2009 Property Market Highlights

With silver linings just starting to show from the gloomy economic condition, the Malaysian property market has shown resilience throughout the course. Appetite for property during the recession was fuelled by numerous property launches and their accompanying incentives, which saw the lowest Base Lending Rate in history. Local property developers were kept busy by not only projects within our shores, but also in emerging markets overseas. iProperty.com takes a look back at the year that kept people guessing what’s next.

#1: It is a buyer’s market

Property buyers are inundated with choices as developers like S P Setia, Sime Darby Property, Naza TTDI, I&P Group, Gamuda, Mah Sing and more held property launches after property launches. After a soft market situation in 2008, 2009 saw residential properties offered across the low to high end market.

Residential property launches in the Klang Valley include luxury icons such as S P Setia’s first luxury high rise condominium Setia Sky Residences, IMMO Pavilion’s Pavilion Residences Tower 1, Naza TTDI’s The Valley TTDI Ampang, Eastern & Oriental’s (E&O) St Mary Residences, Sime Darby’s Forte bungalows and many others.

It was also busy up north in Penang as developers E&O, IJM and Mah Sing respectively launched Seri Tanjung Pinang, The Light Linear and Residence@Southbay projects.  Other states like Johor and Negeri Sembilan also saw some launch activities.

It is not all a residential show as commercial properties also enjoyed their fair share of launches. Early this year, Gamuda Land launched their Kota Kemuning Business Park 1 followed by other commercial property launches throughout the year such as Sime Darby Property’s d’Vida, the first phase of their Bukit Jelutong City Centre commercial project, Glomac’s Glomac Cyberjaya, Mah Sing’s upcoming StarParc and more.

While property buyers have many residential and commercial properties to choose from, thanks to the multitude of launches, it may seem that they do not need to be in a rush to start investing in choice properties. This is far from the truth as the next highlight illustrates that properties in key locations are still as hot as ever, recession or not.

#2: It is a seller’s market too  

If there is an ongoing recession, property buyers might be forgiven to think otherwise when they headed out to some of the property launches in 2009. The queues are back in some of the property launches this year, which is a testimony that people are still willing to spend on great properties as long as their location and concept is right.

Towards the second half of the year, I&P Group launched their double-storey Temasya Suria superlink homes at Glenmarie, Shah Alam. Massive queues formed before the launch and police were even called in to maintain peace. Some even queued for an entire week for the launch. In just three hours, all units of Temasya Suria homes were sold and it has to be noted that their prices range from RM750,000 to RM1.4 million. A week later, massive queues also formed at the developer’s launch of Sentosa, Phase B39/B40 of Bandar Kinrara, Puchong. This time however, some had even queued for 10 nights just to get an opportunity to buy the freehold link houses priced from RM462,888 to RM693,888. All 80 units were sold within three hours. In November last month, I&P Group launched Canting 2 and Nukilan 2 double-storey terraced houses in their Alam Impian township in Shah Alam which saw queues starting from 6.30am. Priced from RM419,769 to RM1.02 million, all of them were snapped up on the second day of the launch.

The situation was similar for IJM Land’s launch of The Light Linear condominium in Penang which saw long queues for its remaining non-bumiputera units with some queuing for three days. On 31 October, S P Setia launched Brio Tower of SetiaWalk apartments as well as Phase 8B of Setia Eco Park. Both launches saw queues starting from midnight and 7am respectively. Half of Brio Tower was sold within a day while all 28 semi-detached units of Phase 8B were sold out within three hours. What’s even more amazing for S P Setia is that the launches of both projects were just a week after the government’s Budget 2010 reintroduction of Real Property Gains Tax (RPGT) which caused concern among some in the property market.

#3: Budget 2010 announcement

The announcement of Budget 2010 did not bring much glimmer to the real estate market but instead has caught some by surprise with the reintroduction of Real Property Gains Tax (RPGT). Effective from 1 Jan 2010, gains arising from property disposal are subject to 5 percent RPGT irrespective of the year the property is disposed. Exemptions are given for:

While it is still too early to determine the impact of the RPGT on the demand and prices of properties, the move can also be viewed as the property market is headed for a rebound.

S P Setia Berhad president and chief executive officer, Tan Sri Dato’ Sri Liew Kee Sin commented, “There was some apprehension on the announcement of the RPGT being imposed again. However, we have not seen any setback as far as S P Setia is concerned judging by our sales (as described in point #2). We need to remember that RPGT is a tax on gains derived and not proceeds received from the disposal or real property. The reimposition of the tax by the government at this time indicates their confidence in the health of the sector and also that there are decent gains to be made. However, to ensure that this nascent recovery is not choked off, the rate of tax is only 5 percent. At such a low rate we believe that it will not significantly impact decision to buy or sell properties, regardless of holding period.”

Gamuda Land managing director, Mr Chow Chee Wah says, “We have seen a lot of lukewarm response (for RPGT) from the industry players in the media. Similar like other players, we find that 5 percent for RPGT is not very favourable because in the past, the free waiver of RPGT was among the attraction pull for purchasers especially foreign buyers to invest in Malaysian properties. Personally, we think it is a good idea to have a flat rate of 5 percent because this minimises the confusion most purchasers will have. This will ensure a hassle free process for buyers and sellers instead of them having to figure out how many percentage of tax they will have to adhere to each year when they sell their property. We foresee that the secondary market will be busy with activity during these few months before the implementation of the RPGT in January 2010. Nonetheless, the RPGT does not really affect developers like us, as our purchasers are the primary market buyers who are interested in staying in.”

The set back, according to Chow is the rather frequent change of policies which reflects a bit of instability in the government which in turn will deter future interested investors to come in.

Chow further commented on Budget 2010, “We salute and are happy that our government is encouraging more green homes with the Green Building Index Certificate tax incentive. The initiatives for the Green Building Index will definitely create more awareness and encourage more developers to consider adopting green construction technology as it will help with the quality of homes and lifestyles for our purchasers. This goes to show that Gamuda Land is on the right track towards green development since we have been practising these for years.”

Chow added that the developer ensures at least 40 percent of the land area in their township planning is dedicated to parks and lakes such as the creation of residential wetlands.

Hua Yang Berhad’s chief operating officer, Ho Wen Yan opined that while it is still too soon to determine the true impact of the 5 percent RPGT, its impact may not be as severe to the developer as in the investor market as Hua Yang operates in the first-time and owner-occupier housing market.

Meanwhile, Tan Sri Dato’ Sri Leong Hoy Kum, group managing director and group chief executive of Mah Sing Group Berhad said of Budget 2010, “The Government has set aside RM1.5billion to promote green technology, which is a significant amount that will certainly make a big impact. We are already incorporating eco-friendly features in the design stage of our properties and this will incentivize us to obtain the Green Building Index certification as the tax rebate is equivalent to the cost of implementing that green technology. House buyers who buy Green Building Index (GBI) certified properties will also enjoy stamp duty waivers, and we believe this is a good multi-prong approach to increase the number of environmentally friendly projects in Malaysia.”

#4: Lowest BLR in history

Perhaps one of the biggest catalyst for demand in the property market is due to the lowest Base Lending Rate (BLR) in Malaysian history. Set by Bank Negara at 5.55%, financial institutions found it suitable to offer rates as low as BLR-2.4% to entice property buyers back into the market. Towards the end of 2009, banks started to offer lower rates with some of them reported to be at BLR-1.8%, a sure sign that demand for property has started to play catch up. It is not only the BLR that is low, ING Insurance has also offered their fixed lending rate at 4.85%, their lowest ever since its incorporation in Malaysia.

#5: Never seen before incentives

As if the low BLR rate is not enough, property developers have thrown in irresistible property buying incentives like low downpayment, zero interest during construction, legal fee and disbursement for SPA covered by the developer and more, into the equation.

S P Setia’s Setia 5/95 Home Loan Package saw their group sales jumped from RM102 million to RM1.25 billion between 31 January and 31 July and monthly sales averaged more than RM190 million, setting a new sales performance benchmark. This result is the strongest and most rapid sales performance ever witnessed by the developer over a duration of six months.

Another developer that smashed records was Sime Darby Property. Their Parade of Homes campaign saw over 1,600 property units sold and recorded sales exceeding RM1 billion. The campaign started in June 2008 and ended 15 June 2009.

Mah Sing Group’s Easy Home Ownership campaign offered buyers to defer payments until completion of the property which was met with what they call a resounding success. Apart from that, the developer catered to those who want to move in immediately with a selection of completed properties under the build and sell scheme. In 2009, Mah Sing Group had overshot their full year sales target by approximately 1.4 times, achieving RM615 million for nine months period.

#7: Local players in expansion mode

Major property developers continued their venture into overseas property markets. S P Setia, who made their maiden foray into Vietnam back in 2007, has continued their expansion in 2009 with an agreement with Becamex IDC Corp for the development of a mixed-use project located in Lai Thieu Town, Tuan An District, Bing Doung Province, Vietnam. The latest venture makes it the third overseas project in Vietnam for the developer. Apart from Vietnam, S P Setia has also entered into a joint venture in October 2009 with Hangzhou Ju Shen Construction Engineering Limited to carry out a mixed real estate project in XiaoShan, Hangzhou in the province of Zhejiang, China.  

For Gamuda Land, their Yen So Park, Hanoi, Vietnam project has seen major infrastructure and landscaping works completed in 2009. The mixed development is split into four components – a modern sewage treatment plant, commercial district, business district and residential district. The launch of apartment and link units is scheduled in 2010.

On a local front, Mah Sing Group went on a landbank acquisition frenzy. The developer bought five parcels of land with a combined GDV of approximately RM1.9 billion in 2009 which has surpassed the group’s aim to purchase landbank that can yield RM600 million to RM800 million in GDV annually. So far, the developer has about RM5.4 billion remaining GDV and future progress billings which can last them for between eight to 10 years.

Market Outlook 2010
Views from some of Malaysia’s property developers

“2010 will be another positive growth year. The forecast is for growth next year as the global economy recovers. Malaysia is a young country with a growing population. Demand for housing overall still out-strips supply. Furthermore, interest rates are still very attractive. Our outlook is that the residential sector will remain strong, commercial and retail will recover over the next two to three years.” – Ho Wen Yan, chief operating officer, Hua Yang Berhad

“Based on market sentiments, the outlook looks promising. The economy is showing signs of recovery and coupled with our continued low interest rate and ample liquidity, I am confident we should see things improve in the coming year.” – Tan Sri Dato’ Sri Liew Kee Sin, president & CEO, S P Setia Berhad

“Based on the trend in 2009, we foresee that launches and sales will be picking up positively for the coming year. Given some of our projects will soon reach to its entire development’s completion, we are actively looking out for land banks for development. We would also like to see more liberation in policies such as in Foreign Direct Investment, the bumiputra quota issue, as well as friendlier policies to help make housing more affordable and accessible to the people. It would be great if the government could provide further aid and even more incentives to developers so that we can build a healthier and competitive industry that provides the best for the country.” – Chow Chee Wah, managing director, Gamuda Land Berhad