Be more considerate to home buyers, banks told

Property project s: (From left) Chor and Mapex organising chairman Datuk Ng Seing Liong listening to a briefing by SP Setia Bhd group president and CEO Tan Sri Liew Kee Sin during a tour at the expo in Kuala Lumpur.

KUALA LUMPUR: Banks should be more lenient towards genuine house buyers who want to get a housing loan, said Datuk Seri Chor Chee Heung.

The Housing and Local Government Minister said some banks were too “scared” to approve the loans as they were afraid borrowers would not be able to make repayments.

“The banks are being very, very prudent. Sometimes, too prudent that a lot of would-be borrowers don't have a chance to buy houses,” he told reporters after launching the Malaysia Property Exposition (Mapex) 2012 yesterday.

While stressing that Bank Negara's guidelines on housing loans were far-sighted in ensuring prudent loan approvals, he also urged banks to be more “considerate”.

He said he had also heard of developers complaining that they found it difficult to sell their units as buyers were unsuccessful in obtaining loans.

Chor advised banks to investigate the background of each individual applicants to determine whether they were genuine house buyers.

On another issue, Chor said he had also noticed several property advertisements placed by developers in newspapers, which were not approved by the National Housing Department.

“These advertisements do not comply with the department's requirements, including neglecting to display the advertising permit number or developer's licence in the small print.

“I have asked officers to take action against them, and the maximum fine that can be imposed is RM50,000,” he warned.

Chor said Mapex 2012 gave potential home buyers the opportunity to get educated about property choices as well as make comparisons from the various offers available.

He also urged the Real Estate and Housing Developers' Association Malaysia (Rehda) to follow the Government's lead in building more houses at cheaper prices.

Rehda president Datuk Seri Michael Yam said the exposition marketed property of various prices to cater to the needs of house buyers, adding that Mapex had also received very strong support from financial institutions and developers.

Mapex 2012 will run until tomorrow at the Midvalley Megamall Exhibition Centre.

By The Star

Glomac focuses on township homes

Artist impression of Bandar Saujana Utama residences.

GLOMAC Bhd will be focusing on plans for new landed residential units within its townships of Saujana Utama in Sungai Buloh, Saujana Rawang and Lakeside Residences in Puchong, Selangor for the next 12 to 18 months.

“This is what the market wants,” the property developer's group managing director and chief executive officer Datuk FD Iskandar told StarBizWeek recently. FD Iskandar recalls with amusement that about five years ago, he felt there was not enough demand for township developments.

“Back then, I told analysts and fund managers that I was not going to do townships anymore. Now I have to say, I am going back to townships.”

FD Iskandar says there is strong demand for landed residential units at selected locations in the Klang Valley priced at RM1mil and below.

He also says that in the next two years, 70% to 75% of the group's sales would come from residential units.

“This is the opposite of the situation two years ago, when 65% of our sales came from commercial properties. Last year, the ratio went to 55% (commercial) and 45% (residential). Now, it's the other way around 55% (residential) and 45% (commercial).”

FD Iskandar points out that the launch of 105 units of two-storey terrace houses with GDV (gross development value) of RM75mil at Lakeside Residences was fully sold through balloting last month.

The units, with built-ups of 2,230 sq ft and 2,120 sq ft and lot sizes of 22ft x 75ft and 22ft x 80ft, were priced from RM680,000 onwards.

Lakeside Residences, which is a mixed development with a GDV of RM2bil on a 200-acre leasehold parcel, will be the group's flagship project in the next few years. There are plans for about 6,000 residential units to be launched at Lakeside Residences within the next six years.

About 20% of the units will be landed homes, with the balance being high-rise units.

FD Iskandar says Lakeside Residences is part of Puchong's thriving commercial hub, and the guarded development will also benefit from the LRT (light rail transit) extension line which starts from the Sri Petaling station and passes through Kinrara, Puchong and ends at Putra Heights.

The extension is expected to be completed in 2014.

The next two phases for Lakeside Residences will also consist of two-storey terrace houses, with 139 units (GDV of RM94mil) targeted to be launched before year-end.

Lakeside Residences in Puchong is among the key drivers for Glomac’s sales.

This will be followed by the launch of a further 75 units (GDV of RM54mil) next year.

“Once Lakeside Residences is more matured in three or four years, we will have plans to build serviced apartments, condominiums and shop-offices. We might even put up a mall. We can fully develop Lakeside Residences in five or six years.”

Regarding the 1,000-acre Saujana Utama and 345-acre Saujana Rawang, FD Iskandar notes that both the townships have contributed combined sales of RM72mil for the group's first quarter ended July 31.

“The situation is different today. A year ago, we were selling RM4mil to RM5mil a month in Rawang. Now, we are selling RM15mil to RM20mil a month (in Rawang).”

FD Iskandar says Saujana Utama with a total GDV of RM1.4bil had done well since the development began in 1996.

“To date, we have sold RM1.1bil in Saujana Utama.”

This year, the group has also expanded its land bank to tap demand from middle income home buyers in the Klang Valley.

In February, the group bought a 200-acre leasehold parcel next to Saujana Utama for RM44mil through a public auction.

“We should be launching developments on the new parcel next to Saujana Utama by mid-2013.”

In June, Glomac bought 192 acres in Dengkil, Sepang from Lee Chin Cheng Dengkil Oil Palm Plantations Sdn Bhd for RM66.8mil.

The new parcels in Saujana Utama and Dengkil are expected to have a GDV of RM800mil each.

According to FD Iskandar, the Dengkil land would cater to home buyers looking for landed units priced RM500,000 and below.

“Double-storey houses in Putrajaya and Cyberjaya are expensive now, with prices hitting RM750,000 to RM800,000. So, who is catering to the RM400,000 to RM500,000 home market and civil servants? This is the gap we are going into.”

He says the Dengkil land is only three km away from Putrajaya and Cyberjaya, and 2.5 km away from KL International Airport.

The development will face the Maju Expressway, and the group has conducted preliminary discussions with the highway concessionaire.

“We are asking for ingress and egress to the expressway.”

Another record year in store

For its financial year ending April 30, 2013 (FY2013), Glomac is on track to outdo its record sales of RM663mil achieved in the previous financial year.

FD Iskandar points out that the group had achieved new sales of RM212mil for its first quarter ended July 31 due largely to healthy take-up rates for launches at Reflection Residences @ Mutiara Damansara, Glomac Centro in Petaling Jaya as well as Bandar Saujana Utama and Saujana Rawang.

Glomac has a pipeline of future projects with a total GDV of RM7bil, out of which RM1.13bil will be launched in financial year 2013.

Key drivers for the group's sales in financial year 2013 will be Lakeside Residences in Puchong, Phase 4 of Plaza Kelana Jaya, and the townships of Bandar Saujana Utama and Saujana Rawang in Selangor and Sri Saujana at Kota Tinggi, Johor.

“Usually, we hit 80% to 85% (sales of the new property launches). So, I think we should have at least RM800mil (of sales in FY2013),” says FD Iskandar.

The group's unbilled sales as at end-July is also at a record high of RM763mil.

Reflection Residences @ Mutiara Damansara consists of 299 units of freehold serviced apartments in a 39-storey block, with a GDV of RM270mil.

The units are sized from 1,092 to 1,705 sq ft and priced from RM750 per sq ft.

Launched at end-March 2012, Reflection Residences has a take-up of 82%.

As for Glomac Centro, its phase one consisting of 54 units of two-storey shop offices (GDV of RM117mil) and 344 units of serviced apartments (GDV of RM250mil) was launched in April 2012.

The two-storey shop offices, with an average price of RM2.1mil each, has a take-up of 59% while the serviced apartments, with sizes ranging from 1,175 to 1,670 sq ft and priced from RM655,000 per unit, has a take-up of 32%.

Meanwhile, at Glomac Damansara, a 25-storey office tower sold en-bloc to Lembaga Tabung Haji for RM171mil two years ago is 62% completed.

Glomac Damansara, which sits on 6.8 acres of freehold land, has a GDV of RM950mil and also features 12 units of five and eight-storey shop offices anchored by a 16-storey office block, two towers of residential units, and a retail mall.

The residential component consisting of 356 units in two 26-storey tower blocks with a GDV of RM288mil has a take-up of 85% since its launch in February 2011.

Its final phase consisting of a 350,000 sq ft boutique retail mall (GDV of RM336mil) is earmarked for en-bloc sale.

Glomac deputy chief operating officer Brandon Ong also points out that the group's net gearing is at a comfortable 6%, which gave it the capacity to further increase its land bank when the opportunities arise.

As at July 31, 2012 Glomac has fixed deposits, short term placements, cash and bank balances amounting to RM360.7mil.

“It is a good time to be sitting pretty. Prices of land are starting to ease a bit. Land owners are more reasonable now,” says Ong.

The group has an undeveloped land bank of 1,000 acres, with 90% in the Klang Valley and the rest in Johor.

In a recent report, Maybank Investment Bank (IB) Research noted that Glomac's net gearing of only 0.07 times at end-July 2012 provides it with a potential war chest of RM315mil (based on its target net gearing of 0.5 times), which could be used for land acquisition.

“It is actively looking for sizeable landbanks in the Klang Valley to ride on the current strong demand for affordable landed properties,” says the research unit.

Maybank IB Research says Glomac's recent first quarter results had come inwithin expectations, accounting for 20% to 22% of its and consensus full-year estimates.

For its first quarter ended July 31, 2012, Glomac posted a 17.3% year-on-year increase in net profit to RM21mil, while revenue rose 26.1% to RM161.1mil.

Hong Leong Investment Bank's research unit says it expects subsequent quarters to be stronger for Glomac, on the back of its record RM763mil in unbilled sales.

By The Star

Should you buy an abandoned house?

According to reports, there ar e 177 private housing projects that have been abandoned as at May 31.

BUYING property and then selling (or renting) it is often viewed as a good form of investment by many. This is especially the case for strategically-located homes that are either new or have been well maintained by a previous owner.

However, sometimes, an abandoned house or even an old, dilapidated one, could be worth investing in. Admittedly, reviving an abandoned house can be a daunting task. But with a little bit of patience, effort and money, the home you're looking to revive could just end up being a diamond in the rough.

Abandoned house

According to reports, there are 177 private housing projects that have been abandoned as at May 31.

Finding abandoned houses is actually not that difficult, as they tend to stick out like a sore thumb! The main issue, however, comes after you've found one, and then need to locate its owner.

“One simple way is to ask the neighbours,” says James Wong, director of international property consultants, valuers and estate agents, VPC Alliance (M) Sdn Bhd.

Wong: ‘One simple way (to find out about the owner of an abandoned house) is to ask the neighbours’.

However, a house could be abandoned for so long that even the neighbours might not know of the owner's whereabouts.

“The official way is if the house is within the jurisdiction of the municipality, local council or district council, and to go to the assessment section to check the owner and address,” says Wong.

“If the house is outside the jurisdiction of the municipality, local council or district council, then you need to go to the land office to do a title search on the property, which will reveal the ownership of the title. Then, you have to check the owner's contact details and contact,” he adds.

But what if the owner is deceased?

“In a situation where the owner is deceased, one can appoint a lawyer to make checks at the central probate registry at the High Courts to verify whether the family members of the deceased have filed for a petition for a grant of probate (where the deceased died leaving a will) or for letters of administration (where the deceased died intestate),” says National House Buyers Association (HBA) secretary-general Chang Kim Loong.

Chang: ‘Checks about an abandoned property could be made at the related land office’.

He says checks could also be made at the related land office to ascertain whether an application has been filed (at the land office).

“They could also make enquiries at the Amanah Raya office for confirmation. Having established the identities of the beneficiaries to the deceased estate, one can approach them and negotiate the offer to purchase.”

Cheaper price

Elvin Fernandez, managing director of property consultancy firm Khong & Jaafar Sdn Bhd, points out that abandoned houses, or homes that have deteriorated over the years, tend to be cheaper.

“When you buy a home, you are buying it for the land and the building. The value of a property is what the building and the land are collectively worth.”

He says that the value of a property is affected when the condition of the building has deteriorated.

“If the house has been left unattended for a long time or has depreciated quite substantially, then usually the land value remains the same but not the building value.

“The greater the depreciation, the lesser the value. In fact, there might actually come a time when the building will have no value at all,” Elvin says.

He says in rare instances, the building's deterioration level could be so bad that it could create a spillover effect on the land and affect the land's value as well.

“It's not a rule that's set in stone, but usually it's the building value that drops,” Elvin says, adding that even the location of the property could play a role in the property's value.

“It depends. A house in Damansara Heights that's been abandoned for a while could still have its value intact, while a house in a poorer (rural) neighbourhood that has been left unattended for just six months could already see a substantial depreciation in its value.”

A good buy

Elvin believes that buying an abandoned house is definitely worth the investment, seeing as these homes generally retail for a much cheaper price (compared with new properties or lived-in ones in the secondary market).

Elvin: ‘The value of a property is affected when the condition of the building has deteriorated’.

“Abandoned properties could be worth a good buy and definitely a must to look at,” he says.

Malaysian Institute of Estate Agents (MIEA) deputy president Siva Shanker also feels that purchasing an abandoned house is a “great investment opportunity.”

“You have a lot of this going on nowadays, especially within Petaling Jaya. There are a lot of old houses in that area and many people are buying them either to move in or to flip it (resell) for a profit.

“It's a great investment opportunity. People buy the home for between RM600,000 and RM700,000, then spend RM500,000 on refurbishing it and then selling it for about RM1.3mil. You can easily make a profit of between RM200,000 or RM300,000 right there!”

Siva believes that refurbishing an old or abandoned house is much more cost effective than buying a brand new one (or a lived-in one in the secondary market).

“The Malaysian property buyer is such that once he's bought a house, whether straight from a developer or an existing buyer, he's going to tear it down and make renovations of his own.

“And this is not at all cost effective, because the developer (or previous owner) has probably already given the buyer everything he needs. But after buying the house for say, RM1mil, he's then going to spend another RM500,000 on renovations. Better to buy an old house, which is cheaper, and then install whatever you need.”

MIEA president Nixon Paul, meanwhile, feels that it's “safer” to buy a house from the primary or secondary market.

“Buying an abandoned house will be cheaper, but think of the refurbishment that you're going to have to do, which could cost a lot more than what you would normally do for a new one.”

Siva: ‘Purchasing an abandoned house is a great investment opportunity. You have a lot of this going on nowadays.’

“You're going to need to spend a lot of money on a lot of things that have either deteriorated or are totally gone.”

Siva asserts that although buying an abandoned house and refurbishing it is a good investment opportunity, he does add that it's not for everyone.

“If you have the money, the holding power and the property know-how, then it's a good way to generate income.”

On a personal note, he does wish that it would be possible for buyers to “pre-customise” their homes when they buy it from a developer, and not purchase a “finished” product that will not necessarily appeal to everyone.

“Wouldn't it be nice if the buyer had a choice on the level of fixtures that go into a home, so that the price could be reduced accordingly? Because most people are going to move in and make changes that will end up being a waste of money.

“We need to slowly move into a more mature market where there can be more flexibility in the property that we buy,” he says.

By The Star

Do crime rates affect property prices?

ALIA bought a house in an established neighbourhood in Kuala Lumpur a couple of years ago. There were security personnel patrolling the area. Two months after formalising the purchase, the guard patrols stopped because more than half of the residents in the area did not want to pay the monthly RM60 security fees.

Street crime and break-ins occurred, one of which resulted in the death of a youth who charged at an off-duty police personnel with several others with parangs. It was not that the neighbourhood was crime free before. It was just that some residents wanted a higher level personal security and had hoped that the rest of the community would support the cause.

Alia decided to rent out the place instead after the security services were discontinued.

In another part of the Klang Valley, a young family paid the deposit to rent a landed property after having lived for years in a condominium. They changed their mind after a drive to their “new” home one evening and discovered the area to be rather dark even at 7.30pm, despite the street lights.

While the above may be anecdotal, does the fear of possible crime affect property prices, and their yield? While there is no empirical evidence to suggest the affirmative, research in Britain and the United States between crime rate and property prices suggest that crime and the fear of possible crime does have an effect on urban property prices. The studies were not just referring to ghettos but took a broad look at different areas and types of properties.

If we consider the current property prices and the rate of crime in the Klang Valley and major cities, there does not seem to be a correlation between the two. Crime is rampant despite what the crime index indicates. And prices have moved up considerably, despite what many consider to be a general increase in crime in various parts of the Klang Valley and major cities.

Notwithstanding that, the question whether crime rate has an effect on property prices is an interesting one.

According to a 2003 research The Costs of Urban Property Crime by Steve Gibbons, published in The Economic Journal 114 (November), urban crime has effects “over and above the direct costs to victims, the costs of deterrence and the costs of law enforcement. The fear or crime', while not a uniquely urban phenomenon ... has ... a powerful influence on perceptions of area deprivation.”

The research paper divided crime into criminal damage to properties and burglary in dwellings. Gibbons concluded that criminal damage to dwellings which includes “vandalism, graffiti and arson have a significant negative impact on prices” while “burglaries have no measurable impact on prices.” He based his research on London.

He writes that while it is “surprising that prices respond more to acts of criminal damage than to burglaries given the apparent physical and emotional costs”, Gibbons explains that “vandalism and graffiti are important factors” that motivate “fear of crime in the community,” even though “these types of crimes are not strongly correlated with incidents of a more serious nature.”

Gibbons also quoted earlier studies in 1978 and 2001 which concluded that “crime rates do affect property values, although the effects may be small ...”

Another study by Stephanie Swift in 2005 found that “crime, violent and non-violent, has an affect on housing prices.” Swift chose a Florida setting.

Swift concluded that “crime does affect housing prices.” She also concluded that “residents are willing to pay more in order to keep themselves and their families out of danger.”

This may explain the emergence of gated and guarded strata projects and its non-strata variant. The more established neighbourhood has also taken to cordoning off certain roads and hiring their own security personnel although there is a tendency for such ad hoc arrangements to be temporal as not everyone in the community may want to contribute to the monthly security fees. In a strata project, owners are legally bound.

The demand for security stems from the perception that they and their loved ones will have a certain measure of security, although this is open to dispute.

If we were to broaden the question, does crime rate affect a city's liveability, the affirmative may be more apparent, although factors contributing to liveability include other variables, just as house prices are determined by various factors.

In Triumph of The City by Edward Glaeser, an urban economist and professor at Harvard University, Glaeser writes about the importance of cities. One of the features of liveability, besides a string of other factors, is the importance of personal safety and security and the perception of this security.

Concerns about personal security have been noted in a survey of international firms by the American Chambers of Commerce in South-East Asia, published in September 2012.

In that survey, 38% of Malaysian-based respondents registered concerns with personal security, a higher proportion than in the other Asean countries surveyed.

This argues for a closer look at crime prevention, for the sake of enhancing Malaysia's competitiveness so as to stimulate foreign direct investments and exports, and to give greater fundamental basis to property price increases.

In another press report, Rajiv Biswas, senior director and Asia-Pacific chief economist at IHS Global Insight Singapore, said foreign investors need a sense of comfort and security that Malaysia is a better place to do business compared to its neighbouring countries.

Hence, despite claims that the crime index is down, increasingly people near and close to us are experiencing it.

Since budget day on Sept 28, four of The Star employees have been robbed of their new car and belongings, and two of them have their houses broken into. A fifth related the incident of a brother being robbed while having drinks in a pub. The lack of personal security is no longer a perception. It is real.

Deputy news editor Thean Lee Cheng is of the view that there is a need for greater police visibility, among other crime management strategies.

By The Star (by Thean Lee Cheng)

How affordable housing can succeed

IMAGINE a cook without his pots, pans and utensils, can he still perform his duties of cooking a delicious meal for his clients?

We need essential tools and resources to accomplish our tasks even if we are skilful in our own profession. Same goes to the property industry.

With the market demanding more low and medium-cost housing, all stakeholders should look for the most effective ways in maximising the usage of our resources to build affordable housing and to meet the ever increasing housing demand.

In my article last month, we identified the root causes that influence the pricing mechanism of a housing project. These include the rising land acquisition cost, lengthy approval period, holding cost of unreleased bumiputra units and cost of building utility infrastructure.The next questions are:

What are the remedies available?

Which parties have the ability, expertise and resources to implement the remedies?

First of all, to address the issue of high land cost, the Government could tap onto the expertise of the private sector to develop government land as the land acquisition cost is much lower. Land can be fairly distributed to property developers through open tenders. This way, more homes can be built on a more affordable and effective manner for the people.

To increase the supply of affordable housing, the Government should also conduct a study to accelerate the development's approval process by reducing the number of steps and the time involved (sometimes two to three years) in the approval process, have an automatic release mechanism for unsold bumiputra units, and remove the burden of utility infrastructure costs on developments, which should be borne by privatised utility companies themselves instead.

In the recent budget announcement, it is encouraging to see that the Government has proposed several measures to tackle the issue of affordable housing in Malaysia. The efforts include the allocation of RM1.9bil to build 123,000 affordable housing units nationwide and a RM500mil fund to build 80,000 houses priced between RM100,000 and RM400,000.

People and organisations that work on their areas of expertise are most likely to deliver outstanding results. Government agencies that have been working on affordable housing can build these housing effectively as they have both the expertise and resources.

On the other hand, though private developers have the expertise, the challenge of high land and material cost are the main hurdles in meeting the demand, just like the cook without his pots and pans. To meet the desired outcome, it is important for the Government to fund more government agencies with expertise and resources to embark on this initiative. I still recall in 1974, when I joined the Selangor State Development Corp (PKNS) as a director, the main objective of PKNS was to build mass housing for the people and to eliminate the shortage of affordable housing.

However, according to a recent article in The Star, PKNS today has also ended up venturing into high-end developments to subsidise its low-cost housing projects and infrastructure, as it no longer receives grants from the Government. This has inevitably distracted the corporation from delivering more affordable housing projects to the public.

Therefore, it is important for the Government to constantly revisit the original objectives of corporations such as PKNS and other SEDCs (State Economic Development Corporations), Syarikat Perumahan Negara Bhd, and 1Malaysia People's Housing Scheme (Prima) that have relevant expertise, and continue funding them to build low and medium-cost housing.

Generally, people and organisations perform best in their areas of expertise. However, this must be backed with essential resources. If both the Government and private developers can leverage on each other's expertise and resources, I believe we can work towards a more sustainable and affordable housing policy, and realise the rakyat's dream of having their own homes.

In that way, the cooks can equip the kitchen with the right utensils to cook up a delicious meal.

FIABCI Asia Pacific chairman, Datuk Alan Tong, has over 50 years of experience in property development. He was FIABCI world president in 2005/06 and was named Property Man of The Year 2010. He is also the group chairman of Bukit Kiara Properties.

By The Star

UDA to kickstart new housing concept in 2013

KUALA LUMPUR: UDA Holdings Bhd is among the four government- linked companies (GLCs) spearheading the build-and-sell housing concept.

“We’ll be having a meeting with UDA next week. They are scheduled to kickstart this initiative next year,” Housing and Local Government Minister Datuk Seri Chor Chee Heung said.

“From now until 2015, we encourage all property developers to adopt build-and-sell. We’re aware there’ll be teething problems as we transition from the current system to the 10:90 concept,” he told reporters here after officiating at the launch of ERA Malaysia real estate business system pilot programme late yesterday.

“For one, the banking sector needs to reform the end and bridging financing arrangements with property developers. The build-and-sell concept is more riskier for developers and there’s a chance bankers may ignore smaller ones. We’ll need to address this issue,” Chor said.

The build-and-sell concept, already implemented in Australia and Singapore, only requires a buyer to place a downpayment of 10 per cent of the purchase price while the balance is paid after the house is completed.

He noted that Islamic banks have so far agreed to provide syariah-compliant financing and undertake construction risks, with installments only commencing after the house is completed. This scheme is meant for houses costing RM600,000 and below.

Early this year, Chor said the government had tightened laws through an amendment to the Housing Development Act (Control and Licensing) 1966 (Act 118).

Among others, the deposit was increased from RM200,000 to 3 per cent of the cost of physical development, including professional fees for the Housing Development Account, and a maximum penalty of RM50,000 has been set compared with RM20,000 previously for offences under any provision of Act 118.

Asked if the government is offering incentives for property developers, Chor said: “For build-and-sell properties, we can waive the deposit. There’s also a dedicated green lane for faster approvals”.

By Business Times