schemes are indirectly churning out more speculators in the market.

    Unlike genuine investors who usually keep their properties to be leased out for long-term rental income, speculators are those who flip (buy and sell) their properties within a short time for quick profits.

    It is common knowledge that there is a growing number of people (with extra cash for investment) who are pooling their resources to buy up multiple housing units (both apartments and landed) for profit-making purposes. They are hoping that their “investment ventures” will yield substantial profits for them in the current market run up.

    Excessive speculation is unhealthy as it will unnecessarily burden genuine property buyers who find themselves being priced out of the market.

    It will be a good time for the respective state housing authorities to churn out more public housing projects to meet the needs of the lower income population.

    National House Buyers Association honorary secretary-general Chang Kim Loong laments that with the steep prices, only the rich, especially foreigners, can afford to buy. He urged the Government to introduce some kind of a price-control mechanism for houses – a threshold to help curb speculation.

    He also suggests a lower mortgage loan limit (below 90%) for subsequent purchasers.

    It is undeniable that some first time house buyers may still need the financing assistance to make it affordable for them to own a property.

    To ensure the new measures do not unnecessarily burden genuine buyers, especially first timers, some flexibility like allowing a loan limit of up to 95% should be extended to these buyers who meet the banks’ credit assessment criteria.

    Buyers who already own at least one property should have to dig into their own pockets for a higher downpayment for their subsequent purchase.

    The easy financing schemes offered by developers and their panel of bankers should be phased out for upper medium to high-end houses.

    Those who are taking advantage of the facility to speculate in multiple properties should not be granted “the free hand” to manipulate the market for their own gains.

    ● Deputy news editor Angie Ng believes all stakeholders – from house buyers to developers and the regulatory authorities has a role to play to upkeep the sanctity of the market.
    fr:biz.thestar.com.my/news/story.asp?file=/2010/9/18/business/7051004&sec=business