Housing Industry Final

8/8/2019 Housing Industry Final

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HOUSING INDUSTRY:OPPORTUNITIES AND CHALLENGES12th International Surveyors Congress

18 June 2010

Dato Michael Yam

Deputy President, REHDA1


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Overview

About REHDA Malaysia

Property Sector: A Significant Contributor

Current Scenario

Challenges

Opportunities

Moving Forward: Our Recommendations

2


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REHDA is the representative body of property

developers in the private sector.

REHDA was founded in 1970 as the Housing Developers Association

(HDA), and was renamed in 2000 as the Real Estate and Housing

Developers Association to reflect its members diverse portfolio.

There are about 1,000 members, who are active developers (80% of total

active developers)

Protects the commercial interests of members and promotes sectoralgrowth by engaging the Government

Provides leadership to property developers in building quality housing and

real estate for the nation

About REHDA Malaysia

3


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REHDA

Headquarters Remodelled, RebuiltTo be completed in end-2011

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Property Sector, Significant Contributor:

2005 2006 2007 2008 2009

GDP (RM Mil) 449,250 475,192 505,353 528,804 528,860

Value of Transaction (RM Mil) 28,407 28,697 36,490 41,307 41,841

Property Transactions / GDP 6.32% 6.04% 7.22% 7.81% 7.91%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2005 2006 2007 2008 2009

GDP

Sources: Key Economic Indicators, Economic Planning Unit;Property Market Report 2009 ,NAPIC

5


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As at Q4 2009,

Total of4,322,921 housing units

Low-Cost House

571,858

Low-Cost Flats

445,684

3,305,079 Low-Mediumto High Cost

Developers:

- Sole builder of affordable houses

- Build in cooperation with Federalor State Housing

- Subsidised the construction and

delivery of affordable housing

6


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Property Sector, Significant Contributor:

Banking

Source: Annual Report 2009, Bank Negara

164,112.1

209,700.9260,994.7

352,602.8

601,546.4

783,400.8

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09

RM (Mil)

Total Loan for Residential Property Purchase Total Loans to Property Sector Total Loan for All Sectors

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Property Sector, Significant ContributorLinkages to 140 economic activities, including:

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CURRENT SCENARIO9


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61,165 units

46,363 units

61,577 units

RM 11,430 mill

RM 8,483.24 mill

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09

Value (RM Mil)Volume (units)

Volume of Transaction

Value of Transaction (RM Mil)

Property Market RobustProperty Market Performance,

Volume and Value (20072009)

The property market in Q4 2009 has been robust, recovering to above

2007 levels

Sources: Property Market Reports,2007-2009, NAPIC

Values transacted climbed steeper than units transaction, hinting

towards either a hike in house prices or higher purchasing power

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46% 47% 42% 40% 42% 42%43% 44% 44% 44% 41% 39%

39% 37%

40% 42% 40% 41% 39%39%

38% 39% 40%39%

11% 11% 13% 13% 13% 12% 12% 12% 13% 12% 14%15%

3% 3% 4% 4% 4% 3% 3% 4% 3% 3% 4% 5%

1% 1% 1% 2% 2% 2% 2% 2% 1% 1% 2% 2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09

LOW COST (25,000 - 100,000) MEDIUM COST

(100,001 - 250,000)

MEDIUM COST (250,001 - 500,000)

HIGH COST (500,001 - 1,000,000) ABOVE HIGH COST (1,000,000)

Low Cost Down, Medium to High Cost UpProperty Market Performance,by Pricing Segment (20072009)

11

S C


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Upward Price Trends Business as UsualAverage House Price Trends, National(2007-2009)

154,017

151,646

154,205

159,450158,474

162,799

160,147

165,696165,033

146,446

149,419

152,527 152,633

157,460

148,039

156,165 160,247

135,000

140,000

145,000

150,000

155,000

160,000

165,000

170,000

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09

Terraced House High Rise

Sources: House Price Index Reports,2007-2009, NAPIC

12

S H P i I d 2007 2009 NAPIC


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Key Local House Prices Quite StableAverage House Price Trends,KL, Selangor, Johor, Penang (20072009)

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09

Average Price (RM)

Kuala Lumpur Terraced House Kuala Lumpur High Rise

Selangor Terraced House Selangor High Rise

Johor Terraced House Johor High Rise

Penang Terraced House Penang High Rise

Kuala Lumpur (Terrace)

Selangor (Terrace)

Penang (Terrace)

Johor (Terrace)

Kuala Lumpur (High-Rise)

Penang (High-Rise)Selangor (High-Rise)

Johor (High-Rise)

Source: House Price Index,2007-2009, NAPIC

13

S J b t t K ll S i Gl d Gl b l


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Affordability Gap is Comparably LowEstimated affordability for Senior Bank Managers

(2009 2010)

5

23

21

4

13

28 27

14

0

5

10

15

20

25

30Points (x times)

Note: This index is measured as the number of times the average annual salary of a bankmanager for a typical 120sm deluxe apartment in the capital city

Sources: Jobstreet, Kelly Services, Glassdoors; GlobalProperty Guide

14

S P t M k t St k R t 2007 2009 NAPIC


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Future SupplyDwindlingNew Planned Supply (20072009)

36,459

32,815

43,680

25,868

29,150 30,452

20,24718,426

17,272

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09

Units

New Planned Supply

Units where building plan approval have been obtained

within the review period.

Sources: Property Market Stock Reports,2007-2009, NAPIC

15

Sources: Property Market Stock Reports 2007 2009 NAPIC


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Future SupplyDwindlingHousing Starts (20072009)

27,979

36,770

34,310

29,127

26,910

20,571

24,059

23,160

17,181

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09

Units

Housing StartsBuildings where these works have commenced: Foundation

and footing works of low-rise buildings or works below groundlevel including piling and foundation of high rise buildings havestarted and site clearing, leveling and laying of infrastructureto the whole site is ongoing

Sources: Property Market Stock Reports,2007-2009, NAPIC

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Projections

RAM Holdings EconomicResearch

Inflation:

2010: 2.5%

2011 : 2.7%

BLR:

end 2010 : +2.75%-3.00%

2011 : +3.25%-3.50%

OPR:expected increase: +50-75 pts

Little Risk of a broad-basedproperty bubble

Ample supply and cautiousdemand

Any increase in cost-pushprice may be capped by excessproduction capacity, cheaperimports

Construction costs remainhigh

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Summary

Property Transactions Positive

The market is moving towards a higher price

bracket House prices stable or show marginal

increase

However, future supply is dwindling, due todelayed launches impacted by the GlobalBanking Crisis.

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Regulations andPolicies

Raw Land andMaterial Costs

Market-RelatedFactors

Challenges

HumanResources

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Regulatory and Policy Challenges

Approval Process

Time consuming land conversion and development process.

Uncertainties in revised delivery process

Inconsistent Policies

Different States, different Bumi quota and discounts

Unclear Bumiputera quota release mechanism

Low-cost housing imposition (30%), and higher contributions

unrelated to demand or cost benefit

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Obstacles to Innovation and Trends

Plot ratio vs Density

Current regulations do not make smaller units (e.g. 600 sq ft)

viable in urban areas

Others

Weak transportation linkages

Various blanket requirements (e.g. related to carparks; open

spaces; green zone perimeters; etc)

Regulatory and Policy Challenges

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Market Challenges

Foreign Ownership Restriction

Property purchases by foreigners restricted to RM500,000 across the

board

Demand Side

Mismatch of pricing and product that the market demands

Increased demands of quality, innovation and warranties / form of

guarantee from homebuyers

Affordability Gap

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Raw Land and Material Costs

Rising Costs of Development

Scarcity of land and building materials

Short supply of professional experts within the country

Many greenfield sites have no access, and is too

expensive to service due to total lack of infrastructure and services

Protectionism and non-competitive markets

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Source: IMD World Competitiveness Report 2009, as presented in the 1Malaysia Conference, 2010, ACCCIM


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Human Resources: A Nationwide Crisis

41 4130

21

0

5

10

1520

25

30

35

40

45

Ireland Singapore Korea Malaysia

%

% Total Labour Force

Labour force with

tertiary education

9,610

8,818

6,827

3,915

3,723

3,350

- 5,000 10,000 15,000

UK

Australia

Singapore

China

Thailand

Malaysia

USD / permonth

Engineer Monthly Salary

35

2623

20

12 12

0.3

0

5

10

15

20

25

30

35

40

Can Ire UK Aus Mex Por Msia

%

% High SkilledForeign Talent inMalaysia

High-Skilled Foreign Talent (%)

Source: IMD World Competitiveness Report 2009, as presented in the 1Malaysia Conference, 2010, ACCCIM

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Human Resources Challenges

There is a shortage of professionalsfor the built environment

Education

Fewer people taking physical sciences as an education

subject or careerBrain Drain

Local experts or professionals are leaving the country forbetter options elsewhere

Training and Talent Retention

Inadequate training, apprenticeship and mentoringschemes and financial reward for young talent.

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Opportunities

26

Sources: Population, Households and Living Quarters, Department of


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Housing Demand Projections2010 - 2015

YearHouseholdFormation

Living QuartersFormation

ESTIMATED VALUE(RM 000,000)

2010 141,579 165,231 30,497

2011 144,709 168,957 31,184

2012 147,909 172,767 31,888

2013 151,179 176,662 32,607

2014 154,522 180,646 33,343

2015 157,938 184,720 34,094

Assumptions /

Workings

Applies a 2.22%growth rate from

2009 figures


2009 figures

Living Quarters x CurrentAverage Malaysian House

Price ofRM 184,574

Statistics; Malaysian House Price Index (NAPIC)

Note: Projected demand reflects fundamental demand, and is not inclusive ofinvestment / speculative demand, urban migration and inward migration.

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Housing Demand Projections2010 - 2015 5-year average of Units Completed

(2006-2009)

153,983

-

20,000

40,00060,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

Year 2005 Year 2006 Year 2007 Year 2008 Year 2009

Units

Units

28

Sources: Population, Households and Living Quarters, Department of


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Housing Demand Projections2010 - 2015

YearHouseholdFormation

Living QuartersFormation

DEMAND VS SUPPLY

2010 141,579 165,231 -12,404

2011 144,709 168,957 -9,274

2012 147,909 172,767 -6,074

2013 151,179 176,662 -2,804

2014 154,522 180,646 539

2015 157,938 184,720 3,955

Assumptions /

Workings


2009 figures


2009 figures

Household formation against 5-Year Average Housing

Completions (153,983)

Statistics; Malaysian House Price Index (NAPIC)

Note: Projected demand reflects fundamental demand, and is not inclusive ofinvestment / speculative demand, urban migration and inward migration.

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Attractive to Investors

Global Property Guide lists Malaysia as the top Asian country to invest,

with the following reasons from the

Property Recommendations mid-2010:

Good rental yields in Kuala Lumpur, at around 8.8%

Prices around US1,424 per sq. mt.

Low round-trip buy-sell costs at around 5.5.%

Capital gains low, at 5.2%

Sound banking system

Healthy international reserves

Low budget deficits and debt

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Accomodative Financial Sector

Banking sector remains liquid

Credit profile for construction players are

improving as non-performing loans are

substantially lower than previous years since

2006

Housing non-performing loans have been

declining since 2007

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Plans for Urban Redevelopment

Higher intensification of Government policy provides

opportunity for regeneration of Brownfield sites

Self-contained and economically sustainabledevelopment policies platform for township development

Embrace green technology and carbon footprint reducing

development

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Improvement of Government Policies

Clear and easy land and property ownership

Registered title and strata

Local Plans to be gazetted

Transport linkages and networks (MRT)

Efforts to improve ease of doing business in Malaysia to

welcome foreign investors

New foreign worker policy (80:20)

Foreigners can own and borrow freehold and lease

(RM500,000) 33


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Good News10thMalaysia Plan

RM230 billion development expenditure

GNI per capita to increase to RM38,850 +64.8%

RM2.7 billion for roads and rail

37% of local workforce to be skilled by 2015 (Current:

23%)

Lowering the entry barrier for foreign skilled workers

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Good News10thMalaysia Plan

78,000 public housing units to be built by Federal

Government

RM500 million for Tabung Perumahan Malaysia, formajor repairs and maintenance work for private and

public low-cost housing units

En bloc sale to be allowed

Greater KL as a National Key Economic Area

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Moving Forward:Our

Recommendations

REHDA

PropertyIndustry

Policies

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Government PoliciesConducive for Local and Foreign Involvement

Low-cost development to revert back toGovernment

Clear Bumiputera quota guidelines

Uplifting of protectionism and cross-subsidiesborne by developers

Restriction for foreign ownership of property tobe readjusted

Consistency of policies

Adjustments to regulations to reflect currentbuilding practices

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REHDAHigher Standards and Self Regulation

More comprehensive disclosure to buyers on property, including onneighbourhood details for, e.g. 100 m radius

Show rooms must be reflective of the true property, e.g. 1 fullyfurnished showroom and 1 basic showroom for every model unit

Specifications must be detailed out

A Code of Best Practice (Clients Charter)

Drawing up higher standards for the industry supported by theGovernment

Moving towards responsible and quality building throughtransparency, accountability, and excellence.

Better corporate governance with independent directors,adjudicators, compliance panels

Adoption of QLASSIC or CONQUAS quality standards for projects 38


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Property IndustryHigher Standards

More comprehensive disclosure to buyers onproperty, including on neighbourhood detailsfor, e.g. 100 m radius

Show rooms must be reflective of the trueproperty, e.g. 1 fully furnished showroom and 1basic showroom for every model unit

Specifications must be detailed out

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