What drives Penang property prices?

(BusinessTimes)The ever-rising prices of property in Penang are not just down to scarcity of land but are partly due to speculators, strong demand from investors and a low-interest rate environment.

Dr Michael Lim Mah Hui, senior fellow of Socio-economic and Environmental Research Institute (Seri), a think tank, said the investors comprise wealthy Malaysians and foreigners.

The price rise is making property increasingly out of reach for the average Penangites. The strong demand means that developers were putting more expensive price tags on their projects.

Lim, a banker who worked with Credit Suisse, Standard Chartered Bank and the Asian Development Bank, said from 1999 to 2008, the prices of property in Penang rose 40 per cent.

This increase is a tenth more than that for the whole country, and it is still going up.

Terrace houses in Penang now average RM700,000 to RM1.2 million, against RM445,000 to RM520,000 two years ago.

"Condominiums cost RM250 per square feet in 2008 but now the price is RM350 to RM500, depending on the location," Lim said during Seri's roundtable on housing affordability gap in George Town last week.

However, it is not surprising if entire development projects are sold out in two days now as buyers are easily taken in by attractive down payments as low as 1 per cent and the low interest rates for housing loans, he said.

The public may not fully understand the risks of adjustable-rate mortgage (ARM) when they sign up for loans, for example. An ARM gives low rates at the start of a loan but the rates go up after the promotional period.

"Such a situation can result in a (real estate) bubble, which nobody can tell when it will happen," Lim said.

He said certain developers were not helping the situation by reserving the best units for their "special customers".

"Some developers let their prime customers and insiders cherry pick the units they want first before everyone else.

"When the average house buyers visit the developers' sales galleries at the project launch, they find many units had already been sold, encouraging many of them to quickly make down payments for the remaining units as well," he said.

Lim expressed concern that there is a mismatch of supply and demand for properties in the state with many houses, flats and apartments vacant.

He said in 2000, there were 355,436 housing units in Penang but only 284,969 households, indicating an oversupply of 20 per cent.

"Since then, more units have been built. If you go round at night, you will notice that many homes are unoccupied, especially super-condominiums that are beyond the affordability of average households.

"This is also an indication that there is an undersupply of affordable housing in the state," Lim said.

He proposed that the state government study how Singapore's Housing and Development Board managed its public housing. Penang Development Corp should also undertake more land reclamation to develop more affordable homes.

Coca-Cola to invest RM1 billion in Malaysia

NILAI: Coca-Cola Co plans to invest RM1 billion in Malaysia over the next five years to further boost its growth in the South East Asian market.

Glenn Jordan, the company's Pacific Group president, said on Tuesday, March 16, the investment represented Coca-Cola's strong commitment to Malaysia and its consumers in delivering refreshing beverage choices, creating job opportunities and helping to build a better community.

The investment, which includes land and a facility to be built at the Enstek Industrial Park here, would see Coca-Cola Bottlers (Malaysia) Sdn Bhd taking over the bottling and distribution operations, once the existing franchise with its local partner expires.

"With the new plant we will be able to support our core brand of Coca Cola and Sprite in the coming years," Jordan said at the ground breaking ceremony for its eco-friendly bottling plant here today.

The ceremony was graced by Prime Minister Datuk Seri Najib Razak.

Jordan said the company would bring new beverages to Malaysian consumers in the coming month.

The new investment will directly create 600 to 800 new jobs at the bottling plant and is expected to create between 6,000 and 8,000 jobs with local suppliers.

It is also expected to benefit more than 100,000 retail customers in Malaysia.

The 123,024 sq m facility will be built on land purchased from TH PROPERTIES [], the developer of Enstek Industrial Park.

The new plant is expected to commence operations before end-2011. — Bernama

Right time to buy real estate?

KUALA LUMPUR: Further signs of a recovery in the Malaysian real estate market are being seen as the country’s economic recovery takes shape and the stock market soared to fresh highs against the backdrop of a stronger ringgit.

Based on the historical strong correlation between property sales and gross domestic product (GDP) growth, and the fact that real estate sales lag GDP growth by about three months, property sales, according to market estimates, could have bottomed, at the earliest, in the first quarter of 2010.

This is based on the fact that the country had registered economic growth in the fourth quarter of last year following three consecutive quarters of contraction.

Amid the economic recovery, one may ask a pertinent question — is it the right time to buy real estate in view of the anticipation of even higher interest rates which translate into costlier financing, against the landscape of rising property prices going forward?

Association of Valuers & Property Consultants in Private Practice Malaysia president James Wong Kwong Onn thinks so. He said this was the time for potential buyers to take advantage of existing property launches before interest rates went up further.

“The (recent) slight increase in interest rates has got a minimal impact,” Wong told The Edge Financial Daily in a telephone interview last Friday. “But interest rates will go up further,” he added.

Property prices to increase at an annual pace of 10%

According to Wong, whose association represents some 300 members, real estate prices in the country were expected to increase by some 10% this year from a year earlier across the board as the economic environment improves further.

“Development land prices will also go up,” Wong said, as the economic recovery prompted developers to replenish their land bank.

The economy rebounded from a recession, expanding at an annual rate of 4.5% in the fourth quarter of 2009. The fourth-quarter numbers translate into a full-year GDP contraction of 1.7% in 2009. In quarterly terms, GDP expanded 2.2% from the third quarter.

GDP contracted at a smaller annual pace of 1.2% in the third quarter of 2009 although the economy grew 5.7% in quarterly terms.

The central bank recently raised the overnight policy rate (OPR) by 25 basis points (bp) to 2.25% after keeping the benchmark interest rate at 2% at seven consecutive monetary policy committee (MPC) meetings. One bp is one hundredth of a percentage point, or 0.01%.

Investors usually park their money in countries with higher interest rates to generate better returns from their funds. They pick a country deemed to have positive long-term fundamentals, but foreign funds could also come in due to the potential for quick gains which denote speculative elements in the local market.

Anticipation that the ringgit will strengthen will spur overseas investors to acquire local assets such as stocks and real estate, hence, the appreciation of the ringgit due to demand.

This translates into double gain for foreign investors when they sell their assets as they will be able to reap both the currency exchange gains, and capital appreciation of their assets. This scenario could be reflected in the recent rally in the equity market.

Demand-supply forces for residential properties almost at equilibrium

Meanwhile, HwangDBS Vickers Research analyst Yee Mei Hui said demand-supply forces for residential properties in the country were almost at equilibrium, but long-term demand would be supported by the nation’s young population, urbanisation and shrinking household size, besides ample liquidity.

“Demand for niche lifestyle products, especially in the Klang Valley and Penang, are expected to remain strong with rising affluence.

“Demand for high-end condominiums/serviced apartments may remain weak given large incoming supply, especially around KLCC (Kuala Lumpur City Centre) and Mont’Kiara,” Yee wrote in a note to clients.

According to the analyst, buyer enquiries had picked up recently, but prices and rentals were still 10% to 20% below peak rates.

Nevertheless, developers which exhibit strong branding and track records such as Eastern & Oriental Bhd, DNP Holdings Bhd, and Sunrise Bhd should continue to see strong take-up rates.

According to Yee, fresh supply of office space entering the market in the next two years should be absorbed as half of the amount had been pre-let.

“Thereafter, new supply, especially mega projects with unsubstantiated demand, might create an overhang,” Yee said.

In the retail property sector, sentiment is expected to pick up as the economy regains momentum and occupancy of retail space is anticipated to remain stable at 92% with minimal new supply.

HwangDBS Vickers foresees an upward revision in rentals for prime retail space this year, possibly between 10% and 20% for places like Suria KLCC, The Gardens, Pavilion, and Sunway Pyramid.

“Rentals should be driven by rising inflation and tourist numbers,” the research house said.

Companies to watch in this category included KLCC Property Holdings Bhd, IGB Corp Bhd, and Sunway City Bhd, it added.

This article appeared in The Edge Financial Daily, March 15, 2010.

BHP jacks up coking coal prices 55%

Mumbai: BHP Billiton, the world’s top coking coal producer, has signed a coking coal deal with Indian steelmakers at $200 per tonne, up 55% from last year’s prices.

Pawan Burde, vice president (research), PINC Research said the industry was expecting a price rise of around $180 per tonne. “Steelmakers will have to increases prices by $60-70 per tonne.” Burde believes due to the strong steel demand in the country and robust auto and infrastructure spending, passing on this cost to the consumers won’t be a problem.

Lorry 'Hantu' in Construction Site

A hot topic that you guys are talking about, Lorry 'Hantu'.
My question : For you guys working in construction line. Legally speaking, is used of Lorry 'Hantu' allowed in construction site?

There is some respond to my thread:-
Respond No. 1 -
From what I know Lori Hantu is for use of site only. Cannot use on public road. I think the lori have no insurance and not number plate.They are pulled to site by tow trucks.So, if u are hit by lori hantu.... insurance dont cover.... mati kutu.

Respond No. 2 -
Legally speaking, presently there are no legal requirements for testing of such transporting equipment on site, off main road, within stipulated zone, such as construction site. Any accidents on site, compensation is claimable, if negligence can be proven, from the Contactors' all Risk insurance, which is compulsory before any work can commence at construction site. As common to all machinery, the proper maintenance is utmost important, and that will vary from owner to owner. Most such lori hantu are owner operator and most of them only has a car license or motorbike license only or sometimes with indo drivers who have no license at all.

Respond No. 3 -
You have to have reason why you are at the site?As most site is private property..... No Entry!

Respond No. 4 -
What's a Lorry 'Hantu'? Ghost Rider trading in his bike for a lorry?