Malaysia braces for changes Post Budget 2014.

MRT in Greater Kuala Lumpur and potential controversy in Johor are the hot topics in Malaysia’s property market

The property market in Malaysia is undergoing massive changes with new hotspots mapped out by experts in Kuala Lumpur, Selangor and Penang, a controversial Bill in Johor that has got both former Prime Minister Tun Dr Mahathir Mohamad and current Prime Minister Datuk Seri Mohd Najib Tun Abdul Razak up in arms and the possibility of more land reclamation expected in the island of Penang.
Indeed, the Malaysian property market appears to be entering a new era of excitement mixed with uncertainty post-Budget 2014.
If pre-Budget 2014 saw foreign investors feeling wary and on the edge of their seats, then post-Budget 2014 could quite well be described as “chartering new territories” for both the rakyat (citizens) and politicians.

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“Budget 2014 does not affect fundamentals of a location, in terms of hotspots. As for Greater KL, since prices have adjusted for the Blue MRT Line (Line 1), investors may need to do some research to speculate on the Putrajaya (Line 2) and Circle Line stations (Line 3),” said Ishmael Ho, Director at Ho Chin Soon Research.
In agreement, Faizul Rizwan, best-selling property author of “WTF? 23 properties by 30”, said investors need to study the supply and demand situation in Kuala Lumpur and Selangor.

“Investors need to focus on units that are limited in supply and those that are smaller in sizes as they are easier to sell in the subsale or resale market,” he said at the recently concluded Havoc Real Estate Convention 2014 at Craft Complex in Jalan Conlay, Kuala Lumpur.
While traditional prime areas like KLCC and Mont Kiara will be of interest to foreign investors, Rizwan and Ho said Greater Kuala Lumpur is something locals should keep a close watch on.
According to them, townships in Greater Kuala Lumpur and Selangor that are near the upcoming MRT stations are expected to be the next goldmine.

Expect sweeping changes in Johor

The biggest news by far for this year belongs to the state of Johor where the Sultan of Johor, Sultan Ibrahim Sultan Iskandar is mulling to introduce sweeping changes that could have a significant impact on Iskandar Malaysia.
Firstly, the ruler has expressed support for proposals to increase the minimum purchase price on landed homes for foreigners to RM2 million.
The Sultan has said the current RM1 million is unsuitable for Johor due to its close proximity to Singapore.
The move comes at an especially crucial time in the history of Johor as this special economic zone is Malaysia’s most successful economic corridor under its Economic Transformation Programme (ETP).
Property prices have for the first time appreciated – something not seen before in Johor’s real estate sector.
Nusajaya’s prices now average around RM900 psf in Medini while Johor Bahru’s is around RM1,000 psf.
Figures from Iskandar Regional Development Authority (IRDA) also showed that as of January 2014 Iskandar Malaysia had attracted RM133.07 billion worth of investments.

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While the proposed ruling will protect Johoreans from soaring property prices, analysts predict Iskandar Malaysia will be adversely affected.
“This measure will surely dampen the property market in Iskandar Malaysia as it depends on the support of foreigners,” stated Ho.
According to IRDA, Singapore is the top foreign investor at RM9.183 billion followed by Spain and Japan at RM4.181 billion and RM3.743 billion respectively.
If approved, this new policy will mirror closely policies in the opposition state of Penang.
Secondly, and perhaps the most controversial plan by far, the Johor Housing and Real Property Enactment Board Bill was passed recently in Nusajaya with amendments to limit the Sultan’s power.
Initially, the Bill was to empower the Sultan with executive functions that critics say will go against the principles of Malaysia’s constitutional monarchy and override policies on a national level.
Former Malaysian Prime Minister Tun Dr Mahathir Mohamad has said the Bill appears to overcome national policies as it will give the Sultan of Johor executive powers.
Current Prime Minister Datuk Seri Mohd Najib Tun Abdul Razak has also expressed his concerns by calling on the Chief Minister of Johor Khaled Nordin to ensure that the Bill would be in line with the principles of the Federal Constitution.
With mounting pressure from Putrajaya, the Bill was subsequently amended and will now require the Sultan of Johor to act on the advice of the Chief Minister.

The Bill will also see the formation of the Johor Housing and Real Property Board that will be tasked with policymaking, implementation, coordination and planning of housing and real estate development in the state.

Branded residences setting new psf pricing in KLCC

In the prime area of KLCC, branded luxury residences are making in roads and setting a new benchmark in psf pricing.
“For investors wanting to invest in the luxury market, my advice is to focus on units that are small in size as they are limited in supply and easier to sell in the resale market. I would also urge investors to choose those that are near to LRT/Monorail stations with top-notch facilities,” Rizwan said.
Notable projects like The Four Seasons Place KL and Banyan Tree Signatures Pavilion are being launched at RM2,950 psf and RM2,500 psf respectively.
Others like W Residences and Harrod’s Hotel and Residences have achieved RM3,000 psf in pricing – setting a record for the high-end market.

New prime areas coming up in suburbs

With the planned MRT extension spanning from Sungei Buloh all the way to Kajang, even the suburbs in Greater Kuala Lumpur are commanding hefty price tags that one would usually associate with Damansara Heights and Bangsar.
Sharing his research at the convention, Rizwan said Southern and Northern Klang are the next hotspots.
For example, Ambang Botanic and Setia Eco Park are commanding prices of RM3.5 million and RM5 million respectively
The areas will be served by the upcoming Bandar Utama and Klang MRT stations and are easily accessible via the Shapadu and NKVE Highways.
In addition, Rizwan said the many amenities there like Bukit Rajah Shopping Centre, Billion, Centro, Shaw Centre Point and Setia City Mall @ Setia Alam have made these suburbs highly sought after.
“Shopping centres increase the desirability of an area and will cause property prices to appreciate,” he said.

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Rizwan also shared another upcoming hotspot in Denai Alam, Selangor, where a massive project is currently being undertaken by Sime Darby.
Measuring 19,000 acres and part of the Selangor Vision City master plan, the township will be served by the upcoming MRT 1 Line with stations that will include Taman Industri and Sungai Buloh.
Amenities in the area include Space U8 – Malaysia’s first eco-mall, 1 Utama and The Curve.
There are also plenty of golf courses in the area such as Sri Selangor Golf Club and Saujana Golf and Country Club, which means properties there command top dollar.
For instance, Rizwan’s research shows that Verdana has an asking price of RM1.4 million while Sri Pilmor @ Ara Damansara is RM3.7 million.
Meanwhile, Ho’s research showed that semi-detached homes in Selangor enjoyed the most capital appreciation compared to other types of residential properties.
Citing data from the National Property and Information Centre (NAPIC), the report revealed that between 2000 to 2013, the house price index for such homes rose almost 100 points to reach 202 points in 2013.
Ho also shared his opinions about the MRT Circle and Putrajaya Lines at the same convention.
“Our advice has always been for investors to follow the infrastructure like MRT stations and go with branded developers. However, “following” branded developers is not limited in the sense of solely purchasing their product. It simply means that a branded developer could transform a particular area. Therefore, it can be helpful to understand where a branded developer heads to in terms of their land acquisition exercise,” said the younger Ho.

Kuala Lumpur welcomes a dedicated entertainment enclave

Another interesting development in Kuala Lumpur is its own dedicated entertainment enclave much like Lan Kwai Fong in Hong Kong and Clarke Quay in Singapore.
Located just next to Tun Razak Exchange (TRX), the project – TREC – is Malaysia’s first purpose-built urban lifestyle, entertainment destination and KL’s largest F&B enclave located along the bustling Jalan Tun Razak.
With a development cost of RM323.6 million and built on a seven acre site, TREC will feature 77 outlets with a total of 256,000 sq ft of lettable space offering lifestyle and F&B choices, with lease-only units ranging from 350 sq ft to 5,000 sq ft.
“TREC wants to be pioneers of a one-stop integrated entertainment and lifestyle zone that has made the likes of Hong Kong’s Lan Kwai Fong, or Shanghai’s Xintiandi must-visit locations in their countries. In doing so, it would cement KL (and Malaysia’s reputation) as a thriving destination for lifestyle/entertainment seekers,” said Cher Ng, its founder who is best known as the man behind Zouk KL.
TREC is a joint-venture between Ng and Dato’ Douglas Cheng Heng Lee of Berjaya Assets.
“TREC concept is in an outdoor environment and its architecture and landscape are specially designed and built for F&B purposes. The feeling and vibe in both are very different. Another point to note is that TREC has five distinctive zones offering a variety and assortment of styles and ambiance according to our five different ‘experience zones’,” Ng noted.
With phase one to be completed in early 2015 and the grand opening slated for end–2015, TREC will have Zouk KL as its anchor tenant.
The current Zouk KL lease in Jalan Ampang will expire by end 2014 and will require a new site.
“The new Zouk @ TREC is a fantastic location and will benefit from a great frontage view of the golf course and it is also directly opposite the future Tun Razak Exchange (TRX),” said Ng.
According to Ng, TREC’s current take-up rate is around 60 percent.
“We expect to hit 85 percent by the fourth quarter this year,” said Ng who is currently in the midst of negotiations with a number of local, regional and international brands – some of which come from as far as the UK.

Penang

According to Ho Chin Soon, terraced homes in Penang enjoyed the most capital appreciation, increasing 187 points to reach 287 points in 2013 since NAPIC began tracking the price index in 2000.
Ho Chin Soon’s map for Penang also showed considerable land reclamation in Sri Tanjung Pinang that could block the sea views along Gurney Drive.
Eastern & Oriental Berhad is the developer for Sri Tanjung Pinang and plans for the reclamation are currently under discussion with the state government.
Market watchers, however, opined that a new hotspot is Seberang Perai where property developers have been acquiring land parcels.
“As for Penang, investors should pay attention to the second bridge,” said the younger Ho.
The opening of the second bridge has seen Mah Sing Group acquiring land parcels in Jawi with a new integrated development called Southbay East to be introduced soon.