Post date: Feb 11, 2011 11:39:42 PM
Tuesday, 08 February 2011
Suburban Hotspots Takes the Lead
New trends that have emerged in the market place in 2010 hold out the promise of excit-ing new choices for aspiring homeowners.
The trends include innovative suburban concepts, an increasing variety of green projects, and on the corporate side, mergers between top property developers.
The spreading urban sprawl away from the Kuala Lumpur city centre has seen the rise in popularity of brand new town-ships, creating notable pockets of competitive, demand-driven suburban hotspots.
Desa ParkCity, Ara Damansara and Setia Alam are prime examples of middle-to-high cost developments that are attracting a clientele whose needs were previously under-served.
Prices in these areas were recently recorded from RM800 to RM1100psf .
The advantages of their strategic location and the implementation of unusual features could justify the premiums attached to the purchase price of properties in these developments. Some clear traits are the proximity to major highways such as the North Klang Valley Expressway, reliable safety features such as township patrols and accessibility to active commercial areas, notably for Ara Damansara and Setia Alam.
These new suburbs have almost always emerged out of greenfield projects, allowing the developers to take into account design and infra structure considerations that are able to incorporate larger use of space compared with urban regeneration projects within the city centre or even Petaling Jaya’s established suburbs.
Rising prices of residential properties around the KL city centre will continue to push buyer attention outwards from the city centre fringes into areas such as Rawang, Shah Alam, Sungai Buloh and Kajang. More and more new resi-dential developments are sprouting in this areas to cater to existing demand and rising demand from cost-sensitive home buyers.
Greener Pastures Another trend that has emerged is the green building concept. While green concepts cut across many industry guidelines and future initiatives, real estate is no exception.
Malaysia’s Green Building Index (GBI) has gained mileage for the industry, having increasingly gained acceptance from developers and recognition from the industry worldwide. Arguably, this is one of the current trends that looks set to move from being a good-to-have certification to a mandatory requirement in time to come.
Property developments that have re-ceived GBI certification are:
3 HARMONI, Sunway SPK Daman-sara by Sunway City Berhad (Residential);
Ken Bangsar by Ken Property Sdn Bhd. Commercial developments (Residential);
1 First Avenue, Bandar Utama Da-mansara by Bandar Utama City Sdn Bhd (Commercial); and
Menara Worldwide, Jalan Bukit Bin-tang by Worldwide Holdings Bhd (Commercial)
The M&A buzzword
The 4th quarter of 2010 saw three major property mergers and acquisitions announcements: SunCity - SunHold-ings, UEM Land Holdings Bhd - Sunrise Berhad and MRCB-IJM Land Bhd. Themerger of SunCity - SunHoldings and UEM Land Holdings Bhd - Sunrise Ber-had will result in a combined market capitalisation of RM3.6 billion and RM9.0 billion respectively.
While the obvious benefits of any M&A activity to gain larger market share and to create synergies goes without say-ing, a separate set of advantages emerge from these potential public-private mergers. The merged entities will be endowed with an increase in collective market capitalisation, combined landbanks and the benefit of government-backed support.
Moving into 2011, developers and home buyers alike are expected to tread cautiously amidst speculation of active government intervention in curbing the rising inflation rate, controlling household debt as well as monitoring the activity of “hot money” inflows. This has been the trend observed across key Asia-Pacific markets, especially in China and Singapore as the region continues to be an exciting investment target for investors around the world.
On the domestic front, the recent im-plementation of a maximum loan-to-value (LTV) ratio of 70% by the Central Bank of Malaysia is one method to keep the residential market transac-tions in check. We believe that the gov-ernment’s mega ETP projects lined up such as the RM36.6b Mass Rapid Transit System and the Greater KL development will continue to spur interest and provide a positive long-term outlook to the foreign investment community.
Asian Data Centre Hub in the making
One of the Economic Transformation Programme’s (ETP) key highlights is the plan to position Malaysia as a data centre (DC) and outsourcing hub in the South East Asian region.
Malaysia’s market share of DC space in Asia is approximately 4%. Market leaders in Asia are China and South Korea, with India and Singapore trailing closely be-hind. Currently, the 21 existing DCs in Malaysia take up 0.5m sq ft of floor space. Effort is being undertaken to in-crease the space to 5.0m sq ft by 2020. IT services and outsourcing revenues are projected to increase in the range of 10% to 12% year on year up to 2014.
One of the Economic Transformation Programme’s (ETP) key highlights is the plan to position Malaysia as a data centre (DC) and outsourcing hub in the South East Asian region.
Malaysia’s market share of DC space in Asia is approximately 4%. Market leaders in Asia are China and South Korea, with India and Singapore trailing closely behind. Currently, the 21 existing DCs in Malaysia take up 0.5m sq ft of floor space. Effort is being undertaken to increase the space to 5.0m sq ft by 2020. IT services and outsourcing revenues are projected to increase in the range of 10% to 12% year on year up to 2014.
- Cyberjaya
- Technology Park Malaysia
- UPM-MTDC
- KL City Centre
- KL Sentral
- TM Cybercentre Complex
- Mid Valley City
- I-City - Bandar Utama
- Bangsar South City
Some financial incentives offered are:
Pioneer Status: 100% exemption from taxable statutory income. This incen-tive is granted for a period of five years for the first round.
100% Investment Tax Allowance (ITA).
Eligibility for research and development grants (for majority Malaysian-owned MSC-status companies).
Freedom to source capital and borrow funds globally.
Duty-free Importation of multimedia equipment (DFI).
Local success stories also pave the way for further expansion of data centres in Malaysia. CSF Group, a Malaysian data centre company listed on London’s Alter-native Investments Market owns four buildings covering a total area of 205,000 sq ft. Their latest data centre, CX5, was completed at the end of 2010.
With the government’s ambitions for data centres projected to fulfill a robust future demand for IT and outsourcing services, Malaysia still has much to catch up on in terms of updating its IT infra-structure, cost competitiveness and avail-ability of labour. In line with the ETP’s Greater KL plan to attract skilled foreign professionals, coupled with the recent creation of Talent Development Corporation, first steps are already being taken to open the door for skilled personnel to contribute to the country’s human capital requirements.
Affordable medical care, good educational institutions and developers’ credibility are among the top criteria that determine Korean investors’ decision to purchase property over-seas.
This was revealed at a recent MPI-organised seminar on property investment in Malaysia at REC Institutional Investments 2010 conference in Seoul.
Korean buyers are particularly keen on retirement villages and holiday homes. Their attraction to these types of properties in Malaysia is linked to the affordable medical care in the country.
Korean investors also look at the availability of good international schools and colleges that offer quality English language education. Some who are familiar with Malaysia are looking to share opportunities to invest with their family members and friends.
Concerns on whether the local property market is heading towards a bubble and the rising tension on the North-South situation in their country have recently spurred Koreans to look for properties overseas. Political stability, freedom of religion and transparent taxation laws have placed Malaysia on their list of pre-ferred investment destinations.
The primary element individual buyers assess before committing to a purchase is the credibility of local developers. A credible developer with a laudable profile will definitely stand a chance to capture this market. This group looks for properties worth between USD750,000 to USD1million.
On the Institutional Market front, more and more Korean funds are allocating resources to be invested in alternative investment classes. This funds are aggresively seeking investments as yields achievable in many overseas markets are potentially higher than yields achievable domestically. Plagued by the aging demograhic phenomenon, local pension funds are seeking even higher returns and more diversified holdings overseas.
Most prime properties in Seoul have been traded in 2009/2010. Hence, Korean institutions are also facing increasing difficulty in sourcing for appropriate hard assets in the local market.
Regulators have plans to deregulate rules on corporate pensions, similar to the recent relaxation of policies in China for insurance companies’ investments. This has further enhanced the funds’ interest to diversify their portfolios.
However, real estate investment as an alternative investment product is a relatively new concept.
These Seoul Searching
funds are tradionally risk-averse and very selective of investments. They prefer to deploy capital in developed, transparent markets with easy exit.
Faced with lack of manpower and lack of information on overseas legal and institutional frameworks, these funds welcome parties that can provide them with a clear platform on the intricacies of investment assessment and deal-sourcing processes.
As guarantee for additional funding is a big uncertainty, these funds prefer to partner with credible co-investors with good credit ratings and similar portfolio of interest for en-bloc purchases. A key point to note here is that the funds are primarily on the lookout for Grade-A commercial properties with stable tenant income.
Institutional funds that are strenthening their international foray are Korea’s National Pension Service (with approx. US$240 billion in assets), Korean Teachers Credit Union, Public Officials Benefit Association and Korea Post.
RM3b boost for Corridor Development
The Mace Group from the United Kingdom and Corridor Development Corporation Bhd (CDC) recently signed a Memorandum of Understand-ing to source and partner in various projects in Malaysia, particularly in regional development corridors. Mace Group is a global consultancy and construction giant with businesses in over 50 countries, with re-corded fee turnover of US1.4 billion in 2010. Mace will invest RM3 bil-lion in various construction projects in Malaysia over the next five years, working closely with CDC on a number of construction, real es-tate and industrial projects in the development corridors.
At the initial stage in 2011, Mace will invest around RM200 million to RM300 million in the development of Sungai Rambai in the south of Melaka. These projects include the development of the Rambai New Township project, Sungai Rambai Enterprise Zone and the re-development of Sungai Rambai old-town project.
Urban regeneration effort put Johor on par
As the third most populous state in Malaysia and the fifth largest in terms of landmass, Johor is one of the country’s key market centres for both leisure and commercial activity. The state is also the third largest contributor to national GDP at approximately 10%, behind the states of Selangor and Wilayah Persekutuan KL.
Malaysia’s major towns have undergone the evolutionary property development phases; moving from local council-led developments to private townships and subsequently, to large mixed de-velopments. Sophisticated safety features and interior design have gone hand-in-hand to contribute to the continuing increase in land and property pricing, especially around Greater Kuala Lumpur, Penang Island and even Kota Kinabalu in Sabah. Johor Bahru, however, struggled to move beyond a local property play until ambitious regeneration efforts were announced.
Most importantly, Johor state’s Iskandar Malaysia (IM) connection and proximity with Singapore offers a symbiotic potential akin to the Shenzhen-Hong Kong metropolis.
The announced High Speed Rail System (HSR) from Kuala Lumpur to Singapore is a key factor in opening up access and improving economic activity both domestically and with Singapore. Impending development on land swaps between the Malaysian and Singaporean government is predicted to create bilateral advantages upon completion of these plans.
IM has been a continuous work-in-progress to attract foreign direct investment, in the form of infrastructure and development joint ventures as well as opening of new branches. The total value of investments between 2006 and September 2010 stands at RM64.4 billion (USD20.8billion). Upcoming developments in JB City Centre include a RM12 billion (USD3.9 billion) mixed development by Southkey Properties Sdn Bhd and a RM4 billion (USD1.3 billion) Lido Boulevard mixed development.
Retail is Shining Bright
Malaysia’s annual retail sales achieved com-mendable growth in 2010.
Retail Group Malaysia (RGM) on behalf of Malaysia Retailer Association (MRA), showed retail sales grew 7.6% year-on year to RM76.5 billion in total sales in 2010. This is forecasted to move steadily with a 5% growth for 2011.
Malaysia is currently home to 300 shopping complexes, with half of these located in the Greater Kuala Lumpur vicinity. Comparable to other lively retail hubs in the region such as Singapore and Jakarta in Indonesia, the average occupancy rate in Malaysian shopping complexes currently hovers at a healthy 80%, an observed trend for the last five years.
The tourism industry plays a large part in boost-ing the positive outlook for this sector. The Ma-laysian Association of Shopping and Highrise Complex Management (PPK) predicts an achiev-able increase in tourist shopping expenditure from 28% in 2010 to 40% by 2020, an amount that comes up to RM63 billion worth of shop-ping in 2020.
While gross figures show a total of 2.2 million sq ft of net lettable area entering the retail market in 2011, the softer aspects of the retail sector promise many more exciting developments. Shopping mall operators are refining their game with more customer-centric infrastructure and enhancements in place. These include:
Berjaya Time Square to Pavilion - 800m of covered walkways
Jalan Perak/Pavilion to Crowne Plaza - 400m of elevated and covered walkways
Jalan P.Ramlee/Jalan Sultan Ismail to Jalan Pinang) - 450m of covered walkways
Skybridges connecting existing retail mails to new phases, including at The Curve and Plaza Damas
Incoming global brands such as Sephora at Starhill Gallery
New Projects to Spur Growth
Malaysian Prime Minister Datuk Seri Najib Tun Razak announced 19 more projects within the Government’s Economic Transformation Programme (ETP) in a continuous effort to engage both local and foreign audiences with development updates. These updates cover the country’s 10 highlighted National Key Economic Areas covering: 1) Oil, Gas & Energy 2) Business Services 3) Agriculture 4) Healthcare 5) Tourism 6) Electrical & Electronics 7) Education 8) Communications content & infrastructure 9) Wholesale and retail, and 10) Greater KL Development.