Malaysia braces for change post-Budget 2014

MRT in Greater Kuala Lumpur and potential controversy in Johor involving the Sultan and the Federal government are the hot topics in Malaysia’s property market.

View of Johor Bahru from Singapore. The new Bill has caused controversy in Malaysia. Photo: IRDA

View of Johor Bahru from Singapore. The new Bill has caused controversy in Malaysia. Photo: IRDA

By Khalil Adis

The property market in Malaysia is undergoing massive changes with new hotspots mapped out by experts in Kuala Lumpur, Selangor and Penang, a controversial Bill in Johor that has got the both former Prime Minister Tun Dr Mahathir Mohamad and current Prime Minister Datuk Seri Mohd Najib Tun Abdul Razak up in arms and the possibility of more land reclamations expected in the island of Penang.

Indeed, the Malaysian property market appears to be entering a new era of excitement mixed with uncertainty post-Budget 2014.

If pre-Budget 2014 has had foreign investors feeling wary and on the edge of their seats, then post-Budget 2014 could be well described as “chartering new territories” for both the rakyat (citizens) and politicians.

“Budget 2014 does not affect fundamentals of a location, in terms of hotspots. As for Greater KL: since prices have adjusted for the Blue MRT Line (Line 1), investors may need to do some research to speculate on the Putrajaya (Line 2) and Circle Line stations (Line 3),” says Ishmael Ho, director at Ho Chin Soon Research.

Agreeing, Faizul Rizwan, best-selling property author of “WTF? 23 properties by 30”, said investors need to study the supply and demand situation in Kuala Lumpur and Selangor.

“Investors need to focus on units that are limited in supply and those that are smaller in sizes as they are easier to sell in the subsale or resale market,” he said at the recently concluded Havoc Real Estate Convention 2014 at Craft Complex in Jalan Conlay, Kuala Lumpur.

While traditional prime areas like KLCC and Mont Kiara will be of interest to foreign investors, Rizwan and Ho Chin Soon said Greater Kuala Lumpur is something locals should keep a close watch.

According to them, townships in Greater Kuala Lumpur and Selangor that are near the upcoming MRT stations, are expected to be the next goldmine.

Expect sweeping changes in Johor

Coastal Highway - since 2008, the Malaysian government has spent close to RM900 million to build the Coastal Highway linking Johor Bahru to Nusajaya. As a result, property prices in Nusajaya have appreciated greatly.

Coastal Highway – since 2008, the Malaysian government has spent close to RM900 million to build the Coastal Highway linking Johor Bahru to Nusajaya. As a result, property prices in Nusajaya have appreciated greatly. Photo: IRDA.

The biggest news by far for this year belongs to the state of Johor where the Sultan of Johor, Sultan Ibrahim Sultan Iskandar is mulling to introduce sweeping changes that could have a significant impact on Iskandar Malaysia.

Firstly, the ruler has expressed support for proposals to increase the minimum purchase price on landed homes for foreigners to RM2 million.

The Sultan has said the current RM1 million is unsuitable for Johor due to its close proximity to Singapore.

The move comes at an especially crucial time in the history of Johor as this special economic zone is Malaysia’s most successful economic corridor under its Economic Transformation Programme (ETP).

Property prices have for the first time appreciated – something not seen before in Johor’s real estate sector.

Nusajaya’s pricing now averages around RM900 per sq ft in Medini while Johor Bahru’s is around RM1,000 per sq ft.

Figures from Iskandar Regional Development Authority (IRDA), also showed that as of January 2014 Iskandar Malaysia had attracted RM133.07 billion worth of investments.

While the proposed ruling will protect Johoreans from soaring property prices, analysts predict Iskandar Malaysia will be adversely affected.

“This measure will surely dampen the property market in Iskandar Malaysia as it depends on the support of foreigners,” says Ho.

According to IRDA, Singapore is the top foreign investor at RM9.183 billion followed by Spain and Japan at RM4.181 billion and RM3.743 billion respectively.

If approved, this new policy will mirror closely policies in the opposition state of Penang.

Secondly, and perhaps the most controversial plans by far, the Johor Housing and Real Property Enactment Board Bill was passed recently in Nusajaya with amendments to limit the Sultan’s power.

Initially, the Bill was to empower the Sultan with executive functions that critics say will go against the principles of Malaysia’s constitutional monarchy and override policies on a national level.

Former Malaysian Prime Minister Tun Dr Mahathir Mohamad has said the Bill appears to overcome national policies as it will give the Sultan of Johor executive powers.

Current Prime Minister Datuk Seri Mohd Najib Tun Abdul Razak has also expressed his concerns by calling on the Chief Minister of Johor Khaled Nordin to ensure that the Bill would be in line with the principles of the Federal Constitution.

With mounting pressure from Putrajaya, the Bill was subsequently amended that will now require the Sultan of Johor to act on the advice of the Chief Minister.

The Bill will also see the formation of the Johor Housing and Real Property Board that will be tasked with policymaking, implementation, co-ordination and planning of the housing and real estate development in the state.

Branded residences setting new per sq ft pricing in KLCC

Pavilion in Bukit Bintang. Overhead linkways currently link Bukit Bintang to KLCC. Photo: Khalil Adis

Pavilion in Bukit Bintang. Overhead linkways currently link Bukit Bintang to KLCC. Photo: Khalil Adis

In the prime area of KLCC, branded luxury residences are making in roads and setting a new benchmark in per sq ft pricing

“For investors wanting to invest in the luxury market, my advice is to focus on units that are small in size as they are limited in supply and easier to sell in the resale market. I would also urge investors to choose those that are near to LRT/Monorail stations with top-notch facilities,” Rizwan said.

Notable projects like The Four Seasons Place, Banyan Tree Pavilion Signature Residences are being launched at RM2,950 per sq ft and RM2,500 per sq ft respectively.

Others like W Residences and Harrod’s Hotel and Residences have achieved RM3,000 per sq ft  in pricing – setting a record for the high-end market.

New prime areas coming up in suburbs

Faizul Rizwan, sharing his findings at the Konvensyen Hartanah 2014 held at Pusat Kraft at Jalan Conlay.

Faizul Rizwan, sharing his findings at the Konvensyen Hartanah 2014 held at Pusat Kraft at Jalan Conlay. Photo: Khalil Adis.

With the planned MRT extension spanning from Sungei Buloh all the way to Kajang, even the suburbs in Greater Kuala Lumpur are commanding hefty price tags that one would usually associate with Damansara Heights and Bangsar.

Sharing his research at the convention, Rizwan said Southern and Northern Klang in the next hot spot.

For example, Ambang Botanic and Setia Ecopark are commanding prices of RM3.5 million and RM5 million respectively

The areas will be served by the upcoming Bandar Utama and Klang MRT stations and is easily accessible via the Shapadu and NKVF Highways.

In addition, Rizwan said the many amenities there like Bukit Rajah Shopping Centre, Billion, Centro, Shaw Centre Point and Setia City Mall @ Setia Alam have made these suburbs highly sought after.

“Shopping centres increase the desirability of an area and will cause property prices to appreciate,” he said.

Rizwan also shared another upcoming hotspot in Denai Alam, Selangor, where a massive project is currently being undertaken by Sime Darby.

Measuring 19,000 acres and part of the Selangor Vision City masterplan, the township will be served by the upcoming MRT 1 Line with stations that will include Taman Industri and Sungei Buloh.

Amenities in the area include Space U8 – Malaysia’s first eco-mall, 1 Utama and The Curve.

The plenty of golf courses there such as Sri Selangor Golf Club and Saujana Golf and Country Club also mean properties there command top dollar.

For example, Rizwan’s research shows that Verdana has an asking price of RM1.4 million while Sri Pilmor @ Ara Damansara is RM3.7 million

Meanwhile, Ho Chin Soon’s research showed that semi-detached homes in Selangor enjoyed the most capital appreciation compared to other types of residential properties.

Citing data from National Property and Information Centre (NAPIC), his research showed that between 2000 to 2013, the house index rose for such homes rose almost 100 points to reach 202 points in 2013.

Ho Chin Soon also shared his speculative MRT Circle and Putrajaya Lines at the same convention.

“Our advice has always been, for investors to follow the infrastructure like MRT stations and go with branded developers. However, “following” branded developers is not limited in the sense of solely purchasing their product. It simply means that a branded developer could transform a particular area. Therefore, it can be helpful to understand where has a branded developer head to in terms of their land acquisition exercise,” said the younger Ho.

Kuala Lumpur welcomes a dedicated entertainment enclave

Artist impression of Zouk KL once in opens in the first quarter of 2015 at Jalan Tun Razak. Photo: TREC.

Artist impression of Zouk KL once in opens in the first quarter of 2015 at Jalan Tun Razak. Photo: TREC.

Another interesting development in Kuala Lumpur is its own dedicated entertainment enclave much like Lan Kwai Fong in Hong Kong and Clarke Quay in Singapore.

Located just next to Tun Razak Exchange (TRX), the project – TREC – is Malaysia’s first purpose-built urban lifestyle, entertainment destination and KL’s largest F&B enclave located along the bustling Jalan Tun Razak.

With a development cost of RM$323.6m and built on a 7-acre site, TREC will have 77 outlets with a total of 256,000 sq ft of lettable space offering lifestyle and F&B choices, with lease-only units ranging from 350 sq ft to 5,000 sq ft

“TREC wants to be pioneers of a one-stop integrated entertainment and lifestyle zone that has made the likes of Hong Kong’s Lan Kwai Fong, or Shanghai’s Xintiandi must-visit locations in their countries. In doing so, cement KL (and Malaysia’s reputation) as a thriving destination for lifestyle/entertainment seekers,” said Cher Ng, its founder who is best known as the man behind Zouk KL.

TREC is a joint-venture between him and Dato’ Douglas Cheng Heng Lee of Berjaya Assets.

“TREC concept is in an outdoor environment and its architecture and landscape are specially designed and built for F&B purpose whereas the areas you have mentioned are very much retail mall centric. The feeling and vibe in both are very different. Another point to note is that TREC has five distinctive zones offering a variety and assortment of styles and ambiance according to our five different ‘experience zones’,” said Ng.

With Phase 1 to be completed in early 2015 and the grand opening slated for end–2015, TREC will have Zouk KL as its anchor tenant.

The current Zouk KL lease in Jalan Ampang will expire by end 2014 and will require a new site.

“The new Zouk @ TREC is a fantastic location and will benefit from a great frontage view of the golf course and it is also directly opposite the future Tun Razak Exchange (TRX),” said Ng.

According to Ng, TREC’s current take up rate is around 60 per cent.

“We expect to hit 85 per cent by the fourth quarter this year,” said Ng who is currently in the midst of negotiations with a number of local, regional and international brands – some of which come from as far as the UK.

Penang

Charming colonial buildings in Georgetown, Penang.

Charming colonial buildings in Georgetown, Penang. Photo: Khalil Adis.

According to Ho Chin Soon, terraced homes in Penang enjoyed the most capital appreciation, increasing 187 points to reach 287 points in 2013 since NAPIC began tracking the price index in 2000.

Ho Chin Soon’s map for Penang also showed considerable land reclamations in Sri Tanjung Pinang that could block the sea views along Gurney Drive.

Eastern & Oriental Berhad is the developer for Sri Tanjung Pinang and plans for the reclamation is currently under discussion with the state government.

Market watchers, however, opined that a new hot spot is in Seberang Prai where property developers have been acquiring land parcels.

“As for Penang, investors should pay attention to the second bridge,” says the younger Ho.

The opening of the second bridge has seen Mah Sing Group acquiring land parcels in Jawi with a new integrated development called Southbay East to be introduced soon.

This article was first published by The PropertyGuru.

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