The positive multiplier effect from an improved performance in the construction and property sector is tremendous, with the stakeholder chain including the manufacture and supply of building materials; the service industry of contractors, architects, engineers, etc; the developers and even the financial institutions.

This industry is not just about residential and commercial development but also the tourism and industrial economy. It is a holistic economic driver.

Take the tourism industry for example. When tourist arrivals are up, there will also be a boost to hotel and retail consumer demand. With tourism being one of the Government’s top priority growth sectors, there has been a focus on encouraging the development of affordable three-star hotels to attract mass tourists.

However, with the country shifting towards a modern developed economy, we must turn our attention to attracting investments into upmarket, boutique and innovative hotel property development to bring the industry to the next level; tourist arrivals must increase together with the increase in value spending.

Hotel owners should be given additional incentives to bring the investment yield return earlier. It may be worthy to relook at the existing investment tax allowance incentive as well as the availability of duty exemption for materials in hotel property development.

Closely linked to the tourism industry is the availability of retail attractions to complement hotels of similar class, with retail development popularly linked to commercial office space development to provide the consistent retail traffic. Commercial space also remains the top three property interest of Malaysian and foreign investors.

Currently, there are no incentives for the retail sector. Consideration should be given to developing incentives holistically and linking it with initiatives to drive tourism, thus providing further push to the sector. Perhaps tax incentives such as income exemption based on retail investment turnover value or spending on green technology can be given to retail outlets or “green” commercial buildings.

When it comes to landed or high-rise residential properties, crisis or not, there seems to be no lack of demand, with some of these properties being snapped up on launch.

This show of investor confidence bodes well for the real estate sector which has attracted much foreign investment and known to offer a reasonable investment yield.

Hence, we must continue to attract foreign investment into the high-end property development market and leverage our “preferred location” status in this part of the world.

Here, the attraction for foreign investors would not be tax incentives but rather, high quality development with full facilities and in a prime location – the formula to high investment yield. Hence, the Government should continue to deliver on its policies to facilitate a speedy investment process for foreigners.

A final analysis on the property sector is for the Government to consider how it can support the wish of most Malaysians to own their own home. Malaysia has a large middle-income population who strive to own a home and it is this dream which can keep the demand for residential property healthy.

With pockets of initiatives sporadically introduced such as the reduction in interest rates, subsidies given to developers for low-cost housing and even financial institutions’ willingness to reschedule loan repayments, we must ask if more can be done.

Relative to our salary standards, it is becoming more difficult for the middle-income group/family to sustain a home, let alone own one. Suggestions previously put forward such as first home subsidy and deduction for interest expense on loans for home purchases should be reviewed.

Some other thoughts are tax rebates for a certain period of the loan term depending on the value of property purchased, different stamp duty rates for different property prices, unprecedented tax breaks for developers undertaking certain types of projects or development type.

The challenge will be in ensuring that the savings given to developers is passed on.

The property sector plays a crucial role in sustaining and spurring economic growth. There is a compelling need to review and introduce policies that are holistic and integrated, with incentives provided to each player in the property chain and across the portfolio of properties.

Ng Say Guat is executive director at PricewaterhouseCoopers Taxation Services Sdn Bhd.

The Star – 21 October 2009

Master Builders Association Malaysia (MBAM) president Ng Kee Leen said there was certainly greater optimism of a revival in the construction sector, thanks mainly to the Government’s stimulus packages and overall improvement in the global economy.

“We are definitely seeing more tenders and small public works jobs being dished out in recent months, but most of the bigger or mega projects are likely to be rolled out next year,” he told StarBiz recently.

The construction sector grew 1.1% in the first quarter but contracted 2.8% in the second.

“We expect the third and fourth quarter results to be positive,” he said, adding that the construction sector’s growth for the whole of 2009 could be 3%.

For 2010, Ng said “barring unforeseen circumstances, the construction sector’s gross domestic product should be better than this year’s 3% forecast, but definitely well below the highs seen in early 2000 when it was hovering around 6% to 7%.”

The construction sector remains attractive, especially since material costs such as sand, steel and cement prices have stablised, he said.

However, Ng advised construction players, especially developers in the sector, to not just build “more of the same” and expect the market to mop up whatever they build.

“Developers must be market driven to build projects that are wanted by the community,” he said, adding that there was now more interest in energy-saving buildings that embraced the green concept.

According to Ng, the construction sector’s yearly turnover was around RM60bil.

“About 50% of this turnover are from government projects and the balance from private initiated investments,” he said, adding that much of the government spending was for infrastructure development, including road works.

Ng noted that developers were also more confident of the property sector’s growth, with some unlisted ones like GSB Sentral Sdn Bhd, a member of the diversified Gapurna Group, having already started groundworks on its 348 Sentral development – a green property project with a gross development value RM1.1bil to be completed 2012.

GSB Sentral director Imran Salim said the company was very confident of the project’s success going by the 60% uptake of floor space of the building by its main tenant – Shell Malaysia.

Datuk Osman Abu Bakar, the secretary-general of the Malay Contractors Association which represents some 7,000 bumiputra contractors, said many of the projects dished out so far by the Government were for smaller projects.

“There are more tenders and small construction projects out these days and our members have benefited from these projects as our members are mostly Class F contractors,” he said.

A member of the Indian Contractors’ Association said he had benefited from the Government’s simulus packages.

“Most of the contracts we’ve secured are small roadworks projects. However, our company has not derived any benefits or jobs from mega projects,” he said.

A construction analyst with OSK Research concurred that the construction sector was on the road to recovery and that players in the market, from developers and contractors to real estate agents, were definitely more optimistic of the sector’s growth going forward.

“There are more property launches by developers and more tenders this third and fourth quarters. This is a good sign. But many contractors are waiting for more mega projects to be rolled out, which we suspect will occur next year,” he said.

The billion-ringgit projects that are likely to be rolled out or have been confirmed include the RM9bil Pahang-Selangor interstate raw water transfer project, the RM7bil Kelana Jaya and Ampang light rail transit line extension works and the construction of the low-cost terminal, according to the OSK analyst.

A construction analyst from another brokerage said that while there were early signs that the construction sector was recovering, the rollout pace of major projects remained slow.

“Also, now that the global economy appears to be on the mend, we wonder if the mega projects proposed when the economy was in a downturn will be implemented,” the analyst said.

“Granted mega projects implemented can help boost significantly the construction sector, but government funds on smaller infrastructure projects such as those in east Malaysia can also have significant impact on the overall health and resilience of the Malaysian economy, besides the construction sector, over a longer term.”

The Star – 12th October 2009

By the time you are ready to retire – assuming you’ve been able to find a job in the first place – there will be two billion more.

You will have watched the world population grow by 30% and I don’t know what you are going to do about it.

The two billion new people we are talking about are unlikely to come from the West where recreation is no longer remotely synonymous with procreation.

They will come from countries such as China and India where people are pretty clever. For the first time in history they will be a colossal economic force largely united by nationality, coming from financially independent families and looking for a job. Maybe your job.

I don’t want to scare you, but if you are reading this article instead of doing your homework, please get back to your studies immediately.

Malaysia, as an under-populated resource-rich country, will become increasingly attractive. The next wave of migrant workers into Puchong and Ampang may well be coming from the same countries as 100 years ago but this time they won’t be miners or rubber tappers. They will be carrying laptops and living in condos.

My point is that as its knowledge economy gathers pace, Malaysia will continue to grow at a faster rate than a mere organic 2% and the impact on real estate values is going to be substantial.

There is no point grizzling about the terraced house you could have bought in Bangsar when the biggest building there was the Apilektrik; the opportunities are here and now, and property is still cheap.

If you want a new three-bedroom bungalow for RM250,000 or a quarter-acre building lot for RM150,000, they are all available within an hour’s drive from Kuala Lumpur.

You would think that agricultural land would have shot up in value but rural smallholdings can still be bought for RM20,000 to RM25,000 per acre and they will give you a net income of 10% or so if you’re prepared to put in the time to manage them properly.

In the secondary market, bargains abound. There is a tremendous miss-match between buyer and seller and the bottleneck revolves around antiquated loan recovery systems.

Even now, banks are sitting on billions of ringgit worth of non-performing loans, which may eventually be parcelled up into huge packages and sold off to other institutions at so many sen in the dollar. Banks will moan about the existing foreclosure legislation and so forth which gives them little choice, but isn’t this a cop out?

There is a need for fresh, market-driven solutions to the problems of foreclosure and sale, starting with the archaic auction process, which is long overdue for an overhaul. I don’t understand why the banking industry is not pushing harder for reforms, which would enable them to take more innovative and proactive initiatives.

For example, if my bank approached me with a RM1mil package comprising a few acres of agricultural land in Johor, a low-cost flat in Rawang and an apartment in Kajang, wrapped up in an attractive 80% mortgage deal, I’d probably take it. In my personal case, I’d take it in disbelief that any bank might think I could repay before I popped my clogs, but many other customers would see it as a unique long-term and diversified stake in the market.

Malaysia has many other hidden assets, one of which is the ability to complete big development projects in challenging circumstances. The Government has recognised this and organises roadshows to developing countries, encouraging Malaysian professionals and developers to promote their capabilities.

The market out there is massive; it is estimated China will build 430 billion sq ft in about five million buildings by 2025. These numbers are almost too huge to comprehend, like the distance to the moon or the number of times I have to explain to my wife that golf is good for business.

To maintain their slight lead in the region, I feel that professionals might be given some fiscal and financial incentives to export their expertise. An example would be double-tax deductions for travelling expenses. Other countries such as Australia have practiced this with success.

See you in Shanghai, Bruce.

Christopher Boyd is executive chairman of Regroup Associates Sdn Bhd

The Star – 7th October 2009

Some of these come in special loan packages, others through lucky draws and freebies like housing appliances such as air-conditioners and wardrobes. And evidently, they are working.

MK Land Holdings Bhd is one of them. Properties under the group such as Metropolitan service apartments block D, Metropolitan block D (retail and office), Metropolitan block C (residential units), Armanee Terrace block B (duplex condominium), Rafflesia phase 1 (3-storey semi-D bungalows) and Rafflesia phase 2 (3-storey semi-D bungalows) are offering freebies to buyers until end of this month.

Chief operating officer Fatimah Wahab says response has been encouraging since the offers for the properties kicked off on Sept 1.

“We are giving 7% discount to bumiputra buyers, early bird discount up to 5%, free kitchen cabinets with hob and hood, free air-conditioner units in the living hall and all rooms, free wardrobe for the master bedroom and free legal fees to buyers of our Metropolitan block C residential units,” he says.

Since the launch of Metropolitan block C last month, she says, about 30% of the units have been sold. As for the Metropolitan service apartments block D, there is a discount of up to 10%, free legal fees, waiver for legal fee for sales and purchase agreement (SPA) and a booking fee of only RM1,000. In addition, under its “buyer get buyer scheme”, if an existing purchaser recommends someone else to buy a property from the company, the introducer will get an incentive of up to a maximum of RM10,000, depending on the purchase.

Naza TTDI Sdn Bhd meanwhile is offering special housing packages and freebies for its luxury development, The Valley TTDI in Ampang.

Senior general manager for marketing and sales Myrzela Sabtu says among the incentives offered to buyers are free stamp duty and legal fees, zero interest during construction, financing up to 95% and free solar heater.

“The promotion, which runs from Sept 1 till Nov 1, has so far received encouraging response from buyers. We’ve manage to achieve slightly more than 50% sales to-date aided by this promotion,” she says.

Another property developer, LBS Bina Group Bhd, is offering a lucky draw contest dubbed “I Love MyHome” to buyers apart from its LBS Hassle Free Home Ownership Programme. The contest is open to all buyers of LBS’ properties from February 2009 to February 2010.

“The total prizes for this lucky draw is RM200,000. The grand prize is a Perodua Viva car while the first prize is a Kriss 120 Sports motorcycle. There are other attractive prizes to be won too,” says a LBS spokesperson, adding that the company also offers other incentives such as free furniture and fittings and 12 months security fee waiver for buyers of its Town Villa at Taman Tasik Puchong.

“The incentives under our LBS Hassle Free Home Ownership Programme includes free SPA legal fees and free SPA disbursement fees. Buyers need only to pay RM1,000 for down payment,” he adds. LBS is the developer of Bandar Saujana Putra in Kuala Langat and Bandar Putera Indah in Batu Pahat. It also has projects in Cameron Highlands.

TH Properties Sdn Bhd, which is developing Bandar Enstek near Sepang, is offering special packages for buyers of its De’siran (2-storey terrace) and Matahari C & D (2-storey bungalow) homes.

In an email reply to StarBizWeek, chief executive officer Zaharuddin Saidon says the company is offering free SPA legal fees for both developments.

“Apart from that, the company is offering free 12 months Streamyx subscription and free home alarm security system for those who buy our De’siran and Matahari C & D units,” he says, adding that the promotions are ongoing until all units are sold.

Is this enough to get buyers to come out in droves to buy their properties? Maybe not but it certainly adds to the pull factor.

Potential house buyer Wan Harris Amir Wan Mohamed Nor, who is an engineer, says freebies are not a priority for him. “They serve as a complement but as a first time house buyer, the most important thing for me is the financial package offered by the developers,” he says.

As for Md Ridzuan Hanafiah, who is looking for a house currently, while he lauds the move by developers to woo customers, his main wish is that developers do not compromise the quality of their offerings given the soft property market. “That is most important,” he says.

The Star – 3rd October 2009

“The recent spate of building failures and regular complaints of defects of completed properties should be a wake-up call for all stakeholders of the construction industry,” he said, adding that improving quality entails enhancing efficiency and productivity.

He said this after officiating The Star’s first “Property Fair Kuala Lumpur – Stylish Living” at Menara Star here yesterday.

“The Star’s effort is a good contribution not just for the property market’s growth, but also for the whole construction industry. It can drive the whole supply chain of the building industry,” Kong said.

Also present at the event were Star Publications (M) Bhd executive deputy chairman Datuk Clement Hii, executive director Ng Beng Lye, group managing director/chief executive officer Datin Linda Ngiam and group chief editor Datuk Seri Wong Chun Wai.

Ngiam said The Star has been holding annual property fairs in Penang over the past seven years.

“The amazing response from both exhibitors and visitors to the property fair explains why it is currently the leading property fair in Penang,” she said in her speech at the event.

“With such growing success each year, it only seems right that we should hold a similar one in Kuala Lumpur. But in saying that, there are more compelling reasons that influenced our decision to start one here,” she added.

The property fair will be held from Nov 27 to 29 at the KL Convention Centre in Halls 4 and 5, from 11am to 8pm. Admission is free.

Visitors will get to view the latest offerings by renowned developers involved in building luxury bungalows and exclusive condominiums.

Representatives from participating financial institutions and the Employees Provident Fund (EPF) will also be around to provide assistance.

Ngiam said there will also be talks and forums conducted by industry experts on topics like property investment, feng shui and home inspirations. The fair will be fully supported by The Star’s print, radio and on- line media.

Meanwhile, Ngiam also officially introduced The Star’s StarProperty portal – www.starproperty.my.

This site features the latest on auction listings, news and reviews of local and international properties and lifestyle articles.

“The site which is barely two months old has over a million hits and over 47,000 property listings,” she said.

The Star – 30th September 2009

Despite the seemingly brighter days ahead, developers are treading carefully and have not completely lowered their guard on the market’s passiveness to avoid an over built situation that will send property prices southwards.

While mulling over whether it is still too early to launch their projects, especially if they are green field developments that will take many years, developers should not completely withdraw from the market. Instead, they should stay in touch with their potential and existing buyers.

Engaging their customers will enable developers to stay on top of things and know what their buyers want and plan their projects accordingly.

Buyers’ needs are always evolving and developers who take the trouble to stay in touch with them will benefit tremendously.

After all, customers know best what they want and they will be quite spontaneous to share their views if sought.

They would appreciate developers who keep them posted on new initiatives and seek their views, especially for product development and improvement.

These days, it is not unusual to receive newsletters and project brochures from developers. There are also announcements on new upcoming project launches to promote repeat buying.

With the Internet, developers should go a step further and interact directly with buyers. By opening up the communication channel through a well managed and user friendly website, a participative virtual community will emerge among residents and buyers of their projects.

An active two-way communication flow and interaction will promote a more well informed and knowledgeable society.

In the process, developers will be able to get invaluable information first hand from their customers on how to design, or redesign, their projects.

Developers who value their customers’ views and input will be able to have the right products in place, whether it is during the good or bad times.

The tag line for developers these days should be to deliver real value for customers. A clear focus on customers will certainly go a long way to earn their lifetime loyalty.

It is still very much a buyer’s market and property buyers now have many choices to choose from.

Instead of building rows and rows of standard housing units or shop lots, it will be good if developers allow buyers to have some degree of flexibility in the interior layout plans of the property they are buying.

For a start, this can include the number of rooms and their sizes, choice of colours, and materials used, to meet the different needs and budgets.

Although such flexibilities are only practised in very high-end housing estates now, especially for houses with price tags of at least a few million ringgit onwards, the developer that is willing to extend this “magnanimous” gesture to the medium-range projects will, without a doubt, become an instant favourite.

Many Malaysians are still practising the extended family tradition with their aging parents and grown-up children staying together in the same house, and catering to their differing needs will be a good act of corporate social responsibility on the developer’s part.

Going by the earning capacity of the majority of average Malaysians, buying a decent house priced at slightly over RM300,000 is still a big commitment.

To borrow for a property priced that cost RM300,000, a couple will need to have at least a combined monthly income of RM10,000.

So the onus is on developers to offer greater value to house buyers and any gestures that show that they truly take great care to plan their projects to meet their buyers’ needs will earn them a more loyal following.

Village or “kampung” environment has always been the preferred for many Malaysians until quite recently when rapid urbanisation and massive infrastructure projects changed the people’s living landscape and way of life.

To many, it is still their preferred living environment as they like the stability of staying “grounded” in landed housing units and enjoy the closeness and camaraderie of their fellow villagers.

To promote closer kinship among the people, one of the ways is to replicate the village–like features and environment in our new townships.

Deputy news editor Angie Ng believes that a return to more community-centric developments will be good to promote and revive a stronger bonding among the people, in line with the 1Malaysia aspiration.

The Star – 29th August 2009

Gamuda Land Sdn Bhd managing director Chow Chee Wah says usually, the design of a boutique development is for the middle to high-end housing, catering to a special targeted niche market that has a discerning taste and appreciation for resort lifestyle living.

“Gamuda Land has a few boutique developments, namely Valencia in Sungai Buloh, Jade Hills in Kajang and Madge Mansions in Kuala Lumpur. Both of these landed developments – Valencia and Jade Hills – are within the 300-acre range, while Madge Mansions, our high-end condominium is on 2.16 acres,” he says in an email.

Chow defines Gamuda Land’s concept of a boutique development as one with a low density ratio and a host of other Oooomph! factors.

“It has to be very exclusive, very private with top security features in placed. Added to that is the ambience and this includes a host of criteria – quality products, safety and security, tranquil environment, well-equipped facilities, status and class, and a good return on investment, he says.

He says Gamuda Land first ventured into boutique developments in the year 2000 with Valencia.

“This luxurious project became the first boutique development in Malaysia with a private 9-hole residents’ golf course and country club. Valencia soon became a much sought after address because it offers the perfect combination of living in a landed property with condominium living facilities.

“It is a private, exclusive development within an environment equipped with the best resort facilities for a healthy and secure living lifestyle,” he says.

Facilities and ambience aside, Chow says a boutique development is also about location. It has to be a prime address that an owner will be proud of.

“It is about being a class above others,” he says.

“Gamuda Land decided to undertake this type of projects because we saw a growing demand and need for it. In urban areas, especially in the Klang Valley, the growing population of the affluent and elite group are looking for residences that meet their needs and desires for fine resort living.

“Valencia and Jade Hills testify to our success in this boutique home category. More than 60% of Valencia purchasers are repeat buyers. Thirty percent of Valencia’s residents today are expatriates, a large majority of them are Europeans. This means our boutique developments have become prime investments,” he says.

Because developers saw the popularity of boutique properties, they are now beginning to offer boutique commercial developments.

IRDK Land Sdn Bhd director Datuk Kevin Woo says such developments are not a trend but a need as the market evolves.

“The difference between boutique commercial developments and other commercial developments is the concept and setting of the development. It gels the business with lifestyle elements by providing and facilities,” he says.

The company is developing a boutique commercial development called Alam Avenue in Shah Alam, comprising 51 commercial units on three-storey intermediate shop offices and five-storey corner and end units.

“The ground floor will have a floor to ceiling height of 4.5 metres (15 feet). It will be generously fitted with high quality zinc aluminium roller shutters of 10 feet high to give maximum advertising and showroom presence.

These shops will have generous 17-feet verandas and walkways frontage to accommodate alfresco dining and cafes. They will be tiled luxuriously with homogenous floor tiles. Decorative light fittings will be installed at the walkways to enhance the ambience and to exude on easy flamboyant lifestyle where business and leisure meet in a quaint setting,” he says.

The gross development value of the project is about RM100mil. It is scheduled to be completed by December next year.

A green development is another concept introduce by developers. Sentral City (M) Sdn Bhd has gone one step further by incorporating a touch of Zen in its green concept development in Puchong Zen Residence@Asplenium condominium.

General manager Pang Swe Haw says the word Zen has been widely used in different industries like food and beverages but nobody has attempted to define the true meaning and essence of Zen.

“Zen is a living philosophy which centres around the simplicity and beauty of nature around us.

“In Zen Residence, we aim to create landscape and architecture settings that encourage the residence to take a longer and closer look at the environment around them and hope they will be able to develop a greater insight and appreciation of nature.

“So, we may not be the one who first use the word Zen, but we are the first to really explore and implement the Zen living concept,” says Pang.

With GDV of about RM96mil, Pang says Zen Residence has achieved close to 90% sales to date. The company will continue to explore this concept in their next project that is currently on the drawing board.

The Star – 29th August 2009

Their confidence in the free market economy must have been shaken badly after so much wealth and asset value have been eroded by the global financial meltdown.

The leveI of confidence going forward will depend on how the people perceive their general well-being and whether there’s hope for the future, which depends among other things on their expectation on the health of the local and global economy.

It will be a herculean task to reinstate the same robustness to the economy to that of the pre-global crisis days and much work remains to be done in many parts of the world.

The same goes for Malaysia and hopefully all parties will get down to work expediently for the common goal of lifting the country’s chance of a sustainable economic recovery and growth.

The liberalised measures introduced by the Government, aimed at raising the country’s competitiveness and attract foreign direct investments to the country, will need the total commitment and cooperation of all to succeed.

Based on the strong sales registered by developers these past few months, one wonders whether there is a pent-up demand for residential properties, especially landed properties, as the supply pipeline has been put on hold or substantially scaled down when the crisis hits.

The question on whether property buyers will be flocking back into the market after the days of easy financing packages for house purchases are over remains to be seen.

There is still some hesitation among buyers on whether this is the best time to seal the deal as some are still waiting for better deals or offers to come along.

To be sure of striking the right chord with buyers, developers should literally put themselves in the buyers’ shoes and proactively seek their feedback on what type of property products are being sought after.

Housebuyers today are looking for more than a roof over their head. Expectations have certainly gone up many notches and they want more value from developers before committing to buy.

Besides the basic requirements of a good location, quality standards and developer’s reputation, buyers are also giving more priority to safety and conducive environment, well landscaped parks and surroundings, community facilities, good infrastructure and accessibility.

There is still much liquidity in the system and property is one of the time-tested investment tools with potential for capital appreciation and rental yields.

The prevailing low interest rates and slew of incentives offered by developers are helping to fan property buying interest.

After all, property in Malaysia has proven to be a good investment tool and hedge against inflation. Prices of most of the residential property, except for high-end condominiums in the Kuala Lumpur City Centre and Mont’Kiara areas, have held out quite well throughout the crisis period.

Developers will not go wrong if they target their products at the mass market segment as the country’s young population, where at least a third of the 26 million population are between 25 and 44 years, will need a fairly big number of houses each year.

Those with high-end projects may opt to wait out a little longer until market sentiment has recovered before putting out their projects for sale.

It will certainly help with the sales if developers take the proactive steps of making sure their housing units are designed practically and buyers will not need to do any further renovation before moving in.

Having the housing units fitted with some basic necessities such as air conditioners, wardrobes and kitchen cabinets will prove to be a big plus for buyers as it will save them substantial time and money to shop around by themselves.

Offering a few choices of colours, materials and designs will be a practical option for buyers.

By sourcing for these fittings for a whole project, developers will be able to enjoy economy of scale and lower average cost which can then be passed on to their buyers.

Deputy news editor Angie Ng believes every little extra effort and value adding initiatives by developers will go a long way to raise the chances of success for property projects these days.

The Star – 15th August 2009

PETALING JAYA: Bank earnings and loans growth are likely to improve towards the end of the year, bolstered by the recent deregulation of the Foreign Investment Committee (FIC) guidelines on properties as well as easing conditions for new listings and fund-raising activities.

According to a foreign brokerage, property transactions, both residential and commercial, are expected to increase following the relaxation of the FIC rules, which should spur demand for property financing.

Higher property financing would lead to a turnaround in loans growth by year’s end or early next year, it said, noting that property financing comprised 36.4% of total loans in the banking system.

“The policy changes will create more revenue streams for Malaysia’s financial sector and reduce dependency on pure interest income,” the foreign research house said, adding that loans growth in May was underpinned by the relatively stable household loans segment, which grew 8.4% year-on-year.

In addition, the liberalisation would also encourage more mergers and acquisitions (M&As), as well as more capital and equity market activities, which would benefit investment banks, it said. With greater foreign ownership allowed in stockbrokers, product innovation – such as the roll-out of more varied derivative products – is likely to improve.

The foreign research house added that Malaysia’s capital market was expected to gain better access to capital and investments with the removal of the 30% bumiputra equity requirement, making it more attractive for foreign listings while supporting existing listed companies seeking to raise funds.

A local bank-backed brokerage said residential mortgages showed “no signs of weakening” as they sustained 10% growth from December 2008 to May 2009 despite the gloomy economic landscape.

This was due to progressive release of housing loans approved in the past one to two years, high savings rate of Malaysians, sustainable property transactions thanks to limited speculation, low interest rates and attractive schemes by developers, it said.

Moreover, there could be more corporate deals in the pipeline, including new listings and M&A transactions on the back of improved average daily trading value on Bursa Malaysia, it said.

This would augur well for investment banking income, including brokerage and corporate advisory fees, the research house added.

HwangDBS Vickers Research, meanwhile, said the liberalisation was “very bold measures” to improve the competitiveness of Malaysia’s properties internationally.

“The biggest winners will be developers with large exposure to the more ‘open’ districts like the Federal Territory and Penang, where the authorities would likely be supportive,” it said.

The Star Newspaper – 20th July 2009

Predictions on exactly when recovery will set in seem to depend on which channel you watch

IN Albert Camus’ celebrated book, The Plague, we read of an insidious outbreak of disease accompanied by a rat infestation in the French town of Oran. At least, that’s what we appear to be reading, but the story is actually an allegorical reference to the inexorable Nazi occupation of France.

It seems to me that the potential A(H1N1) threat could be read as an allegory for the impending danger of the global financial crisis.

Here, we have a life-threatening sickness sneaking unseen into the country to wreak havoc and destruction.

We can see minor signs popping up at random but the real tsunami has not hit us yet and already, we are reading of early signs of recovery.

It’s like sitting in a dark ride at the amusement park, waiting to be smacked in the face by a wet fish.

Just how the region is doing in terms of economic growth is shown on the “weather” map.

Predictions on exactly when recovery will set in seem to depend on which channel you watch.

Certainly the Malaysian market has seen some bright points recently.

The relaxation of local equity requirements for foreign investors has already generated renewed interest in the commercial property market.

There is a strong possibility of new foreign capital inflows and some of the many investment property sales that collapsed in the second half of last year could well be achieved this year.

Malaysian commercial property remains attractive in terms of yield, price and growth potential and having seen a recent minor value adjustment of around 15%, it is looking better value than ever. Be prepared for a number of major sales to be announced in the next 12 months, to both foreign and local investors.

The top-end residential market, while falling some 25% in value from its peak, has shown remarkable resilience and even renewed confidence. For example, the recent launch by Eastern & Oriental Bhd of their St Mary’s serviced apartments in the Golden Triangle has met with strong sales at around RM1,000 per sq ft. Sunrise Bhd has seen similar success with a new release in Mont’ Kiara, and Mah Sing Bhd has reportedly done equally well with its super-sized three-storey link houses in Batu Maung, Penang.

Globally, the office leasing market has felt some of the greatest impact of the financial crisis, with many multinationals resorting to deep cuts in operating costs, large-scale retrenchment and a freeze on new investment. Regionally this has dragged rental values down.

In Malaysia, the office leasing market has been a victim of circumstances since the beginning of the year and we hope we will not see a reenactment of the stagnant period from 1999 to 2006, with companies reluctant to expand.

Personally, I remain optimistic because the growth of the services sector is likely to pick up and will be boosted by a climate of liberalisation. Nevertheless, what we might see in the investment market is a greater differentiation in value between fully let buildings and those sold vacant or off the plan with no rental guarantee.

The appreciation of yield and the quality of that yield is a science that finally emerged in 2005 when the Securities Commission announced its new guidelines for the formation of real estate investment trusts and caused a scramble for investment properties. We are still waiting for banks to embrace this movement and provide more longer-term finance for commercial properties.

There is some cause for optimism with the recent growth of regional equity markets and successful elections in Indonesia and India. Maybe, that wet fish won’t come after all.

The writer is executive chairman of Regroup Associates Sdn Bhd property consultancy.

The Star Newspaper – 16th July 2009