mpi market report october 2010

8/4/2019 Mpi Market Report October 2010

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CTOBER 2010 ISSUE

Budget 2011: Strengthening Public-Private Partnerships

0

5

10

15

20

25

0

10,000

20,000

30,000

40,000

50,000

60,000

2003

2004

2005

2006

2007

2008

2009

(in' millions)RM' million

Re ce ip ts ( LHS ) A rr iv al s ( RHS )

Source: Ministry of Finance

Table 1: Major development projects inMalaysia

Figure 1: Tourist Arrivals and Receipts toMalaysia

Source: Tourism Malaysia

Spotlight on the Hospitality Industry Property Transactions Update Greater KL Conurbation Residential Property Price Trend Investor Highlight: SingaporeReal estate sector to benefit from Budget 2011s infrastructure push The 2011 Budget unveiled on 15 October 2011 saw more pump primingnitiatives to ignite economic growth. The government estimates real GDProwth of 7.0% in 2010 and 5%-6% in 2011.

The Budget pushes on with the governments agenda for increased public -private partnerships notably through more announcements of significantnfrastructure and development projects. With the public sector settinghese projects in motion, this is seen as a promising step and positivecknowledgement of the private sectors role in driving foreignnvestments into the country. The 5 notable high impact infrastructure

projects announced will cost an estimated total of RM81b (US$25.1b)Table 1).

Beneficiaries of these projects will benefit from improved accessibility,

nhanced infrastructure and possible appreciation of land value in areas ints vicinity. These include areas such as Puchong and Subang in Selangor,

Kampung Baru and Pudu within KL City Centre, Batu Kawan and BalikPulau in Penang and Johor Bahru City Centre in Johor.

Exciting days ahead for the Hospitality industryMalaysias continued rise in tourists and business travelers are seen asmain drivers for the local hospitality industry. Total tourist receiptsncreased to RM53,368m in 2009 compared to RM49,561m in 2008. The

Ministry of Tourism records a total of 180 4-star and 5-star hotels inMalaysia as at end 2010, with total room supply of 54,175 rooms. Foreignnvestors own 58% of the 4-star and 5-star hotels in Malaysia. There are no

estrictions on foreign ownership of hospitality assets in Malaysia. BesidesKL, other local thriving hospitality markets are Penang, Johor, Sabah,Melaka and Langkawi Island.

According to Mr. Previn Singhe of Zerin Properties a leading speacilist inhe sale-purchase of hotels in South East Asia says, the outlook for the

hospitality sector will continue to be strong moving into 2011. New trendsn the industry are limited service hotels, serviced apartments, spa resorts,

budget and branded budget hotels. He believes on the continued strengthf hotel rates and occupancy levels, fueled by factors such as growth of theourism market, opportunities for varied products. There is still lack of

prominent international hotel brands. (Fig. 1-5)

Major Infrastructure Projects Announced

Cost

(RM'billion)

Cost

(US$'billion) Completion Date

Major Infrastructure Projects Announced

Kuala Lumpur International Financial District (KLIFD) 26 8.06 n/a

Mass Rapid Transit in Greater KL 40 12.4 2020

Malaysian Rubber Board land, Sungai Buloh 10 3.1 2025

Warisan Merdeka (100 Storey Tower) 5 1.55 2020

Corridor Development

Iskandar Malaysia 0.34 0.11

Northern Corridor Economic Region 0.13 0.04

East Coast Economic Region 0.18 0.06

Sarawak Corridor of Renewable Energy 0.09 0.03

Sabah Development Corridor 0.11 0.04

Between 2020 - 2025


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CTOBER 2010 ISSUE

Figure 2: Average Room Rates of 3 to 5-Starand Budget Hotels in KL, 2005-2010

Source: Zerin Properties Research

Figure 3: Occupancy Rates of 3 to 5-Starand Budget Hotels in KL, 2005-

Figure 4: Total Average Room Rate &Occupancy Rate for Hotels inPenang, 2008-2010

Figure 5: Total Average Room Rate &Occupancy Rate for Hotels inJohor, 2008-2010

0

50

100

150200

250

300

350

400

450

2005 2006 2007 2008 2009 2010

3 star 4 star 5 star Budget

40%

45%

50%

55%

60%

65%

70%

75%

80%

2005 2006 2007 2008 2009 2010

OccupancyRate

3 star 4 star 5 star Budget

0%

10%

20%

30%

40%

50%

132

133

134

135

136

137

138

139

140

141

142

2008 2009 2010

OccupancyRate

AverageRoom

Rate(RM)

Average Room Rate (LHS) Occupancy Rate (RHS)

0%

10%

20%

30%

40%

50%

60%

0

50

100

150

200

250

300

2008 2009 2010

OccupancyRate

A

verageRoomR

ate(RM)

Average Room Rate (LHS) Occupancy Rate (RHS)


3/9

CTOBER 2010 ISSUE

Property Transaction UpdateJan-July 2010 data from NAPIC recorded a total of 4,815 transactions with a value of RM14.4b (US$4.6b) in the 4 majorstates tracked by MPI; Kuala Lumpur, Selangor, Johor and Penang. The residential sector continues to be robustthroughout the year in Kuala Lumpur, Selangor and Penang. A total of 1,066 transactions (RM2.45b/US$0.79b), 998transactions (RM2.25b/US$0.73b) and 278 transactions (RM0.50b/US$0.16b) were recorded in Kuala Lumpur,Selangor and Penang respectively. Transactions in Johor remain dominated by the industrial sector. The development ofIskandar Malaysia is seen to be the main driver of further growth for the states industrial sector. A total of 105industrial land amounting to RM0.32b/US$0.10b changed hands. (Fig. 6-9)

Greater KL Conurbation Residential Property Price Trend

Notwithstanding existing favourable conditions such as low lending rates and high margin of financing available toproperty purchasers, limited supply of land and innovative product offerings are noteworthy factors that are influencingprice premiums of residential properties in Kuala Lumpur (KL) and to some extent, Penang island. Rental rates forlanded property in KL is observed to be moving faster than the stable rentals for high rise units, currently averagingbetween RM2,800 RM3,000 (US$620 - US$930) per unit. Average gross yields for double storey terraced houses andhigh rise units in 2Q10 are stable at 3.3% and 6.6% respectively. A trend in pricing tiers emerges from the difference inasking prices of suburban areas such as Puchong, Shah Alam and Rawang moving inwards towards the heart of KL city.Both landed and high rise property in outer areas have the potential to command up to 70% of the value of each innertier, giving rise to the potential that properties in the outer fringes of KL could appreciate even further. The new MassRapid Transit plan to increase connectivity will also contribute to further price appreciation in the suburban areas.Currently, residential properties in Tier 3 and Tier 4 are purchased by first time home buyers.

Note: US$/MYR = 3.1Source: MPI Research


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CTOBER 2010 ISSUE

Infrastructure UpdateNew highways in the pipeline under budget 2011With further major developments proposed within KL city centre, new highway works announced in Budget 2011 aim toalleviate traffic to and from the suburbs around Kuala Lumpur. Currently, Malaysia has 23 toll concessions with volumegrowth on the uptrend contributed by local travellers and cross-border traffic. According to latest figures from thecountrys largest highway concessionaire, PLUS Expressways Bhd recorded RM2b (US$620m) toll collection on the backof traffic volume growth of 7.1%.

Operators Project Location

PLUS Sungai DuaJuru Highway Penang

PLUS Damansara-Petaling Jaya Highway Greater KL

PNB Ampang-Cheras-Pandan Elevated Highway Greater KL

PNB Guthrie-Damansara Expressway Greater KL

Kumpulan Europlus Pantai Barat-Banting-Taiping Highway Selangor - Perak

n/a Paroi-Senawang-KLIA Highway) Negeri Sembilan

Residential Sector UpdateOutlook from the countrys leaders in property developmentThe recent, The Edge Property Excellence Awards 2010 saw top developers rewarded for their achievements in

providing quality and innovative products to the Malaysian market. Industry players are optimistic of the propertymarket scene citing ample liquidity, steady employment rate, low mortgage rates, tax incentives and high saving rates asprimary factors that will sustain the robust domestic market. In selected areas, property prices are even estimated toincrease by 10% or more within the next 12 months. Property players are increasingly cognizant ofMalaysias consumermarket as demands have become more sophisticated over the years. Projects on the winners portfolios show increasedemphasis on provision of facilities such as security features, improved customer service, quality assurances andconvenient access to basic amenities such as schools, parks and retail space.


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CTOBER 2010 ISSUE

Commercial Sector Update

En-bloc Purchase: The Crest, Kuala LumpurA Singaporean investor recently acquired 31 units at The Crest at the value ofUS$25.6m (RM80m). A Grade-A 26-storey office tower situated on Jalan SultanIsmail, The Crest office tower comprises 143 office units with nett lettable space of190,430 sq ft at a total gross development value (GDV) estimated at US$67.8m(RM212m). The Crest development also includes The Crest Residence, a 44-storeyhigh end residential tower and a 6-storey podium comprising 842 parking bays.

Source: Company Website

Construction Sector Update

Greater KL MRT plan

The proposed 150km Mass Rail Transit (MRT) within Greater Kuala Lumpur willbegin construction in 2011 at an estimated development cost of US$13.76b(RM43b). Components of the MRT plan includes three main lines that run around a20km radius of central Kuala Lumpur, further land acquisition and development ofunderground commercial space. This proposed plan stretches over nine years andwould be integrated with other rail transport providers. The proposal that has beenput forward by Gamuda Bhd and MMC Corp Bhd is currently undergoing technicalstudy.

Source: The Star

Details Property Location Estimated GDV CompletionDate & Details

The Crest Office Tower,SKN Land & Development Sdn. Bhd

Block B KLCC,Kuala Lumpur

US$67.8m(RM212m)

4Q 2011

Details of proposer Property Location Development Cost CompletionDate & Details

Gamuda Bhd &MMC Corp Bhd

150km MRTsystem

GreaterKuala Lumpur

US$13.76b(RM43b)

Expected in 1Q2020


6/9

CTOBER 2010 ISSUE

Industrial Sector UpdateKulim Hi-Tech Park: Malaysian-German Joint VentureA joint venture involving QT Hightech (M) Sdn. Bhd. and its German partner, Lfoundry GmbH indicated an initialinvestment of US$68.48m (RM214m) to build five the wafer fabrication clusters. Situated at the Kulim Hi-Tech Parkwithin the Northern Corridor Economic Region (NCER), these clusters will be set up in the next 10 years. This venture isexpected to generate gross income in the excess of US$1.3b and contribute an estimated 8,500 job opportunities.

Bayan Lepas: Construction of new US$40m manufacturing facilityNational Instruments (NI), headquartered in Texas, will begin construction of its US$40mil manufacturing facility locatedon a 17-acre site in Bayan Lepas, Penang. NI manufactures computer-based measurements, automation software andhardware products catering to industries such as automotive, defense and telecommunications.

Hospitality Sector Update

Malaysian developers foray into hospitality sector: Launch of Premiere HotelWCT Bhd recently launched its first hotel hotel in Klang, Selangor, comprising 250 rooms witha price point ranging from US$49 (RM155) to US$155 (RM480). Built at a cost of US$23.25m(RM75m), this hotel is part of BBT_ONE, a development comprising office towers and retailspace.

Joint Venture Details JV Value Location Date & Details

QT HighTech (M) Sdn.Bhd /

Lfoundry GmbH (Germany)

US$68.48m

(RM214m)

Kulim Hi-Tech Park,

Kedah

3Q 2010

(fabrication industry)

Company Land Area Location Date & Details Investment Value

National Instruments (NI),

USA

17 acres Bayan Lepas,

Penang

1Q 2011

(manufacturing facility)

US$40m

Owned by Property Location Price Date & Details

WCT Bhd Premiere Hotel Klang,Selangor

USD23.25m(RM75m)

3Q2010(mixed use property)


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CTOBER 2010 ISSUE

Investor Potential: Singapore

Recent measures to slow down rising prices of residential properties with the directive from the Singapore authoritieshave affected residential sales at a decrease between 10%-20% as both buyers and sellers are watching the market toassess the implications of government announcements. The directive prohibits Singaporeans who owns to non-subsidisedHDB flats to concurrently own an HDB flat and a private home within the minimum occupation period of five years.Overall, the Singapore property market will remain robust; DTZs May 2010 report indicates increasing interest fromChinese buyers, now the number three overseas buyers in the city-state. Domestic investor outlook is also promising; theEconomist Intelligence Unit forecasts private consumption to continue to expand by an average of 4.1% up to 2011.

For Malaysian developers to tap into the Singaporean property market the following points may help:

Assure the investor by using se warranties, access to authorities for queries or redress and offer credible propertymanagement services. Cater to standards that Singaporean investors are used to: Highlight certifications such as the Green Building Index,

BCAs Green Mark, major property awards, etc.

Can leverage on sales in Singapore by using MPIs Malaysia Property Gallery.

Table 2: Statistics of Singapore Investments into Malaysia, 2008

2008value

(S$m)

2008value

(US$m)

YOY Change(%)

Notes

Direct Investment into Malaysia 24,341.5 18,573.42 6.8 8.2% ofSingapores total directinvestments for 2008

Direct Equity Investment intoMalaysia

21,321.4 16,277.74 7% 8.6% ofSingapores total directequity investments for 2008

Direct Investment into MalaysianReal Estate, Rental & Leasing Sector

661.8 505.2 n/a 2.7% ofSingapores total directinvestments into Malaysia for 2008

Note: SGD/US$ = 0.7634Source: Singapores Investment Abroad 2008 (published April 2010), Singapore Department of Statistics


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CTOBER 2010 ISSUE

Note:

Transactions in Selangor comprise districts of Petaling, Gombak, Sepang and Hulu Langat only.Transactions in Kuala Lumpur comprise municipalities of Batu, Seksyen 1-100, Kuala Lumpur, Ampang and Petaling only.Source: NAPIC

Property Transactions above RM1 million from Jan July 2010 (Selected States in Malaysia)

Figure 6: Number and Value of Transactionsby Sub-Sector in Kuala Lumpur

Figure 7: Number and Value of Transactionsby Sub-Sector in Selangor

Residential -1066

(US$789.31m /

RM2.45b)

Commercial -

723

(US$691.96m /

RM2.15b)

Industrial - 47

(US$191.62m /

RM594.03m)

Development -

74

(US$247.99m /

RM768.75m)

Total Transactions: 1910

Total Sales Volume: US$1.92b / RM5.95b

Residential -

998

(US$725.23m /

RM2.25b)

Commercial -

649

(US$740.26m /

RM2.30b)

Industrial -338

(US$486.85m /

RM1.51b)

Development -

149

(US$127.63m /

RM395.66m)


Total Sales Volume: US$2.08b / RM6.45b

Figure 8: Number and Value of Transactionsby Sub-Sector in Johor

Figure 9: Number of Value of Transactionsby Sub-Sector in Penang

Residential - 78

(US$160.45m /

RM497.39m)Commercial -

40 (US$89.95m/ RM278.85m)

Industrial - 35

(US$68.59m /

RM212.63m)

Development -

49 (US$48.61m/ RM150.69m)


Total Sales Volume: US$367.6m / RM1,139.55m

Residential - 31

(US$19.49m /

RM60.43m)

Commercial -

71 (US$64.68m

/ RM200.51m)

Industrial -105

(US$103.93m /

RM322.19m)

Development -

62 (US$71.60m

/ RM221.96m)


Total Sales Volume: US$259.71m / RM805.09m


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CTOBER 2010 ISSUE

For further information and up-to-date tracking of Malaysian real estate data, visit:www.malaysiapropertyinc.com

For further enquiry, write to:[email protected]

This report contains information that is publicly-available and has been relied on by Malaysia Property Incorporatedon the basis that it is accurate and complete. MPI is not liable if the case proves to be otherwise. No warranty orrepresentation, express or implied, is made to the accuracy or completeness of the information contained herein, andthe same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal withoutnotice, and to any special listing conditions imposed.

mpi market report october 2010

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