SP Setia – in a league of its own


  • Business Premium
  • Saturday, 08 Jun 2019

SP Setia's award-winning Setia SPICE development in Penang

HOT on the heels of its 11th World Gold Award win at the FIABCI World Prix d’Excellence Awards 2019, SP Setia Bhd is forging ahead with renewed optimism to navigate the challenging property market.

The property developer, which bagged three prestigious awards during the ceremony, says it had initially expected the Malaysian property market to recover in the second half of the year – but external factors such as global trade tensions could prevent this from happening.

In view of this, SP Setia CEO Datuk Khor Chap Jen says the group’s strategy for the rest of the year is to change and adapt as the market shifts.

“Given that we are in different geographical locations, and also have the wide range of products – from the low-end to the luxurious end of the market – we are able to quickly pull the levers.

“The industry is very fluid at the moment – everything changes very quickly.

“When there is demand in a particular location, we will go there. If there is demand for a certain type of product, we will focus on developing that,” he says during an interview after the awards ceremony in Moscow.

While a niche developer would have to be extremely careful in timing its launches, he says, a company with such breadth and depth as SP Setia had the ability to adapt quickly as the market changes.

“What we need to do is be quick to respond and also be able to foresee or predict changes accurately.

“For instance, everyone expected the global trade tensions to subside and for things to improve eventually, but it it has prolonged and now it looks as though it could get worse. In such times, you have to restrategise accordingly,” he says.

At the FIABCI awards ceremony late last month, SP Setia picked up the World Gold Award for its Setia SPICE development in Penang, under the Purpose-Built category.

It also bagged two World Silver awards – for Parque Melbourne in the Residential High-Rise Category and Circus West Village at Battersea Power Station, London in the Residential Mid-Rise Category.

The group also made history by becoming the first ever company to receive three FIABCI awards for projects located in three different continents in a single year.

Back home, SP Setia remains way ahead of the competition, being the only Malaysian developer to have received so many World Gold Awards to date.

Such success, Khor says, is made possible by the dedication and hard work of SP Setia’s 2,300-strong team.

“We are thrilled and honoured that our projects are recognised and placed on par with other world-class developments,” he says.

But does winning awards actually help business?

Khor says receiving such accolades help the business in two ways.

“It is only when you pit yourself against your competitors that you will know where you stand.

“We want to be an international developer, so this is one avenue for us to pit ourselves against other developers on the international stage. With this, we know where we stand, and where we need to go from here – this is how it benefits us,” he says.

From the buyer’s perspective, recognition and awards provide a sense of confidence towards the property developer.

“The award serves as an endorsement for us,” he says.

While SP Setia has set itself apart from the competition with the accolades, Khor says it is important that property players continuously learn from one another.

“We frequently organise visits to award-winning developments by other players, and we also get a lot of requests from others who want to visit and learn from what we have done.

“In this industry we cannot hide our successes – we must share, and only then can we learn faster and improve ourselves,” he says.

During the recent FIABCI event, a record 35 of the world’s top property developments were awarded, including six developments by Malaysian property developers.

Last year, SP Setia bagged three World Gold awards at the FIABCI World Prix d’Excellence Awards 2018 held in Dubai.

The three awards were in the Affordable Housing Category for the Seri Kasturi Apartment project in Setia Alam; Master Plan Category for the Setia Eco Glades project in Cyberjaya and Sustainable Development Category for the Eco Sanctuary project in Singapore.

Moving into the second half of 2019, Khor says the local property market is likely to remain challenging.

SP Setia, which has a sales target of RM5.65bil this year, says it will be ramping up its launches and sales of properties, with a planned RM6.47bil worth of projects to be launched from the second quarter until year-end.

The major launches will be in the central region, with some in the southern and northern regions.

As at March 31, 2019, the group had 45 ongoing projects, with remaining land bank of 9,477 acres, valued at a gross development value (GDV) of RM145.9bil and total unbilled sales of RM10.95bil.

Sales target

The property giant is targeting some 90% local sales and 10% international sales this year, given the external geopolitical tensions.

“We were expecting the market to pick up during the second half of this year, but there are a lot of external factors like the trade war which come into play.

“Although it does not directly affect us, it affects sentiment,” he says.

Khor says the group had expected sentiment to pick up, based on the increased number of potential customers visiting their sales galleries, looking to buy property after holding off for the past couple of years.

However, he says, the prolonged trade tensions has led to potential buyers mulling whether they should hold off for a while longer. “A lot of Malaysians are involved in businesses, they run SMEs, and they are ultimately affected when global trade is slow.

“They want to protect their cashflow. Real estate is a big ticket item, which they can afford to put on hold,” he explains.

Khor adds that one of the group’s target market was “upgraders” – those who already own a house and are looking to buy a bigger house.

“During times like these, with uncertainty in the global market, they may decide to hold off on upgrading their home – and this affect sales,” he says.

While he still does not rule out a recovery in the second half of year, Khor says it depends on how several external factors play out.

“Ultimately, we do see people coming out to buy property.

“Hopefully, external

factors do not weigh too much on people, but in Malaysia, I believe there is a lot more certainty, and things are more settled after

the change in government last year,” he says.

On the new administration, Khor says the Pakatan Harapan government has been doing a “fairly good job”, particularly with its focus on affordable housing.

“What we are hoping they will do, moving forward, is improve the way certain things are currently done.

“Providing affordable housing is a very noble effort, but the model used to achieve this has always been cross-subsidy.

“When you use the cross- subsidy model, the companies involved must perform well.

“If they are not doing well, then you cannot expect affordable housing to thrive, because there is no money to subsidise the affordable housing,” he says.

In the cross-subsidy model, developers use profits gained from placing higher price tags on higher-end properties, to subsidise the development of affordable homes.

Especially during weak market conditions, Khor stresses, it is difficult for the cross-subsidy model to work.

Khor says it is important that the government takes on the responsibility of providing affordable housing in order to ensure that there will always be sufficient supply for affordable homes for the people – regardless of strong or weak market conditions.

On plans to expand into other overseas markets, Khor says there are no concrete plans for this at the moment.

Outside Malaysia, SP Setia already has a presence in countries like Vietnam, Australia, Singapore, China, the United Kingdom and Japan.

“We never say no to expanding into new countries, but we have to look at our resources.

“Wherever we go, we must be able to add value, otherwise there is no reason for us to enter the market,” he says.

The latest overseas development it is currently working on is in Japan, where the group has a 4.9 acres in Osaka.

Located in the city of Izumisano, SP Setia’s maiden foray into the country will be a mixed development with a RM1.8bil GDV.

“We have just started on the project – we have submitted all the plans and hope to get the approval sometime this year,” he says.

Looking ahead, Khor acknowledges that many Malaysian property developers have revised their sales targets for the year, in view of a potentially tough market ahead.

Khor says SP Setia is still waiting to see how things pan out.

“We are only halfway through the year, and the second half is traditionally a stronger period for us, so we will be prepared and take things as they come.”

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