Developers still getting good sales from new projects

In every storm, there is a silver lining. Despite the current tough economic conditions, property developers are still able to launch new projects and fetch encouraging sales from ongoing projects, thanks to the low interest rates and attractive financing packages offered by property developers.

Based on banking data released in early May, approved loans for residential property surged 49% in March from the previous month.

According to developers, home buyers are not simply opting for cheaper homes due to the slowdown but are looking for good value buys as opposed to just a cheap sticker price.

That is reason enough for some developers to base their launches on their target markets instead of being compelled to switch to cheaper or affordable properties.

Most, if not all, major property firms are offering attractive financing packages to lure property buyers.

SP Setia Bhd launched its 5/95 home loan package in January. Under this programme, it registered sales of over RM500mil to date. It also targets to sell RM300mil worth of properties during the three-month extension of the 5/95 home loan package promotion from April 19 to July 19.

SP Setia president and chief executive officer Tan Sri Liew Kee Sin says the sales figures show that the market is still active.

“Property players in Malaysia are riding out the challenge well. Many have come up with attractive packages to entice buyers,” he tells StarBizWeek.

Another property player, Mah Sing Group Bhd, also launched an easy home ownership programme that has lifted sales to RM170mil in the first quarter for the financial year ending Dec 31 (FY09), compared with RM115mil previously.

In fact, its group managing director and chief executive Datuk Seri Leong Hoy Kum says sales chalked up in the first three months of FY09 already represent 38% of its RM453mil full-year sales target.

“Attractive financing packages and low interest rates are increasing the affordability for buyers. Buyers will also look at various other factors including location, practicality of design, value-added features and branding as well as track records of developers to make their purchase decisions,” he says.

Paramount Corp Bhd managing director Ong Keng Siew says its home ownership scheme, which was launched early this year has helped grow its sales in recent months. He believes that the scheme will continue to help generate sales in the next two years.

The company recently announced that it plans to launch a mixed township development – Bayan Hills in Sungai Petani next year with a gross development value (GDV) of RM1bil.

Paramount has also launched 38 units of two-storey semi-detached industry property in Kota Damansara with GDV of RM120mil, of which 22 units were sold to date.

Mah Sing plans to expand its landbank for commercial and residential projects which fits its business model of quick project turnaround.

It is looking to acquire one to two more pieces of land for integrated commercial developments next year.

Next month, Mah Sing will launch two developments, Starparc Point in Setapak, Kuala Lumpur, a five-acre commercial development with a GDV of RM125mil and the 54-acre residential precinct of Southbay Penang with a GDV of RM518mil.

The Southbay Penang residences comprise 284 super-link homes priced from RM795,000 and 76 bungalows priced from RM3.7mil. Currently, it has five ongoing commercial projects in Kuala Lumpur and Penang worth a total GDV of RM2.2bil. Meanwhile, SP Setia is set to launch a block of Setia Sky Residences with a GDV of about RM220mil and is waiting for one more approval from the authorities.

This is SP Setia’s first high-rise project in the Kuala Lumpur City Centre and it is located in Jalan Tun Razak on 5.96 acres with a total GDV of RM800mil, comprising four 39-storey tower blocks, with each block containing 211 condo units.

When the project was first unveiled, it was priced at an average of RM800 per sq ft. “Now, the price is at an average of RM680 per sq ft as raw material prices have stabilised. We have not reduced any of the unit sizes. Built-ups are still from 800 sq ft onwards,” he continues.

The company also has a few launches in the pipeline in Penang in the coming months. The group is confident of achieving its target of RM180mil in revenue from the sale of its properties in Penang for the financial year ending Oct 31 (FY09).

Liew says the group is on track to achieve total sales of RM1.1bil for FY09.

SP Setia’s products range from link houses for the mass market to luxury bungalows. Prices for its terraced homes in Setia Alam, Shah Alam start from RM300,000.

In Johor, its link homes are priced between RM200,000 and RM250,000. “All our townships are continuously launching in phases,” Liew says.

Paramount’s Ong says luxury developments may take a hit during a slowdown. But there’s no big impact to the mid-range to upper mid-range properties “because Malaysians still like to own properties”.

“Demand is still there, but all depends on the locations and reputation of the developer. People like to buy properties whether for their own use or for investment,” he says.

“Property is the best bet against inflation. Those smart property investors will always look for good properties to invest,” he says.

Mah Sing’s Leong says: “We feel that medium to high-end landed residential property segment will still do well due to the limited investment options for good properties in prime locations”.

According to the National Property Information Centre report for 2008, transaction volume grew by 10% for houses priced above RM500,000 and by 33% for houses priced above RM1mil.

Leong says this probably reflects the supply demand gap for properties in this price range, especially as semi-detached homes and bungalows account for less than 10% of the residential property supply. Mah Sing has met close to 40% of its full-year RM393mil launch target given the continuous strong demand.

“We plan our launches very carefully, and generally, our products enjoy at least 80% sales take up,” Leong continues.

He says “affordable” homes can be from RM200,000 to RM500,000, depending on location and the property.

By The Star (by Rachael Kam)

Building higher values

The economy’s weaker-than-expected performance in the first quarter of this year at -6.2% and further contractions expected in the second and third quarters, albeit at smaller percentages, is a big wake up call for the government and the people to put in greater efforts to rein in the declines.

The poor performance points to more difficult times ahead for many industry sectors including property, which will be in for a few more lacklustre quarters.

This shows that the magnitude of the problems plaguing the global economy is very severe and things certainly don’t look good for corporate earnings.

Much of the excesses and incompetencies that plunged many of the developed economies into one of their worst recessions since the Great Depression are still unresolved, and these will need much more effort and time to be addressed.

Far from what some pundits would like us to believe, a bottoming out of the world’s economy is still nowhere in sight, much less a recovery.

It is best to face the wrath of the global financial meltdown by getting to the bottom of the problem and repairing the weaknesses rather than see any positive sign as a “green shoot” that the government measures are working well.

Although Malaysia has been lucky so far and spared from a much more severe hit suffered by other countries, there is a need to strengthen its economic structure and move into higher value adding activities.

The Government’s initiatives to liberalise the economy are a good start and these should be followed by a more enabling environment to promote greater income earning opportunities and allow wages to catch up with those in other countries.

Even in the lower economic activities, such as waitressing in the food and beverage (F&B) sector, there are opportunities for higher value activities to be introduced.

It is necessary to employ more Malaysians instead of unskilled foreigners in a broad spectrum of economic sectors, including the F&B and factory production lines, as they are better educated and require less training.

Rather than keeping wages low by employing foreigners, it is necessary to allow wages to rise and catch up with those in other neighbouring countries. Malaysians are drawing much lower wages compared with their counterparts in Singapore and even Thailand.

Doing so will also prevent large amount of money from being repatriated to the other foreign countries that these workers come from and ensure higher domestic consumption for more sustainable economic growth.

Meanwhile, in the property sector, more liberalising measures are also needed for industry players to get back on their feet after being pulled down by the global economic crisis.

Currently the Government has made it mandatory for developers to build low-cost housing, which industry players lament are dragging them down further especially during the current tough market conditions.

It is worth looking at setting up a statutory body that will function as a public housing board to undertake an indepth master plan of all the low-cost or public housing needs in the country and build enough such units to meet demand.

The Government’s initiatives to allocate most of the RM1.4bil for Syarikat Perumahan Negara Sdn Bhd (SPNB), the housing unit of the Ministry of Finance, to deliver some 32,000 low-cost homes in Malaysia through various housing programmes under the two economic stimulus packages is a good start.

If the initiative is taken further and develop into a long-term national housing programme, it will ensure a more orderly development of low-cost housing for all needy Malaysians to own homes.

To further the housing cause, a good model to study is Singapore’s Housing Development Board, which is responsible for the planning and building of all public housing needs in the city state. Its ability to build high-quality public housing, complete with good community amenities at affordable prices, must be one of the best in the world.

·Deputy news editor Angie Ng believes that upgrading the country’s economic structure into a high value add and earnings economy will prepare it for a more competitive global environment after the crisis.

By The Star (by Angie Ng)