IOI Prop to gain from MRT2

By BUSINESS TIMES

IOI Properties Group Bhd (IOIPG) may emerge as the key beneficiary for the mass rapid transit Sungai Buloh-Serdang-Putrajaya line (MRT2), given that it has 200ha of landbank in Putrajaya, that houses IOI Resort City. IOI Resort City comprises IOI City Mall, One and Two IOI Square, Putrajaya Marriott Hotel & Spa and Palm Garden Hotel.

Under construction is IOI Resort hotel. RHB Research said with the latest green light from the government to go ahead with the MRT2 project, IOIPG emerges as the key beneficiary. Based on information provided by Gamuda Bhd, MRT2 will run from the Sungai Buloh depot to Putrajaya, and the proposed stops include Kepong, Sentul, KLCC, Cheras Sentral, Serdang, Uniten and Precinct 14 Putrajaya. “IOIPG’s IOI City Mall will likely be a valuable asset.

With this MRT line, the GDV for its landbank in Putrajaya will likely rise further,” RHB Research said in a note yesterday. The research house is maintaining its “buy” rating on IOIPG, with a target price at RM3.38, at a 30 per cent discount to its revalued net asset valuation (RNAV). The IOI City Mall, with a Net Lettable Area (NLA) of 1.4 million sq ft, will have its soft opening this month.

About 90 per cent of the retail space has been leased and key anchor tenants include Parkson, Tesco Premium, HomePro and Index Living by Aeon. “Our checks reveal that Phase 2 of the mall, which will be constructed at a later stage, will have a NLA of 900,000 sq ft. Phase 2 will be at a close proximity to Universiti Tenaga Nasional (Uniten) and the proposed Uniten MRT station could potentially be located there.

“If this materialises, the IOI City Mall will likely see long-term value appreciation, which would spur IOIPG’s RNAV re-rating. “We expect the future GDV (currently at RM3.1 billion) of the remaining Putrajaya land to expand, given the boost from this latest infrastructure development,” RHB said.

– Malaysia Property News

SP Setia open to more landbank acquisitions

By BUSINESS TIMES

KUALA LUMPUR: SP Setia Bhd is open to the opportunity to increase its landbank in Malaysia.
Acting president and chief executive officer Datuk Voon Tin Yow said the company was continuously looking to increase the size of its land although it was not aggressively seeking to acquire land any time soon.

“If there is a good opportunity then we will acquire,” he said here yesterday after the global launch of commercial leasing and residential sales of Battersea Power Station in London, which includes the project’s Phase 3 development.

The public exhibition was to create a new urban quarter for London and raise the development’s brand profile ahead of its Phase 1 opening in Spring 2016.

On Battersea Power Station’s Phase 3 development, Voon said he expects sales would be equally well as those of Phase 1 and Phase 2 as there had been encouraging week of sales of pre-registered and existing buyers in London.

“The global launch yesterday was aimed at bringing in global brandnames to the Battersea Power Station development as it launched both the commercial leasing and residential sales,” he said.
The public exhibitions, hosted by shareholders and Battersea Power Station Development Company (BPSDC) representatives, also opened yesterday in Paris, New York, Shanghai, Singapore and Hong Kong.

The exhibition opens today in Dubai and will move to Tokyo, Los Angeles, Beijing, Doha and Milan next week.

The £8 billion Battersea Power Station site is owned by a consortium of Malaysian investors comprising SP Setia, Sime Darby and Employees’ Provident Fund (EPF).

The development is set to become the new town centre and the anchor for the Nine Elms neighbourhood along the South Bank of London.

– Malaysia Property News

Global search for Battersea retail space

By THE STAR

LONDON: In what must be the most promoted Malaysia/UK property marketing campaign ever, the latest phase of the Battersea Power Station was launched, and with it, the search for tenants for its 3.5 million sq ft of commercial retail space.

The global event kicked off with a simultaneous live screening of the London official launch in Kuala Lumpur, Singapore and Hong Kong.

Phase 3a, comprising 539 apartment units, were simultaneously launched in Paris, New York, Shanghai, Singapore, Hong Kong and Kuala Lumpur. Expectations ran high that sales for the apartment units will be robust.

It was anticipated internally that 60% of available residential space would be sold in the first weeks following strong sales from pre-registered and existing buyers in London. Units have been sold prior to the launch and Battersea Project Holding Co Ltd chairman Tan Sri Liew Kee Sin said pre-sales was encouraging.

As for the 3.5 million sq ft of commercial retail space worth £3bil, Battersea Project Holding Co Ltd, the holding company for shareholders of the project – S P Setia Bhd, Sime Darby Bhd and the Employees Provident Fund – will be keeping it for lease.

“Today’s simultaneous global launch is to find the most creative businesses, fashion, retail, food brands and restaurants to bring alive each phase of the development at Battersea Power Station. It is a momentous milestone in our journey to create a new flourishing community in central London,” said Liew in a statement yesterday.

“By bringing the very best of UK and international businesses to the site, we will create one of the most wonderful places to live, work and visit in the capital. Home buyers interested in the exceptionally well appointed Gehry Partners and Foster + Partners homes are encouraged to visit our exhibitions over the coming weeks, as this is our last residential launch for at least two years.”
Among the famed who bought was musician Sting from the Police. It was reported that Sting paid £8mil for a unit here.

Battersea Power Station Development Co chief executive officer Rob Tincknell said there were a few other big name personalities who bought but they preferred to stay anonymous.

“But Battersea Power Station is not only for film stars and superstars. It is for families too,” Liew told the media. “We want to create a family environment where all the elements will be here.”

The next Battersea Power Station residential sales launch is expected to be in 2016, when phase 3b is launched. Phase 3a and 3b will have a total 1,305 units. Phase 1, comprising more than 800 units, will be ready in June 2016.

Sales in Dubai opens today. The sales tour moves to Tokyo, Los Angeles, Beijing, Doha and Milan next week.

On sale are homes in phase 3a designed by famous architects Gehry Partners (Prospect Place) and Foster + Partners (Battersea Roof Gardens).

Says Tincknell: “Launching the global commercial and residential tour today, 31 years to the day the Power Station ceased to produce electricity is hugely rewarding. I am excited to see how we will build on the Power Station’s brand by housing leading global retail and business brands to create a truly world-class community to live and work in and an electrifying destination to visit.”
He says the homes designed by the two world renowned architects are set to become “new landmark buildings” for London.

Prices begin from £495,000 for the studio apartments, £590,000 for the 1-bedders, £1.2mil for the 2-bedroom units, £1.9mil for the 3-bedders, and £3.2mil for the 4-bedroom units. Penthouses prices are on application.

The entire 42-acre project is scheduled to be completed in 2025. It will be home to 25,000 people living and working on site.

With 40 million visits anticipated each year, Battersea Power Station will be one of the largest retail, leisure and cultural complexes in central London, with businesses on site forecast to contribute almost £1bil a year to the UK economy in the first 20 years of operation.

Battersea Power Station is being prepped to become the new town centre and the anchor for the new Nine Elms neighbourhood (comprising 26 different developments) along the South Bank of London.
Nine Elms will see over 18,000 new homes serviced by an extension to the Northern Line with two new London Underground stations – one of which will be located in the Phase 3 development of Battersea Power Station.

An estimated 25,000 new jobs will be created in an area that is similar in size to the West End of London.

Urban Wellbeing, Housing and Local Government Minister Datuk Rahman Dahlan and a group of Malaysian leaders and diplomatic staff were at the official launch of the global exhibitions at Battersea Power Station yesterday.

– Malaysia Real Estate News

Seminar raises more questions about the state of property sector

By THE STAR

TWO common questions on the local property market… Will house prices ever come down? Is it better to buy now before GST?

While speakers at the 24th National Real Estate Convention, comprising an economist and a few property consultants, try to provide some form of answers, new questions have cropped up, due to interest in the residential sub-segment of the property sector.

Housing transactions comprised a big chunk of total property transactions in terms of both volume and value between 2008 and 2013, with prices taking an upward path at the end of 2009.

During this five-year period, residential sub-segment formed an average of 48% and 63% of total value and volume of the total property market. This has led to house mortgages taking up a major part of the total lending. Hence, the increase in household debt.

Yeah Kim Leng, the dean of the School of Business at Malaysia University of Science and Technology says the property market is “shaped by so many forces” and must be view against the national and internationl global economy.

While Malaysia has been enjoying five years of growth of between 5% and 6%, the country has to focus on the long-term prospect against the ever-changing national and international backdrop.
He says Malaysia’s issues with regards the property sector are not unique – other countries are also dealing with their respective challenges in the property sector.

“The current global economic conditions are important to the Malaysian economy, which, like other countries, has been impacted by ‘cheap money’ and low cost of financing,” he says.

He says just as growth is uneven in different countries, so are the property markets in the developed and developing countries. Prices are rising in UK and Australia, stable in Germany, easing off in the US and falling at a slower pace in Spain and Greece. In China, prices are falling while Singapore property prices are in a state of flux, rising and falling.

The question today is: How long does it take for property markets (in the world) to recover)?
On the home front, Yeah says, the local property prices are not sustainable. Prices are rising faster than income.

“We are over-leveraged and any increase in debt should be in relation with our income level,” he says. Financial institutions’ exposure to the property and construction industry in 2013 were massive.
Loans-to-deposit ratio hovered at 80% at the end of 2013, with almost 45% going into propety sector, says Yeah. Banks are flush with cash, but our household debt is no longer sustainable (for us to borrow anymore). Our property loans suggest that we have reached a stage where we need to rebalance credit growth, says Yeah.

“Property prices are also no longer sustainable. The questions to ask are: How fast are property prices cooling? How sustainable are price increases?

“The challenges for next year are how will we adjust to the new price environment, with the imposition of GST and the continuing subsidy rationalisation?”

The conclusion is that there may be some form of soft landing in the property sector.

Despite this rather sombre introduction, Real Estate and Housing Developers’ Association Malaysia (Rehda) president Datuk Seri Fateh Iskandar Mohamed Mansor is adamant that prices will not come down because land prices and cost of construction are not coming down.

Fateh Iskandar says there are five components that make up the cost and price of a house, namely:
> land cost/price;
> construction cost;
> compliances;
> capital contribution charges; and
> financing and profit margin.

“All five are subject to cost pressures and are on an upward trajectory,” Fateh Iskandar, who heads the Glomac group says.

The daily wages of construction workers have risen by 81%-200% between 2007 and 2013. Building materials like cement, steel bars and bricks have gone up 15%-50% between 2009 and 2013, he says.
Corporatised utility companies like Tenaga Nasional Bhd (TNB), the water concessionaires, Indah Water, Telekom and the Construction Industry Development Board are frontloadiing capital expenditure to consumers by imposing it on private developers, who then pass the costs to house buyers, says Fateh Iskandar.

Compliance costs relate to local authorities’ planning requirements which involves issues like density vs plot ratio, development charges and other planning specifications. These are also passed on to buyers.

“Construction cost makes up 46%. If a developer’s background is agriculture, his land cost may be as little as 10% but for others, this may be 20%. Lenders are imposing stricter requirements when it comes to end-financing and bridging finance issues,” he says.

Since last year, and increasingly this year, the inability to get a mortgage loan has resulted in many walking away from a purchase.

“People want to buy but they are unable to get a loan,” says Fateh Iskandar.

About 80% of households earn less than RM6,900 monthly, and of this, 40% earn less than RM2,000, which explains why many are forced to walk way from a purchase, he says.

Assuming a RM500,000 loan for 30 years, with a 10% downpayment and 90% financing (base lending rate of 6.85% less 2.40%), the monthly repayment is about RM2,519, says Fateh Iskandar.
He says the loan rejection rate is 35%, 30% and 26% in Selangor, Kuala Lumpur and Penang the last two years compared to 20%, 20% and 13% respectively.

Foo Gee Jen, managing director of CH Williams Talhar and Wong Sdn Bhd offers no silver lining. He sums up the state of the housing situation in the Klang Valley with several observations.
Among the most obvious is that speculative activities of the last several years have resulted in high sales but this is accompanied with rising vacancies (see table).

Foo says investors and speculators are buying, or have bought, residential properties that genuine homemakers do not want (because they are either poorly located or are too small.) Foo draws attention to the small office, home office market and its variances.

Other concerns include the high house prices in non-prime locations. New launches in Semenyih and Rawang now cost almost 65% to 75% of those in Petaling Jaya and Bandar Utama, he says.
In Iskandar Malaysia, Johor, Chinese developers have flooded the high-rise market. Development trend has switched from high-rise to landed.

The key trend in Klang Valley’s housing market today has more developments near infrastructure projects, rail and highways.

Does the above observations help to enhance value?

– Malaysia Property News