Lafarge, Malaysia's largest cement producer by capacity confirmed raising cement prices

The usually staid cement industry got a bit hot under the collar recently when rumours surfaced of a hike in prices that will, in fact, take effect today.

The Master Builders Association Malaysia (MBAM) kicked up a fuss last week after it was notified by one its members, which happens to be a large listed developer, that one of the “major” local cement manufacturers had all but decided to raise the list price of cement in the Klang Valley.

A few days earlier, the Building Materials Distributors Association of Malaysia came out to say that the price for a 50kg bag of cement was set to climb RM1 and the price per tonne RM20, according to market talk.

This means a 6% increase from the current prices of RM16.75 per 50kg and RM320 per tonne. The last time prices were higher was in March 2011, also by 6%.

Naturally, those who would be affected were up in arms, alleging that collusion and even an artificial shortage had taken place among the six producers, namely YTL Cement Bhd, Tasek Corp Bhd, Cement Industries of Malaysia Bhd, Lafarge Malayan Cement Bhd, CMS Cement Sdn Bhd and Holcim (M) Sdn Bhd.

Then yesterday, Lafarge let the cat out of the bag when the country's largest cement producer by capacity confirmed it was raising prices.

“The decision was made unilaterally and taking into consideration our increasing costs associated with manufacture and delivery of cement, which we have endeavoured to absorb over the years,” its executive director, Chen Theng Aik, was quoted as saying by a local daily.

He also refuted claims of collusion, insisting that a shutdown of its facilities for maintenance earlier this year had led to lower production.

When contacted, MBAM president Matthew Tee said the organisation, which represents the local construction industry, had made its stand and was sticking to it.

In a statement last week, MBAM appealed to the Domestic Trade Ministry to look into the matter, saying the increase in price would “definitely” result in a spike in the price of all concrete and cement-based products, and inevitably the cost of construction.

“Contractors will be impacted as they have signed fixed-price contracts with project developers. Ultimately, the price increase will be passed on to end-purchasers and house buyers.

“We see no reason for the said increase as production costs have not gone up but in fact fuel and energy costs have come down this year. We would like to draw the attention of the Malaysia Competition Commission to investigate whether the major cement manufacturer is making use of its dominant position to lead in the said price increase and thus control the market price.”

Tee also told StarBiz by phone that the association did not oppose a price rise per se, but rather the lack of “due and proper notice.”

“As long as there is proper notice, and based on fair market conditions, we are OK with higher prices,” he said, noting that the two sides had in the past engaged each other on this very issue.

He also questioned the view that Lafarge's decision was motivated by supply and demand, stressing that price hikes should not be done erratically. “What if it goes up again in September, or later?”

Another industry player pointed out that once Lafarge began charging its new rates, the rest were sure to follow suit, if past experience was anything to go by.

So far, only Sarawak-based CMS Cement has said publicly it will keep prices as they are. The other firms did not immediately respond to queries from StarBiz.

Meanwhile, the Cement and Concrete Association of Malaysia (CNAC) has steered clear of the debacle, saying it has no role whatsoever in the setting of prices by its members.

“I have made it quite clear. Pricing is not a matter for CNAC to collate as that would be against competition laws. Each company has the right to raise prices on its own volition,” executive director Grace Okuda explained.

On the repercussions of this for property developers, Real Estate and Housing Developers Association president Datuk Seri Michael Yam said any increase in building material costs would, due to the compounding effect, lead to more expensive homes and offices.

“We are concerned because there is only so much the customer can bear,” he said, but added he was cognisant cement companies were entitled to a return on their business.

Be that as it may, analysts are of the opinion that the price rise was driven by market forces as massive infrastructure projects, including the Klang Valley My Rapid Transit and extension of the Light Rail Transit, get under way, giving a fillip to demand.

One industry watcher rubbished claims that more costly cement would cause a plunge in consumption or some such adverse reaction.

“The market will adjust itself. Supply and demand will take precedence at the end of the day,” he said.

Source: www.thestar.com.my

Property prices in Penang is expected to rise given the rise in raw material prices and scarcity of land- Raine & Horne Malaysia director Michael Geh

The scarcity of land on Penang island and its lure as a tourist destination and a second home for foreign retirees have caused residential property prices to soar by more than 25% over the past five years.

According to real estate valuers, the prices are among the highest in Malaysia, which is why the Consumers Association of Penang claimed that only the rich could live on the island a world heritage city.

A survey by The Star revealed that condominium units in Batu Ferringhi, Tanjung Bungah and Gurney Drive which front the sea are being sold at astronomical prices, in some cases beginning with RM2mil for a 1,000 sq ft unit.

Even pre-war houses in the inner city for example, in Campbell Street have been snapped up mostly by non-Penangites, who have turned them into boutique hotels or simply kept them because of their architectural beauty.

The prices of the houses have rocketed from about RM500,000 in 2007 to approximately RM800,000 today an increase of about 30%.

Raine & Horne Malaysia director Michael Geh said the increase was among the steepest in the Pulau Tikus, Gurney Drive, Tanjung Tokong, and Tanjung Bungah residential neighbourhoods, which experienced a rise of over 25% in prices of condominium units.

Other areas where prices of condominium units and terrace and semi-detached houses have shot up by at least 25% are Bayan Baru, Sungai Ara, Minden Heights and Batu Maung.

The medium-range housing schemes in George Town neighbourhoods of Perak Road, MacCallum Street, Burmah Road, Jelutong Road and Sungai Pinang have not been spared.

“These have seen over a 25% increase in prices over the past five years,” Geh said.

An apartment located in such a neighbourhood cost RM180,000 in 2007 but is now RM250,000,Geh said the rise in property prices had driven many people to buy homes in Seberang Prai, where property prices are a third of those on the island.

“But we are seeing property prices on the mainland rising as well,” he added.

An apartment in Butterworth town is now selling for RM250,000, compared to RM180,000 five years ago, while a terrace house now costs RM500,000, compared to RM300,000 in 2007.

Given the rise of raw materials prices and the scarcity of land, property prices in Penang were expected to continue rising, Geh added.

Meanwhile, Penang Barisan Nasional chairman Teng Chang Yeow said there were only one or two major hillslope projects during the previous administration. Now, there were hillslope projects all over the island.

He said the present guidelines on hillslope development were adequate, but the state government should be more stringent in enforcing them.

Source: www.starproperty.my

Property developers buying up land amid slowing real estate market in Malaysia

Research analysts and property consultants have mixed views about developers that have been buying sizeable parcels of land recently, as the real estate market has slowed down and prices are relatively reasonable.

“It is a good time to acquire land when the market is slow. Some property developers may just be able to get a bargain price for their purchases,” said property consultancy CB Richard Ellis (M) Sdn Bhd executive director Paul Khong.

Khong told StarBiz via e-mail that real estate sellers would also be more realistic concerning prices, as there were not too many buyers around.

He pointed out that the property sector was moving slowly back to a “buyer's market” and the principle of “cash is king” would rule again.

In recent months, property developers such as Mah Sing Group Bhd, SP Setia Bhd, WCT Bhd and Hua Yang Bhd have been actively expanding their land bank particularly in the Klang Valley.

Last week, Mah Sing announced that it was paying RM333.26mil or RM18.55 per sq ft for 412 acres targeted for a mixed township near Bangi, Selangor.

SP Setia recently acquired 21.3 acres freehold land in Penang for RM185.6mil, and said this was for a mixed residential development project with a gross development value (GDV) of RM1.1bil.

Meanwhile, WCT recently acquired two parcels of 468 acres and 57 acres in the Klang Valley.

WCT executive director Choe Kai Keong had told StarBiz that the land costing RM450mil has a potential GDV of RM5.2bil.

The 468 acres in Rawang, Selangor would be developed into an integrated township with an estimated GDV of RM1.2bil, while the 57-acre in Overseas Union Garden in Kuala Lumpur is planned for a mixed development worth RM4bil.

Hua Yang also has been acquiring small parcels of land in the Klang Valley since last year.

Hua Yang, which is known for developing residential properties in the affordable segment, recently agreed to pay RM15.2mil for 21 acres of freehold land in Ipoh, Perak.

“Prices and sales of properties have obviously slowed down in 2012 as the number of buyers has been halved, with stricter bank lending guidelines. This is rather sensitive in the mid-high and high-end segments (such as above the RM3mil category) of the residential market,” said Khong.

Khong said property developers were now moving quickly to look at larger land banks to develop new projects, and were looking at cheaper locations where there was still demand from the mass market in the mid and lower-mid sections.

“Landed properties especially in the RM2mil and below categories should still do relatively well, as investors will still continue their quest but at a slightly lower segments.”

He also noted that the recent land sales were centred in secondary locations outside the city centre, but were in reasonably “good locations” and were in respect of big parcels where the developers could develop the “evergreen” landed segments again.

Khong pointed out that regardless of market conditions, property developers needed to take a long term view about their land bank.

“They have to continue to acquire land and develop, to sustain their operations and cover overhead costs.”

However, one property analyst contacted by StarBiz said there were concerns that developers might be too aggressive in expanding their land bank.

“In good times, when the property market is hot, developers can increase their gearing without much worry as they can launch and sell properties quickly. Now, the market has cooled and they should be careful about increasing their gearing too much,” he said.

Maybank Investment Bank (IB) Research said in a recent report that it took a neutral view of SP Setia's recent land buy in Penang.

“Despite its strategic location, the RM200 per sq ft land cost (in Penang) appeared to be on the high side. It is 33% to 60% higher than the RM125 to RM150 per sq ft asking or transacted prices in the area.”

However, Maybank IB noted that SP Setia's net gearing was still very healthy, as this was expected to increase to 0.14 times post-acquisition of the Penang land (from 0.08 times as at January 2012).

Meanwhile, Kenanga Research said it took a neutral view of Mah Sing's recent land buy near Bangi as the deal is expected to result in the company's net gearing reaching 0.6 times (from the 0.3 times in the fourth quarter of 2011), based on an assumed 70:30 debt-equity financing.

“This has exceeded our comfort level of 0.5 times net gearing,” said the research unit.

However, Kenanga Research said Mah Sing's expected net gearing of 0.6 times is manageable amd should fall below 0.5 times over the next two quarters, on the back of continuous billings.

Source: www.thestar.com.my

MRT Update: Four additional packages to construct MRT line at Sg Buloh, Kota Damansara, Petaling Jaya, SerembanPortal, Bandar Tun Hussein Onn and Taman Mesra at Cheras areas have been awarded

Mass Rapid Transit Corporation (MRT Corp) has awarded four additional packages worth RM3.22 billion for the construction of the 51km Sungai Buloh–Kajang (SBK) MY Rapid Transit (MRT) Line.

This was following the conclusion of the One Stop Procurement Committee (OSPC) meeting chaired by Prime Minister Datuk Seri Najib Tun Razak in Putrajaya today.

"The packages are for Viaduct 1, Viaduct 4, Viaduct 7 and Depot 1," MRT Corp said in a statement.

The viaduct packages include construction and completion of viaduct guideways and related works, while the depot package is for the construction of the Sungai Buloh Depot and related buildings.

Package V1, which is a Bumiputera-exclusive package, covers work between the Sungai Buloh and Kota Damansara stations of the SBK alignment, and this tender was won by Syarikat Muhibbah Perniagaan & Pembinaan Sdn Bhd.

Package V4, for works between Section 17 in Petaling Jaya and the Semantan Portal was awarded to Sunway Construction Sdn Bhd.

The Semantan Portal is where the alignment will continue underground.

Meanwhile, Package V7 for works between Bandar Tun Hussein Onn and Taman Mesra, both in Cheras, was won by MTD Construction Sdn Bhd.

The final package awarded at the OSPC Package DPT1 is for works related to the Sungai Buloh Depot. The open category tender, was won by a Bumiputera company, Trans Resources Corporation Sdn Bhd.

MRT Corp Chief Executive Officer Datuk Azhar Abdul Hamid said he was pleased that further progress had been made with the awarding of the tender packages, noting that this was the third tender award by the OSPC.

"After the award of the Viaduct 5 and Viaduct 6 packages in January to IJM Construction Sdn Bhd and Ahmad Zaki Sdn Bhd, respectively, and the award of the underground package in March to MMC-Gamuda JV, these awards show further progress for the SBK line.

"I congratulate the winning bidders, and take this opportunity to remind them the importance of this project not just to Kuala Lumpur as a city, but to Malaysia in general," he said.

Azhar added that as with the previous contract awards, the best evaluated tenders were selected after a stringent, proper and fair evaluation by the OSPC.

"The evaluation looks at various factors, including technical capability, financial strength and of course price.

"The key is finding a fit that will ensure the project gets the best technical input from a capable contractor, while maintaining costs within our expectation for the packages," he said.

In terms of economic benefit, apart from job creation, Azhar said that the construction sector specifically woukd be a major beneficiary as there would be positive spin offs.

MRT Corp is expected to award more tenders over the next month.

MRT project is part of the government’s Greater Kuala Lumpur/Klang Valley’s National Key Economic Area (NKEA), under the Economic Transformation Programme (ETP).

The SBK Line runs from the north-west town of Sungai Buloh to the south-east city town of Kajang.

Upon completion, it will contain 31 stations and serve 1.2 million people along the route.

It will also have strategic integration with Kuala Lumpur’s existing rail transport network, namely the LRT, Monorail and KTM Komuter, as well as intra and inter-city bus routes.

The end result will be better connectivity for Kuala Lumpur and its surrounding cities, while reducing the number of cars that enter the capital. - Bernama

Source: www.btimes.com.my

Property Market Update: Rents are forecast to slide with slower economic growth and an anticipated oversupply in the coming months- DFZ Research

Cautious sentiments arising from an anticipated economic slowdown have led to a generally subdued property market which is likely to face a tough year ahead, DTZ Research said.

In a statement yesterday, the property services company said investment activities in the country experienced a slow start to the year, with volume in the first quarter of 2012 (Q1) dropping to RM427.5 million, lower than the quarterly volumes registered in 2011.

"However, the decline does not reflect waning investors' interest for good assets as dismal market conditions in Europe diverted attention to Malaysia and the region, leading to an increase in enquiries. New real estate investment trust (REIT) listings in the pipeline are also expected to give investment activity a boost in the later part of the year," said DTZ Research.

"Funding for good projects and borrowers are still available as liquidity remains ample. Investment activities are expected to pick up in the later part of the year, subject to availability of assets in the market, as more foreign funds have new mandates for the country," it added.

It pointed to IGB Bhd's purchase of a 50% stake in the holding company of Renaissance Hotel as the largest transaction recorded in Q1.

Meanwhile, the stricter guidelines on personal loans have led local property developers to focus on smaller and more affordable units, said DTZ executive director and head of residential marketing, Eddy Wong.

"The imposition of tighter lending guidelines requiring housing loans to be approved based on the net household income instead of gross income should, to some extent, cool an overheated market that has run up substantially in terms of pricing in the last two years, as well as focus developments toward the more affordable housing segment," he added.

The residential market was relatively quiet in Q1 with no new completion recorded and no launches seen due to various public holidays.

The average capital value of high-end condominiums in Kuala Lumpur increased marginally by 0.5% quarter-on-quarter to RM634 per sq ft, while the average monthly rental value rose 3.1% quarter-on-quarter to RM3.62 per sq ft.

DTZ Research also foresees that the office market will see more competitive pressure on rents with pending completions as well as planned projects such as the Kuala Lumpur International Financial District.

"Rents are forecast to slide with slower economic growth and an anticipated oversupply in the coming months, as the pressure to find tenants gathers intensity," it said.

While no new offices were completed in Q1 with the total supply of office space in Kuala Lumpur remaining at 64.6 million sq ft, the city will see a growth in stock of 19% in the next three years; this includes an estimated 4.8 million sq ft of new office space for 2012.

On the Multimedia Development Corp's move to allow MSC-status companies to be located within areas designated as "cybercities" without necessarily being in a specific MSC-designated building, DTZ executive director of consulting and research, Brian Koh, said: "Such a move gives prospective tenants more flexibility and choice on one hand, while helping landlords with such locations to derive cost savings on capital expenditure on the other."

On the retail sector, DTZ Research said it is anticipated to grow slower at 6% this year, down from 6.5% in 2011 due to more cautious consumer spending, job uncertainties and an anticipated tightening of credit card spending.

"Though retail centres in Kuala Lumpur registered a slight decline in occupancy rates, new upcoming major retail centres nonetheless continued to attract retailers who are selective and would still lease space in centres expected to see high footfall.

"The retail sector is likely to continue with moderate growth supported by relatively cautious consumer spending and tourist arrivals, and the recent upward revision of salaries for civil servants. Notwithstanding these, with more retail space entering the market and uncertainty in the global economy, the challenge to keep occupancy rates up remains a major concern," it said.

Source: www.thesundaily.my

Every reason to feel upbeat about the property market

REPORTS released in the last two to three weeks on the state of the property sector in Malaysia and other countries in this region should offer some comfort to both builders and investors.

The Malaysian Property Market Report 2011 that is issued by the Valuation and Property Services Department of the Finance Ministry has painted a fairly positive picture.

According to the report, the Malaysian property market saw its highest growth in the last five years. For instance, the number of transactions in 2011 was up 14% and the value of transactions in the same year rose 28% compared with the previous year.

Perhaps it is for this reason that sentiment remain upbeat not only among property investors in Malaysia but in other countries in this region as well, such as Indonesia, Singapore and Hong Kong.

Also released just recently is the Asia Property Market Sentiment Report 2012 by iProperty.com, a network of property websites covering Malaysia, Indonesia, Singapore and Hong Kong.

According to this report, 59.5% of those surveyed think that the Malaysian property market is still doing well, and 62.3% of them have expressed a desire to acquire new property within the next six to 12 months. That, certainly, is a show of confidence in the property market in Malaysia, and sweet music to developers' ears.

More numbers: of those surveyed, 28% have said that they were looking to buy for investment.

But then again, some may ask, is it all that great? Are those numbers for real? Even if they are, are we drawing the right conclusions, the perennial pessimist will ask.

Given the scenario, we have reason to feel positive about the Malaysian property market.

Not reported here or anywhere, but widely acknowledge and perhaps even fairly extensively practised is the purchasing of properties for the future generations.

Parents monitor the prices of houses for the benefit of their children. Many who can afford it are already buying new homes for their children, out of fear that prices could rise to a level beyond their children's means if they wait for the children to grow up, find a job and start looking for a home on their own.

This practice now begs the question: if the children of this generation can't afford to buy their own homes, how then are their own children going to fare? But that is another issue.

Looking at it from an investor's point of view, there is still a lot of upside in the property market, particularly in Malaysia.

The property market in Malaysia is still quite under-priced when compared with those in Indonesia, Hong Kong or our nearest neighbour Singapore.

There are many family ties between Malaysia and Singapore and our cousins across the Causeway have more than occasionally envied us our property prices.

The fact that Singaporeans make up a large proportion of foreign property purchasers in Malaysia, particularly in Johor, is a case in point.

Property developers are also increasingly eyeing markets outside Malaysia with many carrying out promotional efforts to attract buyers from China, Indonesia and of course Singapore.

So long as property remains cheaper in Malaysia than in those countries, we will continue to be an attractive investment destination.

Even moves by the authorities to keep prices in check, such as one proposal to raise the floor price of property foreigners are allowed to buy, may not have the desired effect of preventing prices from rising.

A recent report says that the government may decide to put in place new requirements for foreigners planning to invest in the property market in Malaysia by restricting them to properties valued at RM1mil and above. Currently, they are allowed to purchase any property valued at RM500,000 and above.

This is not likely to have much impact as most property purchases by foreigners are in the RM1mil and above category anyway.

In a buoyant market, this requirement may even encourage developers to raise prices to a level above RM1mil just to widen their target market to include foreigners. That would be one more way to keep prices going up.

On the whole, the economy is performing fairly well. Unemployment rate is about 3% while the inflation rate was at 2.2% in February. The Bursa Malaysia index hit a new high this month.

Foreign direct investment has also risen by 12.3% to RM32.9bil in 2011 compared with the previous year.

These are reasons to feel upbeat. If one needs an indicator on how good sentiments are, just count the number of new property launches since the beginning of this year.

The three hotspots of Klang Valley, Penang and Johor Baru continue to command top prices as demand continues to focus on these three areas.

Overall growth for the residential sector, according to the Malaysian Property Market Report, was 19%, with Selangor recording the highest for home transactions at 28%.

Yes, there is reason to be optimistic. The challenge now is to ensure that we continue to enjoy sustained growth, but prices remain affordable for the vast majority of Malaysians.

Most of all, we do not want the bubble to burst.

Source: www.thestar.com.my