What’s in store for us in 2016

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Petronas Twin Towers in KLCC. 2016 will be a tough year for the Malaysian property market. Photo: Khalil Adis Consultancy

 

The brew of the weakening Ringgit, oversupply in the property market and political climate could impact buying sentiments for this year.

By Khalil Adis

Malaysia faces a delicate balancing act in 2016 in providing affordable homes for locals while trying to lure foreign investors to its property market. The announcements of Budget 2016 clearly dictate that the mass market segment will drive its property market ahead.

However, there have been no revisions to the Real Property Gains Tax (RPGT), minimum purchase price and state levies in popular states like Johor and Kuala Lumpur.

This would make it even more challenging to attract foreign buyers despite the falling Ringgit.

In addition, negative sentiments from the political developments in the country and the perceived oversupply in the market may have spooked potential investors and could result in a “wait-and-see” situation.

With developers marketing high-end projects, they are faced with a difficult situation of finding the right group of buyers in an already small and niche market.

With the pressure to move their existing stocks, they may offer further discounts and other attractive packages.

This would certainly spell good news for buyers with plenty of good deals to be found in the market.

The secondary market will be especially attractive in 2016 as there will be those who are desperate to sell, especially with so much supply in the market.

With this in mind, bargain hunters looking for already completed properties will be spoilt for choice.

Household debts across Malaysia are also on the rise.

This, combined with the increased cost of living, will mean some cannot service their mortgages and will have their homes repossessed.

Therefore, auction properties are expected to rise accordingly, presenting very good buying opportunities for savvy investors.

Here’s a breakdown of the outlook for 2016 by the different popular markets.

Iskandar Malaysia

Iskandar Malaysia received very little interest in Budget 2016 with the exception of the Eastern Gate – in the corridors of Pasir Gudang and Pengerang.

In all, RM18 billion has been allocated for the massive oil and gas Pengerang RAPID project that is expected to have a spillover impact in Pasir Gudang.

In addition, the Budget had also allocated for a new public hospital in Pasir Gudang to cater to its growing population.

While analysts and market watchers are feeling somewhat disappointed with the allocation of budget for Iskandar Malaysia, it also confirms what many have been saying – the Eastern Gate is poised to be the next growth centre in Iskandar Malaysia.

As more jobs are being created, this will fuel demand for homes in and around the Eastern Gate.

The great thing is property prices here are still relatively affordable for locals averaging around RM300 toRM400 per sq ft.

In addition, the state and federal government had allocated spending for public infrastructure.

These include the upgrading of the Pasir Gudang Highway.

In fact, Dato’ Mohamed Khaled Nordin, Chief Minister of Johor had announced that 865 units of affordable housing will be built here by 2018.

Therefore, Johoreans hunting for their first home should target this area.

As for foreign buyers, although they are far and few between, I would say this is the best time to buy a property in Iskandar Malaysia as some developers are desperate.

It is best to get a home for your own stay rather than for investment.

If you are buying for investment, hotel suites are a good choice especially those in JB Sentral and Nusajaya.

Kuala Lumpur

Despite the falling Ringgit, the property market in Kuala Lumpur is admittedly quiet.

Foreign investors are few and far between, while locals feel that they are priced out of the market.

PR1MA homes that are planned around transport hubs and train stations, is a good opportunity for locals to start their property hunts.

A total of 5,000 units of PR1MA and PPA1M houses will be built in the vicinity of LRT and monorail stations in 10 locations, including Pandan Jaya, Sentul and Titiwangsa.

In my opinion, Bangsar is a “to-go-to” location as it has an affluent neighbourhood with plenty of amenities, trendy cafes and shopping malls.

While rentals in Bangsar have remained relatively flat since 2014 remaining at RM3.35 up to the first quarter of 2015, in the secondary market, the capital values based on transacted price has strengthened to RM898 per sq ft.

Thus the secondary market is where all the good deals are.

Selangor

Government linked companies (GLCs) are planning to build 800 affordable homes near MRT lines.

With the Ampang LRT Extension Line now open from Sri Petaling all the way to Putra Heights, plus future extensions along the Kelana Jaya Line, locals should look for housing projects in and around the vicinity.

Kwasa Damansara is also a hot area to watch ou他 for as it will contain two stations within the township.

Penang

The RM27 billion Penang Transport Master plan will drive the property market on the island.

The LRT line will comprise a 17.5km elevated line stretching from Penang International Airport all the way to Menara KOMTAR.

Penangites buying their first homes should look to the Bayan Lepas and Gelugor area near the LRT station.

Those who are priced out from the island should look to Seberang Prai.

For foreigners, avoid the Gurney and Batu Ferringhi area as a massive project being planned will result in massive traffic congestions.

Instead look to properties along the LRT line. I particularly like the Georgetown area due to the heritage sites and abundance of delicious local food there.

Malacca

Hotel suites is a good product to consider in Malacca due to the shortage of quality hotel rooms.

Due to the increasing number of visitors to Malacca, hotels and shopping centres have benefitted immensely from the spill over in the tourism industry.

There is strong pent-up demand among tourists for 4 to 5-star hotels in the city centre due to its convenience and easy access to tourism hot spots like the UNESCO World Heritage Site, Jonker Street and shopping belt.

When investing in hotel suites, make sure to go for mixed-use development with hotels, shopping centres and residential components.

This will ensure good traffic to maximise on your return of investment.

 

This story was first published in the January 2016 issue of iProperty.com Malaysia.

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Jurong East and Nusajaya

Property values around Jurong Lake Distict and Gerbang Nusajaya are expected to rise thanks to the iconic High Speed Rail (HSR) project.

 Jurong Lake District is fast taking shape as a decentralised CBD with almost 500,000 sq m of office space plus 200,000 sq m of retail, food & beverage and entertainment space called Jurong Gateway with plans for 2,800 hotel rooms. Photo: Courtesy of the Urban Redevelopment Authority (URA)

Jurong Lake District is fast taking shape as a decentralised CBD with almost 500,000 sq m of office space plus 200,000 sq m of retail, food & beverage and entertainment space called Jurong Gateway with plans for 2,800 hotel rooms. Photo: Courtesy of the Urban Redevelopment Authority (URA)

By Khalil Adis

Jurong East in Singapore and Gerbang Nusajaya are set to enjoy further growth as they become new regional centres thanks to the iconic High Speed Rail (HSR) between Singapore and Malaysia although there will be a delay by two years to 2022 for that to fully materialise.

First announced in 2010, the project is the first of its kind in the region which will cut travel time from Singapore to Kuala Lumpur to a mere 90 minutes.

This is expected to spur cross-border investments on both sides of the causeway and enhance property values at the eight HSR stops spanning from Sungei Besi in Kuala Lumpur all the way to Jurong East in Singapore.

At the recent Leaders’ Retreat in Singapore, Singaporean Prime Minister Lee Hsien Loong revealed that Jurong East has been chosen as the site for the Singapore terminus which will tie in with the government’s overall plans to transform the area into the country’s second Central Business District (CBD).

Noting that the project has received great attention both domestically and internationally, Lee and Malaysian Prime Minister Datuk Seri Najib Tun Abdul Razak said the HSR project will be a game-changer.

“Both Leaders were encouraged by the support and attention from the global community and looked forward to further progress on this game-changing iconic project which will boost connectivity, facilitate travel between Kuala Lumpur and Singapore, enhance business linkages and improve people-to-people ties,” read a statement from the Prime Minister’s Office (PMO).

Singapore’s new gem in the making

Back in 2008, the Urban Redevelopment Authority (URA) had announced the Draft Master Plan for Jurong Lake District which comprised a new CBD and commercial hub along with retail malls and hotels.

The area is fast taking shape as a decentralised CBD with almost 500,000 sq m of office space plus 200,000 sq m of retail, F&B and entertainment space called Jurong Gateway with plans for 2,800 hotel rooms.

Once a sleepy neighbourhood blessed with a lake, Jurong East is now buzzing with life and currently home to a Grade ‘A’ office tower. Called Westgate, this is where CapitaLand, one of Asia’s largest real estate companies, now calls home. Meanwhile, Genting Hotel became the first hotel to make its mark in the district in April 2015.
This growth is set to receive a further boost from tourists and business travellers from Malaysia once the HSR project is completed as it will enhance the area’s desirability.

A property values booster
With the announcement of the HSR station within the area, property values are set to rise even more especially in the current bearish market.

If we follow historical trends in Singapore, properties which are located within close proximity of transportation hubs such as MRT stations tend to appreciate between 5 to 10 per cent over a long period of time.

Further boosting the property market in the vicinity is the demand to live in and around Jurong Lake District, thus leading to higher asking prices.

Homes near the terminus such as those in the neighbourhoods of Jurong East, Lakeside and Taman Jurong are already reporting a 1 per cent increase in asking prices despite the weakening market which is the result of the various cooling measures in place.

These neighbourhoods are 5 minutes away from Jurong Country Club which has been identified as the site for the terminus location

A matching CBD in Nusajaya

Gerbang Nusajaya's press conference. This township will serve as the gateway to Malaysia with a HSR station and mixed-use development. Photo: Courtesy of UEM Sunrise.

Gerbang Nusajaya’s press conference. This township will serve as the gateway to Malaysia with a HSR station and mixed-use development. Photo: Courtesy of UEM Sunrise.

While the station in Nusajaya has not yet been announced, government officials have indicated that it will be located close to Motorsports City near East Ledang.

In April 2015, Nusajaya’s master developer UEM Sunrise Berhad further revealed its comprehensive development plans for Gerbang Nusajaya which will have its own CBD similar to Jurong Lake District.

“Gerbang Nusajaya is the gateway to Iskandar Malaysia and will serve as the commercial and business engine for Nusajaya,” said the company in a statement.

Spread across 4,551 acres of land, this second phase of Nusajaya’s development will be designed with catalytic industries similar to the various economic drivers in Nusajaya and Medini.

Both these areas are home to tourism, logistics, finance, information communication technology and creative industry establishments just to name a few.

In anticipation for the HSR terminus in Gerbang Nusajaya, a number of catalytic developments have been planned.

They include Nusajaya Tech Park, a 519-acre integrated eco-friendly tech park and FASTrack Iskandar which is a 300-acre ‘motorsports city’.

This is the closest hint we can get on the possibility of the Nusajaya HSR station being located here.

With a gross development value of RM42 billion, property values for existing homes in Nusajaya and Medini will enjoy a boost from the economic spillover.

As it stands, condominium prices here range from RM800 to RM1,000 per sq ft.

In the near future, it could possibly increase by 5 to 10 per cent as the area will be developed over a period of 25 years.

An estimated 76,000 direct job offerings and 137,000 indirect job offerings are expected to be created as a result.

UEM anticipates Gerbang Nusajaya to have an estimated 220,000 population upon its completion, tying it nicely with its site for Nusajaya’s HSR terminus.

This article was first published by iProperty.com in its June 2015 issue.

Remaking Melaka

While tourism may be the major economic driver in Melaka, the city is fast attracting investments in the other sectors.

By Khalil Adis

River cruise in Melaka. Photo: Khalil Adis.

River cruise in Melaka. Photo: Khalil Adis.

If you are a first time visitor to Melaka, you’d be forgiven for thinking tourism is the main industry here.

On the surface though, it appears tourism is its major economic driver since this is a more visible industry judging by the many places of attractions and tourists who flock to the city.

However, Melaka also has burgeoning mining and manufacturing sectors that have contributed significantly to its economy.

“Other than tourism, Melaka is coming up in other ways. There is a body set up called Invest Melaka where they invite other bodies to come in to invest in Melaka,” said Cassandra Tio, head, marketing and sales property division of the Hatten Group.

Indeed, data from Invest Melaka showed that in 2012, Melaka’s economy grew by 5.7 per cent led by four major industries – mining, manufacturing, construction, agriculture and services.

Mining accounted for 46.9 per cent of the market share while manufacturing, construction, agriculture and services accounted for 43.5 per cent, 2.9 per cent, 6.5 per cent and 0.1 per cent of its economic growth respectively.

A state government body formed in 2003, Invest Melaka has over the years attracted key multinational companies such as Petronas and SunPower Infineon to set up their base here.

Fastest growing state

Melaka is slowly waking up from its slumber and is now a buzzing city, driven by tourism. Photo: Khalil Adis.

Melaka is slowly waking up from its slumber and is now a buzzing city, driven by tourism. Photo: Khalil Adis.

As if reliving its history during its golden era as the preferred port of call, Melaka looks set to rise once again.

Government data showed that Melaka is the fastest growing state in Malaysia in 2011 and 2012, beating Kuala Lumpur.

Key factors that have drawn Petronas and SunPower to invest here include Melaka’s strategic location between Port Klang and Port of Tanjung Pelepas (PTP) as well as between three airports –  KLIA, Melaka International Airport and Senai International Airport.

Petronas is Malaysia’s largest oil and gas company and wholly owned by the Malaysian government.

Its Melaka Refinery Complex houses two refining trains which have the capacity to process 100,000 barrels and 170,000 barrels per day of sweet and sour crudes.

SunPower, which opened its plant in 2010, has so far invested US$600 million for its first phase of its fabrication plant and created 1,100 jobs.

In 2011, it invested a further US$600 million for the second phase of its development.

Medical tourism

Mahkota Medical Centre in Melaka is one of the designated hospitals in Malaysia where Singaporeans can use their CPF Medisave for medical treatment. Photo: Courtesy of Mahkota Medical Centre.

Mahkota Medical Centre in Melaka is one of the designated hospitals in Malaysia where Singaporeans can use their CPF Medisave for medical treatment. Photo: Courtesy of Mahkota Medical Centre.

Melaka is also fast becoming a centre for medical tourism, as Indonesians and Singaporeans flock to hospitals such as Mahkota Medical Centre for medical treatment.

According to data from International Medical Travel Journal, the city saw 168,000 Indonesians coming to Melaka due to the lower costs of medical treatment as opposed to Singapore.

In fact, Mahkota Medical Centre is one of the designated hospitals that Singaporeans can use their CPF Medisave, explaining Melaka’s rising attractiveness as a medical centre.

One Singaporean who recently sought medical treatment there is Bryan Teo.

“I decided to do my knee surgery here in Melaka as the cost of medical treatment here is affordable yet the quality of healthcare is comparable to Singapore. The favourable currency exchange rate also means significant cost savings,” said the marketing manager.

The sports enthusiast has been nursing a knee injury since early this year.

He decided to give Melaka a try after reading about the quality of treatment there.

“Being able to use my CPF Medisave at Mahkota is the key factor. I am sure our government will only recommend the best hospitals for medical treatment in Malaysia,” said Teo.

Spillover in the property market

Harbour City at Pulau Melaka by Hatten Group. This mixed use development comprises residential, retail and hotel components. Photo: Courtesy of the Hatten Group.

Harbour City at Pulau Melaka by Hatten Group. This mixed use development comprises a theme park, shopping mall and hotel components. Photo: Courtesy of the Hatten Group.

With the new found vibrancy injected into Melaka, this has led to an economic spillover in its property market.

Being a major heritage site for tourism and new destination of choice among medical tourist, the Hatten Group is offering investors hotel suites which offer you returns on your investment,

At Harbour City, for instance, there are various hotel suites to choose from to fill demand from tourists and medical tourists.

Investors at Harbour City will be able to get their returns every three month based on the tenancy agreement with the hotel management arm.

“At Hatten Group, we have out hotel management arm where we undertake hotel suites from our buyers to run it as a hotel. We give the purchasers the option such that when they purchase the suites, they can empower us to manage it for them,” said Tio.

Historic city comes of age

Move over Iskandar Malaysia, Melaka is fast becoming the city of choice for sophisticated investors drawn by its rich heritage sites, vibrant tourism industry and affordable cost of healthcare.

Heritage town attracting significant interests from Singaporean investors. Photo: Khalil Adis.

Heritage town attracting significant interests from Singaporean investors. Photo: Khalil Adis.

By Khalil Adis

The historic city of Melaka was once a thriving port city serving as an important international spice trade route since the 14th century.

Founded by Parameswara, Melaka was then colonised by the Portugese in the 15th century.

That, however, marked the decline of Melaka as an important trading centre as it became a hostile city causing many ships to bypass the route.

It subsequently fell under the control of the Dutch and British Empires in the 16th and 18th century respectively but it never quite regained its dominance in the region.

As the winds of change blew across the Straits, Melaka soon became part of the Crown Colony alongside Penang and Singapore.

Today, what remains of the city is its many imposing historic architecture serving as a nostalgic reminder of its glorious past – from the iconic red Christ Church building to the ruins of St. Paul’s Church on top of St. Paul’s Hill.

View of Dataran Palawan, developed by Hatten Group. Photo: Khalil Adis.

View of Dataran Palawan, developed by Hatten Group. Photo: Khalil Adis.

Remaking Melaka

As we speak, however, Melaka is slowly waking up from its long slumber as it braces forward to the 21st century.

Enter the Hatten Group which is helping to restore the city to its former glory.

Like Parameswara, its chief executive officer, Datuk Wira Eric Tan, stumbled upon Melaka in 2004 by chance and saw an opportunity to develop the city.

“We saw an abandoned project there and Datuk saw opportunity in that piece of land. Unfortunately, the rest of the people in Melaka did not see it. This piece of land is like how Ngee Ann City in Singapore was like. If you recall, it used to be completely empty land next to Wisma Atria. That’s how Datuk saw the potential and he created this Dataran Palawan in Melaka,” said Cassandra Tio, head, marketing and sales property division of the Hatten Group.

Indeed, the developer’s many iconic developments such as Imperio, Elements and Silverscape have won four major titles at the South East Asia Property Awards 2014.

This major feat has not only helped to reshape the city’s architecture but also create a much needed buzz in Melaka.

As a result, Melaka is now back on the radar as an investment destination of choice among local and foreign investors.

Indeed, during the recent launch of its project called Harbour City in Pulau Melaka, Hatten Group, reported over 60 retail and hotel units being snapped up by Singaporeans at its two road shows in Singapore.

“When we introduced this, we are actually simulating what the other cities like in KL and Singapore have. We see that as a general demand for Melaka,” said Tio. “Integrated projects have been a growing demand. We are building the retail centre where above it will be the residences. This will attracts already a standard catchment of population for retail malls.”

Melaka is slowly waking up from its slumber and is now a buzzing city, driven by tourism. Photo: Khalil Adis.

Melaka is slowly waking up from its slumber and is now a buzzing city, driven by tourism. Photo: Khalil Adis.

Tourism boom

Since 2008, Melaka has witnessed a boom in tourist arrivals thanks to it being listed on the UNESCO World Heritage site.

Data from Tourism Melaka and NAPIC showed that tourist arrivals witnessed a 200 per cent increase from 2006 till 2012.

In 2013, for instance, there were 4.11 million and 2.92 million tourist arrivals from the overseas and domestic markets respectively.

Expecting a sleepy town, I witnessed first hand the buzz as I took the bus from Melaka Sentral to the city centre at Dataran Palawan.

“We came from Thailand for the long weekend to soak in the historic city of Melaka. We arrived by coach to Melaka Sentral Bus Terminal and decided to take a bus to the city centre. We just can’t believe how packed it is,” said Surasak Thonorwan from Bangkok.

From the top of Hatten Hotel where the Alto Sky Lounge is located at, you could see slow moving traffic as tourists from all over thronged the streets at Jonker and the mall at Hatten Square.

Hotel rooms, ranging from budget to five-stars, were reportedly all running at full occupancy.

“Tourism doesn’t just fall over the weekend. For the weekends it is mainly locals who come in. For the weekdays it will be the tour group from Taiwan, Hong Kong, Japan who come in with the tour group,” said Tio who noted that tourists from China have been coming in strongly on a weekday. “That explains why hotels from the budget to three-star and no frills are fully booked throughout the whole year.”

With the opening of the high speed rail project come 2022, tourist arrivals are set to rise even more once the station in Ayer Keroh is completed.

“Melaka will become like a checkpoint where tourists can do national conferences and exhibitions near to the Ayer Keroh area and yet enjoy the historic town and the facilities in Melaka,” said Tio.

This is part one of the story. Stay tuned for part two.