The Edge, 22 August 2011 - Hot grabs outside Klang valley,Surge in Penang planned projects

The Edge, 22 August 2011

Economic growth in other regions prompts developers' buying spree.

PETALING JAYA: Major property developers ave been snapping up large plots of land worth well over a billion ringgit, even as the global economic scene turned cloudy. And it is interesting to note that, these acquisitions are mainly located outside the country's largest property market, the Klang valley.

Mah Sing Group Bhd, Hua Yang Bhd, S P Setia Bhd, Dijaya Corp Bhd, Berjaya Land Bhd and Eksons Corp Bhd are among the noted property developers that have this month announced acquisitions of land for future development projects.

According to tabulations of a selection of notable deals by The Edge Financial Dialy, five major developers have alone spent some RM1.07 billion to buy 1,502 acres (600.8ha) of land in the past few months.

Factors such as scarcity of land in mature markets like Kuala Lumpur and Petaling Jaya, which has led to high asking prices as well as future economic developments in other regions may have prompted the buying spree.

Johor appears to be the new property hot spot now, judging by the rush of developers there.

Analysts said that the change of perception towards the southern state was triggered by the rejuvenation of Iskandar Malaysia.

Surge in Penang planned projects: They noted that since UEM Land Holdings Bhd's acquisition of Sunrise Bhd, there has been more pro-active development committee team spear heading the development of Iskandar.

Sentiment has also been boosted by warming bi-lateral ties between Malaysia and Singapore and maiden investments by Temasek Holdings is seen coming to Iskandar.

In Johor, Mah Sing, under the leadership of Tan Sri Leong Hoy Kum, acquired 83ha (205.7acres) of prime free hold land in Tanjung Kumpang for RM54.7 million in April or RM6.10 psf, while Hua Yang purchased two prime parcels of land in Johor Baru measuring 0.8hafor

RM10.7 million or RM117 psf.

Mah Sing's Land is located within the Iskandar land development region, some 1Km from the port of Tanjung Pelepas and some 23Km to Jurung industrial estate in Singapore.

It is proposing to develop the land into an itergrated industrial and business park named Mah Sing Ipark, with an estimated gross value (GDV) of about of RM610 million.

Last week Dijaya acquired 92ha of freehold land in Plentong for RM220 million or RM22.25 psf in its bid to strengthen its presence in the Iskandar Malaysia development region.The company is building a mixed development named Tropicana Danga Cove with a GDV of RM2.8 billion. Construction of the project will start this year, together with another project called Tropicana Danga Bay, a high end intergrity property development with a GDV of RM3.8 billion.

Tan says Dijaya will be launching quality properties in the region

According to group Ceo, Tan Sri Danny Tan Chee Sing, DIJAYA will be launching more quality properties in the region to ride on its proximity to Singapore.He said Iskandar Malaysia will drive up demands for properties in the region as more investments will be pouring in,

especialy from neighbouring Singapore. The rising cost of doing business in the island republic has prompted many of its small and medium enterprise to relocate to Johor due to its Proximity to home and lower costs according to a recent research.

Hua Yang said its Johor Bahru acquisition is in line with its business expansion to make the southern region a key revenue contributor to the group.The move is also in line with its vision to become a nationwide community developer providing affordable homes throughout the country.

The land parcels that it recently acquired are located in Jalan Abdul Samad in Johor Bahru city centre, and only 3.5KM from the new customs, Inspection and Quarantine complex. The land will be developed into a residential project comprising service apartments, to cater for professionals working in Jahor Bahru and Singapore with an estimated GDV of RM120 million.

So will the property markets in the prime area such as Kuala Lumpur, Petaling Jaya and Penang island disappear from the property developers radar?Not quite, but with limited large tracks of prime land, developers have beeen focusing niche, higher end projects.

In the heart of downtown Kuala Lumpur Mah Sing will develop a 1.7ha parcel at the former Tunku Abdul Rahman flats better known as the Pekeliling flats in Jalan Tun Razak, in a joint venture with privately-held Sdn Bhd and Usaha Nusuntara Sdn Bhd.The project tentatively called M Sentral, is estimated to have a GDV of RM 9 billion. Mah Sing acquired the land for RM600 psf, and will look to jointly develop the rest of the former Pekeling Lands which measures 58 acres.

Hua Yang also has several projects in the pipeline in Kuala Lumpur, especially those under its RM 840 million One South intergrated development located in Sungei Besi, south to the city centre. The project spreads over 16.7 acres and is currenlty enjoying high take up rates with its phase one comprising retail and office units more than 80% sold.

The group has also acquired 1.55 acres of leasehold commercial in Desa Pandan, which is located near Jalan Tun Razak and the proposed Kuala Lumpur International Financial District ( KLIFD ). The land was purchased for RM32 million and the group plans to develop it into affordable service apartments with the pricing in the range of not more than of RM400 thousand and GDV of RM160 million.

With limited prime land left in the urban centres, property developers should have to look much further out to build new townships. And thats where SP Setia went to Hulu Langat, where it hopes to recreate another "Setia Alam" - its successful transformation of a backwater palm oil estate to a thriving township in less than a decade.

SP Setia acquired 409ha of freehold landin Beranang, Hulu Langat for RM330.1 million or RM7.50 psf. The oil palm land will converted into a mixed residential township with an estimated GDV of RM3.5 billion.

Maybank investment bank research said ion a report that the property developer is spearheading a new relatively untapped trend of affordable housing development which will provide steady bread and butter sales to the group and support its long term growth. The research house noted that the land could turn out to be another highly successful "Setia Alam" given SP Setia's track record and expertise in developing townships.

Upnorth Penang continues to draw attention. Confidence in this status was summed up by Berjaya Group tycoon Tan Sri Vincent Tan. He said he was impressed with the level of cleanliness in Penang; The state has done well economically over the past few years, having attained the highest level of investments in the last year with RM12.2 billion.

Berjaya Land Bhd acquired 23ha of land in the famous Penang Turf Club area for RM459 million cash or RM184 psf for a high end residential property development. The group said the project with an estimated GDV of Rm1.52 billion will be a low destiny exclusively gated housing development comprising of bungalows, semi-detached units, and low-rise condominiums. The development will take up five years to complete.

Not only is the Penang island property market red hot now, the same could also be said about the property market on the main land, Seberang Perai.Other than Tambun Indah land Bhd, which has firmly positioned itself on the mainland Penang property after successfully building several notable townships such as Taman Tambun Indah, Juru heights, Pearl garden and Pearl villas, Hua Yang is also making its forey into the market.

According to the group's chief executing officer Ho Wen Yan, the group is currently scouting for landbanks on mainland Penang as well as in Kota Kinabalu, Sabah. He said that the group is going to raise RM100 million to fund land bank acquisitions in these two keys market.

"Penang is one of the most high growth states in terms of economy and population. It is a target market for us to build affordable housing in the state. In Kota Kinabalu we will look at building High - rise affordable residential property in the urban centres, whereas if it is outside the urban centre it would be viable for us to build more landed properties," he said during the press conference after the companies AGM last Friday.

However there are concerns over the various property projects in the more mature markets of Kuala Lumpur and Penanag islands, giving rise to fears that there will be an over supply of housing.

Penang for example has seen as surge in planned projects over the next 10 to 15 years worth RM29.6 Billion, according to the news reports. At the current level of property purchasing in Penang, which is an all time high, it will take 10 to 11 years for the market to absorb such a large number of projects.

Datuk Jerry Chan Fook Sing the Real Estate and Housing Developers Association (REHDA) Penang Chairman had said property launches should be perfectly timed to suit demand so the manyt projects would not lead an oversupply in the islands property market which will

dampen prices/yields.

According to Affin Investment Bank property analyst Isaac Chow, there will always be a demand in the medium and low cost property markets but the high end residential property market will see a slower demand, as buyers have become more selective and prices will be quite shaky especially for high rise developments.

" The right property in the right location will see an increase in demand, and hence pice, whereas the wrong property in the wrong location will see a lower demand, and the price will decrease," he told The Edge Financial Daily.He amintained that property prices in Malaysia

are still generally affordable as only about 20% to 25% of a buyers monthly disposable income is spent on rent or mortage payments as opposedto buyers in other countries who would have to spend almost 30% of their monthly disposible income on mortages.

With the recent turbulence in the global fiancial markets amid fears of a recession in the US and Europe, developers are still confidentin the property market."Development is an industry that cannot slow down. every 10 to 15 years we have a downtown but we have to weather it and keep going. For us it will b Business as usual," Dijaya managing director told The Edge Financial Daily.