Bullish outlook for property


  • Business
  • Wednesday, 10 Dec 2003

Tan Sri Mustapha KamalGroup Executive ChairmanMK Land Holding Bhd

 

THE outlook for the global economy appears to be much currently than it was a year ago. What do you see are the challenges and prospects for the Malaysian economy for 2004? 

The economy is on the right track and the outlook is good. The country is expected to register an economic growth of 6%. The recent upgrading in rating for the country and certain main stock counters should also augur well for the share market. Coupled with strong corporate earnings and improving investor sentiment, the outlook is positive. 

The key challenge to the Malaysian economy would be a more competitive environment as a result of globalisation and trade liberalisation. There is a greater need to strategise and position the country to provide innovative and quality goods and services at competitive pricing.  

What are the prospects for your sector/industry for 2004? 

Tan Sri Mustapha Kamal

The overall property market is expected to be good in tandem with the country's projected economic growth and improving market sentiment. The high employment rate, continued demand for properties, the readily available end-financing and the fact that we are still enjoying low interest rates would translate into higher affordability. Overall, these factors will improve the confidence and sentiments of consumers and businesses. 

The government has outlined numerous incentives for the construction/housing industry during the past two/three years. Have these incentives given a boost to your company’s operations and revenue? 

The government stimulus package, which includes stamp duty and RPGT exemption, has certainly had a positive impact on property sales. In June, we had a property carnival that focused on the benefits provided for by the stimulus package and sales were more than encouraging. We anticipate the positive effect to continue in the coming months. 

What will be the focus for your company/group for 2004? 

In anticipation of the stronger demand in 2004, the group will concentrate on sales for projects in Klang Valley, namely in Damansara Perdana and Damansara Damai, both in Petaling Jaya. The project in Damansara Perdana, which has good location and excellent access, is now becoming a part of the Golden Triangle of PJ.  

The area is quickly emerging as a major centre for shopping, fashion, food and entertainment, with popular attractions such as 1 Utama, IKEA and Tesco, and with The Curve and Cathay Cineleisure to be completed next year. In addition to sales, we will continue to focus on establishing M K Land as one of the leaders in providing innovative and quality products and maintaining good customer service. With improved economic outlook and consumer sentiments, we expect more interest in our resort-home development in Bukit Merah Laketown Resort, Taiping and Langkawi Lagoon, Langkawi. 

Do you expect your company/group to do better or worse in 2004, compared with 2003? Why? 

With the improving economy and the anticipated strong demand for residential properties, we anticipate our company to do better in 2004. Our Damansara Perdana and Damansara Damai projects are maturing and are able to command premium selling prices. 

In 2004, we will have a wide range of products to offer, ranging from affordable homes to medium and high-end products such as townhouses and luxury condos. As an example, sales of our latest launch in Damansara Perdana - Metropolitan Square - was excellent. The ground floor shops were sold out in two days, and there was even a queue overnight. 

The Chinese economy continues to power ahead. Is China an important factor in the management of your operations? 

A vibrant Chinese economy may bring about more intra-regional investment and trade. To a certain extent, we are expecting an impact on the reduction of building material cost and our resort operations may benefit in terms of the expected increase in the arrival of tourists from China. 

Datuk Seri Abdullah Badawi has taken over as Malaysia’s fifth Prime Minister. In your view, what should be his priorities for (i) the country: and (ii) the industry you are in. 

Abdullah has started well by following through on the government efforts to cut down red tape and corruption and to instil greater professionalism in the services. 

We would suggest that a priority is to ensure that the country enjoys continuous stability, so that investor confidence is maintained. For the property industry, it would be beneficial to maintain low interest rates to maintain growth and demand. It is also important to maintain the policy on recruitment and employment of foreign labour to support the construction and the property sector as a whole. 

Datuk Seri Liew Kee SinGroup Managing DirectorSP Setia Bhd

CHALLENGES and prospects for the Malaysian economy for 2004 

Datuk Seri Liew Kee Sin

After weathering a tough year marred by the Iraq war and SARS outbreak, the Malaysian economy is rebounding strongly as evidenced by the better-than-expected gross domestic product (GDP) growth of 5.1% for the third quarter of this year.  

For the first time in several years, the prospects for both the external and domestic sectors look very good. Signs of recovery have been observed in the US, European, Japanese and other Asian economies. On the home front, our macro-economic fundamentals are sound, supported by increasingly robust domestic consumption, buoyant commodity prices and an improving export sector.  

Given the positive scenario, there is all around optimism that the full-year GDP figure will surpass the official 4.5% forecast. For 2004, the growth momentum is expected to accelerate and the consensus is for GDP to expand at a faster rate of 5.5% to 6.0%.  

The prime challenge for Malaysia in 2004 is to strengthen private consumption while capitalising on positive external sector developments to achieve broad-based growth supported by the twin pillars of domestic and external demand.  

The multiplier effect from the economic stimulus package coupled with renewed consumer confidence should continue to spur demand on the domestic front.  

In recent years the Government has quite rightly been focusing on the development of a more vibrant small- and medium-scale enterprises (SME) sector as a crucial new engine of growth to fuel economic activities. 

With easier financing through government subsidised credit programmes, the stage is set to nurture strong SMEs capable of driving domestic private investment for future economic expansion.  

The economic recovery experienced by our major trading partners also augur well for the country’s manufacturing sector and should boost export activities. However, the area Malaysia must concentrate on is the services sector. We must strive to be more competitive to attract a larger share of the global foreign direct investment (FDI) increasingly being channelled towards this area.  

According to the United Nations Conference on Trade and Development (UNCTAD), the share of the services sector to total FDI now amounts to 60% at the global level whereas the manufacturing sector only accounts for 35%.  

This presents a tremendous opportunity for Malaysia to actively promote its services sector to capture a bigger share of global FDI now that the lion’s share of manufacturing FDI is monopolised by China. 

Prospects for your sector/industry for 2004 

The attractive incentives targeted at the housing industry under the government’s stimulus package were indeed welcome. These measures provided the much-needed catalyst to boost housing demand after a period of lacklustre performance earlier this year exacerbated by the Iraq war and SARS.  

The option for developers to contribute a fixed sum to SPNB instead of building low cost houses announced in Budget 2004 also provides greater flexibility in development planning.  

The positive effects of the stimulus package will flow through into 2004. We are very bullish on the growth prospects for the industry particularly the residential segment which can only improve against the backdrop of an improving economic outlook, positive consumer sentiment, healthy job and stock markets and historically low mortgage rates.  

This confluence of positive factors along with the country’s young population, rapid urbanisation and high savings rate will continue to encourage home ownership. 

Have the incentives for the construction/housing industry given a boost to your company’s operations and revenue? 

The Government’s incentives definitely helped during the past two/three years when overall economic and consumer sentiments were somewhat uncertain. The various incentives introduced over the years such as the stamp duty waiver along with the higher margin of financing offered by financial institutions have succeeded in stimulating sales of our property products thereby ensuring a healthy cashflow during difficult times. 

We also benefited from the May 2003 stimulus package targeted specifically for products priced below RM180,000 given that the bulk of our products in Johor Baru fall within that category. Since the announcement, our sales in Johor have surged steadily.  

In the coming months, more properties tagged below RM180,000.00 will be launched in our existing Johor Baru and upcoming Klang Valley projects. Accordingly, we are confident that the favourable market environment will translate into better turnover for the group. 

Focus of your company/group for 2004 

The group’s focus for 2004 is to further strengthen our position as a developer of choice among house buyers in all our target markets. We have three exciting new projects within the Klang Valley to be launched in 2004 offering a comprehensive range of property products from mass affordable housing to high-end niche projects. 

The first to be launched by early 2004 is our flagship mass residential township project known as Setia Alam. Setia Alam is sited on a 3,930-acre parcel of freehold land in Shah Alam with eventual direct access to the New Klang Valley Expressway.  

Within the residential sector, mass affordable housing will continue to hog demand but niche mid- to high-end homes are also increasing in popularity as the country's affluence and standard of living rises.  

Towards the later part of the year we aim to launch an exciting new development currently referred to as the “Eco-Parks Project” to capture this growing pool of housebuyers.  

The Eco-Parks Project is located on the eastern flank of Setia Alam closer to Bukit Jelutong. This project will be developed jointly with the Employees Provident Fund and Great Eastern Life Assurance (M) Bhd.  

At the very high-end we are most gratified that our resort-styled Duta Nusantara project in the Hartamas area is almost fully sold within one year of its launch.  

This has paved the way for us to launch other similar high-end developments. We recently purchased a 13-acre piece of prime land next to our existing Duta Nusantara development. We hope to launch this new project before the end of 2004, which will give us another opportunity to tap this sophisticated and lucrative market segment.  

Do you expect your company/group to do better or worse in 2004, compared with 2003? Why? 

Given the bright outlook for the property sector, we are confident of performing better in 2004. Our well-located land bank and sizeable locked-in property billings from our Duta Nusantara, Bukit Indah 1 & 2 Johor, Setia Indah Johor, and Putrajaya Precinct 9 projects will drive our earnings over the next two years.  

The imminent launch of our Setia Alam township followed by the Eco-Parks and Duta Nusantara 2 projects are also expected to generate higher sales for the group, going forward. 

In your view, what should be the new Prime Minister's priorities for the country and the industry you are in? 

Since taking office a month ago, Datuk Seri Abdullah Ahmad Badawi has demonstrated his astute and moderate leadership style to good effect, winning approval from the business community and the man on the street.  

The premier’s pragmatic approach in managing the economy, from reducing wastages of public funds to speeding up payment for contractors is definitely a step in the right direction. His consultative approach also goes down well with the country’s relatively young population.  

Pak Lah has also proven that he is truly in touch with people’s needs by stressing on the need to improve the efficiency of public service. 

For the country, Pak Lah’s major priority is to preserve racial unity and political stability for business and investment activities to flourish in a conducive environment.  

Another immediate concern is to enhance the country’s competitiveness and help Malaysia climb higher up the rungs on the world productivity ladder.  

Strengthening the roles of regulatory institutions remains an important criterion to ensure continued investors’ confidence in the transparency and good governance of the capital and corporate markets.  

In this regard, the Prime Minister’s serious stance to wipe out corruption is highly laudable. There is also the need to ensure the continued development and implementation of policies that provide investors and entrepreneurs with a stable climate within which to manage and grow their businesses. 

For the property sector, we hope the Prime Minister can continue to improve the efficiency and effectiveness of the delivery system.  

A key factor to boost productivity and profitability is to have in place a well-integrated mechanism operating efficiently at every step of the development process from planning right up to the completion and handover of houses to buyers.  

This is crucial for developers to keep overheads and administration costs low. In this respect, the Prime Minister can call for government agencies and departments involved in property development to continue to expedite the approval process to keep the growth momentum on a sustained uptrend. 

Datuk Jeffrey Ng

Datuk Jeffrey NgManaging DirectorAsia Pacific Land Bhd

CHALLENGES and prospects for the Malaysian economy for 2004 

With the expectation of an improved global economic outlook for 2004 and continued improvement in our country’s economic fundamentals, including an uptrend in the stock market, 2004 will be a better year. The key challenge, however, is to sustain the momentum of economic growth in the face of increasing global competition against our products and services and for foreign direct investments.  

As the private sector will experience greater business competition, it is crucial that cost of doing business be further reduced through higher productivity, better efficiency, more effective business-cost model and improved production methods in order to achieve stronger financial performance.  

Furthermore, to increase our national competitiveness, the Government must ensure that the new directives and policies to enhance efficiency in its public sector delivery system be successfully implemented including at the state and local government level. Faster processing and approvals will see more business activities and projects coming onstream.  

Prospects for your sector/industry for 2004 

With the country’s expected GDP growth in 2004 to exceed 5%, the housing market will continue to out-perform the other property sub-sectors next year. In an environment of attractive government incentives, low interest rates, easy end-financing, job stability and improving consumer confidence, the residential property sub-sector will improve further.  

Barring the hard-core unsaleable units in bad locations or suffering from mismatch of product type, surplus stocks are expected to be progressively reduced by the inducement of the Government’s stimulus package, which will remain in force up to May 2004. House prices will remain stable, as there is a continuous future supply of new houses and absence of property speculation.  

The retail and office property sub-sectors will likely remain stable with newer and better located properties experiencing slightly better rental rates and increased occupancies. 

Comparatively, the industrial property sub-sector will be less active as they are directly dependent on new investments in the manufacturing sector which is expected to face tough competition from other regional economies, notably China. 

Barring any serious threat to the global/regional travel trade, the hotel industry will likely see an improvement in room occupancies for 2004 despite new supply of more than 2000 rooms this year and in 2004. With the expected higher business confidence and consumer disposable income, both the domestic tourism and business travel sector will enjoy better growth. . 

Have the incentives for the construction/housing industry given a boost to your company’s operations and revenue? 

Most definitely. It is not only the incentives alone such as stamp duty waiver, tax relief, cash rebates and subsidised interest rates that have enabled us to achieve higher housing sales. Since the Asian Financial Crisis in 1997, the Government has created a conducive atmosphere of low borrowing cost, low inflation, easy availability of financing to housebuyers and minimal property speculation.  

All these efforts have given us confidence to launch and plan for more housing units because we believe that demand for home ownership will be sustainable.  

However, business competition has also intensified as more new players are entering into the market and existing players are planning to launch more units. 

Focus for your company/group for 2004 

Prudent balance sheet management. We will continue to degear through divestment of low yielding and loss-making assets to a level, which will enable us to expand our land bank for future property development. We are not afraid to cut loss on disposal of such assets when the sale proceeds are utilised to reduce bank loans and to take advantage of more profitable business opportunities. Property development is our main source of profits and cashflow and will remain our core business now and in the future. 

Do you expect your company/group to do better or worse in 2004, compared with 2003? Why? 

2004 will be a stronger year than 2003 because it is an election year supported by an expected overall improvement in our economy due to continued economic recovery in the developed economies and returning of domestic market confidence, especially when profits are made from the stock market. 

We will be aggressive in our marketing efforts to promote our urban regional centre, Bandar Tasik Puteri, in order to increase our market share of housing sales in Selangor. New product range in our premium corridor will be offered to broaden our customer base. Continued efforts to improve our standard of property management services, upgrading and refurbishment of our investment properties and hotels in 2003 are producing positive flow-on results in terms of better occupancy and rental/room rates for 2004 onwards.  

Is China an important factor in the management of your operations? 

Not at the moment. Certainly, China offers enormous opportunities. But to succeed in China, one must have huge financial resources, committed hands-on senior management involvement and a reliable/trusted local Chinese partner. Without a proper understanding on the intricacies of how to do business in China, rushing in to chase for the potential opportunity will prove to be disastrous. 

 

In your view, what should be the new Prime Minister's priorities for (i) the country and (ii) the industry you are in? 

On the foreign scene, it would be great if Abdullah can speedily patch up and foster warmer and closer relationship with all our international major trading/investment partner countries. Enhancing bilateral and diplomatic relations to a higher level will enable our country’s exports and FDI to continue to grow in a sustainable manner.  

On the local front, perhaps it is timely for the Prime Minister to focus on nurturing and enriching the development of its human assets, the “Malaysian people”, in terms of culture, ethics and mindset in order to take on the future challenges of global competition. We need “home grown” Malaysian products and services that have the real potential to become world-class brands. It would involve setting of higher education standards as well as developing a larger pool of highly skilled IT workforce via human resource investments.  

For the property industry, he could review the present low cost housing policy, which has remained unchanged for many years even though market conditions and demographics have changed. As the population’s wealth and income increase over time, low-medium and medium-cost homes are in greater demand. Currently, this existing policy is too broad based and has caused excess supply of unsold/unsaleable low cost homes throughout the country. 

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