Real Estate Boom & Buzz

Transcription

1 January 2011 Issue MPI Market Intelligence Real Estate Boom & Buzz Suburban Hotspots Takes the Lead Inside this Issue Suburban Hotspots Takes the Lead Asian Data Centre Hub in the making Seoul Searching RM3b boost for Corridor Development Urban regeneration effort put JB on par Retail is shining bright New Projects to spur growth New trends that have emerged in the market place in 2010 hold out the promise of exciting new choices for aspiring homeowners. The trends include innovative suburban concepts, an increasing variety of green projects, and on the corporate side, mergers between top property developers. The spreading urban sprawl away from the Kuala Lumpur city centre has seen the rise in popularity of brand new townships, creating notable pockets of competitive, demand-driven suburban hotspots. Desa ParkCity, Ara Damansara and Setia Alam are prime examples of middle-to-high cost developments that are attracting a clientele whose needs were previously under-served. Prices in these areas were recently recorded from RM800 to RM1100psf. The advantages of their strategic location and the implementation of unusual features could justify the premiums attached to the purchase price of properties in these developments. Some clear traits are the proximity to major highways such as the North Klang Valley Expressway, reliable safety features such as township patrols and accessibility to active commercial areas, notably for Ara Damansara and Setia Alam. These new suburbs have al- Current Market Drivers Sustainable Townships Creative Designs Green Building Con cepts most always emerged out of greenfield projects, allowing the developers to take into account design and infra structure considerations that are able to incorporate larger use of space compared with urban regeneration projects within the city centre or even Petaling Jaya s established suburbs. Aerial view of Desa ParkCity

2 Cover Story Rising prices of residential properties around the KL city centre will continue to push buyer attention outwards from the city centre fringes into areas such as Rawang, Shah Alam, Sungai Buloh and Kajang. More and more new residential developments are sprouting in this areas to cater to existing demand and rising demand from cost-sensitive home buyers. Greener Pastures Another trend that has emerged is the green building concept. While green concepts cut across many industry guidelines and future initiatives, real estate is no exception. Malaysia s Green Building Index (GBI) has gained mileage for the industry, having increasingly gained acceptance from developers and recognition from the industry worldwide. Arguably, this is one of the current trends that looks set to move from being a good-to-have certification to a mandatory requirement in time to come. Property developments that have received GBI certification are: 3 HARMONI, Sunway SPK Damansara by Sunway City Berhad (Residential); Ken Bangsar by Ken Property Sdn Bhd. Commercial developments (Residential); 1 First Avenue, Bandar Utama Damansara by Bandar Utama City Sdn Bhd (Commercial); and Menara Worldwide, Jalan Bukit Bintang by Worldwide Holdings Bhd (Commercial) The M&A buzzword The 4 th quarter of 2010 saw three major property mergers and acquisitions announcements: SunCity - SunHoldings, UEM Land Holdings Bhd - Sunrise Berhad and MRCB-IJM Land Bhd. The Page 2 Source: GBI merger of SunCity - SunHoldings and UEM Land Holdings Bhd - Sunrise Berhad will result in a combined market capitalisation of RM3.6 billion and RM9.0 billion respectively. While the obvious benefits of any M&A activity to gain larger market share and to create synergies goes without saying, a separate set of advantages emerge from these potential publicprivate mergers. The merged entities will be endowed with an increase in collective market capitalisation, combined landbanks and the benefit of government-backed support. The 4 th quarter of 2010 saw three major property M&A announcements: SunCity - SunHoldings, UEM Land Holdings Bhd - Sunrise Berhad and MRCB-IJM Land Bhd Moving into 2011, developers and home buyers alike are expected to tread cautiously amidst speculation of active government intervention in curbing the rising inflation rate, controlling household debt as well as monitoring the activity of hot money inflows. This has been the trend observed across key Asia-Pacific markets, especially in China and Singapore as the region continues to be an exciting investment target for investors around the world. On the domestic front, the recent implementation of a maximum loan-tovalue (LTV) ratio of 70% by the Central Bank of Malaysia is one method to keep the residential market transactions in check. We believe that the government s mega ETP projects lined up such as the RM36.6b Mass Rapid Transit System and the Greater KL development will continue to spur interest and provide a positive long-term outlook to the foreign investment community. GBI certified 3 Harmoni, Sunway SPK Damansara

3 Malaysia Highlights Asian Data Centre Hub in the making One of the Economic Transformation Programme s (ETP) key highlights is the plan to position Malaysia as a data centre (DC) and outsourcing hub in the South East Asian region. Malaysia s market share of DC space in Asia is approximately 4%. Market leaders in Asia are China and South Korea, with India and Singapore trailing closely behind. Currently, the 21 existing DCs in Malaysia take up 0.5m sq ft of floor space. Effort is being undertaken to increase the space to 5.0m sq ft by IT services and outsourcing revenues are projected to increase in the range of 10% to 12% year on year up to The trend in government-togovernment cooperation is expected to continue to drive this year s joint ventures Companies set up in MSC-status areas enjoy attractive financial and nonfinancial incentives on the back of stateof-the-art infrastructure. The areas include: Asia (ex Japan) IT services & outsourcing revenues Page 3 with GCC countries. - Cyberjaya - Technology Park Malaysia - UPM-MTDC - KL City Centre - KL Sentral - TM Cybercentre Complex - Mid Valley City - I-City - Bandar Utama - Bangsar South City Some financial incentives offered are: Pioneer Status: 100% exemption from taxable statutory income. This incentive is granted for a period of five years for the first round. 100% Investment Tax Allowance (ITA). Eligibility for research and development grants (for majority Malaysian-owned MSC-status companies). Freedom to source capital and borrow funds globally. Duty-free Importation of multimedia equipment (DFI). Local success stories also pave the way for further expansion of data centres in Malaysia. CSF Group, a Malaysian data centre company listed on London s Alternative Investments Market owns four buildings covering a total area of 205,000 sq ft. Their latest data centre, CX5, was completed at the end of Asia (ex Japan) IT services & outsourcing market Source: Gartner, ETP Handbook With the government s ambitions for data centres projected to fulfill a robust future demand for IT and outsourcing services, Malaysia still has much to catch up on in terms of updating its IT infrastructure, cost competitiveness and availability of labour. In line with the ETP s Greater KL plan to attract skilled foreign professionals, coupled with the recent creation of Talent Development Corporation, first steps are already being taken to open the door for skilled personnel to contribute to the country s human capital requirements. Data Centres in Malaysia Company Affiliated Computer Services, Inc. American International Group Inc (AIG) AIMS Cyberjaya Advanced Micro Devices (AMD) AMWAY IT SERVICES SDN BHD Asia Pacific Information Services Sdn.Bhd. Basis Bay Basis Bay Capital BMW CSF Advisers Sdn Bhd CSF CX DELL GBC DHL (APIS) GI Technical Hewlett-Packard Company HSBC Electronic Data Processing (Malaysia) Sdn Bhd ('HDPM') Megacenter Systems Sdn Bhd NTT MSC Sdn Bhd Patimas Outsourcing Services Sdn Bhd (Formerly known as Cordoda Corporation Sdn Bhd) Stirk Lamont (MSC) Sdn Bhd TRW Automotive Services Sdn Bhd Source: MSC

4 Investor Update Seoul Searching Affordable medical care, good educational institutions and developers credibility are among the top criteria that determine Korean investors decision to purchase property overseas. This was revealed at a recent MPIorganised seminar on property investment in Malaysia at REC Institutional Investments 2010 conference in Seoul. Korean buyers are particularly keen on retirement villages and holiday homes. Their attraction to these types of properties in Malaysia is linked to the affordable medical care in the country. Korean investors also look at the availability of good international schools and colleges that offer quality English language education. Some who are familiar with Malaysia are looking to share opportunities to invest with their family members and friends. Concerns on whether the local property market is heading towards a bubble and the rising tension on the North-South situation in their country have recently spurred Koreans to look for properties overseas. Political stability, freedom of religion and transparent taxation laws have placed Malaysia on their list of preferred investment destinations. The primary element individual buyers assess before committing to a purchase is the credibility of local developers. A credible developer with a laudable profile will definitely stand a chance to capture this market. This group looks for properties worth between USD750,000 to USD1million. On the Institutional Market front, more and more Korean funds are allocating resources to be invested in alternative investment classes. This funds are aggresively seeking investments as yields achievable in many overseas markets are potentially higher than yields achievable domestically. Plagued by the aging demograhic phenomenon, local pension funds are seeking even higher returns and more diversified holdings overseas. Most prime properties in Seoul have been traded in 2009/2010. Hence, Korean institutions are also facing increasing difficulty in sourcing for appropriate hard assets in the local market. Regulators have plans to deregulate rules on corporate pensions, similar to the recent relaxation of policies in China for insurance companies investments. This has further enhanced the funds interest to diversify their portfolios. However, real estate investment as an alternative investment product is a relatively new concept. These funds are tradionally risk-averse and very selective of investments. They prefer to deploy capital in developed, transparent markets with easy exit. Faced with lack of manpower and lack of information on overseas legal and institutional frameworks, these funds welcome parties that can provide them with a clear platform on the intricacies of investment assessment and deal-sourcing processes. As guarantee for additional funding is a big uncertainty, these funds prefer to partner with credible coinvestors with good credit ratings and similar portfolio of interest for en-bloc purchases. A key point to note here is that the funds are primarily on the lookout for Grade-A commercial properties with stable tenant income. Institutional funds that are strenthening their international foray are Korea s National Pension Service (with approx. US$240 billion in assets), Korean Teachers Credit Union, Public Officials Benefit Association and Korea Post. Page 4 Source: Korean Ministry of Health & Welfare, Real Estate Committee (EU Chamber of Commerce Korea)

5 Foreign Direct Investment RM3b boost for Corridor Development The Mace Group from the United Kingdom and Corridor Development Corporation Bhd (CDC) recently signed a Memorandum of Understanding to source and partner in various projects in Malaysia, particularly in regional development corridors. Mace Group is a global consultancy and construction giant with businesses in over 50 countries, with recorded fee turnover of US1.4 billion in Mace will invest RM3 billion in various construction projects in Malaysia over the next five years, working closely with CDC on a number of construction, real estate and industrial projects in the development corridors. At the initial stage in 2011, Mace will invest around RM200 million to RM300 million in the development of Sungai Rambai in the south of Melaka. These projects include the development of the Rambai New Township project, Sungai Rambai Enterprise Zone and the redevelopment of Sungai Rambai old-town project. According to Mace director Mark Richards, activities are set to roll out in the first two quarters of next year. To date, CDC has development and construction projects with a gross development value (GDV) of RM 5billion and is actively seeking foreign participation. Urban regeneration effort put Johor on par As the third most populous state in Malaysia and the fifth largest in terms of landmass, Johor is one of the country s key market centres for both leisure and commercial activity. The state is also the third largest contributor to national GDP at approximately 10%, behind the states of Selangor and Wilayah Persekutuan KL. Malaysia s major towns have undergone the evolutionary property development phases; moving from local council-led developments to private townships and subsequently, to large mixed developments. Sophisticated safety features and interior design have gone hand-in-hand to contribute to the continuing increase in land and property pricing, especially around Greater Kuala Lumpur, Penang Island and even Kota Kinabalu in Sabah. Johor Bahru, however, struggled to move beyond a local property play until ambitious regeneration efforts were announced. Most importantly, Johor state s Iskandar Malaysia (IM) connection and proximity with Singapore offers a symbiotic potential akin to the Shenzhen-Hong Kong metropolis. The announced High Speed Rail System (HSR) from Kuala Lumpur to Singapore is a key factor in opening up access and improving economic activity both domestically and with Singapore. Impending development on land swaps between the Malaysian and Singaporean government is predicted to create bilateral advantages upon completion of these plans. IM has been a continuous work-in-progress to attract foreign direct investment, in the form of infrastructure and development joint ventures as well as opening of new branches. The total value of investments between 2006 and September 2010 stands at RM64.4 billion (USD20.8billion). Upcoming developments in JB City Centre include a RM12 billion (USD3.9 billion) mixed development by Southkey Properties Sdn Bhd and a RM4 billion (USD1.3 billion) Lido Boulevard mixed development. Page 5 Source: MPI

6 Sector Spotlight Retail is Shining Bright Upcoming Retail Developments in Greater Kuala Lumpur 2011 Name of Development Net Lettable Area (sq ft) Location CITTA Mall 424,000 Ara Damansara Festiva Mall 450,000 Setapak 1 Shamelin Shopping Mall 420,000 Cheras Suria KLCC extension (Lot C) 140,000 KLCC Solaris 2 300,000 Duta Mas The Paradigm 500,000 Kelana Jaya 2012 Nu Sentral 700,000 Brickfields Jaya Supermarket, Section ,000 Petaling Jaya 2013 IOI Mall 1,300,000 Putrajaya Planning Stage Sunway Velocity 600,000 Jalan Peel Rivercity 250,000 Jalan Ipoh Pudu Jail Redevelopment 500,000 Jalan Pudu Sentul Raya 160,000 Jalan Sentul Solaris 3 500,000 Duta Mas Damansara Uptown 250,000 Damansara Setia Alam Mall 700,000 Shah Alam Ampang (Pramerica) 580,000 Jalan Ampang I-City 850,000 Shah Alam Vision City 750,000 Jalan Sultan Ismail Four Seasons 260,000 KLCC Malaysia s annual retail sales achieved commendable growth in Retail Group Malaysia (RGM) on behalf of Malaysia Retailer Association (MRA), showed retail sales grew 7.6% year-on year to RM76.5 billion in total sales in This is forecasted to move steadily with a 5% growth for Malaysia is currently home to 300 shopping complexes, with half of these located in the Greater Kuala Lumpur vicinity. Comparable to other lively retail hubs in the region such as Singapore and Jakarta in Indonesia, the average occupancy rate in Malaysian shopping complexes currently hovers at a healthy 80%, an observed trend for the last five years. The tourism industry plays a large part in boosting the positive outlook for this sector. The Malaysian Association of Shopping and Highrise Complex Management (PPK) predicts an achievable increase in tourist shopping expenditure from 28% in 2010 to 40% by 2020, an amount that comes up to RM63 billion worth of shopping in While gross figures show a total of 2.2 million sq ft of net lettable area entering the retail market in 2011, the softer aspects of the retail sector promise many more exciting developments. Shopping mall operators are refining their game with more customer-centric infrastructure and enhancements in place. These include: Berjaya Time Square to Pavilion - 800m of covered walkways Jalan Perak/Pavilion to Crowne Plaza - 400m of elevated and covered walkways Jalan P.Ramlee/Jalan Sultan Ismail to Jalan Pinang) - 450m of covered walkways Skybridges connecting existing retail mails to new phases, including at The Curve and Plaza Damas Incoming global brands such as Sephora at Starhill Gallery Source: DTZ Nawawi Tie Leung Page 6

7 In the Pipeline New Projects to Spur Growth Malaysian Prime Minister Datuk Seri Najib Tun Razak announced 19 more projects within the Government s Economic Transformation Programme (ETP) in a continuous effort to engage both local and foreign audiences with development updates. These updates cover the country s 10 highlighted National Key Economic Areas covering: 1) Oil, Gas & Energy 2) Business Services 3) Agriculture 4) Healthcare 5) Tourism 6) Electrical & Electronics 7) Education 8) Communications content & infrastructure 9) Wholesale and retail, and 10) Greater KL Development. Entry Point Projects: 19 projects announced at Q Company Investment Project Details ExxonMobil > RM10b Partnering with Petronas Carigali Sdn Bhd to develop oil & gas facilities in Tapis field and Telok gas development project. Shell Malaysia RM5.1b Upgrade, expand and build upstream, midstream and downstream facilities. Earmarked projects are Shell MDS wax plant in Bintulu, a new diesel processing unit at the Shell Refinery in Port Dickson and the Gumusut deepwater development, Sabah. Dialog Group Bhd: Independent Deepwater Petroleum Terminal, Pengerang, Johor RM5b Partnering with the State Government of Johor and Vopak to develop deepwater petroleum terminal project at Pengerang, Johor with a storage capacity of 5m cbm. Malaysia Nuclear Power Corporation - This corporation will spearhead the initial evaluation on the possibility of nuclear energy usage for future demand and diversify the energy mix. Data Centre Hub RM671.6m MyTelehaus, CSF Group and Teliti Data will co-develop new and upgrade existing facilities to supply 475,000 sq ft of data centre floor space. Herb Plantation, Pasir Raja RM2.2b Cultivate herbs that are in high demand for the production of nutraceuticals and botanical drugs. University Malaya Health Metropolis RM1.25b UM Holdings Sdn Bhd will be investing in the 2m sq ft facility which will integrate healthcare, bio-research and post-graduate education. Hovid Berhad RM50m Collaborating with Winthrop Pharmaceuticals, a subsidiary of Sanofi-Aventis, to manufacture and supply generic drugs for diabetes and pain management worth RM50m. Teluk Datai Development RM1b Teluk Datai Resort Sdn Bhd will upgrade and construct hotels in Pulau Langkawi. YTL Group: Pulau Gaya Development RM75m Development of a resort in Pulau Gaya, off the coast of Kota Kinabalu. AUO Sunpower RM2.2b JV between SunPower Corporation, USA and AU Optronics Corporation, Taiwan to produce high-efficiency solar cells that will generate more than 1,400 megawatts annually. Skills Malaysia - Launching of Skill Malaysia 2011 to achieve the target of a 40% skilled workforce by SelecTV: Hospitality IPTV RM30m Creation of an internet protocol TV (IPTV) platform, to distribute Malaysian content to hotel rooms in Malaysia, Thailand, Indonesia and the Middle East. Mines Wellness City (Country Heights) RM3b Development of a health and wellness resort. Damansara City2 RM1.9b Guocoland Berhad will be involved in a mixed development comprising 2 office blocks of 560,000 and 285,000 sq ft each, 290,000 sq ft in retail space, a 300-room hotel and a 260- unit serviced apartment block. Mass Rapid Transit (MRT) RM36.6b Construction of MRT to increase connectivity in the Greater KL area. Talent Corporation - Implement initiatives to engage and attract the best talents required to fill the 3.3m positions that will be created by the various National Key Economic Areas. Page 7 Source: Pemandu

8 In a Nutshell The Million Ringgit Club The following charts indicates transactions by subsector of properties worth more than RM1m in the first 10 months of 2010 ( Jan - Oct). Figure 1: Kuala Lumpur Figure 2: Selangor Commercial - 1,010 (USD0.98b / RM3.04b) Industrial - 58 (USD0.20b / RM0.63b) Development (USD0.55b / RM1.70b) Residential - 1,586 (USD1.20b / RM3.73b) Industrial (USD0.63b/ RM1.95b) Commercial (USD0.90b/ RM2.79b) Development (USD0.20b/ RM0.61b) Residential - 1,540 (USD1.07b / RM2.89b) Total Transactions Total Transactions: 2,768 units 2,768 Total Sales Value: USD2.94b / RM9.10b Total Sales Value USD2.94b/ RM9.10b Transactions in Kuala Lumpur comprise municipalities of Batu, Seksyen 1-100, Kuala Lumpur, Ampang and Petaling only. Total Transactions Total Transactions: 3,284 units 3,284 Total Total Sales Sales Value Value: USD3.14b USD3.14b/ / RM9.74b RM9.74b Transactions in Selangor comprise districts of Petaling, Gombak, Sepang and Hulu Langat only. Figure 3: Johor Figure 4: Penang Development - 88 (USD0.10b / RM0.31b) Residential - 83 (USD0.06b/ RM0.19b) Industrial - 45 (USD0.01b / RM0.30b) Development - 90 (USD0.01b / RM0.30b) Industrial (USD0.31b / RM0.95b) Commercial (USD0.10b / RM0.32b Commercial (USD0.13b / RM0.39b) Residential (USD0.25b / RM0.79b) Total Transactions 436 units Total Transactions: 436 Total Sales Value: USD0.57b USD0.57b/ / RM1.78b RM1.78b Transactions in Johor comprise districts of Johor Bahru, Pontian and Kota Tinggi only. Total Transactions Total Transactions: units Total Sales Value: USD0.57b / RM1.78b Total Sales Value USD0.57b/ RM1.78b Transactions in Penang comprise districts of Barat Daya and Timur Laut only. Source: NAPIC Page 8

9 Oct-06 Feb-07 Jun-07 Oct-07 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Nov-06 Feb-07 May-07 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 Graphically Speaking Economic Indicators Figure 1: GDP Growth Rate (%) Figure 2: Inflation Rate (year-on-year % change) (%) (%) Source: Dept. of Statistics Source: Dept. of Statistics Figure 3: Housing Starts Figure 4: Base Lending Rate (%) Units* 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 (%) Note: * Number of housing units by private developers approved for construction in Peninsular Malaysia. Source: NAPIC Source: Bank Negara Malaysia Page 9

10 Real Estate Boom & Buzz About Us Malaysia Property Incorporated is a Government initiative set up under the Economic Planning Unit to drive investments in real estate into Malaysia. As the first port-of-call for real estate investment queries, Malaysia Property Inc. connects interested parties through an extensive network of government agencies, private sector companies, real estate firms, business councils and real estate-related associations. MPI has two core objectives; to create international awareness and to establish connections between foreign interests and Malaysian real estate industry players, ultimately contributing to real estate investments into the country. For further information and up-to-date tracking of Malaysian real estate data, visit: For further enquiry, write to: info@malaysiapropertyinc.com Disclaimer This report contains information that is publicly-available and has been relied on by Malaysia Property Incorporated on the basis that it is accurate and complete. MPI is not liable if the case proves to be otherwise. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and the same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed.