Spotlight on the Hospitality Industry
Property Transactions Update
Greater KL Conurbation Residential Property Price Trend
Investor Highlight: Singapore
Real estate sector to benefit from Budget 2011’s infrastructure push
The 2011 Budget unveiled on 15 October 2011 saw more pump priming initiatives to ignite economic growth. The government estimates real GDP growth of 7.0% in 2010 and 5%-6% in 2011.
The Budget pushes on with the government’s agenda for increased public-private partnerships notably through more announcements of significant infrastructure and development projects. With the public sector setting these projects in motion, this is seen as a promising step and positive acknowledgement of the private sector’s role in driving foreign investments into the country. The 5 notable high impact infrastructure projects announced will cost an estimated total of RM81b (US$25.1b) (Table 1).
Beneficiaries of these projects will benefit from improved accessibility, enhanced infrastructure and possible appreciation of land value in areas in its vicinity. These include areas such as Puchong and Subang in Selangor, Kampung Baru and Pudu within KL City Centre, Batu Kawan and Balik Pulau in Penang and Johor Bahru City Centre in Johor.
Exciting days ahead for the Hospitality industry
Malaysia’s continued rise in tourists and business travelers are seen as main drivers for the local hospitality industry. Total tourist receipts increased to RM53,368m in 2009 compared to RM49,561m in 2008. The Ministry of Tourism records a total of 180 4-star and 5-star hotels in Malaysia as at end 2010, with total room supply of 54,175 rooms. Foreign investors own 58% of the 4-star and 5-star hotels in Malaysia. There are no restrictions on foreign ownership of hospitality assets in Malaysia. Besides KL, other local thriving hospitality markets are Penang, Johor, Sabah, Melaka and Langkawi Island.
According to Mr. Previn Singhe of Zerin Properties a leading speacilist in the sale-purchase of hotels in South East Asia says, the outlook for the hospitality sector will continue to be strong moving into 2011. New trends in the industry are limited service hotels, serviced apartments, spa resorts, budget and branded budget hotels. He believes on the continued strength of hotel rates and occupancy levels, fueled by factors such as growth of the tourism market, opportunities for varied products. There is still lack of prominent international hotel brands. (Fig. 1-5)
Property Transaction Update
Jan-July 2010 data from NAPIC recorded a total of 4,815 transactions with a value of RM14.4b (US$4.6b) in the 4 major states tracked by MPI; Kuala Lumpur, Selangor, Johor and Penang. The residential sector continues to be robust throughout the year in Kuala Lumpur, Selangor and Penang. A total of 1,066 transactions (RM2.45b/US$0.79b), 998 transactions (RM2.25b/US$0.73b) and 278 transactions (RM0.50b/US$0.16b) were recorded in Kuala Lumpur, Selangor and Penang respectively. Transactions in Johor remain dominated by the industrial sector. The development of Iskandar Malaysia is seen to be the main driver of further growth for the state’s industrial sector. A total of 105 industrial land amounting to RM0.32b/US$0.10b changed hands. (Fig. 6-9)
Greater KL Conurbation Residential Property Price Trend
Notwithstanding existing favourable conditions such as low lending rates and high margin of financing available to property purchasers, limited supply of land and innovative product offerings are noteworthy factors that are influencing price premiums of residential properties in Kuala Lumpur (KL) and to some extent, Penang island. Rental rates for landed property in KL is observed to be moving faster than the stable rentals for high rise units, currently averaging between RM2,800 – RM3,000 (US$620 - US$930) per unit. Average gross yields for double storey terraced houses and high rise units in 2Q10 are stable at 3.3% and 6.6% respectively. A trend in pricing tiers emerges from the difference in asking prices of suburban areas such as Puchong, Shah Alam and Rawang moving inwards towards the heart of KL city. Both landed and high rise property in outer areas have the potential to command up to 70% of the value of each inner tier, giving rise to the potential that properties in the outer fringes of KL could appreciate even further. The new Mass Rapid Transit plan to increase connectivity will also contribute to further price appreciation in the suburban areas. Currently, residential properties in Tier 3 and Tier 4 are purchased by first time home buyers.
Infrastructure Update
New highways in the pipeline under budget 2011
With further major developments proposed within KL city centre, new highway works announced in Budget 2011 aim to alleviate traffic to and from the suburbs around Kuala Lumpur. Currently, Malaysia has 23 toll concessions with volume growth on the uptrend contributed by local travellers and cross-border traffic. According to latest figures from the country’s largest highway concessionaire, PLUS Expressways Bhd recorded RM2b (US$620m) toll collection on the back of traffic volume growth of 7.1%.
Residential Sector Update
Outlook from the country’s leaders in property development
The recent, ‘The Edge Property Excellence Awards 2010’ saw top developers rewarded for their achievements in providing quality and innovative products to the Malaysian market. Industry players are optimistic of the property market scene citing ample liquidity, steady employment rate, low mortgage rates, tax incentives and high saving rates as primary factors that will sustain the robust domestic market. In selected areas, property prices are even estimated to increase by 10% or more within the next 12 months. Property players are increasingly cognizant of Malaysia’s consumer market as demands have become more sophisticated over the years. Projects on the winners’ portfolios show increased emphasis on provision of facilities such as security features, improved customer service, quality assurances and convenient access to basic amenities such as schools, parks and retail space.
Industrial Sector Update
Kulim Hi-Tech Park: Malaysian-German Joint Venture
A joint venture involving QT Hightech (M) Sdn. Bhd. and its German partner, Lfoundry GmbH indicated an initial investment of US$68.48m (RM214m) to build five the wafer fabrication clusters. Situated at the Kulim Hi-Tech Park within the Northern Corridor Economic Region (NCER), these clusters will be set up in the next 10 years. This venture is expected to generate gross income in the excess of US$1.3b and contribute an estimated 8,500 job opportunities.
Investor Potential: Singapore
Recent measures to slow down rising prices of residential properties with the directive from the Singapore authorities have affected residential sales at a decrease between 10%-20% as both buyers and sellers are watching the market to assess the implications of government announcements. The directive prohibits Singaporeans who owns to non-subsidised HDB flats to concurrently own an HDB flat and a private home within the minimum occupation period of five years. Overall, the Singapore property market will remain robust; DTZ’s May 2010 report indicates increasing interest from Chinese buyers, now the number three overseas buyers in the city-state. Domestic investor outlook is also promising; the Economist Intelligence Unit forecasts private consumption to continue to expand by an average of 4.1% up to 2011.
For Malaysian developers to tap into the Singaporean property market the following points may help:
Assure the investor by using se warranties, access to authorities for queries or redress and offer credible property management services.
Cater to standards that Singaporean investors are used to: Highlight certifications such as the Green Building Index, BCA’s Green Mark, major property awards, etc.
Can leverage on sales in Singapore by using MPI’s Malaysia Property Gallery.
For further information and up-to-date tracking of Malaysian real estate data, visit: www.malaysiapropertyinc.com
For further enquiry, write to: info@malaysiapropertyinc.com
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.
