BTQS 3062 Integrated Project

(Property Development)

• Week 13
• Tutor Identified Incident
• Semester 1 : 05/2023

• Sr Ng Chooi Chooi

BTQS 3062 - WEEK 13 1

Tutor Identified Incident

Part I

BTQS 3062 - WEEK 13 2

Tutor Identified Incident PART I
How Affordable are Malaysian Homes ??

❖ Housing and Local Government Ministry (KPKT) indicated that there are between
1,000,000 to 1,700,000 short of affordable homes.

❖ In 2015, Khazanah published a report that said houses in Malaysia are ‘seriously
unaffordable’.

❖ SO, How UNAFFORDABLE are Malaysian Homes??

❖ Lets explore this in the subsequent slides.

BTQS 3062 - WEEK 13 3

Tutor Identified Incident PART I
1. How Affordable are Malaysian Homes in a global context??

❖ The “world’s most expensive city to buy real estate in 2019 is Hong Kong”……according
to the UBS Group.

❖ “The number of years a skilled worker needs to work to be able to afford a 650 ft2
apartment near the city centre, is just over 20 years.”

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Tutor Identified Incident PART I
1. How Affordable are Malaysian Homes in a global context??

❖ The top 10 least affordable cities are : 6. New Yok,

1. Hong Kong, 7. Amsterdam,
2. London, 8. Vancouver,
3. Paris, 9. Sydney, and
4. Singapore, 10. Munich
5. Tokyo,

❖Kuala Lumpur or any other major Malaysian city is not even in the
Top 20.

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Tutor Identified Incident PART I

1. How Affordable are Malaysian Homes in a global context??

(cont’d)
❖Based on the Property Price Index 2019 price-to –income ratio, released by Numbeo (the
world’s largest user-contributed database):

❖Kuala Lumpur is ranked #105

❖Phnom Penh ranked at #7
❖Bangkok at #16
❖Singapore at #19
❖Jakarta at #20.

❖Malaysia is not among the least affordable property markets, and problems is more
severe in many other countries.

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Tutor Identified Incident PART I
2. How bad is the housing situation in Malaysia today?

❖“Property prices have increased, and wages are not keeping up”
❖Is the above statement true??

❖Lets look at the data from Khazanah’s The State of Households 2018 report.

❖In 1993;
❖Average house hold income : RM1,703.
❖Average housing price : RM100,000.
❖Mortgage period : 30 years with 8 % interest.
❖Monthly instalment : RM660.
❖Instalment RM660 : 40% of the household income.

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Tutor Identified Incident PART I
2. How bad is the housing situation in Malaysia today? (cont’d)

❖In 2016;

❖Average house hold income : RM6,950.

❖Average housing price : RM428,000.
❖Mortgage period : 30 years with 4.5% interest.
❖Monthly instalment : RM1,942.
❖Instalment RM1,942 : 30% of the household income.

❖From the above analysis, the income-to-price ratio for properties has not gotten worse.

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Tutor Identified Incident PART I
3. Why current affordable housing does not really help?

❖Most affordable housing is far from the city or town centres.

❖People have to live further away from their work location.

❖Public transport helps, but Malaysian are not fully reliant on public transport.

❖ Toll, fuel, time and costs .

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Tutor Identified Incident PART I
3. Why current affordable housing does not really help?
(cont’d)
❖Some example of PRIMA projects in Kuala Lumpur, are

▪ Residensi PR1MA Alam Damai is about 5.9KM by car from the

nearest MRT station.
▪ Residensi PR1MA Brickfields is about 2.8KM from KL Sentral.
▪ Residensi PR1MA Bukit Jalil is about 5.7KM away from LRT Bukit Jalil.

❖As a benchmark, a distance of 500 meters is considered “walking distance”.

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Tutor Identified Incident PART I
4. Why are our household expenses so high ?
❖A large portion of the Malaysian rely cars as their mode of transportation.
❖From statistic published by Numbeo, 14.9% of household income spend on transportation.

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Tutor Identified Incident PART I
4. Why are our household expenses so high ? (cont’d)
❖For example, lets compare the selling price for a Honda HR-V in Malaysia vs Australia.

Malaysia :
❖Honda HR-V selling price : RM118,800
❖Monthly instalment (90% loan @ 3% ) for 5 years : RM2,049.30

Australia :
❖Honda HR-V (similar mode) selling price : $29,990 (RM85,751)
❖Monthly instalment (90% loan @ 3%) for 5 years : $517.30 (RM1,479.13)

❖As the above comparison, we need to pay extra RM570.17 (28%) for a similar car in
Malaysia.

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Tutor Identified Incident PART I
5. Why are lower property prices not necessarily a good thing ?

❖If the Housing Price Index (HPI) go negative for the next 5 years, are you in a rush to
purchase a new house??

❖Would you take a RM500,000 mortgage to purchase a house, if in 5 years later your home
would have a value of RM200,000 ??

❖When property prices decline, supply become restricted.

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Tutor Identified Incident PART I
5. Why are lower property prices not necessarily a good thing?
(cont’d)

❖The existing home owners will wait and hold on for sale. Supply in sub-sale market will
reduce.

❖When supply limited, prices move up again.

❖Population is expanding, demand is increasing, its difficult to keep the property prices
dropping.

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Tutor Identified Incident PART I

What can be done to tackle the housing affordability challenge ?

❖The government should focus on reducing the overall household expenses for the
average family. A good starting point would be abolishing the exorbitant taxes on
cars.

❖Affordable housing should be close to the city or public transit points. The last mile
connectivity between rail stations and affordable housing locations can be greatly
improved.

❖More effort can be put towards further enhancing wage growth. The only way to do
this is to increase the productivity of the average Malaysian.

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Tutor Identified Incident PART II

Covid-19 Act: What’s in it for the property sector and homebuyers ?

❖The long awaited Temporary

Measures for Reducing the Impact of
Coronavirus Disease 2019 (Covid-19)
Act (Covid-19 Act) finally gazetted on
23 Oct 2020.
❖Offer solutions and provides some
measures to help property industry
stakeholders and property buyers.
❖The validity of Covid 19 Act has been
extended to 31 Dec 2021.

Source : Edge Property, issue 3141/2020

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Tutor Identified Incident PART II

Covid-19 Act: What’s in it for the property sector and homebuyers ?

❖For agreements signed between purchasers and developers before 18 March

2020

❖It the purchasers failed to serve their housing loan instalments between
March 18 and Aug 31, 2020, developers should not impose late payment
charges on the unpaid instalments.

❖Purchasers could apply for extension up to Dec 31, 2020.

Source : Edge Property, issue 3141/2020

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Tutor Identified Incident PART II

Covid-19 Act: What’s in it for the property sector and homebuyers ?

❖For property developments which should be delivered between March 18 and

Aug 31, 2020

❖Developers could apply to the government to extend the time of delivery of

vacant possession up to Dec 31, 2020.

Source : Edge Property, issue 3141/2020

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Tutor Identified Incident PART II

Covid-19 Act: What’s in it for the property sector and homebuyers ?

❖On Defect Liability Period (DLP)

❖Any agreement signed between the purchaser and developer between

March 18 and Aug 31, 2020 should be excluded from the calculation of DLP.

❖Purchasers could submit an application to the Local Government and

Housing Ministry for an extension of up to Dec 31, 2020.

Source : Edge Property, issue 3141/2020

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Tutor Identified Incident PART II

Covid-19 Act: What’s in it for the property sector and homebuyers ?

❖On the Tribunal for Homebuyer Claims

❖If the limitation period to file a claim has expired during March 18 – June 9,
2020, the homebuyer is entitled to file the claim from May 4 to Dec 31, and
the Tribunal for Homebuyer Claims shall have jurisdiction to hear such
claims.

Source : Edge Property, issue 3141/2020

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Tutor Identified Incident PART II

Covid-19 Act: What’s in it for the property sector and homebuyers ?

❖Inability to perform contractual obligation

❖For any parties who are unable to perform any contractual obligation arising
from any of the categories of contracts due to measured under the
Prevention and Control of Infectious Diseases Act 1988 (Act 342), they shall
not be the reason for the other party to exercise the rights under the
contract.

❖Any disputes arising out of this may be settled by way of mediation, with
help from the mediator appointed by the authorities.

Source : Edge Property, issue 3141/2020

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Tutor Identified Incident PART II

Covid-19 Act: What’s in it for the property sector and homebuyers ?

❖These contracts include:

❖Construction work-related contracts (Including consultancy and supply of

materials, workers and equipment);

❖Performance bond and equivalent that is granted pursuant to a construction

or supply contract;

❖Professional service contract;

❖Lease or tenancy of non-residential immovable property;

Source : Edge Property, issue 3141/2020

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Tutor Identified Incident PART II

Covid-19 Act: What’s in it for the property sector and homebuyers ?

❖These contracts include:

❖Event contract for venue, accommodation, amenity, transport,

entertainment, catering or other goods or services including business
meeting, incentive travel, conference, exhibition, sales event, concert, show,
wedding, party or other social gathering or sporting event for the
participants, attendees, guests, patrons or spectators of such event;

❖Contract by a tourism enterprise as defined under Tourism Industry Act 1992

(Act 482) and a contract for the promotion of tourism in Malaysia;

❖Religious pilgrimage-related contract.

Source : Edge Property, issue 3141/2020

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PART III COVID-19 : Impact on Property Market

3 major concerns surrounding property market :

1) Disruption in economic activities

➢ The Covid-19 control measures around the world reduce global trade

➢ Prolonged MCO/CMCO, SMEs closing down, productivity and economic lossess

and rise in unemployment

➢ Hold back investment activity, expansion or new asset acquisition

Source : CBRE WTW Press Release

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PART III COVID-19 : Impact on Property Market

3 major concerns surrounding property market :

2) Confidence and sentiments running low

➢ Private consumption the biggest demand for economy

➢ Income falls, fear of job security, private consumption dopped significantly

➢ Priority of households to spend on necessity items, buying property is less

preferences

Source : CBRE WTW Press Release

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PART III COVID-19 : Impact on Property Market

3 major concerns surrounding property market :

3) Oversupply amplified

➢ Residential – weakening consumption in addition to overhang situation

➢ Fear of oil and gas industry downturn, impact the office sector

Source : CBRE WTW Press Release

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PART III COVID-19 : Impact on Property Market

Residential :

➢ Remain slow in short to medium term

➢ Lack of spending confidence

➢ More stringent lending policies

➢ Defer purchase

➢ New launches take a back seat for a while

Source : CBRE WTW Press Release

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PART III COVID-19 : Impact on Property Market

Office :

➢ Less adversity, office tenancy has a longer lease term

➢ Organisations operations and remote work arrangements

➢ Create demand for smaller and more flexible office space

➢ Office’s occupancy rate in Klang valley above benchmark of 80%

Source : CBRE WTW Press Release

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PART III COVID-19 : Impact on Property Market

Retail and Hotel :

➢ Tourism and retailing of non-essentials badly hit

➢ Malls – difficulty in securing tenants

➢ Reduce capacity

➢ Slower recovery

➢ E-commerce surges

Source : CBRE WTW Press Release

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PART III COVID-19 : Impact on Property Market

Industrial :

➢ Temporary slow down in activity

➢ Drop drastically in foreign investments

➢ Industries such as pharmaceuticals, medical supplies and equipment & etc – bright
spot in property market

➢ Prospects of e-commerce, logistics and warehousing activities in Malaysia

Source : CBRE WTW Press Release

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PART III COVID-19 : Impact on Property Market

Understand How the Proper Market’s Heath Affects Pricing :

➢ 5 key factors affect the pricing :

➢ Primary market supply and demand

➢ Secondary market supply and demand
➢ Bank lending rates
➢ Unemployment rates
➢ Commercial activities

Source : PropertyGuru, 28 August 2020

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PART III COVID-19 : Impact on Property Market
Understand How the Proper Market’s Heath Affects Pricing :

➢ A property cycle takes place

every 8 to 12 years

➢ Slump property market

➢ Demand is slow

Source : PropertyGuru, 28 August 2020

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PART III COVID-19 : Impact on Property Market
Understand How the Proper Market’s Heath Affects Pricing :

➢ Real estate loan applications and approval in FY2020 stood at 41%

➢ The same period FY2019 stood at 43%
➢ Stringent loan approval requirements
➢ Reduce risks of bad debts
Source : PropertyGuru, 28 August 2020

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Big results require big ambitions
By Heraclitus

Quote of the day

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