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Second Penang bridge ready for use

October 18th, 2013 41 comments

Heavy load: Trailer trucks ferrying concrete boulders along the 240m stretch of the main span of the cable-stayed bridge during the load test.

The second Penang bridge is now 99% complete and the launching date will be determined by the Federal Government some time next month.

Jambatan Kedua Sdn Bhd (JKSB) managing director Datuk (Ir) Dr Ismail Mohamed Taib said they hoped to wrap things up by Nov 8.

The Batu Maung interchange ramp that collapsed in June was rebuilt earlier this month.

“Motorists will get to enjoy free trips of the bridge for one month after its launch,” Dr Ismail told reporters during a load test at the bridge’s main navigational span yesterday.

The load test was carried out at the 475m cable-stayed bridge, to ascertain the load capacity of the bridge.

“It is important to ensure that the cable-stayed bridge is built according to the design and specifications,” Dr Ismail said.

A total of 17 trailer trucks ferrying concrete boulders weighing 595 tonnes were placed along the 240m stretch at the main span of the cable-stayed bridge.

Dr Ismail said even an earthquake would not affect the bridge.

“It was specially designed to withstand quakes measuring 7.5 and above on the Richter scale.”

Dr Ismail also said the project’s cost, which was earlier stipulated at RM4.5bil, was RM50mil lower and the excess funds had been used for landscaping and decorative lights.

The colour and tempo of the lights could be changed according to the country’s major festivities or celebrations, similar to the Incheon Bridge in South Korea.

The toll rate for the bridge has yet to be determined.

Source: StarProperty.my

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Supply and demand is most significant cause of rising property prices

October 17th, 2013 No comments

Work in progress: Tong says red tape also hampers efforts to reduce property prices.

Real Estate and Housing Developer’s Association (Rehda) national treasurer DatukN K Tong recently said that the escalating prices of properties, was significantly caused by the supply and demand factor.

“As land prices continue to rise, there is also the issue of not producing houses fast enough to cater to the increasing demand.

“We need to accelerate the number of units being built and this can be done when all parties work closely,” said Tong, adding that a property market report by the National Property Information Centre (Napic) showed the existing stock nationwide in the first quarter of 2013 was 4.6mil residential units (excluding kampung and estate houses).

The report also said the average housing completion yearly was 100,000 units relative to the average annual household formation, which was 140,000.

Tong also noted that the delay in issuing approvals was also a reason why property prices had increased tremendously over the years.

“When there is a delay in issuing planning approvals, development costs, which include utility costs, tend to increase, resulting in more costs passed down to house buyers,” he said.

He added that Rehda had been continously engaging with the Government and utility companies like Tenaga Nasional Bhd, Telekom Malaysia and Indah Water Konsortium Sdn Bhd, among others, to find ways to resolve the matter.

“Unfortunately, despite all these issues, the public still has the misconception that the developers are to be blamed for escalating property prices,” said Tong, adding that the best way to tackle the issue was to hasten approval time, decrease red tape and utility costs, as well as building more affordable houses to cater to the population.

While everyone has a role to play, Tong suggested that the Government should also look at ways of relocating some of the subsidies and allocate the sum for more affordable homes to be built instead.

On Aug 29, Selangor Development Corporation (PKNS) general manager Othman Omar had also said that delays in issuing planning approval can lead to an increase in development costs of about 20% to 30%, which, in turn, increases the development cost from RM5 per sq ft to RM30 per sq ft. The cost would then be passed down to the house buyer.

Othman also mentioned that outdated and inconsistent requirements from local councils also contributed to the contrasting cost of houses in different jurisdictions.

Meanwhile, Tong said the second Malaysia Property Expo (Mapex) of the year would be held from Oct 25 to 27 and it was expected to generate RM300mil in sales.

He said REHDA was confident that the property event would be more successful than the first Mapex in April, which recorded RM200mil in sales.

He said about 92 property developers would be participating in the event, which would also include several free public talks on a variety of subjects.

Source: StarProperty.my

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Pre-Budget 2014 – Tackling the property bubble conundrum

October 14th, 2013 No comments

People in Penang registering online for the PR1MA programme. It would be prudent for the Government to continue with its efforts in constructing housing projects that are affordable for the rakyat.

NOTHING is certain in life except death and taxes.

With the current economic climate and ever-escalating property rates these days, it is increasingly difficult for the average young professional and budding families to afford their own property, much less those in the low-income group. Even well-to-do families are looking at snapping up properties for their school-going children.

Suffice to say that one of the rakyat’s main concerns at this juncture is the continuous price hike in the housing market. It is a gripping concern that is not only felt by the rakyat but acknowledged by the Government as well.

In light of the upcoming Budget 2014 announcement, let us look at the primary cause of this conundrum. And what steps have been and will be taken to address this issue.

Supply and demand

The economic constant that influences prices is always supply and demand. There is much speculation as to why home prices are shooting through the roof.

Some have mused that it may be the inadequate supply of homes that drove up prices. But others have argued there is no sudden surge in the nation’s population and there should be a healthy supply of homes.

However, in all the clamour of trying to damper the price hike of homes in our nation, we seem to have ignored the groups who need affordable homes the most – the low-income group.

Thus, it would be prudent for the Government to continue its efforts in constructing housing projects that are affordable for the rakyat. Various initiatives such as the setting up of 1Malaysia People Housing Programme (PR1MA), which is charged with the task of building affordable quality homes, must be doubled and intensified.

Recently, PR1MA approved 15 affordable housing projects with a total gross development value of RM5bil, which will see 20,000 units of PR1MA homes made available to middle-income earners across the country.

The latest effort by 1Malaysia Development Bhd (1MDB) on affordable housing projects in Penang is also a good example of PR1MA at work.

Other efforts undertaken by the Federal Government is the assistance extended to the State Government and local authorities in constructing the Housing Project for the Hardcore Poor (PPRT). The PPRT is aimed at building affordable homes which are then rented to the poor at very affordable rates.

Recent efforts undertaken by Johor government to punish developers who refuse to build more affordable homes may appear harsh but a necessary evil.

Careful selection of contractors by the Government involved in these housing projects is crucial as those with excellent track record in safety should be selected to build the houses at the lowest base cost so that houses can be sold to eligible buyers at affordable prices.

The key here is to deliver the homes that are affordable yet does not compromise on quality and safety.

Having said that, allowing free market forces to take their course entails that property developers be given the utmost liberty when it comes to developing the type of properties that they prefer.

However certain levies and charges can be directed at these developers to help the Government finance low-cost housing projects.

Curbing speculation

The rise in short-term demand of properties can be attributable to speculators who flip properties for capital gains. Fiscal and non-fiscal measures, if implemented carefully, could aid in reducing such speculative activities.

One non-fiscal measure is to ban the Developer’ Interest Bearing Scheme (DIBS) where it encourages property speculators to make a sizeable gain with low initial costs. While the recent Bank Negara ruling in tightening credit facilities for buyers may not bode well with some quarters, this move could reduce speculation as well.

Of course, fiscal measures remain as the primary mode in curbing speculation. These measures are not new as the Government has used the fiscal measure in the past, going as far as 40 years ago, when it enacted the Land Speculation Act 1974 (LSA).

The LSA somewhat created a lot of uncertainty and with a rate of 50% on disposals occurring within two years of acquisition of asset, this had deterred genuine disposals. But one could not deny that the LSA played a role in curbing the speculative activities then.

The LSA was replaced by the Real Property Gains Tax Act 1976 (RPGT Act) with effect from Nov 7, 1975. The RPGT Act was more of a holistic piece of legislation compared to the LSA. Over the last decade, the RPGT saw a fair share of changes. As it stands, the RPGT rate will be enforced at 15% where it will be imposed for a holding period of up to 2 years, a 10% rate for a holding period exceeding two years to five years and 0% rate for a holding period of more than five years.

Of late, there have been calls to increase the rate further, while some feel that the increase of RPGT rate may not effectively curb speculation. Without RPGT, I believe that speculative activities may run rampant and this is evidenced in 2003 when RPGT was lifted for a while. Countries that have reduced capital gains tax over the years like Australia have experienced price surges in their property sectors.

An increase of 10% to 15% of RPGT for each category would be a good starting point. Also, a minimum rate of 5% of RPGT should be introduced even if the holding period is more than five years. After all, there is one life-time exemption for each of us.

The proposed increase of tax rate is expected to change the behaviour of investors. It may not solve the housing crisis but it could aid in reducing market instability.

Malaysia is not acting alone. A UK independent think-tank has suggested that the introduction of a property speculation tax could stabilise the housing market. The report argues that the move would “curb excessive volatility in the property market” and prevent a housing bubble threatening economic recovery.

In this respect, the proposed increase in property tax levied on properties owned by foreigners in Johor, depending on the scale, may yield positive outcome in dampening speculation.

As for newly developed properties, the calculation of the holding period should begin from the date of completion as opposed to the date of the sale and purchase agreement. If there is any sale prior completion, the highest tax bracket should apply.

While RPGT is imposed on the seller, the present law requires stamp duty to be borne by the buyer, unless agreed otherwise between the parties. In this instance, stamp duties on the second and subsequent properties should be increased to curb speculative buying of properties.

Moreover, seller stamp duty could also be introduced. In Hong Kong, stamp duty on certain real properties has been doubled to 8.5% to cool off the property market.

Changing the rates of RPGT, stamp duty and other forms of property taxes are temporary measures that are both practical and flexible in dealing with the property price hike conundrum. On the macro scale, all the stakeholders including the developers, home buyer associations and the Government should come together with a view to finding a viable long-term solution.

* Tan Hooi Beng is executive director of Deloitte Malaysia’s tax practice and leads the business tax service line.

Source: StarProperty.my

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PDC, PE Land ink pact on premium retail outlet for Penang

October 12th, 2013 7 comments

Johor Premium Outlet

The Penang Development Corp (PDC) has signed a purchase and development agreement for the construction of a premium retail outlet in Bandar Cassia, Batu Kawan.

The agreement, signed between PDC and developer PE Land Sdn Bhd, will see the nation’s second premium outlet after the Johor Premium Outlet.

Commercial real estate services firm CB Richard Ellis (M) Sdn Bhd (CBRE) will act as the principal consultant.

The premium outlet, costing about RM200mil, will be built on a plot of 16ha land that will also include a 300-room international-class hotel, cafes and food and beverage outlets, a landscaped garden as well as residential units.

It is part of a mixed development in Bandar Cassia branded as the Penang Designer Village with a gross development value of about RM1bil.

Penang Chief Minister Lim Guan Eng said PE Land had won the project in an open tender, and would own, build and operate the facilities while CBRE would act as the principal consultant.

“Payment for the land premium of RM65.34mil would be within three months from today,” he said in Komtar yesterday.

He added that the setting up of the premium outlet was the latest component in the state’s plan to develop Batu Kawan with new attractions towards a quality place to work, live, learn, shop and play.

“We hope that the outlet would help to make residential living in Batu Kawan more attractive for affordable homes built by PDC (12,000 units).

“The state government wishes to dispel negative perceptions that this new satellite township in Batu Kawan was inferior to living on the island,” he said, adding that with catalytic projects like educational institutions, private hospitals and premier industrial companies, the state hoped to establish the satellite township as a quality place to work, live, learn, shop and play.

PE Land chairman Jason Tai said the project was the company’s first investment in Peninsular Malaysia.

The company had been given three years to complete the construction of the premium outlet, but would try to do it in two years’ time, he said, adding that the project was expected to create about 3,000 job opportunities.

PE Land currently operates Sarawak’s premier mall, Kuching’s The Spring Mall.

Source: StarProperty.my

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Analysts expect RPGT to increase to 30% in Budget 2014 and pre-GST rush next year

October 9th, 2013 10 comments

The local property sector may only see a real property gains tax (RPGT) increase in Budget 2014, according to a report by Kenanga Research.

It said it was expecting the tax rate to increase to 30% from 15% for properties sold within two years and 15% from 10% for properties sold within three to four years.

It said the 10% rate would remain unchanged for properties sold in the fifth year and zero RPGT for properties sold in the sixth year onwards.

“We believe this has been largely been discounted and priced-in somewhat, but we do expect some slight knee-jerk reactions for a couple of weeks post announcement,” it said. Budget 2014 will be tabled on Oct 25.

Kenanga Research also said the market could experience “panic buying” by investors next year if the goods and services tax (GST) was implemented in 2015.

“Experience from other countries had seen such trends in anticipation of future cost push inflation on asset prices.

Source: StarProperty.my

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