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One voice against rates

April 5th, 2014 296 comments

Unhappy lot: Residents of One World and One Sky condominium posing for a group picture in front of their commercial units in Bayan Baru, Penang.

RESIDENTS of the One World and One Sky condominium blocks in Bayan Baru, Penang, are disputing the annual property value (APV) fixed for their units by the Penang Municipal Council (MPPP).

One World chairman Brandon Oon, representing the owners of all 538 units of both blocks, said the APV of their units were very high compared to some other commercial units in the municipality.

Citing a commercial centre in Bukit Jambul as example, he said the APV there was just RM3,100 for a 730sq ft unit while theirs were between RM22,800 and RM28,000 for units which are from 1,160sq ft to 1,450sq ft in size.

Oon said the owners understood that their condominium units were classified as commercial units in a small-office-home-office (SOHO) development as the contracts they signed stated so.

He said they were willing to pay the assessment rates for such units but felt that the APV was unjustified.

“When our appeal to reduce the assessment rate was rejected, the only reason MPPP gave was that our homes are commercial units. We are looking forward to have a dialogue session with MPPP to get an explanation why the APV for our units are so high,” he told a press conference at the One World community hall yesterday.

Oon said the assessment rates fixed by the MPPP for their units were between RM2,350 and RM2,884.

Consumers Association of Penang (CAP) head of complaints Ravinder Singh, who was present, said the questions raised by the residents were valid.

MPPP Financial Management Committee alternate chairman Joseph Ng Soon Siang said he believed the residents would write in an official letter to the council for a dialogue session to review their case.

“We will look into the matter if we receive any letter. I must discuss with my colleagues before deciding on the issue as previously we had a dialogue session with them on Feb 14,” he said when contacted yesterday.

The council had, on March 27, announced that the appeal by the condominium residents to reduce their assessment rates had been rejected.

Source: StarProperty.my

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Developers’ focus shifts with Second Penang Bridge

March 31st, 2014 3 comments

The opening of the second Penang bridge has stirred interest on Seberang Prai housing market.

The island, however, is seeing fewer residential property launches due to land shortage, higher land cost and a challenging property market environment. Nevertheless, Raine & Horne director Michael Geh says the gross development value (GDV) of the projects launched on the island this year will still be higher.

Of this RM4.56bil, about RM1.86bil will be residential and commercial projects planned in Seberang Prai, while the remaining RM2.7bil will be on the island.

Although in value terms the island will have a lion’s share, much of the focus is expected to be on Seberang Prai, located on Peninsular Malaysia.

To a large degree, the focus on Seberang Prai has been triggered by the announcement of the second bridge by Malaysia’s fifth prime minister and Penangite Tun Abdullah Ahmad Badawi in the Ninth Malaysia Plan in August 2006. Since then, property prices in Seberang Prai and on the island have risen significantly. One can consider 2006 as the watershed where Seberang Prai is concerned.

The opening of the RM4.5bil second Penang bridge on March 1 is also expected to spur a second wave of interest.

The connectivity is expected to boost retail, for a start. There are plans to develop a RM200mil premium retail outlet known as Penang Designer Village and an integrated shopping mall which will be anchored by an IKEA store in Seberang Prai.

PE Land Sdn Bhd will undertake the Penang Designer Village, while the integrated shopping mall with residential components will be developed by Aspen-Ikano.

Residential development is also expected to improve with the entry of big players into that area in terms of style and design.

Last December, Mah Sing Group Bhd acquired 30.9ha in Jawi, comprising 20 pieces of prime freehold contiguous land, for RM400mil. Its group managing director and chief executive Tan Sri Leong Hoy Kum says the group plans to introduce an integrated township called Southbay East.

Leong says the township is currently at the planning stage. He says the freehold township located just 6.6km from the Jawi toll plaza on the North-South Expressway is expected to attract those who work and live in Southbay East’s immediate surroundings. The property developer is proposing linked homes, semi-detached units and town houses. There will also be a club-house.

But land prices may become an issue. Henry Butcher Seberang Prai’s associate director Fook Tone Huat says vacant land prices in the area, especially those in south Seberang Prai where the second bridge is located, are now hovering between RM40 and 50 per sq ft, a huge jump from 2006’s RM8-RM9 per sq ft.

Land prices in Central and North Seberang Prai were then between RM20 to RM40 per sq ft, compared with today’s range of between RM50 and RM100 per sq ft. The increase in land prices has translated into higher property prices.

“New landed properties such as double-storey terraced units in South Seberang Prai are now priced between RM350,000 and RM400,000 compared with between RM150,000 and RM200,000 prior to 2006,” Fook says.

Double-storey terraces in prime locations in Central and Northern Seberang Prai have doubled from RM200,000-RM270,000 range to RM400,000-RM600,000.

“We are also seeing a lot of life-style condominium projects being planned in Bukit Mertajam this year with new units priced at at around RM300 per sq ft,” Fook says.

As for the secondary or sub-sales market, double-storey terraced houses have a wide price range of between RM250,000 and RM500,000, depending on location.

Landed properties in the sub-sales segment command the best pricing in Bukit Mertajam and Butterworth town.

Despite the interest in Seberang Prai, Fook expects the volume of property transactions to soften this year, due largely to the difficulty in obtaining housing loans.

“There will definitely be fewer transactions this year compared with about 12,000 registered for 2013.

“Since January, we have seen fewer enquiries for primary and secondary market properties as the rejection rate of housing loans is currently at about 60%. Property prices are expected to remain more or less the same as last year,” Fook adds.

Real Estate and Housing Developers’ Association (REHDA, Penang) chairman Datuk Jerry Chan says due to the tightening of bank loans, he expects the volume of property transactions to decline by about 30% this year.

“The overall transacted value will also fall by about 20%,” he says. Raine & Horne’s Michael Geh expects properties in the secondary segment to remain stable, while those in the primary market might soften slightly.

“There will definitely be a dip in the volume of transactions, due to the stringent loan conditions,” Geh says.

Despite issues about buyers getting the margin of financing they would like to have, this does not seem to have deterred developers from entering the Seberang Prai market in a fairly big way.

DNP Land, which is part of Singapore’s Wing Tai group, will be developing a RM250mil condomonium project known as Bukit Mertajam Mahkota and the RM550mil Jesselton Hills landed property scheme in Bukit Mertajam, located in Central Seberang Prai. Tambun Indah Land Bhd is also planning RM616mil worth of landed property launches for Bukit Mertajam and Pearl City in Simpang Ampat, south Seberang Prai.

DNP Land (North) general manager K.C. Tan says the Bukit Mertajam Mahkota project will be the town’s first high-end condominium development. As for Jesselton Hills in Alma, it will have 200 units of semi-detached and terraced houses.

“The projects are strategically located between the first and second bridges, and is close to Jalan Song Ban Kheng, a prime residential district. They are also surrounded by the Prai and Bukit Minyak Industrial Parks and Penang Science Park.

“We expect buyers from Kedah, especially from Kulim High Tech Park, as Bukit Mertajam is the main connecting point between Penang and Kedah,” Tan says.

IJM Land, known for its Penang island Light project, is also launching RM236.5mil worth of properties comprising double-storey houses in Jawi, south Seberang Prai, and double-storey linked bungalows in Bukit Mertajam, central Seberang Prai. One of Kuala Lumpur’s heavyweight, Sunway Bhd is also planning to launch some RM150mil worth of residential and commercial projects for the second phase of Sunway Wellesley in Seberang Prai, a mixed-development project in Bukit Mertajam, at the end of this month, while the RM60mil third phase, comprising resort condominiums, will kick off in October.

Sunway Bhd general manager Tan Hun Beng says the group will be launching more properties in Seberang Prai as the lower land prices there has allowed the group to price its properties affordably. In June this year, Sunway will launch the RM80mil Sunway Cassia third phase, double-storey semi-detached and three-storey terraced houses, in Batu Maung, in Seberang Prai.

The focus on Seberang Prai, by no means, mean that there is less interest on the island. In fact, property prices have grown by leaps and bounds the last several years. This year, however, will see less launches of landed units, due largely to land shortage and high prices.

Raine & Horne Malaysia director Michael Geh says the price of vacant land has increased to around RM250 to RM300 per sq ft in Batu Maung in the southern part of the island, where the second bridge is located, from about RM50 to RM60 per sq ft prior to 2006. This effectively means that in just eight years, land prices have increased by 400%.

However, Geh also says land prices depend on what the land is being zoned for, whether it is agriculture, commercial or residential usage. This increase in land prices coupled with other factors have resulted in higher property prices.

New two- and three-storey terraced houses on Penang island now cost about RM1.2mil in the south of the island, compared with about RM450,000 prior to 2006.

“New condominiums in similar locations are now priced at RM700,000-RM800,000, compared with RM250,000-RM300,000 prior to the second-bridge announcement in 2006. In the prime locations of the north-east districts such as Tanjung Bungah, Tanjung Tokong, and Pulau Tikus, new lifestyle high-rise units start from RM800,000 onwards, doubled what it used to be in 2006,” Geh says.

How sustainable are these prices? The reponse to launches will be an indication.

Eastern & Oriental Bhd will be launching its RM800mil Andaman Edition 18 East condominium scheme on the island in the first half of this year. IJM Land will introduce its RM125mil Trehaus@Bukit Jambul. This comprises condominium villas and semi-detached villas, and a yet-to-be-named medium and low-medium cost project, which has a RM177mil GDV, in the fourth quarter of this year.

S P Setia will launch in the second half the RM300mil Setia Sky Vista, a condominium project, in Relau.

These launches will be keenly watched.

Source: StarProperty.my

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Developers in bed with underworld contractors face ban, Penang says

March 29th, 2014 23 comments

Penang will blacklist any developers found in cahoots with “gangster contractors” who intimidate home buyers into engaging them for renovations.

The state government said it has arranged to meet with the Penang police chief to crack down on the group allegedly intimidating and threatening new home buyers into engaging their services, especially in high rise projects.

“We will not tolerate this. If we find any developer involved in designating these gangster contractors to intimidate and threaten home buyers into booking their renovation services at their projects, we will not hesitate to blacklist the developer,” said Penang Housing state executive councillor Jagdeep Singh Deo.

He told a press conference that he had recently received complaints from home buyers who alleged they were threatened for not engaging the project’s designated contractor to undertake renovation works on their newly completed apartment units.

“They now fear for their safety as they had been threatened,” he said.

This is not the first time such incidents took place, and Jagdeep admitted that it has been going on for years in other residential high rise projects in the state.

Such cases involve “designated” contractors who set up temporary stations at newly completed apartments and allegedly coerce home buyers planning to renovate their units to use their services.

Home buyers who appoint their own contractors will be forced to either pay a “fee” or to buy renovation supplies such as cement and tiles from them.

“I have said this before, there is nothing in the law that requires home buyers to up take up renovation packages if they don’t want to and this most definitely is not in any sales and purchase agreement,” Jagdeep said.

He called on all home buyers who faced similar issues at their apartments to lodge police reports against the errant contractors.

“This is criminal intimidation and harassment. The police can take action against them,” he said.

He said the state will urge the police to act harshly against these contractors while the state will check to ensure the developers are not in cahoots with these contractors.

Source: The Malay Mail Online

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Paramount buys land in Batu Kawan to build university college and mixed development

March 26th, 2014 13 comments

From left: Paramount Corp group CEO Datuk Teo Chiang Quan shakes hands with Penang Development Corp GM Datuk Rosli bin Jaafar, as Penang Chief Minister Lim Guan Eng and deputy GM of PDC Iskandar Basha bin Abdul Kadir look on.

Paramount Corp Bhd has purchased 30 acres of freehold land in Batu Kawan, Penang for RM67mil from Penang Development Corp (PDC) to build a university college and mixed development project

The land for the future KDU College Penang was priced at RM40.50 per sq ft while the land for the proposed mixed development was priced at RM55 per sq ft. It is located 5 minutes from the Second Penang Bridge at Bandar Cassia, a new township in Province Wellesley.

Under the agreement, Paramount will build Penang’s first university metropolis in Batu Kawan. The metropolis will be developed by Paramount Property, the property development arm of Paramount, and will be anchored by a new purpose-built campus for KDU Penang, owned by Paramount’s KDU Education Group.

The acquisition will be funded through internally generated funds and bank borrowings.

“In addition, Paramount is required to complete and commence the development of the education component within 5 years. It is also required to complete the integrated development within 10 years, both from the agreement date. It is to obtain all approvals from relevant authorities and complete the development at its own cost,” Paramount said in a statement.

Paramount told Bursa that the rationale for the deal is to increase the group’s land bank at locations with strong growth potential and to strengthen the group’s long-term sustainability by synergising the two core businesses of property development and provision of educational services.

The deal is in line with PDC’s policy to promote and sell land to attract catalyst projects in Bandar Cassia, and to provide services that will help complement the area’s industrial and housing development sectors.

Source: StarProperty.my

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Malaysians get RPGT tax-free once-in-a-lifetime!

March 20th, 2014 7 comments

As proposed, with effect from Jan 1, 2014, the RPGT rates have been increased from the previous rates of 0% to 15% to the new rates of 0% to 30%, which are summarised as shown in Table 1.

The new rates should not significantly affect long-term investors. Although many may have some concerns on the higher rate of RPGT, it is important to note that RPGT will only be imposed on any gains on the disposal of a property instead of on its selling price.

As such, I believe that some investors may not regard the change in the RPGT rates as one of their foremost concerns in holding back their property investments.

This is especially so for newly launched developments where the developers require three to four years of construction period to complete the developments. Hence, if they were to sell their property in the fifth year, the RPGT rate should only be 5% and “Nil”% if they were to sell in the sixth year.

Table 1: NEW RPGT RATES

If an individual investor were to sell his investment within three years from the date of investment, he may still consider exercising his “once-in-a-lifetime” RPGT exemption on any gains arising from the disposal of his residential property.

In most cases, this exemption shall only be used when a significant gain arises from the disposal of the property after a short holding period. In view of the above, it is unlikely that the new RPGT rates will be labelled as the main disincentive for investors to invest in real properties moving forward.

Nevertheless, there is no doubt that the change in the RPGT rate will affect the short-term property speculators who tend to buy and sell their investments within a short holding period.

When will the Government next change the RPGT rates?

Despite all of the above, you may notice that the Government often fine-tunes the RPGT rates after a period of time – i.e. there have been five changes in RPGT rates within a period of six years since April 1, 2007, as summarised in Table 2.

What else is coming? We hope that this new set of RPGT rates is only a short-term measure imposed by our Government.

Better to purchase in own name or under a company?

For investors who take a contrarian view and believe in the “time-to-buy-now” approach, they may be interested to know which is the best way to hold their investments, i.e under their personal name or under the company’s name. This is because different methods of holding the investments will result in different tax consequences at the time of disposal as shown in Table 1 above.

Will there be any fixed formula to address the question of who should hold the investment?

I can only share my view on a general basis. It depends greatly on the individual investor as to whether he has diligently reported all of his income to the MIRB (Malaysian Inland Revenue Board).

If he has, he should have no worries about holding the property under his name or his company’s name. This is especially true if he intends to dispose of the property within five years from the date of purchase since there is no difference in the RPGT rates.

Table 2: CHANGES IN RPGT RATES

However, if the purpose of such investment is for the long term, i.e. he will only dispose of the property after five years of purchase, it may be better for the individual to hold the property under his personal name.

This is because any gain on the disposal of the property after a five-year holding period by individual investors will not be subject to any RPGT.

Even if he changes his mind and decides to dispose of the property within three to five years of purchase, he can still opt to exercise the “once-in-a-lifetime” tax exemption so that he does not have to pay any tax on the disposal of such a property.

However, it is important to note that this tax exemption is only applicable for the disposal of residential property by individual citizens or Permanent Residents (PRs) and is not applicable to any disposal of commercial property or disposals by persons other than citizens or PRs.

On the other hand, if the individual is interested to invest in properties but has somehow not complied diligently with the tax law, he may choose to keep himself away from the radar of the MIRB by being less active in property investment under his personal name.

If the investment is under a company and the company were to dispose of the property within a five-year holding period, there is actually no difference in terms of the RPGT tax liability.

However, the method of holding may help to keep the investors away from the attention of the MIRB. Hence, it is always important to know your rights and plan ahead to minimise your tax liability over the long term.

* Fennie Lim heads the Crowe Horwath KL Tax Division and has been in the tax profession for the last 22 years. She has a wide range of experience in tax compliance, tax advisory and indirect taxes, and has advised many large local and multinational clients on complex tax engagements. *

Source: StarProperty.my

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