THE 22 nd NATIONAL DEVELOPERS CONVENTION AND GENERAL MEMBERSHIP MEETING GROUNDWORK: SHAPING A SUSTAINABLE HOUSING INDUSTRY HOUSING THE NATION PRESENTED BY : TAN SRI DATUK EDDY CHEN LOK LOI PAST PRESIDENT OF REHDA MALAYSIA, CHAIRMAN REHDA Institute 26-27 September 2013, Fairmont Makati, Philippines
Overview Malaysia: Quick Facts Malaysian Real Estate Evolution REHDA Malaysia The Malaysian Property Industry Public-Private Partnership, Malaysian Experience Housing Development in Malaysia Issues and Challenges Why Malaysia? Way Forward 2
Malaysia: Quick Facts AREA sq km MALAYSIA 330,252 Peninsular Malaysia 131,805 Sarawak 124,450 Sabah 73,997 3
Malaysia: Quick Facts 29.3 mil population at 1.3% annual growth Stable GDP growth (5.6% in 2012) Income per capita forecasted (US$ 10,296 in 2013) Low & stable unemployment rate : 3.2% as of 2012 Source: Economic Planning Unit and Department of Statistic, 2012 4
Malaysia: Quick Facts HOUSING STOCK 2009 2010 2011 2012 POPULATION 27.9 mil 28.3 mil 28.6 mil 29.33 mil (f) HOUSING STOCK 4.34 mil 4.43 mil 4.51 mil 4.58 mil (Q3 2012) Source: Economic Report 2011/2012, Economic Planning Unit, NAPIC HOUSING DEMAND (units) Annual Household Formation 142,657 Average transactions per annum 200,000 Average housing completions per annum 100,000 Source: Department of Statistics, NAPIC 5
Malaysia: Quick Facts Stable political environment Rule and enforceability of law Consistent and healthy growth economies Business-friendly environment Easy access to funding & sound banking system Healthy international reserves Low budget deficits and debt Lack of natural disaster High Connectivity 6
Malaysian Real Estate Evolution 7
MALAYSIA N REAL ESTATE EVOLUTION THE 60 S INFANT YEARS OF THE HOUSING INDUSTRY Mass housing development goes back about 40 years ago. Formal and structured housing programs were undertaken in 1966. The Government saw housing as a component of social services to meet the needs of lower income group. Private sector developers purchased and developed properties with active participation by the State Government. 8
MALAYSIA N REAL ESTATE EVOLUTION THE 70 S A DECADE OF STEADY GROWTH Housing policy took 2-pronged objectives of the NEP of eradicating poverty and restructuring societies. The then HDA (now known as REHDA) was formed to convey the private sector developers input to the Government housing policies. Government s role was quite substantial with various federal and state agencies actively involved in housing provision. 9
MALAYSIA N REAL ESTATE EVOLUTION THE 70 S A DECADE OF STEADY GROWTH Private sector developers involved in the development of medium and high end housing. The 70 s witnessed growing interest in the housing sector, led by: a. Increased in population purchasing power; b. growing economic prosperity of the country Government agenda to create a housing democracy. 10
MALAYSIA N REAL ESTATE EVOLUTION THE 80 S A DECADE OF CONSOLIDATION Housing programs in urban areas were accelerated with greater emphasis on low cost housing or social housing. To optimize urban land use, subdivided low cost housing was implemented. Mandatory requirement for private sector developers to build at least 30% low cost social houses. Between 1981 & 1983, tighter credit control for property development and collapse in primary commodities prices in 1983 & 1984 impact the housing industry adversely. 11
MALAYSIA N REAL ESTATE EVOLUTION THE 90 S A PERIOD OF MATURATION Growing maturity in terms of quality and range of products. Modern technology, rapid development and scarcity of prime land led developers to build condominiums and develop large townships. In 1997, no Malaysians are without a home. 12
MALAYSIA N REAL ESTATE EVOLUTION THE 90 S A PERIOD OF MATURATION In 1998, HOC was launched by the Prime Minister to help clear existing housing supply suffered under the 1997 Asian financial crisis. In 2005, squatters were effectively eradicated moved to projects that were designated as people s housing. 13
Real Estate & Housing Developers Association REHDA A Responsive Respected Responsible Relevant NGO 14
REHDA Association of real estate and housing developers founded in 1970 Recognized as the leading voice of advocacy and governance of the real estate and housing industry REHDA (total 11 REHDA branches) represents about 80% of total active developers nationwide. Number of members as at September 2013 1036 Members involvement in residential, township development, commercial, shopping complexes, golf course etc. Protects the interests of members and promotes sectoral growth via active engagement with the Government, participates in various committees (States and Federal Government), and holds key positions in several regional bodies of an international network. 15
THE MALAYSIAN PROPERTY INDUSTRY 16
Malaysia Property Sector Contributions to GDP Year 2009 2010 2011 2012(e) GDP (RM mil) 629.9 674.9 709.3 743.5 Value of Property* Transactions (RM mil) 80.9 107.4 137.8 106.3 (as at Q3 2012) Property Transactions / GDP 12.8% 15.9% 19.4% 14.3% Residential, Commercial, Industry, Agricultural, Development Land and others. Source: Economic Planning Unit, NAPIC 17
Property Sector as A Significant Contributor Linkages to 140 economic activities 18
HOUSING DEVELOPMENT IN MALAYSIA 19
Malaysian private housing developers deliver approximately 100,000 units of houses annually 20
100 developers listed in Bursa Malaysia are well-capitalized 21
MALAYSIA PLANS Performance of Housing Sectors: Private sector driven mostly exceeded target. Sources : 3MP 9MP 22
LOW & MEDIUM COST HOUSING- Private Sector s Performance Private sector s achievement in delivering low cost & medium cost house OVER ACHIEVED Malaysian Plan Low Cost Medium Cost Target (Unit) Achievement (Unit) Target (Unit) Achievement (Unit) 7 MP (1996-2000) 140,000 129,598 110,000 206,208 8MP (2001-2005) 40,000 97,294 64,000 222,023 9MP (2006-2010) 77,700 N/A 178,000 N/A Sources :Property Market Report, 2012,NAPIC 23
PUBLIC-PRIVATE PARTNERSHIP (PPP) MALAYSIAN EXPERIENCE 24
PPP in MALAYSIA : Introduction PPP - a substantial contributing partnership to the housing delivery system. PPP in housing started during the administration of the former Prime Minister of Malaysia, Tun Dr Mahathir Mohamad from 1982 to date. Tun Mahathir believes that the private sectors are better placed to deliver some of the nation s goods and services more effectively. Some of the PPP modes of operation including of: 1. Land Swap 2. Land Sales profit sharing 3. Direct alienation The above items, all values are determined by government valuers. 25
PPP in MALAYSIA: Land Swap Land swap in exchange for building for the government as ascertained facilities or buildings. The former will alienate an equivalent value of government owned land to the developers (JV partner) for housing or any commercial project as the latter deem fit. 26
PPP in MALAYSIA: Land Sales & profit sharing Land sales & profit sharing in exchange for the value of land and a share of the developments future profit (varies from 20% - 30%) The government will alienate the same equivalent value of land to the JV partners for housing or commercial project. 27
PPP in MALAYSIA: Direct Alienation Government will alienate the land to private developers on a straight out land premium payment. 28
HOUSING DEVELOPMENT PLANNING & PROCESS 29
3 Levels of Governance FEDERAL GOVERNMENT National Housing Policy STATE GOVERNMENT Land Matters, Land Use LOCAL GOVERNMENT Zoning, Building by Laws 30
Property Development Process 31
Process Residential Properties Governed under the Housing Development (Control & Licensing) Act 1966 ( HDA ) Mandatory to use standardized Sale and Purchase Agreement ( SPA ) from HDA Payment of purchase price is via progressive installments based on stages of work done and Completion of SPA is within 24 months (landed houses) or 36 months (apartment/condominium/subsidized unit) from date of SPA Memorandum of Transfer will be executed upon issuance of title to the property. 32
Commercial Properties Process Market driven agreement Payment of purchase price is via progressive installments based on stages of work done Completion of SPA is usually within 36 months from date of SPA Memorandum of Transfer will be executed upon issuance of the title for the property. 33
Financing to House Buyers Local or foreign banks offer loan packages High margin of financing (MOF) up to 90% of the property value Loan approvals subject to the purchaser s financial standing and credit worthiness Enjoy loan tenure up to 40 years, or 70 years of age, whichever is earlier 34
Acquisition of Property by Foreigner Properties of RM500,000 and above (USD: 161,300, price differs from one state to another state) Requires consents by state authorities Foreigner also can purchase properties under Malaysia My Second Home Programme (MM2H) Financing Local or foreign based banks offer loan packages Currently, loan are available between 60% and up to a maximum of 90% of the purchase price of the property Loan approvals subject to the foreign purchaser s financial standing 35
Residential Developments Source: Property Stock Report Q4 2011 36
ISSUES & CHALLENGES 37
CHALLENGES Scarcity of residential development land & high land cost Non-availability of affordable land High Cost High Compliance Cost (between 15-30% of GDV) - contribution to privatized utilities companies, surrender of land, construction of infra etc. High construction cost recent hike in cement, constant increase building materials, labor and machinery 38
CHALLENGES Shortage of skilled workers Demand > supply drive rates up Labor Reliant on foreign labors High cost of labor leads to affordability issues 39
CHALLENGES PUBLIC TRANSPORTATION SYSTEM Ineffective timing, route coverage, and non-user friendly especially to OKU. PUBLIC TRANSPORTATION CAPACITY Lagging behind population 40
ADDRESSING ISSUES: Government action Improved plot ratio Adoption of IBS mechanization Government intervention in infrastructure facilitation funds Aggressive public transport upgrading works 41
Why Malaysia? 42
Why property is a good asset class and investment proposition in Malaysia? Excellent ownership registration and titles Land law is based on Australian Torrens System Predominantly FREEHOLD Liberalized policy on foreign acquisition Competitive commercial property capital values and yields Favorable tax regime 43
Way Forward As a rapidly developing country, property market is one of the key drivers & engines of economic growth spearheading its transformation In moving forward to high income nation status, property developers will continuously making effort to respond the needs and current demand of Malaysians and global environment in providing world class real estate 44
Thank You Responsive Respected Responsible Relevant www.rehda.com 45