penang - Malaysia Property Inc.

COVER STORY
2
Figure 1: Existing Supply of Residential Units in Penang as at Q2 2013
40,000
No of Residential Units (unit)
PENANG
REAL ESTATE
MARKET
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
by YK Heng
Mainland
Stratified
Landed
Island
Penang State
Total
Source: NAPIC, MPI Research
Located in the northern part of the
Peninsula Malaysia, Penang is a small
state that has an estimated population of
1.6 million. The Penang state consists of
Penang Island which is 299.65 sq km and
Seberang Perai which is 738.41 sq km.
According to Henry Butcher Research
Report H1 2013, Penang’s property
market performance softened in the first
quarter of 2013. The total number of
properties transacted in Penang recorded
a significant drop of 18% compared
to 5,756 in 1Q 2013 compared to 1Q
2012. Despite the drop in number of
transactions, the total transacted value of
residential properties increased by 3.5%.
As for foreign purchasers, the Penang
state had capped the minimum
purchase price for strata-titled and
landed properties on Penang Mainland
at RM 1 mil. The strata-titled properties
on Penang Island are capped at RM
1mil whereas landed properties are
capped at RM 2 mil effective July 2012.
With the enforcement of these policies, contributed three quarters of all landed
Penang State government aims to curb the property supplies in Penang.
speculation of property value in the state.
Based on the research by Henry Butcher
Approved applicants under the Penang, rental yields of landed residential
Malaysia My Second Home Program properties could fetch a lower yield of
(MM2H) are still able to purchase 2 – 3% in general, whilst apartments
home at a minimum purchase price and condominiums could fetch a slightly
of RM 500,000 and above with a limit higher yield that hovers around 4 – 5%.
to purchase only up to 2 units only.
The research report also highlighted
Residential Market : Have prices that foreign transactions accounted for
peaked?
a small portion of 2.98% in 2010 and
NAPIC’s recent release Q2 Property 2.26% in 2011.
Stock Report indicates that the existing
supply of residential properties in Penang
State is 367,158 units. As tabulated in
Figure 1, existing supply of residential
unit consist 36% of landed property and
According to
64% of stratified property.
As shown in Figure 2, more than two
third of the future supply of housing on
the island will be in the form of stratified
property. The mainland hosts most of
the landed property development which
Figure 2: Future Supply of Residential Units in Penang as at Q2 2013
No of Residential Units (unit)
60,000
50,000
40,000
30,000
20,000
10,000
0
Mainland
Island
Landed
Penang State
Stratified
Source: NAPIC, MPI Research
“
Henry Butcher
Penang
H1’2013
research report,
Penang’s property
market performance
softened in the
first quarter 2013
The softening market has led MPI
to reassess the supply and demand
situation. A pertinent question to ask,
is Penang residential market hitting
oversupply stage soon? Based on an
average household size of 3.98 and a
population of 1.66 mil and 1.75 mil by
2015 and 2020 respectively, Penangite
require 417,000 homes by 2015 and
439,700 units by 2020.
COVER STORY
3
Table 1: Penang Residential Analysis (2013 - 2020f)
Year
2013
2015f
2020f
Estimated Population
1.60 million
1.66 million
1.75 million
Average Household Size
3.98
3.98
3.98
Residential Unit Needed
(Housing Demand)
402,010
417,000
439,700
Residential Unit Existing Stock
(Housing Supply)
367,158
461,844
461,844
Differences between Housing Supply &
Demand
(34,852)
+44,844
+22,144
Condition
Demanding
Oversupply
Oversupply
Source: Dept of Statistic Malaysia, MPI Research
Retail & Hospitality Sector: Thriving
The retail and hospitality sector depends
highly on consumer spending power.
The higher the spending power of the
target group, the better the retail and
hospitality sector is doing. According to
Dept. of Statistics, Penang’s household
income ranked no.3, after Kuala Lumpur
and Selangor.
Figure 3: Office Supply & Demand in Penang Island as at Q2 2013
90,000
80,000
70,000
60,000
50,000
40,000
30,000
20,000
0
Occupied Space
2013
10,000
2012
Office Market: Stable
Apart from being known as a good
place to live and retire, Penang is also
well known for its manufacturing and
electronics sector. Both these sectors
require a decent amount of offices and
industrial spaces for their operations.
Purpose-built offices are located mostly
in the island near its capital, Georgetown
whereas industrial space is in the
mainland.
Purpose-built office sector in Penang
has remained stable since 2008.
However with the aggressive promotion
of investPenang to attract more SME
to establish businesses in Penang, it
might seem that there is a need to
develop more office space in the state.
2011
Penang is ranked third in terms of the total
proposed investment in the approved
manufacturing projects. As one of the
key choices for manufacturers, Penang
has attracted Bosch Solar Energy, Boon
Siew Honda Sdn Bhd, VAT Manufacturing
Malaysia Sdn Bhd and others to operate
their manufacturing plant here in
Penang.
of building, size and facilities provided.
The market prices of prime office space
range from RM 180 to RM 500 per As in Q2, 2013, the total existing
sq.ft, whilst the market rentals ranged supply of retail complex in Penang
between RM 1.50 to RM 3 psf on the state was 1.422 million sq meter.
island, depending on the location, grade
2010
Whether this oversupply affects
property values in Penang will depend
on increasing demand by expatriate
and foreigners. InvestPenang and the
state government are working hard to
promote Penang as an electronic and
tourism hub for foreigners.
According to Henry Butcher Penang,
the market prices and rentals for
p u r p o s e - b u i l t o f f i c e i n Pe n a n g
were generally healthy and stable.
2009
Furthermore, the tighter loan
requirements enforced by Bank Negara
Malaysia lately and by the state will slow
down the residential transactions in the
state.
2008
Assuming that future supply will be ready
by 2015 or 2016 based on potential
launches, it is observed that there will
be a surplus of 44,844 units for 2015.
The gap starts to pick up and narrows to
22,144 units by 2020 with the condition
that there are no more unannounced
new projects coming on stream.
Currently, 76% of the office spaces in
Penang are located on the island. As
shown in Figure 3, the average office
occupancy rate has increased from 74%
to 81% since 2008. Incoming supply of
purpose built office is estimated around
0.25 million according to NAPIC’s report.
All these incoming supply are located
at the mainland such as Butterworth,
Bukit Mertajam and Nibong Tebal. A
total of 0.148 mil sq meter of office
spaces has received approval to
be constructed on Penang Island.
Office Spaces (sq.meter)
(from previous page)
Vacant Space
Source: NAPIC, MPI Research
COVER STORY
4
Figure 4: Total Supply of Industrial Unit in Penang by type of properties
Penang Island supply accounted 63.1%
of all while mainland accounted 36.9%.
According to NAPIC, the island’s
shopping complexes has a higher
occupancy rate of 75.4% compared to
the mainland which only recorded 59.2%
occupancy. A new shopping complex,
Gurney Paragon Mall located on Gurney
Drive, Penang Island had just softlaunched and opened on 23rd July 2013.
According to Henry Butcher Penang, the
south-west district on the island could
be another potential growth area for the
retail sector with its current population of
more than 140,000.
In addition, the ongoing Subterranean
Penang International Convention and
Exhibition Centre (sPICE) with an
Aquatic Centre, a four-star hotel and a
retail podium also serves as a platform
for domestic and foreign visitors
for business meetings /incentive /
convention/exhibition (MICE) which will
spur the retail activities in that area.
6,000
5,000
No of Industrial Unit (Unit)
(from previous page)
4,000
3,000
2,000
1,000
0
Terrace
Semi-Detach
Existing Supply
Detach
Incoming Supply
Flatted Factory
Industrial Complex
Planned Supply
Source: NAPIC, MPI Research
Industrial market: Stable
Key industries in Penang are electronic
and manufacturing which require
warehousing and factories for their dayto-day operation. Due to the scarcity of
land, 82.5% of the industrial supply is
located in the mainland. Penang has a
total supply of 8,282 units of industrial
units as at 2nd quarter 2013 of which 519
units will only be completed in the future.
According to the figure 4 above, the
total supply in Penang comprise largely
terrace factories numbering nearly 5,000
units as computed from NAPIC 2013
preliminary Q2 report. It is observed that
incoming supply consist of mostly semidetached factory which is equally divided
between the island and mainland.
Furthermore, a total of 162 units of
detached factory had obtained approval
of which 89% are located in the mainland.
Outlook
Penang’s property market especially the
residential market is expected to contract
further by double-digit this year due to
more stringent bank loan conditions.
Subterranean Penang International Convention and Exhibition Centre
The LIGHT Waterfront development in Penang Island
Meanwhile, in the latest interview
with The Star, Henry Butcher Malaysia
(Penang) Vice President Shawn Ong
said that there is interest to purchase
properties but property investors are
waiting for the high prices to re-adjust.
Based on MPI’s calculations of new
residential supply coming onstream,
the Penang market appears to face an
oversupply situation.However many of
the existing residential stock are very old
buildings. It is likely the new generation
will shift to live in the new apartments
and condominiums which offer lifestyle
experience. As for commercial and
industrial sectors in Penang, both of
these sectors are expected to stay stable
in 2014.
FOREIGN PERSPECTIVE
SHOPPING MALL
& RETAIL
DESTINATIONS
GOING GLOBAL
WITH REITS
5
Figure 5: Market Share of Global Retail REITs
Others
44%
Simon Property Group
17%
Westfield Group
21%
by Veena Loh
Why do retailers need to expand?
Size matters in retailing.
The bigger the retailer, the greater the
economies of scale it can enjoy. Moreover,
when a retailer sets up branches in other
areas or states, it provides a constant
reminder of its brand, reliability and
offers convenience to customers loyal to
its brand. One of the ways it can expand
is to look for opportunities in growing or
new markets.
Capture the coming upturn
If it has deep pockets, it can also look
for good locations to invest and thereby
capture the market when it returns at a
time when others are unable to do so,
thereby, reinforcing its presence and
branding. During a property downturn,
retailers should position their locations
at strategic convenient spots in order to
rebound more quickly.
Successful retailers who drew on
REITS
Globally there are 38 REITs focusing on
retail properties. Most of those were
small companies. Only 9 Retail REITs
are listed in the Russell 1000. Some of
the biggest retail REITS are shown in
Figure 5.
These top 4 global retailers share similar
strategies. Their business strategy is
to develop existing centres, expand
through new developments and explore
opportunities by acquiring existing
operations. They differ in the following
strategies as shown in Table 2.
Pros and Cons of Going Global with
REITS
Malaysian developers who wish to set
their footprint outside the country should
consider the following advantages and
disadvantages of going global with
REITS.
Kimco Realty Corp
7%
Pros
One of the advantages of doing so
is it enables the retailer to finance
geographical expansion within country,
thereby reducing its risk. The advantage
of converting a retail mall to a REIT is
that the new entity is able buy a retail
mall without paying for stamp duty,
normally fixed at 3% of purchase price.
This enables a company to acquire land
and other retail malls quickly especially
during a time when property prices are
rising rapidly or when opportunities
“
General Growth Properties
11%
The advantages
of converting a
retail mall to a
REIT is that the new
entity is able to buy
another retail mall
without paying
stamp duty.
Table 2: Business Strategies of Global Retailers
Business Strategy & Success Factors
Focus Solely on retail Sector
Own vast array of retailer relationship &
leasing expertise
Adopted By
Westfield Group
Simon Property Group
Westfield Group
Kimco Realty
Focus on luxurious retail spaces that provide General Growth Properties
an ‘destination retail’ concept
Relocate the shopping centres to most
denselypopulated & high income areas
Kimco Realty
Portfolio consist of grocery & discount goods Kimco Realty
Solid Tenant Mix
Kimco Realty
Own assets all along the price spectrum of
retail real estate
Simon Property Group
Source: Various Companies Annual Report
FOREIGN PERSPECTIVE
(from previous page)
It also enables retailers to relocate to
places with higher population and/or
income and sell off the weak performing
malls in the less popular areas without
having to pay for Real Property Gains Tax
(RPGT). This represents huge savings
to the REIT and gives the retailer a
competitive advantage over non-REIT
retailers. This makes it easy for a retailer
to enter the market and exit within 5
years.
Moreover, as long as a Malaysian REIT
distributes at least 90% of its current
year taxable income, the REIT will be
treated as tax transparent and would not
be levied a 25% corporate tax.
Cons
Retail REITs own and operate retail space,
making them especially vulnerable in a
general economic downturn. If consumer
spending levels decline, demand for
retail properties decreases as retail
businesses contract. Slow demand
lowers rents that tenants are willing to
pay for retail properties. Leased space
tends to correlate with economic cycles.
6
This risk is exacerbated for retail REITs
charging above average rents. During
a boom, companies with high sales per
sq ft are able to charge the highest rents
of any mall operator. But, during an
economic slowdown, the high margin
retailers can be the hardest hit. To avoid
this, firms like Simon Group Property
cater to the whole spectrum of price
range.
Retail REITs such as KIM, with centers
that are anchored by consumer staples,
are also more insulated against the risk
of an economic downturn as consumer
staples are traditionally resistant to
changing economic conditions.
MPI is able to
matchmake
developers with
foreign retail
operators. MPI
matchmade Mitsui
Fudosan with KL
airports.
What MPI can do for you
MPI is able to matchmake developers
with foreign retail operators. MPI
matchmade Mitsui Fudosan with KL
airports. Mitsui will bring a new premier
fashion outlet into Malaysia. In 2012,
MPI’s B2B mission in Japan with the 2
top Japanese banks has also brought in
new retail names into Malaysia for the
first time.
“
Retail REITs with concentrations in
particular sections of the country are
also vulnerable to changes in regional
economic conditions. As such, investors
may avoid retail REITS during economic
slowdown and prefer to invest in
diversified REITS.
HIGHLIGHT
7
GREATER KL
2020
A REAL ESTATE
VISION OF A CITY
FOR THE FUTURE
by David Chong
Could the above commentary be part
of the new Greater Kuala Lumpur real
estate landscape in the near future?
At the moment, if you live or work in
Greater Kuala Lumpur, chances are,
you will have passed through many of
the transformation elements, planned
and currently in the midst of being
implemented to transform Greater Kuala
Lumpur into a world class city of 10
million. This article will briefly touch on
key real estate elements of Greater KL.
To drive Malaysia into a high income
nation by 2020, PEMANDU (Performance
Management and Delivery Unit), a unit
under the Prime Minister’s Department
was set up in 2009. Part of PEMANDU’s
role is to support the delivery and
drive the progress of the Economic
Transformation Programme (ETP), for
Malaysia to achieve high income status.
To reach high income status, Malaysia
must grow by an average of 6% per
year to reach a Gross National Income
(GNI) per capita of RM48,000.00 or USD
15,000.00 whereby this will be achieved
through attracting USD444 billion worth
of investments which will in turn create
3.3 million new jobs.
You might have come across the term
ETP but how will it impact the real estate
in Greater KL? One of the main pillars of
the ETP is the 12 National Key Economic
Areas (NKEAs) , whereby Greater KL is
one of the twelve components. Most of
the NKEAs have some elements of real
estate be it directly or indirectly.
For Greater KL, the overall aim is to
transform it into a world class metropolis
from infrastructure to liveability. To
achieve this, the government will
implement various Entry Point Projects
“
Personal commentary of Greater KL City Residents**
Retrived from http://www.permandu.gov.my
(EPPs) under the Greater KL NKEA
component. We will briefly touch on
some aspects of the EPP in Greater KL
with a real estate element.
To achieve
high income status,
Malaysia must grow
by an
average of 6%
per year.
Attracts World’s Top MNCs
The government has set up InvestKL in
2011 to attract 100 of the world’s top
MNCs into Greater KL. Presence of top
MNCs and service provider companies
providing servicing these MNCs,
relocating and expanding their relocating
and expanding their operation scale to
Greater KL will directly and indirectly
boost the demand for top quality office
space.
The government is also providing various
incentives, for example tax exemptions
for up to 10 years to companies that
meet the government’s criteria, to set
up their Operational Headquarters,
Re g i o n a l P r o c u r e m e n t / Re g i o n a l
Distribution Centres. Therefore, this will
translate into demand for expansion of
major infrastructures such as container
seaports and industrial real estate such
as factories and warehouses in various
parts of Greater KL, depending on the
type of industry.
TalentCorp
Understanding the fact that internal and
external talent is an important element
to drive a high income economy, the
government through TalentCorp will
work to grow Greater KL’s talent
workforce by an additional 4 million by
2020, whereby an estimated 2.5 million
out of these will comprise of foreign
expatriates and Malaysians living outside
the region.
(continued next page)
Table 3: ETP Progress as at 31st Dec 2012
Year
2011
2012
Total
Projects
110
39
149
Investment
RM 179.2 bil
RM 32.1 bil
RM 211.3 bil
GNI in 2020
RM 129.5 bil
RM 6.6 bil
RM 136.1 bil
Jobs
313,741
94,702
408,443
Source: PEMANDU
HIGHLIGHT
8
(from previous page)
To build a skilled workforce for Greater
KL/KV, TalentCorp is focusing on three
main areas by reversing the Malaysian
diaspora through the Returning Expert
Programme (REP), attract foreign talent
through the Resident Pass Programme,
encouraging managed local immigration
by searching for local talent currently
based outside Greater KL.
The population growth will be due to
job opportunities via large presence of
MNCs, and MNCs attracted to relocate to
Greater KL due to a large pool of quality
talent, will spur the growth of real estate
in Greater KL. In addition, the increase in
the population of skilled and professional
workforce that are well remunerated
will create a high demand for retail
and commercial real estate from the
increased demands in consumer goods
and services. The population needs
a place to work and also to ‘play’. This
will propel real estate growth in retail
outlets and shopping malls, restaurants
and cafes, and also different types of
services.
High Speed Rail
Both the governments of Malaysia and
Singapore have in principal agreed to
the high speed rail connection between
the 2 capital cities. The full report on
the proposed high speed rail link has
been finalized from the Malaysian side
early this month (August, 2013). Both
governments will start the process
of engagement and discussion with
joint ministerial committee meeting
thereafter.
When completed, this will become a
catalyst for the development of certain
townships in which the proposed rail will
stop.
Mass Rapid Transit System (MRT)
An integrated urban mass rapid
transit system is the key to reducing
travel time and congestion around a
hugely populated city. At the moment,
construction has commenced for the first
MRT line from Sungai Buloh to Kajang
and this can be visibly seen in many parts
of the city.
Prices of property in strategic locations
along this line has already increased,
especially those near the planned station
stops. Many developers are also buying
up and developing those parcels of land
located strategically located near the
station stops. Developers are also coming
up with residential and commercial units
“
The 12 NKEAs in the Economic Transformation Programme (ETP)
integrated with the station stops to allow
to a more ‘seamless’ connectivity and
travel. Complemented with the existing
LRT lines which will also be extended
(construction has commenced), the
upcoming MRT lines will transform the
transportation landscape in Greater KL.
This is particularly important to ease
the traffic congestion in the city, as
well as for the increase in population
to 10 million in 2020 from the current
7 million. The ‘rakyat’ living in Greater
KL will now be able to live further away
from the city centre, yet be able to reach
their workplace and back within a more
consistent and predictable time frame.
River of Life
The government has announced plans to
revitalise the Klang River and transform
certain areas of Kuala Lumpur along the
Klang River into high economic and high
commercial value space. This project
will be done through co-operation of the
various municipal councils, government
ministries and departments. The first
part of the plan is to clean the water in
the Klang River to recreational standards.
Thereafter, the second part would be
to beautify and improve the economic
viability of certain corridors along the
Klang and Gombak River along landmarks
such as Dataran Merdeka and the Masjid
Jamek area. Thirdly, the relevant
Government
should also place
adequate focus on
the execution of
these plans with
appropriate timeline
and high standards
land along these corridors will be
developed with appropriate master
planning to spur economic investments.
These are just some examples of what
possibilities that the future holds for real
estate in Greater KL. The government
should also place adequate focus on the
execution of these plans with appropriate
timeline and high standards. I am
definitely looking forward to living in
a transformed Greater KL in years to
come.
** Note that all personal commentary excerpts of Greater
KL City citizens in the above are fictitious and only meant to
better visualise the experience of Greater KL in 2020 as highlighted in the government’s transformation programme and
may not actually depict the reality of what Greater KL City
will be in the future. But the content of the article are based
on actual facts and substance. For more information on the
government’s Economic Transformation Plan (ETP), please go
to http://etp.pemandu.gov.my
INVESTOR PREFERENCES
9
Table 4: Comparative Analysis of Residential Price Index between major cities
in Malaysia & Indonesia
MPI COURTS THE
HIGH NET WORTH
MARKET IN
INDONESIA
Country
Malaysia
Indonesia
City
Kuala
Lumpur
Selangor
Johor
Jabodebek - Surabaya
Banten
1Q 2009
House Price Index
141.1
119.2
139.1
141.79
173.41
1Q 2013
House Price Index
208.3
171.4
190.3
179.87
219.74
Changes within 4
years
47.6%
43.8%
36.8%
26.9%
26.7%
Source: NAPIC, Bank Indonesia’s Residential Property Price Survey
Are you aware that there is a classification
for rich people in the society known as
HNWI? What does this classification
mean? HNWI is a classification used by
the financial services industry to denote
an individual or a family with high net
worth, usually having US$ 1 million in
liquid financial asset.
HNWI in Indonesia is expected to
quadruple from 1,029 to 5,161 in 2022
based on the Knight Frank Wealth
Report. Besides, World Wealth Report
2013 also highlighted that Indonesia
posted a double-digit growth rate in
HNWI population in recent years.
The number of rich Indonesians listed
in Forbes Richest has tripled in number
to 25 people since 2010, according to
Forbes Asia 2012. Global wealth report
2012 published by Credit Suisse states
that the rise in personal wealth in
Indonesia is very strong, with average
wealth increasing more than fourfold
since the year 2000. Based on all the
published research, Indonesia, our
neighbor has much underlying potential
into which we should seriously look at.
As mentioned earlier, there are currently
about 74 million middle class and affluent
consumers in Indonesia and this number
will double by 2020 to approximately 141
million people. This implies that there
will be 8 to 9 million people entering
the middle class each year. BCG also
On a macro basis, Malaysia’s residential
house price has quadrupled since 1Q
2009. Unlike the trend in Malaysia, the
overall residential property price only
doubled since 1Q 2009 according to the
survey.
As tabulated in Table 4, property values
in major cities such as Kuala Lumpur,
Selangor, and Iskandar region in Johore
had encountered capital appreciation.
Residential prices in major cities such as
Kuala Lumpur and Selangor has risen by
44% - 48% while Johor has risen by 37%
since 1Q 2009.
Both Surabaya and Jabodebek registered
only 26% growth between 1Q 2009 to 1Q
2013 which indicates that appreciation
of properties in a few major cities in
Pulau Jawa is rather slow. Jabodebek is
a region which consist of Jakarta, Bogor,
Tangerang and Bekasi area which is
located at the west part of Jawa Island
whereas Surabaya is a city located at the
east of Jawa Island.
Outlook
Based on the analysis shown earlier, the
capital appreciation in the major cities
in Malaysia have higher appreciation
in capital values over the past 4 years.
Besides, Malaysia is free from natural
disasters and is politically stable.
Indonesia’s investors who are looking at
alternative investments overseas might
look into Malaysia as an investment
destination due to its proximity and
familiarity. With the growing HNWI
population, Malaysian developers can
target the wealthy population of our
neighboring Muslim country.
What MPI can do for you
MPI is organizing a Malaysia Property
Showcase in Indonesia on 18th – 27th
October 2013. The event will be held at
Jakarta and Surabaya with the purpose
of penetrating the HWNI market in
Indonesia. For more information,
kindly contact Michael at michael@
malaysiapropertyinc.com or Chandra at
[email protected].
Figure 6: House Price Index : Malaysia vs Indonesia
200
20.0%
180
18.0%
160
16.0%
140
14.0%
120
12.0%
100
10.0%
80
8.0%
60
6.0%
40
4.0%
20
2.0%
0
1Q 2009
1Q 2010
1Q 2011
1Q 2012
1Q 2013
Malaysia
Indonesia
Malaysia’s y-o-y changes
Indonesia’s y-o-y changes
0.0%
Source: NAPIC, Bank Indonesia’s Residential Property Price Survey, MPI Research
y-o-y changes
Indonesian Purchasing Power
Indonesia has the world’s fourth
largest population, with approximately
248 million people. The current Gross
National Income per capita for the
country is Rp 9,490,533.09. The recent
release of ‘Asia’s Next Big Opportunity’ by
The Boston Consulting Group discussed
the rising middle-class and affluent
consumers in Indonesia.
Comparative analysis
As shown in Figure 6, Malaysia’s
home prices have been rising steadily
since 2009. It has grown faster than
Indonesian home prices except for 1Q
2013. Although the capital appreciation
in Malaysia has been slower in 1Q 2013,
Malaysia’s currency is less volatile
compared to Indonesia.
House Price Index
by YK Heng
states that Indonesians are extremely
optimistic about their financial future and
has strong expectations that they wil be
able to make more money in the next
few years.
NEWSFLASH
10
KUALA LUMPURSINGAPORE
HIGH SPEED
RAIL LINK
by Yarlini Kukan
THE Land Public Transport Commission (SPAD) will speed up the process of kick-starting the multi-billion ringgit high-speed rail
(HSR) link between Kuala Lumpur and Singapore where its 330km journey will only take 90 minutes.
SPAD has been carrying out a study on the HSR project since early last year. The study includes a detailed assessment on the
technical and engineering aspects, cost, financial and operations, and benefits of the project.
Industry experts say the biggest gainer is Iskandar Malaysia in Johor. Investor interest in Iskandar Malaysia is at an all-time high
with the completion of key catalytic projects last year and the signing of a new agreement between Malaysia and Singapore this
year. Furthermore, Singapore is one of the largest investors and leading contributors to Iskandar Malaysia.
With an estimated cost of RM 40 billion which includes RM10 billion to buy high-speed bullet trains, the HSR link is expected to be
completed by 2020.The HSR project will also complement another rail project, The Rapid Transit System Link that will link Johor
Baru to Singapore’s Thomson Line, which is set to be ready by 2019.
ISKANDAR
MALAYSIA
RECORDS
RM 118.93 BIL
IN INVESTMENT
by Yarlini Kukan
Iskandar Malaysia recorded RM7.56 billion in new investments in the second quarter of this year, bringing cumulative committed
investments since 2006 to end-June 2013 to RM118.93 billion.
Johor Menteri Besar, Datuk Seri Mohamed Khaled Nordin said up to June 30, 2013, local investors contributed 66% out of the
cumulative committed investments while the balance of 34% was contributed by foreign investors.Iskandar Malaysia promotes
nine key economic sectors such logistics, tourism, healthcare, education, financial services and creative industry. Three
manufacturing sectors namely electrical and electronics; petrochemicals and oleo-chemicals; food processing and agro products
recorded the highest investments of RM43 billion.
In the tourism sector, Pinewood Iskandar Malaysia Studios which offers 100,000 sq ft of film stages and 24,000 sq ft of TV studios
will be fully completed soon would promotes Johor as a destination of choice for international investments. Futhermore, the
opening of the water park at Legoland Malaysia in October 2013 will attract more tourists to Iskandar Malaysia. Besides that,
the Sungai Segget rehabilitation project will help improve the quality of the river water and reduce pollutant loads to the Strait
of Tebrau, Johor.
The JB Transformation Programme aims to make Johor Bahru a vibrant and sustainable city of international standing and provide
socio-economic benefits to the local residents.
POLICY
11
Figure 7: Malaysia’s Household Debt (2008 - 2012)
700
Household debt (RM billion)
NEW RULING
BY BANK
NEGARA
MALAYSIA
800
600
500
400
300
200
“
With the new ruling, property buyers
will no longer be able to take loans for
more than 35 years compared with the
previous maximum loan term of 45
years. Personal loans terms were also
reduced to 10 years compared with the
previous term of 25 years. These new
rulings set by Bank Negara is aimed at
reducing household debt in Malaysia,
44.5% of which are housing loan debt
and 16.8% are personal loan debt.
These stringent actions were taken by
Bank Negara Malaysia due to the high
household to gross domestic product
ratio of 83%. Although it is not at an
alarming rate yet, it is still the highest
among the emerging countries in Asia. If
this continues, Malaysia will face a huge
household debt problem. The stricter
lending rules are also seen when Bank
Negara prohibits the offering of preapproved personal financial products.
These new lending measures will be
extended to all financial institutions
and credit cooperatives regulated in the
country. These institutions must follow
the regulatory lending limit which is set
at 60% of applicant’s net salary.
The latest measures introduced by Bank
Negara Malaysia is to curb household
debt in ensuring a sound and sustainable
household sector. In addition, certain
measures will have to be placed and
combined with the existing ones to
prevent debt from reaching an alarming
Extremely long
property
loan periods
encourages
excessive debt
accumulation by
household
rate. The earlier measures introduced
in 2012 only has marginal impact of
slowing down the rise of total household
debt by 0.4% from 13.4% in 2011 to
13.0% in 2012.
Extremely long property loan periods
encourages excessive debt accumulation
by households and this increases the
vulnerability of the sector. For example,
the loan to value (LTV), previously at
70% for a third housing loan and debt to
net income could be further tightened.
The 70% LTV could be lowered or applied
to the second housing loan while the
debt to net income ratio could be further
tightened by lowering it from 50% to
30% of the monthly net income. The net
income could be defined more stringently
to include other obligations of the
borrower. To rein in excessive increase
in property prices that contributes to
the rise in housing loan demands, the
real property gains tax (RPGT) could
be further raised to curb speculative
activities.
On the other hand, there have been
2012
2011
The recent new ruling by Bank Negara
Malaysia (BNM) was received with mixed
views on how it will affect the property
industry. The most significant impact will
be the loan term applicable to property
buyers.
2010
0
2009
100
2008
by Aisyah Mahzan
Source: Bank Negara Malaysia
concerns regarding the impact of these
new measures as these new lending
measures will have a significant effect on
the younger generations compared to the
older generations which are financially
more stable. The younger generations
who have only just started working will
have a harder time in purchasing their
first property let alone a second or third
property. The affordability level of the
younger generation will be lower with
the new lending measures in place.
Bank Negara Malaysia should also
impose a more lenient approach to first
time home buyers. It should be made
easier for them to purchase their first
property so that the government’s initial
goal of “one person one home” could be
realised and serve as a platform for them
to enter the property market.
The platform should be practical and
approachable from the taxation,
financing and procedural point of view.
This will help the younger generation
to own a house as the property prices
in Malaysia keeps increasing, with the
higher cost of living in the cities also
affecting the affordability level of the
younger generations.
If this keeps occurring, they may totally
not consider buying their own property as
it is beyond their means and resort stay
ing with their parents as an alternative.
This in turn will have a negative impact
on the Malaysian property industry.
On a good note, these new lending
measures do not affect loan applications
made before the 5 July 2013.
GRAPHICAL SPEAKING
12
high occupancy rate
of commercial
buildings in selangor
& kuala lumpur
Source: NAPIC & MPI Research
Occupancy Rate for Commercial Buildings in selected states as at
1Q 2013
Purpose-Built Office
Shopping Complex
Kuala Lumpur
77%
82%
Selangor
78%
82%
Johor
74%
70%
Penang
76%
69%
Others
83%
82%
Source: NAPIC
Purpose-Built Office
Other State
Penang
Kuala Lumpur
Johor
Selangor
State
Existing Space
%
Kuala Lumpur
7,072.21
53%
Selangor
2,444.32
18%
Johor
701.81
5%
Penang
846.61
36%
Other State
2,384.04
18%
Total
13,449.04
100%
Shopping Complex
State
Existing Space
%
Kuala Lumpur
2,398.37
17%
Selangor
2,920.49
18%
Johor
1,684.30
29%
Penang
1,421.90
31%
Other State
3,832.09
31%
Total
12,257.15
100%
Other State
Kuala Lumpur
Selangor
Penang
Johor
ABOUT US
Malaysia Property Incorporated is a Government initiative
set up under the Economic Planning Unit to drive
investments in real estate into Malaysia.
As the first port-of-call for real estate investment queries,
Malaysia Property Inc. connects interested parties through
an extensive network of government agencies, private
sector companies, real estate firms, business councils and
real estate-related associations.
MPI has two core objectives; to create international
awareness and to establish connections between foreign
interests and Malaysian real estate industry players,
ultimately contributing to real estate investments into the
country.
For further information and
up-to-date tracking of Malaysian real estate data, visit:
www.malaysiapropertyinc.com
For further enquiry, write to:
[email protected]
Disclamer: This report contains information that is publicly-available and has been relied on by Malaysia Property Incorporated on the basis that it is accurate and
complete. MPI is not liable if the case proves to be otherwise. No warranty or representation, express or implied, is made to the accuracy or completeness of the
information contained herein, and the same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and
to any special listing conditions imposed.