Steady economic growth will drive property sales


Mah Sing Group Bhd is banking on product innovation and design to stay ahead. Having established itself in the Klang Valley and Johor, it is eyeing more land in these areas for a combination of upmarket and premium affordable homes 

DATUK LEONG HOY KUM 

President and group 

chief executive 

Mah Sing Group Bhd  

 

StarBiz: Your outlook of the property sector for the second half of 2005 

Leong: Overall property sales will remain good driven by sustained economic growth. Although the recent rise in fuel prices is putting some upward pressure on inflation, it may lead to more people moving their money from cash to invest in property as this may be viewed as the most viable hedge against inflation. This is especially so now that real interest rates are in the negative territory with the consumer price index (CPI) of 3.1% already exceeding short-term fixed deposit rates. 

However, the key to success is to have strong track record and flexibility to meet changes in consumers’ needs as well as strategic and niche land bank. The current signs of the market taking a breather are more confined to properties below RM150,000 in secondary suburban areas. 

Datuk Leong Hoy Kum

This current consolidation will allow developers to undertake some corrective realignment before heading back on the track. While the competition among property developers is intense, we believe well conceptualised lifestyle projects offering mid- to high-end homes with innovative designs in strategic and niche locations with easy accessibility, a recognised brand name and strong marketing expertise are likely to do well. 

The concern about an interest rate hike may, to a certain extent, derail the current conducive interest rate environment, but any increase is likely to be at a measured pace and the affordability ratio would still be high. The current stable political and economic climate will cushion the impact well. Malaysia’s high savings rate coupled with our very young demographic profile, declining average household size and urban migration would provide a consistent and sustainable stream of house buyers. 

StarBiz: Opportunities and challenges for the sector going forward 

Leong: For developers with strong balance sheets and cash reserves, this would be an opportune time to expand their land bank at strategic locations, with reasonable pricing and more competitive payment terms. 

We can also expect a more active property investment market with the real estate investment trusts (REITs) picking up momentum. This should augur well for the broad property market in Malaysia. 

However, the shift towards a buyers’ market has made developers more innovative and flexible. There is a growing emphasis on good track record and quality after-sales service.  

 

Intensifying competition as markets are liberalised has made the business environment very challenging. We have to be very market driven and be flexible in changing product mix to cater to the needs of consumers at any particular point of cycle. 

Furthermore, changing lifestyles and the escalating costs of real estate as well as the innovative application of new technologies and new materials are some forces shaping new residential environments. As lines between work and play blur, more and more buildings are built with greater regard to their surroundings, and designed and built to fit in and enhance the environment. Traditional layouts have metamorphosed and become interconnected multi-functional spaces that offer greater flexibility and a more casual environment.  

With the clever application of new materials, innovative designs and new technology, the tropical heat that once made people stay away from the outdoors is no longer an issue. Gardens and terraces are now designed to be habitable and the indoor-outdoor lifestyle is extending the kitchen and dining to the patio or garden. 

StarBiz: Major government policies that have contributed to the industry’s performance 

Leong: Government efforts to reduce reliance on external trade and instead look towards domestic demand to drive economic growth will translate into greater economic resilience and will have a multiplier effect on domestic demand. Recent fiscal measures to pump prime the economy by bringing forward some RM2.4bil worth of projects under the 9th Malaysian Plan will be a shot in the arm for economic growth. 

The decision to maintain a low interest rate regime and the current ringgit peg will also ensure sustainable growth. Developmental efforts to enhance the capabilities of the labour force also augur well for the industry. The Graduate Training Scheme helps graduates who are unable to gain employment to acquire additional skills and increase their chances of getting jobs. This will lead to higher income level when these young graduates enter the workforce. We see a sustained wave of spending surging through the economy as these youth mature and enter the workforce. 

StarBiz: Ways to bring about better opportunities and a more robust property market 

Leong: Continuing favourable employment market, favourable financing conditions and stable interest rates will provide additional impetus for households to spend on durable goods and houses.  

Healthy competition among property developers will provide buyers with more choices, thereby improving the property market. As long as households continue to see some modest appreciation in the values of their homes it will encourage them to spend more. 

Introduction of more incentives to promote home ownership for first-time buyers of properties costing RM350,000 and below should help to give the industry a much needed boost. 

StarBiz: Property sector that offers potential for your company 

Leong: We see potential in the mid- to high-end types of development. It is for this very reason that we offer our Perdana series of premier lifestyle affordable homes and our Legenda series of upmarket homes. Going forward, we will strive to maintain a comfortable balance between the Perdana and Legenda homes. That ratio would, to some extent, be dependent on the location of our land bank, changing market trends and the outlook of the property market. The challenge here lies in offering the market the right product in the right place at the right price and time. 

We also see developers emphasising more on security of their development by providing gated and guarded security. Previously confined to high-end and high-rise development, such security is also increasingly being extended to landed mid-price terraced homes. 

The growing affluence and evolving lifestyle of the people have led to the growth of a more discerning class of buyers who are more lifestyle-orientated. The increase in their standard of living results in a steady growth in the upmarket property segment. Leveraging on this opportunity, we will also look at pocket-sized developments of 10 to 30 acres in established prime areas to replicate the success of our high-end development of Damansara Legenda. 

Moving forward, Mah Sing will focus on sourcing for strategically located land, reading the market trends well, and coming out with innovative and trend-setting design concepts that mirror the current lifestyle of the target market in a particular area. We aim to establish Mah Sing’s position as a premier lifestyle developer of choice over the next few years, be it in the high-end or township segment. Building up brand name and reputation, especially in the development of landed residential property, will remain our top priority. 

StarBiz: New projects from your company 

Leong: Aman Perdana, our latest enclave of premium affordable semi-detached homes and bungalows in Klang and Austin Perdana, our township development in Tebrau, Johor, will see several more phases being unveiled in stages in the coming months. Also to be launched are the remaining semi-detached units of Damansara Legenda. 

Mah Sing is currently eyeing several pieces of land in the Klang Valley and Johor for a combination of upmarket Legenda projects and premium affordable homes under our Perdana series. To replicate our success of the upmarket development of Damansara Legenda, we have earmarked several “hotspots” for pocket-sized niche high-end development within the Klang Valley.  

We are looking to continue our presence in Johor with a Perdana series development. Regardless of whether it is a Perdana or Legenda development, it will bear the distinctive hallmarks of Mah Sing’s development – lifestyle concepts, signature grand entrances, extensively landscaped parks, gated and guarded security, greenstreet concept and quality homes that are practical, functional and aesthetically pleasing. 

To maintain our lead position as a premier lifestyle developer in an increasingly competitive market, Mah Sing has to constantly remain innovative in its strategies.  

 MAHSING :  [Stock Watch]  [NewsMAHSING-O :  [Stock WatchMAHSING-O :  [Stock Watch]

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