Sandwiched between two petrol stations along Jalan Burhanuddin Helmi, Ken Holdings Bhd will build a green office building, which will house its corporate headquarters. The 13-storey energy-efficient office tower will be equipped with facilities equivalent to that of a 5-star hotel. It will have four levels of basement parking, food and beverage outlets as well as a ballroom that will also double as a conference room. Recreational facilities will include a swimming pool, gym and sauna for tenants.
Saturday April 7, 2012By THOMAS HUONG firstname.lastname@example.org
Prices and rentals for residential properties in the Klang Valley should stabilise this year due to credit-tightening measures by banks and investors' cautious sentiment after prices of houses rose by 6.6% last year, according to property consultants.
However, they point out that property developments in selected locations, especially in areas where the proposed Klang Valley My Rapid Transit (MRT) and Light Rail Transit (LRT) stations are, would still perform well in terms of capital appreciation.
Property consultancy CB Richard Ellis (M) executive director Paul Khongsays price increases in the Klang Valley residential market had slowed down slightly in the last two quarters.
“Property developers are offering more incentives and freebies to push sales, ranging from free SPA (sales and purchase agreement), stamp duty, free air-conditioners to even trips to Hong Kong,” he says.
Khong says that this year, buyers are more cautious as prices are currently toppish.
“Loans are now getting difficult to secure. Larger numbers of buyers especially investors, have now taken a more conservative stand.”
Some heat has been taken out of the speculative end of the property market in recent months, says property consultancy Khong and Jaafarmanaging director Elvin Fernandez.
“Speculation is an accepted and needed element in any market, excessive speculation is not,” says Fernandez.
One property research analyst says the residential property market is set to take a breather, and prices should be flat in 2012 and 2013.
“Last year was a sterling period when property prices went up a lot, especially for new development launches.
“So, we are coming off from a very high base set in 2011. Can the market maintain this kind of momentum?
“We do not think so as there are no major catalysts and banks are cooling down the residential property sector,” he says.
The property analyst also says a lot of residential properties launched in 2010 would be completed this year.
“Many owners will try to flip' their units. So, there will be affordability issues if prices keep going up.”
According to data on Bank Negara's website, the number of loans applied for purchases of residential property increased by 17% year-on-year in the first two months of 2012 to RM26.7bil.
The amount of residential property loans approved during the period was RM12.25bil, which was 2.7% higher compared with a year earlier.
Meanwhile, the amount of loans applied for purchases of non-residential property increased by 15.3% year-on-year in the first two months of 2012 to RM13.83bil.
The amount of non-residential property loans approved during the period was RM6.83bil, which was 8.4% higher compared with a year earlier.
Another property research analyst says the central bank's data shows that credit-tightening measures are working to cool down the property sector. “This year to date, demand is still very strong, and has in fact increased substantially, especially for residential properties.
However, the amount of loans approved was not substantially higher compared with the same period last year,” he says.
Fernandez says there is evidence that the run-up in prices for the various “hot spots” of housing in the Klang Valley and in Penang, have been arrested due to cooling measures undertaken by Bank Negara and the tightening on housing loans by banks.
Effective this year, banks have started using net income instead of gross income to calculate the debt service ratio for loans.
Fernandez also points out that coming out of the holiday season this year, there was a distinct slowdown in enquiries for mortgage valuations and house purchases in the secondary market.
“The Government has said it was serious about preventing a property asset bubble. So, even if banks start to loosen the lending guidelines in the later part of the year, how much can property prices go up before measures such as increasing the real property gains tax (RPGT) are imposed?”
The 2011 property market report, compiled by the Finance Ministry's Valuation and Property Services Department, says the Malaysian All House Price Index had surged to 156.9 points in the fourth quarter of last year compared with 147.2 points a year earlier.
The report also says the demand for high-end units priced above RM500,000 had increased in the country, with 21,905 transactions last year (compared with 16,782 in 2010).
“This could be attributed to the increase in affordability level and supported by the ease in borrowing as well as attractive loan packages offered by the financial institutions,” says the report.
Khong says this is also largely due to the fact that there is a substantial increase in the number of units priced above RM500,000 in recent times within the Klang Valley.
“Many residential properties have gone beyond this price level. So, a lot of sales done would largely be in this category now.”
Khong points out that nowadays, it is virtually impossible to buy a landed property at RM500,000 or below in good locations in Petaling Jaya and Kuala Lumpur.
“A terrace house in Taman Sri Hartamas is already above RM1mil and even one in SS2, Petaling Jaya or Bandar Setia Alam, Shah Alam has also moved up above this RM500,000 range.”
The report noted that last year, prices of houses continued to consolidate, with landed housing in general on an upward trend.
Across the board, terraced houses in Kuala Lumpur recorded price increase of 8% to 13%.
For example, the prices of single-storey terraced houses in Lucky Garden, Taynton View and Salak South Garden rose by 8.1% to 11.9% while double-storey terraced houses in Bandar Tasek Selatan saw price increases of 11.7%.
However, the prices of high-rise developments in Kuala Lumpur showed mixed trends.
Low-cost flats in Taman Batu Permai recorded price increases of 11% due to strong demand while the prices of low-cost flats in Bandar Baru Sri Petaling dropped by 5% due to competition from other stratified buildings in the area.
Apart from that, the prices of condominiums at Casa Kiara II and Mont Kiara Pines rose by 12.8% and 13.3% respectively.
Residential housing prices in Selangor were also influenced by projects such as the MRT and Light Rail Transit, with single and double-storey terraced houses in locations such as Petaling Jaya, Subang Jaya and Bandar Utama registering double-digit increases of 14% to 34.3%.
In the high-rise segment, it is noted that apartment units in Bandar Puchong Jaya and Taman Puteri Impian recorded price increases of 3.3% and 21.5% respectively.
Meanwhile, in Putrajaya, prices of residential properties also recorded strong growth.
Prices of double-storey terraced units in Precinct 11 increased by 18%, with the highest price registering at RM430,000 (against RM370,000 in 2010) while prices of low-cost flats in Precinct 9 rose by 10%.
The report also points out that the 55km Sungai Buloh-Kajang MRT alignment, which is expected to be completed in 2017, could result in an appreciation in property values within the areas served by the project such as Taman Tun Dr Ismail and Phoenix Plaza.
“Those who have parcels of developed or undeveloped land along the alignment are poised to enjoy the spillover effects of the rise in property values.”
Across the board in the country, the rental rate of both landed and stratified residential properties is stable.
However, there are exceptions particularly in the Klang Valley.
In Bandar Utama, Selangor, rental of two and two-and-a-half storey terrace houses grew by 30% and 36.4% respectively with rental ranging from RM1,900 to RM2,900 per month.
Rentals for single-storey medium cost terrace houses at Bandar Sri Damansara increased strongly by 35%.
Meanwhile, in Kajang, single-storey terrace houses in Taman Cheras Jaya and Taman Bukit Mewah showed rental growth of 9.1% and 5.3% respectively due to their strategic location near the exit to SILK Highway.
Increases in rentals are also seen in low-cost flats and apartments in Damansara Damai, Bandar Puchong Jaya and Taman Kinrara.
Double-digit rental growth is seen in condominiums at Bandar Baru Ampang, Taman Pandan Mewah, One Ampang Avenue and Pelangi Damansara.
In Kuala Lumpur, rental increase of 4% to 13% is seen for single and double-storey terrace houses in Danau Kota, Happy Garden, OUG and Salak South Garden.
Rental of apartment units were generally stable, except for certain high-rise developments in Kuala Lumpur, the Petaling district and Ampang which increased by 5.5% to 18.2%.
However, Fernandez says rental yields for ubiquitous two-storey terrace houses in selected areas in the Klang Valley are getting lower.
“The trend has been towards lower returns, slipping below the critical 3% benchmark. Below 3% is a cause for concern as houses should return between 3% and 6% (all risks net return) depending on house type, and whether it is landed or strata.”
One property analyst also says it is getting tougher for residential property buyers to obtain decent rental yields.
“Rentals will always be area specific. But generally, how many people in the Klang Valley can afford to pay rental of RM2,000 a month with the exception of foreigners. Typically, young professionals and couples are paying rentals in the range of RM1,000 to RM1,500 a month.”
Boom for shops
In Kuala Lumpur as well as the Petaling and Batu districts, prices of shops increased by 2.9% to 21.4%.
Those in Taman Alam Damai (Damai Niaga) recorded the highest average price change, from a range of RM895,000 to RM910,000 in 2010 to a range of RM1.1mil to RM1.2mil last year.
Notable price increases for shops are also seen in Happy Garden (8%) and Salak South Garden (11%).
In Selangor, shop prices increased by 18% and 42.4% in the central town prime areas in Subang Jaya and Kota Damansara respectively as positive expectation from the proposed MRT and LRT projects spurred the commercial segments.
Meanwhile, rentals for commercial shops showed optimistic performance last year.
Rental of ground floor shops in Jalan Masjid India, Kuala Lumpur continued to be the highest at RM20,000 to RM25,000 per month.
Ground floor shops rental that showed double-digit increases include Kuchai Entrepreneurs Park and Taman Connaught at 16.6% and 11% respectively.
For Selangor, good areas in Petaling Jaya recorded rental increases of 13.3%.
Khong says shop rentals will continue to escalate slightly this year, reflecting the high prices that investors paid for such shops.
“In areas where commercial activities are bustling, rents will be good as well. Rents may not fairly match the capital values in many cases.”
However, he points out that shophouse rents will depend largely on the actual commercial performance of the individual centre.
One property analyst says shop owners in new housing projects where there is population growth will benefit.
“Remember, there are limited supply of shop lots. And, those who buy shop lots tend to have holding power, so they can afford to wait for better times.”
Other states doing well
Johor's property market performed well last year, with 52,946 transactions worth RM17.1bil.
Compared with 2010, Johor's property market volume and value increased by 9.1% and 44.6% respectively.
The report says Johor's residential property prices are generally stable with instances of mixed performance.
Single-storey terraced houses within areas in Johor such as Taman Puteri Wangsa, Taman Ungku Tun Aminah, Taman Bukit Indah and Taman Perling see price increases of 2.9% to 11.1%, with prices ranging from RM125,000 to RM220,000.
Houses in areas within Nusajaya such as Taman Nusa Idaman and Horizon Hills record price increases of 6.4% to 9.1%, with prices ranging from RM392,000 to RM448,000.
In Johor's high-rise residential segment, developments such as Straits View Condominium in Bandar Baru Permas Jaya saw price increases of 5.2%, with transactions done at RM470,000 to RM570,000 while Taman Perling Apartments registered the highest price increase of 23.3%, with transactions done at around RM220,000.
However, prices in Tanjung Puteri Apartment declined by 12.6%.
Property analysts are confident that the property sector in the Iskandar Malaysia economic growth corridor will perform well.
“The boom area will be Iskandar Malaysia. Lately, many major property developers have made forays there.
This is what happened with areas like Cyberjaya and Puchong, Selangor in the past,” they say.
Meanwhile, Penang's property market had an outstanding year with 39,415 transactions worth RM13.1bil, thus registering growth of 51.7% and 39.5% respectively compared with 2010.
It is noted that Penang's residential property prices are also on an upward trend, due to the scarcity of land on the island.
For example, double-storey terrace and semi-detached houses at Island Park see price increases of 13.4% to 30.8%, as the area is buttressed by neighbourhood developments such as Tesco hypermarket, Queensbay Mall, hospitals and schools.
As for Sabah, the property market improved slightly last year, with 10,321 transactions worth RM4.43bil, thus registering growths of 1.4% and 12.8% respectively compared with 2010.
In Sabah, prices of residential properties were generally unchanged, with a few exceptions.
For example, double-storey terrace houses in Seri Millenium Kingfisher, Kota Kinabalu are transacted at higher prices of RM400,000 to RM450,000 due to the area's proximity to the city centre.
In Sandakan, similar property in Taman Indah Jaya and Taman Fajar witnessed 20% and 14.6% price increases respectively.
The high-rise segment in the state also recorded price increases, and highlights included condominium units in Grace Ville and One Borneo Tower A in Kota Kinabalu, where prices increased by 17.9% and 10.8% respectively.
Sunday July 1, 2012
BY LISA GOH
Property consultants forecast the property market to remain slow for the rest of the year. Will the average middle-income earner be able to afford the house of their dream now?
COMMUNICATIONS executive Michelle (not her real name) has been house-hunting for a while now but has yet to find a property that suits her budget.
Having been in the workforce for nine years, Michelle, 33, feels it is time to buy her own house. But with the prices of residential properties in Malaysia skyrocketing over the last two years, her prospect of getting her dream home looks bleak.
“Back in 2009, my friends were telling me to buy my own place but at that time, my priority was to travel. Around last year, when I was finally ready to commit to getting a house, prices weren't what they used to be any more.
“A decent 1,000sq ft (93 sq m) apartment that used to cost around RM200,000 to RM300,000 is now RM500,000 to RM600,000. That is far beyond what I can afford,” she laments.
From early 2010 up to the end of last year, residential properties in good locations within the Klang Valley have seen a sharp spike of between 20% and 40% in price, a trend which has caused grave concern for potential house-buyers.
But how is the scenario looking in 2012?
According to KGV International Property Consultants executive director Anthony Chua, the first half of the year has been generally quiet.
“There seems to be a breather in the residential market. It's definitely not as busy compared with the same period last year. (The number of) inquiries with us have also lessened significantly,” Chua says.
He explains that inquiries in 2012 with KGV on high-end properties (above RM2mil) have gone down by about 30% compared with the first half of last year. Inquiries on other segments (between RM1mil and RM2mil, and below RM1mil) have also gone down but not as drastically.
Reasons for this could include tighter lending guidelines set by the banks and buyers taking a more cautious approach on their investments this year.
(Following Bank Negara's new lending guidelines, which came into effect on Jan 1, loans are now approved based on net income compared with gross income previously, in addition to the need for more documentation. The new guidelines are intended to help keep household debt in Malaysia to reasonable levels.)
Chua adds that there was a lot of speculation in the property market in the past two years, and that the market is due for a correction.
“The economic scenario is not as rosy and people are expecting things to worsen, which could be why they are hesitant to invest. And to a lesser degree, it could also be the coming general election, which is causing some uncertainties,” Chua says.
Paul Khong, executive director of property consultancy CB Richard Ellis (M) Sdn Bhd, shares similar sentiments.
“The number of buyers (for properties above RM3mil) has dropped by about half with the stricter bank-lending guidelines, which has eliminated the speculative group (of buyers).
“For properties below RM2mil, the market is relatively active with more real transactions. With the new lending guidelines in place, many investors have disappeared from the radar,” Khong says, adding that those who want to purchase their third property now will need 30% in cash for downpayment.
“So, to buy a RM3mil property, they'll need RM1mil in cash if it is their third property. Previously, RM400,000 was enough,” Khong says.
Interestingly, Chua notes that while interest in property purchase has waned, prices are still going strong for landed property.
However, sellers are seen to be less aggressive this year.
“They seem to be less demanding and more willing to accommodate. Last year, they would have said this is my price', and would have refused to budge,” he says.
Property consultants forecast the property market to remain quite slow for the rest of the year.
Even so, for average middle-income earners such as Michelle, the current prices of properties in various locations within the Klang Valley (refer to chart) leave her with few options.
“I don't even dare look at landed property any more. Even apartments at relatively good locations cost RM400,000 and up.
“For my budget, an apartment around RM200,000 to RM350,000 would still be quite comfortable,” says Michelle, who currently lives with her family in Petaling Jaya.
A mass communications graduate from the United States, Michelle draws a salary of about RM5,000 a month, which goes into paying for her car loan, household expenses, utilities, and credit card bills.
“Household expenditure doesn't just cover grocery shopping. I also have to pay for medical bills, car maintenance and repairs as well as give my parents some money too,” she says.
“As banks are now looking at net income, the loan amount I qualify for is unlikely to be enough for me to even afford an apartment in the Klang Valley.
“Sure, you can still get cheaper houses in places like Bukit Beruntung, but it's just too far away. My life is here. At the rate property prices are going, the thought has crossed my mind that I may never be able to afford a place of my own.”
It's not just within the Klang Valley that property prices have escalated.
Early last month, it was reported that residential property prices in Penang have shot up by more than 25% over the past five years.
Condominium units in Batu Ferringhi, Tanjung Bungah and Gurney Drive, with sea-front views, are being sold at astronomical prices, in some cases beginning with RM2mil for a 1,000 sq ft unit.
Houses which cost about RM500,000 in 2007 now cost RM800,000 an increase of about 30%.
Raine & Horne Malaysia director Michael Geh was reported as saying that the increase was among the steepest in the Pulau Tikus, Gurney Drive, Tanjung Tokong, and Tanjung Bungah residential neighbourhoods, which experienced a 25% increase in prices of condominium units.
Other areas where prices of condominium units and terrace and semi-detached houses have shot up by at least 25% are Bayan Baru, Sungai Ara, Minden Heights and Batu Maung.
Medium-range housing schemes in George Town neighbourhoods of Perak Road, MacCallum Street, Jelutong Road and Sungai Pinang have also not been spared an apartment located in such a neighbourhood cost RM180,000 in 2007 but is now RM250,000.
It is precisely with this concern in mind that the National House Buyers Association (HBA) has come up with a 10-point proposal to the Government, to find solutions which it claims will hopefully bring prices down.
Among the proposals are for the Government to unlock its land banks in various locations and give priority to affordable housing projects rather than high-end properties.
The HBA is urging the Government to take the lead in developing affordable homes and not leave it to property developers.
It has also proposed that those who buy homes under the affordable housing projects (with a proposed price range of RM150,000 to RM300,000) be barred from selling their property until after 10 years. Before the 10-year period is up, they should only be allowed to sell the house back to the Government.
The association has also proposed that the Government impose a higher stamp duty and real property gains tax as well as tighter mortgage rules for those buying a third and subsequent properties.
HBA secretary-general Chang Kim Loong notes that with the way prices are climbing, the majority of young working adults will not be able to afford to buy a home.
“I'm talking about young people from around the age of 25 to 35 years old, with an average income of about RM3,500 per month.
“The rule of thumb is that a third goes into paying for your home.
“But with RM1,000, many will still not be able to afford it. The consequence of this could be that an entire generation of young adults could be locked out of property investments,” he explains.
A question that needs to be asked, however, is whether HBA's proposal for “affordable housing scheme” by the Government will be able to meet the needs of the urban middle-income earners such as Michelle.
“There are several factors to consider. The location, for example,” Michelle says.
“If the design and quality is decent, then yes, I am willing to consider it. But this doesn't mean we have to settle for bad quality homes, with cheap construction materials.”
|By Wong King Wai of The Edge Malaysia |
Sunday, 27 March 2011
Property values along MRT line to appreciate
The value of houses located along the proposed MRT line, like those in Taman Tun Dr Ismail (TTDI) and Bandar Utama, are expected to appreciate. CB Richard Ellis (CBRE) Malaysia managing director Allan Soo says the house prices will rise quickly but it will also depend on how fast the MRT is built and how much traffic it carries.
“If the MRT makes life easier, I would rather take it than drive. The line is one of the better ones I’ve seen as it stretches from Sungai Buloh to Jalan Bukit Bintang to Cheras,” he says when presenting The Edge/CBRE Klang Valley Housing Property Monitor for 4Q2010.
Data for the last quarter of 2010 showed growth in property prices in almost all areas surveyed. However, the data collected and the word on the street were markedly different. “It is a surprise, to be honest,” says Allan Soo, in presenting the monitor. “The fourth quarter is usually quieter; even the agents say it is so. The data is a surprise to us. It doesn’t tally with what we know.”
Nevertheless, the positive growth is welcomed as 2011 gets underway. However, several areas showed a drop or low growth, such as 2-storey terraced houses in Jalan Datuk Sulaiman in Taman Tun Dr Ismail, which dropped 20.51% for the quarter. Soo believes that the area is facing stiff competition from surrounding areas that are guarded. “Security concerns and issues may have caused some areas in Taman Tun Dr Ismail to lose their flavour compared with guarded communities,” he says.
Two other areas that recorded low or zero growth are on the high-rise list. The first is
TTDI’s The Plaza, which recorded 0.74% growth. Soo believes this could be due to the positioning of the condominium, which means some units have better views than the others.
The second is Lanai Kiara in Mont’Kiara, which experienced zero growth in the quarter. Soo says competition is drawing buyers away from Lanai Kiara due to its age — there are newer condominiums in the vicinity to choose from.
On a positive note, the 1-storey terraced houses in the monitor showed positive gains compared with the year before. Streaking to the top of the list are houses in TTDI’s Burhanuddin Helmi.
“TTDI is still seen as a good location and the 1-storey terraced houses are the only things to buy if you missed out on the 2-storey homes,” Soo says. “The good performance of the Burhanuddin Helmi area is due to its better design and infrastructure.”
As for 2-storey terraced houses, all of those in the monitor showed strong growth, with houses in Bandar Sri Damansara SD10 surging 39.47% in 4Q. Bandar Utama’s BU1 homes were next, growing 32.73%.
Some older high-rises, such as Bangsar’s Tivoli Villas (+19.35%), TTDI’s Kiara Park (+15.56%) and Villa Flora (+15.38%), also outshone their younger competitors.
“Bangsar and Damansara Heights do not have any new supply, with the exception of One Menerung. As a result, the tenancy market is still very established and strong in comparison with others,” Soo says. “Moreover, the high-rise market in Bangsar and Damansara Heights is stable. The secondary market grows and allows older units, like those in Tivoli Villa, to go up in price. This doesn’t happen in other places.”
As for the good performance of TTDI’s Kiara Park and Villa Flora, Soo says their large land size and good location and designs trumped the competition.
In summary, all areas and property types showed some growth. Soo believes 1Q2011 will be quiet. “This quarter will be flat but things will improve from the next quarter onwards,” he says.
As for concerns about escalating property prices, Soo says the 70% loan-to-value ratio for the third housing loan has made an impact, especially on houses priced at RM3 million and more, due to the high financial outlay.
He uses a three-tiered pricing structure to explain the performance of the property market in the coming months. In the top tier are houses priced from RM3 million, followed by the middle tier comprising properties priced from RM1 million to RM3 million. The last tier consists of houses priced below RM1 million.
The houses in the first tier, Soo says, will not do well for the reason mentioned earlier. Second-tier homes in selected hot spots will do well but houses in the last tier will do very well, he adds.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 847, Feb 28-Mar 6, 2011
|Written by Chua Sue-Ann |
Friday, 04 March 2011
KUALA LUMPUR: It was a hot Sunday afternoon when a group of Taman Tun Dr Ismail (TTDI) residents met for lunch in a newly painted terrace house facing a busy highway.
Their conversation centred on the proposed mass rapid transit (MRT) project that will soon change lives in a big way, regardless of whether their houses are acquired to make way for part of the planned Sungai Buloh-Kajang (SBK) line.
The residents along Jalan Medan Burhanuddin Helmi in TTDI say they are not opposing the MRT project or compulsory acquisition of their properties. They tell The Edge Financial Daily that they are open to having their property acquired on the condition that they be resettled within the TTDI area.
TTDI residents’ fears of compulsory land acquisition were sparked in early February after finding notices, surreptitiously pinned on trees and lamp posts, notifying them that their properties could be acquired under the Land Acquisition Act 1960.
The same fears are spreading in many parts of the Klang Valley that the MRT will pass through. This brings to the forefront the acquisition of land for the project and its associated cost.
The entire proposed MRT project, comprising three lines, is expected to cost RM36.6 billion, making it the largest infrastructure project in Malaysia’s history. But that figure excludes land acquisition, rolling stock and any potential rise in building material prices.
Taking into account the land acquisitions, the final bill is likely to be higher. Any sharp increase on top of the estimated RM36.6 billion will raise more doubts over the funding of the massive project.
The authorities have yet to reveal the cost of the proposed SBK line, the first route that is to be built.
Some quarters point out that the MRT, which is partly underground, will cut through densely populated areas in Kuala Lumpur’s city centre as well as affluent residential areas such as Damansara Heights and Taman Tun Dr Ismail. As such, land acquisition costs are unlikely to be low.
The Land Public Transport Commission or Suruhanjaya Pengangkutan Awam Darat (SPAD) has countered by saying that part of the line will be underground, particularly in the city center, and this will save on costs land acquisition for that portion.
ERE Consulting Group Sdn Bhd, hired by SPAD to conduct a study on the environmental impact of the MRT project in the Klang Valley, says that, for the Sungai Buloh to Semantan segment of the SBK line, TTDI is a “critical area” with 41 lots up for acquisition while the Maluri to Kajang segment will require the aqcuisition 65 lots in Kajang town.
According to ERE, the 51km SBK line will require the acquisition of 473 lots, of which 310 lots are located along the elevated sections of the track. The consultant anticipates 97ha of property may have to make way for the project.
The consultants identified four critical areas for potential land acquisition -- TTDI, Taman Suntex in Cheras, and two villages on Malay reserve land, Kampung Sungai Sekamat and Kampung Sungai Balak.
Construction for the SBK line’s underground portion, spanning Semantan to Cochrane, is expected to start in July, while construction for the elevated track is scheduled to begin in February next year.
Apart from the large financial cost, there is a human cost to the project as well, as affected residents are battling to keep their homes.
TTDI residents have emerged as the most vocal group to air their grouses on the SBK alignment, which calls for one TTDI station and elevated tracks that will trace the fringes of the leafy suburb.
Opinions are divided in the community, with some residents saying they have no need for the MRT in their peaceful neighbourhood while others have welcomed plans for improved public transport.
Two streets in TTDI, Medan Burhanuddin Helmi and Pinggir Zaaba, are facing potential acquisition and are likely to suffer the direct impact of the MRT project.
Both streets sit behind barrier walls that shield them from the bustling Lebuhraya Damansara Puchong (LDP) and ongoing upgrading road works.
Medan Burhanuddin Helmi residents say they have had no peace for the last 15 years, with their street sitting on a narrow two-way lane precariously by the congested LDP.
Now, they are facing yet another challenge -- plans for a MRT station near the One Utama shopping mall and office blocks -- just across the highway, which they say will make their street “unlivable”.
According to one retired man who declined to be named, he and his like-minded neighbours have written to SPAD to register their protest.
SPAD has since clarified in a press statement that TTDI houses may not need to be acquired simply because the properties are located beyond the 20m minimum buffer zone.
With compulsory acquisitions looming, affected home owners are concerned about the valuations attached to their properties and the inconvenience that comes with relocating, among other worries.
Datuk Mani Usilappan, former director-general of the Ministry of Finance’s Valuation and Property Services Department. says fair compensation upon property acquisition is a constitutional right and the Land Acquisition Act is aimed at making the entire acquisition process “as soft as possible” on affected owners.
Article 13 of the Federal Constitution states that no person shall be deprived of property save in accordance with the law and that no law shall provide for the compulsory acquisition or use of property without adequate compensation.
“The whole idea is that the person affected should not be worse off because of the acquisition,” says Mani, who is now in private practice.
Mani acknowledges that government valuations for properties have often been lower than private valuations, but says the differences left room for further discussions.
“Property owners always have very optimistic views of their property if they have not tried to sell it yet. If they have placed their property out, they will know. Government valuations are not that far off from market value,” Mani says.
Mani says the final award for an acquired property prices in the cost of relocating and inconvenience but does not take into account sentimental value for property.
Land acquisitions seem to be the immediate challenge for the SPAD that could possibly inflate the MRT project’s costs.
That said, perhaps the real challenge for the government is dealing with cost escalations due to rising raw material prices in the years to come.
Year 2010 saw the increase of property prices despite key changes that took place, such as:
- March and May: 5 bps rate hikes
- October: Full loan for first-time buyers and stamp duty exemption of 50% on instruments of transfer on a house not exceeding RM350,000
- November: Central Bank announced the implementation of a maximum loan-to-value (LTV) ratio of 70% for people buying their third house onwards
StarProperty.my asks the individuals below about their expectations for the property market for year 2011.
Naza TTDI, Group Managing Director
“The property market here is resilient and I am confident it will grow stronger in 2011. The exciting development plans that Malaysian Prime Minister announced in the Budget 2011 will act to spur the real estate market, especially in globalised areas where economic activities are most active. Property investors must be aware of the strategic plans announced by government as the real estate market in Malaysia will move forward with globalisation. No doubt the implementation of a maximum loan-to-value (LTV) ratio of 70% will affect the investing movements in the housing market but this will be balanced by the Economic Transformation Programme (ETP) that is poised to create new prospects and opportunities in the real estate market.
I do believe that the Greater Kuala Lumpur project will also contribute to the property market heating up in 2011. The continued foreign interest and rapid growth in urban areas that is strategically planned and developed will not only make the property market more attractive to investors but also promote the development of the surrounding cities and towns.
Our new signature development surrounding the Matrade project at Jalan Duta will hopefully create the right buzz and interest from both local and foreign investors. The development itself is planned to complement the city of Kuala Lumpur yet iconic in itself lending to our nation’s international presence.
There are in fact many Malaysian developers who are capable of developing properties of international standard. In this regard, NAZA TTDI is one of the top privately owned companies with the capability and potential to successfully develop large scale mega projects and also niche boutique projects of international standards.
As we all know, success of any development is gauged not only by the construction of the physical buildings, but also how successful the developer has been able to establish a viable and thriving community in the area of development. In today’s climate where the purchasers have many choices in deciding where to live, locate their businesses and offices, it is important for the developers to offer innovative products that responds to the requirements and the needs of their prospective buyers and tenants. This is what NAZA TTDI strives to do for all our developments regardless of magnitude, GDV or land area.
2010 − a great year, 2011 − even better!”
Ho Hon Sang
Managing Director of Property Development Division, Sunway City Berhad
“We remain optimistic of the market outlook for 2011 due to steady employment rate, ample liquidity and attractive financing packages. Property is still deemed as a preferred inflation hedge. The demand will remain strong for landed residential properties but this is confined to certain strategic locations in the Klang Valley. The shortage of supply especially in good locations will command good secondary prices while new launches will be much sought after.
We do not think that Malaysia will experience a property bubble due to the limited supply of land in prime areas and availability of liquidity at the banks and institutions such as the Employees’ Provident Fund (EPF). While the 70% cap on LVR will affect the property market, we do not foresee it to have an adverse impact. We believe buyers will continue to search for quality properties as they remain a safe and solid asset class. Latest round of quantitative easing by the US will see some funds inflow to this part of the world.
Developers will continue to launch lifestyle-driven housing concepts as this will be a trend that is here to stay. Developers are also designing houses with larger built-ups and surrounded by lush greenery to accommodate families wanting a green and spacious living environment, away from the hustle and bustle of city life. Security is another important factor which explains the demand for gated and guarded projects. Homebuyers will be attracted to new lifestyle features that are aesthetically pleasing and functional at the same time.
2010 − improved market conditions and a good year due to return of market confidence, 2011 − positive progress with vibrant and competitive outlook due to strong offerings from developers for customers.”
Chang Kim Loong AMN
National House Buyers Association, Hon. Sec-Gen
“Unless the Government does more to curb excessive speculation, property prices especially in urban and even sub-urban areas will continue to rise beyond the reach of many wage earners, especially those fresh into the work force or about to start a young family. Even middle income wage earners with joint salaries are unable to buy in.
One will notice that the pay cheque increase does not commensurate with the increase in prices of residential property. People buy in on the premise that economy is growing or allegedly to be increasing. In an event of a downturn it would trigger a snow ball effect. Ask the man-on-the-street; don't just seek opinions of parties with vested interest i.e. developers, builders, real estate agents, property consultants who are there to sell property.”
Reapfield Properties, Senior Vice President
“We expect that the property market will still be buoyant and vibrant in 2011. It is hard to predict how much the market will continue to grow as an actual figure but we are able to comment there are many factors which would ensure that the market remains very sustainable:
1. Inflation is on the way up. Building materials cost increasing and with upward pressure on wages are crucial reasons why there is no reason property would head south.
2. Immigration of more than 3m people to the greater Kuala Lumpur ensures housing pressure
3. Infrastructures, e.g. LRT, road networks will ensure that the growth will be in tandem with these main infrastructures planned
4. Stability of the government will ensure confidence amongst the investor market
Property market is the driver of the economy and it is best to leave it to the banks to moderate the lending based on cost of funds and the true value of the properties. To comment on the market response to the cap on LVR is premature. Our view is that it would not drastically affect the market as the lending institutions will accommodate for these new rules.
2010 − vibrant/sustainable, 2011 − a brilliant year.”
Khoo Boo Tee
Newfields Property, Executive Director
“The momentum is still there. Therefore I think it will carry on from last year. In my opinion, everything seems steady. Developers are still launching new projects and people are still buying. Most of them buy to stay, so the cap (LTV) from the government doesn’t really matter.
The population is there. If you look at the Economic Transformation Program (ETP), the population in Kuala Lumpur will be approximately 10 million by 2020. Now, I think we have about 6 million people. Therefore the demand for properties will definitely be there. The cap is good for the industry as a whole.”
Would you pay thousands of ringgit, on top of skipping what you do for a living for several days, to have the inside track on real estate investment?
Many of us wouldn’t, but there are those who do not baulk at such investments because of the potential returns from bricks and mortar.
A real estate investor, fresh from attending two recent property seminars in the Klang Valley, found himself in the company of avid property buyers with varied profiles. Whether they were medical practitioners — doctors and specialists are known to really fancy property investment — budding entrepreneurs, professionals or college leavers, they were united by a common goal — to get rich (or richer) the real estate way.
Property seminars and talks are nothing new really, although the recent surge in value in selected addresses has helped fan interest.
A good friend who paid more than RM600,000 for a typical intermediate 1-storey terraced house in Kuala Lumpur’s Taman Tun Dr Ismail (TTDI) earlier this year still laments her decision.
Consider this: The standard version of the first batch of bungalows in TTDI cost only about RM110,000 — that was in June 1976. In that same launch, the standard semi-detached homes were sold for about RM90,000.
Excluding TTDI Hills, there are now 437 bungalows and 396 semidees in TTDI. In the launch of the final batch of bungalows in 1984, the 156 units cost RM413,000 onwards each. In September that year, the last batch of 162 semidees were put on the market for RM330,000.
And stop blaming your forefathers for not having had the ability or foresight to accumulate landbank that would now make you an instant millionaire. It is too bad if you do not belong to the famed See Hoy Chan group or Eng Lian group of Bangsar.
When the times are good, it is easy to forget those who lost their pants in property deals that went awry when the going was tough. The impact of the 1997/98 Asian financial crisis brought even the so-called giants of property development to their knees. Then, the US subprime crisis threatened to cripple the global economy, although Malaysia got off relatively easy.
But as property diehards will acknowledge, there is money to be made in real estate whether in good times or bad. Ultimately, apart from having an healthy appetite for risk and luck thrown in for good measure, one has to look hard, which explains the continuing quest for knowledge on property.
Interestingly, common sense and keeping an open mind can be counted as the best ingredients of a sound property investment.
Sentiments and ego are taboo because a shrewd investor must maintain a balanced view devoid of emotions. Sure, go ahead and listen to what your best friend has to say about a property sale or lease, but stay true to your own course. Nobody knows your investment threshold better than yourself.
Be open to criticisms about a piece of property you want to invest in because human nature is such that we tend to shut out negativity and focus on the positive aspects of something we are inclined towards.
Take care not be swept away by a sense of euphoria. The most knowledgeable and cautious of investors have been known to make overstretched commitments on the strength of a show unit alone, and of course lived to regret the decision.
Like in any other form of investment, it is imperative to do your homework. Map your cash flow and keep your ears open to not only what the developer or owner is telling you, but also what you are not told.
Fraud is a real threat in any property deal. A seemingly official-looking document such as a sale and purchase agreement can be tampered with, as can tenancy agreements. Never underestimate the extent to which the unscrupulous will go to achieve their dubious goal. So, it pays to always ensure your investment is protected in the eyes of the law.
Some quarters have bandied about ways to circumvent the taxman, but that is not something we will discuss here.
Whatever the case, common sense must prevail before a document is inked. For many, all it takes is one bad real estate decision to bring them down.
In the final analysis, not everyone can be Li Ka-shing or Donald Trump.
Au Foong Yee is The Edge Malaysia’s chief marketing officer. She has been tracking and writing on the Malaysian real estate sector for close to two decades, but continues to be amazed by its dynamics
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 837, Dec 20-26, 2010
Value rose to record RM97bil in Jan-Nov period of last year
KUALA LUMPUR: A total of 342,179 property transactions worth RM96.77bil were recorded between January and November last year, which means the full year's transactions could reach the RM100bil mark, said Knight Frank Malaysia managing director Eric Ooi.
Ooi was commenting on figures provided by the Valuation & Property Services Department director general Datuk Abdullah Thalith Md Thani
at the Property Market Outlook for 2011 yesterday.
“This is the first time transactions value has reached this figure,” said Ooi at the event organised by the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia.
In light of this, and considering Malaysians penchant for property investments, Ooi said it was unlikely that property values would fall. It may not rise as much as it did last year, but the uptrend is there.
Ooi, together with Henry Butcher chief operating officer Tang Chee Meng, said property value rose between 30% and 40% last year.
“This is the first time property went up so much,” Tang said, adding that he had never seen such record growth for the property market in 30 years.
“The condominium market saw a price rise of between 60% and 100% between 2003 and 2008. This pales in comparison to the rise in value of landed units which rose as high as 40% in just one year. If one were to average out the rise in condominium prices, it is about 20% a year,” Tang said.
Earlier, in his overview of the Malaysian economy and the Malaysian property market, director general of Valuation & Property Services Department Abdullah Thalith said it was very significant that the transaction volume between the 11-month period increased 12.2% year-on-year, but the value of transactions increased at a higher rate of 35% from RM71.67bil to RM96.77bil.
“The recovery of the Malaysian economy has reinvigorated the overall property market,” he said.
In terms of lending in the broad property sector, the purchase of residential property took up the lion share of bank loan, at 58.8% compared with the purchase of non-residential property, at 22.1%. Construction took up 9.6%.
“Credit expansion for the broad property sector in the banking system increased from RM342.09bil as at the end of September 2009 to RM391.25bil as at end-September 2010,” he said.
“This means the residential property sub-sector remained the main mover of the property market,” he said. In this residential market, transactions in Kuala Lumpur recorded a growth of 8.2%, Selangor 7.2%, Johor 3.6% and Penang (island) 9.7%.
Terraced houses continued to dominate the market, especially in Selangor with 27,165 transactions, Johor with 12,555 transactions and Penang 4,358 transactions.
The city of Kuala Lumpur recorded more condominiums changing hands, 10,333 units versus terraced housing at 3,756 units.
|Written by Racheal Lee of The Edge Malaysia |
Monday, 20 December 2010
The suburbs of Bandar Utama, Mutiara Damansara and Desa ParkCity has seen property values rise steeply over the years. The development of this conurbation in the Klang Valley probably began with Bandar Utama, where a 2-storey terraced home measuring 1,873 sq ft recently sold for RM750,000 — 56% more than its initial price tag of RM480,000 in 2002, transaction data by Landserve Sdn Bhd shows.
After Bandar Utama came Mutiara Damansara, developed by Mutiara Rini Sdn Bhd. And when Ikano Corp Sdn Bhd and Tesco Stores (Malaysia) Sdn Bhd set up shop in its commercial precinct in 2000 and 2001 respectively, real estate values there spiked.
The launch of the award-winning Desa ParkCity, a 473-acre freehold high-end master-planned township development, in 2002 brought even greater prominence to the area. Property values here are setting benchmark prices. A renovated 2-storey Zenia link house there sold for RM2.05 million recently, while a 2-storey SouthLake linked house — which sold for RM640,000 in 2008 — has seen its value double.
So with homes in these parts seeing such impressive appreciation, what about the surrounding areas of Kepong, which comprises townships such as Bandar Manjalara, Taman Bukit Maluri and Kepong Baru, as well as those in Segambut like Taman Sri Sinar and Taman Sri Bintang?
Property developers and consultants say residential and commercial property values in the older parts of Kepong have increased substantially over the years as well. The overall robust demand for homes in the Klang Valley and the spillover effect from the newer and higher-end neighbouring townships have contributed to their growth. According to Landserve managing director Chen King Hoaw, Kepong — which includes Bandar Manjalara, Kepong Baru and Medan Putra Business Centre — covers about 3,800 acres (excluding Desa ParkCity).
He says the real estate in the surrounding areas, including those that lie on the other side of the hills to the east of Desa ParkCity that are adjacent to Taman Sri Bintang and Taman Sri Sinar in Segambut, have seen their values rise over the years.
City & Country recently visited Bandar Manjalara, located across the road from Desa ParkCity. The almost fully developed township is accessible via the LDP into Jalan Burung Hantu that divides Desa ParkCity and Sunway SPK Damansara from the older Bandar Manjalara and Medan Putra Business Centre. The difference in character and atmosphere between the two areas are rather apparent.
Bandar Manjalara, Taman Bukit Maluri, Taman Sri Bintang, Kepong Baru, Taman Sri Sinar, Segambut Dalam and Jinjang Selatan have existed side by side for decades and are all interconnected.
This entire stretch from Bandar Manjalara to Segambut Dalam houses mainly medium-cost terraced houses and shophouses, new villages, squatter settlements, factories and warehouses that are either temporary or semi-permanent structures.
Before the development of Mutiara Damansara, Desa ParkCity and Sunway SPK Damansara, this stretch was known as the Sungai Penchala Malay settlement, with large tracts of undeveloped land covered with trees and thick undergrowth.
According to real estate agents familiar with the area, current demand for landed housing here is rather strong, and the limited supply of medium to medium high-end residential properties in recent times.
There is also an overall shortage of land for landed home development in the vicinity, with most new projects being high-rises, as evident from the number of upcoming condominium projects.
Chen points out that a 2-storey terraced home measuring 1,650 sq ft in Bandar Manjalara, which went for RM280,000 in 2000, appreciated 10.7% to RM310,000 in 2002 when Desa ParkCity was launched. Two years later, a similar unit saw an appreciation of 16.1% while yet another unit sold for RM460,000 this year, translating to a 48% rise in capital appreciation over eight years (see charts).
(For comparison, the Nadia homes at the gated and guarded Desa ParkCity have enjoyed more than 100% appreciation in eight years.)
IJM Land also developed a project called Bayu Sri Bintang, adjacent to Desa ParkCity. Consisting of bungalows and semi-detached homes, this freehold development is fully sold.
Not too far away from Bandar Manjalara, a fully furnished 2½-storey terraced house in the leasehold Laman Rimbunan project is now on the market for RM800,000. The project was launched at end-2004 with prices starting from RM385,000.
The gated and guarded Laman Rimbunan is a joint venture between Faber Group Bhd and Metro Kajang Bhd. The RM600 million project, which sits on 100 acres of land, comprises six phases and is now in the third phase of development, having recorded almost full take-up rates for the previous two.
Once completed, Laman Rimbunan will comprise 150 units of 3-storey shopoffices, 584 units of 3-storey terraced houses, 160 units of 3-storey semi-detached homes, 88 medium-cost apartments and 360 low-cost apartments.
As for commercial properties, CBD Properties managing director Adrian Wang says there is a slight over-supply of commercial property, especially along Jalan Kepong, with the completion of numerous shoplots in this area.
A secondary school, SMJK(C) Kepong 3, is being built there while Tesco Hypermart recently opened for business in Bandar Manjalara. Road-widening works are also being carried out in Jalan Kepong to ease congestion.
Besides Tesco, there is a Jusco department store in Metro Prima and a Carrefour hypermart at the Kepong Entrepreneurs Park, as well as shops in Metro Prima, Kepong Entrepreneurs Park, Laman Rimbunan, Taman Fadason, Medan Putra in Bandar Manjalara and M Avenue in Sri Sinar.
“The commercial properties and shoplots in Jalan Kepong benefit from their proximity to the hypermarkets and accessibility to major highways. Shoplots in Jalan Kepong are now selling at RM1.5 million onwards, compared with their launch price of about RM900,000 for a standard unit,” says Wang.
Landserve’s Chen says that in the past, one had to access the Manjalara/Kepong area via Jalan Kepong or Jalan Segambut. Lebuhraya Damansara-Puchong (LDP) was only opened in 1999.
“More often than not, the roads were congested. Kepong was considered far from Taman Tun Dr Ismail, Damansara or SS2 in Petaling Jaya. Not many would have thought of its potential for high-end living. To have expatriates living here was unheard of.
“Today, the landscape has changed. Many defunct factories and warehouses, wooden houses and shops have been demolished to make way for newer developments. Many commercial developments, including the hypermarkets, have been completed in Kepong, Jinjang and Segambut. Roads have been widened and upgraded into highways. Modern residential developments are now built for the middle to upper-middle-income bracket,” he says.
Desa ParkCity has, without doubt, played a part in elevating Kepong into a higher-end area, and there is no denying that some of the excitement from the “hot” market there has spilled over to its other neighbours as well.
Chen notes that Sunway SPK Homes Sdn Bhd, a joint venture between Sharikat Permodalan Kebangsaan Bhd and Sunway City Bhd, was the first developer to ride the Mutiara Damansara/Desa ParkCity developments when it launched the 63-acre freehold Sunway SPK Damansara in 2004. This was followed by Villa Manja @ Sunway SPK Damansara in 2007 and Sunway SPK 3 Harmoni in 2010. The high-end 2 and 2½-storey terraced houses, 2-storey semidees and townhouses there achieved brisk sales.
According to CBD Properties’ Wang, a 2½ -storey intermediate terraced house, with a built-up of 2,477 sq ft, in Sunway SPK Damansara is going for about RM1.2 million to RM1.25 million, compared with the developer’s price of RM638,000 in September 2004.
“At Villa Manja, a standard semidee with a land area of 4,050 sq ft and built-up of 3,948 sq ft, is going for RM2.3 million to RM2.7 million when the developer’s price was RM1.5 million in August 2007,” he tells City & Country.
Sunway SPK 3 Harmoni was launched in March, with prices starting from RM832,000. The project consists of 3-storey townhouses, with sizes of 2,336 to 2,583 sq ft.
Bandar Sri Damansara
Across the LDP from Sunway SPK Damansara is the freehold township of Bandar Sri Damansara by Land & General Bhd (L&G). Property prices there have been trending upwards steadily. Wang notes that a basic unit has increased 30% to 40% over the past two years, from RM350,000 to RM550,000.
A series of launches has been lined up over the next five years in the township. Early next year, a RM1.5 billion condominium project, which lies within a 40-acre park, will be launched by L&G. It will feature a total of 2,800 units and be developed in four phases over eight years.
The developer will save the trees in the park and put in boardwalks and jogging tracks for residents to enjoy the open space. Phase 1 of the project will comprise 928 units in four towers. L&G has yet to fix the selling price, but is looking at RM500,000 onwards.
TA Global Bhd is also developing a project in Bandar Sri Damansara called Damansara Avenue, a RM3.8 billion mixed-use development formerly known as Seri Suria. The site, over 48 acres of commercial land, was acquired in February 2006 for RM95 psf.
The developer launched the first phase — the RM205 million Ativo Plaza — in August at RM460 psf onwards. To date, 90% of the project has been taken up. This phase comprises 198 office suites and 43 lifestyle retail units in an 8-storey building on a 5.73-acre site but only the office suites were for sale. The office suites range from 547 to 4,094 sq ft and were priced from RM266,000 to RM2 million. The sizes of the retail units are between 1,415 and 2,692 sq ft.
TA Global aims to launch the first residential phase, comprising 250 units of high and low-rise residences with sizes of 600 to 3,400 sq ft, next quarter through a balloting process as more than 4,500 registrants have signed up.
Chen is positive about the growth prospects of Desa ParkCity and the surrounding areas and believes there is a growing pool of homebuyers and investors looking to upgrade. Demand for new products such as quality homes and well-located retail shops, he adds, will remain strong here.
“This is because undeveloped land suitable for residential developments for the medium to high income group is scarce. Supply is limited, hence prices are expected to trend upwards,” he says.
Chen hopes the redevelopment of the older parts of the Kepong/Jinjang/Segambut area will continue, and include transforming old factories and warehouses into modern industrial parks. He also hopes that the large squatter settlements in Segambut Dalam will be replaced by new projects and amenities or the full potential of this locality will not be realised.
CBD Properties’ Wang expects the completion of the Desa ParkCity International School by end-2011 to generate more demand for homes among foreigners and expatriates in Desa ParkCity, as well as the surrounding areas of Bandar Manjalara and Bandar Sri Damansara.
“Values will increase as demand for properties, both residential and commercial, increases,” he say
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 837, Dec 20-26, 2010
The Klang Valley property landscape is set for a massive change with major government land being open for re-development and a number of new infrastructure initiatives.
They include the mass rapid transit (MRT) system, Greater Kuala Lumpur development plan, the re-development of the Rubber Research Institute (RRI) land in Sungei Buloh and the Sungei Besi airport.
These projects are certainly high-profile and potentially significant as catalysts for change in the interest of a more organised living, working and recreational environment.
The proposed development projects present immense opportunities to both the people and industry players to participate in their planning. As such, their views should be given due attention and incorporated if they proved to be relevant.
They are important to ensure the sustainability and growth of the country’s infrastructure development for years to come.
It is not every day that an opportunity for re-development of such massive scale arises; so, it should not be treated as a profit-making venture but a chance to overhaul poorly-planned cities.
The 3,300-acre RRI project has the potential to become a showcase for a well-planned sustainable township that will last for decades.
Besides its potential gross development value of RM10bil, there are many intangible values which should be considered including a safer neighbourhood as well as more accessible, economical and convenient public transport system.
More development projects could also result in more proposed mergers and acquisitions (M&As).
But these M&As have generated both excitement and concerns in the market.
For industry players, those looking to merge their companies may be driven by the need to strengthen their capital base and technical capability.
They believe that by becoming larger developers, they will get to enjoy economies of scale and become more efficient. It will also provide a stronger financial position, healthier balance sheet, larger landbank and management expertise.
Merged entities will also mean larger market capitalisation and liquidity. Their higher profile may also attract interest from investors.
While there may be merits to support the M&As, there are also shortcomings that may de-rail such plans.
The M&A process will become problematic if the enlarged team cannot work as a team as there are bound to be differences in corporate culture, vision, work ethics and practices.
A contentious issue will always be about the controlling stake of the new company. Therefore, it is crucial for the companies to get it right from the very beginning from controlling stake to the right management team.
It will be ideal if the two companies which are going to merge addressed issues concerning their differences and assimilate best practices.
For the public, the formation of bigger entities may mean that there are fewer smaller developers and less competition in the industry.
This scenario is not healthy as the absence of competition means that players need not produce their best product offerings to survive in the market.
Nonetheless, a bigger entity does not necessarily equate a stronger, and more successful company as many mega financial institutions in the West had crumbled during the global financial crisis. More importantly, companies, whether big or small, should conduct their business in an ethical manner.
They should not be guided by the motto of “making profits at all cost” and therefore sacrificing their values and responsibilities to the community at large.
Conglomerates have been known to fall from grace when greed takes over sound ethical values.
I believe companies that grow through the organic process may have smaller capacities but they have built for themselves a strong foundation to face market challenges and uncertainties.
In the property sector, there is certainly a big role for the smaller players who are focused on their strength and in doing what they do best.
The bottomline is to ensure that they deliver good values, quality and wholesome projects to their customers.