Developers see ample opportunities in property


  • Business
  • Wednesday, 22 Dec 2004

Buying interest in the property sector is expected to remain resilient. SP Setia Bhd group managing director/CEO Datuk Seri Liew Kee Sin is of the view that the property cycle has yet to peak and there are ample opportunities to tap the demand for housing products. 

Datuk Michael Yam, CEO of Sunrise Bhd, sees opportunities for office and retail properties to address the imbalances in the property sector, which is currently dominated by the residential sub-sector. Sunrise is embarking on work related to the introduction of Real Estate Investment Trusts (REITs).  

Turning challenges into opportunities remains a favourite theme with Tan Sri Mustapha Kamal Abu Bakar, executive chairman of MK Land Holdings Bhd.  

During the last downturn, his group had sustained itself by developing and selling affordable homes. MK Land is looking for opportunities to increase its landbank in selected locations. 

Datuk Seri Liew Kee Sin SP Setia Bhd group managing director/CEO

DATUK SERI LIEW KEE SIN 

Group Managing Director  

and Chief Executive Officer 

S P Setia Bhd 

 

What is your outlook for the property sector for 2005? 

The property sector’s outlook is closely correlated to the health of the economy. Hence the projected 6% GDP growth next year is good news for the sector. Buying interest in 2005 should remain resilient especially for well-planned landed residential properties in good locations undertaken by reputable developers.  

Favourable structural trends will continue to underpin growth going forward. These include the nation’s young demographics, rapid urbanisation, shrinking household size and ease of financing. 

 

What are some of the opportunities and challenges for the sector going forward? 

From my observation, the property cycle is only mid-way through the current uptrend and has yet to peak. Therefore, there is ample opportunity for developers to tap the still strong demand for housing products. 

Nevertheless, competition is heating up with the acceleration of property launches by key market players. It is crucial for developers to adopt marketing strategies and branding initiatives that create product differentiation and deliver value enhancement. This will help expand sales and win customers’ loyalty in the long run.  

Another continuing challenge is careful project planning to mitigate the impact of rising construction costs and protect profit margins.  

With the tax incentives offered under Budget 2005 to promote Real Estate Investment Trusts (REITs), is your company taking steps to benefit from these incentives? 

The promotion of REITs is a good move as it allows property companies to convert investment-grade assets with high income/rental yields into cash. In the case of SP Setia, our core business is the development of residential properties for sale. We do not have significant property investments at present. 

Nevertheless, we view the tax incentives offered under Budget 2005 to promote REITs very positively. Properly structured, REITs can constitute a whole new asset class capable of generating attractive returns for both institutional and retail investors.  

REITs also provide an alternative and more liquid avenue to conventional property ownership, which will create strong spill-over effects for the property industry as a whole.  

 

Which property sector and market offer the best potential for your company?  

The mass residential and upgrading market offers the best potential as its high sales volume provides a stable stream of earnings to ensure sustainable long-term growth. This market typically refers to affordably priced landed properties, which are still the preferred property choice of Malaysian house buyers.  

That said, we are also developing higher-value products to generate better returns.  

Our ventures into the high-end market by developing smaller tracts of land in prime locations with a quick turnaround time such as the recently completed Duta Nusantara and the upcoming Duta Tropika have been very well received.  

We are also jointly developing the country’s largest enclave of affordable semidees and bungalows, Setia Eco Park, with the Employees Provident Fund and Great Eastern Life Assurance. This project is geared mainly towards upgraders.  

Having a wide range of property products gives us the flexibility to vary our product mix according to market conditions. It also allows us to cater to the specific needs of each different market segment and enhance our profitability. 

 

What are some of the interesting property launches by your company this coming year? 

For the coming year, we aim to further strengthen our position in the Klang Valley and Johor Baru markets. Following the successful launch of Precinct 8 in Setia Alam, we will launch Precinct 6, with higher value products comprising wide-terraces and semidees next year. 

Meanwhile, Setia Eco Park will be launching bigger built-up semidees and bungalows following the good response to the initial launch of bungalow lots this year.  

Down in Johor Baru, we are busy preparing our new Tebrau land for launch by the end of 2005/start of 2006. This project will cater for both the mass residential market as well as upgraders as we plan to introduce to the Johor market some of the innovative products which have seen great success in our Klang Valley projects.  

Tan Sri Mustapha Kamal Abu Bakar, executive chairman of MK Land Holdings Bhd.

TAN SRI MUSTAPHA KAMAL  

ABU BAKAR 

Executive Chairman  

MK Land Holdings Bhd 

 

What is your outlook for the property sector for 2005? 

The Malaysian economy is expected to remain strong in 2005 with domestic sources of growth playing a major role. Government fiscal and monetary policies are expected to remain favourable in a low inflation, interest rate and unemployment environment. 

In line with the encouraging economic growth forecast, the property market is expected to continue its growth into 2005. The performance of the various sub-sectors is expected to vary. The residential sub-sector is more resilient and is expected to perform better than other sub-sectors and the commercial sub-sector is also favoured.  

Location, branding, price range, design, the quality of customer service and facilities are some of the key factors that determine demand for properties. Projects that are well thought out and that meet the needs and requirements of customers are expected to continue to perform well. 

Overall, we expect 2005 to be another good year for the property sector. 

 

What are some of the opportunities and challenges for the sector going forward? 

The challenges moving forward will mainly be due to some uncertainties in the global economy that stem from fluctuations in the oil prices and potential increase in interest rates. Locally, developers are intensifying property launches and hence increasing supplies in certain areas in the country. 

MK Land has always taken pride in our ability to response and adapt quickly to changing market conditions. This was evident in the last economic crisis when the group was able to successfully sustain itself by developing and selling affordable homes during the downturn.  

We turned a great challenge into an opportunity. 

We foresee continuous opportunities for our group in 2005. Considering our landbank in prime locations in Petaling Jaya, Cyberjaya, Perak and Langkawi, we believe that these will be able to sustain our growth.  

We are also looking for opportunities to increase our landbank in selected locations to enhance our earnings-generating capacity. 

In addition, through our strong, committed and experienced staff force, the group has strategised to create product differentiation through innovative design and competitive pricing.  

The encouraging response to the group’s products reflects its correct positioning and favourable image among the public and investors. All these factors have provided the group with good opportunities moving forward. 

 

With the tax incentives offered under Budget 2005 to promote Real Estate Investment Trusts (REITs), is your company taking steps to benefit from these incentives? 

The recent announcement on REITs is very positive as it introduces tax transparency for REITs and puts the Malaysian REITs on firmer footing.  

The tax incentives given to REITs are important as they will encourage the industry players to convert their illiquid assets into liquid assets, thereby enabling real estate companies to utilise the income from the sales of existing properties for the development of new projects.  

MK Land is mainly a “pure” property developer as the group currently does not hold significant property investments. We see REITs as a potential opportunity and will watch with interest their development in the country.  

 

Which property sector and market offer the best potential for your company? 

The residential sector has accounted for more than half of the property transactions in the country over the past few years. It is expected to lead the market into 2005 and the coming years, supported by the continuing low interest rate environment, higher disposable income and favourable economic climate. 

MK Land has been focusing on the residential sector for the past financial years. The group believes that residential projects with the right pricing, innovative design and good facilities will perform better than other sub-sectors.  

The residential sector has provided the group with the best potential for growth, while commercial products within a residential setting have also been proven to be successful. 

MK Land’s three main development projects, Damansara Perdana, Damansara Damai and Cyberia, which have received encouraging response from the public, will continue to be our main profit drivers.  

 

What are some of the interesting property launches by your company this coming year? 

Property launches have always been interesting and colourful events. MK Land has gone international with its launched of Metropolitan SQ in Damansara Perdana, in that both its Sydney and Tokyo blocks have been fully taken up while its Milan block was just launched. Upcoming launches would include the London, Paris and New York blocks at Metropolitan SQ.  

MK Land has also launched its Seasons Square in Damansara Damai, starting with the Spring, Summer, Autumn, Winter and Tropical blocks.  

The Cyberia project in Cyberjaya has gone “Crescent” with its condominiums and town villas.  

A product with a local flavour featuring Kampung Air apartments that stand on stilts over water was recently launched in our Bukit Merah Laketown Resort. 

Highly anticipated future launches include landed products in the form of semi-detached homes and bungalow units on elevated ground in Damansara Perdana. 

Datuk Michael Yam, CEO of Sunrise Bhd

DATUK MICHAEL YAM 

Chief Executive Officer 

Sunrise Bhd 

 

What is your outlook for the property sector for 2005? 

In our view, property prospects, particularly the residential sub-sector, are bright in 2005. Since the Asian economic crisis in mid-1997, the initial recovery in the economy in 2000 has been dampened by a whole chain of negative world events ranging from the destruction of the World Trade Centre in New York to the invasion of Afghanistan by US forces in 2002, the SARS outbreak and the Iraq war in 2003. 

Having undergone some seven years of pessimism, we are experiencing a positive rebound in a psychological reaction to the years of gloom. We have come to the realisation that seven years of impasse have passed and one needs to get on with life as evidenced by the record car sales figures for 2004.  

One of the beneficiaries of this psyche is the property sector, which has proven to be a good hedge against inflation and proves to be more resilient and less volatile than stock prices. 

 

What are some of the opportunities and challenges for the sector going forward? 

Our view on the opportunities and challenges for the property sector going forward are as follows: 

Opportunities: 

·Liquidity in the financial sector and low interest rates spur demand for properties 

·Well-located landbanks in ur-ban areas will see rising demand in line with the growing affluence and increase in urban migration  

·Natural progression of economic prosperity will see companies with proven records of delivery and quality do well 

·Opportunities for the development of offices and retail properties to address the imbalances in the property sector which is dominated by residential properties. 

Challenges: 

·Global conflicts and threats of terrorism 

·Rising US interest rates will have a knock-on effect on Malaysian rates 

·Cost of compliance due to numerous legislation adds to the cost of responsible developers. The Government should actively educate the consumer and tighten enforcement in tandem with relaxing legislation and adopting a more regulatory and self-disclosure approach 

·Vulnerability to increases in raw material prices, particularly steel, fuel, sand, timber etc  

·Continuing availability of lab-our at competitive prices 

·Development of human capital, particularly in the area of management, customer service and quality. 

 

With the tax incentives offered under Budget 2005 to promote Real Estate Investment Trusts (REITs), is your company taking steps to benefit from these incentives? 

Since two years ago, Sunrise has been reviewing its portfolio and identifying assets that may lend themselves to be part of a REIT. Preparatory work was carried out in anticipation of the Government introducing incentives such as tax transparency and waiver of stamp duties and capital gains tax on transfers. An asset has been targeted for REIT and discussions are ongoing with several parties to take advantage of this enabling act. 

The introduction of this new asset class will cause developers to review the planning of future developments and provide another option to dispose of their assets. 

 

Which property sector and market offer the best potential for your company? 

The Sunrise brand has always been synonymous with premium, high-quality, enhanced value and well-managed properties, particularly condominiums. Sunrise will continue to target and concentrate on the mid to high-end market of the residential sub-sector while at the same time diversifying into commercial and retail sub-sector to complement and add value to its mainly residential developments.  

As a discerning and market-savvy developer that understands the market dynamics, undertakes good market research and is sharp enough to spot a niche, we will be able to capitalise on the positive sentiment of consumers.  

We will continue to meet the demands of the market based on sound principles. 

 

What are some of the interesting property launches by your company this coming year? 

For year 2005, we anticipate launching a whole range of 4-, 5- and 6-star lifestyle condominiums, double-storey link, semi-detached and bungalow houses, shop offices and office suites.  

This whole array of products is being offered to provide more choices to our customers in various locations including Mont’ Kiara, South Lakes at The Mines and Seremban Forest Heights.  

It will indeed be a busy year for Sunrisers and we feel strongly that we are well positioned in terms of timing and very complementary product offerings for different market segments and different pockets. 

While these products are very different in terms of pricing, types and locations, they will have the features and benefit of Sunrise’s branding, reputation, record of quality, delivery and innovation, which will be backed by provision of strong customer services and underpinned by good yields and capital appreciation. 

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