MPI Market Report – March 2011


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MPI (Malaysia Property Inc) is a Malaysian Government initiative to promote foreign investment in Malaysian real property.

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MPI Market Report – March 2011

  1. 1. FACILITAT ING & PROMO T I N G I N VE ST M E N T F O R M A L AY S I A N R E A L E S TAT E | March 2011 issue 10 COVER STORY The Worthy Shop Office NEW FLASH Cyberjaya: An Emerging Suburb SPOTLIGHT Chris Boyd On The Evolution Of Real Estate INVESTOR PREFERENCE Indians Keen On APAC SECTOR FOCUS Affordable Education In A Tropical Paradise CEO’S SPACE Can My Children Buy A Home Near Me? Sunway Giza, IN A NUTSHELL Kota Damansara Transaction Data On Malaysian Property Above RM 1 MillionTHE WORTHY SHOP OFFICEThis segment of the market offers long-term rewards to patient investorsby Sheila Singam & Afiq SyarifuddinWhen Subang Jaya resident S Ravi was values since the units were launched, in a relatively short period of time.advised by his friend to buy a shop office Ravi is now a much wiser man, andas an investment in the newly-launched more inclined to listen to the advice In Rawang, a town 35km from KualaTaipan area in USJ 10 some 15 years ago,of seasoned property investors. Shop Lumpur, for example, shop offices thathe laughed at the idea. He didn’t think offices have often been overlooked were launched some 10 years ago at justthere would be tenants rushing in to as a choice by new investors in the under RM300,000 were transacted fortake up space there any time in the nearproperty market. Many investors feel RM1 million in 2010, leaving those smartfuture as the emerging USJ area was safer parking their money in residential enough to purchase them laughing allhardly a retail hot spot at the time. properties, particularly condominiums, the way to the bank. which have traditionally yieldedToday, Ravi is kicking himself and respectable returns. In Bandar Kajang, a three-storey shopsuffering deep pangs of regret because office was recently transacted at RM1.3in September last year, he heard that Yet the figures show that time and again, million, while another four-storey unitone of the units had been sold for shop offices have generated healthy at Reko Sentral, also in Kajang, wasRM3.18 million - almost four times the returns for those bold enough to take transacted at RM3.45 million, almostlaunch price of RM890,000 or so! the plunge. And it’s not just units in fast- five times the launch price six years ago. growing metropolises that yield healthyHaving seen the rapid take-up rates and profits – even those in smaller, outlyingthe acceleration in rental and capital towns have proven to give good returns (continued next page)
  2. 2. COVER STORY 2(from previous page) average of about RM7 per square just commercial properties, but also foot (psf), and the first floor going for residential units located in the vicinity. RM4,500 or more. Higher floors areOne of the reasons for the quick being rented at an average of RM2 psf. Even government administrative andappreciation of shop offices and Thus a three-storey unit can yield a total service agencies are seeing the wisdomthe healthy rental yields is the rent of RM20,000 for an investor. of relocating to less congested areas.increasing demand for this property Clinics, local councils and the rest aretype, particularly in satellite towns This translates to a yield of 6% for decentralising their services to betterand secondary growth areas. Astute an investor willing to pay up to RM4 meet the needs of the people by movingdevelopers are capitalising on million, the latest transacted price of a to shop lots and secondary areas.this by launching new commercial three-storey unit here.developments where the predominant The demand for shop offices in good locations has already been felt by theFigure 1: Transacted Price of 3 - 3 1/2 Storey Shop/Office in Selected Areas developer of Petaling Jaya Commercial City, an integrated commercial Area Transacted Price (RM) Anticipated ROI (% ) development comprising shop offices, serviced suites, a hotel, office tower and shopping mall just beside the New De’ Strands 2,238,000 6.4 Pantai Expressway in the booming Sunsuria Avenue 2,450,000 7.1 Bandar Sunway-Subang Jaya corridor. Bangsar Baru 5,000,000 5.6 SS2, Petaling Jaya 1,960,000 9.1 The developer’s strategy of pricing its SS25, Petaling Jaya 1,388,800 8.2 three-storey shop offices at a more Taman Tun Dr. Ismail 1,650,000 6.1 competitive rate than other similar developments has ensured good take- up of the units. The three-storey shopSource: NAPIC, Various website office units launched in 2008 wereoffering is shop offices ranging from Another development that is set to priced slightly less than RM870,000, thetwo to six storeys high. create waves in a secondary growth area five-storey units were pegged at RM2.5 is CITTA, which comprises three-storey million and the eight-storeyThe demand for shop offices appears to retail spaces with a nett lettable areabe coming from various sources. One of of 424,000 square feet. Developed bythese is from the influx of new retailers Puncak Dana Sdn Bhd and German fund (continued next page)attracted by the strong economy and manager SEB Asset Management, theincreasing buying power of a growing development aims to capitalize on the WHAT TO LOOK FOR WHENmiddle class population that is settling “underserved population” of the Aradown in housing estates in the fringes Damansara, Glenmarie, Subang Bestari EYEING SHOP OFFICES AS ANof greater Kuala Lumpur. and Kelana Jaya areas.The units are INVESTMENT expected to be put up for rent in theThe modus operandi is to rent or second half of this year, with rentalspurchase several units and combine pegged between RM4 and RM10 psf. • Catchment population & them to provide larger premises that demographicsare perfect for showrooms and retail Another ready market looking for shopoutlets. The upper floors are often offices in secondary growth areas comes • Location & accessibilityutilised as offices or for storage. from second-tier corporations looking • Take-up rate of ground floor to set up business in suburban areas.An example of a development offering Their preferred locales are of course, lotsthis concept is Sunway Giza in the developments that have the makings • Maintenance ofalmost-mature Kota Damansara of a successful suburban centre, withtownship, which is located about 18km the right mix of components and a ready environmentfrom Kuala Lumpur City Centre and catchment population. • Amenities and facilities10km from Petaling Jaya. The unusualconcept of two-and-a-half and three- The excellent network of highways • Surrounding developmentsstorey stratified shop offices grouped servicing up-and-coming developments • Parking facilitiesaround a central courtyard appears to makes it convenient and practical forbe quite popular with tenants, judging these corporations to set up offices in • Rental returns of similar from the demand for ground and first townships away from the city centre. units in surrounding areasfloor space. For retailers, these highways have • Developer track record The ground and first floors of most of extended the catchment area by making • Capital appreciation overthe units are fully taken up, with ground it easier to attract clientele from furtherfloor rental rates going from RM12,000 away. The anticipated completion of the past five yearsonwards for 1,650 sq ft of space, or an MRT has also boosted the prices of not
  3. 3. NEWS FLASH 3 Local companies 94%CYBERJAYA: MNCs 6%AN EMERGING FactboxSUBURB Figure 2: Local & Multi- INVESTMENT VALUEMORE MULTINATIONALS SETTING UP national companies IN CYBERJAYA, 2010OFFICE HERE breakdown in (RM’billion) Cyberjayaby S.Sulocana & Afiq Syarifuddin • Residential RM1.37 • Commercial RM0.27SP Setia Bhd is the latest developer toestablish a footprint in the ICT hub of • Enterprise RM1.55Cyberjaya with the launch of its RM3 Source: Cyberviewbillion residential development, SetiaEco Glades. multinational companies in Cyberjaya. setting up offices here, converting itThe development will feature from a sleepy town to a liveable, exciting2,437 units of superlink houses, Cyberjaya was launched in 1997 by the suburb.semi-detached homes, bungalows, then Prime Minister of Malaysia, Tuncondominiums and shop lots. The first Dr Mahathir Mohamad, to attract ICT There are currently over 500 companiesphase of the development will comprise companies into setting up their regional located here, including globallycondominiums and semi-detached headquarters here. The township was recognised names such as DHL, HSBC,homes, and is scheduled to be launched designed to incorporate state-of-the- DELL, Shell, BMW, AMD and Ericsson. Inby the first quarter of 2012. art IT infrastructure and attractive 2010 alone, Cyberjaya attracted a total incentives were offered to companies investment value of RM3.19 billion.The launch price for the semi-detached that came in. In 2010, Cyberjaya wasand bungalow houses is expected to be designated a model green sustainable Cyberview Sdn Bhd, the landowner ofin the RM2 million to RM 3million range. township by the government, hence Cyberjaya, has RM2.52 billion worthThe developer is targeting expatriates increasing its pull factor. of developments in the pipeline forand locals who work in the area and this year. This will be achieved throughare looking for a place to invest. There The move has paid off, and Cyberjaya land sales of enterprise, commercial,are currently an estimated 4,000 is now on the radar of many institutional and residential spaces.expatriates working in various multinationals; more and more are(from previous page) competition from new developments in was transacted at RM3.8 million in the vicinity such as Bangsar South and December 2010, and is expected to Solaris Dutamas. generate a return of 5% based on aones complete with lift went for RM3.9 monthly rent rate of just over RM16,000.million. A two-storey intermediate unit in Overall, the figures show that shopPrice aside, the selling point for these Telawi is going for an asking price of offices are definitely a worthwhileunits could well be the excellent RM5 million, while its three-storey investment, but there is a condition tolocation and concept. The developer has counterpart is going for between RM6.5 consider: An investor looking at thisconsulted extensively with landscape million and RM8 million. Buyers of these segment of the property market must bespecialists and consultants to design units are definitely not in for speculative have holding power and be prepared toan interactive lake featuring musical purposes, neither are they too focused be in for the long haul for the investmentfountains, wading pools, floating decks on the rental yield, which works out to to truly yield generous returns. This isand retail kiosks, offering an attractive around 4% based on a monthly rent of not a segment for speculators or thoseenvironment for corporations and RM14,000 for the ground floor, RM5,500 looking for gains within a period of lessretailers looking to set up shop. for the first floor and RM3,000 for the than five years. That’s not to say that top floor. investors can’t realise returns in fiveBut it’s not just in emerging areas that years – they can. But to enjoy sizeableshop offices are attracting interest. Another nearby area that is still capital gains on their investment, theyThere are takers even for the high-priced attracting investor interest is the need to be prepared to park their moneyunits in mature commercial precincts thriving Desa Sri Hartamas commercial there for at least 10 years.such as Bangsar’s Telawi area, despite precinct, first launched in the mid-the congestion in the area and the 1990s. A four-storey shop office here Fancy a shop office, anyone?
  4. 4. SPOTLIGHT 4EVOLVING grow.WITH Another location that has potential to grow is Kota Damansara, which isMALAYSIA developing into a preferred suburb as it has good public amenities that complement the population in thatby S.Sulocana area.British-born Christopher Martin Boyd In other states like Sabah, Kota Kinabaluis not a new face on the Malaysian real has got a lot to offer and is largelyestate scene. Before assuming the unexploited and under-developed. It hasposition of executive chairman of CB good infrastructure, is a good touristRichard Ellis Malaysia (CBRE), he held attraction and has a vibrant economy,senior positions at two international all of which could offer attractiveproperty consultancy firms and a listed returns on investment.development company. Down South, Johor is seeing investmentsDuring his 41 years as a real estate taking shape. Iskandar Malaysia isprofessional in Malaysia, he has been developing rapidly, with a slew of Chris Boyd, Executive Chairman,involved in many mega-development infrastructure projects sprouting up. CB Richard Ellis Malaysiaprojects, as well as mergers andacquisitions. He has seen Kuala Lumpur MPI: What is the outlook for theevolve from a small capital city to where residential, retail and commercial MPI: What are the factors that will driveit is now. Property Quotient caught up segment in 2011? the property sector for years to come?with him recently to find out his viewson the Malaysian property market. Here Boyd: The residential segment in the Boyd: Factors that will drive the propertyare excerpts of the interview: Greater Kuala Lumpur area experienced market are dynamic economic growth, a a slowdown in incoming supply in 2008. young population and a well-developedMPI: What are the major developments As a result, there was a supply squeeze banking system offering ample liquidityin the property sector in Malaysia that in 2009 and 2010 that pushed prices into the market. The recent governmentyou would like to highlight? upwards. In 2011, new supply will be initiative of unleashing the Economic coming in and this will tend to moderate Transformation Program will alsoBoyd: In 1974, the population of the prices. The residential segment is very fuel the sector with fresh inflow ofKlang Valley was 900,000 and now it good at self-regulation; it will not investments and infrastructure projectsis 6.5 million. I have been privileged to decline and is most likely to plateau, that will definitely spur the sectorobserve the scale of development that with prices stabilising as new supply further.has taken place throughout the years. comes onstream.On the commercial front, there are two MPI: What is the competitive advantagesignificant changes I wish to highlight. The retail segment will see additions Malaysia has compared to other of approximately 4 million sq ft for the countries in the Asia Pacific region?Now, you have large retail malls that did next three to four years. This amountsnot exist in the mid-70s. It was almost to 10% of total supply. Rental rates have Boyd: Currently, foreigners are not wellimpossible to populate shopping grown at 10% per annum for the past aware that they can purchase just aboutcentres with tenants because all five years and are expected to grow at any type of property in Malaysia. Thepotential tenants then were small mom a similar rate this year. Average rental need to create and embed awareness onand pop operators. Currently, malls are rates in KL city centre work out to the Malaysian property market is vitaltenanted by big chained retailers, such around RM 12 to RM 16 per square foot as the yields are attractive comparedas Mango, Guardian Pharmacy, England (psf). with other countries in the Asia PacificOptical and others. region. The Malaysian market is also MPI: What segment will offer the best attractive as it offers opportunityMPI: What are the emerging returns in 2011? for diversification, has a strong andgeographical areas to look out for? stable currency, sound demographics, Boyd: The segment that is most low geopolitical risk, transparent titleBoyd: The buzz word is the Mass Rail promising is the retail segment. This system, low entry cost, no estate dutyTransit, planned to run from Sungai segment currently enjoys an average and ample financing options. AnotherBuloh to Kajang. Everybody is on the yield of 6% to 7% and good capital attractive attribute is that for taxlookout for new land openings along the appreciation. The factors that are purposes, interest costs can be setroutes of the new MRT lines. Although driving the segment are evenly matched off against rental income -- not all taxSentul had a bad reputation in the past, supply and demand, a young population regimes in the Asia Pacific region offerit now has an immense potential to and rising inflation. this relief.
  5. 5. INVESTOR PREFERENCE 5INDIANS ownership were abolished, Indian nationals emerged as the fourth largestKEEN ON group of residential property investors in Malaysia, with Kuala Lumpur,APAC Penang and Johor being their preferred locations.MPI SURVEY SHOWS MORE ARE Indian investors tended to mirror theCONSIDERING MALAYSIA BECAUSE OF investment patterns of their familyITS POSITION AS A REGIONAL HUB members and friends, preferring to purchase where their countrymen hadby A.Lalitha & Hazrul Izwan India Asean Business Fair 2011, New Delhi bought. Prices of properties purchased predominantly fell in the USD150,000The Asia Pacific region is the top Almost one third of the respondents to USD300,000 category.destination sought after by investors said they favour high investmentfrom India looking to park their money returns when purchasing property in a Indian celebrities that are rumouredin real estate. foreign country. to own real estate in Malaysia include music director Deva as well as actorsA recent survey carried out by the In terms of type of property and location, Madhavan and Vadiveloo.Malaysia Property Incorporated team many Indian investors are zooming inin India showed that investors from on residential and commercial property As at November 2010, Indians make upthe subcontinent ranked Asia Pacific as in Kuala Lumpur’s suburban areas the eighth largest number of applicantsthe most desirable region to purchase like Bangsar, Mont’Kiara and Petaling from amongst the applications underproperties, followed closely by Europe Jaya. Many indicated a preference for the Malaysia My Second Home (MM2H)and the Middle East. landed residential property if they were programme. purchasing for their own use.The top reason fuelling their decision If the United Nations Developmentto purchase property in the Asia An interesting fact that emerged Programme’s 2010 report is anythingPacific region is for business expansion from the survey is that Vastu Shastra to go by, more Indian nationals may bepurposes and for exploring potential compliance is important to Indian looking to own property in Malaysia.partnerships within a moderate-risk investors and they consider it part ofenvironment. the value-added package when buying Malaysia has one of the largest property. Vastu Shastra is the Hindu communities of Indian diaspora in theZooming in on investors’ opinion of system of design based on directional world, making it a familiar place forMalaysia as a place to invest, the MPI alignments. Its Chinese counterpart, Indian nationals looking to live or workteam discovered that more than 80% of feng shui, already has a big following in overseas. The UNDP report states thatthe respondents showed keen interest the East. India is one of the largest “sending”in buying property in the country. nations in India, with an emigration rate Indian interest in the Malaysian property of 0.8%. The report indicated that 72%On the business side, they see the market is not a new phenomenon. Prior of those leaving the country have optedcountry as a regional hub that offers to 2008, before the Foreign Investment to work in other Asian countries.potential for growing businesses. Its Committee Guidelines on propertyimpressive transportation system andinfrastructure compared with otherdeveloping countries in the region are Investmentalso plus points for them. 56%On the personal side, Indian investorsare attracted to Malaysia’s culture,lifestyle, heritage and history, some Figure 3: Main intentions Business expansionof which overlap because of the of property purchase 7%commonalities in the colonial past of in Malaysiaboth countries. Both Malaysia and Indiawere ruled by the British before theyreceived independence.Malaysia’s natural scenery, sunshine Own residenceand beaches are also a draw for Indian 37%investors, some of whom have said theyfeel extremely comfortable living here. Source: MPI Research
  6. 6. SECTOR FOCUS 6AFFORDABLE of branch campuses of reputable foreign universities in Malaysia, withEDUCATION uniformity maintained in terms of course content, academic standards “Malaysia isIN A TROPICAL and degrees awarded. acknowledged asPARADISE Supported by the government, MAPCU also initiated the innovative concept of twinning degree programmes in which one of the pioneeers in this region in the studies are conducted partly in Malaysia development ofby Hazrul Izwan & Hizzan Hamid and completed abroad at the foreign partner university. In certain cases, affordable trans-Since the birth of the MalaysianFederation in 1963, higher education programmes may now be conducted national educational entirely in Malaysia although theinstitutions (HEIs) have expanded degrees continue to be conferred by the programmes”phenomenally in number, student foreign universities. Hence a student atenrolment, and the range of specialties the Malaysian branch of a foreignthey offer. Figure 4: Number of Foreign Students in Higher Education Institutions byIn 2000, there were 11 universities in Region, 2005 -2009the public sector, besides six private No. of students (‘000)universities and 283 private colleges.The demand for higher education was 90so high that all six private universities 80were established in just two years in 701996 and 1997 in response to public 60demand for admission to the HEIs andthe inability of the government-funded 50HEIs to meet the need. 40 30In 1996, enrolment in the HEIs was 2017,589; in 1997, it jumped to 28,344students. Even so, in 1997, only one- 10third of the total of 86,384 applicants 2005 2006 2007 2008 2009could be admitted. Consequently, in1996, more than 15,000 students wentoverseas for higher education. Legend: Asia Oceania Africa Latin AmericaRealising that there was a ready Europe Otherscaptive market for higher educationwithin Malaysia and a shortage of Source: NAPIC, MPI Researchinstitutions to meet the need, many of university does not have to leave these In Johor’s Iskandar Region, the southernthe existing colleges and universities shores to be awarded the degree, saving economic corridor of Malaysia linkingbanded together to form the Malaysian him considerably in terms of costs. business activities to neighbouringAssociation of Private Colleges and Singapore, a number of big namesUniversities (MAPCU). Working closely So successful were MAPCU’s endeavours such as University of Southampton,with the Malaysian government, that ever since 1998, Malaysian private Marlborough College, Raffles University,MAPCU’s mission was to make higher institutions of higher learning have University of Newcastle, Netherlandeducation affordable while helping been increasingly spotted by foreign Maritime Institute of Technologythe government reduce the outflow of universities from countries such (NMIT) and Management Developmentfunds for education overseas. as the United Kingdom, Australia, Institute of Singapore (MDIS) have also United States and France to form a ventured-in to take their place in thisMAPCU’s objectives include promoting collaboration, given the country’s emerging sector.and co-ordinating the development of potential capacity to become a popularMalaysia’s private higher education education centre in the region. In an effort to make Malaysia theindustry; enhancing the quality and education hub for Asia, the Ministry ofdelivery of courses and programmes Prominent international universities Higher Education (MoHE) has targetedconducted by its members and such as Monash University, Curtin 150,000 foreign students for localaffiliating itself with international University of Technology, University of colleges and universities by 2015. Thereassociations and bodies involved in both Nottingham and Swinburne University were already 75,000 internationalpublic and private higher education. of Technology have already established students in Malaysia at the beginning a strong presence in Malaysia and offerAmongst its strategies for fulfilling the same courses that are available atthese objectives were the establishment their main campus. (continued next page)
  7. 7. SECTOR FOCUS 7(from previous page) Figure 5: List of Private Higher Education Institutions (HEI), as at March 2010of 2011, studying in institutionsranging from International schools to Type of Institutions Number of Private HEIprivate and public tertiary educationinstitutions offering diploma, degreeand PhD courses. This signifies Private HEI with University Status 20the acceptance of Malaysia as an Private HEI with University College Status 22international centre for education. Private HEI with University Status (Foreign University Branch Campus in Malaysia 5Today, Malaysia is acknowledged as Private Colleges 390one of the pioneers in this region inthe development of affordable trans-national educational programmes and Source: Ministry of Higher Education, Malaysiaattracts students from the Middle East,Asia and Africa to its numerous high-quality colleges and universities. The tropical climate is warm and humid “Key attractions of throughout the year without any drasticOne of the key attractions for these weather changes. Malaysian education arestudents is the cost of living, which can low cost of living andbe as low as RM11,000 per year, which Malaysia is also geographically-safeworks out to just under US$3,000 per from major natural disasters as it is affordable tuition fees”annum. This, and the affordable tuition located in a natural catastrophe freefees, are the reason why many of them zone. As such, from the political, Figure 6: An Example of Comparative Education Cost for a Bachelor’s Degree in Computer Science (3 years) of an Australian University Item Australian Branch Campus Australian University Savings(%) in Malaysia (Estimated Cost) (Estimated Cost) Tuition Fees USD7,566 USD17,489 56.7 Living Cost USD2,970 USD11,351 73.8 Health Insuranc e USD54 USD223 75.8 Average Education Cost for one (1) year USD10,590 USD29,063 63.6 Total Education for Three (3) Years USD31,770 USD87,189 63.6 Source: MPI Research, StudyMalaysiaare opting for Malaysia as the first choice geographical, social and economical and earn two qualifications uponwhen it comes to tertiary education. point, Malaysia is a very suitable place graduation – one from the Malaysian for students, especially international university and the other from theThe Malaysian lifestyle is another students to study and live in. reputable foreign partner university.factor. Malaysia offers great lifestyleoptions at a much more affordable rate The holders of student passes are For investors aiming to set upthan many other metropolitan cities in allowed to work in some specific sectors educational institutions to capitaliseAsia. Accommodation and food are still while studying, to help supplement on a growing market, there are numberrelatively cheap, and its multi-racial, their living allowances. Subject to other of requirements they will have to adheremulti-cultural society ensures new immigration requirements, students to.arrivals feel quite at home in their new are allowed to work part-time for aenvironment. maximum of 20 hours per week during These include legislative quality semester breaks or holidays of more assurance requirements and governingParents are also more comfortable than seven days. legislation such as the Education Actsending their children to study here as 1996, as well as the Private HigherMalaysia is a socially secure country Over and above these advantages, Educational Institutions Act 1996.with safety measures incorporated in students can enrol in one-degreethe laws of the country. programme at a Malaysian university
  8. 8. CEO’S SPACE 8CAN MY Our National Economic Transformation Action Plan will see an influx of new nothing to do with what their parents were used to. As a result, the city hasCHILDREN financial services, oil and gas companies and logistics companies setting up been blessed with international brands for entertainment, shopping and diningBUY A HOME offices in the Klang Valley. They will bring with them opportunities for work such as Starbucks, Tesco and the new restaurants that have come and willNEAR ME? for Malaysians, together with higher salaries. They are also expected to invest in Malaysia’s growing importance come with the introduction of new hotels such as the Grand Hyatt and St Regis. as the logistics gateway to India, China and Indonesia. These young graduates are also unable to buy property in the city centre and Mr Leong is lucky that what he bought if one of them happen to be Mr Leong’s 30 years ago, and which he still owns, offspring, it is likely that they will stay has appreciated in value and now is with their father until they get married. worth nearly 90 times his original purchase. Recently, a two-storey semi- Not surprisingly, young people do detached house in Petaling Garden that not require the space their parents was purchased by the owner in 1975 for had when they purchased their own RM21,000 was sold for RM1.8 million. premises. This is because most of them Of course, many people do not own have become accustomed to living real estate for that long but if they did, in smaller properties when they wereby Kumar Tharmalingam this should be the value proposition in studying overseas. Also, young couplesMr Leong, who is retired and lives in popular locations with easy access to do not wish to spend their time cookingPetaling Jaya, met me at a seminar schools, hospitals and services. and cleaning or managing a large homewhere I was speaking on Malaysian real as their lifestyles demand outsideestate. He asked two questions. The pressure on new housing and the entertainment and instant enjoyment prices they command also have to do on a regular basis.• hy have houses become so W with Kuala Lumpur being the financial unaffordable to people like me? capital of Malaysia and the home of As a result, we have noticed the rising the Stock Exchange of the country. popularity of homes of below 1,000 sq ft• ow will my children be able to buy H As such, most companies that wish in size purchased mainly by the younger a property similar to mine with to list their companies into the Stock generation as their first home, which current values being so high? Exchange need an office in the city and could also be near their parents’ home as that means that their directors move to they are apartments or condominiumsI told him that both are very important Kuala Lumpur from wherever they are and not landed real estate.questions and to answer I had to go into and bring with them the proceeds ofsome background. the listed vehicle. Hence, prime landed The Government is now seeking to property has never lost its value in Kuala put houses within a RM100,000 toFirst, the affordability factor and the Lumpur. RM250,000 range to meet the risingrights of the next generation to own demand from young people whoproperty in proximity to their parents claim to be priced out of the currentare not tenable in the changing world property market. That price range isthat we live in.The Klang Valley, or only possible if the major component ofGreater KL, as it is now known, is the the house price, which is land value, iscapital city of Malaysia and has grown absorbed by the Government, and a newexponentially over the last 30 years. industrial building platform is used for standardisation of construction.Just to give an example, out of the4.43 million homes that have access So my answer to Mr Leong, the retiredto services such as electricity, water, pensioner, was this: The only viable waytelephony and sewage, nearly 40% are for his children to own a property likein the Klang Valley, representing 1.681 his at this point in time is for him to sellmillion homes. The remaining 2.732 his current house and use the proceeds Old housing scheme in Taman Tun Dr. Ismailmillion homes are spread over the rest to purchase a number of smaller unitsof the country. A further impetus to the growing might in a location further away (and more of the Klang Valley is the number of affordable) than his current address.The Greater KL Local Councils’ combined young people who migrate to the capital His children could share in the financing,budget is larger than any single state city every year to look for employment since the equity portion would comebudget in the country. This is not a local as soon as they graduate.This pool from the original investment.phenomenon, as the same situation of young people, many of whomapplies to London, New York, Sydney, have graduated from international The only other way, as I see it, is if theyMoscow and Istanbul. universities, require a lifestyle that has struck a lottery.
  9. 9. iN A NUTSHELL 9TRANSACTION DATA ONMALAYSIAN PROPERTYABOVE RM1 MILLION Figure 7: TRANSACTION VOLUME OF PROPERTIES BY LOCAL AND FOREIGN BUYERS, JAN-DEC 2010 Units 4,500 1.2% 4,000 3,500 11% 3,000 2,500 2,000 1,500 1,000 1.9% 7.1% 500 0 Kuala Lumpur Selangor Penang Johor Figure 8: TRANSACTION VALUE OF PROPERTIES BY LOCAL AND FOREIGN BUYERS, JAN-DEC 2010 RM’million 14,000 12,000 1.2% 10,000 6.5% 8,000 6,000 4,000 2.0% 3.1% 2,000 0 Kuala Lumpur Selangor Penang Johor Legend: Local Property Buyers Foreign Property Buyers Note: - Buyers comprise individuals and companies. - Transactions in Kuala Lumpur comprise municipalities of Batu, Seksyen 1-100, Kuala Lumpur, Ampang and Petaling only. - Transactions in Selangor comprise districts of Petaling, Gombak, Sepang and Hulu Langat only. - Transactions in Johor comprise districts of Johor Bahru, Pontian and Kota Tinggi only. - Transactions in Penang comprise districts of Barat Daya and Timur Laut only. Source: MPI, NAPIC
  10. 10. PROPERTY QUOTES 10 Property Quotes “I believe Malaysia’s retail sector remain largely untapped given its young population and a steadily rising income level” “We foresee there will be strong demand from the SMEs, Andrew Brien, Chief Executive Officer halal food industries, light manufacturing, distributive Suria KLCC Sdn.Bhd. trade and those who need to upgrade to industrial properties which can serve multi-purpose functions such as integrating their logistic, warehousing, showrooms and office under one roof.” “The need to create and embed awareness on the Malaysian property market is vital as the yields are attractive compared with other James Leong, Managing Director countries in the Asia Pacific region” VPC Alliance (KL) Sdn.Bhd. Chris Boyd, Executive Chairman CB Richard Ellis (M) Sdn.Bhd.ABOUT USMalaysia Property Incorporated is a Governmentinitiative set up under the Economic Planning Unitto drive investments in real estate into Malaysia.As the first port-of-call for real estate investmentqueries, Malaysia Property Inc. connects interestedparties through an extensive network of governmentagencies, private sector companies, real estate firms,business councils and real estate-related associations.MPI has two core objectives; to create internationalawareness and to establish connections between foreigninterests and Malaysian real estate industry players,ultimately contributing to real estate investments intothe country.For further information andup-to-date tracking of Malaysian real estate data, visit:www.malaysiapropertyinc.comFor further enquiry, write Disclamer: This report contains information that is publicly-available and has been relied on by Malaysia Property Incorporated on the basis that it is accurate and complete. MPI is not liable if the case proves to be otherwise. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and the same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed.