Staying ahead during challenging times

THE slowdown in the property market is not news to developers and the public. But some developers have weathered the headwinds by planning carefully and implementing good strategies. For a glimpse of this, we asked the winners (Top 10) of last year’s The Edge Malaysia Top Property Developers Awards for their views at the start of the evaluation of this year’s Top 10 ranking.

The Edge Malaysia Top Property Developers Awards, a part of The Edge Malaysia Property Excellence Awards, is now in its 14th year and has become much sought after. Besides the Top 10 listing, other awards include The Edge Malaysia–PEPS Value Creation Excellence Awards, The Edge Malaysia-PAM Green Excellence Award and, most recently, The Edge Malaysia Affordable Urban Housing Excellence Award and The Edge Malaysia Notable Property Achievement Award. Exemplary leadership is also recognised through The Edge Malaysia Lifetime Property Achievement, The Edge Malaysia Outstanding Property Entrepreneur and The Edge Malaysia Outstanding Property CEO awards.

The Edge Malaysia Property Excellence Awards honours the captains of industry who propel the property market. While we contacted all 10 of last year’s winners, UOA Development Bhd was unable to participate.

Here is what the rest had to say.

Sarena Cheah (MD of Sunway Bhd’s property development division, Malaysia and Singapore)

In today’s challenging property market conditions, what opportunities are there for investors and homebuyers?

Most savvy purchasers are familiar with the golden rule of property buying — selecting the right location. In addition, we believe that infrastructure is key to ensuring the long-term success of any development.

The first phase of the MRT will be completed soon (Sungai Buloh-Semantan). It will be a fully functioning MRT line when the connection to the Kuala Lumpur city centre is completed — which will be good for properties along its alignment. The recent signing of the memorandum of understanding for the Kuala Lumpur-Singapore high-speed rail has also revived some optimism in the property market.

Commercial spaces will continue to make good investment sense as high-density living becomes the norm and people seek to gather and meet in common spaces, which begin to function as a ‘third place’ (the home and office being the first two).

As in any developed city, with new developments becoming scarce, ‘rejuvenation’ projects are also good opportunities. These are usually located in strategic areas but are priced lower than those in popular locations. This presents an opportunity for investors to ride the upside once the location is rejuvenated.

When will the property market recover from the current slowdown?

Markets are cyclical. In the past two years, the Malaysian property market has held itself quite steadily despite the ‘mini-storms’. This is also partly because the market has a self-correcting mechanism, as we are primarily a sell-then-build market. The slowdown in new property launches has balanced the market and, hopefully, with the right regulatory intervention, it will safely pass this period. The lowering of the overnight policy rate may not be substantial, but it has improved market sentiment slightly.

What strategies have you put in place to ride out the current soft market?

We are fortunate to have a diversified real estate strategy, both in geography and in businesses. Our property investment division enjoys a recurring income stream from rents and we are taking the opportunity to undertake some asset enhancement initiatives, reinvesting in our communities in the Klang Valley, Ipoh, Penang and Johor so we are prepared for the imminent upward trend.

We have also introduced more products in strategic locations priced from RM500,000, which has yielded good results as seen in the 100% take-up rate for Sunway Gandaria’s retail units in Bangi as well as 80% take-up for Sunway Mont Residences at Mont’Kiara. We are deepening our research into industrial building system technologies, smart city concepts and product innovations, and continue to build relationships with our consumers in line with our positioning as a master community developer.

Edward Chong (IJM Land Bhd MD)

In today’s challenging property market conditions, what opportunities are there for investors and homebuyers?

Homebuyers and investors have an excellent opportunity to secure a choice property. Most developers are offering good incentives and interesting promotion packages to entice sales. First-time homebuyers are also more likely to find their dream home as developers are launching more affordable units.

Homebuyers and investors should grab the opportunity to look for properties in mature areas and established townships where land is scarce or newer well-connected areas with good infrastructure and public transport such as highways, the LRT and MRT. 

We appreciate that housing is one the largest, if not the largest, commitments most Malaysians will make and, therefore, it is important to buy from established developers with a good track record that deliver quality homes on time.

When will the market recover from the current slowdown?

The market is expected to remain resilient for the rest of this year, underpinned by a growing economy and a young population driving domestic demand, with a more positive outlook for next year.

What strategies have you put in place to ride out the current soft market?

We are constantly reviewing our product offerings to ensure that new launches are in line with market demand and affordability levels, focusing largely on affordable and mid-range products. For ongoing projects, we have tailored marketing promotions and incentive packages for each property type to suit the needs of the potential buyer. Managing our balance sheet and cash flow is another key priority during this period.

Datuk Jauhari Hamidi (Sime Darby Property Bhd MD)

In today’s challenging property market conditions, what opportunities are there for investors and homebuyers?

You can never go wrong investing in property and despite the market conditions, investors and homebuyers should go ahead with their plans to acquire property as the value will eventually appreciate. Appreciation is mainly due to the township’s potential and the developer’s commitment to constantly upgrade facilities and infrastructure. Sime Darby Property is here for the long term and we continue to grow our township and developments to add value.

When will the market recover from the current slowdown?

There will always be challenges, and it is up to the developer to adopt winning strategies to counter market volatility. We applaud Bank Negara Malaysia’s recent lowering of the overnight policy rate (OPR) to 3%. It will definitely help spur the economy and deliver a positive impact on the property industry.

What strategies have you put in place to ride out the current soft market?

We focus on creating a product mix with good location and connectivity catering to the needs of consumers. We also focus on value creation and enhancement of property development projects through integrated, niche and transit-oriented developments, together with strategic partnerships.

Our strategy is to ensure that we offer the right product at the right price and at the right time. We look at innovative ways beyond the traditional channels to promote our products. This includes digital and social media, Sime Darby Property’s mobile app and many upcoming initiatives.

All initiatives will look at generating the right leads for each product category to ensure our existing and potential customers’ needs are well taken care of. It is all about doing things differently, fostering amalgamation of functions across business units to ensure operational cost savings and embracing an innovative culture.

Datuk Khor Chap Jen (S P Setia Bhd president and CEO)

In today’s challenging property market conditions, what opportunities are there for investors and homebuyers?

Investors and homebuyers can look forward to deals and easy ownership packages. In terms of what and where to buy, it depends on their needs and means. Investors and homebuyers should evaluate the risks. It would be safer to buy from reputable property developers.

When will the market recover from the current slowdown?

Globally, we are all faced with a sluggish economy and unless the global market recovers, we will continue to be affected. Bank Negara’s recent cut of the OPR resulted in a lowered interest rate for bank loans. This will help to reduce the loan burden for businesses and consumers, allowing them to revitalise cash flow activities and stimulate the market and expedite its recovery.

What strategies have you put in place to ride out the current soft market?

In soft market conditions, investors and home buyers will be more careful with the selection of property. S P Setia is focusing on developing the right product at the right price for mid-range high-rise and landed properties. We also have products for underserved markets, such as empty nesters, in both newer and older areas. Finally, we also have affordable housing. We have recently launched the 10:90 scheme to help first-time homebuyers and upgraders. This scheme is based on the build-then-sell framework — the first 10% is billed when the sale and purchase agreement is signed and the rest upon completion of the property, which is usually two years down the road. This is to help buyers to get through this period when financing is harder to come by.

Tan Sri Leong Hoy Kum (Mah Sing Group Bhd Group MD)

In today’s challenging property market conditions, what opportunities are there for investors and homebuyers?

It is important investors look out for factors such as quality, reputation and location. Good connectivity and a prime location will increase the value of the property over the years. Individuals should also select a developer with a good track record, which increases the chances the projects will be delivered on time with high quality.

Currently, the market is looking at affordable homes. We support this need as 89% of our planned residential launches are priced below RM1 million this year (68% below RM700,000 and 50% below RM500,000).

When will the market recover from the current slowdown?

The property sector is undergoing consolidation. Buyers’ sentiment was weak in the first half of 2016 but demand is still strong for mass-market properties in well-connected areas. The Malaysian Institute of Economic Research showed a rebound of consumer sentiment in the first quarter.

The cut of the OPR by Bank Negara has lifted overall buyers’ sentiment. This was reflected in the launch of Lakeville Residence on July 16 and 17, with a take-up rate of 92%.. Households are adjusting to the effects of the GST and rising prices. Continued growth in income (average 5.5% salary increase expected for 2016), government measures to increase disposable income (3% reduction in Employees Provident Fund contributions, higher BR1M cash handouts and additional tax relief for those earning RM8,000 and below) and salary increments for civil servants effective July will also help to boost sentiment. Further easing measures, if any, will also help improve buyers’ sentiment.

What strategies have you put in place to ride out the current soft market?

We invest in R&D to ensure projects meet buyers’ needs and complement their lifestyles. On the marketing front, we focus on specific and targeted campaigns catered for market demand. We also ensure to provide our customers with a memorable experience from the first point of contact. For instance, we have thematic property exhibition booths such the Mad Hatter’s Tea Party and the Gentlemen’s Club.

We offer value-added services to existing customers via M Care and M Club. They are entitled to incentives on selected projects, post-delivery services and priority invitations to property launches, events and promotions.

We will continue efforts to hit our sales target of RM2.3 billion in 2H2016, stick to our strategy with prudent and disciplined financial management, and focus on selective launches of the right products in the right locations.

Datuk Seri Robert Tan (IGB Corp Bhd MD)

In today’s challenging property market conditions, what opportunities are there both for investors and homebuyers?

Young Malaysians, whether single or married, who relocate to the Klang Valley from their urban, semi-rural or rural hometowns for career opportunities, young Malaysians joining the workforce as well as couples and those starting families will continue to fuel property purchases.

In the Klang Valley, these homebuyers are purchasing homes in older, centrally-located city areas as well as new suburbs, which are mainly found in the south.

Investors generally favour properties in the city that cost more than RM500,000. New suburbs in less central locations offering units from RM250,000 are an alternative. Such investment opportunities stretch from Rawang in the north down to Seremban, with competitively-priced landed residential homes in particularly high demand.

Prices have generally been trending with an upside bias, with the exception of price-controlled properties.

When will the property market recover from the current slowdown?

Barring unforeseen circumstances, we anticipate a gradual recovery by end-2016, stretching into 2017.

What strategies have you put in place to ride out the current soft market conditions?

We have intensified our marketing efforts to better reach out to both local and foreign prospects, and have introduced and fine-tuned personalised sales packages for such potential clients.

We have also implemented a rent-and-own scheme for unsold properties and continue to develop strategically in in-demand market segments and locations.

Datuk Izzaddin Idris (UEM Sunrise Bhd executive director)

In today’s challenging property market conditions, what opportunities are there for investors and homebuyers?

The right products in the right locations will always be a good investment. Developments located near existing or future rail line stations or transit-oriented developments are generally good investments, which will attract long-term buyer and tenant demand. Also, properties within well-planned townships in locations that are well served by a good highway and road network, provide accessibility and connectivity and come with amenities and facilities will also be a good investment, especially for homebuyers. Locations or townships that include catalytic components, such as leisure attractions, major commercial or business-oriented developments and healthcare or education hubs, will also have an advantage over others that are ‘run of the mill’.

During tough times, it is crucial that buyers are mindful of the track record, reputation and ability of the developer to deliver the product on time. It should be able to follow through with the promise of providing the facilities/amenities and after-sales services upon the completion of the properties, especially when these are strata-titled. Failure to do so and with bad management may cause the value of the properties to drop.

Given the current economic climate, it is a buyer’s market. Developers are very competitive at the moment in their product offerings and price points. As an investor or homebuyer, it is an opportune moment to look for good buys in the market now and take advantage of the attractive packages, discounts and other incentives that are being offered.

When will the market recover from the current slowdown?

The key property states (by transaction value) in Malaysia recorded a double-digit year-on-year decline in transactions in 1Q2016. The recently announced 25bps cut in OPR to 3% is unlikely to cause a significant improvement in demand unless we see another 25bps reduction. We expect a slight recovery in 2H2016, partly driven by more mass-market/affordable launches in the primary market. Transactions could pick up slightly in 2017, driven by marginal improvement in consensus GDP forecasts (4.4% in 2017 compared with 4.2% in 2016) and in the central region, underpinned by the completion of the Klang Valley MRT Line 1. In the absence of any reversal in tightening measures, we expect the market in general to recover meaningfully only in 2018.

What strategies have you put in place to ride out the current soft market?

Given our significant exposure, in terms of landbank, we are intensifying our efforts to reach out to international manufacturing companies that can create value for the overall development of Iskandar Puteri. The latest example would be the sale of 25.37 acres in SiLC in Iskandar Puteri, Johor, to South Korea-based cosmetics company, AMOREPACIFIC Corp. With the establishment of the facility, we will see the creation of jobs and thereafter demand for homes in Iskandar Puteri.

We are certainly looking forward to do more of this type of strategic land sales that will (1) help strengthen our balance sheet/cash flow position; (2) create demand for our homes by attracting migration/population to the vicinity; and (3) enable us to use the proceeds for opportunistic acquisitions in the central region that can be developed within the next one to two years.

Teh Chin Guan (IOI Properties group chief operating officer (property development))

In today’s challenging property market conditions, what opportunities are there for investors and homebuyers?

There are still quite a few good properties in prime locations and due to the difficult market conditions, various easy ownership packages are being offered that provide a good opportunity for investors and homebuyers alike to tap. Moreover, the recent downward adjustment of 20bps in the lending rate offers further opportunities for buyers to acquire at a lower cost.

When will the market recover from the current slowdown?

We are starting to see pent-up demand for some properties in choice locations and we think the market is ripe for the picking for those looking to buy for their own use and/or those wanting to benefit from the attractive sale packages.

What strategies have you put in place to ride out the current soft market?

We have a variety of properties, ranging from landed and strata to commercial properties in the affordable to luxury price range in various locations. Thus, we can concentrate on affordable houses to ride out this period, although we are ready with the right product range when the market trend reverses.

Chow Chee Wah (Gamuda Land MD)

In today’s challenging property market conditions, what opportunities are there for investors and homebuyers?

The property market is in a consolidation phase at present and there are opportunities there for them to pick up value-for-money products. Initial phases of new projects with an advantageous location and connectivity, strong master planning and delivered by reliable developers will continue to attract buyers. This is especially for developers who have historical data that show asset appreciation over time, particularly when the market is recovering.

When will the market recover from the current slowdown?

Most likely in the first half of 2018.

What strategies have you put in place to ride out the current soft market?

We are tapping locations with pent-up demand to initiate targeted launches. Our new projects are coming onstream in good locations with refreshing master planning and products that offer great value, be it for owner-occupiers or investors.

Our deferred payment scheme has attracted upgraders and first-time homebuyers. For upgraders, this programme will allow them to keep their present house and only dispose of it when we hand over their new homes. As for the latter, the programme will ease their financial commitment to owning their first home. Meanwhile, investors can lock in their property of choice at the present price before the market fully recovers.

This article first appeared in City & Country, a pullout of The Edge Malaysia Weekly, on Aug 1, 2016. Subscribe here for your personal copy.