THE government will initiate measures to address various issues gripping the property sector, including curbing rampant speculative activities in the market.

Housing and Local Government Minister Datuk Seri Chor Chee Heung said he would present to the cabinet findings of an industry meeting which could be used to come up with innovative ways to build affordable homes.

“The government has done fairly well in addressing the housing issues of the lower income. However, 40 per cent of the medium-income society still need accommodation.

“My ministry will use some of the findings to improve the sector,” Chor told reporters here after opening a roundtable discussion on “Housing Affordability – Issues and Challenges”.

The government will put forward recommendations, which will be based on proposals made by Real Estate and Housing Developers Association Malaysia (Rehda) such as on how to curb speculative property prices, financing, abandoned projects and sluggish developments.

Metro Kajang Holdings Bhd group managing director Datuk Eddy Chen Lok Loi said for example, a house built in Perlis cost RM250,000 but the same house using the very same materials but built in KLCC would cost RM1 million.

“This is caused by land cost due to two different locations. Nevertheless, there are some of the issues which Rehda will look into to address this such as materials prices. Working groups and a task force have been set up,” said Chen.

Meanwhile, National House Buyers Association secretary general Chang Kim Loong said all parties, including the government and developers, need to launch proactive measures to stop steep price increases in the property market due to false demand and excessive speculation fuelled by easy mortgages and low real property gain tax.

“There is a huge mismatch between what the average household income can afford to buy compared to what is available in the market. A homeless generation will emerge and create various social problems,” said Chang.

Chang said the average rakyat in a major urban area was struggling to buy his dream home where the average household with income of RM5,962 in 2009 would not be able to qualify for a 90 per cent loan over a 30-year period.

Assuming the average household income rises 15 per cent this year, the household may still not qualify for a 90 per cent loan in far areas such as Kajang, let alone in hot areas such as Kuala Lumpur.

He added that the government must also fine-tune the Bumiputera quota which has not made any headways.

“Don’t get me wrong, we have no qualms over the discount for the first buy. But when you buy properties for the fourth and the fifth time and get up to 15 per cent discount … that is wrong,” said Chang.

Source: Business Times

Jambul Heights, a low density residential development by Aurora Properties Sdn. Bhd. This condominium is strategically located within the established township of Bukit Jambul, Penang.

Comprises 62 condo units with built-up area from 1,221 sq.ft. onwards. Spacious layout with 3 bedrooms and 3 bathrooms, and comes with 2 car parks.

Project Name : Jambul Heights
Location : Bukit Jambul, Penang
Property Type : Apartment/Condominium
Built-up Area : 1,221 sq.ft. onwards
Total Units: 62
Land Tenure : Freehold
Indicative Price : RM702,000 onwards
Developer : Aurora Properties Sdn. Bhd.
Contact No: 04-228 3539

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LATELY, there have been many ongoing discussions on the topic of high property prices. It made me ponder on the various causes that might have contributed to the situation, including the question of whether developers are making too much.

As I took a sip of tea, many thoughts came to mind which I found interesting and worth sharing before we dwell further into the real factors of rising property prices.

Based on annual reports (see chart) of three major property developers in Malaysia, namely SP Setia, UEM Land Holdings and Mah Sing Group, they are generating an average of 18% profit margin from their projects, and at the same time incurring a staff cost of about 7% of their total revenue.

These companies are major developers in mass residential properties which have high sales turnover, and therefore a good reflection of the average developers’ profit margin in the residential market.

These findings may contrast with people’s perception of the profitability of the property development industry.

Though it may sound like a fantasy, assuming I could convince these three property developers to give back their entire profit to their customers, it would mean an average of 18% discount on property prices for the year in question.

This would seem like a fantastic bonanza for the buyers of the properties in question. But would a 18% discount really make these properties affordable? I would imagine that people will still find these properties expensive.

Let’s take an example of a terrace house that costs RM700,000 in Petaling Jaya. It would be priced at RM574,000 after the 18% discount.

If a home buyer is able to secure a 90% loan with a maximum repayment period of 30 years, the monthly loan instalment for RM700,000 and RM574,000 would be RM3,081 and RM2,526 respectively (based on a BLR-2.4% loan package with current BLR at 6.6% per annum).

From the above example, while the discount may seem substantial at absolute price, it is not significant in terms of monthly loan instalment for home buyers.

The debt commitment level for the latter is still considered high and out of reach for most people especially those who have just started their career.

Now, let’s take a hypothetical scenario that the property developers decide to make their staff work for free that year.

It would mean another 7% discount to customers after deducting staff cost. Even with this total discount of 25%, property prices in many areas would still be considered unaffordable to many.

Anyhow, back to reality, it is impossible for any commercial enterprise to work for free or give up its profit if it was to run a sustainable business, as well as to satisfy its shareholders’ expectations.

For the property development industry which has a product life cycle of four to six years (starting from land acquisition to handover of keys to customers), it is a challenge to further compress the profit margin after taking into account the risk and inflationary factors involved in such a long product life cycle.

Let us look at other industries as a comparison and review their profit margins.

For the banking industry, the three largest local banks that were selected are Maybank, CIMB and Public Bank. Likewise, the three major players from the mobile telecommunication services were Axiata, Maxisand Digi.

The results showed that the average profit margin for the banking industry is 35%, while the mobile telecommunication industry is enjoying an average profit margin of 26%. So, back to my question “are developers in Malaysia really making too much?”

Compared with the average profit margin of the banking and telecommunication industries, the profit margins of property development companies are significantly lower and definitely not on par in terms of the actual profit before tax figures.

Putting aside the profit margin for property development which is already relatively low compared with the other two industries, what are the other factors that are causing high property prices?

Many other underlying factors could be looked into in relation to the escalating property prices, instead of merely contemplating the issue as a market trend or as a result of developers’ profits.

The Government, property developers, home buyers, as well as NGOs (non-government organisations) will need to work together to identify the root causes of inadequate supply of affordable homes in Malaysia.

Let’s ponder this issue over the next few weeks and I welcome any suggestions and feedback to shed some light on it as I dwell further into this crucial topic in my next article.

● FIABCI Asia-Pacific chairman Datuk Alan Tong has over 50 years of experience in property development. He is also the group chairman of Bukit Kiara Properties. For feedback, please email feedback@fiabci-asiapacific.com.

Source: The Star

GEORGE TOWN: Thousands of residents in low-lying areas were hit by an early morning flood after a downpour that started at 3am.

Parts of Jalan P. Ramlee, Jalan Sungai Pinang, Jalan Patani, Jalan Air Itam and Jalan Datuk Keramat were flooded. The water level was knee-deep in some areas, and the situation was made worse by the high tide yesterday.

At least 3,000 people, mainly those living in the flood-prone areas of Datuk Keramat and Jalan P. Ramlee, were affected.

Many residents could be seen cleaning their houses after the floodwaters receded.

Retiree Hamid Karim, 59, said the water rose to chest-level at Jalan P. Ramlee during the three-hour downpour.

“I stayed at my neighbour’s house until 9am. My family members were sent to my relatives’ house nearby. When I returned, my bed, cupboards, washing machine and fridge were soaked,” he said.

Another resident Hajjah Rahima Mohd Noor, 80, said her house was hit by flash floods for the third time since June this year.

She said the water rose to at least one metre in her house during the downpour.

Datuk Keramat assemblyman Jagdeep Singh Deo said the rainfall recorded was 140mm within two hours yesterday.

He said the problem would be solved permanently once Phase Two of the flood mitigation project is completed.

The project costing RM150mil is listed under the 10th Malaysia Plan. It involves the widening and deepening of the river from Kampung Rawa to the Dhoby Ghaut bridge to help alleviate flooding in the surrounding areas.

State Agriculture and Agro-based Industries Committee chairman Law Choo Kiang said the rainfall recorded yesterday was the highest since September 2008.

“Water overflowed the banks in Sungai Pinang, causing flash floods in several areas.

“The water started to recede at 8am. The Penang Municipal Council and state Drainage and Irrigation Department must carry out the clean-up work immediately,” he said.

Source: The Star

Kobay Jelutong, an upcoming mixed development by Kobay Properties Sdn Bhd strategically within Jelutong township in Penang.  This project comprises shopping mall, shop lot, SOHO towers, apartment as well as a low medium cost apartment.

This project is currently in planning  stage and it is yet to be confirmed. Please remember to  us so that you will get informed with latest property updates.

Property Name: Kobay Jelutong 
Location : Jelutong, Penang
Property Type : Mixed development
Built-up Area: (Pending confirmation)
Land Tenure : Freehold
Developer : (Pending confirmation)

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