AllianceDBS Research said the Penang property market has been facing challenging conditions since 2014 as property prices continue to rise, albeit at a slower pace.

“We notice that transaction numbers have continued to extend its decline in 2016 and there is no sign of a recovery in the near term as prices remain stubbornly high.

“Also, property launches have been experiencing slower take-up like that seen prior to 2011, when projects took 2-3 years to be fully sold, a sharp contrast to the sold-out-upon-launch affairs that we have been experiencing over the past few years,” Alliance said in a report.

Nevertheless, it said the removal of speculative fervour in the property market would also position developers for a healthier market.

“We expect property development projects in attractive locations, with attractive pricing and selling points, to continue to do well despite the softer sentiment,” Alliance said.

It noted that developers are increasingly more aggressive in engaging property agents to help market their launches even beyond Malaysia, given the challenging environment.

“We understand agents could be entitled to as much as 5% of project GDV, implying higher marketing costs, while selling price hikes may be capped by relatively weak sentiment,” Alliance said, adding that the slower economic outlook had resulted in more potential buyers adopting a wait-and-see attitude before committing to the purchase of properties.

The research house said developers have also been incorporating more affordable homes in their launch pipelines while the absolute property prices have been kept low by offering smaller built-up units. Affordable landed properties with ready infrastructure and amenities remain in demand, as evident in some of the launches in Seberang Prai.

Developers have also been looking for cheaper land in mainland Penang to tap on the demand for affordable housing.

“Mainland Penang’s property transactions have been gaining more market share from Penang Island with a 55-60% market share, compared to about 40% in 2009,” it said.

The opening of the Second Penang Bridge in March 2014 has spurred the economic development of Batu Kawan, Penang’s third satellite city located in Seberang Prai Selatan district (South of Mainland Penang).

“Thanks to the improved connectivity, Seberang Prai Selatan experienced an explosive population growth of 25% over 2009-2014, compared to the state’s 4% growth. Penang state government’s investor friendly initiatives to promote Batu Kawan via catalytic projects have also driven the area to be the next growth corridor,” Alliance said.

With the participation of various industry-leading brands, Batu Kawan is no longer perceived as a backwater, but an emerging township promising vibrant residential lifestyle at a fraction of the cost in Penang Island.

“Eco World is poised to be one of the largest private landowners in Batu Kawan with its recent acquisition of 375 acres of prime land in Batu Kawan to tap on the rising prospects there.

“Other established developers at/near Batu Kawan include Aspen Group (245 acres), Paramount Corp (29 acres) and Tambun Indah (380 acres),” Alliance said.

Source: TheStar.com.my

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Amid slowing demand and deteriorating profits, it seems now is a good time for housing developers — who are accused of being only interested in higher-end properties — to switch their focus to affordable housing, demand for which far outstrips supply.

But developers are saying that this would not be possible, especially if affordable houses are to be priced at the level the government and the people are seeking.

Deputy Finance Minister Datuk Othman Aziz, speaking at the 2017 Budget Focus Group Meeting on “Accelerating the Supply of Affordable Housing” last month, said houses priced up to RM165,060 are considered affordable to a median Malaysian household.

But developers said even a price of RM250,000 would not be a viable price tag, especially in the Klang Valley and other major urban areas. They argue that there are many aspects in the building cost that have continued to rise — most of which are the result of escalating land prices.

Real Estate & Housing Developers’ Association Malaysia (Rehda) president Datuk Seri FD Iskandar Mohamed Mansor noted that Khazanah Research Institute’s (KRI) report last year titled “Making Housing Affordable” concentrated primarily on three costs: material cost, machinery and equipment cost, and labour cost.

Of these three, he said, wages still show an increase. “In reality, the cost of labour has consistently been on the rise especially during times when there is a critical shortage of skilled labour,” he said in an emailed interview with The Edge Financial Daily.

“Many skilled workers trained in Malaysia have since returned to their country of origin or have moved to another country where the salary commanded is much higher than in Malaysia,” added FD Iskandar, who is also Glomac Bhd managing director and chief executive officer.

After paying for land to build a property project on, developers are required to surrender a portion for the construction of facilities, roads and drainage, social and community facilities, provision of open spaces, and utility companies, among others.

And, there is also capital contribution of “between 3% and 30% of gross development value to private utility companies such as Tenaga Nasional Bhd and Indah Water Konsortium Bhd, as well as other fees and deposits to various agencies and authorities”, said FD Iskandar.

Land prices have been going up and are higher in the city centre due to its scarcity. The premium for land conversion status, which is valued at a certain percentage of the tract’s current market value, will also increase. FD Iskandar said generally, the charge for land conversion has doubled within the past five years.

Land constitutes up to one-third of construction cost, which then makes cross-subsidising low-cost and affordable houses rather unsustainable for property developers, said the Rehda chief.

Even without factoring in the land price, he said low-cost housing selling price is capped at far below the cost to build it. And this results in the cost being pushed to other homebuyers.

“Currently, the cost to build low-cost housing — excluding land cost — is about RM105,000 for strata and RM75,000 for landed, whereas the selling price is controlled at RM42,000 maximum. Cross-subsidies for low-cost units are shouldered by buyers of other segment within a project, pushing prices up further,” FD Iskandar said.

In a prior interview with The Edge Financial Daily, KRI managing director Datuk Charon Wardini Mokhzani said: “Many of the issues of affordability in Malaysia are not so much the prices, but the incomes are not as high as they could be. Half of Malaysians earn less than RM1,600.

“It’s hard if you want to bring up a family — in Kuala Lumpur, especially. The possibility of you ever being able to buy a house is quite remote,” said Charon.

He also acknowledged that land prices are a major factor in raising property prices, but this is the result of a vicious cycle that needs to be stopped.

“Why have land prices gone up? I can sell it for a higher price than yesterday because people want the land to build houses. And why have house prices gone up? Because land prices have gone up,” Charon laughed.

Since KRI’s publication of Making Housing Affordable last October, the research institute has been saying property developers can achieve higher productivity and efficiency by switching to Industrialised Building Systems (IBS) method, where essentially a home’s components are prefabricated at a facility and later pieced together at the site.

“The first one or two projects may be more expensive than the old way because it takes time for people to learn how to do it. It takes time to get enough critical mass of suppliers,” said Charon.

Asked about this, FD Iskandar said the increase in employing IBS may be 5% to 20%. As such, “incentives must be given for IBS to work especially in the initial stages. For example, tax break for five years, 80% of government projects must be done through IBS, and others.”

The Rehda president noted that homes that were sold at RM200,000 or below tended to have high take-up rates. Citing data from the National Property Information Centre, transactions of residential properties priced RM200,000 and below were above 100,000 units per annum between 2011 and 2015.

“[In 2015,] transactions of residential properties priced RM200,000 and below made up 52% of the total transaction, at 123,679 units,” he said.

Tan Sri Leong Hoy Kum, managing director of Mah Sing Group Bhd, which has been pushing for more affordable properties, however, thinks that properties “below RM1 million are still considered acquirable” by urbanites.

“However, we have to understand that different locations have different income level, resulting in different levels of affordability … on the fringes of the city, affordable properties are approximately RM500,000 to RM700,000; while properties priced below RM500,000 are located well outside the city,” he told The Edge Financial Daily.

Source: TheEdgeProperty.com.my

Taman Skyridge, an ongoing affordable housing development by OHM Group at Tanjung Tokong. It is located off Lebuh Halia, right next to Skyridge Garden. Other neighboring communities include The Peak Residence, The Latitude, Taman Mount Erskine, Mont Residence (under construction) and Tri Pinnacle (under construction).

This development comprises a 35-storey building, offering 123 affordable units with indicative price ranges from RM200,000 onwards.

Facilities (~80,000 sq.ft.):

• Basketball court, Indoor table tennis, Gymnasium
• Landscape garden, Garden lounge, Lounge, Viewing deck
• Study area, Function area, Conference room, Multi purpose hall
• Children’s playroom, Dancing room, BBQ deck

READ MORE ABOUT AFFORDABLE HOUSING:

• Eligibility and the requirement of buying affordable housing
• Full list of affordable housing in Penang

Project Name : Taman Skyridge
Location : Mount Erskine, Tanjung Tokong, Penang
Property Type : Affordable housing
Built-up Area: 750 sq.ft. & 850 sq.ft.
Total Units: 123 (affordable housing), 183 (LMC)
Land Tenure: Freehold
Indicative Price: RM200,000 onwards (affordable housing)
Developer : OHM Group

Location Map:

In a move to facilitate loan transactions between first-time house buyers and banking institutions, the government is expected to announce a new scheme during the tabling of the 2017 Budget.

Second Finance Minister, Datuk Johari Abdul Ghani said his ministry is currently collaborating with Bank Negara, Malayan Banking Bhd (Maybank), the CIMB Group, RHB Bank Bhd and the AmBank Group to study the best mechanism in implementing the scheme.

Johari said the scheme is aimed at helping first-time house buyers, especially young graduates, or those who have just started work, to get a full loan for the purchase of houses priced below RM300,000.

“Sometimes, the government would provide a deposit of RM30,000 (under the MyDeposit Scheme, First House Deposit Financing Scheme) for houses priced RM300,000, but the applicants still need to borrow RM270,000 whereas banks can only give a loan of RM200,000 according to their monthly wage. Thus, this is where we come in to help.

“The scheme is expected to be announced by Prime Minister Datuk Seri Najib Tun Razak when tabling the budget,” he told reporters during a media conference after the launching ceremony of the ‘Rumah Mesra Rakyat’ (RMR) Online system for the ‘Rumah Mesra Rakyat 1Malaysia'(RMR1M) programme, here today.

Also present was Syarikat Perumahan Negara Berhad (SPNB) chairman, Datuk Dr Abd Latiff Ahmad.

Johari said SPNB had currently completed 36,013 units of RMR1M houses, while another 1,921 units were still under construction and 254 were in the process of agreement documentation.

During the event, SPNB launched a new system, the RMR Online system as an alternative to help applicants to apply and check on their status as well as to complete the documentation required.

Find out the full list of affordable housing in Penang

Source: Bernama