Iskandar Malaysia Property Market Affected By Cooling-off Measures

The property market in Johor Baru and Iskandar Malaysia has been negatively affected by the cooling measures introduced by the authorities to address rising property prices, says the Real Estate and Housing Developers’ Association of Malaysia (Rehda).

Rehda Johor chairman Koh Moo Hing said potential property buyers in the two areas were now adopting a wait-and-see attitude.

“Feedback from our members (in Rehda Johor) shows that sales are now slowing down compared with last year, and we also expect fewer property project launches this year. Property price rises were expected to also slow down after this,” he told Bernama here yesterday.

He added the Malaysian Property Exposition in Johor in November last year also recorded fewer visitors.

Last year, the Government, in tabling Budget 2014, raised the Real Property Gains Tax to 30% for properties disposed within three years, while the Johor government raised the minimum value of properties that foreigners could buy from RM500,000 to RM1mil.

The second measure had had a bigger impact on the property market in Johor Baru, Koh said.

Potential buyers were now more wary and wanted confirmation that a completed property had been occupied before making a decision to buy, he said.- Bernama

Commercial Property Bubble In KL, Warned By Nazir Razak

As government strategic development agency 1MDB stepped up its investment pitch for the new Tun Razak Exchange (TRX) financial district to investors last week, CIMB group chief executive Nazir Razak suggested that the government reconsider the mammoth supply of commercial space in Kuala Lumpur to prevent an oversupply.

1MDB's unit, 1MDB Real Estate Sdn Bhd, as master developer, had formally invited qualified international and domestic investors to submit proposals for Phase 1 of the 70-acre TRX and to be part of its strategic development following "strong expressions of interest from a host of local and global players".

There has been "overwhelming" expressions of interest for about half of Phase 1 which will comprise up to 10 acres, a source told BT.

He said local investors are mulling over a number of the one to 1.5 acre plots for corporate headquarters or investment. However, it remains to be seen if interest is sustained when the actual bidding takes place.

Still, TRX, the first phase of which is scheduled to be completed in 2017-2018, has its attractions: Putrajaya has rolled out the red carpet, offering a number of incentives including a five-year tax break and plans for a dedicated MRT station at the site.

Other developers, especially those in the vicinity, have complained at being put at a disadvantage, particularly in a softening market. According to reports, some 26 million square feet of space is scheduled to come on-stream in the Klang Valley over the next five years despite current occupancy hovering at an average 80 per cent.

To fears of a potentially serious oversupply, Mr Nazir added his concerns over the weekend.

The younger brother of Prime Minister Najib Razak urged the government not to embark on its projects simultaneously given their enormous size, and questioned Putrajaya's deep involvement in property development.

In an interview with The Edge, he pointed out that KL Sentral - about eight km from the city centre and increasingly popular with corporations because it is a public transport hub - alone would supply some 10 million sq ft of space.

Indeed, CIMB's new building in Sentral offers 600,000 sq ft.

Add the contributions of TRX, the Warisan Merdeka development and its 100-storey skyscraper, plus the integrated development in Sungei Buloh on the outskirts of the city, among others, and an office space bubble cannot be discounted.

"I cannot imagine where all the occupancy is going to come from," Mr Nazir said, adding that tenants could be persuaded to move to new buildings if rentals were attractive, but previously occupied towers would be left vacant.

In the case of TRX, the whole development would stretch over 15-20 years and its commercial space would be manageable if not for the other projects.

In addition to the five residential blocks in TRX, Phase 1 will see two hotels and a retail mall as well as four office towers including a "signature tower" - the last possibly to be developed in a partnership between China Exim Bank and 1MDB under a joint agreement to explore mutual investment opportunities.

1MDB RE plans to hold equity interests through joint ventures for the bulk of TRX - named after the country's second prime minister, Tun Abdul Razak, the father of Messrs Najib and Nazir - and will only consider land sales on a case-by-case basis, subject to the master plan. - Business Times Sg

Short-term Rental Properties

Visit Malaysia Year 2014 campaign has officially started on New Year’s Day. In Kuala Lumpur alone, Kuala Lumpur City Hall (DBKL) is anticipating 15 million tourists to visit the country’s capital this year. The campaign offers a great business prospects for Malaysians who have interest in participating in the tourism industry.

Amongst the many lucrative business opportunities available for Malaysians during the campaign period is vacation rental services, which is also known as short term rental tenancy. The tenancy can provide a meaningful income for home owners who opt to not open their homes for long term rental tenancy during this time.

Over the last few years, short term rentals in Malaysia have been making waves in the vacation accommodation preference. On iBilik alone, there are over 5,000 short term rental listings available in locations all over Malaysia. 

People like the option of renting accommodations with full house facilities, such as kitchenette, laundry machines and big spaces for their travelling. The choice is extremely popular especially when travelling in large parties.

Opting for short term rental is a popular choice among Malaysians who frequently have to travel for business, holiday trips with families and wedding party trips. 

Fikri Aidil has been using short term rentals for a couple of years. “It’s convenient not to have to the groups separated in different hotel rooms and having to eat out throughout the trip. Most of the time, it saves money as well,” he comments.

To start a short term rental business, one can visit Propwall to survey the estimated property prices in the area. For example, a property on auction at the D’Savoy Condominium, A’ Famosa Resort starts from RM130,000. From there, one can estimate the cost of mortgage, repairs and insurance the property will require. 

Thereafter, the prospective buyer may cross reference the information of the property with the estimated rental yield from the short term rental business that he will obtain. On iBilik, it shows that the average rental rate of the D’Savoy Condominium ranges from RM200 to RM350 per night. 

All the information at hand in must be keyed in to a spreadsheet, with a guesstimate of different scenarios one might encounter regarding vacancy (or lack thereof), maintenance and repair cost. From this, it can be gauged whether the short term rental investment is still a worthy endeavour.

Part of the investment also includes providing an adequate amount of furniture and electrical appliances. Guests are more attracted to fully furnished units that are well presented. As most of the bookings are done online with only pictures to judge the quality of the units, the need to have professional photos taken from good angles is crucial.

Although the short term rental business is not yet regulated in the country, it is better to register the business with Inland Revenue Board of Malaysia (LHDN) to avoid any tax complications in the future. The Star

7 New Shopping Complexes To Be Ready In 2014

The Klang Valley will see the entry of new shopping malls this year while others will go through a makeover that will add more space to the the retail property segment.

Property consultant CH Williams Talhar & Wong Sdn Bhd managing director Foo Gee Jen, in a report, noted that this segment of the market could expect steady growth, as seven new malls and five refurbishments, with a total estimated net lettable area of five million sq ft, were completed by this year in the Klang Valley.

“Should these malls be completed as scheduled, the total cumulative supply as of 2014 will register at about 49 million sq ft of net lettable area.

“As most of the malls have pre-leased their retail space, it is envisaged that the overall retail sector will continue to remain strong in terms of occupancy and take-up, whilst rental levels are expected to remain the same,” he said.

Foo pointed out that consumer spending in the country remained strong.

“Shopping is a past-time for Malaysians,” he said. Citing a survey, Foo claimed that at least 20% of the urban population in Malaysia spent their weekends in shopping malls.

“Going forward, I think people may be a bit more cautious, in light of the rising cost of living. However, demand for essential goods will continue to remain steady,” he said.

The air of caution over private consumption stems from expectations that consumers may start to feel the squeeze as subsidy rationalisation, electricity tariff hikes and a rise in property taxes kick in.

However, Foo remained confident of consumer spending based on the Visit Malaysia Year (VMY) 2014 campaign, back-to-school period, New Year sale and the Chinese New Year season, with retail sales to grow moderately in the current quarter compared with the fourth quarter ended Dec 31 despite the rising cost of living.

The retail property sector is still expected to see steady growth in 2014 despite the supply of new malls into the market and the rising cost of living, which is unlikely to deter consumer spending.

According to him, the malls coming onstream this year include The Strand, D’Pulze, Nu Sentral (formerly known as Lot G, KL Sentral), Main Place (formerly Taipan Square/Newgate 21), Jaya Shopping Centre, Quill City Mall (formerly Vision City), Sunway Pyramid Phase 3, M Square, The Atria, Sunway Velocity Lifestyle Mall, Sunway Putra Mall (formerly known as The Mall) and CapSquare Mall (refurbishment). IOI City Mall is expected to come in next year.

“We expect to see consumers spend prudently, as they keep consumption within their budgets amid high household debt and the 14.9% increase in power tariff effective Jan 1.”

Alliance Researchchief economist Manokaran Mottain expected a rise in inflation in the first quarter of the year due to the increase in spending during the Chinese New Year period.

“During the festive season, there is often more demand than supply and inflation will spike,” he said, adding that the full impact of the VMY 2014 campaign would only be felt towards the middle of the year.

“This is because most tourists tend to come during the summer period, which is from the middle of the year onwards.”

Malaysian Association for Shopping and Highrise Complex Management past president Richard Chan said there was still good demand for shopping mall space, adding that rental rates were “not going down”.

“Shopping malls in city centres especially are charging three-figure-per-sq-ft rental rates. Why? Because the demand is there! But the important question is whether the supply is meeting the right demand.

“For the mall managers, if you’ve done your research, then it should be no problem. But some developers don’t do this and the whole thing fails! Today, managing a mall is not just about managing property – it’s about managing a business.”

Chan added that consumers are likely to be a bit more frugal with their spending habits due to the rising cost of living.

“People might scale back on big-ticket items such as cars and property. But even then, some apartments are still selling well. Why? Because people still need them.”- The Star

KL Property Market To Self-correct In 6 To 12 Months- Knight Frank Malaysia

The mid -to high-end residential market in Kuala Lumpur is expected to “self-correct” in the next six to 12 months, with the impending implementation of more cooling measures aimed at curbing speculative activities, said international property consultant Knight Frank Malaysia.

“Overall, the slew of cooling measures is anticipated to dampen speculative activities,” said Knight Frank, referring to the increase in real property gains tax (RPGT) for disposals made within five years of the purchase of the property and the ban on Developer Interest Bearing Scheme (DIBS).

Other cooling measures include increasing the minimum price for properties to be purchased by foreigners from RM500,000 to RM1,000,000, and requiring banks to give out property loans based on net selling price (after discounts and rebates) rather than on gross selling price.

“While we expect lower volume of transactions going forward, property prices, in particular for landed residential units, are expected to remain competitive with positive growth for those located in selected, established or upcoming areas, albeit at a slower pace — mainly due to limited existing or incoming supply, and higher land cost,” it said in its report Real Estate Highlights for Kuala Lumpur, Penang and Johor Baru for the second half of 2013.

The global property consultancy firm also noted that more property developers are now adopting a “wait-and-see” approach to evaluate the impact of these new cooling measures.

“Going forward, we expect to see developers offering greater discounts and more freebies in view of the abolishment of DIBS in order to push sales and remain competitive in the primary market.

“Some developers are also starting to focus on township developments in upcoming suburban locations, such as Rawang and Kajang in Selangor, where demand for housing with affordable price remains strong.

”We expect to see more housing developments in these areas, particularly those with potential access to public transport links such as the light rail transit extension and the upcoming Klang Valley mass rapid transit lines,” it said.

Meanwhile, Knight Frank believes that landed houses priced between RM600,000 and RM800,000, as well as high-rise residential properties priced below RM500,000 will continue to attract strong demand, particularly from first-time home buyers and upgraders.

The overall outlook is expected to remain challenging, impacted by the various cooling measures, softening demand and the expectation of interest rate hike next [this] year which will dampen sentiment,” it said.

On the Kuala Lumpur office market, Knight Frank sees tenants being spoilt for choice as supply continues to outstrip demand, with landlords offering attractive incentives to retain existing tenants and attract new tenants to maintain and improve their levels of occupancies.

It also noted that several property developers have adopted a cautious stance by deferring the construction of their office projects, with work to commence only when they have secured pre-leasing commitment from potential anchor tenants.

“(But) the concerted efforts by InvestKL to attract multinational corporations (MNCs) to set up their regional hubs in Kuala Lumpur are expected to help cushion the high level of office supply. As at November, nine MNCs had committed to set up or expand their operations in Malaysia,” it added.

Additionally, Knight Frank has a cautious optimism on the Klang Valley retail property sector as consumers are expected to tighten spending ahead of further government subsidy rationalisation measures as well as a hike in electricity tariff and toll rates.

Nevertheless, the Kuala Lumpur hotel market is set to remain resilient with concentrated efforts from the government to ensure that the tourism sector remains at the forefront of the country’s economic development. On Penang’s property market, Knight Frank said it is expected to remain in its consolidation mode.

“With the new measures introduced in Budget 2014, the high-end residential sector is expected to be affected to a higher degree while the commercial sector should remain relatively stable.

“On the other hand, the impending opening of the Second Penang Bridge and the Penang government’s efforts to spur developments in the southern parts of both the island and the mainland will very likely lead to brighter prospects in these locations,” it added.

The Johor Baru property market is also expected to remain firm in the medium term with more Malaysians and Singapore-based developers expected to venture into Iskandar Malaysia.

“Development activities will continue to be concentrated within the city centre, Danga Bay, Nusajaya and Medini locality within Zones A and B of Iskandar.” Knight Frank said besides high-end condominiums and apartments, the Iskandar region is expected to see more retail malls and purpose-built offices coming up in the skyline. - The Edge Malaysia