Malaysia Property Market Can Flourish Without HSR

Experts believe the axing of the Kuala Lumpur-Singapore High Speed Rail (HSR) is likely to have a marginal effect on Malaysia’s real estate market, reported The Edge.

“I think some of the HSR’s hype (of bringing added value to locations along the alignment) was misplaced and might have been over-optimistic,” said Savills Malaysia Executive Chairman Datuk Christopher Boyd.

One reason is that there are already many good cross-border transport links between the two countries such as railways and air transportation. Moreover, the high expectations did not exactly result in large-scale investments within the vicinity of the HSR’s proposed stations likely due to its redundancy with existing transportation systems.

“Studies overseas have shown that in many cases, the benefits that HSR links are able to bring are often overestimated. Stations along the alignment can actually pull value away rather than bring value in.”

“It would have been a nice and convenient thing to have but it is not an essential or must-have thing to have now. It will come in time when the market is really ready for it. So (the scrapping of the HSR) is not a catastrophe or severe loss for either Malaysia or Singapore. I don’t think that is going to be a very big impact on land value,” he noted.

In agreement is Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) President Foo Gee Jen.

“Not many people are buying big tracts of land around the station locations. The investments are more small scale. The losses would be more in terms of time and planning. There was not much speculative buying around where the stations are supposed to come up.”

However, he expects the scrapping of the project to impact growth corridors like Melaka-Seremban and Muar-Batu Pahat, particularly the Negeri Sembilan’s Malaysia Vision Valley.

While the termination of the HSR could weaken investor confidence given the loss of potential spillover benefits, the government may reconsider the large-scale project when Malaysia’s debt is reduced from RM1 trillion.

“It is prudent to call off the HSR and other mega projects that can be revived when the government is in a stronger financial position.”

However, plans for major developments and infrastructure along the HSR are likely to be cancelled or put on hold.

“And for those who have paid high prices for the properties that had been planned along the alignment, they may suffer a setback. The properties in those areas are expected to lose their premium and the prices will be realigned to the level of the vicinity, but the drop of prices is not expected to be significant as our property market is still holding up,” he added.

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Scrapping HSR a Wise Move, Time will tell

The new government’s final decision to axe the Kuala Lumpur-Singapore High Speed Rail (HSR) appears to be a smart move as the project’s high cost is likely to exceed its potential benefits, reported the Sun Daily.

“This project can take longer than envisaged to break even given the stiff competition with other modes of connectivity such as road and air. Much will depend on ticket pricing and ridership,” said AmResearch on Wednesday (30 May).

While there will be some negative consequence for terminating the HSR, the research house believes the negative effects are not tremendous.

For instance, the penalty of up to RM500 million to cancel the project is only about 0.45 percent of its RM110 billion total cost, which appears manageable.

“The move has given some breathing space on savings, especially with the high public debt at RM1.09 trillion or 80.3 percent of the gross domestic product (GDP),” it noted.

However, the axing of the HSR and the MRT3 project or Circle Line have significantly affected the share prices of Malaysia-listed construction companies, resulting in a collective decline of 10.87 percent or 24.42 points.

For instance, Gamuda’s stock price slumped 23 percent to RM3.18, that for Malaysian Resources Corp Bhd (MRCB) fell 16.8 percent to 57 sen, while YTL Corp’s slid 8.8 percent to 93 sen.

Earlier this month, a consortium consisting of Gamuda and MRCB have been appointed to build the civil infrastructure works of the HSR’s northern domestic portion, while a joint venture between YTL and THP bagged the southern segment.

AmResearch said the outlook of the local construction industry appears lacklustre as the new government reviews large-scale projects to trim down debt.

“Apart from the KL-Singapore HSR, we believe more mega projects could potentially be deferred, scaled down or cancelled.”

Furthermore, it said, the implementation of a more transparent public bidding system is expected to lower the profit margins of construction firms.

“Not helping either, are the prolonged downturn in the local property market that weighs on Gamuda’s property division, coupled with the uncertainty arising from the potential expropriation of Gamuda’s toll road and water concessions,” added the research house.

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MY Government Committed to JB-S’pore MRT Line

In view of the cancellation of the mass rapid transit (MRT) line 3 and the KL-Singapore high-speed rail project, Transport Minister Anthony Loke assured that the government will continue the Johor Bahru-Singapore MRT but subject to cost review, reported The Edge.

However, he declined to say if the decision to push through with the rapid transit system (RTS) project came from Prime Minister Tun Dr Mahathir Mohamad.

Set to commence operation by 31 December 2024, the RTS will connect Johor’s Bukit Chagar with Singapore’s Woodlands. The 4km rail link is expected to carry up to 10,000 passengers per hour each way.

The project’s cost is yet to be determined since it would depend on the rail alignment agreed upon by a joint venture to be set up between Singapore’s SMRT Corp Ltd and Prasarana Malaysia Bhd, which will also jointly hold a 30-year concession on the link.

Malaysia and Singapore inked a bilateral agreement on 18 January, signifying the two countries’ commitment to the project. The agreement outlines the technical, safety and security requirements; financing, commercial, procurement and regulatory frameworks; as well as immigration, customs and quarantine arrangements.

Calls for tenders for the RTS project is expected this year.

Damansara Realty Bhd on 8 May said it is partnering with China State Construction Engineering (M) Sdn Bhd to bid for the rail project.

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Iskandar Malaysia recorded RM9.33 billion committed investments for Q1 2018

ISKANDAR MALAYSIA – Iskandar Regional Development Authority (IRDA) today announced that Iskandar Malaysia (IM) had recorded committed investments of RM9.33 billion in Q1 of 2018, bringing the total cumulative committed investments to RM262.43 billion from 2006 until 31 March 2018.

Of this total, 59% or RM153.54 billion represent investments that have been realized.

To date, local investors had contributed RM160 billion (61%) to the total cumulative committed investments while the balance RM102 billion (39%) were contributed by foreign investors. The top five countries with highest cumulative committed investments into IM from 2006 to March 2018 are China, Singapore, US, Japan and the EU.

Datuk Ismail Ibrahim, Chief Executive of IRDA said that this reflects continuous investor confidence in IM as it moves towards its long-term development objectives. This is also evidence by the many visits to IM by various international parties.

Just today, IRDA received a visit by Frédéric Laplanche, Ambassador of France to Malaysia with his entourage, which included senior representatives from various French companies, who are here to exchange experience and ideas related to the Smart City agenda.

Earlier this month, IRDA also received a visit by H.E Bai Tian, Ambassador of People’s Republic of China to Malaysia and his delegations and this time around, the purpose of the visit was to explore business and investment potential in Iskandar Malaysia.

“Visits such as these provide us with the opportunity to further highlight IM’s many strengths and opportunities and also act as a platform to strengthen relationship and exchange knowledge with other international parties and global players, in line with the region’s vision to become the preferred destination to invest, work, live and play,” said Datuk Ismail Ibrahim

Promoted sectors in Iskandar Malaysia

Manufacturing : RM 62.06 billion
Logistics : RM 6.69 billion
Healthcare : RM 4.11 billion
Tourism : RM 6.69 billion
Education : RM 2.76 billion
Creative : RM 0.59 billion
Financial Services : RM 2.09 billion

Supporting sectors

Residential properties : RM 48.86 billion
Utilities : RM 12.97 billion
Retail properties : RM 80.64 billion
Industrial properties : RM 20.92 billion
Emerging Technologies : RM 2.94 billion
Government (Infrastructure) : RM 10.67 billion

These investments continue to benefit the Rakyat of Johor and Malaysia with ample business opportunities for entrepreneurs and SMEs as well as the creation of more jobs. From 2007 to March 2018, a total of 746,457 jobs have been created in Johor and most of these came from the various sectors in Iskandar Malaysia including manufacturing, hospitality, food & beverage, and education.

“IM will also continue to focus on strengthening its soft and hard infrastructure with state-of-the-art facilities provided to the investors whilst at the same time benefiting the Rakyat,” said Datuk Ismail

In line with this, the public transportation system for this region will be enhanced by providing efficient and accessible public transport. IM will embark on the Bus Rapid Transit (BRT) system to accommodate the targeted increase in population of up to 3.0 million by 2025. The first phase of BRT will be ready by 2021.

Another important infrastructure enabler is connectivity and this will also be the focus in the third development phase as IM needs a smart ICT infrastructure to remain attractive to new and existing investors whilst at the same time providing convenience to the people of IM in as many ways possible.

IM is also poised to be the preferred regional logistics hub. Port of IM is one of the 5 Big Moves of Iskandar Malaysia Comprehensive Development Plan 2014 – 2025 (CDPii). IRDA envisions to position IM as a world-class dynamic logistics and maritime hub in ASEAN and Asia-Pacific.

Datuk Ismail added that for IM, the next seven years is not only about attracting new investments, but the investments must be inclusive in order for the local communities, businesses and talents to participate and reap benefits from the wealth generated from economic activities. With all these elements in place, the region will, in no time, achieve its vision of becoming a Strong and Sustainable Metropolis of International Standing.

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THERE HAS NEVER BEEN A BETTER TIME TO BUY in MY

THERE HAS NEVER BEEN A BETTER TIME TO BUY

Savills Malaysia would like to reiterate that 2018 will be significant for the Malaysian property market, particularly with the new government’s promise of clean and fair governance. We anticipate the markets to have a knee-jerk reaction this week, and the 2nd quarter of 2018 to be relatively quiet for property transactions, with the onset of the Ramadhan fasting month next week. However, the outlook for Malaysia appears to be promising, as the new government sets to work to address some of the institutional problems that have held back Malaysia’s long-term prospects and deterred foreign investment.


RESIDENTIAL MARKET

The value of unsold units that have been completed in Kuala Lumpur and Selangor rose 44% in 2017. In the same year, the number of unsold houses in Selangor rose by 108% to 5,200 units.

We anticipate that renewed confidence in the market will encourage buyers who have been holding back. However, there will be a period of adjustment and consolidation required to clear existing stock before we see much evidence of price increases. Generally, we foresee that prices will firm up in 2019, and it will be early 2020 before developers can respond by stepping up supply. In short, particularly in Greater KL and Penang, there has never been a better time to buy.

OFFICE SPACE

Sadly, not even the new government has much influence on low global crude oil prices – and oil & gas players make up 33% of the office market in KL city center. While it will still take some time to absorb the 16.9 million sq ft of new space to be completed by 2020 – in the short term, we anticipate that with the uncertainties of the elections behind us, more potential upgraders will see their way clear to invest in a move to new premises. This could lead to an absorption of more than the 1.9 million sq ft we saw in Greater KL last year. In the medium term, we anticipate that new office take-up will increase in tandem with a growing economy and more foreign direct investment. Datuk Christopher Boyd (Chairman of Savills Malaysia) does not think that abolition of GST will have any meaningful impact on office rentals.


RETAIL SECTOR

While the market is likely to remain well supplied in Greater KL, we see the likelihood that retail turnover will pick up in areas where GST is lifted from merchandise, and not replaced by a sales tax. We hope that luxury goods will fall into that category, making Malaysia a major tourist shopping destination. Mr Allan Soo (Deputy Executive Chairman of Savills Malaysia) opines that the groceries, food and beverage, and mass prestige fashion brands will see positive impact from the lifting of the GST.

INDUSTRIAL SECTOR

Datuk Paul Khong (Managing Director of Savills Malaysia) believes that renewed market confidence will boost foreign direct industrial investment. Coupled with surging domestic consumption, the prospects for the industrial and logistics market are very positive.


Look out for rising industrial rents which have lagged behind recent strong increases in industrial land values. Good news for REITS and other funds which are focused on this market sector.


THE INVESTMENT MARKET

Institutional investors, particularly overseas investors, dislike uncertainty. With GE14 behind us, we are preparing for a major uplift in domestic and foreign interest in commercial investment properties. Malaysia has extremely liberal policies related to foreign investment in commercial property and can offer attractive yields. The prospects of appreciation in the Ringgit and strong economic growth will now make Malaysia an outstanding regional investment opportunity.

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Developers selling Land to cope with hard times

Some major developers have started selling land in non-prime locations over past few months, while some are exiting local markets amidst Malaysia’s soft property sector and the uncertainty caused by the upcoming general election this year, reported The Malaysian Reserve.

For instance, Sime Darby Property recently revealed that it intends to sell 768.9ha of land in Sabah and Kedah, in a bid to focus on developments in the country’s central region.

Another major real estate developer, UEM Sunrise, also disclosed plans to sell 164 acres of land in Johor to Country View this year – valued at RM107 million. Previously, the company sold several sites in Johor’s Iskandar Puteri area and Canada for a total of around RM551 million. This accounted for 19 percent of its RM2.9 billion revenue in FY2017 compared to gross earnings of RM1.84 billion in the prior year.

According to Nawawi Tie Leung Property Consultants Executive Director Brian Koh, developers usually dispose pieces of land in remote locations and those that do not generate earnings when times are bad.

He explained that some developers have bought land outside the central region for future expansions when business was good. “But now, when the sector is not as vibrant, they need to consolidate on a strategic level and reaffirm their respective positions in the main market.”

However, the central region is also suffering from an oversupply of properties, and it’s uncertain if the existing un-occupied units can be absorbed by the market.

Meanwhile, property consultancy MacReal International’s Principal Partner Michael Kong noted that it’s a strategy of developers to focus their resources on sought-after locations at the expense of far-flung areas.

Developers are now trying to minimise their losses after “getting hints from the media and statistics announced by Bank Negara Malaysia (BNM) and the National Property Information Centre (NAPIC) on the present glut,” he explained.

Nevertheless, developers’ recent actions are expected to help the overall economy, particularly their market research and shift towards affordable housing.

“With more market studies, they are trying to understand the supply, demand and dynamics of a location for new launches, rather than continue developing townships outside Kuala Lumpur where demand is less,” noted Kong.

This year, a market recovery is unlikely to occur during the first six months due to the existing cautious sentiment due to the looming 14th General Election.

“I don’t think we will see any quick recovery in 2018. I believe that there would not be any sharp changes in property prices, particularly in the primary market. Things would most probably clear up for either a positive or negative by 2H 2018,” he added.

 

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Upbeat over 2018 propspects in Iskandar?

Real estate developers in Malaysia are currently facing issues this year, one of which is a large number of unsold completed houses, but they are bullish that the market’s situation will improve by 2018.

“Everyone builds, thinking the market would be good, but now we are facing a bit of a headwind,” said Sunway Iskandar Chairman Tan Sri Dr Jeffrey Cheah.

But with the correct policies and interventions from the government, he is confident that the mismatch in supply and demand in the residential sector could be addressed.

“All of us are facing challenges. But, I think the government is very proactive, and is now looking at unsold units as well as how to help developers.”

According to UEM Sunrise CEO and Managing Director Anwar Syahrin Abdul Ajib, the prevailing supply and demand imbalance is caused by out of place housing projects.

“We see at times development in areas that are not suitable due to a lack of infrastructure and such. In the case of UEM Sunrise, we consider areas with existing infrastructure and where people want to go to such as Putera Harbour and Nusa Idaman.”

The duo said this after officiating the opening of the new Coastal Highway Southern Link (CHSL) in Iskandar Puteri on Monday (27 November).

The 5.2km road, which connects the Second Link Expressway with the Iskandar Coastal Highway, halves the travel time to five minutes from Medini to the Sultan Abu Bakar Customs, Immigration and Quarantine Complex.

The comments from Sunway and UEM Sunrise follow a report from Bank Negara Malaysia (BNM) on 17 November that the number of unsold dwellings across the country had reached a record level of 130,690 units in Q1 2017.

This is not only the highest level in ten years, but exceeds the historical average of 72,729 units per annum between 2004 and 2016. Residences costing more than RM250,000 also accounted for 63 percent of these properties.

By proportion, Johor saw the largest number of unsold units at 27 percent, followed by Selangor (21 percent), Kuala Lumpur (14 percent), and Penang (8 percent).

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