Hectare Peak

07/08/2023

"The average household income in Malaysia increased by 2.4 per cent in 2022 to RM8,479 compared to RM7,901 in 2019, according to the Household Income and Household Expenditure Survey 2022."
https://www.iproperty.com.my/news/average-household-income-at-rm8479-in-2022-88996?fbclid=IwAR1k2f3Vv6EmSReGiPJrPgFOarOr0NoUFsI3IbFt8KqA1xzXlf6WrZk9D6g
Good signs that we are recovering from the Covid years. Let's see where we will be by end of this year.

Chief Statistician Datuk Seri Dr Mohd Uzir Mahidin said the report, released by the Department of Statistics Malaysia (DOSM), showed that the median household income had increased moderately by 2.5% per year to RM6,338 in 2022 compared to RM5,873 in 2019.

10/06/2022

This is an interesting write up that can explain the affordable housing conundrum in Malaysia. Currently government had imposed the affordable housing restrictions to developers based on the location and land size. Let's magnified certain points that the author had stated in the next following few posts.

We take a look at how efficient the new Rumah Selangorku RSKU Harapan is in incentivising property developers to build more affordable housing in Selangor.

24/05/2022

Is the property market as robust as it seems after the grueling MCO period?
One can gauge it through the land transactions. Speaking with land owners, agents, developers and potential private buyers, one can gauge that the market sentiment is still cautiously prudent. The uncertainty of international factors such as Russian war and domestic issues such as potential GE, the industry players are still acting cautiously.
Let's see how it turns out for the remaining months of this year.

22/04/2022

"To illustrate the problem contractors face, the MBAM highlighted that the price of steel bars in February 2021 stood at RM2,680 per metric ton (MT), but jumped 30.6% to RM3,500 per MT in April 2022.
Likewise, bulk cement price, which was at RM210 per MT in February 2021, climbed 40% to RM350 per MT in April this year, according to the association."
Construction cost is increasing in this period. As construction costs constitutes approximately 50% of GDV, this will definitely impact the prices of upcoming new launches. Let's observe the domino effect to the new house prices.

KUALA LUMPUR (April 18): The Master Builders Association Malaysia (MBAM) has expressed their concern about high building material prices and called on...

06/04/2022

Interesting take on the Malaysian housing industry's health.
"However, when it is assessed from the state or regional level, one can find that ratios (existing stock to houshold ratio) for areas like Penang (1.17) and Kuala Lumpur (1.16) are higher than 1.1, far exceeding the national-average ratio (0.82). Even other prime markets like Negeri Sembilan (1.09), Johor (1.05), and Selangor (1.03) are approaching the “near-to-saturation” status in terms of supply-demand, signifying that high-growth stage featured with the speculation herd instinct and rapid expansion in investment volume is becoming less and less prevalent in these markets"
Perhaps the developers can start focusing on the states with much lower ratio, such as Sabah, Sarawak, Terengganu & Kelantan.

The Buffett indicator – defined as “the total market capitalization of stocks divided by the total value of the nation’s gross domestic product ...

08/02/2022

Year 2021 had passed, and with a blink of an eye it's already the second month of year 2022. Where can we go from here on for the property industry? Will we be doing better this year? How are we coping with rising prices of raw materials and labour shortage? Not to forget the aftermath from MCO's and natural disaster that hit our nation. Let's observe and embrace this year as we journey through this recovery period.

26/08/2021

“When Chinese developer Country Garden Pacificview Sdn Bhd advertised its Danga Bay, Johor Bahru, project at 50% discount for about six weeks starting in early June, earlier buyers were angry. New buyers were delighted.”
https://www.freemalaysiatoday.com/category/nation/2021/08/18/houses-at-half-price-anyone/

Are the property prices going down, especially for the completed units? It looks like it’s happening at the current moment. Let’s look at the event from developer’s perspective. Why are they doing it, even if they are offending the earlier buyers?
Property developers, as like any other business entities are profit oriented. Holding stocks in long run is never good for a business. What are the major issues they faced?
1) Once a development achieved VP, the valuation of the property will be adjusted and usually will be lower compared to during construction stage. We have heard many times how buyers didn’t get the valuation that they preferred for their bank loan application. This is a common occurrence in the industry. With that, how can the developer sell more completed units compared to during construction stage?
2) Keeping the unsold units in good conditions. There is a general observation that vacant units are deteriorating much faster compared to tenanted ones. Developers will have to continue to clean, maintain or repair defects for the vacant units to ensure its presentable for any potential buyers to view. Of course, it takes resources to have this done.
3) Paying maintenance fees and sinking funds. Developers are obligated to pay for the unsold units. Imagine for one unit cost RM400 a month; holding 100 units will cost the developer RM 40,000. Perhaps it makes more financial sense for the developer to offload the completed units with higher discounts.
Taken into account the points above, will it be too surprising for developers to sell the completed units with high discount rate?

Developers are cutting prices drastically for unsold stock, leaving earlier buyers in shock.

08/08/2021

"Chin Hin Group Bhd announced the completion of its acquisition of a 50.8% stake in Chin Hin Group Property Bhd (CHGP). This will be the third public listed company to be included in Chin Hin Group, together with Solarvest Holdings Bhd and Signature International Bhd."
It's clear the strategy for the group is to be involved in the value chain of property sector, especially in construction works. Why does a group does it? The advantage is clear; cost reduction, better quality control and effective resource management. Will it be a sustainable business model in Malaysia context?

PETALING JAYA (Aug 5): Chin Hin Group Bhd announced the completion of its acquisition of a 50.8% stake in Chin Hin Group Property Bhd (CHGP). This wil...

28/07/2021

FMCO still enforced but clearly it's not working. When will the market fully reopen again? Many people have being operating in the grey, not knowing what to plan or do.
How's the housing market at the moment? Developer's are quiet, mostly just doing their usual rounds of digital marketing. Agents are quiet too for this round. It's not surprising though, as currently there's no end in sight. No one knows when we are allowed to work as usual again.
Hang in there Malaysians, we pray for better days to come.

10/06/2021

Well, it certainly does affect the construction cost of a development. Construction costs usually constitutes 40% to 50% of GDV. Main building works (MBW) contracts will increase with the higher steel price. What can the developer do to reduce the cost? Nothing much as main con will be the one bearing the costs of it if it was awarded. Perhaps the start of the construction can be delayed until the cost normalize? Many things to ponder before a developer can launch their new project.

Covid-19 has severely hit nearly every sector of economy across countries. Construction is of no exception as projects have either been suspended or d...

26/05/2021

"Is the business of building and selling affordable homes sustainable? Doh responds with a firm affirmative. It is all about a strategic approach that hinges on building what the market needs and can afford.
The modus operandi? Relentless eyeballing of cost control without cutting corners. “For instance, we simplify our structure so that decisions can be made quickly and we move fast.
“There is no magic wand. Only hard work that we have to get used to,” stresses Doh, who calls himself a property manufacturer."

https://www.edgeprop.my/content/1845628/zeroing-building-affordable-properties

Key points to take:
1) Close cost monitoring especially on construction cost
2) Pragmatic organization structure without too many layers of decision making levels
3) Accurate market study which can minimize sales risks during land feasibility study
4) Acting as property manufacturer, interpreting the development processes as manufacturing process. Practical, direct and effective.

What other key points we can take from here?

Call it a love affair but sans the feelings. Developers generally detest it but they cannot run away from their social responsibility of building a...

15/04/2021

What can we do to change the market? Some of the suggestions pondered upon are;
1) Affordable housing to be centralized and done by the government
2) Implementing rent-to-own scheme for the owners to move up whenever they are ready
3) Less government intervention and let the market to cater for the different market segments. Government to focus on B10 only.
Which will be more feasible in Malaysia's property industry climate?

In Part 2 of the series, we examine what can be done, as property prices consistently keep rising.