DBKL’s incentive for developers needs to be implemented wisely

The recent announcement by Kuala Lumpur City Hall (DBKL) to give 50 percent discount on development charges to developers could spell good news and bad news for the consumers.

By Khalil Adis

Take a walk around Kuala Lumpur and you will notice the towering skyscrapers dotting the city’s skyline. From the Petronas Twin Towers to Menara Maxis, these buildings have become icons of Kuala Lumpur.

However, there is a cost for having such iconic buildings – the lack of green lungs in Kuala Lumpur and park connectors to connect the different land use.

Kuala Lumpur has been developing rapidly since Mahathir’s era in the 80s to the current Najib’s administration.

Some of the iconic developments that will soon tower over the city will include Tun Razak Exchange (TRX), KL Metropolis, Warisan Merdeka @ KL118, Bandar Malaysia, and the Pudu Jail Redevelopment near the Hang Tuah Monorail Station.

In TRX alone, 25 buildings will be developed ranging from offices to residences.

Delicate balancing act between development and sustainability

While the various mega developments will certainly be a confidence booster for the property market, it needs to be analysed from a bigger picture.

As someone who visits KL often, there are several things that I have noticed about the city which could be further improved – the notorious traffic jams, the lack of connectivity, and green lungs between the developments as well as the public transportation.

Look at the big picture

While I welcome DBKL’s incentive to boost the quiet property market, it needs to be implemented cautiously.

One thing I noticed about Kuala Lumpur is the fondness for overdevelopment with very little thought for its surroundings and its impact on the environment.

And when improvements are made, they seem to be more of an afterthought rather than a proper masterplan. For example, the sky bridges linking Pavilion to KLCC and the upgrading of train stations.

As such, the city’s potential is not fully achieved, especially when it aims to be a developed country by 2020.

One of the best example is Singapore. In Singapore, we have a central body called the Urban Redevelopment Authority (URA) that oversees the entire masterplan of the city.

Therefore, when developers tender for a site, they must ensure that they adhere to the planning guidelines that make the entire city work and not just their development only.

As a result, you can walk from one building to another via park connectors, sky bridges or tunnels to the MRT stations. Each different part of the city complements each other to ensure the city works.

In Malaysia, the developers are only concerned about their own projects. As a result, there is a lack of integration between the different buildings and train stations.

Dilemma in building the city

I recall back in 2009 when I attended DBKL’s briefing on making Kuala Lumpur a green and sustainable city, as well as its way of tackling the traffic jams that Klang Valley experience on a daily basis.

According to DBKL, almost one million cars enter and exit the city every day, leading to traffics jams that KLites have gotten used to.

Since 2009, you can see lots of improvements to make the transfer within the different lines smooth.

For example, you now have Nu Sentral to connect the KL Sentral Monorail Station to the main KL Sentral. Meanwhile, at the Hang Tuah LRT Station, you do not have to tap in and out to change to the Hang Tuah Monorail Station. There’s also the park–and-ride scheme to encourage car owners to take the trains.

The city now has a population of 7 million with 2.5 million jobs created in 2010 and a further 4.2 million by 2020.

If you look at the current traffic situation, there are still traffic jam issues that plague the city.

Therefore, I feel a lot more things need to be considered when DBKL announced that it would give developers a 50 percent discount on development charges.

While I laud DBKL for implementing and improving the entire transport system since 2009, developers need to ensure that they adhere to a masterplan for the benefit of the rakyat.

The good and the bad

Despite the falling Ringgit, the property market in Kuala Lumpur is quiet. Foreign investors are few and far between, while locals feel they are priced out of the market.

The advantage of this incentive is that it will jump-start the quiet property market.

Developers may also pass on the cost-savings to the consumers, which might create a good time to look for bargain hunts in Kuala Lumpur – be it for locals or foreign investors.

For locals, this will definitely be favourable, especially for first-time homeowners and upgraders who cannot afford to purchase a house and have to find an alternative in the suburbs in Selangor.

The disadvantage includes an increase in traffic congestion with more developments coming in the Klang Valley vicinity.

What would work is to have integrated green developments with park connectors and bridges linking to the future MRT line to make Kuala Lumpur an even greener city.

The various Budget 2016 announcements to spur green and sustainable development could work well for Kuala Lumpur, if implemented correctly.

Budget 2016 has allocated a substantial amount for green technologies and sustainable developments. Green is also predicted to be the buzzword for next year.

Hopefully, the budget contributes for DBKL’s masterplan, to provide a more sustainable Kuala Lumpur. This would provide some sort of incentives for the developers to build green developments and make the city more pleasant for everyone.

I am certainly looking forward to see if DBKL will be announcing that its fund is part of Budget 2016.

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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.

Ringgit’s fall, Malaysians’ gain?

With the devaluing of the Malaysian Ringgit, there are certain sectors in Malaysia that may have benefited from it.

The Malaysian Ringgit is the weakest performing currency in the region. Photo: Khalil Adis Consultancy.

The Malaysian Ringgit is the weakest performing currency in the region. Photo: Khalil Adis Consultancy.

By Khalil Adis

As a Singaporean who is often in Malaysia almost every week, I have witnessed first hand the advantages and disadvantages of the falling Malaysian Ringgit as it has declined steadily over the past few months.

From SGD$2.65 to RM1 to a recent high of S$2.8 to RM1 in June 2015, it is indeed music to the Singaporeans’ ears as it means we get more bang for our bucks.

While this is a cause for concern for Malaysians, there are sectors which may have benefitted immensely from the devaluation of the Ringgit.

Advantages

Take the recent June school holidays which coincided with the record low of the Malaysian Ringgit versus the Singapore dollar.

Singaporeans flock to Malaysia in droves to take advantage of the favourable exchange rate for vacations just across the causeway.

This has helped to boost tourism-related industries like food & beverage, hotels, home-stays and short-term rentals.

Even the Vehicle Entry Permit (VEP) imposed on the Malaysian customs has not deterred Singaporeans from going in for quick shopping trips and to wash their cars.

From City Square to KSL, Singaporeans can be seen thronging the malls and the supermarkets during the recent holiday and especially now with Hari Raya around the corner.

Over at the vicinity of New York Hotel in Johor Bahru, businesses along the stretch where car washing kiosks are located at, were brisk as many Singaporean-registered cars can be seen lining up.

In this case, even small to medium-sized enterprises benefitted immensely from the spillover impact from Singapore.

The property sector also saw a marginal boost amid a slow market in Iskandar Malaysia as some Singaporeans took advantage of the favourable exchange rate to purchase properties there.

One particular development located within close proximity to Singapore recently slashed their booking fee from RM10,000 to RM5,000 making it an attractive proposition for investors.

This was indeed a small cheer amid the doom and gloom in the property market as this is one of the few project that has continued to sell well where others saw muted sales.

Even certain projects in the KLCC area saw good take-up rates from foreign investors who saw this as an opportune time to enter the market.

With an average pricing of RM2,500 per sq ft, Singaporean investors snapped up studio units at one particular iconic development located in the heart of KLCC.

When converted to Singapore dollar, you cannot even get a similar property at a prime location in the Lion City.

As Singaporeans and foreigners need to pay state levy in each state when they purchase a property, government coffers from Johor to Kuala Lumpur have received an added boost.

That’s not all

The spillover is also felt in related industries such as law firms, interior design companies and real estate agencies.

Disadvantages

While foreigners and certain sectors in Malaysia appear to be the winners amid the falling Ringgit, Malaysians and foreigners with significant savings in Malaysian banks and exposure to businesses there will be at a disadvantage.

Let me share one scenario

Some of my Malaysian friends have avoided entering Singapore altogether or take a holiday in far flung places as the falling Ringgit means their dollar diminishes when they travel abroad.

Even Thailand is off the radar as the Thai Baht has strengthened considerably against the Ringgit.

As a result, some have opted to do a staycation instead.

In another scenario, a Singaporean friend of mine who does businesses in Malaysia and has a bank account there, sees no point in changing his Ringgit to Singapore dollar as according to him “it’s depressing as I can’t spend that much in Singapore for my day-to-day living”.

What he has done instead is to park his Ringgit in his Malaysian bank account and come back to Singapore to diversify his business.

Foreigners with significant businesses in Malaysia have also reported significant drops in their revenue as the falling Ringgit means it becomes more expensive to procure their services.

One contact of mine who works in the real estate sector said business has been down since early 2015 as Malaysian developers find it expensive when engaging foreign businesses outside Malaysia.

He had to cut staff and hire part-timers instead

Speaking of real estate, consumers buying property will be faced with rising construction costs as some of these materials are sourced from overseas. As a result, developers will then pass on these costs to them.

For those who are thinking of buying a commercial property, you will be hit with a double whammy – GST and rising construction costs.

Even the renovation sector will not be spared as they will pass on the costs to consumers for luxury materials like Italian marble and so on.

Conclusion

So what’s best way to beat the Ringgit blues?

The best hedge against it is to invest in a property and focus on capital appreciation.

I believe that is the best bet for Malaysians right now.

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

Tips and strategies when investing in Kuala Lumpur and Selangor in 2015

2015 is expected to be a challenging year ahead for the Malaysian property market.  Still, there are opportunities to be sought by both locals and foreign investors

View of Petronas Twin Towers in KLCC. Photo: Khalil Adis.

View of Petronas Twin Towers in KLCC. Photo: Khalil Adis.

By Khalil Adis

I was walking around KLCC and Bukit Bintang one night  and noticed that despite the bright lights emitting from Malaysia’s iconic Petronas Twin Towers, it stands in stark contrast to the many vacant units at the nearby luxurious condominiums.

I recall covering the KL property market back in 2008 when some of the units in KLCC were launched as ‘bungalows in the sky’.

One particularly iconic development that I had visited has units as big as 4,000 sq ft

While living in such apartments is definitely a dream for many, alas, it is out of reach for the majority of Malaysians.

Coupled with the Lehman’s Brothers crisis during the same year,  developers suddenly realised that such units were indeed hard to move as they aren’t affordable to locals while foreign buying had somewhat waned.

Still, there were some high net worth Malaysians and foreigners who had purchased units there as ‘trophy properties’ and to rent them out.

Sadly, that didn’t quite happen.

In this article, I will be sharing with you tips and strategies should you wish to invest in Kuala Lumpur or Selangor in 2015 in the hope that you will minimise your mistakes.

Kuala Lumpur

Most homes in the Klang Valley area are already averaging more than RM600, 000 and are out of reach for first-time homeowners.

Therefore, this market will primarily be driven by middle income and well-to-do locals as well as foreign investors.

Properties in prime areas are priced from around RM2, 000 per sq ft onwards. 

Last year, Kuala Lumpur’s prime areas witnessed a flurry of high-end condominium launches last year in Bukit Bintang and KLCC like Harrod’s and Banyan Tree averaging at RM3, 000 per sq ft.

Despite the prestige of such brand names, many locals tend to shy away from such projects due to overall quantum price.

However, high net worth Malaysians may still snap up such projects as these are considered ‘trophy properties’.

Even so, they are not likely to live in the area, preferring to rent it out or use it as their holiday homes.

For foreigners, these projects will be very popular due to the increase in minimum purchase price and their location right smack in the city centre.

On 1 March 2014, the minimum purchase price for foreigners buying properties in Kuala Lumpur was increased from RM500, 000 to RM1 million.

Hence, if we use RM2, 500 per sq. ft. as a price gauge, a studio apartment of 500 sq. ft. can easily fetch RM1.25 million.

According to DTZ Research, the third quarter of 2014 saw ahealthy amount of new supply with the completion of another five high-end residential projects adding a total of 574 units to the market.

For the first three quarters of 2014, a total of 1,892 units have been completed.

The new completions in the third quarter were mostly locatedin the city centre, namely Brunsfield Residence@U-Thant (93units), Madge Mansions (52 units), One@Bukit Ceylon (354units) and an unnamed high-end residential development at UThant by Bandar Park Sdn Bhd (12 units).

Only one development, Kenny Hills Residence (63 units) is located outside the city centre.

Data from DTZ Research also shows that another 4,604 highend residential units are expected to enter the market by the end of 2014.

Amongst the major developments expected to be completed in the fourth quarter of 2014 are The Elements (1,040 units) by Elite Forward, Sky Residence-Phase 2: Celesta & Divina (450] units) by SP Setia and Icon Residence (260 units) by Mah Sing Group.

For locals who are thinking of buying a home in the KlangValley area, it is best to get small units like a studio as they can be easily rented out and sold to both locals and foreigners as  their quantum price will be within the range for both locals andforeigners.

In addition, such units are limited in supply making them a rare find.

According to DTZ Research, the high-end residential market in Kuala Lumpur saw marginal growth in the rental values.

Average rents increased 0.7 per cent quarter-on-quarter, from RM3.59 per sq ft per month in the second quarter to RM3.61 per sq ft per month in the third quarter.

Moving forward, average rents are expected to fall due to the almost 6,000 supply of new units will be coming on-stream in city centre from 2016 onwards.

Also, data from National Property and Information Centre(NAPIC), showed that Kuala Lumpur has an existing stock of 434,484 units with an incoming supply of 53,394 units as of thefourth quarter of 2014.

All these factors will put pressure on rental yields.

For those who are thinking of renting out their properties, it is best to take a long-term investment horizon by focusing on capital appreciation.

The luxury sector also saw marginal growth in capital values.

According to DTZ Research, average capital values increased 0.7 per cent quarter-on-quarter, from RM758 per sq ft in the second quarter of 2014 to RM763 per sq ft. in the third quarter.

This is expected to increase marginally, barring any economic crisis.

Selangor

Areas near the MRT extension, spanning from Sungei Buloh to Kajang Line are expected to be popular among locals as it will ease their commute time to Klang Valley, where many jobs are located at.

In addition, there are still affordable properties that can be found here from below RM600,000 – well within the affordability price range for locals.

For locals, buying a property near the upcoming MRT stations will increase the overall desirability, rental attractiveness, and capital values of your property as they will be in demand once the MRT line is completed in 2017.

For foreigners, they might skip Selangor altogether.

This is because there seems to be some sort of anomaly in Selangor’s property market as the minimum purchase price for foreigners has been increased to RM2 million effective 1 September 2014 in Zones 1 and 2.

The two zones include the Petaling, Gombak, Hulu Langat, Sepang, Klang, Kuala Selangor and Kuala Langat districts.

This is rather odd as the entry price in these areas are well below RM1 million.

As Selangor is located outside the Klang Valley area, the minimum purchase price here should follow Kuala Lumpur’s as not many foreigners will need a big space just to qualify for the RM2 million ruling.

In view of this, foreigners may be better off buying a property in Kuala Lumpur instead where the entry price is around RM1 million.

Supply

According to data from NAPIC, Selangor will have the largest incoming supply for new homes in Malaysia as at the fourth  quarter of 2014 bringing it to a total of 157,450 units.

Those who are thinking of renting out their units will face great competition once these units come on-stream in 2016 to 2017.

Therefore, properties that are located close to the MRT lines will be very much in demand and can command higher asking price.

Properties near to upcoming MRT stations with interchange stations such as Kwasa Damansara in Kota Damansara, Sungei Buloh and Kajang will be highly sought after.

Kwasa Land Sdn Bhd is currently building a township in Kwasa Damansara for bumiputeras measuring 2,330 acres.

The township will be served by two MRT stations and four expressways – NKVE, Guthrie, NSE and the proposed Dash Highway.

In Kajang, a PR1MA housing project near the Kajang KTM and MRT stations are in the supply pipeline to be launched in the future starting from around RM158,000.

Properties near to MRT stations generally command a five to 10 per cent premium in pricing compared to others.

Download KL/Selangor Infographic here

This article was first published on Property Insight in its June 2015 issue.

Malaysia property outlook 2015

2015 is expected to be a challenging year ahead for the Malaysian property market. Still, there are opportunities to be sought by both locals and foreign investors.

Petronas Twin Towers in Kuala Lumpur. Photo by Khalil Adis.

Petronas Twin Towers in Kuala Lumpur. Photo by Khalil Adis.

By Khalil Adis

The mass market and mid range property sector will continue to drive the domestic market this year due to the loan curbs imposed by the Malaysian government in 2014 for multiple property owners.

In a recent survey, iProperty.com, citing statistics from Bank Negara, said there was a decline of 4 per cent from a peak of 15.8 per cent in “credit-fuelled speculative purchases of residential properties from borrowers with three or more outstanding housing loans.”

They now make up for only 3 per cent of housing loan borrowers.

As such, the market will favour first timers as they are able to get up to 90 per cent loan and are considered as genuine home owners.

In addition, major urban centres across the country are expected to see strong demand for affordable homes due to the federal initiated PR1MA scheme.

Under this scheme, individuals or households earning between RM2, 500 to RM10, 000 can qualify for homes ranging from RM100, 000 to RM400, 000 that spans from Johor all the way to Penang and even Sabah and Sarawak.

“Malaysia’s relatively young population and labour force, increasing urbanisation, and general inclination to own a house, are factors that are expected to sustain strong demand for affordable residential properties in major urban centres, likely outstripping supply over the near and medium-term,” said iProperty.com in its second half of 2014 survey.

Kuala Lumpur

Most homes in the Klang Valley area are already out of reach for first time homeowners averaging more than RM600, 000.

Therefore, this market will primarily be driven by middle income and well-to-do locals as well as foreign investors.

Properties in prime areas are priced from RM2, 000 per sq ft onwards.

Last year, Kuala Lumpur’s prime areas witnessed a flurry of high-end condominium launches last year in Bukit Bintang and KLCC like Harrod’s and Banyan Tree averaging at RM3, 000 per sq ft.

Despite the prestige of such brand names, many locals tend to shy away from such projects due to overall quantum price.

However, high net worth Malaysians may still snap up such projects as these are considered “trophy properties”.

Even so, they are not likely to live in the area, preferring to rent it out or use it as their holiday homes.

For foreigners, these projects will be very popular due to the increase in minimum purchase price and their location right smack in the city centre.

On 1 March 2014, the minimum purchase price for foreigners buying properties in Kuala Lumpur was increased from RM500, 000 to RM1 million.

Hence, if we use RM2, 500 per sq ft as a price gauge, a studio apartment of 500 sq ft can easily fetch RM1.25 million.

Supply

According to DTZ Research, the third quarter of 2014 saw a healthy amount of new supply with the completion of another five high-end residential projects adding a total of 574 units to the market.

For the first three quarters of 2014, a total of 1,892 units have been completed.

The new completions in the third quarter were mostly located in the city centre, namely Brunsfield Residence@U-Thant (93 units), Madge Mansions (52 units), One@Bukit Ceylon (354 units) and an unnamed high-end residential development at UThant by Bandar Park Sdn Bhd (12 units).

Only one development, Kenny Hills Residence (63 units) is located outside the city centre.

Data from DTZ Research also shows that another 4,604 high-end residential units are expected to enter the market by the end of 2014.

Amongst the major developments expected to be completed in the fourth quarter of 2014 are The Elements (1,040 units) by Elite Forward, Sky Residence-Phase 2: Celesta & Divina (450 units) by SP Setia and Icon Residence (260 units) by Mah Sing Group.

For locals who are thinking of buying a home in the Klang Valley area, it is best to get small units like a studio as they can be easily rented out and sold to both locals and foreigners as their quantum price will be within the range for both locals and foreigners.

In addition, such units are limited in supply making them a rare find.

According to DTZ Research, the high-end residential market in Kuala Lumpur saw marginal growth in the rental values.

Average rents increased 0.7 per cent quarter-on-quarter, from RM3.59 per sq ft per month in the second quarter to RM3.61 per sq ft per month in the third quarter,

Moving forward, average rents are expected to fall due to the almost 6, 000 supply of new units will be coming on-stream in city centre from 2016 onwards.

Also, data from National Property and Information Centre (NAPIC), showed that Kuala Lumpur has an existing stock of 427,231 units with an incoming supply of 51,104 units.

All these factors will put pressure on rental yields.

For those who are thinking of renting out their properties, it is best to take a long-term investment horizon by focusing on capital appreciation.

The luxury sector also saw marginal growth in capital values.

According to DTZ Research, average capital values increased 0.7 per cent quarter-on-quarter, from RM758 per sq ft in the second quarter of 2014 to RM763 per sq ft in the third quarter.

This is expected to increase marginally, barring any economic crisis.

Selangor

Areas near the MRT extension, spanning from Sungei Buloh to Kajang Line are expected to be popular among locals as it will ease their commute time to Klang Valley, where many jobs are located at.

In addition, there are still affordable properties that can be found here from below RM600, 000 – well within the affordability price range for locals.

For locals, buying a property near the upcoming MRT stations will increase the overall desirability, rentability and capital values of your property as they will be in demand once the MRT line is completed in 2017.

For foreigners, they might skip Selangor altogether,

This is because there seems to be some sort of anomaly in Selangor’s property market as the minimum purchase price for foreigners has been increased to RM2 million effective 1 September 2014 in Zones 1 and 2.

The two zones include the Petaling, Gombak, Hulu Langat, Sepang, Klang, Kuala Selangor and Kuala Langat districts.

This is rather odd as the entry price in these areas are well below RM1 million.

As Selangor is located outside the Klang Valley area, the minimum purchase price here should follow Kuala Lumpur’s as not many foreigners will need a big space just to qualify for the RM2 million ruling.

In view of this, foreigners may be better off buying a property in Kuala Lumpur instead where the entry price is around RM1 million.

Supply

OLYMPUS DIGITAL CAMERA

According to data from NAPIC, Selangor will have the largest incoming supply for new homes in Malaysia as at the second quarter of 2014 bringing it to a total of 156, 296 units.

Those who are thinking of renting out their units will face great competition once these units come on-stream in 2016 to 2017.

Therefore, properties that are located close to the MRT lines will be very much in demand and can command higher asking price.

Properties near to upcoming MRT stations with interchange stations such as Kwasa Damansara in Kota Damansara, Sungei Buloh and Kajang will be highly sought after.

Kwasa Land Sdn Bhd is currently building a township in Kwasa Damansara for bumiputeras measuring 2,330 acres.

The township will be served by two MRT stations and four expressways – NKVE, Guthrie, NSE and the proposed Dash Highway.

In Kajang, a PR1MA housing project near the Kajang KTM and MRT stations are in the supply pipeline to be launched in the future starting from around RM158, 000.

Properties near to MRT stations generally command a five to 10 per cent premium in pricing compared to others.

Penang

Charming shophouses with Peranakan influences in Georgetown, Penang. Photo: Khalil Adis.

Charming shophouses with Peranakan influences in Georgetown, Penang. Photo: Khalil Adis.

Penang will continue to be popular among locals and foreigners as it is a major tourism destination with plenty of good food and old world charms unique only to the island.

In January, Penang scored a major feat when Britain’s respected newspaper, The Guardian listed the island as number 8 in the Top 40 global destinations.

This, in addition to Georgetown listed as an important UNESCO World Heritage Site, has resulted in increasing tourist arrivals and a popular destination for retirement.

According to media reports, citing Chief Minister Lim Guan Eng, Penang saw international and domestic arrivals increasing by 8 and 33 per cent respectively in 2014.

This is expected to have a positive impact on its property sector, particularly under the Malaysia My Second Home (MM2H) programme.

Penang is one of the top retirement destinations under this scheme.

Since March 2013, more than 21, 000 applicants have been approved and Penang has always come out top.

Due to its booming tourism industry and island effects, Penang has the second highest price index in Malaysia after Kuala Lumpur according to data from NAPIC,

For locals who find property prices here too expensive but still want to live on the island, fret not.

PR1MA homes in the pipeline include one in Bayan Lepas, not far from the airport and another in Bukit Gelugor.

In fact, Bayan Lepas is the next hot spot as it is close to the second bridge, free trade industrial zone and the airport.

However, the federal government has yet to announce their indicative prices for the PR1MA housing projects.

Other new hot spots where developers have been acquiring land parcels include those near the second bridge on the mainland.

Since the announcement of the second bridge in 2006, land prices have grown by leaps and bounds.

Data from Henry Butcher showed that land prices were around RM8 per sq ft in 2006 but has since moved up significantly to RM50 per sq ft.

EcoWorld and Mah Sing Group are developing projects at Batu Kawan and Seberang Prai respectively, not far from the second bridge.

The traditional prime areas of Gurney Drive, Georgetown, Tanjung Tokong, Tanjung Bungah and Batu Ferringhi will still be popular among foreign investors.

However, expect traffic congestions from Gurney Drive all the way to Batu Ferringhi in the future due to new projects that have been approved and future land reclamations for Eastern & Oriental Berhad’s project at Tanjung Tokong.

Supply

According to data from NAPIC, Penang has an existing stock and incoming supply of 383,017 and 64,224 residential units respectively.

Majority of the incoming supply will be on the northern part of the island where future land reclamations for Eastern & Oriental Berhad’s project is located at.

In addition, almost 1,500 residential units will be coming up in Batu Ferringhi

According to media reports, the Penang government recently approved an increase in density for an upcoming development here from 15 units per acre to 30 units in January.

Traffic congestion has always been a problem in Penang, particularly from Gurney Drive to Batu Ferringhi.

Previously, it was a one way road but the state government has since changed that so that vehicles can ply both ways.

Still, traffic congestion remains a problem, especially during public holidays and weekends.

The next mixed use development overlooking Ferringhi Park will dwarf other developments in the area and will add to the notorious traffic jams.

The area is popular among foreigners and there will be a high likelihood of vacant units as most foreigners view their investment here as holiday homes.

This will put pressure on rental yields.

In view of this, the property market will be challenging for investors.

Affordable to medium priced homes will see transactions in the resale and rental markets as they are geared towards locals.

High-end homes will be better off for your own stay and capital appreciation.

On the overall, the “island effect” will continue to see capital appreciation on Penang as majority of the areas that can be developed on the island are located in the coastal areas.

However, the incoming huge supply, especially in northern Penang will be a cause for concern.

Iskandar Malaysia

Named after the Sultan of Johor, Kota Iskandar is the administrative capital of Iskandar Malaysia. Photo: Courtesy of Iskandar Regional Development Authority (IRDA)..

Named after the Sultan of Johor, Kota Iskandar is the administrative capital of Iskandar Malaysia. Photo: Courtesy of Iskandar Regional Development Authority (IRDA)..

The residential property sector will be challenging and primarily driven by local buyers.

There are four projects of choices for bumiputeras spanning from Tebrau to Pasir Gudang with

The starting prices for the projects in Tebrau and Pasir Gudang start from RM180, 000 to RM185, 000 respectively onwards.

There is no indicative pricing yet for the projects in Masai and Pulai.

Pasir Gudang and Masai will be the new hot spot as it will enjoy the economic spillover from the largest oil and gas hub in Pengerang.

In addition, a new mixed-use development that will be coming up in Taman Seri Albion by UM Land is expected to create some 12, 000 jobs.

In other developments, the Bus Rapid Transit (BRT) line is expected to commence their service this year.

Therefore, areas along the BRT lines spanning from Bukit Chagar to Tebrau, to Senai and Nusajaya are worth looking into.

Foreigners will still look to Medini and Nusajaya as the latter is exempted from the minimum purchase price and Real Property Gains Tax (RPGT) while Nusajaya has better infrastructure and is well-planned.

JB Sentral is also expected to be popular as it will serve as a gateway to Singapore once the cross border rail service connecting Johor Bahru’s Rapid Transit System (RTS) connects to Singapore’s MRT by 2018 to 2019.

Expected to be in Bukit Chagar, the area will be popular among Singaporeans and Malaysian Permanent Residents (PRs) they can buy a freehold property in JB Sentral with full condo facilities whereas in Singapore, they can only buy an HDB flat.

In addition, the opening of Sungei Segget by end 2015 and various Johor Bahru rejuvenation projects will result in a positive impact on property prices in JB Sentral.

This, together with the newly refurbished Menara Komtar JBCC and Angry Birds Theme Park will further add vibrancy of the area especially the tourism and retail sectors.

Supply

Commercial properties will be popular as they are in limited supply compared to residential properties.

Data from NAPIC showed that as of the second quarter of 2014, the existing stock and incoming supply for shop units are 70,792 and 14,657 units respectively.

In comparison, there is currently an existing stock and incoming supply of 710,324 and 131,994 residential units respectively.

The main driver for the buying activity in the commercial sector will be the GST on commercial properties to be implemented on 1 April 2015.

Thus, some investors will look to buying commercial properties before the ruling kicks in.

Oversupply in the residential sector has been a huge concern and it appears the state government is acting on it.

It recently announced it will be putting a freeze on the supply of serviced apartments.

For investors who are thinking of selling their properties, it is best to take a long term investment horizon due to the huge supply coming on stream in 2016 to 2017.

This will put pressure on rental yields and result in high vacancy rates, especially in the Danga Bay and JB Sentral area.

In addition, as a foreigner, you will need to pay for Real Property Gains Tax (RPGT) should you sell your property in the first five years at 30 per cent.

On the overall, the strength of the Singapore dollar versus the weakening Malaysian ringgit will continue to spur investment across the causeway.

However, sales volume will not be as robust as before.

Will new party capital of Asia become the next property hotspot?

By Khalil Adis

TREC is located in Jalan Tun Razak and will open in the first quarter of 2015. Photo: TREC.

TREC is located in Jalan Tun Razak and will open in the first quarter of 2015. Photo: TREC.

When it comes to partying, no other city knows how to live it up and let their hair down like Bangkok. Whether your idea of a night out is dancing the night away or something more salacious, Bangkok offers everything, from go-go bars at Silom to jazz bars in Thonglor.

However, for some, Bangkok might seem a bit too racy. In Singapore, we have our very own Zouk which has helped put Singapore on the global clubbing guide.

For Singaporeans, this clubbing institution has become synonymous with every student’s rite of passage, specifically its “Mumbo Jumbo” nights.

With news that Zouk Singapore’s lease is expiring and that we may potentially see the demise of an uber club that has stood the test of time, it appears Kuala Lumpur could well be the next party hub of Asia – at least for those not wanting to travel too far.

After all, once the curtains close for Zouk Singapore, you always have Zouk KL to rely on there.

Unlike Singapore and Hong Kong which have its own dedicated entertainment enclave in Clarke Quay and Lan Kwai Fong respectively, Kuala Lumpur’s entertainment districts are spread across Bangsar, KLCC, Bukit Bintang and Sri Hartamas.

These areas are also known as property hotspots as locals and foreigners alike want to live close to where all the action is.

Kuala Lumpur’s plus points include relatively affordable cost of entertainment, more variety and a more relaxed environment.

However, traffic jams and lack of parking spaces are also something local clubbers complain about.

By 2015, however, a new entertainment enclave called TREC will open just opposite Malaysia’s own dedicated financial district, Tun Razak Exchange (TRX) with ample parking spaces.

A new KLCC in the making?

TREC which stands for “Taste, Relish, Experience, Celebrate” will feature a variety of different styles, atmospheres and moods in five separate zones offering casual and fine dining, quirky and independent cafes, wine bars, pubs, lounges and clubs.

To alleviate parking problems that KL is notorious for, the developer of TREC will build around 1,000 plus car park bays.

Party revelers can also rely on the neighbouring car parking lands and those inside office buildings which account for approximately 2,000 car parking bays.

Timed with the opening of TRX in 2015, Jalan Tun Razak could well be the next property hotspot in Kuala Lumpur as it will be Malaysia’s largest financial and entertainment hub.

Measuring 70 acres and estimated to generate a gross development value of RM26 billion, Prime Minister Dato’ Sri Najib Tun Razak has already said some 500,000 jobs will be created directly and indirectly once TRX is completed

Of this, 40,000 will be knowledge work specialising in financial services, specifically in the Islamic Finance sector which Malaysia is renowned for.

TREC appears to tap on the future growth of TRX as it is poised to offer 20 million sq ft of space, of which 48 per cent and 31 per cent have been allocated for office and residential spaces.

For sure, those working and living within TRX will need a breathing space to let down their hair after a day’s of hard work.

And when we mean space, we are talking over 200,000 sq ft of space, with a total of 77 units ranging from 400 to 5,000 sq ft, allowing TREC to target a tenant mix unparalleled in Malaysia in terms of scale and diversity.

Costing RM323.6 million to develop, TREC is expected to create over 1,500 jobs and estimated to add RM143 million to the local economy annually.

With pricing for condos in KLCC already reaching a record price of RM3,000 per sq ft, the Jalan Tun Razak could very well be the next prime area but offering investors a lower entry price as it is an up and coming business district.

This article was first published by PropertyGuru Malaysia.

Small but extremely charming

Penang island is slightly smaller than Singapore but it beats Kuala Lumpur and Iskandar Malaysia hands down when it comes to attracting foreign retirees.

Words and photography by Khalil Adis

Charming shophouses with Peranakan influences in Georgetown, Penang. Photo: Khalil Adis.

Charming shophouses with Peranakan influences in Georgetown, Penang. Photo: Khalil Adis.

The playing field has now leveled across the property markets in Malaysia now that the federal government has implemented similar minimum purchase price policy that mirrors those in the opposition state of Penang.

The announcement by Prime Minister Dato’ Sri Najib Tun Razak in October last year follows closely what Penang had implemented in 2012 but without the RM2 million minimum purchase price ceiling for landed homes.

What this means is foreign property investors will now study the market carefully before deciding which areas to invest in.

Hot property destinations like Kuala Lumpur, Penang and Iskandar Malaysia will still be on the radar of foreign investors.

However, what could make or break the deal are the unique characteristics of each destination.

Market reacts to Budget 2014

Shortly after the Budget 2014 announcements, the National Property and Information Centre (NAPIC) released its data for the fourth quarter of 2014 which showed a subdued market which goes to show the measures have been effective in curbing excessive speculation.

For example, transaction for residential properties declined by 9.7 points.

Data from NAPIC also showed that huge drops were recorded in Kuala Lumpur, Selangor and Penang at 47.5 per cent, 16.2 per cent and 28.1 per cent respectively.

Johor was the only one that witnessed an increase of 4.9 per cent.

This decline came as a result of the new Real Property Gains Tax regime which will see Malaysians and foreigners paying 30 per cent tax should they sell within the first to third year and first to fifth year respectively.

A combination of the cooling measures and oversupply have resulted in the overall price index decline in Malaysia – something that the federal government has been wanting to achieve prior to the election period in 2013.

An oversupply situation is a conundrum as it means plenty of choice for investors and a softening market ahead.

However, it also means it will be challenging to find a tenant and rental yield may not be as attractive.

Kuala Lumpur, Iskandar Malaysia or Penang? 

View of Penang Komtar in Georgetown. Photo: Khalil Adis.

View of Penang Komtar in Georgetown. Photo: Khalil Adis.

According to Malaysia Property Incorporated, foreign investor accounted for 5.5 per cent of the Malaysia market with Kuala Lumpur coming out top at 10 to 16 per cent followed by Johor and Penang at 10 to 14 per cent and 6 to 7 per cent respectively.

While Kuala Lumpur has always been a perennial favourite and will appeal to investors who want the excitement of city living, the city is notorious for traffic jams and high cost of food.

Another concern is the oversupply in condominium units that have seen increasing vacancy rates.

According to data from the National Property and Information Centre (NAPIC), as of the fourth quarter of 2013, Kuala Lumpur has an existing stock of 424, 324 units, incoming supply of 52, 714 units and planned supply of 22, 629 units.

Meanwhile in Iskandar Malaysia, the property market has finally woken up from its slumber.

For the first time, Johor has seen its property prices increasing at an alarming rate after Iskandar Malaysia was launched in 2006 by former Prime Minister Abdullah Badawi.

From RM250 per sq ft for the very first condominium, Ujana in Nusajaya in 2009 to RM1, 350 for Puteri Cove in 2014, the upbeat in property sentiment caused the state government to impose a new state levy for foreigners from RM10, 000 to RM20, 000 or 2 per cent of the property purchase price (whichever is higher).

However, the property market in Iskandar Malaysia is still in its infancy stage and while food is affordable, they aren’t as authentic and tasty as Penang’s.

Also, the only visible tourism landmark here is LEGOLAND Theme Park while the key industries in Nusajaya will take time to develop as Iskandar Investment Berhad (IIB), only started to bring brand names like Newcastle University of Medicine Malaysia (NuMED) in 2008.

The case of an oversupply is also a scary reality in Iskandar Malaysia as we are looking at almost a million units coming on stream (including existing stock).

Long snaking queue at the famous chendol store along Penang Road. Photo: Khalil Adis.

Long snaking queue at the famous chendol store along Penang Road. Photo: Khalil Adis.

While Penang attracted the least number of foreign investors, its tourism industry is vibrant thanks to Georgetown being listed on the UNESCO World Heritage Site.

Tourists who come to Penang are often drawn by the cheap yet delicious street hawker fares, original drinks like nutmeg juice and Georgetown’s old world charms.

With The Guardian listing Penang as number 8 in the Top 40 global destinations in January this year, more tourists have fallen for Penang’s charm and see it as an ideal retirement place.

In fact, Penang is one of the top retirement destinations among foreign retirees under the Malaysia My Second Home (MM2H) Programme.

Since March 2013, more than 21, 000 applicants have been approved and Penang has always come out top due to the charming island life, scrumptious local food and idyllic beaches.