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Discontinuation of The Reduction Of Fixed Deposit Placement Based On Property Purchase And MM2H Approval By Government Pension
Kindly be informed that MM2H Centre has discontinued the reduction of Fixed Deposit placement based on property purchase worth RM1 million and above in Malaysia. Also discontinued is the MM2H...
In Retrospect: 2009 Print E-mail
Wednesday, 02 December 2009 05:22

At the end of fourth quarter of 2008 with the onset of the global financial crisis after the Lehman Brothers collapse (and the fiasco of sub-prime loans), doomsday scenarios for global financial markets were making the headlines every other day. Analysts were claiming that the year of 2009 would be an uphill struggle. Over a year later, financial and real estate markets in Asia and SEA have moved ahead albeit a stuttering start to the year.

Analysts have attributed it to many reasons. A recent article in Financial Times by Robert Zoellick, president of the World Bank Group (November 25, 2009) stated: “Asia is now leading the world economy with increases in industrial production and trade ... Elsewhere in Asia, equity markets have surged and property prices are on the rise, notably in Hong Kong and Singapore.”

The first two quarters in Singapore, Malaysia, Indonesia (Jakarta and Bali) saw residential from mass-market to luxury property sales transactions and launches declining at depressing rates. Singapore’s Urban Redevelopment Authority (URA) flash estimates reported that the property price index (PPI) in the first quarter of 2009 (1Q 2009) declined by 14.1 percent quarter-on-quarter (q-o-q). Malaysia’s gross domestic product (GDP) experienced a sharp drop, a contraction of 6.2 percent for 1Q 2009. In the heart of Kuala Lumpur City Centre (KLCC), luxury condominium prices dropped by 15 to 20 percent with projects such as the Oval and the Troika with declining asking prices.

However, the property market in Singapore not only began showing signs of recovery – URA’s flash estimates saw an increase in the PPI of 15.9 percent in 3Q 2009 – but exhibited such a sharp  increase in sales transactions and prices that country’s government introduced anti-speculative measures to prevent a property bubble from forming.

According to figures from Singapore’s Ministry of Trade and Information (MTI), Singapore’s GDP expanded by 20.7 percent in 2Q 2009 compared to the previous quarter from -.9 to -.6 percent to -.6 to -.4 percent. Also, there has been resurgence in the investment sales market. Investments sales value rose, for two consecutive quarters,according to Tay Heuy Ying, director of Research and Advisory, Colliers International. It was S$1.35 billion in 2Q 2009 and $4.51 billion in 3Q 2009 after figures stood at $276.55 in 1Q 2009.

Statistics for the Malaysian market showed an increase in sales figures in the later part of this year. Says Dato’ Abdul Rahmin Rahman, founder of Savills Rahim & Co., “Late records of 2009 show an increase of foreign buyers or investors into the Malaysian market which is probably an indication of them gaining some confidence in the country’s property market stabilising.” The Malaysian government has also introduced a bold deficit cutting budget to improve the economy, but also restored the real property gains tax (RPGT).

Bali’s and Jakarta’s property markets improved over the past two quarters from the sluggish beginning of the year. The third quarter saw around 3,155 apartment units entering the Jakarta market in three new projects. In Bali, the Bukit area is doing well while the Amed region in Karangasem is gaining popularity with investors and has been seeing steady growth.


Surge in home prices
The surge in the home prices was unexpected since the country is still in recession. DTZ’s head of Research of SEA, Chua Chor Hoon, attributes low interest rate, liquidity and optimism in the recovery of the economy by 2010 for increasing buying sentiment in 2Q 2009. Tay explains that strong buying momentum started in the mass-market segment which later filtered to the higher-end market, resulted in an increase of home prices to 15.8 percent in 3Q 2009.

URA’s data points out prices of non-landed private residential property increase by 15.2, 18.5, and 16.1 percent in the CCR, RCR and OCR regions respectively in the third quarter alone. Some developments in the luxury segment that showed record sales were Seven Palms units in Sentosa Cove that went for average price of S$3,300 psf (one unit went for $3,429), while Nassim Park Residences and the Ritz- Carlton Residences was priced at $3,813 psf and $3,404 psf respectively. Recently, the Boulevard Vue development sold a unit at $4,150 psf.

Good class bungalows (GCB) in Singapore had a good run, especially from May onwards. According to caveats lodged in the URA REALIS system, there were only three transactions in the first three months of this year but 59 transactions in total were recorded from January to August.  Transactions peaked in June at 29 of which a GCB, Cluny Park went for $38 million ($1,004 psf for 37,849 sq ft). Most of the investors fell into the high net-worth individuals (HNWI).
Of GCB’s Capella Singapore, luxury resort in Sentosa Island is renting out manors ranging $42,000 to $48,000 depending on their sizes.

Government measures
In January, several economic measures were declared which included giving developers a one year extension to complete private residential properties as well as qualified developers to rent out their unsold units for the next two to four years.
Anti-speculation measures were also announced on September 14, to help cool the market. There was a removal of Loan schemes Interest Absorption Scheme (IAS) and Interest-only housing Loans (IOL) and the reinstatement of the Confirmed List for 1H 2010 Government Land Sales Programme (GLS). Many welcomed these measures as they would prevent speculative demand without hurting genuine demand from owner-occupier buyers and investors.
GLS has also prompted developers to look towards the public sector for development land. 11 sites on the reserved list have been pushed for a sale and tender for nine of the sites have closed.
Also, in the third quarter of the year, the Ministry of National Development (MND) released a statement that it is working with other relevant government agencies would be regulating the real estate industry (with regards to agents).

Sustainable Development
MND Minister Mah Bow Tan revealed in an interview with Property Report in July that nearly $1 billion “has been set aside to champion new sustainable development initiatives despite the current economic downturn.” Singapore developers like CapitaLand, Keppel Land and City Developments Limited are also exporting their green expertise overseas. One of the green projects being undertaken is the Tianjin Eco-city, which had its groundbreaking ceremony in September.
Developers here too are designing buildings that feature eco-friendly elements that include the Belle Vue Residences and Citylights.


Government Measures
The Malaysian government introduced a sizeable stimulus package of RM60 billion for the next two years in March to help cut deficit and aid the ailing economy. Also, the real estate sector saw a few changes, such as the move to reduce borrowing cost – tax relief on interest paid on housing loans up to 10 000 a year for 3 years.

However, the RPGT at a flat rate of 5 percent was also reintroduced, which is viewed to be more negative than positive. The Business Times Editorial (October 27, 2009) reported: “Mr. Najib’s proposal would appear to penalise those who were never speculators.” Dato’ Rahman claims that this will raise questions on the effectiveness or stability in the implementation of the tax. Moreover, foreign investors might find it less attractive to invest in the country.

Despite the RPGT, there several measures were implemented to increase foreign investments. A budget of 25 million is being set aside for the next five years to create awareness to promote as Malaysia as an investment destination under ’Malaysia My Second Home’ (MM2H). REHDA, organisation of Malaysia property developers welcomed the package.

Development Surge
“Buying and leasing activities slowed especially in the first half of 2009 but there was some improvement towards the third quarter of the year,” explains Ong Kah Seng, manager for Consultancy & Research, Knight Frank. He adds that low mortgage rates as well as developers’ incentives which include rebates, flexi payment scheme, and zero interest during construction stage prompted market activities in the first nine months of the year.

There has been a surge in supply with a total of 1,500 luxury condominium units scheduled to be completed in KLCC and Mont Kiara before the end of 2009 while several premium projects are coming up in Penang and the Johor region.

Eastern & Oriental Bhd (E&O) has scheduled to launch high-end property launches worth 4 billion, which includes the Seri Tanjung Pinang on Penang, and the sale of St Mary residences in Klang Valley.

Binjai on the Park in KLCC luxury condominium saw its units sell for a range of 2400 psf to 3500 psf while the Kenny Heights Sanctuary’s units are priced from 1.4 million onwards. Kenny Heights Estate at Mont Kiara-Damansara comprising 49 four-storey town villas are selling at 4.5 million while the Regent Residences is available from US$400, 000. One of the recent launches, the Pavilion Residences in the heart of the capital is offering its units from 1,100 psf.

NAZA TTDI is presenting the Valley TTDI development with 66 link villas and 68 bungalows, Brunsfield Embassyview a premium project in the Embassy row in KLCC while the Amarin Group launched the Amarin Wickham consisting 21 luxury units, priced at 1,000 psf and above.

1 billion is being pumped into the Bayan Lepas area in Penang for high-end residences – prices are from 550, 000  to 780,000 for landed houses and RM 300,000 to 500,000 for apartments.

Iskandar Malaysia (IM) in the Johor area is a key development site in Malaysia. Malaysia aims to attract RM50 million in investments in the first five years and up to 370 million over 20 years. It includes several luxury residences in Danga Bay Island such as the Casa Almyra (152 villas), Danga View apartments (prices range from 5 to 20 million), Iskandar Residences and Oakwood Residence.

The Nusajaya region is also seeing signature projects, such as Nusajaya Residences, East Ledang, Horizon Hills, Ledang Heights, Nusa Idaman, and Leisure Farm Resort. The Leisure Farm Resort is an integrated luxury residential enclave that is targeting foreign investors, especially Singaporeans.

Sustainable Development
Malaysia is going green this year with its launch of the Green Building Index (GBI) in April for environmentally-friendly construction. Mayor of KL Dato’ Ahmad Fuad Ismail, in an interview earlier this year stated that his department Kuala Lumpur City Hall, endorsed the ’World Class Sustainable Cities’ indicating the city’s commitment to sustainable development.


Dominique Gallman from Exotic Real Estate explains: “The Bali property market went through difficult times till the middle of the third quarter, when the trend suddenly reversed and buyers stopped making low ball offers that didn’t have a chance to get accepted.”

Jones Lang LaSalle figures highlighted that 1,000 homes were to enter the Bali cash-driven market by the end of 2009. In Southern Bali where acclaimed beachfront property areas are, the sales and rental figures have been adequate. Tina Shazell, president/director of PT Real Estate Bali states that many clients have been looking for a villa between US$1 to US$2 million. Tourist arrival numbers too have been close to 2008 figures with 1.9 million people. This area has the most projects with 30 in developing or completed stages. One of the newest projects is the Mertasari in Sanur, an expensive development on sale from US$2.8 million for an 800 sqm villa to $4.7 million for 1,000 sq m.

Bukit area in Bali’s is still quite in demand. Projects such as Bulgari, Karma Kandara and the new Alila Uluwatu function as five-star villa resorts driven by individual investors, rented out and managed for guaranteed returns on investment. Gallman states: “The lower-end of the market is going at US$500,000 which gives you the idea of growing possibilities in the area.”

However, prime lands are becoming limited due to various ongoing or completed developments in the traditional hotspots while infrastructure, market, and sustainable pressures are pushing luxury developments away from these regions such as Seminyak.

One upcoming area for development is the Amed region in Karangasem. It is gaining popularity for its availability of more land as well lower land prices compared to Seminyak and Bukit.  A 250 are  plot of land (one are is 100 sqm) is $33, 200 per are in Ungasan and $850 in Jimbaran is $25,000 per are while a 62 are beachfront land in Amed costs $3,870 per are. The Griya Villas and Spa, a luxury villa by PT Bintang Raya Cipta will be one of the biggest upcoming developments. 14 luxury villas in phase one sales will be priced from €155,000 for a 50-year leasehold.

CBRE statistics show that sales of luxury condominiums slowed in first quarter of 2009. Average asking prices for luxury apartments in the Jakarta CBD and units in the outlying areas remained at US$137 per sq ft and $79 per sq ft, respectively. A number new luxury  developments were completed in the 1Q 2009, including the Hampton’s Park, FX Residences, Bellezza Tower, located in the prime south of the city.

Looking ahead in 2010

Top industry leaders, professionals and property agents give Property Report their views on what to expect for the 2010 market in Singapore, Malaysia and Indonesia.

The property market in KL was in the doldrums early this year. It started showing more life especially in the high-end condominium segment in the second half of the year as the economic conditions looked well. It is expected to stabilise and slowly improve as the economy gains strength and the government’s on-going liberalisation of the services sector works into more demand eventually.
Chua Chor Hoon, head of SEA Research, DTZ

Being a property expert in Asia, I forecast Singapore property market to increase further by another 7 percent and prime districts will continue to have another good run in 2010. Prime districts have seen an increase last year but not on a great percentage. With the economy improving, and increased confidence levels, investors are slowly entering the market but most are waiting for a better recovery of the economy.
Eric Cheng, group managing director, ECG Group of Companies

My views and expectations for year 2010 is that the property market shall continue to move upwards. For the residential sector in 2010, we can expect the market to move upwards by 10 to 20 percent, especially for the luxury properties. As for Malaysia and Indonesia, their economy is  slower  improving but its steady and also they should prosper better this coming year.”
Raymond Chow, ceo/president, Ray International

“Sustained by positive economic indicators in the major global markets, particularly in Asia and growing consumer confidence that the recovery is for real indeed, I see that the Bali property market will get back to where it was before the crisis hit in 2008. Developers that shied away from signing on new projects will get active again next year, and we anticipate that interesting new developments will hit the market.”
Dominique Gallman, Exotiq Real Estate

“Generally prices and/or demand will continue to be stable. The residential property prices will show slight increase especially in KL. The recent introduction of the RPGT may have a slight impact on the market, especially for the overseas investors. It is a hindrance to the foreign investors mostly not because the 5 percent imposed, but the inconsistency of the policy where it was taken away/abolished two years ago.”
Dato’ Abdul Rahmin Rahman, founder, Savills Rahim & Co.

I think we could still see more uptrend as the general residential property market would move in the same direction, be it high-end or mass-market. It is also going to be slower generally. I think it is all relative, as the last quarter it increased by over 15 percent and I don’t think it’s going to top that in any of the quarters in 2010. But the whole of 2010 may grow anywhere by between 10 and 20 percent so we could see as little as less than 5 percent growth in some quarters and between 5-10 percent in others. The rate of growth would be volatile.
Nicolas Mak, adjunct lecturer, Building & Environment Division, Ngee Ann Polytechnic

Given the positive signs witnessed in the last quarter locally and the modest recovery that is underway globally, Singapore’s economy looks likely to be brighter in 2010. This will help lift business sentiment and confidence, which will bode well for the property market. Additionally, the opening of the integrated resort is expected to re-ignite investors’ confidence in investing in Singapore’s property market. In light of these factors, Singapore’s property market is expected to firm up in 2010, with generally stable rents and modest rise in prices.
Tay Huey Ying, director, Research and Advisory, Colliers International

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