Compliance costs and property prices

In property development, there are various costs involved, but one of the largest costs is compliance costs. According to Real Estate and Housing Developers’ Association (REHDA) vice president and chairman of REHDA’s Kedah/Perlis branch Datuk Ricque Liew, a survey is being carried out and compliance costs might account for approximately 30% of the purchase price of properties.


REHDA vice president Datuk Ricque Liew

What are compliance costs?
Compliance costs refer to the cost of doing business while complying with regulations. The property industry is saddled with compliance costs such as capital contribution to utilities companies, regulatory controls, subsidising low cost units and the bumiputera quota.

Liew said, “In the last three to four years, (I have) been attending lots of things on behalf of REHDA. And thankfully the people in EPU (Economic Planning Unit) is listening and reviewing whether (it is) fair to impose all these (costs) on this particular industry. The problem with public perception is that (the) developer makes tonnes of money.”

Inequitable cost loading
Currently, infrastructure costs, such as piping for water and cabling for electricity, are borne by developers. Upon completion, developers then handover the responsibilities to the respective utilities companies. Liew said, “It is the cost of compliance that is loading to the house’s price.”

Liew opined that all service providers should contribute towards their respective capital infrastructure costs or capital expenditure (capex), as opposed to property developers installing the infrastructure. He also mentioned that the utilities companies can then recover costs through tariffs.

Low cost housing
In order to ensure that the private sector construct low cost housing, the Malaysian government, through the local authority, imposes 30% quota provision of low cost housing in every residential development.

Liew suggested a review as to whether the need for the quota on low cost housing is still necessary as Malaysia’s economy has grown and the low cost policy was set in the late ‘60s or early ‘70s. He also said that the government must recognise that things are different today, and that he has been engaging various industries on the notion of the Malaysian government resuming the responsibility of providing subsidised housing for its rakyat.

“Now, the government, under EPU, is looking at one-room, two-room, and three-room apartments. (I am) happy to note that they are going in the right direction. Like Singapore’s HDB, they monitor. (For example) young and married couples only need 1-room apartment. Once (they) need to upgrade and move into a 2-room unit, (they can) return to (the) housing development board to redistribute the (1-room) unit for people with similar needs,” Liew elaborated on Singapore’s approach.

Liew sums it up
“Compliance costs (are) much higher (in Malaysia) compared to other countries. Singapore does not have these types of compliance costs. The Singapore Government through HDB takes care of social housing,” he explained.

Liew summed it up, “Most immediate, (we should) remove (the) need for developers to provide low cost housing. Two, cap the (bumiputera) discount to certain products below, for example, RM350,000. Utilities companies can recover costs based on consumption, meaning to increase tariff.”

REHDA Property Forum 2010
Datuk Ricque Liew, an interesting and animated speaker who supports the GST (Goods and Services Tax) and is an advocate for non-subsidised petrol, water and electricity, will be sharing more of his views on “Coping with Increased Compliance Costs” at the 2-day REHDA Property Leader Forum 2010. The forum will take place on 22 – 23 April (Thursday and Friday).

For inquiries or registration, call 03-7803 2978, email syahiidah@rehdainstitute.com / ong_huitse@rehdainstitute.com, or visit www.rehdainstitute.com

By The Star (by Sherry Koh)

How competitive are Malaysian properties in the global market?

StarProperty.my asks CB Richard Ellis Malaysia Sdn Bhd managing director Allan Soo on how Malaysia can enhance its competitiveness in the property industry.


CB Richard Ellis Malaysia Sdn Bhd managing director Allan Soo will be speaking at the REHDA Property Leader Forum, which will take place on 22 – 23 April.

Malaysia’s place on the Global Competitiveness Index (from the Global Competitiveness Report, a yearly report published by the World Economic Forum) had dropped to 24th in 2010 from 21st previously, indicating that the country is becoming less attractive as an investment destination. How much has this affected the property sector?
Soo: Actually for a while after the Lehman Bros crisis, most of the investment funds who were here left Asia, not just Malaysia. Now some have come back but there is still some difficulty in raising capital, particularly in Europe, so the numbers are substantially less compared with 2007.

Malaysia was also not immediately back in the map as many funds moved into new areas like Vietnam and India. However, now they are back here as we have a larger and better quality asset base to invest in, compared with Vietnam which is still so young as a market.

What has contributed to the decrease or increase in Malaysia’s attractiveness,
in terms of property investment?
Soo: There is no change in our attractions in terms of assets but the fact that there is now no requirement for FIC (Foreign Investor Committee) approval and that foreign funds can acquire 100% equity in a property has made Malaysia certainly very attractive.

Where are most of the foreign investors from?
Soo: Many are regional funds, mainly from Singapore.

Why are they the largest percent of investors in properties in Malaysia?
Soo: The original restrictions on local funds by our authorities limited their ability to compete with international funds, particularly our REITs (Real Estate Investment Trusts). Pricing was a problem as foreign funds could offer lower yields than our REITs.

As a result foreign funds have been leading the market as far as yields and prices are concerned. Now our local funds are still looking at 7% and above, and this may be an obstacle if foreign funds start pushing the yields down.

What types of properties do most foreigners invest in?
Soo: Mainly retail centres and commercial buildings with running income streams. Most would prefer prime assets although some individual funds have appetites for even assets in smaller towns.

What are the key reasons foreigners invest in Malaysian properties?
Soo: They are investing here as yields are attractive and as the rents are steady. Plus many of our buildings are of international quality.

What are the important drivers or determinants of making Malaysia a more property-competitive country?
Soo: We need a comprehensive public transport now, to make properties more attractive. Properties in Singapore which are near MRT (Mass Rapid Transit) stations actually showed the highest price growth rates in the last 5 years and some even went up during the global crisis.

We also need to reduce the crime rate for the cities here to be more liveable. On top of this, we need to cut the red tapes and improve our IT connectivity. This will attract more FDI’s (Foreign Direct Investment) and increase our expatriate market, which in turn will increase office and condo rents and then prices. It’s really not about the properties themselves – we are already pretty good in design and construction. It’s more about the supporting amenities and infra(structure).

There have been some changes in our regulatory framework (such as RPGT, FIC guidelines). Did it impact the property industry?
Soo: The new RPGT caused some confusion initially but that has now cleared and has had almost no effect on foreign acquisition. FIC has now been disbanded and that has made us very attractive.

How do the regulations in foreign ownership compare to our neighbours?
Soo: We are much more attractive compared to the rest of the region.

Some argue that high-end properties will rise because that is the segment foreigners will invest in. Should there be substantial restrictions in the residential and/or commercial sector for foreigners?
Soo: No. We need a bigger share of the FDI’s and foreign investments to make our market more robust. Remember it is because we are part of a regional map that we are attractive.

It is reported that there is a decrease of expats in Malaysia. Has this impacted the property industry in any way?
Soo: Rents have started to come down for high-end condominiums.

In Singapore, the high price of quality residential projects is the result of foreign purchasing, which has pushed properties beyond a lot of Singaporeans' affordable level. Will this happen to Malaysia?
Soo: This could happen here and in fact KLCC(Kuala Lumpur City Centre) prices are beyond the reach of ordinary Malaysians. But we have 1.63 million housing units and only 5,600 of these are in KLCC. That is a small percentage going to foreigners and a small percentage beyond ordinary Malaysians. I don’t see areas like Puchong attracting foreigners and becoming impossible for Malaysians.

REHDA Property Forum 2010
Allan Soo has a laudable record in retail, research and development consultancy. He is a regular contributor to trade journals and will be speaking on “Competitiveness of Malaysian Properties in the Global Market” at the REHDA Property Leader Forum 2010. The forum will take place on 22 – 23 April (Thursday and Friday).

For inquiries or registration, call 03-7803 2978, email syahiidah@rehdainstitute.com / ong_huitse@rehdainstitute.com, or visit www.rehdainstitute.com

By The Star (StarProperty.my) (by Sherry Koh)

Mah Sing scouts for more land

Mah Sing Group Bhd, the country's fifth largest property developer by revenue, said it is "actively" scouting for more land at home and abroad, either via outright sales or joint ventures with land owners.

In a statement issued yesterday, it said it intends to look for large landbank for a potential mass housing project and will continue to explore overseas expansion to complement its local expansion.

It also expressed interest in participating in the government's tender process for several parcels of land in Jalan Stonor, Jalan Ampang, Jalan Lidcol in Kuala Lumpur, that will be developed by the private sector as well as the development of 1,200ha in Sungai Buloh into a new hub for the Klang Valley by the government and the Employees Provident Fund.

"We are interested in both the niche lands in Kuala Lumpur's Golden Triangle as well as the larger suburban lands suitable for township developments like the new Klang Valley hub in Sungai Buluh," Mah Sing group managing director and group chief executive Tan Sri Leong Hoy Kum said.
"We are confident that we can add value to the land and contribute positively by capitalising on our vast exposure, experience and success in property development as well as sound financial standing," he added.

The group will capitalise on opportunities - land acquisitions from both the government and the private sector, joint ventures or reviving distressed assets.

"We look forward to participating in the government's tender processes for the lands and will be happy to take on the entire project or joint venture with government linked companies," said Leong.

Mah Sing received four awards at the Asia-Pacific International Property Awards 2010 in Hong Kong on Friday, the largest number of awards to be won by a single Malaysian developer this year.

It won 5 Stars Awards for Best Property (One Legenda,Cheras) and Best Architecture (Legenda@Southbay, Penang island), as well as the Highly Commended Award for their Grade A office, The Icon Jalan Tun Razak in the Best Office Development category.

Its exclusive bungalow project, "One Legenda" was also named the Best Property Asia-Pacific and will represent Malaysia on the world level later this year.

By Business Times

Ireka confident 'Tiffani by i-Zen' will be sold out by year-end

KUALA LUMPUR: Ireka Development Management Sdn Bhd, the property management arm of Ireka Corp Bhd is confident of selling all 399 units of luxury condominiums in "Tiffani by i-Zen", Mont Kiara, by the end of this year.

Tiffani by i-Zen was developed by London-listed Aseana Properties Ltd, which undertakes property development activities in Malaysia and Vietnam. Aseana is an associated company of Ireka Corp.

Aseana has appointed Ireka Development Management to be its exclusive development manager for Tiffani by i-Zen, which comprises 399 units of luxury condominiums designed in a variety of sizes from 815 square feet to 8,011 square feet penthouse.

According to Ireka Development Management chief operating officer Lim Ech Chan, about 90% of the units have been taken up at the moment.

"There is always demand for properties in Mont Kiara because this area is well-established, with a large community spread here. Properties in Mont Kiara are good for both staying and investment purposes," Lim told reporters in a briefing here on Wednesday, April 21.

Ascott Ltd, the international service residence owner-operator, has secured a two-year management contract to service 147 corporate leasing units in Tiffani by i-Zen. At the moment, 30 units have been handed over to Ascott's management.

"From January till now, about 70% of the 30 units were taken up mostly by foreigners from America, Japan as well as South Korea," said Ascott's country general manager Tony Ho.

Each of the 147 units of fully-furnished apartments in Tiffani by i-Zen — including double- and triple-bedroom units — is fully fitted with air conditioners, wardrobes and water heaters.

Among the other amenities in Tiffani by i-Zen are a "sky infinity pool", as well as game courts for tennis, squash and basketball.

Meanwhile, Lim said Ireka Development Management will launch a RM1.2 billion project called Seni Mont Kiara next year. "The project is still under construction at the moment and there will be 605 units of luxury residences there," he added.

By The EDGE Malaysia (by Darlene Liew)

Quill profit up on property income

PETALING JAYA: Quill Capita Trust, a real estate investment trust (REIT), posted a 1.69% rise in net profit to RM7.47mil for the quarter ended March 31 compared with the previous corresponding period.

This was achieved on higher income contribution from properties and lower borrowing costs. Revenue rose 1.6% to RM17.18mil.

In a separate announcement, Axis REIT declared a net profit that was 36.87% higher at RM14.26mil for the first quarter ended March 31 compared with a year ago, while revenue came in 14.53% higher at RM19.84mil.

By The Star

DutaLand JV plan lapses

Property developer DutaLand Bhd said a planned joint venture with China-Boda Group to develop two separate pieces of land in China and the Iskandar region in Johor, has lapsed.

“Due to non-fulfillment of certain conditions stipulated in the MOU (memorandum of understanding), the proposed joint venture between DutaLand and China-Boda Group under the MOU has now lapsed,” DutaLand said in a stock exchange filing yesterday.

By Business Times