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21 Responses to “Why Properties Price Would Not Drop”

1. alan on February 20th, 2010 at 5:23 pm

   Co-owning property with a friend

   LIKE almost everyone else, Casey dreams to have her own house. But the 30-year-old administration executive, who is based in Petaling Jaya, knows she can’t afford one.

   So, for the past 10 years of working in the city, Casey, who hails from Kedah, has been moving around within the Klang Valley renting rooms in different private residences.

   “The rentals are becoming a huge burden as I move on to a better living space to suit my lifestyle. These payments are really eating into my disposable income, and in the end, I’m not getting anything out of it. So, it’s not worth it, but buying a unit is also not easy for me,” she laments.

   Apparently, she is not alone. Her friend, May, a 28-year-old software engineer from Sarawak whom she has known for more than three years, also finds herself in the same situation.

   Common quandary

   Such cases are perhaps quite common among many young, single working adults these days. It’s getting increasingly difficult for many of them to get a foot on the property ladder and invest in a first home.

   Unless, of course, they receive support from others such as their family members or close relatives. Otherwise, starting it all by themselves to get on the property ladder is going to be a great struggle.

   It helps little that property prices have been escalating over the last 15 years at a pace that’s faster than the growth of their pay cheques.

   Another reason is their lack of regular savings over the years of their working life.

   For Casey and May, whatever the factors that have contributed to their present quandary, they are putting it all behind them. They are determined to move on and break away from the shortcomings of tenant-ship.

   So, May comes out with an interesting idea – pool their financial resources to buy a house in a good location. Afterall, both believe in the well-preached mantra that the first thing about buying a piece of good property is all about “location, location, and location”.

   Co-ownership sounds like a good idea that enables one to stretch one’s money and acquire a better property in an ideal location. But is it really wise to make such a big-ticket financial commitment over a long period with a friend?

   Most of the property experts polled by StarBizWeek appear apprehensive.

   “For friends, such arrangement may not be a good idea,” says a lawyer, who specialises in residential property purchases.

   Generally, property co-ownership in Malaysia is only common among individuals who have made a lifetime commitment to one another such as husband and wife or couples who are planning to get married soon, but not among friends who are not related to one another, the lawyer explains.

   It is interesting to note, nevertheless, that property co-ownership is a growing trend in the UK, where a number of young, single professionals, and young families have already started to subscribe to such scheme to buy their first homes.

   Their case studies are featured in the website of shared mortgage specialist, called Share To Buy. This organisation is an associate company of Britannia.

   According to Malayan Banking Bhd senior executive vice-president head of consumer banking Lim Hong Tat, it is possible for non-related individuals to apply for mortgage financing under joint names in Malaysia. But, he says, banks would still tend to give careful consideration to the stability of the relationship between the joint borrowers to manage its risk exposure as mortgage financing is usually long term in nature.

   The risks involved

   Experts point out that when friends enter into agreements to buy a house together, there is always the risk that circumstances might change that could affect their deals.

   For instance, one of them might get married later, or the other may become unemployed and hence not able to keep up payments, or one may even die.

   While the national land law in Malaysia allows co-sharing of a property between individuals who are not related to one another, a lot of complications ranging from financial to legal matters could arise if the relationship of the individuals concerned turns sour.

   “Fallout between friends is a major problem. That itself could lead to litigation and court cases,” explains Elvin Fernandez, managing director of property valuer and consultancy firm Khong & Jaafar Sdn Bhd.

   “Such misunderstanding is harder to solve when the individuals have no relational commitment to one another,” he adds.

   “Even if one were to take measures to prepare for all possible eventualities and protect one’s investment, co-ownership of a property between non-related individuals is very hard to manage,” an estate agent says.

   The lawyer, whom StarBizWeek contacted, concurs. She says: “Even if the parties involved create a personal agreement covering all eventualities, the present legal framework may not recognise it. So, one party could be opening him/herself to unnecessary risks.”

   For instance, the lawyer says, in the event of one party defaulting on the mortgage, the bank will still exercise its right to pursue the regular instalments for the loan repayment in full from the other party.

   In the event of death, she explains, one party has to deal with the Land Administrator pertaining to the will of the deceased partner. If the deceased had willed it to another individual, then one will have to get into a new partnership with another person in owning the property.

   Consider carefully

   But what happens to the mortgage part when one party passes on?

   “For joint borrowing, if the borrowers have taken MRTA (mortgage reducing term assurance) cover of equal proportion for the duration of the loan, the MRTA will pay off the portion of the loan of the deceased party. The surviving joint borrower will repay the remaining portion, which is usually at a lower monthly amount,” Maybank’s Lim explains.

   The lawyer advises: “One has to deliberate carefully before signing the dotted lines to co-own a property with a friend because there are definitely more risks than what the benefits could justify.”

   Having said that, though, she tells StarBizWeek that there are successful cases of non-related individuals in Malaysia who have formed such alliances to buy properties purely for investment’s sake, and not to stay together.

   “Most of these cases involve individuals who are very good friends with one another, who have known each other for a very long time, and they are very clear about their goals, such as how much to invest individually and when to exit to make a profit. They have no intention of keeping the property for long or to stay with one another,” the lawyer explains.

   “It is best that individuals consult property and legal experts to get indepth analysis and to find out what are the other options available to minimise their risk exposure if they insist on co-owning a property,” she adds.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/2/20/business/5692948&sec=business

2. alan on February 23rd, 2010 at 10:37 am

   RA Group lines up 2 projects

   It expects to roll out the mid to high-end developments in next two years

   SELAYANG: RA Group is lining up two medium to high-end residential projects in the next two years in light of the improving market sentiment.

   The company, a developer of commercial, industrial and residential properties, has completed phases I and II of One Sri Damansara, which have gross development values (GDV) of RM34mil and RM14mil respectively.

   Chief operating officer Gerda Chan said that even during the financial crisis, there was demand for high-end products, especially in the Klang Valley.

   “(The demand for) medium to low-end properties was affected by the financial crisis but those in the high-end segment are doing quite well,” she told StarBiz in an interview.

   On new projects, she said the company targeted to launch phase II of Desa Mantin, sited on 4ha in Setul, Negri Sembilan by the third quarter of this year.

   “The first phase of Desa Mantin comprised terrace and semi-detached houses. The development of the second phase is still under planning; it might be a bungalow development,” she said.

   Chan said the company was also planning to launch semi-detached or superlink houses at its 3.35ha Templer Hills development in Selayang.

   She said all the company’s projects were currently sited in the Klang Valley and it had about 20ha that had not been developed.

   “We have a 12.15ha freehold plot in Semenyih that is yet to be developed,” she said, adding that the company was looking for more land in the Klang Valley.

   Chan, who is also a major shareholder of RA Group, said the company would focus on the high-end market going forward.

   Its current projects are the Bukit Serdang Industrial development, comprising 33 factory units of various types, with a GDV of about RM95mil.

   On the Templer Hills project, Chan said the company was targeting the medium to high-end market. Twenty of the 45 units in the project had been taken up.

   With a GDV of RM99mil, the project comprised five types of bungalows, including modern contemporary designs to attract the new generation of executives.

   The residential development is a gated and guarded community with build-up areas of between 3,500 and 6,600 sq ft. Each unit is priced from RM1.5mil to RM2.8mil.

   Sited within the vicinity of Selayang Hospital, Selayang Mall, Pasar Borong Selangor and Tesco, the project is about 20km from the Kuala Lumpur city centre.

   On concerns over landslide, Chan said the company had obtained relevant technical support and approvals from the authorities.

   “A lot of people worry about the matter, so the developers have to give them more assurance to build up their confidence level,” she said.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/2/22/business/5646040&sec=business

3. alan on February 27th, 2010 at 7:13 pm

   The Chinese love for properties

   China, Hong Kong and Singapore’s buoyant property markets.

   AS US gaming giant Las Vegas Sands goes hither and thither in preparation for what it describes as the “most expensive stand-alone integrated resort-property ever built” scheduled in late April this year, all eyes are on the effect on the city state property sector.

   The opening of the US$5.5bil (RM18.7bil) Marina Bay Sands casino resort complex will come two months after the start of gaming operations at Resorts World Sentosa, a development owned by Malaysia’s Genting Group.

   Las Vegas Sands says the 963-room hotel, part of the shopping mall and convention centre will also open together with the casino.

   The second phase of the opening slated for June 23 will include a massive sky garden on top of the development’s three hotels as well as more retailers, it said.

   Its chairman and chief executive Sheldon Adelson says their dedication to complete the project never wavered despite the challenging economic climate.

   Construction of the complex – the US gaming firm’s first development in Southeast Asia – had been delayed by materials shortages and financial difficulties faced by subcontractors due to the recent global economic slump.

   As Asia climbs out of the economic quagmire which has engulfed the world, the property radar in this part of the world have been far more rosy than that of the West.

   Singapore’s property sector, as with Hong Kong’s and China’s, have piqued quite a bit of interest among Asians themselves and watched with envy in the West.

   Known as the exotic Far East by the West, property prices in this part of the world have remained excitingly buoyant by contrast, so much so that the Singapore government has recently imposed a levy on people selling residential properties within a year from the date of purchase.

   The city-state also lowered the loan-to-value limit to 80% from 90% for all housing loans provided by financial institutions.

   The measures are “aimed at pre-empting the formation of a property bubble,” Adrian Chua, an analyst at DBS Group Holdings Ltd writes in a note.

   “The earlier-than-expected introduction of measures signals that more could come should prices and volumes not revert back to sustainable levels.”

   Singapore’s steps come after the island’s private home sales last year were just shy of the 2007 record, helped by the nation’s economic recovery. A total of 14,688 homes were sold last year, compared with the record 14,811 transacted in 2007, according to government data.

   Private residential prices rose 7.3% in the fourth quarter from the previous three months, extending the biggest rally in 28 years, based on data from the Urban Redevelopment Authority. The government’s property price index surged 15.8% in the third quarter.

   China’s property market is no less exciting. Having grown by leaps and bounds, it will probably go through a “more meaningful correction” this year because the price gains in 2009 aren’t sustainable, Christopher Lee, corporate ratings director at Standard & Poor’s, says.

   The outlook for the Chinese market is “neutral” for this year, Bei Fu, an associate director of corporate ratings at S&P, says on a conference call with Lee this week.

   “The middle of 2010 could be a potential turning point for many developers,” Fu says. “A combination of slower demand, higher supply and various government initiatives will dampen market sentiment.”

   China’s property prices has surged 9.5% in January, the most in 21 months, as total new loans have surged to 1.39 trillion yuan (US$204bil), more than in the previous three months combined.

   The China Banking Regulatory Commission told banks last month to “strictly” follow property lending policies.

   Investors tend to “sit on the sideline” in anticipation of more tightening measures to curb property price gains this year, Lee says.

   Gradual and cautious

   Beijing will scrap some home-purchase incentives after the jump in prices, reducing the scope of a housing sales-tax exemption and enforcing a 40% down-payment requirement for second homes, the capital’s Municipal Commission of Housing and Urban-Rural Development says in a statement this week.

   The People’s Bank of China raised the reserve requirement by 50 basis points for the second time this year just before Chinese New Year to slow bank lending. The change came into effect this week.

   The central bank says it wants to gradually normalise monetary conditions from a “crisis mode” after gross domestic product grew 10.7% in the fourth quarter, the fastest pace in two years.

   “Policy introduction this year will be in a gradual and cautious manner,” Fu says. “Stability will be the focus.”

   The Chinese government will increase supply of subsidised public housing this year to provide affordable accommodation for people with lower incomes, and there will be a “surprise” in the number of available luxury homes by the middle of this year, when projects started one year ago are completed, leading to stronger competition among developers, she says.

   Industry consolidation

   “Bigger and stronger property players will do even better as they have the scale and financial resources to grow, and smaller companies will find the market condition more challenging,” Hong Kong-based Fu says. “We expect to see more merger and acquisition activities in the sector.”

   Over in Hong Kong, developers are optimistic the city’s government will maintain its “benign” stance toward the industry, and that borrowing costs will remain low, sustaining real estate demand.

   “The government has kept a rather benign stance towards the Hong Kong property sector,” Macquarie Group Ltd analysts led by Chris Cheng says in a research report.

   “Nothing significantly new was introduced in relation to property” in financial secretary John Tsang’s budget speech earlier in the week.

   The city has announced that it will raise the stamp duty on homes selling for more than HK$20mil (US$2.57mil) to 4.25 % from 3.75%.

   This is in response to US Federal Reserve chairman Ben S. Bernanke’s remark that a slack labour market and low inflation will allow the Federal Open Market Committee to keep the benchmark lending rate low “for an extended period.”

   The Hong Kong Monetary Authority typically tracks the Fed’s interest rate movements because the city’s currency is pegged to the dollar. The lowest mortgage rates in at least two decades and an influx of overseas capital equivalent to more than a third of Hong Kong’s annual gross domestic product helped fuel a 29% gain in property prices last year.

   The raised transaction tax on luxury homes, the first increase since 1999, will only affect about 2% of the property market. Of 110,000 Hong Kong residential sales in 2009, about 2,000 sold for more than HK$20mil, according to realty company Midland Holdings Ltd.

   By the way, all three countries are predominantly Chinese.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/2/27/business/5749135&sec=business

4. alan on March 10th, 2010 at 6:29 pm

   RAM revises outlook for 4 sectors to stable

   This reflects its expectation of a sustainable economic turnaround

   KUALA LUMPUR: RAM Rating Services Bhd has revised its outlook – from negative to stable – on the construction, residential property, hotel and tourism and retail sectors, reflecting its expectation of a sustainable economic turnaround.

   “Recovery, however, remains fragile but prospects for this year are much more encouraging than they were a year ago,” chief executive officer Liza Mohd Noor said after an investor meeting here yesterday.

   The ratings house has maintained a negative outlook on the shipping industry, as well as the broad manufacturing sector, stating that their turnaround remained inadequate for a revision in outlook.

   It believes that the marine support and brownfield services sub-sectors within the broader upstream oil and gas industry were “potential gems”, backed by strong demand and stable oil prices.

   Sectors within the broad manufacturing sector dealing with daily consumable and/or medical products were expected to “fare better” than its other counterparts.

   Meanwhile, group chief economist Dr Yeah Kim Leng said the Government’s target for a 5.6% fiscal deficit target this year was “achievable”.

   “The target is attainable provided that there is no increase in spending or any unexpected spending,” Yeah said.

   He said the country’s moderate debt level at 42% of gross domestic product (GDP) and strong funding capability, coupled with low external debt, suggested no fiscal risk.

   Malaysia’s fiscal deficit last year stood at 7.4% of GDP.

   RAM forecasts a 4.9% GDP growth for this year, underpinned by positive growth for all broad industry segments.

   Yeah expected the ringgit to strengthen to 3.20-3.30 against the US dollar by year-end, backed by better growth performance, high current account surplus and international reserves, together with low inflation.

   As at 5pm, the ringgit was trading at 3.34 against the greenback.

   Inflation, which would be cost-push rather than demand-pull, was expected to be at 2.5% this year, and 2.7% in 2011, he said.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/3/10/business/5827702&sec=business

5. alan on April 8th, 2010 at 10:25 am

   Steel price on the rise

   PETALING JAYA: Domestic long and flat steel products will see substantial price increase at least for the next three months following an imminent shift in the annual iron ore contracts to quarterly pricing by the world’s top three iron ore mining companies.

   The cost of iron ore – the major raw material for steel making – to Asian steelmakers could now rise 80% to 100%, or US$110 to US$120 per tonne, under the new pricing mechanism, said industry players.

   This compared with US$60 per tonne, the settled iron ore price for 2009/2010 annual contracts.

   Vale SA of Brazil, BHP Billiton and Rio Tinto Group have considerable bargaining clout, controlling two-thirds of the US$88bil global seaborne iron ore trade.

   AmResearch, in its latest steel report, said regional export prices of semi-finished and finished steel products were already on an uptrend after the Chinese New Year break.

   Some Malaysian steel millers have also resumed their export orders for billets to Asean region at US$450 per tonne last December. Billet prices have since rebounded by about 33% to US$600 per tonne currently.

   Malaysian Iron and Steel Industry Federation (Misif) president Chow Chong Long told StarBiz there was a huge potential for local steel bar prices to trade above the current RM2,300 to RM2,400 per tonne level.

   “Local steel millers, like their international counterparts, will be affected by the shorter term iron ore contracts. There is no choice but to pass the higher iron ore cost to our customers,” he added.

   Chow said steel demand was also expected to accelerate in the coming months with rising orders from the Asean region, structurally weak US dollar and resurgence in domestic steel consumption.

   Perwaja Holdings Bhd and Kinsteel Bhd chief executive officer Datuk Henry Pheng concurred that steel prices could experience substantial increases in the coming months.

   In China, the current spot steel price had surged US$150 to US$155 per tonne compared with US$60 to US$80 per tonne last year, he said.

   Pheng, however, was of the view that the new quarterly iron ore pricing mechanism had some advantages for local iron ore consumers like Perwaja and Kinsteel.

   “While the traditional contracts stipulate a fixed rate annually, the quarterly pricing allows steel manufacturers like us to better manage our costs should there be drastic price adjustments during the year,” he added.

   Pheng also said Kinsteel had not yet committed itself to the second-quarter 2010 iron ore contract.

   Kinsteel, which has a three-month iron ore inventory, would not commit to the second-quarter iron ore contract, which was now 90% above the 2009 iron ore benchmark price of US$90 per tonne, said Maybank Investment Bank in its latest report.

   “The management is evaluating to source local iron ore reserves in Kuantan, Trengganu and Kelantan, which could have more favourable pricing,” it added.

   Malaysia is believed to have at least 50 million tonnes of iron ore reserves.

   Maybank Investment Bank has also turned positive on Kinsteel as the company’s April-to-May billet deliveries had been sold forward at US$550 per tonne (versus US$600 per tonne currently), which already reflected the inflated iron ore costs.

   On the overseas front, Arcellor Mittal, the world’s largest steelmaker, was reported as saying that its end-product prices would likely increase by 21% in the second quarter of this year.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/4/8/business/6009241&sec=business

6. alan on April 10th, 2010 at 7:12 pm

   Book review: The Magic of Property Investment

   EXCERPTS from The Magic of Property Investment:

   Here are several reasons why Renesial Leong likes property investment over other forms of investments:

   >Cash flow on a monthly basis

   Make sure your rental income is able to cover mortgage repayment, service charges and other expenses.

   >Leverage

   A 10% downpayment is equivalent to 100% ownership. Be careful with the gearing though.

   >Capital appreciation

   Well located properties have good capital appreciation over time, especially landed units.

   >Property investment pays for itself over time

   If the rental income is sufficient to cover the monthly expenses, the property pays for itself over a period of time.

   >Return on investment

   Well thought out purchases, when put on the rental market, generally provide a positive return on investment.

   >Control

   You have control over what and where you want to buy, and the type of properties you are comfortable with. It is also within your control whether you want to rent or put it up for sale.

   >Hedge against inflation

   One of the reasons why property appreciates in value over time is due to inflation. The price increase in new properties is generally reflected in an increase in existing properties.

   >The benefit of use

   Whether it is a house, an apartment or a commercial property, there is a demand for it if the property is well located

   fr:biz.thestar.com.my/news/story.asp?file=/2010/4/10/business/6019820&sec=business

7. alan on April 15th, 2010 at 8:31 am

   Billet prices likely to rise

   This is to counter effects of costlier iron ore, says Masteel MD

   KLANG: Billet prices are expected to increase by US$70 to US$80 per tonne in South-East Asia going forward from US$640 per tonne presently due to higher iron ore prices.

   Iron ore is the main raw material in steel making while billet is a semi-finished product to make steel bar.

   Malaysia Steel Works (KL) Bhd (Masteel) managing director and chief executive officer Datuk Seri Tai Hean Leng said even through billet prices had increased by US$90 per tonne to US$640 per tonne since mid-March, it would have to rise by another US$70 to US$80 for steel mills to counter the effects of higher iron ore and coke costs.

   “According to CRU Steel Weekly, the cost of steel products will have to be adjusted by US$170 to US$180 per tonne to reflect the new material cost, following the introduction of new quarterly iron ore contract,” he said.

   The world’s top three iron ore mining companies, Vale SA of Brazil, BHP Billiton and Rio Tinto Group, have made an imminent shift in the annual iron ore contracts to quarterly pricing.

   Tai said the shorter contract would benefit major iron ore exporters as the miners were pressing for even higher prices in the coming quarters.

   “As major Chinese mills have not agreed to the new quarterly pricing, they are paying spot prices that have continued to surge,” he said.

   On Masteel’s performance, Tai said the company expected its overseas business to contribute 65% to its revenue when its new downstream mill was completed in 2012. Its overseas revenue contribution was about 30% last year.

   Masteel is investing about RM300mil in a downstream project, which will be located close to its existing meltshop at its Bukit Raja plant, Klang.

   “Downstream business contributed between 55% and 60% to our revenue last year,” Tai added.

   On Vale’s intention to invest RM9bil in an iron ore distribution centre for Asia in Teluk Rubiah, International Trade and Industry Ministry secretary general Tan Sri Abdul Rahman Mamat said: “We met them last year. There are a lot of issues that they have to address like gas, infrastructure and iron ore.

   “Of course, in the final analysis, it is a business decision. They are still evaluating the plan.”

   Vale is one of the largest diversified metals and mining companies in the world and its investment in Perak will be one of the state’s largest investments to date when it materialises.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/4/15/business/6056026&sec=business

8. alan on April 23rd, 2010 at 8:07 pm

   Concern over rising prices of houses

   Speculators believed may be taking advantage of easy financing

   PETALING JAYA: The jump in home prices lately has raised concern that speculators may be taking advantage of the easy home financing scheme.

   Since the introduction of the scheme early last year, property sales have improved considerably while prices in some locations in the Klang Valley and Penang have edged up by between 10% and 20%.

   Under the housing facility, buyers only need to fork out a small deposit of 5% or 10% of the property price and do not need to make any further payment until after their property has been delivered to them.

   Developers are absorbing the stamp duty, legal fees and interest cost during the construction stage.

   While some industry players agree that there is cause for concern, most feel the housing facility is still needed at least over the next 12 months until the market is back on a stronger footing.

   Ireka Development Management Sdn Bhd chief operating officer Lim Ech Chan said easy-payment schemes had its pros and cons.

   With the low entry cost, such schemes enabled those who have difficulties buying a house to put down the initial 5% or 10% downpayment and have their own roof over their heads two to three years later.

   “When SP Setia first came out with the scheme, it helped the mass market a great deal,” Lim said.

   He said the drawback was that since buyers did not have to pay anything for the next two to three years, they may sell their units when the project was completed.

   “If the project is handed to them during a boom, they can sell it. But if the project is handed to them during a weak economic environment, they will have to pay for the mortgages.”

   ECM Libra head of research Bernard Ching said the recent 25 basis point increase in overnight policy rate had prompted more buyers to buy and lock in at the current interest rates as they might expect the cost of fund to rise further.

   “This is the best time to buy a property for own occupancy as entry cost is at an all time low. As seen in the high buying interest in the past six months, many buyers are buying to hedge against rising inflation down the road,” Ching told StarBiz.

   According to Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector president James Wong, developers need to catch up with “lost time” when launches had to be deferred for more than a year as a result of the global financial crisis.

   “Buyers were facing cashflow problems then and needed to watch their spending. Buying big-ticket items like a house is the last thing on their mind. There are merits in the scheme as it has lowered the entry cost and make house purchase more affordable for buyers.

   “Such financing schemes require a lot of resources and only the big developers with strong financial resources can afford to adopt them. In a way, it is a variant of the build-then-sell concept,” Wong said.

   He said there was still no risk of overheating in the market as the double-digit rise in property prices was registered only for very niche projects in very-sought-after locations where demand far surpassed supply.

   “Property prices on the whole are still much lower compared with those in other countries. While there is still upside potential, prices will not spiral out of control,” Wong said.

   Since buying interest recovered in the past few months, developers are no longer offering the housing facility across the board but only for selective projects.

   “Besides, Bank Negara is very stringent and only eligible buyers who have the required minimum income level will be able to sign up for the housing packages,” Wong added.

   On its downside, he said while the scheme might had drummed up sales, it could give the wrong indication of the real or effective demand for houses.

   Admitting that there would always be speculators in the market, SP Setia Bhd president and chief executive officer Tan Sri Liew Kee Sin said as long as speculation was not rampant, it was actually good for the market as it demonstrated confidence and would improve market liquidity.

   “The key is for banks to be vigilant in their credit assessment to determine the borrowers’ ability to service the loan. They should also be selective in terms of the projects and developers to whom they extend the scheme.”

   Liew said the higher prices reflected insufficient supply to meet the strong demand for projects in good locations and there was ample room for further price appreciation for good landed residential property.

   Since the scheme was launched early last year, SP Setia’s monthly sales averaged more than RM190mil between January and July 2009, which was a new sales benchmark for the company.

   Mah Sing Group Bhd president Tan Sri Leong Hoy Kum said of the company’s RM727mil sales recorded last year, 51% of the buyers signed up for the easy financing facility. The sales was much higher than its target of RM453mil.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/4/23/business/6112841&sec=business

9. alan on April 24th, 2010 at 10:48 am

   Napic: Property deals rise to RM25.2bil in Q1

   KUALA LUMPUR: Property transactions for the first quarter this year increased to 91,979 worth RM25.2bil, says National Property Information Centre (Napic) director Dr Zailan Mohd Isa.

   “Last year’s record showed that 79,024 transactions worth RM16.92bil were done in the same period,” she told reporters after the launch of Napic’s property report yesterday.

   “The transactions done in the first quarter this year covers all sectors that include residential, shopping complex, shops, offices and industrial building.”

   Deputy Finance Minister Datuk Chor Chee Heung, who launched the report, said the outlook for property market this year would be much better than last year.

   “The recent Budget has proposed various measures to spur the property market. Apart from providing new homes for the needy groups, the issue of abandoned housing projects have also been tackled.

   “The 5% real property gains tax have also been reintroduced to prevent speculation on the price of houses. All these will contribute to the growth of the market,” he said.

   Chor added that the Government wanted to spur the Islamic Real Estate Investment Trust (I-REIT) industry to increase foreign direct investments in the country, especially those by Middle-Eastern investors.

   “The Malaysian REITS industry, in general, is still small compared with other countries like Singapore, which is worth US$15.1bil and Hong Kong US$8.3bil.

   “Ours is worth just about US$1.43bil and we need to do more to increase the FDIs into our property market,” he said.

   Chor also said the recent hike in overnight policy rate by Bank Negara would not give much impact on the property market.

   fr:biz.thestar.com.my/news/story.asp?file=/2010/4/24/business/6120389&sec=business

10. alan on April 26th, 2010 at 8:37 am

    Ipoh landed properties to cost 10%-15% more in second half

    IPOH: The selling price of landed properties targeted for launch here in the second half of this year will be priced between 10% and 15% higher than last year due to better demand, rising raw material and land cost.

    Real Estate Housing Developers’ Association (Perak) chairman Datuk Francis Lee said that since the Asian Financial Crisis in 1997, property prices had been stagnant.

    “Presently profits reached sub-normal levels in Ipoh, with margins of about 10%.

    ”For example, the cost to construct which include the land and raw materials, and to market a landed property with a built-up of 1,800 sq ft, is around RM200,000.

    “When sold in the market, such a property is priced between RM210,000 and RM225,000, depending on its location.

    “The profit should be at least 20% as there are risks that the developer have to encounter, such as late delivery due to unforeseen circumstances and the liability period for claims on defects,” he said.

    Lee said that for the past six months, the property development market in Ipoh had picked up.

    “The demand is rising gradually,” he added.

    “The growing demand in the property market, rising raw material prices, and land cost are likely to push property prices up in the second half by 10% to 15%.

    “However, if the demand drops, there will be no new projects launched because of the abnormal returns.

    “This will eventually force prices to move up to a more equitable level,” he said.

    Lee said the present home ownership in Ipoh is about 60%, while the remaining 40% comprised those who stay as extended families or in rented premises.

    “The potential for home ownership to grow in Ipoh is there, as it has a population of about 710,000,” he said.

    Lee added that the purchase of primary and secondary residential properties in Ipoh was largely driven by effective home ownership demand. And only a fraction of which is in the form of property asset investment.

    “As property prices in Ipoh are largely determined by economic fundamentals devoid of speculative investment, prices of properties are relatively stable even through the recent recession,” he said

    fr:biz.thestar.com.my/news/story.asp?file=/2010/4/26/business/6073616&sec=business

11. alan on May 1st, 2010 at 10:16 pm

    Close monitoring needed over speculative activities

    THE REAL ESTATE
    By ANGIE NG

    PROPERTY, especially residential and shop lots, is often regarded as a good investment instrument and a hedge against inflation.

    There are many savvy Malaysians who are avid property investors and they have benefited from good capital appreciation and rental income over the years.

    The fear of rising prices and costlier bank financing rates have fanned demand for residential properties in the past few months.

    Promoting property development and investment is healthy as it is a sector that creates many economic spin-offs that contribute to the country’s growth.

    Should we be concerned about the rising prices for landed residential properties in Kuala Lumpur and some parts of the Klang Valley and Penang? Could this trend be the start of a property bubble in the country?

    Although the situation is not yet alarming and the high prices are still limited to properties in very well sought after locations, there should be close monitoring to ensure the market does not overheat. If left unchecked, a property bubble could result in large losses.

    We must not forget that the most severe global financial crisis since the Great Depression was triggered by asset bubbles in the United States.

    Those who are eager to reap the maximum yields from their investment by flipping their property for quick profits are the ones who will contribute to overheating in the market.

    There may be cause for worry if prices continue to spiral upwards as a result of speculation by individuals who are taking advantage of the easy availability of funds to drive prices up.

    If speculative activities become rampant, developers may have to discontinue their easy financing schemes for some of their projects to ease the market.

    Bank Negara may also need to raise interest rates further to more equitable levels as it will increase cost of funds and weed out speculators.

    Raising interest rates at this juncture may be equivalent “to catching two birds with one stone” as Malaysians with surplus cash will find it beneficial to deposit their money in banks to earn higher interest income.

    The prevailing low interest rates is one of the reasons why people are opting for other investment instruments over bank savings.

    With the economic recovery gaining momentum, raising interest rates will be an appropriate strategy to drain excess cash from the economy to prevent overheating and asset bubbles.

    Australia, China, Hong Kong, Singapore and Vietnam are some of the countries that have raised interest rates to prevent overheating in their economies.

    It is still relatively easy to buy property in Malaysia due to the availability of easy financing schemes. As long as buyers can prove their ability to service the loans, banks will readily lend to them.

    The strict conditions laid down by Bank Negara for loan approvals have provided a safety net to weed out potential bad lenders and curb non performing loans.

    This is unlike the situation in the US where even ineligible buyers without proper jobs or regular income were extended loans which later turned bad.

    Even without the risk of property bubbles, escalating property prices are worrying many Malaysians, especially those who have just joined the workforce.

    In the past, bungalows and semi-detached houses would cost more than RM1mil. These days even terrace houses in some locations are priced from RM900,000 to more than RM1mil.

    As such, those who have just joined the job market and first time house buyers may still need help.

    Developers can still extend housing loan facilities to them. However such services should be discontinued for those who can afford more expensive properties.

    Although housing loan facilities have become a marketing tool for developers, it is important for industry players to play their part to ensure a healthy and balanced market for the benefit of all. This will be a good time for Bank Negara to normalise interest rates.

    ·Deputy news editor Angie Ng believes Malaysians should remain vigilant of their investments and it pays to spread their eggs in different baskets

    fr:biz.thestar.com.my/news/story.asp?file=/2010/5/1/business/6161520&sec=business

12. alan on May 1st, 2010 at 10:17 pm

    Should house buyers be wary?

    Should house buyers be wary of rising property prices? Anecdotal evidence seem to point to significant price increases in the Klang Valley and Penang although the National Property Information Centre report for 2009, which was released on April 23, noted that residential property prices remained stable for the year.

    The all-house price index, which is a gauge of national prices, saw a gain of only 1.5%.

    ECM Libra Capital Sdn Bhd research head Bernard Ching says in a report dated April 26 that the gain is “the lowest annual gain since 2001.”

    Several property consultants say the recent price rise in properties in select locations reflect pent-up demand after the market slump in the first half of last year.

    They also say that the Malaysian residential property market sentiments are, while not immune to global economic factors and price movements, largely driven by house buyers here.

    It was recently reported that the uptrend in property prices was driven by easy financing schemes offered by banks in partnership with developers and that this had led to some speculation in the market.

    However, the consultants feel that any increase in property prices will still be selective and overall prices will not rise drastically but gradually.

    CB Richard Ellis Sdn Bhd executive director Paul Khong says there have been some price increase but only for landed residential properties and in selected locations.

    “Over the past one year, residential landed property prices have gone up 15% to 20% in good locations in and around Kuala Lumpur and Petaling Jaya,” he says.

    Khong says prices for the luxury condominium sub-segment of the residential property market, are still between 10% and 20% below the market’s peak.

    This sub-segment has been badly hit by the financial crisis as a considerable portion of sales are to foreigners. The number of foreign property buyers have dropped since early last year.

    Khong feels that fewer launches and higher demand will affect the prices of landed residential properties.

    Ching says property launches have been moderate after bottoming out in the first quarter of 2009. This trend was in line with on-the-ground observation of developers preferring to launch in smaller parcels.

    “We expect moderate growth in property launches to continue in 2010. This is supported by declining building plan approval,” he says.

    Ching says the last quarter of 2009 was a record quarter for both the residential and commercial segments of the property market despite the uninspiring set of numbers for the year as a whole.

    He says in 2009, the residential segment recorded a marginal improvement in overall transaction value of 1.3% to RM41.8bil while the commercial segment contracted marginally by 1.4% to RM16.4bil.

    Henry Butcher Malaysia (Penang) Sdn Bhd director Dr Teoh Poh Huat says the recent property price increases reflect the different economic fundamentals at play compared to a year ago.

    He says the property market is driven by the sentiments of Malaysian buyers although these buyers may take into consideration factors at the macro or global levels. “But these factors are short-term whereas investing in property is long-term,” Teoh says.

    He says the significant increase in transactions for the first quarter of this year is a reflection of these sentiments following an unexpected expansion of the economy in the final quarter of 2009.

    “Confidence in the economy is quite strong. There is liquidity due to pump-priming measures as well as the high savings rate in the country. This is reflected in the transactions,” Teoh says.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/5/1/business/6149355&sec=business

13. alan on May 23rd, 2010 at 11:26 am

    Robust outlook for Sungai Besi

    SUNGAI Besi is looking to be the next property development “hotspot” for local developers, and to a certain extent, foreign investors, according to industry players and experts.

    According to YTL Land & Development Bhd project director Safian Ibrahim, the Sungai Besi area holds much potential as the next “new thriving address” in Kuala Lumpur due to its strategic location.

    He notes that it is very well connected and easily accessible via numerous highways as well as railways.

    “What this means is that Sungai Besi has already answered three of the main criteria of homeowners – location, location, location. The only other question that remains is what type of property they can invest in and its subsequent potential returns.

    “More people are realising how much the area has to offer and we expect its future to be exceptionally bright,” Safian says.

    Hua Yang Bhd chief operating officer Ho Wen Yan also believes the area is rapidly developing into an ideal location for property development.

    “We foresee that within five years, Sungai Besi will become a hotspot, akin to a golden triangle location with its multiple accessibility channels and convenient public amenities. Because of escalating property prices, Sungai Besi and Seri Kembangan are becoming suitable locations, as it is well connected via major highways,” he says.

    Property developer Hua Yang will be launching its One South mixed development project in Sungai Besi this year. The RM750mil project features residential, commercial and retail components.

    The development will be carried out in five phases. The first phase will consist of retail outlets and offices. Phases two, three and four will consist of serviced apartments while the fifth phase will consist of offices.

    For its One South development, Ho says the company is targeting small and medium-scale enterprises and office tenants that were looking to upgrade to a newer working environment and lifestyle.

    He also says the company has been looking for a suitable piece of land to develop in the past three years and has identified Sungai Besi as a suitable location.

    Ho says more people are choosing to live outside the KL city and Petaling Jaya area due to escalating property prices and congestion, making Sungai Besi and Seri Kembangan ideal.

    “To make property purchases more accessible, more developments choices need to be given to the surrounding and existing residents in that area, as they look to upgrade their lifestyle.

    “Waiting for the Government to upgrade infrastructure such as roads and public transport may take time and private sector-led projects (need to) strive to provide what the market needs.

    Safian meanwhile says the biggest challenge in developing projects in Sungai Besi is to find a way to bring value to the area while meeting the needs of homeowners.”

    YTL Land has been present there since 2005, when it launched its Lake Fields project, a joint venture with Employees Provident Fund, comprising a 70ha residential development that fronts a 6ha lake.

    “The project was initially earmarked for high-rise condominiums, but from our market research, we noticed that the majority of homes in the area were already made up of condominiums like in Desa Petaling and Seri Kembangan, and matured neighbourhoods like Kuchai Lama and OUG.

    “So we decided to fill this gap in the market with landed homes set in a modern, landscaped environment. Coupled with the advantages of having a strategic location, public transportation and surrounding amenities, we decided that the concept for Lake Fields is all about spacious, convenient, modern living.

    According to Safian, the first phase of homes, Meadows & Glades, which was launched in February 2005, was a tremendous success.

    “All 514 units of the three-storey link homes were snapped up overnight demonstrating homeowners’ need for spacious homes,” he says.

    The development of the Sg Besi Royal Malaysian Air Force (RMAF) air base is another positive factor.

    The Government is redeveloping that 162ha into an integrated commercial hub.

    Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia president James Wong believes this would present an opportunity for property development in that location.

    “The Government has the avenue to make Sungai Besi a destination for property investment,” he says.

    Malaysian Association for Shopping and Highrise Complex Management advisor Richard Chan is hopeful that the area will be developed with an environmental emphasis.

    “There is simply a lack of green within the Klang Valley area. It’s so congested and concrete-looking, it doesn’t look nice!” He says part of the land could be turned into a recreational or fruit park.

    “We have good weather with an abundance of sunshine and rain. Fruit trees will thrive, so why not?”

    Ho believes the re-development of RMAF base will be the catalyst for the growth of the southern part of the Klang Valley.

    “A commercial centre is ideal as the site is surrounded by mature residential areas such as Cheras, Bukit Jalil, Serdang and Seri Kembangan. Furthermore, all the major infrastructure is in place, such as highways and public transport.

    “There will be a definite spillover effect. We expect aggressive growth in that area,” he says.

    Safian believes it would raise the profile of Sungai Besi significantly.

    “Sungai Besi has been under the radar of property investors, when in fact, it has so much to offer as the next future address of the city.”

    fr:biz.thestar.com.my/news/story.asp?file=/2010/5/22/business/6314201&sec=business

14. alan on June 4th, 2010 at 2:48 pm

    MRCB to buy more land in Klang Valley

    KUALA LUMPUR: Malaysian Resources Corp Bhd’s (MRCB) chief executive officer Mohamed Razeek Hussain said the group will use part of the cash raised from recent share sale exercise to buy small pieces of prime land around Klang Valley, while keeping an eye for opportunities to participate in upcoming government projects.

    These includes a massive Government development plan in Sungai Buloh on a joint- venture with the main shareholder the Employees Provident Fund (EPF).

    “We will be looking to participate (in the Sungai Buloh project), but there’s still no award from EPF to MRCB,” Razeek told reporters after the group’s AGM yesterday.

    MRCB’s chairman Tan Sri Azlan Zainol, who is also EPF’s chief, however, did not attend the post-AGM press conference.

    The pension fund had been buying shares in MRCB from the open market after its takeover offer at RM1.50 a piece was rejected by minority shareholders in late March.

    Latest filing with Bursa Malaysia showed EPF as the single largest shareholder in MRCB with a 40.9% stake.

    Shares in MRCB had risen to as high as RM1.69 on April 2 on high hopes it would benefit from the Government’s intention to unlock the values of its landbank around Klang Valley. The stock was up 2 sen to close at RM1.50 yesterday.

    At the press conference yesterday, Razeek said the group’s might look beyond local shores in building up its business.

    “We are always on the lookout for new opportunities, locally or abroad, but we will only go into our areas of core competency,” he said.

    The group is building an apartment block in Melbourne with gross development value of A$57mil.

    Razeek said MRCB was currently bidding for projects estimated to total RM600mil at home to replenish its engineering and construction order book of RM3bil.

    “We have to go with some degree of optimism,” he said, adding that the amount tendered excludes in-house projects at KL Sentral.

    This excludes upcoming projects such as the Light Rail Transit (LRT) expansion, where MRCB is one of the contractors already pre-qualified for the project.

    On his outlook for the current year ending Dec 31, 2010 (FY10), Razeek said the group expected revenue to top RM1bil for the first time this year, with “reasonable growth” in profits from last year.

    In FY09, MRCB return to the black with a net profit of RM34.6mil on sales of RM922mil.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/6/4/business/6398065&sec=business

15. alan on June 6th, 2010 at 7:11 pm

    Concern over higher levy on foreign workers

    PETALING JAYA: Various organisations are against the Government’s move to increase the levy on foreign workers, arguing that the extra costs will only be passed on to consumers.

    Real Estate and Housing Developers Association president Datuk Ng Seing Liong said it was not the right time to increase the levy as developers were in the midst of adopting the Industrial Building System (IBS).

    “It’s definitely going to be a huge increase in costs for property buyers. It is counter-productive. We are implementing the IBS to eventually reduce dependence on foreign labour, which shows that we are working with the Government,” he said.

    The IBS is a system in which construction materials and parts are pre-fabricated in factories and not on-site by labourers, which was the usual practice.

    Deputy Prime Minister Tan Sri Muhyiddin Yassin, who chairs the Cabinet Committee on Foreign and Illegal Workers, had announced on Thursday that the levy for foreign workers would be increased next year.

    Amnesty would also be granted to illegal foreign workers to return to their own countries without facing action.

    Malaysian Foreign Maids Agencies Association president Alwi Bavutty said the levy for the industry should not be raised from the present RM360 yearly.

    “Employers now have to pay RM550 or more for monthly salaries and this will add to their burden,” he said, adding that many Malaysians had no choice but to hire maids.

    Malaysian Indian Contractors Association president R. Muthiah said the move would increase the cost of bringing in foreign workers through Construction Labour Exchange Centre Bhd, a government-appointed agency.

    However, he said the association accepted that any levy increase would need to be tolerated by the industry.

    In Johor Baru, Malaysian Indian Business Association president K. Sivakumar said the Government should not make such decisions without a contingency plan.

    “If such decisions are rushed, the country’s economy will be affected because many industries depend on foreign workers,” he said, describing any such move as “untimely”.

    “Most locals are not up to doing hard labour or do not possess the skills to perform the jobs that foreign workers do,” he said, adding that there should be more night schools to train local workers in various skills.

    fr:thestar.com.my/news/story.asp?file=/2010/5/22/nation/6319751&sec=nation

16. alan on June 24th, 2010 at 9:13 am

    Tough going for M’sian steelmakers

    They seek changes in policies on steel to survive competition from regional players

    SHAH ALAM: The Malaysian Iron and Steel Industry Federation (Misif), which is revising downward the country’s average steel consumption growth to 5% this year, wants the Government to further streamline its policies on steel to enable local market players to survive tough competition from other Asian steel players.

    Misif president Chow Chong Long said its earlier forecast of 10% to 12% growth for this year was dashed following the quarterly iron-ore price increase, deepening euro sovereign debts crisis, potential slowdown in China as well as the rising costs from the removal subsidies in Malaysia.

    “Signs (of growth) were looking good in the first half of this year but the recent global developments have implications on the supply, demand and prices of steel,” he told reporters at the two-day Misif 9th Conference on Status & Outlook of Malaysian Iron and Steel Industry which started yesterday.

    These global developments could also severely affect the Malaysian steel companies which were increasingly becoming more export-driven, said Chow.

    “However, the 10th Malaysia Plan which will continue to upgrade Malaysia’s infrastructure over the next five years, will help boost domestic consumption of building materials including steel.

    “This will help cushion some of the external impact on local steel players,” he added.

    Malaysia exports about 2.5 million tonnes of steel products, particularly long-steel products, annually to Asean countries. Of the long-steel products export, billet is the largest item representing about 603,890 tonnes in 2009.

    Malaysia continues to be a net importer of steel products as there is demand for steel grades and specifications of various materials which are not produced locally.

    Malaysia’s apparent steel consumption declined 16% to 7,094 tonnes in 2009 from 8,442 tonnes in 2008, bearing the full impact of the global economic recession.

    The local steel industry is divided into two key sectors – long products primarily used in construction and industrial and flat products for automobiles, construction, shipbuilding and manufacturing.

    Meanwhile, Amsteel Sdn Bhd senior general manager (marketing) Koay Boon Bioh in reviewing the long products said Misif had forecast a 3% to 5% growth for billets, bars, sections, wire rods and wire products this year.

    “Exports to Asean countries especially Vietnam will sustain within the next few years until their own capacities come onstream. There will also be more steel demand from 10MP as reports indicated about 52 projects worth RM62bil with demand likely to filter within the next six to nine months,” he added.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/6/24/business/6532146&sec=business

17. alan on July 21st, 2010 at 8:53 am

    Don’t politicise steel deal, China urges US

    BEIJING: China yesterday branded a group of US lawmakers as protectionist for seeking to block an investment by the country’s fourth largest steelmaker on national security grounds.

    State-owned Anshan Iron & Steel Group, the parent of Angang Steel Co, has agreed to pay US$175mil for less than a 20% stake in a rebar plant that Steel Development Co, a US startup, is building in Mississippi.

    A bipartisan group of 50 lawmakers called on July 2 for an investigation, expressing deep concern that the investment threatened US jobs and national security.

    Yao Jian, a spokesman for the Ministry of Commerce, said politicising what was a normal commercial deal was tantamount to protectionism.

    “Most US politicians hope China can invest in the US to create jobs, and the move by a small group of politicians to investigate and review the deal in the name of ‘national security’ is inappropriate,” Yao told a news conference.

    “I hope both US politicians and industry representatives will not politicise normal commercial projects that promote the development of bilateral trade,” he added.

    US steel companies have complained loudly about unfair competition from China and have won a number of US anti-dumping and countervailing duties on Chinese steel goods.

    The United States blocks few foreign investments. But last year, a Chinese mining company backed out of a deal to invest in a Nevada gold mine after a US government review raised security concerns. The mine was about 100km from a base the US Navy uses to train its pilots

    fr:biz.thestar.com.my/news/story.asp?file=/2010/7/21/business/6700927&sec=business

18. alan on August 12th, 2010 at 11:00 am

    Homes becoming too costly for the average Malaysian
    MAKING A POING

    AS I was getting ready for some exercise early yesterday morning, I saw a man walking up the street dropping a leaflet into the mailboxes of homes. I took one off him as he approached the front of my house and it was an advertisement for properties.

    The houses on offer in the secondary market were not your typical medium cost house or apartment that many Malaysians live in these days, but were million dollar dream homes that many aspire to own.

    This got me thinking. Why are many new property launches and existing homes exorbitantly priced? Why are there few to none of the bread-and-butter houses being built?

    If developers keep developing and selling higher priced properties, this will lead to an imbalance in supply and demand in the housing market.

    Some of the last major townships launched in the Klang Valley include Setia Alam, Kota Damansara, Mutiara Damansara, Ara Damansara and areas surrounding Kepong and Puchong.

    Initially catering for affordable homes, the price and types of properties being sold in those areas have moved up in scale.

    The surge in home prices these days has been faster than the rise in wages and it would not be long, if it is not already happening, before such properties in the Klang Valley become too expensive for the average Malaysian.

    Cheap financing has enabled Malaysians to own more expensive houses. Home buyers often require a small downpayment before purchasing homes.

    The low interest rate environment, banks flushed with cash and innovative schemes have also allowed loan repayments to be kept within check – for now.

    Furthermore, banks wanting to grab a larger slice of the home loan market are said to have engaged with external sales teams and other agents whose sole motivation might be to secure more loans.

    While the absence of large land banks would be the prime reason for developers opting for smaller and higher priced properties, the process of pricing, while still a function of supply and demand, is also subjective. This subjective approach is also the norm in the secondary market.

    Those who own homes would have heard about how much properties in their neighbourhood were recently sold for. People would then take that as the market price and would likely want the same price or higher when selling their home.

    A gauge of what a house is worth would be the rental it can fetch. As prices of homes rise and the rental market, which is more linked to the disposable income of people, remains static and rigid, the inflated prices of property becomes more apparent.

    Yes, price inflation of properties – if it remains strong – would offset the loss in returns from rent if people buy properties as an investment.

    But then people should also consider whether they are better off renting and investing their money in higher yielding assets.

    Escalating property prices also pushes homes out of the reach of the current generation.

    Younger people who are just starting out in life may have to live at the fringes of Klang Valley, which then increases their cost of commuting to their workplace.

    Those wanting to stay in the Klang Valley have then no choice but to opt for cheaper apartments or low cost dwelling.

    It’s almost like the pickings are getting slimmer. My parents’ generation could afford a bungalow, mine a terrace house and what about my children’s generation if prices keep going up as they have?

    The escalation in home prices, which would add to the leverage of home buyers, is also a warning sign. All it takes is one bad recession – recessions are becoming more frequent than in the past – and that would be trouble.

    We only have to look at the implosion of the sub-prime market in the US to see what a housing collapse can bring.

    Deputy news editor Jagdev Singh Sidhu dreams of a juicy burger as he is on his second attempt of a weight loss programme.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/8/12/business/6842280&sec=business

19. alan on September 9th, 2010 at 11:05 am

    More firms may cut iron ore prices

    SINGAPORE: Anglo-Australian mining giant Rio Tinto has agreed to a 13% cut in iron ore prices for fourth quarter with Japan’s Kobe Steel Ltd, likely setting a trend the industry will follow.

    The deal, expected by the market, could fuel a restocking cycle if followed by other players and lead to stronger prices for most of 2011, offsetting the nearly US$3bil fourth-quarter savings Chinese buyers may see as a result.

    “We have agreed to a 13% cut in the price of iron ore for October-December from July-September,” spokesman for Japan’s fourth-largest steelmaker Gary Tsuchida said yesterday.

    Nippon Steel and JFE Steel, both declined to comment
    fr:biz.thestar.com.my/news/story.asp?file=/2010/9/9/business/7003895&sec=business

20. alan on October 10th, 2010 at 8:52 am

    Struggling to buy first homes
    By CHRISTINA CHIN

    AN accountant with a multi-national factory in Kuala Lumpur, Ursula Lee is still harbouring hopes of buying her first property in Penang.

    “I’m just looking for a decent place, not some luxury apartment, and even that is proving to be a challenge,” says the Penangite who feels she is now ready to buy but is having a problem finding one to suit her budget.

    “The prices have skyrocketed in Penang, especially in certain locations like Tanjung Bunga and Gelugor’s coastal front,” adds Lee, who has come to the conclusion that “most properties are not worth the current market price”.

    She has opted to rent for now because she feels that it is not a good time to buy property.

    “The bubble could burst any minute and you’ll be saddled with an overvalued lot,” she says.

    The 32-year-old regrets not investing earlier when she was still based in Penang.

    “There was a development in Gelugor overlooking the Penang Bridge that I was considering,” she relates. “That was a few years ago when the property was still under construction and there was no hypermarket or office lots there yet.”

    She says a colleague snapped up a unit for about RM300,000 and has just sold it off for more than RM500,000.

    “My mistake was that I did not see its potential. It wasn’t considered high-end then but looking at the price today, it definitely qualifies.”

    Lee, who is also looking at buying apartments in Kuala Lumpur, believes it is best to buy property under construction because prices will double once it is completed.

    “Property prices in Kuala Lumpur have stabilised but it’s stuck at a very high point,” she says. “An apartment in Damansara that was going for RM350,000 in May is now RM400,000. Apparently, the steep and rapid rise was due to a new high-end development next door.”

    While checking out the market, she also found that prices for second-hand leasehold apartments are also on the rise.

    “It used to be that people stayed away from leasehold units but now, even as the lease is getting shorter, the price is getting higher,” says a surprised Lee.

    Kimberley Tan, 32, who bought a condominium unit in Bayan Lepas three years ago, says the place is now worth close to RM700,000. She purchased it with her younger brother for RM430,000. Completed last year, the condominium offers an unobstructed panoramic view of the sea with prices ranging from RM430,000 to RM800,000 for 145.1 sq m to 231.4 sq m units.

    “We are lucky we bought it then because property prices have soared to ridiculous amounts in the last two years,” Tan, a finance specialist, says.

    “It’s even harder for young professionals to buy their first home now because prices are higher than ever,” she notes. “New developments are a good buy but you have to get in before the project’s official launch.

    “The problem is that most developers would require you to buy at least three units at a go and if you wait for the official launch, the units would have been taken up by property investors.”

    Both Lee and Tan knew from the start that they would not be able to afford buying landed property on the island.

    “Unless you are from a two-income family, you can forget about owning landed property,” says Lee. “For a single lady like me, security is of the utmost importance and, of course, you want a fairly nice place. For this, one must set aside between RM350,000 and RM420,000.”

    Despite this, property prices in Penang are still relatively cheaper than other countries in the region, according to Real Estate Housing Developers’ Association Penang chairman Datuk Jerry Chan.

    “Yes, there are some instances where the price has doubled but we are just playing catch up with places like Singapore, Thailand and Hong Kong,” he explains. “We have just come out of a very bad economic downturn so it’s natural for property prices to spike.”

    He adds that a yearly 15% to 20% rise was not sustainable and that the rate of increase would eventually slow down.

    On the other hand, he says it has only been a year-and-a-half that prices have been on the rise, so the bubble is not about to burst just yet.

    fr:thestar.com.my/news/story.asp?file=/2010/10/10/nation/7172386&sec=nation

21. alan on October 10th, 2010 at 8:53 am

    Home, elusive home
    BY JOSEPH LOH

    Of late, there has been a hue and cry about problems of buying affordable housing. Certain factors are being identified as the cause of these problems but are things as clearcut as they seem?

    FOR all intents and purposes, K. Anand looks like a young professional who has the world at his feet. He has a steady job as a bank executive, owns a locally-made car, and will be getting married next year. Now aged 30, he has all the ingredients necessary for a blissful married life, except for one – a house to call his own.

    “Since I got engaged a year ago, I have been looking for a house, but I haven’t found one I can afford yet.”

    Anand has a budget of about RM300,000 – a sum which appears substantial – but as he found out, it is not enough to buy the house that fits his criteria. He wants to own a house, not an apartment, and preferably in the vicinity of Petaling Jaya, Selangor.

    “There is nothing decent below RM400,000 and I do not have that kind of money. I may have to continue renting or look for locations that are much further away,” he says.

    Anand’s situation is one which many young professionals are finding themselves in these days. Prices of residential properties have gone up, notably so in the past 12 months (see graphic).

    This has essentially priced out the young professionals from buying a piece of landed property in popular areas like Petaling Jaya.

    This leaves him with two choices – either buy a smaller apartment unit or buy a house away from the city.

    It is understandable for property prices to rise. However, what the National House Buyers Association of Malaysia (HBA) is concerned about is the drastic escalation of prices over the past few years, says its honorary vice-president Brig-Gen (ret) Datuk Goh Seng Toh.

    “Prices of houses, like everything else, will go up at reasonable inflationary trends, but it should not be at the rate we are experiencing now.”

    HBA honorary secretary-general Chang Kim Loong gives some examples of property around the Klang Valley.

    He describes that in Kajang, a double-storey house was launched in 2004 for RM238,900, but in 2010, the same type of properly was launched at RM327,600, an increase of RM88,700 or 37%.

    In Kota Damansara, a house averaged RM330,000 five years ago but today, the asking price is RM600,000, up RM270,000 or 80%.

    A double-storey house in Puchong cost RM400,000 five years ago, but has now increased to RM600,000, up 50%.

    Chan Ai Cheng, general manager with S.K. Brothers Realty (M) SB, has witnessed the increase in prices but attributes other factors to the rise.

    “In established areas, prices of landed homes have doubled in less than 10 years, but this is a sweeping statement. Rising cost of materials, labour, land costs, scarcity of land in established locations, better designs and finishes, are the reasons for the increase,” she says.

    There are properties in prime areas that are still affordable, but the question is what one gets for the money.

    “You can buy property in Puchong, Kepong or Kota Damansara from RM200,000 to RM400,000, but what you get is a 750 sq ft apartment which is just a pigeon hole,” says Goh.

    Chang says the problem is not limited to the Klang Valley alone.

    “It is a problem in bigger cities and towns, and on Penang island, for example, it is worse. Even those earning RM4,000 monthly cannot afford a place on the island. They have to go over to the mainland in the Prai area.”

    Real Estate and Housing Developers’ Association Malaysia (Rehda) president Datuk Michael Yam says it could be possible for the young professional to afford a house, but not on a single income.

    “If he earns RM3,000 a month and you look at the absolute price of landed property, then it is beyond his reach. However, if it is a double-income family, they could still afford something, but it will be difficult,” he says.

    The burning question is: What is driving up prices?

    Chang says it cannot be denied that cost of raw materials has gone up, but that is not the main reason.

    “The biggest reason is unsustainable demand, driven by easy credit availability and speculation.”

    Goh is more scathing with his remarks.

    “Greed and the market are driving up the prices. For every piece of land, developers want to maximise profits, and there is no social responsibility.”

    To an extent, Goh understands that developers are businesses driven by the bottom line.

    “In the Klang Valley, there are no developers who are building affordable single-storey houses. Why build one when you can build a double-storey unit and sell it for twice the price?”

    Chang goes to the extent of stating that there is an artificial inflation of prices.

    “There is an unholy alliance between developers, certain financial institutions trying to maximise profits and reach targets, and even valuers who collaborate,” he claims.

    He gives an example of a project which when launched three years ago was RM400,000 per unit, but units in a current phase there now cost RM1.8mil.

    “How is this possible? There has to be some reason for the trumped-up valuation and the banks extending the loan period to 35 years. These loans will spill over to the next generation,” Chang argues.

    Goh also discounts the fact that increasing construction costs translate directly to the current spiralling prices.

    “We call it the ‘teh tarik syndrome’, when the price of sugar goes up by 10 sen, the price of a cup (of teh tarik) goes up by 10 sen as well.”

    He explains that construction costs account for about 30% of the ultimate cost, so the drastic increase cannot be justified.

    On his part, Yam counters that the rise in construction costs is an important factor in the price of property.

    “Costs have gone up by more than 50% for everything from raw materials to labour rates,” he says, adding that the cost of land has to be factored in as well, but not the cost of the land the property is built on.

    What should be looked at is the cost of the next plot of land that the developer buys to build on, and because of the scarcity of good, serviceable land, this is entirely at the whim of the seller (of the land), he explains.

    “For example, he may have bought the land for RM35 per sq ft but today it will cost RM200. If they (developers) sell the property cheap, they will not have money to buy the next piece of land.

    “The record is now RM7,000 per sq ft in the central KL area. Yes, it may have been an aberration, but the bar has been set.”

    Developers have also been encumbered with extra, hidden costs, according to the HBA.

    “Developers are not charitable organisations so extra costs (including cost of building infrastructure for basic utilities) are passed on to the buyer,” says Chang.

    He says that developers shoulder the responsibility of building roads and providing infrastructure for utilities, even though some of these providers have been privatised.

    “In the past, these were under the central government. These are now corporatised, listed companies but they still enjoy the same deal. Why are housebuyers still paying for their infrastructure?”

    Yam says developers are not unaware of the problem. They are aware that there is a big demand for affordable units and the take-up rate will be good, yet are not motivated to build them, he says.

    “There is an imperfection in the planning law. There should be some enabling legislation to encourage developers to build smaller, affordable units.”

    Yam explains that typically, planning laws allow only 60 units to be built per acre on residential title land, which is based on a population density principle.

    “As a developer, you want to maximise the net saleable area, so you build as big as you can. It makes no difference if you build 60 units of 1,000 sq ft units, or 60 units of 3,000 sq ft units.”

    “The only ones who are building smaller sized units are the commercial-title apartments, which is based on a plot ratio. So you can chop it (built-up floor space) up into any unit size.

    “The problem is that people who buy them end up paying higher property taxes and commercial rates for utilities.”

    Yam says the solution could almost be as simple as raising the cap on the number or units per acre.

    “The planning laws needs to be reviewed so the developers are encouraged to build smaller units for the market. For example, they should not restrict the number of units per acre, or if they are building small units, more should be allowed.”

    The HBA also believes that the Government can do much to curb the unrestrained spiralling prices of property.

    “If they can implement price controls for essential food items, why not for housing? Both are items of necessity, so why can’t they do that based on the same philosophy?” Chang queries.

    A special government task force should be set up, he suggests.

    “Let us be serious about it and get parties such as NGOs, financiers, industry players and academics to sit down and talk about it.”

    He says Bank Negara, for example, can play a significant role.

    “They are the controlling authority for all financial institutions. They cannot control property prices but can control the bank and the environment where the housing market operates.

    “They can do this by controlling interest rates, the period of repayment and loan-to-value ratio, among other measures.”

    Goh adds that the current one-size-fits-all housing policies cannot continue.

    “We cannot have a policy that is the same for a first-time houseowner or speculator. Singapore, for example, has implemented some sensible measures.

    “They have things like a minimum occupancy period, and you have to stay in a place for five years before you can sell it.”

    People should not be making too much money from property, Goh reasons.

    “It is not like the palm oil industry, for example, which is material substantive income.

    “Property is speculative income, and they are taking money from our future generation to spend today.”

    fr:thestar.com.my/news/story.asp?file=/2010/10/10/nation/7194355&sec=nation