Friday, July 6, 2007

British house prices rose slightly less than expected in June, suggesting higher interest rates are beginning to take their toll on the property market, a survey showed yesterday.

Mortgage lender Halifax said house prices rose 0.4 per cent in June, taking the annual three-month rate to 10.7 per cent. That was below forecasts for a monthly gain of 0.5 per cent and annual rise of 10.9 per cent, but above a 0.2 per cent rise in May. Annual house price inflation for that month was 10.6 per cent.

‘Overall, the evidence suggests to us that the housing market has peaked and is gradually coming off the boil,’ said Howard Archer, economist at Global Insight.

The figures came after Finance Minister Alistair Darling expressed concern about the financial burden faced by thousands of Britons whose fixed-rate mortgages are due to expire just as interest rates are expected to go up for a fifth time in a year.

The Bank of England is widely expected to raise borrowing costs to 5.75 per cent today, following four quarter percentage-point increases since last August.

Halifax chief economist Martin Ellis reckons this could cool the market. ‘The increase in mortgage interest rates - both for fixed and variable products - is curbing demand and will continue to act as a constraint over the coming months,’ he said.

But other housing market data have suggested the market remains in good shape, despite the rising cost of borrowing.

Mortgage lender Nationwide said last week that house prices rose 1.1 per cent in June, taking annual house price inflation to its highest in more than 2 years.

BoE data showed mortgage approvals rose more than expected in May, suggesting the outlook for prices is firm. Halifax said the cost of an average home stood at £197,461.

Source: The Business Times, 05 July 2007
Pender Court, off West Coast Highway and near the Caribbean and Reflections at Keppel Bay condos, has been sold for $80 million or about $872 psf of potential gross floor area. No development charge (DC) is payable.

The unit land price for Pender Court surpasses the last collective sale transaction in the location - that of Fairways Condo which was sold in May for about $785 psf per plot ratio, inclusive of DC and the cost of buying an adjoining piece of state land.

Cushman & Wakefield brokered the collective sale of Pender Court through a private treaty deal inked earlier this week. The 65,480 sq ft freehold site is designated for residential use with a 1.4 plot ratio (ratio of maximum potential gross floor area to land area) and a five-storey maximum height under Master Plan 2003.

The buyer is Bravo Building Construction, which plans to redevelop the freehold plot into an 80-unit condo slated for launch in the second quarter next year. ‘We should easily be able to sell at an average price of $1,800 psf,’ Bravo director Jenny Tan told BT. She reckons Bravo’s breakeven cost for the project will be around $1,200 psf.

‘The site has excellent ‘feng shui’, with the front facing the sea and having Mount Faber as its backdrop. We’re looking for an architectural firm to design a resort-style boutique condo on this site,’ Mrs Tan added.

Bravo, a five-year-old outfit involved in the construction and property development business, has bought some 15 sites in Singapore since September last year. The sites are predominantly residential plots purchased through collective sales and are mostly located in the eastern part of the island. Most of the sites have land areas of 30,000 to 45,000 sq ft. These include Castle Court at Changi Road, Regent Court in Serangoon and Koon Seng House in the Still Road area. The gross development value of the group’s Singapore residential landbank is around $800 million. ‘We will start launching residential projects from November this year,’ Mrs Tan said.

First off will be an 80-unit condo on the Koon Seng House site, and a residential and small office, home office (Soho) project on the Castle Court plot.

Mrs Tan reveals that Bravo was the party that earlier this week sold eight freehold semi-detached houses along Mountbatten Road to Lian Beng Group for $42 million. The eight houses can be redeveloped into a condominium.

Mrs Tan also said that Bravo was the highest tenderer in a Singapore Land Authority tender to lease the former CPIB Building at 150 Cantonment Road on a monthly rental offer of $1.88 psf of gross floor area. ‘If we are awarded this building, we can fit it out as high-tech offices in about three months. We could have about 45,000 sq ft net lettable area of office space,’ Mrs Tan said.

Pender Court’s collective sale is subject to approval from the Strata Titles Board. Owners of the existing 48 apartments will each receive over $1.6 million, according to Cushman & Wakefield.

Source: The Business Times, 06 July 2007
The Urban Redevelopment Authority (URA) yesterday launched a ‘white site’ at the junction of Race Course Road and Rangoon Road for sale by public tender. Experts believe the 1.36 ha could fetch as much as $280 million.

The 99-year leasehold site, which is directly above the Farrer Park MRT Station in Little India, has a 4.2 plot ratio, which means it can generate a maximum gross floor area (GFA) of about 57,225 sq m.

‘Judging by the nearby City Square Residences, the site could fetch $400-$450 per square foot per plot ratio,’ said Lui Seng Fatt, regional director at Jones Lang LaSalle. This works out to $246.4-$277.2 million.

The land parcel is zoned white, which means that it can be put to a range of uses including hotel, retail, dining, entertainment, office and residential. The site, however, comes with a URA requirement that at least 40 per cent of its maximum GFA to be allocated for hotel use.

‘The minimum quantum of hotel use will provide opportunities to meet the demand for hotel accommodation in this area given its location near the historic district of Little India, which is popular with tourists and locals,’ the URA said.

The successful bidder can then choose to develop the remaining 60 per cent of GFA for additional hotel and/or residential, commercial or hospital uses, the government body added. Allowing hospital use will help meet increased interest in private hospital developments, the URA said.

The land parcel is one of the ten sites that were transferred from the reserve list to the confirmed List of the Government Land Sales Programme for the second half of 2007. The site was first offered in August last year, but saw no takers. The URA then decided to open up the plot to hospital development. Related link: Click here for URA’s news release

Even then, a developer will be most likely to use the remaining 60 per cent GFA for residential and commercial space rather than hospital development, observers said.

‘Residential and commercial use will probably prevail because it provides better opportunities for that area,’ Mr Lui said.

Source: The Business Times, 06 July 2007
The construction sector may be hitting the high notes but the simple truth is that one can’t get building materials for a song. Their price has climbed with the boom in the industry.

While the cost of concreting sand came under the microscope earlier this year, a detailed study has revealed that, away from the headlines, the cost of other key materials like structural steel, clay bricks and ready mix concrete has also been going up.

Bundling the numbers together, construction cost consultancy Rider Levett Bucknall (RLB) has estimated that costs for Q1 2007 - captured by its in-house Tender Price Index (TPI) - were 15 per cent higher year-on-year (YOY).

The index registers changes in the cost of both, materials and labour. Labour costs, incidentally, have risen 15-20 per cent over the past six months.

RLB, formerly Rider Hunt Levett & Bailey, noted the ‘considerable pressure on construction resources, given the current volume of construction demand as well as the anticipated demand over the second half of 2007.’ In fact, it estimates that the previous construction demand peak of $24.4 billion achieved in 1997, ‘will be tested and possibly surpassed based on a projection of current trends’.

The costs have climbed, in part, on account of Indonesia’s decision in February to ban the export of sand. Even though concreting sand comprises only a small portion of the overall construction costs, the move also caused some disruption in aggregate supply, it noted.

Other materials also became dearer. The cost of structural steel, for example, has risen by 17.8 per cent. The price of copper, meanwhile, has fluctuated sharply, rising by almost 80 per cent over two years before registering a YOY decrease of 1 per cent in May 2007.

RLB says the prices of many materials are largely determined by the global commodities market which may react to speculation, foreign exchange fluctuations and geopolitical factors. Such gyrations, however, make life difficult for contractors who hope to tender for construction contracts.

A recent Goldman Sachs report, which was bullish on the industry in general highlighted certain investment risks, including execution risks, given the very tight project schedules and capacity, and the possibility of default of main contractors.

So far, at least one redevelopment project - Safra Toa Payoh - has been put on hold due to rising costs.

The government’s e-procurement portal, GeBiz, also revealed recently that the Housing and Development Board did not award at least four recent public tenders for building contracts. One industry player claimed that this was on account of the prices quoted.

Nevertheless, industry players are confident that, given the overall climate, they can weather the rising costs. Property developer United Engineers Group, which also has construction capabilities, believes the outlook will be positive for the next two to three years.

United Engineers group managing director and CEO Jackson Yap added: ‘In a booming property market where property prices are steadily rising, there would still be sufficient or additional margins to buffer against rising costs.’

Woh Hup director Eugene Yong said: ‘There’s uncertainty, but that’s the normal situation. That has not changed. The uncertainty is whether you have correctly priced in the risks,’ he said. The concern, he added, was not with new projects: ‘It’s existing contracts that are the issue.’

The construction boom has given contractors more bargaining power. UE’s Mr Yap says: ‘(Contractors) are able to bargain for more margins from developers as there is currently a shortage for contracting resources. However, due to this shortage in contracting resources, projects will also take a longer time to complete.’

Mr Yap also points out that construction materials are just one component of construction cost. The industry faces other challenges too.

Labour resources are tight particularly for supervisors and project managers, and dormitories and transportation resources for workers are also a constraint, he said. Equipment like cranes and piling machines is also witnessing shortage, and therefore sale and rental prices have also gone up.

Other developers are monitoring prices closely. A spokesman for CapitaLand said: ‘We will continue to review the impact of the increase in materials costs on a case by case basis with the respective consultants and contractors.’

If the rising construction costs have not been met by much alarm, it is probably because the returns from construction and property development are high.

Knight Frank director, research and consultancy, Nicholas Mak notes that the prices for new developments have risen faster than the construction costs.

Indeed, the latest official figures reveal that overall private home prices rose 20.6 per cent YOY with the high-end sector rising even higher. When compared to an estimated 2 per cent increase in development cost due to price hikes in sand and granite, increases in construction cost do seem negligible. Mr Mak added: ‘In a booming property market, there is a lot more opportunity to pass on increases in construction costs to buyers.’

Source: The Business Times, 06 July 2007
Singapore may be just in the nascent stage of the current construction boom but the strain on resources is becoming a concern even for suppliers.

TV Narendran, deputy president (operations) of NatSteel Asia, said: ‘In Singapore, the industry practice is to hold prices for seven to twelve months and this means that the steel supplier has to bear the risk of fluctuating input costs and market prices.’

So far, the steel price increases alone have not had much impact on property prices. ‘Steel accounts for about 5 per cent of the project costs. So even a 15-20 per cent increase in steel prices has an impact of less than one per cent on project cost,’ explained Mr Narendran.

Wee Piew, chief executive of mainboard-listed HG Metal Manufacturing, notes that price increases have been ‘more pronounced’ since the first half of this year. ‘Global demand is very strong, especially from the Middle East and Russia. Steel from Turkey and the Ukraine, which used to come here, is now being channelled to those markets.’

The supply of Chinese steel is also ‘much more controlled now’ due to a cut on export tax rebates, he added. With pressure on both demand and supply, prices are high. The price for deformed bars for construction has risen 35 per cent to US$540 per tonne since January, he said.

Even construction companies which are not directly affected by rising material prices are seeing a strain on resources.

Mainboard-listed Tat Hong Holdings’s share price has appreciated 75 per cent since the begining of the year on the back of the construction boom.

Tat Hong supplies construction machinery including cranes, and its CEO, Roland Ng, said: ‘We believe that rates will continue to be driven by strong demand conditions and tight supply for cranes in this region. We continue to observe a long lead time required for crane manufacturers to deliver on new orders and are not aware of any factors that will drastically alter the situation in the near future.’

Mainboard-listed Tiong Woon Corporation Holdings, a crane and transport services supplier, has also benefited from the boom and its share price has more than trebled since the start of the year.

And Tiong Woon executive director Tan Swee Khim expects crane rates to keep rising by 10 per cent year-on-year for the next two to three years at least.

‘Demand is not really coming from the intergrated resorts in particular, but across the industry, including private projects, infrastructure and refineries. The situation on the supply side is not likely to improve much.’

There is some uncertainty of how the construction boom will play out. An industry player said: ‘Given the limited pool of contractors, subcontractors and suppliers in the local market, it is not surprising that developers may not be able to secure tendering commitments from the larger established contractors who may already have ongoing projects and tendering commitments with existing clients.’

Source: The Business Times, 06 July 2007

Thursday, July 5, 2007

Singapore’s property market is booming, with activity centred in districts 4, 9, 10, 11 and 15. And I believe there is a lot more upside yet. Why?

Singapore’s property market is booming, with activity centred in districts 4, 9, 10, 11 and 15. And I believe there is a lot more upside yet. Why? For each key event listed below, I expect an above average movement of $200 per square foot for the districts mentioned in the years ahead:

Year 2008: Singapore will host the world’s first Formula One night racing. The world will be invited to Singapore, interact with and invest in Singapore.

Year 2009: The first integrated resort (IR) at Marina Bay will be completed with US$5 billion flowing into Singapore from the first wave of tourists. They will come from the business travel, meetings, conventions and dexhibitions segment.

Year 2010: The second IR on Sentosa will be completed with another US$5 billion flowing in from the second wave of tourists. These tourists will come from destinations beyond a nine-hour flight radius.

Year 2011: My guess is that there will be a general election in Singapore which could see some election year goodies.

Year 2015: Singapore celebrates her 50th birthday and hopefully fulfils Prime Minister Lee Hsien Loong’s vision of Singapore as the jewel of the region.

Can we really profit from investing in the property market?

While many wealth creation fads come and go, property investment has consistently created more permanent millionaires than any other investing strategy in history. Here are what some of the wealthiest Americans have said:

‘Real estate is the basis for all wealth.’ - Theodore Roosevelt

‘Eighty per cent of all millionaires made it through real estate.’ - Andrew Carnegie

‘Buying real estate is the best, safest way to become wealthy.’ - Marshall Fields

The truth is that property investment is not just for the rich. If done correctly, anyone who has the desire to succeed can create enough passive income or a lump sum of cash to become financially free.

According to an annual World Wealth Report compiled recently by Merrill Lynch and research firm Capgemini, Singapore has 66,660 millionaires (in US$ terms). They account for about 1.5 per cent of the population, that is, three out of every 200 people here are millionaires.

But the sad truth is that only three out of every 200 Singaporeans will be financially independent when they retire. The rest will either be dependent on family, friends or charity, or have to work indefinitely.

If you’re spending all the money you make and banking on your Central Provident Fund (CPF) for retirement, I want you to wake up from your sweet dreams! The CPF is designed as a supplement to your retirement plan. If CPF savings are all you’ve got, you are either going to have to continue working well past retirement age, or live a meagre lifestyle.

Most people think that the safest option is to park their money in fixed deposits. But they fail to take account of inflation. Today’s inflation rate is about one per cent a year. You need to earn one per cent on your money in fixed deposits just to break even. You’ll need to earn more if you want to create wealth. As such, you will definitely want to invest in instruments that will not only give you a good return but also appreciate in value over time. One good way is to invest in property.

There are two roles to consider. In the beginning, you enter the property market as a buyer and after some time, you exit as a seller. We call this: ‘Buy low, sell high, make money.’ I’ll use a real-life example of the process that made a buyer a cool profit of almost $1 million in a year.

Step 1: The buyer places a one per cent deposit for an option to purchase a property at $1.6 million. That comes to $16,000. The option gives the buyer the right, but not the obligation, to buy the property within two weeks. The owner of the property is not allowed to sell the property to someone else during this period.

Step 2: The buyer exercises the option two weeks later with an additional payment of 4 per cent or $64,000. Once this step is completed, the buyer will have about eight weeks to raise money for the outstanding amount.

Meanwhile, conveyancing work will have started to ensure both parties are legally approved by the authorities for this transaction.

Step 3: Eight weeks later, the buyer pays another 5 per cent - or $80,000 - to complete the purchase.

All in, the buyer has to fork out a cash amount of a $205,600. This comprises 10 per cent for the downpayment, $42,600 for the stamp duty and $3,000 for legal fees. (Stamp duty is taxed at 3 per cent of $1.6 million minus $5,400).

At this stage, the buyer would have invested 10 per cent of the value of the property in cash. The other 90 per cent is financed through bank borrowing. Once this process is completed, the seller hands over the house key to the buyer.

One year later, the owner sells the property for $2.7 million and reaps a profit of $970,715. That is calculated on the sale price of $2.7 million minus the purchase price of $1.6 million. On top of that are the other expenses: stamp duty of $42,600, legal fees of $3,000 X 2 (incurred on the buying and selling); bank redemption of $26,685 (the bank’s penalty as part of loan agreement); 2 per cent for agent’s fee of $54,000 (this is double the market rate to incentivise performance).

There is no secret formula to investing in the property market. All it takes is an understanding of the key terms, a commitment of time and most importantly, a ready lump sum of cash to initiate the purchase.

Where are the areas to invest?I highly recommend Sentosa Cove and District 10.

Sentosa Cove offers one of the most exciting propositions - a residential enclave that shares the island with an integrated resort. The wealthiest individuals in the world will be looking to buy your property which will be situated right next to their favourite entertainment spot.

In district 10, the Duchess area is the place where you can invest in your child’s future. Within a one-km radius, it offers several premier schools: the Nanyang and Raffles Girls’ primary schools, St Margaret’s Secondary School, Nanyang Girls’ High, Chinese High School, Hwa Chong Institution, National Junior College and Hwa Chong Junior College.

When do we invest in the property market? The answer is: Now! There is no better time to start investing for the future.

The writer is CEO, Freely Business School.

Source: The Business Times, 04 July 2007

The supply of luxury condominiums and service residences in the Kuala Lumpur city centre and surrounding suburbs is set to more than double over year

The supply of luxury condominiums and service residences in the Kuala Lumpur city centre and surrounding suburbs is set to more than double over the next three years as developers rush to take advantage of renewed foreigner interest in Malaysian real estate.

Another 10,205 units will come onstream from now till 2010 to add to the existing supply of 4,146 units, according to a recent market report by property consultants Regroup Associates. What this would do to the rental market and yields remains to be seen.

The greatest change would be to the city centre which would see an additional 6,000 units of luxury condos and service residences, thus expanding to account for 57per cent of supply from 28 per cent currently.

Recent measures to liberalise the sector has been a boon to real estate prices, this being most evident in the area around the prestigious Kuala Lumpur Twin Towers where prices are heading towards the RM2,000 (S$889) psf mark and are fuelling even more projects.

In the Mont Kiara/Sri Hartamas area, nearly 2,000 units costing more than RM500 psf would enlarge the existing supply of 900 units. Mont Kiara/Sri Hartamas would continue to account for some one-fifth of supply.

Despite another 1,000-odd units coming on to the embassy area around Ampang Hilir/U Thant, its contribution to supply would remain around the 10 per cent mark.

Because of the huge expansion in the city, other popular and upmarket suburbs such as Bangsar, Kenny Hills and Damansara Heights would account for less of future supply. Indeed, these more ‘mature’ neighbourhoods are building at a much lower pace. Land is scarce and residents there are inclined to protest against planned projects which they view as unwelcome.

Damansara City - a RM1.2 billion integrated development project comprising luxury condos, a five-star boutique hotel, office towers and a mall - has drawn the ire of residents. Following their protests, the matter was discussed in a weekly Cabinet meeting, but few expect the project by Quek Leng Chan’s GuocoLand to be derailed.

Given the rush to strike while the iron is hot, it would not be a surprise to see additional projects take off which would increase supply beyond the current estimates of 10,205 units by 2010.

Regroup estimates the average occupancy in the city centre at 83 per cent currently. In Ampang Hilir/U-Thant, Bangsar and Kenny Hills where supply is far more controlled, occupancy is as high as 90 per cent. Mont Kiara/Sri Hartamas enjoys 88 per cent occupancy, while in Damansara Heights it averages 80 per cent.

While the take-up has been encouraging, developers who have been touting Malaysian real estate as value for money are playing down fears of a glut or if the expatriate market is large enough to absorb future supply.

Regroup executive chairman Christopher Boyd believes the market for tenants will be ‘very competitive’ in two years, especially in the city centre. While the expat market is growing, he said it would have to ‘really grow some more’ for occupancy to be maintained above 80 per cent.

Top-end properties in the form of The Binjai, One KL and The Troika are likely to set new benchmark rentals, he said, but would be constrained somewhat by the fact they are coming onstream at about the same time. Perhaps more worrying is the ‘mid top-end’. ‘There will be a bit of a bulge there which will be even more competitive (for rentals),’ he added.

Source: The Business Times, 04 July 2007

Property owners continue to ride on the buoyant market by offering their sites for development. The latest attempts at collective sales at Meng Gdn

Property owners continue to ride on the buoyant market by offering their sites for development. The latest attempts at collective sales are at Meng Garden Apartments off Killiney Road and Villa delle Rose just off Holland Road.

SuperBowl Holdings’ vacant site at the corner of Balestier Road and Jalan Datoh is also up for grabs; the site has approval for development into a hotel. All three sites are freehold.

Villa delle Rose, with 297,132 sq ft land area, is just off Holland Road, overlooking the Botanic Gardens. The site is zoned for residential use with a 1.4 plot ratio (ratio of potential maximum gross floor area to land area). A $12.6 million development charge (DC) is payable.

CB Richard Ellis, which is marketing Villa delle Rose through an expression of interest exercise due to close on Aug 8, said there is no official price indication.

However, market watchers note that the much smaller Aura Park nearby was recently sold to Lippo Realty for $1,280 psf per plot ratio inclusive of DC.

Sources believe Villa delle Rose’s owners may be looking at a higher price, in the region of the $1,544 psf ppr achieved this year for Bishopswalk.

Villa delle Rose was jointly developed by Keck Seng and Pontiac Land in 1982. The existing development comprises 104 units ranging from 2,800 sq ft to 3,200 sq ft.

CBRE is seeking expressions of interest in Meng Garden Apartments at Lloyd Road with a 35,639 sq ft land area. The site is zoned for residential use with a 2.8 plot ratio. An estimated $440,000 DC is payable. Submissions should be made by Aug 7.

The development of 26 apartments and a penthouse was built in the mid-1980s. Prior to its development, the site was the original residence of the Alkaff family, CBRE said in its news release.

Over in the Balestier area, Colliers is marketing a 22,965 sq ft vacant site approved for hotel development. Searches show the site’s owner is Superbowl Sentosa Pte Ltd, a subsidiary of Superbowl Holdings.

Colliers said the site’s indicative land value is about $40 million, or about $580 psf per plot ratio. No DC is payable.

‘With a proposed gross floor area of 68,896 sq ft and a gross plot ratio of approximately 2.99, the subject site could be redeveloped into an 11-storey tower block comprising 168 hotel rooms above a two-storey podium block - plus a basement car park and a swimming pool,’ Colliers said.

The tender for the Balestier site closes on July 25.

Source: The Business Times, 04 July 2007

Developers CapitaLand and Lippo Group are selling US$342 million (S$522.2 million) worth of bonds backed by two residential projects.

Developers CapitaLand and Lippo Group are selling US$342 million (S$522.2 million) worth of bonds backed by two residential projects.

They are securitising the future payments homebuyers will make for the Metropolitan and Scotts HighPark condominiums, which the developers said have both been sold out.

The deal was announced yesterday by South Africa’s Standard Bank, which is handling the bond sale.

The Metropolitan in Alexandra Road is being jointly developed by CapitaLand and Lippo Group in a 50:50 venture, while Scotts HighPark in Scotts Road is a CapitaLand project.

Most of the units in these two projects are believed to have been offloaded under deferred payment schemes.

What the securitisation does is to bring forward the cash flows due to the developers from these deferred sale payments, thereby freeing up capital for them to redeploy.

In return, CapitaLand and Lippo will assign the receivables to Vesta Investment Corporation, a special purpose vehicle set up for this deal.

Vesta will then issue bonds backed by these receivables to investors.

The floating-rate bonds mature in October 2011, by which time both condos will have been completed and all the payments made in full by the homebuyers.

Although the rates have yet to be finalised, both Moody’s Investors Service and Fitch Ratings have provisionally assigned top ratings to the bonds.

In giving its rating, Moody’s said it considered the track record of CapitaLand and Lippo in ‘developing similar residential projects in Singapore on time and within budget’ as well as ‘the market dynamics for Singapore’s residential properties’.

Private home prices in Singapore jumped 7.9 per cent in the second quarter on the back of good economic growth and strong market sentiment.

Standard Bank, Africa’s largest lender by assets, said the deal will be launched after an investor roadshow in Asia and Europe, which is expected to take place early this month.

This deal ‘is part of CapitaLand’s ongoing strategy to make its capital more efficient and productive’, the developer said in a statement yesterday.

This is the fifth time CapitaLand has advanced cash flows by securitising condos.

In March last year, CapitaLand raised US$332.7 million from the securitisation of Citylights in Jellicoe Road and Varsity Park Condominium in West Coast Road.

Earlier deals were done in 2001, 2002 and 2004. These four alone add up to more than $1 billion of issuance.

Other developers, such as Keppel Land and Centrepoint Properties (now Frasers Centrepoint), have also previously securitised payments from their condos under development.

Source: The Straits Times, 04 July 2007

Businessman Chng Gim Huat of CGH Group has emerged as the top bidder for a hotel site near Amara Hotel, with an offer worth $97.07 million.

Businessman Chng Gim Huat of CGH Group has emerged as the top bidder for a hotel site near Amara Hotel, with an offer worth $97.07 million.

The group plans to invest a further $70 million-plus developing the 99-year leasehold plot into a 270-room, three-to-four-star business hotel. That brings the all-in investment to about $620,000 per room.

‘Assuming an average room rate of about $168 per night currently, the hotel’s occupancy will have to be above 70 per cent before we can break even. But we expect room rates to be at least 20 per cent higher when the hotel is completed, most likely within three years,’ said CGH Group director Benjamin Chng.

The state tender drew only one other bidder - from Hiap Hoe Superbowl JV Pte Ltd, which offered $78.8 million for the site.

The reserve-list site was triggered for release with an undertaking by a developer to bid at least $60.888 million. Mr Chng’s bid at yesterday’s state tender reflects a unit land price of $562 psf of potential gross floor area, which is $11 psf per plot ratio lower than the $573 psf ppr fetched for another nearby hotel plot, awarded to Carlton Properties earlier this year.

The lower bid in yesterday’s tender could be due to the fact that the latest site has a lower plot ratio, and hence smaller maximum gross floor area compared with the earlier plot, CB Richard Ellis executive director Li Hiaw Ho reckons.

Mr Chng told BT yesterday that besides developing the plot into a 270-room hotel, CGH Group also plans to include about 30,000 sq ft net lettable area of commercial space. ‘Some of this will be for the hotel’s use while the rest will be strata titled for possible sale, or we may just keep it for investment,’ Mr Chng said.

CGH Group also owns Orchard Grand Court at Killiney Road, comprising more than 200 ‘hotel-style’ service apartments. It still owns about 600,000 sq ft of ramp-up factory space at Paya Ubi Industrial Park which it developed. This comprises about 40 per cent of the original development. The other 60 per cent has been sold. Of the 600,000 sq ft CGH Group still owns, 80 per cent has been let.

In the residential sector, the group recently completed the 44-unit condo Dengfu Ville in Kampong Eunos, which was fully sold earlier this year.

In August/September, it is planning to launch Esta Ruby, which has 72 apartments housed in a 19-storey twin tower development, with a rooftop pool. The project also includes ground floor shop units and a basement carpark.

Mr Chng controls 51 per cent of Compact Metal Industries.

Source: The Business Times, 04 July 2007

Citigroup’s European headquarters in London’s Canary Wharf was bought by Derek Quinlan, an Irish investor, and Propinvest Holdings for about £1 billio

Citigroup’s European headquarters in London’s Canary Wharf was bought by Derek Quinlan, an Irish investor, and Propinvest Holdings for about £1 billion (S$3.06 billion) in the UK’s second-largest commercial property transaction.

The 42-storey building at 25 Canada Square was sold by Royal Bank of Scotland Group, said Carolyn McAdam, a spokeswoman for the bank. Royal Bank acquired the property at the end of 2003 for more than £700 million.

‘This is a long-term personal investment in a prime property in the heart of London’s new financial centre,’ Mr Quinlan, a 59-year-old former tax inspector, said yesterday.

An increase in central London office rents, fuelled by a shortage of space, is prompting investors to pay record amounts for commercial real estate. HSBC Holdings, Europe’s largest bank by market value, in April sold its London base at 8 Canada Square to Metrovacesa SA for £1.09 billion, the UK’s biggest commercial property deal.

Citigroup, the largest US bank, is the only occupier of the tower at 25 Canada Square, a building with 1.2 million square feet of space. The 25-year lease expires in 2026, with upward-only rent reviews every five years.

The yield, defined as rental income divided by value, is about 4.5 per cent, according to Mr Quinlan. That implies an annual rent of about £45 million, ’significantly’ less than the average for the City of London and Canary Wharf financial districts, Mr Quinlan said. The yield will probably increase to reflect the market rate, he said.

Mr Quinlan controls Quinlan Private, a real estate and private equity firm that oversees assets of more than 10 billion euros (S$20.7 billion). Quinlan Private and a group of investors last month paid 1.16 billion euros for a chain of budget hotels owned by Jurys Doyle Hotel Group.

Mr Quinlan was the main investor in the £1.1 billion purchase from Royal Bank of 47 UK hotels operated by Marriott International.

Mr Quinlan and Propinvest, which is wholly owned by Glenn Maud, were on the shortlist to buy HSBC’s London headquarters, Property Week said in April.

Propinvest lost out to IVG Immobilien and investment bank Evans Randall over the £600 million sale in February of the London office tower dubbed ‘the Gherkin’.

Quinlan Private and General Electric’s real estate unit yesterday agreed to buy the Mall of Plovdiv shopping centre in Bulgaria’s second-biggest city, the companies said. The mall is due be completed in the fourth quarter of 2008. The companies acquired a shopping centre in the capital, Sofia, last year.

Source: The Business Times, 03 July 2007

Canary Wharf Group, a subsidiary of Songbird Estates, said yesterday it had sold an office development in Canary Wharf, east London, for £290 million

Canary Wharf Group, a subsidiary of Songbird Estates, said yesterday it had sold an office development in Canary Wharf, east London, for £290 million (S$889 million) to Fitch Ratings Ltd parent Fimalac.

The 320,000-sq-ft building at 40 North Colonnade is due for completion in 2010 and will house credit rating agency Fitch’s headquarters.

Other occupants could include global accountancy group KPMG, which has an option on some of the office space, in addition to its new headquarters under construction next door.

A spokesman for Canary Wharf Group said it would definitely push ahead with its sole remaining speculative development at 25 Churchill Place, with space becoming increasingly tight at the towering Docklands site, which competes with the City of London district as a financial services centre.

‘It is the only building left now where there will be significant space at Canary Wharf,’ he said, adding that the company planned to finish construction of the 350,000-sq-ft building at 25 Churchill Place within 18-24 months.

He said the company would also push on for the time being with its Riverside site, which was rejected in May by US investment bank JPMorgan as the location for its new London headquarters.

The spokesman said Canary Wharf Group would bring construction up to ground level in the next 18 months and decide at that point whether to continue or temporarily top it off.

Source: The Business Times, 03 July 2007

Abu Dhabi Commercial Bank (ADCB), the United Arab Emirates’ third-biggest lender by assets, plans to set up mortgage finance and property development

Abu Dhabi Commercial Bank (ADCB), the United Arab Emirates’ third-biggest lender by assets, plans to set up mortgage finance and property development units in a bid to tap the emirate’s building boom.

The mortgage unit will be an ‘equal venture’ with UAE developers Aldar Properties, Sorouh Real Estate Co and Abu Dhabi-government investment firm Mubadala Development Company, ADCB’s chief executive officer Eirvin Knox said in an interview at the bank’s headquarters in Abu Dhabi yesterday.

ADCB set up another joint venture with Australia’s Macquarie Bank Ltd to focus on property development and management, he said.

Rising oil wealth in the UAE together with a change in laws allowing foreigners to own homes in some parts of the emirate has spurred a building boom in Abu Dhabi, the largest and richest of the seven sheikhdoms that make up the UAE and the country’s capital.

ADCB expects its assets to double in three years to about US$50 billion, buoyed by economic growth in the UAE, Mr Knox said.

Source: The Business Times, 03 July 2007

Tourism and hospitality industry veteran Jennie Chua will be the new chief executive officer of the Ascott Group from August 1.

Tourism and hospitality industry veteran Jennie Chua will be the new chief executive officer of the Ascott Group from August 1.

Ms Chua will succeed Cameron Ong, Ascott’s managing director and CEO, who has resigned to pursue his personal interests, the company said yesterday.

Ms Chua is already a non-executive director of Ascott and a member of its executive committee since January this year. She was president and CEO of Raffles Holdings from April 2003 to January 2007.

‘With Jennie’s solid track record and experience in the international hospitality industry, she will be able to lead Ascott to new heights by strengthening the management bench strength in Asia, Australia, Europe and the new markets in oil rich countries,’ said Ascott’s deputy chairman and CapitaLand CEO Liew Mun Leong.

After graduating from the school of Hotel Administration, Cornell University, Ms Chua launched her career in the tourism and hospitality industry. She has been honoured with numerous awards, both from Singapore and abroad, in her over 30 years in the industry.

While welcoming Ms Chua as CEO, Ascott chairman Lim Chin Beng also noted Mr Ong’s 12 years of contribution to the group, including playing a key role in leading Ascott’s expansion internationally.

Source: The Business Times, 03 July 2007

Official flash estimates show the rise in home prices

Official flash estimates show the rise in home prices spreading beyond the high-end to other parts of the market including private condos in the city fringe, mass market areas and even to the HDB resale market - prompting some words of caution from the Urban Redevelopment Authority (URA).

Market watchers say the trend is being driven by people who have sold their prime district homes through en bloc sales finding replacement properties further from prime locations.

The URA price index for private homes rose 7.9 per cent in the second quarter over Q1 - the biggest quarter-on-quarter gain since Q2 1999. The latest flash estimate shows a year-on-year gain of 20.6 per cent for Singapore as a whole.

The biggest price gains were not in luxury homes, as reflected in URA’s Core Central Region, covering districts 9, 10 and 11, Downtown Core (including Marina Bay), and Sentosa. While non-landed private home prices in this region increased by 7.6 per cent in Q2 over Q1, the Rest of Central Region (which covers places like Bukit Merah, Queenstown, Geylang, Toa Payoh and Katong) posted an even bigger 7.9 per cent gain over the same period.

Prices in the Outside Central Region - which covers suburban mass-market locations like Woodlands, Clementi, Jurong, Hougang, Tampines and Bedok - were 6.5 per cent higher in Q2 than in the first three months of the year.

The Housing & Development Board’s resale flat price index registered a 2.9 per cent increase in Q2 over Q1, going by the board’s latest flash estimate. This shows prices for public housing rising faster than before, as there was a quarterly gain of just 1.3 per cent in the index in Q1.

In a departure from recent tradition, the URA yesterday advised potential home buyers that they should take into account that there is ’sufficient pipeline supply of private housing, as well as the potential supply from Government Land Sales sites, when deciding to make a property purchase’.

The URA reminded people that the Government will ensure there are sufficient homes to meet demand, saying that it will continue to monitor the market closely.

DTZ Debenham Tie Leung executive director Ong Choon Fah said: ‘There has been a sense of urgency for some people to buy a home when they see the market going up. Obviously the Government is a little bit concerned, but this market is driven by fear and greed. Fear of missing the boat, and greed to make more. These are very emotional things, so people may not act rationally.’

Another property consultancy, CB Richard Ellis, noted that the URA’s overall price index for private homes has increased 13.1 per cent in the first six months of this year. It predicts a full-year gain of 20 to 25 per cent for the whole of this year.

ERA Singapore similarly forecasts an increase of 20 per cent or more for 2007. For the HDB resale flat price index, ERA predicts an increase for the whole year of about 8 to 10 per cent. PropNex also reckons the gain will be about 10 per cent.

Market watchers see yesterday’s data as evidence that the recovery in the high-end residential sector is at last filtering through to other parts of the market.

Knight Frank managing director Tan Tiong Cheng says the key driver of this trend is the growing number of owners of prime district homes who went through en bloc sales and are priced out of the most expensive districts. ‘They are instead forced to find replacement homes outside these locations, starting with city-fringe locations and even spreading to the suburbs,’ Mr Tan said.

In some cases, especially en bloc sales of privatised HUDC estates, the replacement homes may even be HDB resale flats in Queenstown, Bukit Merah and other areas, Mr Tan reckons.

ERA Singapore assistant vice-president Eugene Lim reckons that fear among home buyers that they may miss the boat and lose out on good property buys is also fuelling the current buying frenzy.

‘Everyone seems to want a piece of the action. Those who can’t afford the high prices in prime locations are moving outwards,’ Mr Lim added.

PropNex CEO Mohamed Ismail reckons the increases in the price indices for the Rest of Central Region and Outside Central Region are due to many buyers previously sitting on the fence deciding to buy out of fear that prices may escalate further.

CBRE executive director Li Hiaw Ho highlighted projects in several locations that saw new price levels being achieved in Q2, including Kallang (The Riverine By The Park, $1,400-1,500 psf), Novena (Novelis@Novena, $1,400 psf) and suburban areas (Botannia in the West Coast area, Casa Merah near Tanah Merah MRT Station, Northwood in Sembawang, and Parc Mondrian at Woodleigh Close, in the $600 to $720 psf range).

PropNex’s Mr Mohamed warned that the 7.9 per cent hike in the private home price index for Q2 is ‘bullish and if the growth continues at this pace, it is not healthy for the property market in the long run’.

Source: The Business Times, 03 July 2007

Monday, July 2, 2007

Q2 Orchard Road rents near pre-Asian financial crisis level

Q2 Orchard Road rents near pre-Asian financial crisis level
By Loh Kim Chin, Channel NewsAsia | Posted: 28 June 2007 2132 hrs

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Orchard Road, Singapore (File Picture)

SINGAPORE: Current rentals in Orchard Road appear to be fast approaching pre-Asian financial crisis level.

According to property consultant CB Richard Ellis, rents of units with the highest traffic at Orchard Road registered an average of S$34.40 per square foot per month in Q2.

This was just 70 cents below the average of S$35.10 per square foot per month in 1996.

CBRE cited the strong rebound of the Singapore economy and efforts to rejuvenate Orchard Road as reasons for the spike in rents.

It said that landlords were actively seeking out fresh foreign brands to give their shopping centres an international profile.

During the April-to-June period, more new brands from Europe, US and Australia set up shops here.

At the same time, existing brands such as Celine, Chanel and Cartier have either expanded their range of merchandise or retrofitted their boutiques.

CBRE expects prime Orchard Road rents to grow between 4 and 7 percent for the rest of the year.

This is due to the lack of new supply of shop space in Orchard Road as well as the healthy tourist numbers from Indonesia, Australia, China and India.

- CNA/so

Singapore to host inaugural International Water Week

Singapore to host inaugural International Water Week
Posted: 02 July 2007 1922 hrs

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SINGAPORE: Singapore will host an inaugural international event to showcase new water technologies and solutions.

6,000 delegates will convene at Suntec Singapore from 23-27 June 2008, for the five-day Singapore International Water Week.

A Lee Kuan Yew Water Prize, with a kitty of S$1.5 million over five years, will also be awarded at the event.

The Singapore meeting is set to complement the well-known World Water Week, held in Stockholm annually.

The lack of drinking water is fast becoming a huge problem for many countries.

Singapore has prepared for this by producing NEWater, used mainly for industrial purposes currently.

This initiative of recycling used water has gained Singapore international recognition, and organisers say the country is well-poised to host the international meeting, which is set to break new grounds.

The meeting is expected to cost between S$2 million and S$4 million.

Said Khoo Teng Chye, Executive Director, Environment & Water Industry Development Council, "We want to create an event for the water industry that really would be a global event that would attract water leaders and water experts... every year.

"... this will be differentiated and complementary to other international water events, in that we will focus on technologies... application... successful solutions, and... the Asia Pacific area in which we operate."

One of the highlights of the event is the award of the Lee Kuan Yew Water Prize - worth S$300,000, a gold medallion and a certificate.

The international water award recognises individuals and organisations for their outstanding contribution to solving the world's water problems, through implementation of policies or application of innovative technologies.

Khoo said: "More than half of the world's population will be urbanised or live in cities by the year 2008. Water is a key resource that has to be very well-managed in urban areas.

"We think that in Singapore, the way that we have solved our water problems as a city state, is something that we could share.

"That's why we've decided, for the inaugural Singapore Water Week, on the theme of 'Sustainable Water Solutions for Cities'."

A water festival at the Marina Barrage will also likely be held in conjunction with the International Water Week. - CNA/yy

URA to launch Leisure Plan to open up more areas for recreation

URA to launch Leisure Plan to open up more areas for recreation
By Wong Siew Ying, Channel NewsAsia | Posted: 29 June 2007 2312 hrs

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Related News

• New URA master plan to provide more housing options

SINGAPORE : The Master Plan 2008 is about creating new memories by making Singapore a vibrant playground in the day and night.

One way is to develop the countryside into rural leisure spots.

Getting to know nature is one of the reasons to visit the Kranji countryside, according to farm owner Ivy Singh-Lim.

A hands-on visit also provides an avenue to escape from the bustling city and deepen the bond between family members and friends.

So she is supportive of the idea floated by urban planners to cultivate the Lim Chu Kang-Kranji area as a rural leisure spot.

Farmers say that each week, thousands of people visit their farms to learn more about the plants or to enjoy the rustic appeal of the place.

They believe such farm visits have potential to blossom into a more productive venture, offering not just leisure options but employment opportunities as well.

Mrs Singh-Lim, Bollywood Veggies owner, said: "We can have trishaw rides around here, and that would give jobs to people. We could get older school teachers who have retired to offer educational programmes for kids.

"We are also trying to create a wood workshop where they can make signs, and that's another avenue of providing work for people... I think the countryside offers great opportunities."

But she hopes such ideas will not be dampened by over-regulation. At the top of her wish list is improving transportation to the farms.

Another area that is set to get a boost is the arts scene.

National Development Minister Mah Bow Tan said: "Liveability covers a whole range of things. Here I am talking specifically about spaces for arts and culture, spaces for recreation, spaces for entertainment and night entertainment.

"New parks will be built, and we will link them to existing parks through the park connector network. We hope to be able to expand the park connector network quite extensively."

Bridges can also be used to connect various attractions and turn them into a comprehensive leisure destination.

For instance, the Alexandra Link and the Henderson Crossing will be tied up with the Southern Ridges which comprise Mount Faber, Telok Blangah Hill and Kent Ridge.

The two bridges should be ready by the end of 2007 or early 2008.

This connection will make it possible for visitors to access the chain of hills for a workout or simply to enjoy the panoramic views.

The government also hopes to work with the private sector to develop the harbour front and spice up the entertainment scene.

Already in the works are plans to add night lighting around the city and the Kallang-Bugis area. - CNA /ls

Singapore in good position to be regional centre of arts

Singapore in good position to be regional centre of arts
By Satish Cheney, Channel NewsAsia | Posted: 01 July 2007 2312 hrs

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Minister for Manpower, Dr Ng Eng Hen

SINGAPORE: Singapore is well-positioned to be a centre of arts in the region due to its diverse and rich cultures, said Minister of Manpower Ng Eng Hen at the launch of UOB's 26th Painting of the Year.

Singapore's arts scene will not only serve as a foundation for its identity as a nation but also pave the way for the development of local creative industries.

An abstract painting by artist Hong Sek Chern clinched the UOB Painting of the Year title and S$20,000 in cash.

Her painting was one of the 1,100 entries submitted by some 800 participants.

The top winning works from the contest will be showcased at the Singapore Art Show 2007 in September.

- CNA/so

HDB resale, private home prices show significant growth in Q2

HDB resale, private home prices show significant growth in Q2
By Daryl Loo, Channel NewsAsia | Posted: 02 July 2007 2057 hrs

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HDB resale, private home prices show significant growth in Q2

SINGAPORE: Urban Redevelopment Authority's (URA) initial estimates have shown that prices of private properties have gone up by 7.9 percent in the second quarter, close to a ten-year high.

Resale HDB prices have also risen by 2.9 percent to a level not seen in seven years.

The 7.9 percent overall increase in private property prices in the last quarter outstrips the 4.8 percent rise in the first three months of this year.

This compared with a 9.8 percent increase recorded for the whole of last year.

In Q2, prices of non-landed private residential properties increased by 7.6 percent in the Core Central Region and by 7.9 percent in the rest of the Central Region.

More notably, prices of private properties in the Outside Central Region rose by 6.5 percent, providing further evidence that the upturn is filtering down to the mass market.

Some analysts said this is a healthy sign.

Ku Swee Yong, Director, Savills Singapore, said: "We are very happy to see that prices in the mass market, which is labelled as Outside Central Region, are growing in tandem with the prices in the Central and Core Central districts, along with a strong growth in HDB numbers.

"Together, these numbers show that the foundation for the property market in general is across-the-board and that supports the growth that is in the top end of the market as well."

The latest numbers are causing property watchers to re-look at their estimates for the full year.

Some said they are likely to revise their forecasts upwards for a jump of more than 20 percent in private home prices.

And while the 2.9 percent increase in HDB resale prices is the biggest improvement in nearly nine years, observers said the full-year rise for flats is likely to be a slower 10 percent.

Eric Cheng, Senior Division Director, PropNex, said: "I do not think HDB prices will catch up with the private market because the private pace will be much faster than HDB. HDB would be a consumer market in general and prices will gradually increase."

Analysts said the strong improvement in the second quarter was due to the secondary market, helped by a large number of buyers seeking replacement homes for their apartments that were sold en-bloc.

Mr Ku said: "There wasn't a single significant project that was a contributor to this growth. I think it has sort of spread out to the secondary markets. People started taking interest in areas that used to be undervalued. For example, there was a lot of interest in properties along Bukit Timah Road up to King Albert Park in the past few months."

Updated reports from URA and HDB will be released in about a month.

Singapore's Q2 private property prices up 7.9% from Q1: URA

Singapore's Q2 private property prices up 7.9% from Q1: URA
Posted: 02 July 2007 1248 hrs

Photos 1 of 1

File picture

SINGAPORE : Private property in Singapore posted further gains in the second quarter of this year, said the Urban Redevelopment Authority (URA) on Monday.

Based on URA's estimated price index of private residential property, prices rose from 136.5 points in the 1st Quarter 2007 to 147.3 points in the 2nd Quarter 2007.

This represented an increase of 7.9 percent, compared with the 4.8 percent rise in the previous quarter.

URA also released the flash estimates of the price changes in the three geographical regions for the second quarter.

Prices of non-landed private residential properties increased by 7.6 percent in Core Central Region, 7.9 percent in Rest of Central Region and 6.5 percent in Outside Central Region in the quarter.

The URA said the rise in private housing prices in recent quarters was in line with greater economic growth and rising confidence.

Private housing prices are now increasing at a faster pace because of good economic prospects going forward and the increasing attractiveness of Singapore as a global city. - CNA/ch

Vision & Core Values

Vision & Core Values

To be the leading international serviced residence company with global brands, and products and services that set new industry benchmarks.

Core Purpose
To contribute to the well-being and success of people who live and work away from home.

* Excellence
We strive for excellence in serving our customers. We challenge industry norms with our performance.

* Innovation
We relentlessly search for and create new ways to improve our products and services to delight our customers.

* Integrity
We are fair and honest in our dealings with colleagues, business partners and customers.

* Our Team
Our different perspectives energise our team. We achieve better results as a team than we can individually.

* Developing Our People
We create an environment that attracts and nurtures talent. Our jobs are more than just work, they are avenues for our growth.

Malaysia to be made property hub

Malaysia to be made property hub
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RM50mil grant each from Govt and private sector for promos


THE Government, through one of its public/private sector initiatives, will be rolling out plans to make Malaysia an international property destination.

Datuk Seri Effendi Norwawi, Minister in the Prime Minister's Department, told StarBiz: “The idea is to make Malaysia a destination for foreigners to buy properties. Property prices here are so much cheaper than in places such as London and Singapore. We should show that we have real value for money.''

A matching grant of RM50mil each between the Government and private sector is likely to be introduced for international promotions.

“We should go out to the world with our best projects,'' he said. “In this respect, we are careful with the kind of properties and developers we promote.

A bungalow in Mont Kiara. Property prices here are so much cheaper than in places such as London and Singapore
“We do not want cases where investors buy properties they are not satisfied with, as these will give us a bad reputation. Self-regulation is important to maintain our image,'' he stressed.

Under the plan which is expected to be implemented soon, Malaysia's premier properties will be showcased at exhibitions overseas, with targeted markets in the Middle East, South Korea and Japan.

“We've been having dialogues with Fiabci and the Real Estate Housing Developers Association (Rehda) on the ways to reform the property sector,'' he said.

The Government has taken heed to the recommendations from the private sector and liberalised many areas in the property sector, the latest being the waiver on real property gains tax. “We are now ready to take on the challenge worldwide,'' Effendi said.

The Government's international marketing plan will be coordinated with Fiabci and Rehda.

Among others, real estate agents will be the ambassadors to tell the Malaysian property story. In this respect, their skills and professionalism will be further enhanced to ensure that the message gets across effectively and foreign investors are impressed.

“Our integrated efforts will include pushing the Malaysia My Second Home programme as well as health and ecotourism. There will be no more excuses this time,'' he said.

“We talk to Rehda and have a wonderful working relationship with them. They have brought many of the issues to the National Implementation Taskforce and we have freed all the restrictions.

“We are optimistic that this plan will work because many of our properties are so undervalued,'' he said.

However, he is aware that the speculative element would be something to watch out for. “We ought to be watching this carefully and be prepared to deal with it.

“But our main priority now is to get the promotions going. There is still quite a large property overhang and we have to release it,'' he said.

The first batch of properties to be showcased will probably be those located in the Klang Valley, followed by those in the Iskandar Development Region and Penang.

Analysts upbeat on Mudajaya prospects

Analysts upbeat on Mudajaya prospects
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The involvement of Mudajaya and Zelan in power plants augurs well for their future performance

Ng Ying Loong: Mudajaya's financial performance this year is expected to be driven mainly by local projects
CONSTRUCTION outfit Mudajaya Group Bhd's share price has jumped a whopping 214% since the beginning of this year, propelled mainly by its burgeoning order book and overseas prospects.

As at June, the company had total outstanding projects valued at about RM2.6bil, which should last another three to four years.

It has submitted bids for RM1.7bil worth of projects under the Ninth Malaysia Plan and has said that it is targeting infrastructure projects in the Middle East.

The company said it had identified several potential overseas jobs involving the construction of power plants, water treatment facilities, roads and industrial complexes.

At its AGM last month, managing director Ng Ying Loong said the company expected this year's financial performance to be driven mainly by local projects while overseas projects would contribute substantially starting next year.

Currently, Mudajaya's overseas activities are concentrated in India, where it has established a joint venture with a local firm to build, operate and own a 1,400 MW power plant. The entire deal is worth some RM1.43bil.

The plant is expected to be completed earliest by 2010, after which the group will sell electricity in India.

This will provide it with a long-term income stream.

“We are upbeat on the prospects of Mudajaya and are expecting further upside from the Indian project, which will provide a much stronger upside for its 2008 financial year earnings,” a local brokerage said.

“Things would be much rosier once the plant is in operations,” it added.

Furthermore, Mudajaya also has property business, focused in Sarawak. The company started developing the Batu Kawah township near Kuching city centre 10 years ago. The project has a gross development value of RM1.2bil, with an estimated completion date in 2015.

According to reports, the project currently contributes about RM70mil in sales annually.

Mudajaya's Batu Kawah township project has a gross development value of RM1.2bil and is expected to be competed in 2015
Mudajaya recorded results that were within analysts’ expectations for its first quarter ended March 31. It posted a 19% growth in revenue to RM56.5mil from RM47.5mil in the same quarter last year. Margin increased year on year from 13.2% to 15.1%.

On the whole, the company has performed quite consistently over the years. “Historically, the numbers don’t look bad. For a company of this size (its market capitalisation as at last Friday was RM676.19mil), it is doing well,” an analyst told StarBiz.

He said Mudajaya's prospects looked “promising.” “The company's independent power producer (IPP) project in India certainly bodes well for its future,” the analyst added.

Chang Si Fock
Another company which is aiming for a slice of the IPP pie is Zelan Bhd.

“From a mere construction player, we have become a full-fledged engineering, procurement and commissioning (EPC) player,” group chief executive officer Chang Si Fock once told StarBiz.

Of late, the company has indicated that it wants to be an IPP, apart from being involved in EPC works.

“Our target is that within this year we must start having ownership in IPPs,” Chang told reporters in May.

To this end, Zelan has said that it was targeting to finalise an IPP deal in the current fiscal year ending Jan 31, 2008.

It is in talks with IPPs in India, Indonesia and the Middle East for this purpose. Zelan is looking for opportunities in these countries as it is already actively involved in building power plants there.

This will provide the company with a recurring stream of income, minimising any cyclical effects the firm may suffer from its other business segments in case of downturns.

Zelan has four divisions, namely engineering and construction, IPP and investment, manufacturing and trading, and property development.

In the company's latest annual report, it said it foresaw promising growth opportunities in the power area based on the forecast power demands in Asia.

The report noted that statistics from the International Energy Agency indicated that electricity demand from 2004 to 2030 was forecast to grow fastest in India and China while the Middle East would see above-average demand.

Additionally, it said, India, Indonesia and the Middle East would need to spend about US$26bil yearly over the next 25 years in power plant projects.

Model of the Hampshire Residences project by Zelan Corp Sdn Bhd
As such, the group has reason to be optimistic in increasing its order book.

With all this in the pipeline, the company expects recurring income from the IPP segment to contribute about 40% of its net profit in 2010 and beyond.

For its EPC projects, Zelan has an order book of about RM4.7bil and has submitted bids worth RM10bil. The management has indicated that it was confident in securing the bids, although no specific targets were given.

Meanwhile, the company also has plans to boost its property business, with plans for development in Bangkok and India as well as locally.

On Friday, Zelan's shares closed flat at RM12 after touching a high of RM12.30. Year-to-date, Zelan shares have put on more than 100%.

PanGlobal to build hotel in Kuching

PanGlobal to build hotel in Kuching
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KUALA LUMPUR: PanGlobal Bhd, an investment holding company, is planning to build a hotel cum service apartment in Kuching with a gross development value (GDV) of RM115mil.

Chief executive officer Bernard Wong Shoon Tet said the company was currently waiting for approval on the Development Order. The property will be completed in two to three years.

“The new hotel cum apartment will be built on 1.7 acres situated in a prime waterfront area,” Wong said after the company’s AGM.

In addition, the company is also planning to build a beachside resort but has yet to finalise the location, he disclosed.

Wong said the turnover from the company’s property division rose to RM21.3mil last year. Its existing properties include the Pacific Regency Hotel Apartment and the Menara PanGlobal, both in the city.

PanGlobal, which also has business in timber and coal, planned to grow them organically, particularly in Sarawak, Wong said.

“We will be looking at developing both our natural resources. We see the natural resources business as a sunrise industry. This is likely to generate extra income for the company,” he said.

As for its future prospects, Wong said the company was anticipating turnover to increase 40% in 2009 when its mine-mouth coal power station in Mukah is completed.

PanGlobal is also a leading name in the insurance business. – Bernama

Still some momentum ahead

Still some momentum ahead
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The Government may be considering measures to encourage more property ownership for the mass market after the earlier initiatives to spur activities in the medium to high-end segment.

SINCE the relaxation of residential ownership rules for foreigners and the real property gains tax (RPGT) waiver, high-end residential properties in Malaysia have attracted a fair amount of interest from abroad.

The changes initiated by the Government, which were targeted at stimulating property activities in the medium- to high-end segment, have thus far mainly benefited the high-end segment of the market.

In the last six months, we have seen greater interest from foreign buyers (as well as local buyers) looking to get into the Malaysian residential property market, which is relatively cheaper vis-à-vis global prices. The RPGT waiver was therefore timely in speeding up acquisitions in Kuala Lumpur.

With the recent spike in property prices, land prices around the KLCC vicinity are also seeing a spike
With the anticipated 4.3% appreciation of the ringgit against the US dollar to RM3.30 (from RM3.45 currently) by year end and eventually RM3.10 by end-2008, the investment proposition in Malaysian assets has an added sweetener.

Developers with ongoing developments were seen raising selling prices by 5% to 100% year-on-year from their launch prices. Just last year, eyebrows were raised when high-end properties around the Kuala Lumpur City Centre (KLCC) were going for RM1,000 per sq ft (psf). Today, the upcoming Four Seasons is said to fetch RM2,000 psf.

We expect the pricing gap between mass market and high-end residences in Malaysia to continue to widen in line with the regional phenomenon, as petrodollars and stock market wealth continue to have spill-over effects on property demand in Malaysia as prices remain cheap vis-à-vis regional peers.

With the recent spike in property prices, we are also experiencing a spike in land prices around the KLCC vicinity. We understand that a piece of land along Jalan Kia Peng, where the present Hakka Restaurant is located, was sold via tender for over RM1,300 psf in 2Q07 – a record price.

This was more than 30% above Glomac’s recent purchase of 1.3 acres of freehold commercial land at RM1,000psf (at the junction of Jalan P. Ramlee and Jalan Pinang) in 4Q06.

We believe the current high-end residential prices are sustainable and may continue to set new records as long as the political and economic climates of Malaysia and the world remain favourable, and Malaysia remains business friendly.

Unlike typical residential investments which require investment returns (in the form of rental), the high-end residential game plan differs with the surplus liquidity in the world. Buyers of these properties have varying reasons for such purchases – speculation, prestige, address, excess cash, and status, to name a few. We understand that high-end residences in Dubai are a classic example, whereby rental returns are almost non-existent, despite soaring prices of over US$1,000 psf.

More incentives to come

Following the initiatives benefiting high-end residences, we believe the Government is also looking at options to encourage more property ownership for the mass market. Among the speculated measures that the Government is considering are:

# Restructuring of EPF depositors’ acco-unts to allow for more withdrawals. We understand that there may be plans to restructure the monthly contribution to Accounts I and II from 70%:30% presently to about 50%:50%; and/or to allow simultaneous withdrawals from Account II for purchases of second houses without the need to sell the first house funded by EPF savings.

# A potential temporary waiver or reduction of stamp duty tax, as was the case in 2003, where for a period of one year starting from June 1, 2003, purchases of houses priced at RM180,000 and below from the developers were eligible for stamp duty exemptions, and the secondary market was exempted from RPGT.

# Further relaxation of property ownership. There are talks that the Government may consider extending the relaxation of rules to commercial properties, to encourage more direct investments. However, we note that foreign ownership remains a delicate issue in the country. And without a comprehensive restructuring plan to liberalise the economy in place, any long-term benefits of such a measure remain opaque.

# Fine-tuning the Malaysia My Second Home Programme. The present Malaysia My Second Home programme has had mixed results, with some suggesting that it is drawing the wrong group of people into the country. The Government is mindful of the present outcome, and we understand regulations may be fine-tuned to attract the “right” group of people to stay in Malaysia.

While this initiative is unlikely to have a significant impact on the property market in the short term, it will nonetheless draw more foreign investments into the country over the longer run and benefit retail spending, tourism and the healthcare industry in the country.

# Non-competitive REIT structure. One of the common complaints we gathered from local and foreign investors in our past roadshows, is a lack of tax incentives for real estate investment trusts (REITs) in Malaysia. Despite Malaysia’s introduction of a lower 15% withholding tax (WHT) for individuals (previously at individuals’ prevailing tax rates) and 20% WHT for institutional investors (previously at the corporate tax rate of 28%) in last year’s budget, Malaysia’s attractiveness as a REIT investment destination still lags behind its peers in the region.

Further REIT tax incentives to revive interest

The current withholding tax structure for Malaysian REITs is generally seen to be hampering REITs’ price performance, and an obstacle in attracting new equity issuances among existing players.

The existing structure is also discouraging others from joining the bandwagon, as potential players are enticed by better valuations in other regional markets.

We believe the Government is aware of the need to provide more incentives to make our REITs more competitive and on par with the regional peers.

We remain overweight on the property sector, as it is set to gain further boost ahead of the upcoming general election.

Among property sector players, we like Sunrise and YNH Property for exposure to high-end developments, Mah Sing for its unique business model, SP Setia and WCT Land for their exposure to the mass market, and Sunway City for both property development and asset reflation play.

Among REITs, we prefer exposure to commercial related REIT

Penang real estate to benefit

Penang real estate to benefit
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Penang's real estate industry will gain from the state's position as hub for the proposed northern development region


PENANG'S real estate sector is set to benefit substantially from the Government's upcoming initiative to designate it as the hub for the northern development region that also encompasses Perlis, Kedah and Perak.

The state's tourism and manufacturing sectors will benefit from the initiatives that will also see Penang taking on the role as the region's new transportation hub.

The Government is expected to unveil the new northern development region later this month.

Industry players lauded the proposed Government initiative and called for greater efforts by both the private sector and the Government to optimise the benefits and growth sustainability for the region.

Although Penang is endowed with various advantages, including an idyllic old world charm that makes it a natural tourist haven, more efforts are needed to enhance the state's potential in the real estate arena.

According to Sunway City Bhd senior managing director Datuk C.K. Wong, concerted efforts to promote Penang as a destination for property investments will raise its profile as an international real estate hub.

Given the many supporting factors such as a conducive environment for foreign purchasers and good capital appreciation of the state's residential properties, he said, Penang should take advantage of its role as the regional hub.

The presence of more Klang Valley-based developers in Penang will create greater competition among industry players, encouraging more quality and international-class developments to meet the market's changing needs.

“It is important to sustain the demand side by attracting high value add and environment-friendly industries as well as to promote the state's services sector. More jobs will eventually lead to more home purchasers,” said Wong.

Penang is already a favourite tourist destination and the top choice among participants of Malaysia My Second Home programme.

“There is a lot of potential to be tapped in the various property sectors, including more creative residential products, hotels, shopping complexes, offices and industrial facilities,” Wong said.

He said more incentives, such as those at the Iskandar Development Region (IDR), should be introduced for the northern development region.

“For a start, Penang could do with some upgrading of its existing infrastructure to enable it to catch up with the fast paced developments that are taking place.

“Improved safety and security measures for visitors and residents should also be given priority.”

SP Setia Bhd group managing director Tan Sri Liew Kee Sin concurred that the initiative would provide more employment opportunities and increase demand for houses both on the island and the mainland.

Coupled with the mega projects already announced such as the second Penang Bridge, Penang Outer Ring Road and the monorail project, strong demand from local and foreign buyers are expected.

Mah Sing Group Bhd president Datuk Leong Hoy Kum said the Government's northern development region initiative would rekindle Penang’s heyday when it enjoyed a free port status.

Similar incentives such as those enjoyed by the IDR, including exemptions from corporate tax and withholding tax would be helpful in developing the northern development region, he said.

“The property sector should see almost immediate benefits similar to what IDR has experienced, namely a resurgence of interest in industrial and commercial properties.

More iconic residential projects such as Ivory Tower condominiums will be sprouting in Penang
“This will have a positive spill-over effect on the demand for residential properties and may transform Penang into an international hotspot like Singapore,” Leong added.

E & O Property Development Bhd marketing and sales director K.C. Chong said all parties should look seriously into creating a first-class quality environment that would place Georgetown on par with some of the major cities around the world.

“Issues such as public transportation, public toilets and quality in delivery systems must all be looked into,” he added.

More well planned property projects needed

More well planned property projects needed
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PENANG, being one of the most urbanised states in the country with more than 80% of its population residing in the urban area, needs to have more well planned property projects to cater to the needs of a broad spectrum of buyers.

The premium in the prices of and strong demand for landed residential properties on Penang island are the main magnet for Klang Valley-based developers to venture there.

In order to turn in decent profit after absorbing the high land cost, the developers have to launch more high-end products.

According to Raine & Horne, Zaki and Partners senior partner Michael Geh, there is a mismatch between the types of properties planned or launched recently with what the market actually needed.

He said the current trend of launching very large condominiums of 3,000 sq ft to 5,000 sq ft did not serve the needs of many local buyers and foreign long-term stayers as they were way too large.

“The foreign investors and participants of the Malaysia My Second Home programme, who on the average stay for between three and six months to escape the winter in their country, will need small and cosy residences, especially service apartments of between 1,200 and 1,500 sq ft,” Geh said.

However, Henry Butcher (M) chief operating officer Lim Ewe Tatt disagrees with Geh's views on product mismatch.

“Developers conduct feasibility studies before launching their products in the market to ensure there is no mismatch between what is supplied and what is demanded.

Lim said the luxurious lifestyle projects launched in Penang therefore met the needs of house buyers.

“The most popular type of residential properties are terraced houses priced from RM500,000 onwards and high-rise properties priced from RM150,000,” Lim said.

Sunway City Bhd senior managing director Datuk C. K. Wong said the constraints of land availability would result in a change in designs and project concepts by housing developers.

“More Penangites are looking for properties with bigger land areas, innovative design, big built-up areas and better finishes.

“Good security and safety features as well as homes that are user-friendly for the elderly folks are also important criteria for the Penang market,” Wong said.

E & O Property Development Bhd marketing and sales director K. C. Chong said the Penang market comprised a mixed bunch of people.

There are those that prefer the more traditional forms and styles while the more travelled buyers are happy to adopt new architectural styles, in keeping with their changing lifestyles.

“We also have the various foreigners of different nationalities, which have their own preferences. Hence, it is really up to the developer, the purveyor of style, to offer the right blend of product, concept and environment to his chosen target markets,” Chong said.

SP Setia group managing director Tan Sri Liew Kee Sin said demand for landed properties had always been strong on the island due to the limited land bank available.

“Buyers are becoming increasingly discerning and sophisticated. Lifestyle concepts are very much in demand now due to a lack of such developments in the past.

According to Mah Sing Group Bhd president Datuk Leong Hoy Kum, most Penangites are prudent spenders who seek good value for their purchases.

“Generally, there is a preference for landed residences, especially medium to medium-high end products, although high-rise living is also becoming a popular option,” he said.

The Penang market would welcome well designed landed properties including bungalows and semi-detached homes in good locations.

“For the commercial sector, we believe that projects that tap on Penang’s tourism appeal would do well. These include well planned offices, retail outlet, shopping complexes and dining facilities,” Leong said.

Penang's prime residential properties

Penang's prime residential properties
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Piling works have started on the RM936mil Gurney Paragon mixed development project located at Jalan Kelawei and Gurney Drive
LUXURIOUS high-rise and landed residential properties, with a gross development value in excess of RM1.5bil, will be developed in prime locations of Georgetown and South Seberang Prai over the next five years.

These projects are from Hunza Properties Bhd, Ivory Properties Group and Asas Dunia Bhd. The three property development companies are genrally regarded as having the most anticipated projects on the island and mainland.

The RM936mil Gurney Paragon mixed development project from Hunza -located at Jalan Kelawei and Gurney Drive - is currently undergoing piling works.

“To attract local and foreign investors and second home buyers, Hunza is investing substantially to preserve and restore the St Joseph's Novitiate chapel as a living heritage (as well as a) masterpiece arts and culture centre,” Hunza executive chairman Datuk Khor Teng Tong said.

Datuk Khor Teng Tong
“Apart from being an arts and culture centre, it will also house boutique retailers and fine dining restaurants.

“To enhance its rich historical and heritage value, Hunza has set aside 60,000 sq ft of prime land as a public Festival Court, which will form the nucleus of all activities with the St Joseph's Novitiate chapel as the showpiece of the development. There will be beautifully landscaped gardens and water features with ample pedestrian walkways.”

Chok Keng Vui
At the heart of Gurney Paragon are two condominium towers facing the sea at Gurney Drive and a shopping mall.

“There are 260 luxurious condominium units, of which we have sold 10% since the soft-launch, generating about RM38mil.

Also currently under construction by Hunza is the RM220mil Infinity super condominium project, strategically located in the Tanjung Bungah area and facing the sea.

The Ivory Properties Group will develop high-rise and landed properties with a gross sales value of about RM380mil over the next 12 months
“We have sold 10% of the 260 units, which are priced from RM1.4mil upwards,” he said. The units have built-up areas between 3,800 and 4,800sq ft.

From Ivory Properties Group, some 873 high-rise and landed properties with a gross sales value of about RM380mil will be developed over the next 12 months on the island and the mainland.

Its general manager Chok Keng Vui said that of these, some 302 units were landed properties and high-rise condominium units which are part of the group's latest Island Resort project, yet to be unveiled.

“The Island Resort project is strategically located in Batu Ferringhi. It will be launched later this year during the festive season, targeted at local investors and foreign buyers,” he said.

The Asas Dunia Bhd group is moving towards developing higher-end properties
On the mainland, Asas Dunia Bhd is launching over 1,000 units of residential properties with a gross development value of about RM200mil in South Seberang Prai later this year.

Its managing director Datuk Jerry Chan said the group was now moving towards developing higher-end properties. “The projects are located in Nibong Tebal and Sungai Duri, close to the interchange of the upcoming second bridge,” he said.

Datuk Jerry Chan
In Nibong Tebal, Asas Dunia is building some 600 units of high-end houses.

In Sungai Duri, it is building 90 single-storey semi-detached houses, and 450 low-medium cost properties.

Japanese numbers to double

Japanese numbers to double
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They are attracted to the warm weather


THE number of Japanese second-home buyers in Penang is likely to double over the next two years to 1,000.

Tropical Resort Lifestyle Sdn Bhd managing director Ishihara Shotaro, 48, said in an interview that Japanese were attracted to Penang because of the warm weather, a stable and friendly government, competitive property prices, and low cost of living.

Tropical Resort Lifestyle specialises in bringing Japanese second home purchasers into the state.

“There are 1,600 Japanese in Penang at present, comprising factory supervisors and second-home buyers. About 500 are second-home buyers. This figure is likely to double over the next two years due to the mushrooming of more attractively priced luxurious projects in prime locations of the island,” he said.

Ishihara said that since 2002, he had arranged for 300 Japanese to buy second homes in Penang.

He said Batu Ferringhi, Tanjung Bungah, Tanjung Tokong, and Pulau Tikus were some of the most sought-after addresses for Japanese second home buyers.

Ishihara, whose company operates the Kristal Golf Resort in Sungai Bakap, Seberang Prai, said he planned to develop some 240 units of landed and high-rise properties around the golf resort next year to attract Japanese second-home buyers to stay on the mainland.

There are other Japanese second-home buyers who come to Penang to stay because of the unique private club membership system here and the presence of a large Japanese community.

Meanwhile, Y. Toshima, 65, said he invested in a second home here because of the unique private club membership system that existed in Penang.

Toshima, who is a member of the Penang Sports Club, bought an apartment in Tanjung Bungah for over RM400,000 a year ago.

“Many people in Penang do not realise that in other countries such as Japan, private clubs are run by large corporations. Members do not have a say in the management of the club,” he said.

Harumi Toida, 58, who is a potential second-home buyer, said she came to stay in Penang because of her friends here.

“I am now renting a house in Tanjung Tokong, and will consider buying a second home in Penang in the near future,” he said.

For Jeff and Dianna Sidebottom, second-home buyers from Britain, it was Penang's charm and serene environment that attracted them.

He said that they bought an apartment in Mount Pleasure, Batu Ferringhi, overlooking the sea three years ago for about RM260,000.

“The property is worth about RM360,000 today,” he added.

Fem Lighthart from Holland said the family invested in a second home in Tanjung Bungah because her husband operated a business in Penang.

“We bought two high-rise properties from Hunza Properties Bhd for over RM1mil some 18 months ago. The properties have appreciated by about RM80,000 since then,” she said.

Lighthart said Penang had very good international schools. “This is why we brought our daughter over to Penang to study,” she said.

According to her, Penang is a very popular second-home destination for many Europeans.

“I have many friends who have bought second homes in Penang, especially in the Batu Ferringhi and Tanjung Bungah areas,” she said.

Local ops to drive SP Setia’s growth

Local ops to drive SP Setia’s growth
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SP SETIA Bhd's local operations will continue to be the engine of growth for the group over the next few years although the group has ventured into international markets.

Divisional general manager (international business development) Teow Leong Seng said the bulk of the group's revenue would still be derived from its local operations.

“We have just started to enter the overseas market and this will take a while to be reflected in our balance sheet,” he said in a briefing in Ho Chi Minh City.

SP Setia has teamed up with government-linked conglomerate Becamex IDC Corp to develop a RM2.1bil township, EcoLakes at MyPhuoc, in Binh Duong province, 40km north of Ho Chi Minh City.

From left: Housing and Local Government Minister Datuk Seri Ong Ka Ting, Becamex IDC Corp chief executive officer Nguyen Van Hung and Tan Sri Liew Kee Sin looking at the model of EcoLakes at Myphouc in Binh Duong province in Ho Chi Minh City, Vietnam
SP Setia and Becamex IDC signed an agreement last week to set up a joint-venture company, SetiaBecamex Joint Stock Co, to undertake the residential project.

Teow said the group expected the project to start contributing to its bottom line in the next financial year.

The country's biggest property developer with a total market value of over RM6bil intends to seal more deals in Ho Chi Minh as well as make a name for itself in Hanoi, Vietnam.

“We are planning to explore another piece of land about 1,000ha within the Binh Duong province,” Teow said

He added that SP Setia was also exploring opportunities in India, China, the Middle East and Pakistan.

“We are conducting feasibility studies for our ventures overseas. We have been discussing with some potential partners, but it is still at the preliminary stage,” Teow said, adding that the group was always on the lookout for new opportunities.

He explained that SP Setia would probably form joint ventures with strong partners in countries that it intended to penetrate with the group having majority control.

Group managing director and chief executive officer Tan Sri Liew Kee Sin expects the group's overseas revenue to increase tremendously over the next few years.

Liew said the company chose Vietnam for its first overseas project because of the country's strong economic growth, sizeable population and stable socio-political climate.

EcoLakes will feature a wide range of residential properties such as link and semi-detached houses, villas, apartments and condominium units.

“EcoLakes at MyPhuoc, spread over 226ha in the heart of MyPhuoc Industrial Park, is similar to our Setia Eco Park township in Shah Alam. We won the Master Plan category of the Fiabci Prix d’Excellence Awards 2007 for Setia Eco Park two weeks ago.

“We are now bringing this award-winning eco concept to Vietnam,” Liew said, adding that the project was scheduled to be completed within eight years.

According to Teow, the project was expected to start within three to six months or early next year once it received all the necessary approvals.

EcoLakes at MyPhuoc consists of five or six phases with about 10,000 residential units and 80 acres for commercial development.

The township will be surrounded by green lungs such as linear parks, jogging tracks and bicycle paths while the centrepiece of the township would be a man-made beach.

“We are very optimistic that the homes in EcoLakes at MyPhuoc will be much sought after,” Teow said.

Property values in south Johor rising

Property values in south Johor rising


PROPERTY values in the Iskandar Development Region (IDR), south Johor is set to rise, propelled by strong Government support for the property sector and overall buoyant economy and stock market.

Most analysts are optimistic that the IDR would be a key growth driver for the Malaysian economy as a lot of government and private funds would be invested into the region over time to make it a vibrant and international economic hub.

An analyst with UOB Kay Hian said the Government planned to develop the IDR into an “emerging special economic zone” in the likes of Shenzhen, Dubai and Mumbai where the best brains around the world come to live, work and do business.”

The analyst said the IDR has the potential to attract international developers because of three main reasons – its proximity to Singapore, the entry of international theme park (ITP) operators and government policy changes to attract greater foreign direct investments.

The analyst said the Government’s initial projections show that the IDR could attract about RM370bil in investments over 20 years.

“In the nearer term, the IDR is supposed to attract RM50bil in investments within the next five years, of which RM20bil will be in committed developments. The Government plans to invest RM12.2bil, mostly in infrastructure works to spur the initial developments in the IDR under the Ninth Malaysia Plan,” he said.

With so many goodies thrown in, it's not surprising that many property developers are eager to jump on the bandwagon to kick-start property projects (commercial and residential) or new townships – case in point Nusajaya – in the IDR.

In fact most of the established property players such as UEM World Bhd, SP Setia Holdings Bhd and Gamuda Bhd have already started some property development projects in the IDR.

UEM Group Bhd managing director and chief executive officer Datuk Ahmad Pardas Senin explaining the residential development of the first phase of Horizon Hills in Nusajaya, south Johor in a scaled-down model, while Gamuda Land Sdn Bhd managing director Chow Chee Wah (far left), Gamuda Bhd group managing director Datuk Lin Yun Ling (second from left) and UEM Land Sdn Bhd managing director Wan Abdullah Wan Ibrahim (far right) look on.
Moreover, the analyst said reputable foreign multinational investors and companies like Flextronics International (Netherlands), OSI System Inc (US) and JST Connectors (Japan), have started to relocate or set up their manufacturing and logistic bases in south Johor, especially in areas with large land parcels at relatively low prices.

He said rising foreign direct investments (FDIs) was expected to lead to various spin-offs for Johor’s economy and create new demand for properties, especially high-end properties.

“The IDR's proximity to Singapore is akin to Shenzhen's situation. The latter is able to capitalise on Hong Kong's emergence as a global player,” he said, adding that the IDR could leverage on the republic's transformation into a global city.

“Singapore, next to south Johor, is fast emerging as an international financial and services hub. Moreover, its new international resort (in Marina Bay and Sentosa Island) is projected to create 100,000 new jobs and is expected to attract 17 million tourists to the island by 2010 (from nine million currently).

“The IDR, being so close is likely to experience some spillover effect in terms of visitors and workers,” said the analyst.

He added that the introduction of two Free Access Zones (FAZ) – IDR Johor Baru FAZ and Nusajaya FAZ – to allow seamless movement of people across the border with no limit on duration of stay would further encourage more people to settle there.

As such, UOB Kay Hian believes large landlords at the southern tip of the IDR will be prime beneficiaries.

It will have the biggest price upside, given the limited real estate supply, compared with the abundant supply of plantation land in mid-northern Johor.

“The super prime locations in south Johor are those within a 10km radius of the Johor causeway and Second Link.

“Those closest to the bridges leading to Singapore and sea or river-fronting properties would maximise on the potential commercial value – especially when developments of international standards are undertaken – as well as those closest to the ITP operators and FAZs in Johor Baru and Nusajaya,” said the analyst.

He cited real estate owned by UEM World Bhd (10,336acres), Mulpha International Bhd (800 acres) and Tebrau Teguh Bhd (1,012 acres) Khazanah Nasional Bhd (5,500 acres) and the Johor Royal family (1,000 acres) as potentially the most attractive pieces of land in terms of value appreciation.