Property developers to gain in 2010
PROPERTY developers will continue to emerge as key winners in 2010, driven by rising demand and improving economic outlook, according to an analyst at MIDF Research.
Moving into 2010, he said players would continue to ride on the sector's buoyant recovery based on the improving number of property sales coupled with declining number of overhang units since the first quarter of 2009, the analyst, who declined to be named told Bernama recently.
For 2009, it was an unanticipated recovery story as the sector had outperformed expectations in becoming one of the leading segments in the stock market.
Share price of property companies, which is measured by the KL Property Index, in fact outpaced the benchmark FBM KLCI.
However, the analyst pegged a "Neutral" outlook for the property sector in 2010.
"Despite encouraging sales demand and improving economic sentiment, the fear of demand sustainability, upon the withdrawal of cheap credit, absence of attractive promotions and favourable regulations may take its toll on the property sector," he said.
However, the growth driver in 2010 will be, among others, the favourable regulations, continuous governmental support, a thriving property market taking its cue from an improved economy and the ability to attract foreign direct investment flow.
"Sales demand for residential properties are expected to remain buoyant as investors continue to deem it as one of the more liquid hedging asset. Speculators are also taking advantage of the current market sentiment to lock-in on gains," he said.
A survey across key property players revealed that none was slowing down their pace of project development.
Many were, in fact, taking advantage of the current discounted valuations to replenish land banks and were not holding back new launches.
The analyst said key players have signaled that take-up rates of residential properties have remained strong between 80 per cent and 90 per cent in the last quarter.
"Hence, we are confident residential property sales will remain buoyant, at least within the first half of 2010. We are estimating at least 25,000 new units to be launched over the next quarter," he said.
On the retail/shopping complex and office front, he expected continued oversupply of units, notably in the Klang Valley, as many have been under construction over the past two to three years.
Many corporations and businesses are also holding back relocation plans until the financial crisis is over.
Meanwhile, issues that may dampen the sector's recovery include the re-introduction of the Real Property Gains Tax (RPGT), possible pullback in sales demand due to withdrawal of cheap credit, unanticipated rise in raw material prices thus raising average selling prices and delaying launches and approvals.
"We do not expect any immediate impact from the reintroduction of the RPGT and it was mainly to control the secondary sales market. On the flipside, it may discourage foreign investments in commercial properties," he said.
He said the tax was introduced too soon as the economy was still on the verge of recovery but understood the need for it to curb another asset bubble.
On the Real Estate Investment Trusts (REITs), the analyst does not expect it to be a star performer in 2010 but expects some interest in this segment.
He said the average rental yield for offices and commercial properties was on a downtrend in 2009, with rental for offices falling 1.9 per cent, year-on-year, and 1.35 per cent, year-to-date, within the Klang Valley.
However, the recovery in the property market coupled with an exemption from RPGT and stamp duty will see rising interest in REITs which currently yield an average return of between eight and nine per cent in Malaysia.
On the status of Malaysia's property market, the analyst said he did not expect any property bubble in the immediate-term.
"Appreciation of property prices have been modest so far as demand recovered slowly as investors' confidence returns," he added.
Prices of properties, nationwide, declined 9.8 per cent, year-to-date, due to the economic crisis, but gained 1.40 per cent, year-on-year, due to renewed interest emerging in the second quarter of 2009.
"Nevertheless, assuming the presence of cheap financing, attractive promotions and favorable regulations continue into 2010, coupled with new launches and delivery in 2010, property prices may face an upsurge," he said.
And, despite the Dubai's debt crisis, he said Malaysia would still be able to attract Middle Eastern investors who still reaped positive yields from investing in the country's property market.
The main challenges in the property market will be demand fundamentals, whether it can be sustained, and from another point of view, what else can be offered by both property players and financial institutions to support the growing demand.
"One would be cheap cost of fund (credit). Assuming overnight policy rates are raised back to pre-2006 days of 3.50 per cent, can demand be sustained? Secondly, assuming a second dip does occur, can the property segment take it in its stride?" he said.
The analyst said residential properties will continue to be favorites amongst investors who still demanded mid-to-high-end properties.
"We noted in the second quarter that properties priced between RM250,000 and RM500,000 and between RM500,000 and RM1 million were favorites and registered sustained growth," he said.
Residential properties have historically proven to be good hedge instruments with attractive capital appreciation, while commercial and office properties may see a dip in demand, against a backdrop of new launches, except for those Grade-A offices located in sub-urban areas.
Demand for properties around Kuala Lumpur City Centre is recovering as prices within the vicinity improved in the third quarter with stable rental yields.
As for industrial properties, he said the segment would move in line with the nation's economy.
The analyst was also of the opinion that the property market needed a boost in the form of incentives, that included tax reduction for sub-urban developments, cheap credit, continuous efforts to draw foreign direct investments and for local small players to have joint-ventures opportunities with state governments.
YNH optimistic of projects
PROPERTY developer YNH Holdings Bhd plans to launch two luxury projects, worth a combined RM1.6 billion, in Kuala Lumpur next year.
Its head of corporate services, Daniel Chan, said the company was optimistic of good response, given the product offering and location.
The Ipoh-based developer targets to launch Fraser Residence in Jalan Sultan Ismail and Kiara 163 in Mont'Kiara in the first quarter and second half respectively.
Fraser Residence willl comprise 450 condominium units. Kiara 163, located next to Plaza Mont'Kiara, will feature 580 condominium units, a four-storey mall and a 28-storey office tower.
"We are confident of the two launches as the location of our properties is very strategic. At the end of the day, it's all about location, location and location," Chan told Business Times.
The projects will keep YNH busy for the next five to eight years.
Other projects on hand include its bread-and-butter 400ha Sri Manjung township in Perak, which is expected to last the company for 20 years.
"We will launch new phases next year at the township to keep up with demand, thanks to new developments taking place," Chan said.
He cited the iron ore plant in Teluk Rubiah proposed by Brazil's Vale International SA, the world's second largest diversified metals and mining company.
Chan also expects sales to improve because of developments at Kencana Petroleum Bhd's fabrication yard in Lumut and the Lumut Naval Base.
"We will focus on a few developments and not overexpose ourselves. We have a low gearing of 0.3 time and want to keep it at that.
"We have cash of RM100 million coming in soon from Ceriaan Kiara and Fraser Place KL and will use some of it to fund our new projects."
Chan is confident of YNH posting profits in its fiscal year ending December 31 2009.
He said that while earnings may dip slightly this year, 2010 net profit and revenue are expected to surpass 2008 results owing to the bigger developments coming up as well as sales from existing projects.
Last year, YNH made RM86.8 million net profit on revenue of RM350 million.
By Business Times (by Sharen Kaur)
Labels: Kuala Lumpur, Property Market
Ho Hup appoints valuer for sale of land parcels
PETALING JAYA: Ho Hup Construction Co Bhd said it had instructed an independent firm to conduct a valuation of the parcels of land it planned to dispose.
In a filing with Bursa Malaysia, the company said the market value for the first plot of land in Balakong was valued at RM30 per sq ft while the parcel of land at Bukit Jalil was valued at RM50 per sq ft.
"With the disposal of the (two pieces of ) land, Ho Hup is expected to realise an estimated gain of RM9mil after deducting estimated expenses in relation to the proposed disposals," it said, adding that this would help the company pay a portion of its existing bank borrowings and for working capital purposes.
It was reported that there was a growing rift between the company's management and a major shareholder over the valuation of the two plots of land.
On the platter are two resolutions to be put to the vote at the group's EGM on Dec 31 for the disposals of the two parcels of land.
The first resolution at the EGM was for the disposal of a piece of land in Balakong for RM7.2mil while the second resolution is for the sale of a land in Bukit Jalil to raise RM5.7mil.
Labels: Land
Mydin to build 4th hypermart in Melaka
MYDIN Mohamed Holdings Bhd will build a RM67 million wholesale hypermarket next March in Bandar Jasin Bistari, its fourth outlet in Melaka.
Its Managing Director, Datuk Ameer Ali Mydin, said land acquisition for the six hectare factory site would cost RM7 million and construction another RM60 million.
He said the continued confidence in the peoples' purchasing power prompted Mydin Mohamed Holdings to invest in another hypermarket in the state.
"The state government is offering various incentives to lure investors to turn Melaka into a shoppers paradise for tourists," he said, adding that construction of the factory would begin in March 2010.
"The hypermarket will be ready for commercial operations in May 2011 and provide business opportunities for local retailers," he told reporters in Melaka today after a signing ceremony for the purchase of the factory land from the Melaka Customary Lands Development Corporation (Pertam).
Melaka Chief Minister Datuk Seri Mohd Ali Rustam witnessed the signing of the agreement between Ameer, who signed on behalf of his company, while Pertam was represented by its Deputy Chairman Datuk As'ari Ibrahim.
Ameer said Mydin's biggest hypermarket was operating at the Melaka International Trade Centre (MITC) and generated a monthly turnover of RM18 million while another two outlets operated at Melaka Sentral.
The Bandar Jasin Bistari hypermaket is expected to cater for consumers as far as Muar and Tangkak and will be Mydin's 48th outlet in the country providing employment for about 280 people.
Labels: Shopping Mall