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INTRODUCTION

This review is aimed at highlighting the pertinent measures proposed under the 2008 Budget aswell as other announcements made prior to the Budget in 2008, which could affect thedevelopments of Malaysian Property Market. Each measure proposed will be reviewed and itspossible implications on the Malaysian Property Market will be elaborated. The review ishighlighted in blue. Property sectors and parties that could benefit from the proposed measureswill be identified at the end of the review of each measure.

KEY MEASURES AND ANNOUNCEMENTS

Following are the key measures announced in 2008 that could affect the developments of theMalaysian Property Market.

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Pre-Budget announcements

Measures to enhance the public services : 1

Incentives for the Build Then Sell (BTS) concept : 1

Exemption of Real Property Gain Tax (RPGT) : 2

Salary increase for the country’s one million plus government employees : 3

Amendments of the Housing Development (Control and Licensing) Act : 3

Amendments of the Strata Title Act (STA) : 4

Introduction of Building & Common Property (Maintenance & Management) Act2007

5

2008 Budget

2008 Budget Highlights : 6

Corporate tax reduction : 7

Private valuation will be allowed for purposes of assessment in stamp dutypayment

: 8

Simplified and expedited immigration procedures for foreign skilled workers : 8

Foreign ownership for REITs management companies will be allowed up to 70% : 9

50% stamp duty exemption for the purchase of one house of not more thanRM250,000 per unit

: 9

Increase allocation for Pelaburan Hartanah Bumiputera Berhad (PHBB) : 9

Additional RM100 million for healthcare services related projects in IDR : 10

The Government will host the World ICT Week in Kuala Lumpur in May 2008 : 10

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Construction of infrastructural projects as well as increasing the security level inCyberjaya

: 10

RM858 million for the tourism sector : 11

Free education in Malaysia : 11

RM381 million allocated for the low cost housing programs : 12

Syarikat Perumahan Negara Berhad to construct housing for low income group : 12

Government provides bank’s guarantee for borrowers without fixed income : 12

EPF monthly withdrawal for the purchase of houses : 13

RM887 million for the construction of government’s quarters : 13

RM12 billion to improve public transportation in Penang and Kuala Lumpur : 14

Introduction of East Coast Economic Region (ECER), Sabah Corridor andSarawak Corridor

: 14

RM10 billion to undertake various projects in Sabah and Sarawak : 15

RM105 million for the expansion of pre-school education program : 15

Full exemption of stamp duty for transfer of property between husband and wife : 16

RM6 billion to combat crime : 16

RM1.1 billion for various flood mitigation programs : 16

Economic Outlook - 2008 : 17

Property Market Outlook : 17

Disclaimers : 19

JS Valuers Group : 19

Representative offices : 20

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PRE-BUDGET ANNOUCEMENTS

Several announcements had been made prior to the announcements of the Budget 2008, whichcould affect the development of property market in Malaysia. The key measures announced priorto the 2008 Budget are as follows:

Measures to enhance the public services, which include:

Establishment of the Special Taskforce to Facilitate Business (PEMUDAH) to enhancethe delivery of the public services

Setting up of One Stop Centre (OSC) in all local councils to process propertydevelopment applications

Introduction of Certificate of Completion and Compliance (CCC), which will replace theCertificate of Fitness for Occupation (CFO).

By having an independent taskforce such as PEMUDAH, which comprises members from thepublic and private sectors, various recommendations will be given to enhance the publicservices. Enhancement of the public services will facilitate investors, especially the foreigninvestors, to invest in Malaysia.

With the introduction of OSC and CCC, the property development process, from thedevelopment application until hand over of the property will be simplified and expedited.Speedier development process will reduce developer’s holding costs, which the saving couldbe passed on to house buyers. Speedier property launches are also expected.

Introduction of the CCC also forms part of the government’s efforts to make the buildingindustry more self-regulatory.

Sectors : All sectorsParties : Property developers, purchasers, investors

The government has introduced incentives to housing developers to encourage them toadopt the Build Then Sell (BTS) concept. Developers who adopt the 10:90 variant of the BTSwill enjoy the following benefits:

Exemption from paying RM200,000 deposit for a housing development license Be considered for the exemption from meeting the low cost home construction quota Fast lane approvals within four months.

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The BTS concept is considered as an effective way to prevent a property project frombecoming abandoned. Under the 10:90 concept buyers will make 10% down payment whenmaking house bookings by signing the Sale & Purchase Agreement and pay the remaining90% when the house is ready for occupation.

Based on this BTS concept, developers have to absorb the construction cost beforecompleting the houses. Developers will only receive the balance payments when the housesare issued with Certificate of Completion and Compliance (CCC). This could pose extrafinancial burden to the developers, especially the small scaled developers.

Purchasers will benefit from the implementation of BTS as purchasers do not have to makeprogressive payments during the construction period. In addition, interests of the purchasersand financial institutions are secured as the chances for a project to become abandoned underthe BTS are somehow unlikely to happen.

Although the incentives have been introduced since the first half of 2007, only a handful ofdevelopers applied this concept in their projects. Generally, besides the financial burden ofimplementing the BTS, developers are unconvinced the fast lane approval will providesubstantial cost savings for the projects as compared with the conventional Sell Then Build(STB) concept.

Sectors : Residential sectorParties : Purchasers and financial institutions (if BTS is implemented) and property

developers (enjoy the benefits offered by the government)

Effective 1 April 2007, all property transactions will be exempted from the Real Property GainTax (RPGT).

Prior to the exemption of the tax, many investors were reluctant to invest in the propertymarket due to the constraints posed by the RPGT. With full exemption of RPGT, investmentactivities in the Malaysian property market have increased, particularly for projects that offerattractive investment yields and potential capital appreciation. In general, projects that havebenefited from the exemption of RPGT are projects located in prime locations, such as thehigh end residential and commercial properties.

Sectors : High-end properties and properties that offer attractive investment yieldsParties : Property investors and speculators

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The government has announced a pay increase of between 7.5% and 42% for the country’sone million plus government employees with effect from July, 2007. Details of the increaseare as follows:

Cost of living allowance (Cola) would double to between RM100 to RM300

Police and armed forces personnel would receive additional 20% on top of the pay rise

The lowest grade group or support staff II would see a 35% increase in their basic payand followed by the support staff I, who would enjoy a 25% increase

The middle management and professional as well as the top management were given a15% and 7.5% increment, respectively

The 557,033 retirees would also benefit from the pay hike.

The pay rise will have multiplier effects on Malaysian economy. The purchasing power ofover one million government servants will increase by about 7.5% to 42%. As an example,the government’s post with the lowest pay would carry a basic salary of RM649.15 (up fromRM480.85). Together with the fixed incentive payments, this government employee would begetting about RM1,024 a month.

The pay rise creates demands for retail goods as well as cars and residential properties(especially the affordable residential properties). Government employees form one of thelargest purchaser groups for affordable residential properties.

Sectors : All sectorsParties : Government employees, retailers, property developers, hoteliers, etc.

Various amendments under the Housing Development (Control and Licensing) Act have beenin force effective 12th April 2007. Amongst the key amendments include:

Redefine the “housing accommodation” to include service apartments and Small OfficeHome Office (SOHO)

Redefine the “housing development” to include development of bungalow lands

Minister of Ministry of Housing and Local Government has the final say on determiningwhether a housing accommodation falls within the meaning of this Act

Increase in the fine for errant developers, which include freezing of the HousingDevelopment Account

Housing Tribunal is given wider jurisdictions to hear the complaints by homebuyers

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The amendments addresses various issues associated with the service apartments, SOHO andbungalow lands. Prior to this, many financial institutions are unwilling to finance this marketsegments due to the lack of legislative protections. With this amendment, developersundertaking development of service apartments, SOHO and bungalow lands will have tocomply with the requirements stipulated under the Act.

Various measures have also been introduced to penalize developers that did not comply withthe regulations. The jurisdictions assigned to Housing Tribunal to hear complaints pertainingto housing projects have also been widened.

Sectors : Residential sector, particularly service apartments, SOHO and bungalowlands

Parties : Purchasers and financial institutions

Various amendments under the Strata Titles Act (STA) 1985 have been in force effective12th April 2007. Amongst the key amendments include:

Provide provisions for introducing the computerization system for registration of stratatitles

Enable strata titles to be issued for houses within the gated community schemes

Enable strata titles to be issued for special buildings (old buildings)

Ensure the original proprietor and the purchasers do not delay in executing the transfer ofownership of strata titles (mandatory requirements)

Overcome issues on management corporations such as compulsory requirement to tableaudited accounts during the initial period and engagement of registered propertymanagers to determine adequate amount of maintenance fees chargeable on parcelowners

Allow for the formation of the Strata Titles Board (STB) at the federal level instead of thestate authorities and to provide the STB additional powers to hear disputes and determineorders of the disputes

Increase the fine for certain offences as a deterrent

The amendments address various loopholes of the Act prior to 12th April 2007, amongstothers to expedite the issuance of strata titles, to ensure the relevant parties are mademandatory to ensure strata title is issued as well as to address the issue of “non-strata titles”for old buildings (before the Act was implemented).

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With the strata titles allowed for the gated community schemes, the issues on the maintenanceand ownership of the “common area” within the gated community have been resolved. Thiswill also provide clearer guidelines for developers to plan their gated community projects inthe future.

Management and maintenance of the high-rise buildings are expected to be enhanced and runin a transparent manner. The amendments are imperative to improve the management andmaintenance of strata titled properties. Values of many strata-titled properties havedepreciated due to poor maintenance and management of the buildings.

Sectors : Residential sector, particularly strata titled projects, gated communityschemes

Parties : Owners of strata titled properties, property developers, propertymanagers, financial institutions

On 12th April 2007, the Building & Common Property (Maintenance & Management) Act2007 came into force in all States within Peninsular Malaysia. The main purpose of the Act isto provide for the proper maintenance and management of buildings and the commonproperty after delivery of vacant possession by the developer to the purchasers and before theManagement Corporation (“MC”) comes into existence (“the applicable period”).

The proposed Act will alleviate the maintenance and management problems of the stratatitled properties. The Act provides regulatory framework for subdivided buildingmanagement during the transition period after delivery of vacant possession and prior to theestablishment of Management Corporation under the Strata Titles Act.

Under the Act, a Joint Management Body (JMB) will be established, which comprisesdeveloper’s representatives, managing agent and residents. With the Act in place, it willensure the strata titled building is in good condition and well maintained. The duties of theJMB are as follows:

Maintain the common property and keep it in good serviceable repair Fix and impose charges for the maintenance works Insure the building and apply insurance moneys received for rebuilding and

reinstatement; Prepare and maintain a register of all purchasers; Ensure that the Building Maintenance Fund (BMF) is audited and provide financial

statements to purchasers; and Enforce house rules.

Sectors : Strata titled propertiesParties : Owners of strata titled properties, property managers

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2008 BUDGET

Following tables summarise the expected government revenue and expenditure under Budget2008 and Budget 2007.

Government’s revenue for 2008 Budget and 2007 Budget

Revenue Budget 2008 Budget 2007Total RM168,799 mil RM157,496 milIncome taxes 42.5% 42.5%Non tax revenue and other taxes 28.6% 26.8%Other indirect taxes 13.1% 12.9%Import duties 1.3% 1.7%Export duties 1.6% 1.7%Borrowings and use of government’s assets 12.9% 14.4%

Government’s expenditure for 2008 Budget and 2007 Budget

Revenue Budget 2008 Budget 2007Total RM168,799 mil RM157,496 milDevelopment expenditure 23.7% 28.3%Economic services 10.6% 13.2%Social services 8.0% 9.0%Security 3.7% 4.4%General administration 1.5% 1.7%

Operating expenditure 76.3% 71.7%Emolument 21.4% 16.4%Debt services charges 7.8% 8.3%Supplies and services 15.1% 14.7%Pensions and gratuities 5.0% 4.5%Grants and transfers to state government 2.6% 2.3%Subsidies 6.1% 7.5%Other expenditures 18.4% 18.0%

Source: Economic Reports 2007/2008 and 2006/2007

The Government has successfully reduced its fiscal deficit from 5.5% in 2000 to 3.3% of GDP in2006. The deficit is expected to be reduced further to 3.2% in 2007 and 3.1% in 2008.

The theme of the Budget 2008 is “Together Building The Nation and Sharing Prosperity”

The 2008 Budget will focus on three strategies, which are:

1) Enhancing the nation competitiveness2) Strengthening human capital development3) Ensuring the well being of all Malaysians

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First Strategy: Enhancing the Nation’s competitiveness

Corporate tax reduction.

Year 2007 – 27%Year 2008 – 26%Year 2009 – 25%

The proposed further corporate tax cut in 2009 to 25% is in line with international trends,especially the developing countries. The cut is inevitable taking into consideration of thecompetitive corporate tax rates adopted by other countries (Refer to following table).

Comparison of corporate taxes

Country 2007 2008 2009Malaysia 27% 26% 25%Singapore 20% 18% 18%Hong Kong 17.5% 17.5% 17.5%China 30% 25% 25%Thailand 30% 30% 25%Indonesia 30% 30% 28% / 25%Vietnam 28% 28% 25%

Source: The Star 10 September 2007

The reduction of corporate tax is expected to improve the profit margin of propertydevelopers. By reducing the corporate tax payment, property developers are now able toprovide more incentives to attract purchasers to their projects. At the same time, the savingsfrom paying corporate tax will enable companies to declare higher dividends to theshareholders and bonuses to the employees, which will encourage higher private consumptionto boost the country’s economy.

The proposed cut, which was being made 2 years ahead of time, has also led to speculation onthe possible implementation of Goods and Services Tax (GST) prior to 2009. Theimplementation of GST has been deferred indefinitely after being first proposed in 2005Budget.

Sectors : All sectorsParties : Shareholders and employees of profitable companies, profitable property

developers

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Effective 1 January 2008, private valuation will be allowed for purposes of assessment instamp duty payment. This will enable the transfer of property be executed pending the finalvaluation from the Government Valuation and Property Services Department.

This proposed move forms part of the recommendations by PEMUDAH to improve thedelivery of public services. Currently, it takes about 1 to 3 months to complete the transfer ofproperty after execution of the legal documents. With the new measure, the transfer ofproperty is expected to be expedited further, hence, enhancing the attractiveness of propertyinvestment.

Sectors : All sectorsParties : All parties involved in property transactions

Simplified and expedited immigration procedures, such as:

The Immigration Department will shorten the processing period for the issuance of workpermit to 7 days for skilled workers, compared with 14 days previously.

Effective 1 January 2008, the Immigration Department will introduce a new category ofvisa for business travelers, which will provide for a longer validity period. Other featuresto facilitate easier entry will be introduced.

Effective 1 January 2008, the process of obtaining professional visit passes forknowledge workers will be streamlined by enabling applications to be made in Malaysianembassies and consulate overseas.

Effective 1 January 2008, the Indian and Chinese nationals can apply for Multiple EntryVisas (MEVs) in the country they are residing or working. Initially, this facility will be madeavailable in international financial centres, such as New York, London, Hong Kong andSingapore.

The above proposed measures will encourage more expatriates to work in Malaysia, whichaugur well for Multi National Companies (MNC) having or planning to have offices inMalaysia. These measures are to facilitate the traveling of their skilled personnel to Malaysia.The increase of expatriates and foreign skilled workers will improve the demand for high endresidences as well as hotel rooms and service apartments in major towns.

The loosening of the MEVs will encourage more Chinese and Indian nationals to visitMalaysia. Currently, Chinese and Indian nationals were ranked fifth and ninth in terms oftourist receipts during 2005/2006 period, contributing about RM1,054.2 million andRM724.7 million, respectively.

Sectors : High end residential property and hospitality sectorParties : Owners of high end residential properties in the town area, hoteliers

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Foreign ownership on fund management companies and REITs management companies willbe allowed up to 70%. The minimum requirement for Bumiputera equity will remain at 30%.

Relaxation of foreign ownership on REITs management companies will attract foreign REITscompanies to set up REITs in Malaysia. Increased REITs fund in Malaysia will improve thedemand for investment grade properties, such purpose built office buildings, shoppingcomplexes, hotels and industrial properties that offer attractive investment returns.

Sectors : Investment grade propertiesParties : REITs, Owners of investment grade properties

50% stamp duty exemption on documents of transfer is given for the purchase of one houseof not more than RM250,000 per unit.

This measure will reduce the cost of purchasing a house by up to RM2,000. This measurewill promote the purchases of residential properties costing not more than RM250,000.

Sectors : Residential properties costing below RM250,000Parties : Purchasers of residential properties costing below RM250,000, property

developer

Pelaburan Hartanah Bumiputera Berhad (PHBB) has acquired several strategically locatedproperties for the development of major commercial projects. Among the commercial projectsinclude Penang Sentral, which is an integrated transport and logistics terminal in the NorthernCorridor Economic Region (NCER). In addition, an initial fund of RM400 million has beenearmarked by PHBB to increase Bumiputera property investment in Iskandar DevelopmentRegion (IDR).

This measure by Pelaburan Hartanah Bumiputera Berhad (PHBB) is to promote Bumiputeraparticipation in property sector. By increasing the allocation for PHBB, PHBB will be able toacquire more investment grade properties in major commercial developments such asNorthern Corridor Economic Region (NCER) and Iskandar Development Region (IDR).

Sectors : Investment grade propertiesParties : Bumiputera investors, owners of investment grade properties within

NCER and IDR

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The Government will provide an additional RM100 million, particularly for investments inhealthcare services related projects in IDR.

Health and education services have been identified as catalyst projects to spur furthereconomic activities in this region together with other sectors, such as logistic sector, financialservices, agricultural, manufacturing and the leisure and tourism sectors. The increasedallocation of RM100 million is expected to further enhance the development of IDR.

Sectors : Developments within IDRParties : Investors and owners of properties in IDR

The Government will host the World Information and Communication Technology (ICT) Weekin Kuala Lumpur in May 2008. Various international ICT conferences and exhibitions will beheld, including the World Congress on Information Technology 2008, the conference onUnited Nations Global Alliance on ICT for Development and MSC International AdvisoryPanel Meeting. More than 5,000 domestic and international participants are expected to takepart in these programs. It is hoped that more international ICT companies will invest andcollaborate with local companies.

Such a large scale event will promote MICE (Meeting, Incentives, Conference andExhibition) sector in Kuala Lumpur and boost the demand for hotel accommodation nearbyduring the event. It will also attract foreign investors to invest in Malaysia.

Sectors : MICE sectorParties : MICE operators, hoteliers

Construction of an international school, affordable homes as well as increasing the securitylevel in Cyberjaya.

These measures are timely and essential to promote Cyberjaya as a major Cyber City. Lack ofpublic amenities, such as international school and affordable homes, has deterred investorsfrom moving to Cyberjaya.

Sectors : Developments within CyberjayaParties : Investors and owners of properties in Cyberjaya

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RM858 million has been allocated for the implementation of various programs to furtherincrease the country’s attraction as a major tourist destination, including the provision andupgrading of tourism facilities as well as diversification of tourism products. An allocation ofRM22 million is provided to increase homestay activities in 47 selected villages. Thedevelopment of ecotourism projects will be undertaken to generate income for the ruralcommunity, including Orang Asli.

Visit Malaysia Year 2007 (VMY2007) has attracted considerable number of foreign touriststo Malaysia. The above allocation will sustain the attractiveness of Malaysia as a majortourist destination beyond the VMY2007.

Sectors : Hospitality and retail sectorsParties : Hoteliers, retailers

Second Strategy: Strengthening Human Capital Development

Effective 2008, all examination fees for Sijil Tinggi Agama Malaysia and the annual fee forprimary and secondary schools will be abolished. Text Book Loan Scheme will also beextended to all students.

The new Text Book Loan Scheme, which will be extended to all students, will benefit theadditional 1.2 million students (previously not entitled for the loan scheme). The loan schemeprovides a saving of about RM200 to RM300 per student per year. With the above measures,the education in Malaysia will be completely free.

The above measures will not have significant effects on the Malaysian economy majority ofthe student population, is already enjoying the scheme. The above measures will onlygenerate miniature savings for the low income population as the low income populationwould have enjoyed the Text Book Loan Scheme prior to this announcement. Meanwhile, thesavings from the annual primary and secondary school fees are marginal.

Sectors : Retail sectorParties : Families with school children

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Third Strategy: Ensuring the well being of all Malaysians

The Government will accelerate the implementation of low and medium cost housingprograms. A sum of RM381 million is allocated for the implementation of low cost housingprograms. From this, RM191 million is allocated for the Program Perumahan Rakyat (PPR)Disewa while RM190 million is allocated for PPR Bersepadu. Currently, 12,000 units of PPRDisewa and 25,000 of PPR Bersepadu are being built.

More affordable residential properties will be constructed based on the above allocation. Nodetails on the above projects were made available. Notwithstanding this, it is important thatthe projects are located at suitable locations to ensure the projects are in demand andoccupied when the projects are completed. Otherwise, these projects could contribute to theproperty overhang in the market.

Sectors : Not foreseeableParties : Low income population

Syarikat Perumahan Negara Berhad (SPNB) will also expedite the construction of housing forthe low income group, as follows:

First - Rehabilitation of 6,000 units in abandoned housing projects Second - Construction of 36,000 units of affordable homes Third - Construction of 4,000 units of Rumah Mesra Rakyat

The above measures by SPNB will construct more affordable houses in the market. It hasbeen anticipated that more projects, which have been abandoned presently, could be revivedwith the active involvement of SPNB. Thus far, SPNB has successfully revived severalabandoned projects throughout the country.

Sectors : Existing projects, which have been abandonedParties : Purchasers and end financiers of abandoned projects, low income

population

The Government will establish a fund to provide guarantees to banks, which provide loans tothose without fixed income, such as farmers and small traders. Guarantees will also beprovided to those who have the ability to repay the loans but unable to prove their incomestreams. For a start, RM50 million is allocated to provide such guarantees to Bank SimpananNasional and Bank Islam Berhad, effective 1 January 2008.

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With the Government’s guarantees, the targeted group of purchasers will be able to buyresidential properties, primarily the low to medium costs houses.

Sectors : Affordable residential propertiesParties : Low income population and property developers

The Government will allow EPF contributors to make monthly withdrawals from the balance inAccount 2. The scheme will be effective 1 January 2008 and is for the financing of onehouse. This scheme will make available up to RM9.6 billion annually for the purchase ofhouses.

With the additional contribution from the Account 2, it will not only improve the loanrepayment capability of the EPF contributors, the net income of the EPF contributors isexpected to increase. With the increase, purchasing power and eligibility of the EPFcontributors to obtain higher housing loans will also improve.

This proposed measure will be a major boost for the Malaysian economy with the estimatedRM9.6 billion being made available annually to the EPF contributors that have at least ahousing loan.

Sectors : All sectors, especially the residential sectorParties : EPF contributors, property developers, financial institutions, retailers

The construction of 9,600 units of quarters have been completed in 2007 to provide adequatehousing for civil servants throughout the country, while 13,000 units are expected to becompleted in 2008. The Government has allocated a sum of RM887 million in 2008 to buildmore quarters for civil servants nationwide.

By constructing quarters for civil servants, property developers may not be able to target thecivil servants that have been allocated with quarters by the government.

Sectors : Not foreseeableParties : Eligible government employees

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Over the next four years, a sum of RM12 billion will be expended to improve the publictransportation system in Kuala Lumpur and Penang. To alleviate traffic congestion in Penang,the Penang Outer Ring Road (PORR) will be implemented on a tender basis shortly. Publictransportation in other major cities will also be improved.

The provision to improve the public transportation system in Kuala Lumpur and Penang willnot only improve the quality of living of the Malaysians, it will also spur developmentopportunities for neighbourhood located within the coverage area of the new transportationsystem. While details of the transportation projects in Penang have been announced by theauthority, limited information on the proposed projects for Klang Valley was made available.One of the highly anticipated projects in Klang Valley is the extension of the existing LightRail Transit (LRT).

Sectors : Properties located within the coverage area of the new transportationsystem

Parties : Owners of properties located within the coverage area of the newtransportation system

Economic corridor development continues to be intensified, beginning with the IDR and theNCER. The East Coast Economic Region (ECER) as well as the Sabah Corridor and theSarawak Corridor will be launched soon.

To date, the government has introduced the Iskandar Development Region (IDR) and theNorthern Corridor Economic Region (NCER). Since the introduction of IDR in early 2007,significant increase of Foreign Direct Investment (FDI) into this region has been noted. It hasbeen announced recently that more than US$10 billion will be spent by Middle East investorsover the next few years to develop the tract of land that they recently bought in the IDR.Mubadala Development Co, Kuwait Finance House and Millennium DevelopmentInternational Co have committed US$1.2 billion (RM4.2 billion) to buy 892 ha of land withinIDR. Aldar Properties PJSC will be managing the development of the project.

The government anticipates the introduction of economic development corridors will bringsimilar successes as the IDR for the targeted regions. Prior to the announcement of IDR andNCER, both the southern Johor and Penang, are already the key economic hubs for thesouthern and northern regions of Peninsular Malaysia, respectively. Hence, it is relativelyeasier to kick start the IDR and NCER, as compared with ECER as well as Sabah andSarawak corridors, which lag behind the IDR and NCER in terms of economic developments.

Sectors : Properties located within the economic corridorsParties : Owners of properties located within the economic corridors

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To improve the quality of life in Sabah and Sarawak. Amongst the measures proposed are asfollows:

A sum of RM4 billion is allocated to implement several projects to improve the quality oflife in Sabah. Among the major projects are the construction of Jalan Kota Marudu-Ranau, Sandakan Northern Ring Road, upgrading of Jalan Kota Belud-Langkon,provision of rural health services, hospital facilities, low-cost housing, electricity and watersupply, as well as upgrading of roads and railway.

A sum of RM4 billion is provided for the implementation of development projects inSarawak. Among the major projects are constructions of Jalan Kota Samarahan-Gumpeh, upgrading of Jalan Kuching-Sibu, provision of rural health services, UniversitiPutra Malaysia, IKM in Bintulu, electricity and water supply projects, sewerage as well asreplacement of Batang Lupar Bridge in Samarahan. These projects will improve the well-being of the people of Sarawak.

To further promote tourism activities in Sabah and Sarawak, RM200 million is providedunder the Tourism Infrastructure Fund, managed by Bank Pembangunan MalaysiaBerhad. Priority will be given to tourism projects which leverage on the rich naturalendowments of Sabah and Sarawak.

Introduction of various infrastructural developments in Sabah and Sarawak will not onlyimprove the quality of life of the Sabahans and Sarawakians, it will also encourage propertydevelopments within the two states.

Sectors : All sectors in Sabah and SarawakParties : Investors in Sabah and Sarawak, Sabahans and Sarawakians

Pre-school education programs will be expanded with the construction of 280 new TABIKAthroughout the country, with an allocation of RM105 million. With this, the number of TABIKAwill increase to more than 7,600 to accommodate 300,000 children between 4 to 6 years.

Demand for TABIKA sites throughout the country is expected to increase with the aboveallocation.

Sectors : Properties that could be used for TABIKAParties : Owners of properties that could be used for TABIKA

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The Government proposes full stamp duty exemption be given on the transfer of propertyfrom husband to wife. In cases where the wife wishes to transfer property to the husband, thesame exemption applies.

Change in policy and promote property transfer between spouses. This measure will not havesignificant impact on the property market.

Sectors : Not foreseeableParties : Not foreseeable

The Government is committed to combat crime in our society. A sum of RM6 billion isallocated to the Royal Malaysian Police (PDRM) in 2008. Police presence and visibility will beincreased, particularly in crime-prone areas.

Increased police presence and visibility in crime-prone areas is important to ensure thatcriminal activities in these crime-prone areas are contained.

Sectors : Properties located within crime prone areasParties : Owners of properties located within crime prone areas

A sum of RM1.1 billion has been allocated for flood mitigation programs in Sungai Muda,Sungai Kelantan, Sungai Damansara, Sungai Prai and Kuala Lumpur Flood Mitigation Projectto reduce the occurrence of floods throughout the country. An allocation of RM120 million isprovided for preservation and cleaning as well as beautification programs of rivers throughoutthe country.

The frequent occurrences of floods have dampened the attractiveness of certain locations.Hence, flood mitigation programs are imperative to prevent further flood incidences in theseaffected areas, which could affect the demand for properties located within these areas.

Sectors : Properties located within flood prone areasParties : Owners of properties located within flood prone areas

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ECONOMIC OUTLOOK-2008

With the policies and strategies announced by the government, the country’s Gross DomesticProducts (GDP) is projected to record growth of about 6.0% to 6.5% in 2008. Private investmentis expected to expand at 9.5% while private consumption at 7.9%. Per capita income is projectedto increase by 6.8% to RM23,864 and in terms of purchasing power parity equivalent toUSD14,206.

The services sector is expected to grow at 8.6% underpinned by tourism, transportation, financeand banking, property, education, health and ICT activities. The recovery in demand for electricaland electronic products is expected to contribute to the growth of manufacturing sector at 3.8%.The construction sector, which includes property development, will grow more rapidly at 6.3%following the increase of civil engineering activities as a result of the implementation of the 9MPprojects. The agriculture sector is projected to grow 3.5% and focus will be given to thecommercialisation of plantation and livestock sectors.

PROPERTY MARKET OUTLOOK

In summary, 2008 Budget provides the following key enhancements to the Malaysian propertymarket:

Increase in purchasing power for government employees, EPF contributors and shareholdersand employees of profitable companies augurs well for the demand of properties and theretail sector

Expedited and simplified property development process reduces developer’s holding cost andexpedite the launch of property projects

Enhanced regulatory framework to enhance the maintenance and management of stratatitled properties. Proper maintenance and management of stratified projects are imperative tosustain the value of the projects

Enhanced demand for affordable properties with the 50% stamp duty exemption for purchaseof residential properties costing RM250,000 and below as well as government guarantee toassist this group to obtain housing loan

Influx of expatriates into Malaysia with the relaxed immigration rulings for the foreign skilledworkers will create demand for high end condominiums and hotel rooms

Demand for investment grade properties will increase with the anticipated increase in foreignparticipation in REITs. Besides, the reduction of corporate tax in 2009, companies, especiallythe developers, will have additional capital to invest in properties and expand their land bank

Economic corridors, such as IDR and NCER as well as the soon to be announced ECER,Sabah Corridor and Sarawak Corridor will spur developments within these regions

With over RM8 billion being allocated for the developments in Sabah and Sarawak, moredevelopment opportunities could be expected within the two states.

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In line with the government’s strategy, the proposed catalytic developments will encourage andspread the property developments throughout the country, particularly within the economiccorridors and Cyberjaya. The projected growth of 6.0% to 6.5% for the GDP in 2008 and BaseLending Rate (BLR) at about 6.75% will continue to support growth for the property market.

Demand for affordable residential properties has been enhanced with various measuresintroduced under the 2008 Budget. These measures are not expected to provide immediateimprovement to this market segment. Nevertheless, these measures are crucial to reduce theoverhang of properties in the market.

With the increase of foreign participation and reduce in the corporate tax, REITs funds and otherinvestment funds will continue to drive the demand for investment grade properties, such aspurpose built office buildings, shopping complexes, hotels and industrial properties within thetowns or established locations. The exemption of Real Property Gain Tax (RPGT) has alsoenhanced the attractiveness of property investments.

Since 2004, a number of high-end condominiums or better known as the “super condominiums”have been introduced within and around the KL city areas. The supply of such condominiums isexpected to increase substantially when these projects are completed. The relaxation of theimmigration rules for foreign skilled workers will encourage influx of expatriates into Malaysia.This measure augurs well for the high end condominiums as increase of expatriates will createdemand for the high-end condominiums. Besides the high end condominiums, hotels and serviceapartments will also benefit from the increase of expatriates.

The reduction of corporate tax, improvement in the public services and other incentives has madeMalaysia more competitive in attracting FDIs in view of the increasing competitions from othercountries in this region. FDIs play a crucial role in promoting Malaysian economic growth. Theintroduction of IDR, which has attracted considerable foreign investments, has already promptedthe land value within IDR to increase. It has been anticipated that the economic activities andpopulation within IDR will grow when the developments within IDR take place, hence, creatingdemands for the property market.

The government plan to adopt similar economic corridor development strategies for othereconomic regions, such as ECER, Sabah Corridor and Sarawak Corridor. Notwithstanding this, itshould be noted that implementation of ECER, Sabah Corridor and Sarawak Corridor will bemore challenging as compared with IDR and NCER. Prior to this, IDR and NCER are already themajor economic growth centres for the southern and northern regions of Peninsular Malaysia.

To date, Visit Malaysian Year 2007 has successfully attracted a number of foreign tourists toMalaysia. For the first six months of 2007, foreign tourists spent RM24 billion, recording a 45.9%increase compared with the same period last year. The overall occupancy rates of hotels in thecountry have also improved. Additional allocation to enhance the tourism sector is imperative toensure the favourable tourism trend in 2007 could be sustained in 2008.

Barring any unforeseen circumstances, the Malaysian property market outlook remainsfavourable supported by adequate economic growth, low interest rates and anticipated increasein the private consumptions.

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DISCLAIMERS

The information contained herein is derived from sources which we believe to be reliable. Thispublication is on the basis that the information made available to us is accurate and complete.However, we cannot guarantee its accuracy or completeness. All opinions and estimatesexpressed herein reflect our judgment as of this date and are subject to change without notice. JSValuers Group accepts no responsibility if this should prove otherwise. No liability can beaccepted for any loss arising from the use of this publication.

This report is the property of JS Valuers Group and cannot be copied or reproduced withoutwritten consent from the Group.

CONTACT US

If you have any enquiries with regard to content of this review, please do not hesitate to contact:

Mr. Chan Wai SeenDirector, Research & ConsultancyTel: 03-2162 4133Fax: o3-2162 4188Email: [email protected]: www.jsvaluers.com.my

JS VALUERS GROUP

JS Valuers Group, which is registered with the Board of Valuers, Appraisers & Real EstateAgents, provides full range of real estate consultancy services. Currently, with eleven (11) officeslocated throughout Malaysia, the group continuously provides high quality professional servicesto our valued customers. Amongst the services offered are:

Valuation Estate agency and project marketing Research & consultancy Auction Property management

mailto:[email protected]

http://www.jsvaluers.com.my/

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Following are JS Valuers representative offices located throughout Malaysia.

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