1. FACILITAT ING & PROMO T I N G I N VE ST M E N T F O R M A L AY S I A N R E A L E S TAT E | www.malaysiapropertyinc.com
THE RETAIL MARKET
IN MALAYSIA
Renewed International Interest in Malaysian
Retail Centres Augurs Well For This Sector
May 2011 issue 12
by Afiq Syarifuddin
COVER STORY
The resurgence of international interest The Retail Market In Malaysia
in Malaysian malls can be attributed
to growing foreign tourist receipts SPOTLIGHT
amounted to RM56.5 billion, of which Mapping Malaysian Real Estate
shopping accounted for almost 30% in
2010. POLICY
Getting Past Irregular Regulations
Currently, there are 300 retail centres
in Malaysia offering a total of 114 CEO’S SPACE
million sq ft of space and enjoying a Removing the Blights On Our
healthy average occupancy of 80.2%. Landscape
Of these, more than 40% consisting of
IN A NUTSHELL
50.6 million sq ft of available space are
Residential Sector Continues Strong
located in the Greater Kuala Lumpur
Growth Trend
(GKL) area. Most of these are located
Empire Shopping Gallery, Subang Jaya within the city centre, where they enjoy GRAPHICALLY SPEAKING
an average occupancy rate of 84.2%. Average Price of Property in
Selected States, 1Q2006-1Q2011
MGPA Asia Developments, a private Over the next two years, another 3.2
equity real estate investment advisory million sq ft of retail space is expected to
company, purchased an integrated come onboard in GKL alone. While many tor of RCMC Sdn Bhd, mentioned that
development comprising a hotel, office are predicting an oversupply situation one of the reasons for the interest in
tower and retail mall in Kuala Lumpur’s for the retail sector with this influx of suburban malls in Malaysia is because
city centre in 2007. new space, optimists point out that the the urban sprawl has generated
government’s Economic Transformation residential and commercial precincts
A year later, German fund manager SEB Programme (ETP) is expected to spur that are under-served by the retail
Asset Management AG entered into a the economy. This will in turn, have a sector. Some developers that have
joint-venture with Malaysian company positive impact on all sectors, including capitalised on the demand for a retail
Puncakdana Group to develop the retail. component to serve a rapidly growing
suburban Citta Mall in Ara Damansara catchment population have enjoyed
in Petaling Jaya, a city that is a key Richard Chan, advisor of the Malaysian huge success with their malls.
constituent of GKL. Association for Shopping and Highrise
Complex Management (PPK) and direc- (continued next page)
Pramerica Real Estate Investors (Asia)
Pte Ltd also decided on the strategy
of building a new suburban mall with
the construction of SS Two Mall, also in
Petaling Jaya.
Last year, Li Ka Shing’s Cheung Kong
(Holdings) Ltd purchased Aeon
Bandaraya Melaka from a Malaysian
company, IJM Land at USD 122
million. The conglomerate through
its Singapore-based ARA Asset
Management Ltd, which manages Asia
Dragon Fund II with a fund size USD
1 billion, has also recently launched 1
Mont’Kiara Mall (1MK) worth RM333
million. SStwo Mall, Petaling Jaya

2. COVER STORY 2
(from previous page) Figure 2: Selected Institutional Fund Stakeholders in Malaysian
Retail Development
One of the stars in the rapidly growing
list of suburban malls is The Curve
located on the fringe of Petaling Jaya. Institutional Total Fund Size Launch Projects / Acquisitions
The mall attracts a steady stream of Funds (US$m) Date
customers from the surrounding areas
of Taman Tun Dr Ismail, Sri Damansara,
Kota Damansara, Kepong, Tropicana TMW Asia Property Fund 113.3 2005 Seremban Parade, Ipoh Parade
and other parts of PJ and KL that are & Klang Parade
further afield.
SEB Asian Property 93.3 2008 Citta Mall, Ara Damansara
Other suburban malls that have also SICAV-FIS Fund
been enjoying a good measure of success
are Subang Parade, Empire Shopping ARA Asia Dragon Fund 122.0 2010 Aeon Bandaraya Melaka, Melaka
Gallery and Sunway Pyramid, catering
to the core catchments of Subang Jaya Asian Retail Mall Fund II 58.0 2010 SSTwo Mall, Petaling Jaya
and Bandar Sunway. 100.0 2010 KOMTAR 1st Avenue, Penang
Amcorp Mall, situated beside the
Federal Highway, an arterial road that Source: MPI Research
links Kuala Lumpur, Petaling Jaya, Shah compared with city centre malls in GKL to rent out more than 75 % of space
Alam and Klang, is another suburban also provide a more affordable entry upon opening, with a minimum rent-
mall that experienced a renaissance of level into the market. free period offered, there is a better
sorts after the completion of the Light chance of sustainability for the mall.
Rail Transit station within walking However, Chan said investors will have A prompt return to optimum rental
distance of it. to use the following as yardsticks to rates thereafter is imperative to ensure
evaluate the profitability of any mall, profitability.
Chan added that the success of these suburban or otherwise: occupancy
malls can be largely attributed to a rate, optimum income at market rates, Chan also mentioned that ageing,
viable retail formula comprising good ageing, consumer traffic and lean which relates to the arrears in rent
management, location, accessibility operational costs. owing to mall owners, is one of the
(they are serviced by a network of key factors for a good shopping mall.
highways), tenant mix and a critical Chan pointed out that high occupancy Ideally, there should not be a lapse of
mass of customers with spending power. in a mall does not necessarily ensure more than a couple of months in rental
profitability unless all tenants are paid by tenants to the mall owners as
The success of these malls points to the paying rent at optimum rates. Some this will impact the overall income, and
fact that suburban malls are a viable malls offer long rent-free periods to hence, the profitability. Tenancies that
investment option for corporations ensure take-up of space, which in the lag three to five months behind are a
looking to capitalise on Malaysia’s retail long-term leads to a dip in revenue sign that businesses are suffering and
sector. Their lower acquisition costs collection. If the management is able could give an indication of the overall
performance of the mall.
Figure 1: Overview of Selected Malls in Greater Kuala Lumpur
The mall’s operational costs should
Property Value* Net Lettable Estimated Local Average also not exceed 30% of the optimum
(US$m) Area (NLA) Catchment Rent rent that can be collected at 100%
(sq.ft) Population (US$/sq.ft) occupancy, he added.
City Centre Chan advocates that the consistency of
the clientele’s visits and their spending
KLCC 1,100.00 1,007,868 1,600,000 3.84 - 23.32 habits within the mall should be
Mid Valley Megamall 640.00 1,700,000 5,200,000 3.16 - 13.67 researched as these visitors’s spending
Pavillion 1,000.00 1,370,000 1,600,000 2.01 - 30.66 habits tend to reflect the tenant mix
most suitable for the mall.
Suburban
In summary, Malaysians’ voracious
The Curve 434.20 660,000 450,000 1.79 - 2.93 appetite for new retail, F&B and
Subang Parade 347.00 499,581 500,000 0.60 - 18.87 entertainment experiences is expected
SS2 Mall 180.00 470,000 430,000 - to contribute to the steady growth of
Bangsar Shopping Centre 270.20 223,000 45,000 - the retail sector in 2011. For investors,
it should not be a question of whether
Source: MPI Research to invest or not, just which location to
* Property value as reported in their latest Annual Report invest in.

3. COVER STORY 3
A TALE OF TWO CENTRES
across from the Curve. The theme park
is linked via a pedestrian bridge at the
First Floor to The Curve.
When the 400-room Royale Bintang
Damansara Hotel is completed by the
end of 2011, it will house an indoor Ice-
Skating Rink. The hotel will also be able
to accommodate the high demand for
tourist hotel rooms that the present
hotel is unable to meet. This new
hospitality element will also be a plus
point in giving The Curve the edge over
competition that is expected to come
from new shopping centres that are
expected to open in the vicinity in the
near future.
The Boustead Group as a whole has
The Curve, Mutiara Damansara
always taken a long term view as
opposed to short term gains in all its
The Curve With a net lettable area of 680,000 investments. The strategy for the
sq ft, the Curve is sizeable enough Curve and e@Curve are no different.
The Curve’s architecture which to house more than 10 mini-anchors The returns realised are in the form of
incorporates both an indoor mall and (over 10,000 sq ft each in size) and rental revenue and fair value gains from
an al fresco food street has earned it the another 250 leading fashion and food appreciation in the value of the Curve
label of the first “Pedestrianised Mall” retailers. Together with e@Curve, the and e@Curve annually. Dato’ Ghazali
in the country. entertainment themed shopping mall mentioned that the Group does not
next door which has a lettable size of rule out any acquisitions or disposals
Boustead group property division 220,000 sq ft, the combined strength of if there are opportunities available at
director Dato’ Ghazali Mohd Ali 900,000 sq ft makes this a formidable the right price and terms acceptable to
said with most successful retail shopping destination indeed. the Boustead Group as there have been
projects, location is crucial in order to many interested suitors over the years.
attract shoppers with high spending The Curve management strive to engage
propensity. Boustead is the developer with retailers on a regular basis to ensure
of The Curve, a retail mall located only the best retailers are retained in
within 10 minutes of precincts that the Curve and e@Curve to ensure that
hold some of the country’s highest the mall retains its pole position as a
household incomes. The approach to vibrant and attractive lifestyle shopping
Mutiara Damansara, where the Curve and dining destination.
is located, is via five access points that
lead off major highways such as the LDP, The traffic congestion created by
Sprint Highway and North Klang Valley vehicles going into the mall during
Expressway. the weekends is a happy problem for
shopping mall owners as it means that
Another attraction of The Curve is its shopper volume is high. Retailers will
physical linkage to other niche retail also be happy as it means more business
centres. Presently, there are two on- for them! While this is still an issue The
grade crossings to the IKEA Home Curve has to contend with, Ghazali says
Furnishing Store and IPC (formerly Ikano the Mass Rail Transit service which
Power Centre), an underground link to is expected to be operational in five
IKEA, an overhead pedestrian bridge years’ time, is expected to alleviate the
to IPC and two overhead pedestrian problem.
“The most successful property
bridges to e@Curve. projects, location is crucial in
Another factor expected to enhance order to attract the shoppers
The Curve is also connected to Tesco The Curve’s attractiveness as an with high spending propensity”
on-grade and to Curve NX via another entertainment and shopping
overhead pedestrian bridge. Connection destination is the forthcoming opening Dato’ Ghazali Mohd Ali
to the 28-storey Surian Tower office of the award-winning Indoor Childrens’ Director, Property Division,
block is via e@Curve. These connections Role Playing Theme Park, “KidZania” in Boustead Group
are critical in driving traffic to the Curve. November 2011 in the Curve NX. located

4. COVER STORY 4
Suria KLCC, Kuala Lumpur City Centre
Suria KLCC He added that understanding its 4% to5% due to on-going renovation
customers well made it possible for the work. Construction of an additional
Suria KLCC is ranked number four in centre to have the highest productivity 130,000 sq ft of retail space is expected
terms of productivity in South East per square foot in the country, to enhance the mall’s appeal, especially
Asia, says Suria KLCC Sdn Bhd chief generating sales of around RM2 billion when it is going to house the first
executive officer Andrew Brien. What last year. Although competition has Armani Cafe, larger space for Cartier and
many are not aware of, however, is that comes from the many neighbourhood a larger departmental store. Suria KLCC
the company does not only manage malls mushrooming in the suburbs of is committed to bring in 25 new retailers
the high-performance Suria KLCC but Kuala Lumpur, they still don’t have what into the mall.
also Alamanda Putrajaya, the flagship Suria KLCC has. Due to this, almost two
neighbourhood mall of Putrajaya, and dozen Number One stores are located in
Mesra Mall, which is located in Kemasik, Suria KLCC.
Terengganu.
“We don’t have to be the biggest kid in
Last year Suria KLCC , Alamanda town to be the best kid in town,” says
Putrajaya and Mesra Mall generated Brien. To date, Suria KLCC has brought in
10.2%, 17.6% and 17.5% in specialty 40 new brands into Kuala Lumpur.
sales growth respectively. Investors In terms of retail mix, Brien mentioned
usually look at specialty sales growth that Suria KLCC is continuously
to gauge the success of a mall. looking to plug the gaps that will
ensure customer satisfaction and that
The key to the making of a good shopping it usually takes three to five years
mall starts with understanding the planning for tenants to come in.
customers, Brien says. He mentions
that the company put a lot more into He said that as a strategy to drive “Investors usually look at
research compared with other shopping traffic to the upper floors, Suria KLCC specialty sales growth to
malls to understand its customer base. positioned their F&B section and gauge how successful a mall”
Extensive research shows that Suria renowned bookstore Kinokuniya on the
KLCC’s customer base is predominantly uppermost floor. Andrew Brien
female and that 80% of consumer Chief Executive Officer,
traffic is local, while the remainder are Brien admitted that this year, Suria Suria KLCC
foreigners. KLCC will only see moderate growth of

5. SPOTLIGHT 5
MAPPING and south of Bukit Bintang, mainly the
Kuala Lumpur International Financial
into the market and it will correct by
itself. I think the authorities should
MALAYSIAN District (KLIFD), Warisan Merdeka and
the RMAF Airbase Project in Sungai Besi;
develop a mechanism to continuously
monitor and try to curb this situation as
REAL ESTATE • Three major MRT Stations are located
in the southern Golden Triangle. They
are BB-Pudu, Pavilion and the KLIFD
empty buildings will portray a negative
image to the investor.
by S.Sulocana site; and MPI: To what extent do you think the
• I foresee more parts of the Bukit Economic Transformation Programme
Bintang area being converted for (ETP) will influence the Property
development. Market?
HCS: The Greater Kuala Lumpur
Another upcoming area would be development is one of the most
Cyberjaya. More and more developers important initiatives to drive the
a scurrying to secure landbanks as economy because wealth is generated
Cyberjaya is slowly turning into a self- in concentrated urban cities. Kuala
sustaining suburban township similar Lumpur contributes eight times the
to DesaPark City. GDP of any other geographic cluster in
Malaysia.
People are now more interested in
Ho Chin Soon is the pioneer in producing buying homes in suburban areas closer The most exciting project in the Greater
real estate-based maps in Malaysia. to their workplace and away from KL development is the high speed rail to
He started producing maps 21 years the hustle and bustle of the city. An Singapore and the MRT System. These
ago and now a Ho Chin Soon map is a attractive feature of Cyberjaya is that two projects will spur development
must have for Malaysian companies, travel time to Kuala Lumpur is only 20 of the surrounding areas and increase
investors and home buyers. minutes through the Maju Expressway. commercial and residential activities.
Ho has produced maps of Kuala Lumpur, The authorities have changed the The designation of specific areas to
Johor, Penang and Singapore and has plot ratio and allowed high density specific activities, for example, Financial
written four books: Location, Timing & d e v e l o p m e n t , a t t ra c t i n g m o r e Hub (Kuala Lumpur International
Branding, Iskandar Malaysia, Penang developers to build in this area. SP Setia, Financial District), Shopping Area (Jalan
Island and Greater KL: The Rise of Bukit Mah Sing and Glomac are some of the Ampang to Jalan Bukit Bintang) and
Bintang. MPI caught up with him to gain 12 or so developers that have started Central Business District (KL Sentral)
some insight into the current and future residential and commercial projects are important to create focus and
trends of the real estate market. there. rejuvenate these areas.
MPI: What are the growth segments MPI: What is your take on the concerns MPI: How does Malaysia fare compared
(Residential/ Commercial) for 2011? of rising residential property prices in to Singapore and other regional markets
HCS: The residential sector will be quite the Klang Valley? in terms property market outlook?
hot in 2011. Within the residential HCS: This is a global phenomenon and HCS: Malaysia is a safe haven with stable
segment, landed property prices we are not the only country facing this. returns! Other markets in the region are
are expected to rise and high-end The prices of properties will continue to highly volatile and exposed to the global
condominium price growth will flatten rise and are unlikely to decline. economic situation.
out, with prices ranging from RM500 per
sq ft and above. Having said that, affordable homes are MPI: What are the characteristics that
still available at KL Fringes away from should be incorporated to make the
This year will see an oversupply scenario the city. Major parts of the Rubber Malaysian Property Market attractive
happening in the office space segment Research Institute Sungai Buloh to foreign investors?
but the situation will eventually development are designated for the There should be an end to flip -flop
corrects by itself. The retail segment has development of medium-cost houses policies. For instance, the Real
a fashion element attached to it. The catering to rising demand for affordable Property Gains Tax was removed in
attraction for one shopping centre over homes and to somewhat stabilise 2007 and then re-introduced in 2009.
the next will depend on the trends and property prices. The Government should guarantee
brands it carries. that there will be no changes in such
The government’s efforts to improve policies for say, 10 years, so that foreign
MPI: What are the upcoming hotpots the transportation system in Greater KL investors will be comfortable and
in Greater Kuala Lumpur? will encourage more people to live away confident about investing in Malaysia.
HCS: The action is in the southern part of from the city as they will be able to travel All states should have consistent rules
the Golden Triangle. In my latest book, within minutes to their workplace. and regulations. Currently, different
Greater KL: The Rise of Bukit Bintang, I states have different regulations and
have elaborated on the reasons for my MPI: How do you think industry this is creating unnecessary confusion
assumption. The Bukit Bintang area will players could curb the looming office amongst foreigners and also locals.
rise because: oversupply situation?
• Major projects are located in the HCS: Industry players are already
south portion of the Golden Triangle cautious about releasing more space

6. POLICY 6
GETTING PAST Prior to that, in the period between
January 2004 and January 2008, the
The state of Johor, while adhering to the
EPU guidline, has, for historical reasons,
IRREGULAR MFIV was RM250,000, a comfortable
figure for many foreign investors.
chosen to levy a sum of RM10,000 on all
foreign home buyers.
REGULATIONS The increase came as a jolt to many
prospective foreign investors looking
to buy real estate in Malaysia.
Some other states are giving approvals
for foreign purchase under RM500,000
Foreign purchasers should not be on a case-to-case basis, which works in
deterred by fluctuating rules from The really keen ones still forged ahead, favour of foreign investors, but also
owning property in Malaysia however, willing to pay upwards of contributes to confusing them as to
RM500,000 to own a property here, only what the actual regulations are.
by Michael A. David to come up against different policies
on the MFIV set in place by the various It appears from these cases that it is the
Imagine, if you will, a young man setting State governments in the country. State governments that are calling the
out to woo the woman of his dreams. He shots when it comes to land ownership
promises her a happy and prosperous To date, 11 of the 14 Malaysian states by foreigners. Although the Federal
life and dedicates himself to taking have observed the EPU regulation Government sets the policies on foreign
care of her for the rest of her life if she by setting a MFIV of RM500,000. The property investment, particularly with
will marry him. Convinced by his sweet latest to do so was Selangor, which regard to minimum purchase price for
words and description of what could be, ammended the MFIV from RM 250,000 foreigners, the State governments have
she accepts his proposal, expecting his to RM500,000 on 1 April 2011. the authority to overrule these policies
family to welcome her with open arms. and put their own in place.
Sarawak, however has chosen to stick
Alas, before she can set foot in his home, with its MFIV of RM300,000, which was Having said that, these differing
she is faced with pre-conditions put the value it put in place even when the regulations need not be a deterrent
forward by his mother. She finds ways EPU, which comes under the purview of to foreigners looking to invest here
to conform, thinking she will be given the Federal Government, had pegged it as they can turn to Malaysia Property
the green light to move in. But then at RM250,000. Despite the EPU decision Incorporated to clarify the rules and
her young man’s father comes up with to increase it to RM500,000, Sarawak regulations for purchase. MPI, which
different conditions that put a spanner continues to maintain the MFIV at plays the role of matchmaker between
in her plans. Fed up, she tells him to RM300,000. property purchasers and vendors, is
get his house in order and sort out his also a one-stop information centre
parents’ contradictory dictates if she is The state of Pahang, while largely for foreign investors needing more
ever to wed him and move into his home. adhering to the MFIV of RM500,000 in information on the Malaysian real
most areas, has opted to increase the estate scenario.
If you haven’t quite got the point to amount for purchase of property in
this story yet, it is a metaphor for three prime districts, namely Cameron It is hoped that consistency in foreign
Malaysia’s efforts to woo foreigners into Highlands, Bentong and Kuantan, to property purchase guidelines is reached
purchasing property here. The parents RM750,000. As most of the properties in at some point, but until then, investors
in this story are a representation of the these areas are pegged below this value, should look beyond to the advantages
Economic Planning Unit (the mother) it in effect, makes them inaccessible to of owning property in Malaysia.
and the State government (the father). foreign property purchasers.
The lack of a common guideline between
the two parties on property purchase by Figure 3: Minimum Foreign Investment Values (MFIV) For Each State
foreigners is causing no small measure
of confusion in the minds of genuine State MFIV (RM) Levy (RM)
investors who sincerely want to make
Malaysia their home. Kuala Lumpur, Labuan, Malacca,
Negeri Sembilan, Terengganu, 500,000 Not applicable
Previously, foreigners intending to Perlis, Kedah, Penang, Perak,
buy property in Malaysia needed the and Selangor
approval of the Foreign Investment
Committee (FIC). This prerequisite was Johor 500,000 10,000
removed in January 2008 to facilitate
foreign investment in Malaysian real Pahang 500,000 Not applicable
esate. This has to some extent made (Cameron Highlands, Bentong, Kuantan) 750,000 Not applicable
it easier for foreigners to purchase
property here. Sarawak 300,000 Not applicable
However, the increase in the minimum Kelantan Not allowed to purchase
foreign investment value (MFIV) by
100% to RM500,000 by the Economic Sabah Not applicable
Planning Unit (EPU), also in January
2008, succeeded in countering the
benefits brought about by the removal Source: EPU, State Government
of the need for FIC approval.

7. CEO’S SPACE 7
REMOVING 10 years, while in other parts of the city,
large holes appear to be permanently
THE BLIGHTS etched in the ground.
ON OUR The most prominent of these is the old
site for the Grand Duta Hyatt at the
LANDSCAPE corner of Jalan Ampang and Jalan Sultan
Ismail. This eyesore has been around for
more than a decade since it was moth-
How can we addressed the issue of
balled after the 1997 financial crisis.
distressed properties in the heart of Visitors coming into the city have to
Kuala Lumpur? pass this unfinished structure every
day. A check with DBKL showed that the
development order for the project is still
valid but no work has been done on the
site for many years, leaving it as a blight
on the landscape of a fast-evolving city.
A hundred metres away is the Vision
City project started by RHB Capital
when it was still owned by Tan Sri Grand Duta Hyatt Hotel Project
Rashid Hussain. Also a victim of the
1997 financial crisis, it has remained In 2007 it was sold to Quill-Capita, a
by Kumar Tharmalingam unfinished for more than a decade, an joint venture between the Malaysian
unsightly shell spurned by the Korean Quill organisation and Singapore
Why do parts of central Kuala Lumpur contractor who has vanished from the Capitaland, which paid a princely sum
still look distressed so many years after scene. of RM430 million, much to the relief of
the 1997 crisis? RHB Capital. The new owners are now
trying to find the best solution to unlock
Currently, there is no mechanism to its potential value. DBKL has indicated
track if any projects in Kuala Lumpur City that a new building plan was approved
Centre are half-finished or abandoned The city centre of Kuala in 2010 and is valid till 2013.
for any number of reasons. The City Hall Lumpur is an exciting
of Kuala Lumpur (Dewan Bandaraya location to be in right now The most famous hole in the ground
or DBKL) has cautioned that some of is perhaps Plaza Rakyat in Jalan Pudu,
these projects cannot be considered
and much sought-after by
which was a project begun before
abandoned as they might be in a new property developers who the financial crisis as a joint-venture
approval phase and their building plans wish to establish their brand between DBKL and Plaza Rakyat Sdn.
may be still valid. here while having regional Bhd. Due to legal complications, DBKL
project bases has been unable to terminate the joint-
Still, one cannot help noticing that some venture, so we can expect to see that
parts of the city centre in full view of hole in the ground for some time to
the Twin Towers even now have cladding come.
veiling them from sight after more than
Both the Vision City and Grand Duta
Hyatt projects are within a kilometre of
two other unfortunate developments
that have also floundered along the way.
These are Berjaya Group’s Ritz Carlton
project and Y&H Tower. I suppose one
can’t blame the superstitious if they
decide to label this stretch of Jalan
Sultan Ismail as “suey” – a Cantonese
term used to refer to something or
someone that is cursed.
The Berjaya Group’s Ritz Carlton project
at the corner of Jalan Sultan Ismail
and Jalan Ampang was launched with
fanfare in 2005, yet six years down the
road, only the substructure has been
completed.
(continued next page)
Abandoned Plaza Rakyat in Jalan Pudu effected DBKL - Plaza Rakyat Sdn.Bhd joint-venture

8. CEO’S SPACE 8
(from previous page)
Further down the road, across the site
from Concorde Hotel is the Y&H Tower
which was purchased by a tender
exercise from Danaharta. Y&H is the
third developer to purchase this site
as two other previous owners were
unable to bring the project to market
and went under. The site is a difficult
one as the only green lung in Kuala
Lumpur city centre – the hill called Bukit
Nanas -- is directly behind it. Under
current planning restrictions, this hill
slope would require major structural
ramifications.
Other buildings within this location are
the old, incomplete D&P office which
is now owned by the Wing Tai Group. Vision City project, along Jalan Sultan Ismail started by RHB Capital
Wing Tai has submitted fresh plans for
the project but these have still not been and developer and promoter of projects in the area that appear to be
approved. It may be 2012 before it gets Bumiputra interests in the capital, was suffering a silent death.
off the ground. it necessary to sell such a site without
due consideration to other government- In conclusion, construction activity is
Another of Kuala Lumpur’s barren sites linked corporations that could have the lifeblood of any growing city and
that sticks out like a sore thumb as you purchased the site? shows growth and vibrant economic
drive past is a prime parcel of land on activity. Moth-balled sites, especially
Jalan Sultan Ismail owned by UDA and The city centre of Kuala Lumpur is an those neglected for more than a decade,
approved for a high rise condo before exciting location to be in right now represent low economic activity, poor
UDA’s management changed hands. and much sought-after by property planning and poor enforcement by the
developers who wish to establish their planning authorities.
At the end of May 2011, Mutiara brand here while having regional project
Goodyear Development, a boutique bases. This site will certainly be more Perhaps it is time to put some thought
apartment developer from Subang valuable when Capitaland re-starts the into how we can get these sites geared
Jaya, purchased the site from UDA for Vision City project. It is hoped that this up for the next decade.
RM215.5 million. As the premier owner will spur the resurrection of the other
Figure 4: Selected Distressed Properties Within Kuala Lumpur City Centre
-
Vision City’s integrated Wing Tai Group’s
development project integrated development
Duta Hyatt hotel
project
UDA Land project Berjaya Group’s - Ritz-
Carlton hotel project
YNH’s integrated
office project
Plaza Rakyat’s integrated
development project
Source: MPI Research

9. IN THE NUTSHELL 9
RESIDENTIAL On 5 May 2011, BNM increased the
overnight policy rate (OPR) by 25bp to
The current BLR of 6.6% is supportive
of growth in the residential real sector
SECTOR 3.0%, consequently increasing the Base
Lending Rate (BLR) by 30bp to 6.6% to
but further rate increases might prove
otherwise.
CONTINUES combat inflation.
The average Malaysian residential house
STRONG The hike is unlikely to hamper growth in
the residential property segment as it is
price has been increasing gradually with
low volatility, indicating that the rise is
GROWTH still below the 1997/98 average of 8.0%
to 10.0%. During the 1997/98 financial
due to demand and not to speculative
buying.
TREND crisis the residential property segment
took a hit and gradually recovered from
2000 onwards as rates went back to an
Healthy demand for houses not average of 6.0% to 7.0%. (continued next page)
curbed by inflationary measures
Figure 5: KL Composite Index, KL Property Index and House Price Index,
1992-2010
by S.Sulocana The 1997/98 Y2K buble bust 2008 / 2009
Index Asian in 2001 & Sept 11 Subprime Index
Financial Crisis terrorist attact crisis
Malaysia’s GDP for the first quarter 3,500 250
of 2011 declined to 4.6% compared
with 4.8% in the previous quarter. The 3,000
200
1Q2011 GDP rate is below consensus
estimates of 4.9%. The reported figure 2,500
indicates Malaysia will be going through 150
a bumpy year ahead amidst rising 2,000
inflationary pressures and commodity
prices. 1,500
100
Decelerating global economic growth 1,000
fuelled by the escalation of fiscal 50
conditions in advanced economies 500
and possible global supply disruptions
following the developments in Japan are 0 0
expected to exacerbate the situation.
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Legend: KL Composite Index (LHS)
The average Malaysian KL Property Index (LHS)
residential house price has House Price Index (RHS)
been increasing gradually Source: Bloomberg, NAPIC, MPI Research
with low volatility, indicating
that the rise is due to Figure 6: Average Malaysian Residential House Price, 2003-2010
demand and not to
RM’000
speculative buying 250
200
Inflation continues to rise, reaching
3.2% in April 2011 and signalling a
possible rate increase by Bank Negara 150
Malaysia (BNM) in the second half of
2011. The rise in the inflation rate is due 100
to rising oil prices and subsidy cuts.
The recent subsidy cuts were in sugar 50
and diesel, resulting in prices increasing
from RM1.45 to RM2.30 per kg and from 0
RM1.45 to RM1.80 respectively. The
2003
2004
2005
2006
2007
2008
2009
2010
government has also announced that
all subsidies will be reviewed every six Source: NAPIC
months.

10. IN THE NUTSHELL 10
(from previous page) Figure 7: Malaysian GDP Growth Rate , 2001-2011f
Growth (%)
8 7.2
7 6.8
6.5
5.8 5.8 6.0
6 5.4 5.3
5 4.7
Rising residential property prices are
not broad-based and occur in specific 4
pockets in Kuala Lumpur City Centre 3
where branding has been prominent by
2
either location or developer, for example
Desa ParkCity or SP Setia. 1 0.5
-1.7
0
The growth in residential properties is -1
expected to be strong as Malaysia has
-2
a large young population entering the
2011f
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
workforce. They represent a growing -3
group of prospective first time home Note: 2011f - estimated growth percentage by Economic Planning Unit (EPU) as at February 2011
buyers. Source: Economic Planning Unit (EPU)
Figure 8: Base Lending Rate (BLR) and Overnight Policy Rate (OPR),
(%) January 2007 - May 2011
The growth in residential 7.5
properties is expected to
be strong as Malaysia has a 6.0
large young population and
they represent a group of 4.5
prospective first time home
buyers 3.0
1.5
Close to 60% of the population are below 0
the age of 30 and the 10-year population
Apr-07
Apr-08
Apr-09
Apr-10
Apr-11
Oct-07
Oct-08
Oct-09
Oct-10
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jul-07
Jul-08
Jul-09
Jul-10
growth rate stands at 2.2%. Malaysian
has a high savings rate; household
debt-to-GDP of 76% is supported by Legend: Base Lending Rate (BLR) Overnight Policy Rate (OPR)
high household deposit-to-GDP of Source: Bank Negara Malaysia (BNM)
53%. A high saving rate on the back of
healthy demand provides ample room Figure 9: Consumer Price Index (m-o-m % change) and Inflation Rate,
for growth in the residential property Jan 2006 - March 2011
(%)
segment.
10
8
6
4
2
0
-2
May-06
May-07
May-08
May-09
May-10
May-11
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
-4
Legend: Consumer Price Index (m-o-m % change) Inflation Rate
Source: Reuters, Department of Statistics Malaysia