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US firm Lam Research to invest RM1 billion in Penang

GEORGE TOWN: A big-name semiconductor equipment manufacturer from the United States plans to invest close to RM1 billion to build a factory in Batu Kawan, Penang, in the first quarter of this year, providing 350 high-value jobs when it opens in 2021.

Lam Research, a supplier of wafer fabrication equipment and services to the semiconductor industry, will open its eighth factory on a 138ha site comprising offices, manufacturing facilities and a warehouse. It will cost US$225 million (RM922.5 million).

It has factories in countries such as Austria, South Korea and the US.

In announcing the investment today, Chief Minister Chow Kon Yeow said Lam Research’s entry would provide a significant boost to the thriving electronics and electrical (E&E) ecosystem in the state.

“It will have far-reaching impact, especially on supply chain localisation opportunities, which will, in turn, better the skillset of the technical workforce,” he said in Komtar today.

Lam Research senior vice-president (global operations) Kevin Jennings said it made perfect sense to open in Penang as the electronics and electrical ecosystem here was robust.

“We are the market leader in atomic-level processes critical to semiconductor scaling and manufacturing. In Penang, we will spend about US$150 million and will commit another US$75 million in incremental value for warehousing.

“We are excited to join Penang and partner with the Malaysian government as we add to our global footprint,” he said via a Skype call at the event.

Lam Research, a Fortune 500 company, had revenue of US$9.5 billion in 2019.

Penang already has renowned E&E companies such as Keysight Technologies, National Instruments, Bruker Corp and Agilent.

Source: FreeMalaysiaToday

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Several infrastructure projects in Penang to take off this year

GEORGE TOWN: The Penang government regards 2020 as an important year for the state as several state infrastructure projects will take off in the next 12 months.

Chief Minister Chow Kon Yeow said among the projects that will start this year are the Penang airport expansion, construction work on the redevelopment of the Swettenham Pier Cruise Terminal and package two of the Penang Transport Master Plan (PTMP).

“All these infrastructure projects are expected to start this year, and if not start work then a signing agreement and tender processes will also take place,“ he told reporters after flagging off the City Walk here today.

He said these projects would spur the state economy by providing more jobs and contracts to the relevant sectors.

Chow said these infrastructure projects would also attract more investment to the state.

“What we announced last year will probably move into the construction phase this year, before jobs can be created.

“But jobs would have been created for those announced two years ago,“ he said.

Chow, who is also the state assemblyman for Padang Kota, said the state government has nothing to hide regarding the Package 2 project PTMP linking Bandar Baru Air Itam in Farlim to Tun Dr Lim Chong Eu Expressway here.

He explained that all details of the projects have been included in the environmental impact assessment (EIA) display, including the 19 affected graves at the Batu Lanchang cemetery.

“I have got nothing to hide regarding the project and it is all in the EIA display. If people do not take it out, what can we do? Only they (Gerakan) took a long time to find out,“ he said.

Chow was commenting on the claim by Gerakan that the state government was hiding the fact as it was not mentioned earlier that the project would affect 19 graves in Batu Lanchang.

Last Monday, the state government announced that several meetings were held with the United Hokkien Cemeteries Penang at Batu Lanchang to discuss the status of some more than 100-year-old graves that will be affected by the project. — Bernama

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KPKT ready to cooperate with state govt on rent-to-own scheme

The Housing and Local Government Ministry (KPKT) is prepared to assist state governments in the sale of affordable houses developed by state governments through rent-to-own financing scheme.

Its Minister Zuraida Kamaruddin said efforts to ensure more people own houses are being carried out by both the federal and state governments.

However, some self-employed buyers have problems applying for bank loan as they do not have income statement.

“Those who work on their own were able to buy houses and join the rent-to-own scheme we introduced in September and we hope to help more people especially those in the B40 would be able to own houses.

“Under the rent-to-own scheme, tenants who pay rent on time for five years would be offered to buy the house under the schemes,” she said.

Zuraida told a media conference after launching Syarikat Perumahan Negara Bhd (SPNB) affordable houses here today which was attended by its chairman Mohammad Mantek who is also KPKT secretary-general.

KPKT, according to Zuraida, is open about forging cooperation with state governments and landowners in the construction of affordable house if the site was suitable.

Commenting on the project, Zuraida said it would be developed via a design and build concept with private financing initiative on a 59-hectare site involving the construction of 1,422 units of houses in three phases over seven years.

He said the first phase would be starting in January and is expected to be completed in three years involving 186 units of double-storey link houses (349 units) and single storey shops (12 units).

The location of the houses was seen as strategic as it is near to the Sultan Ahmad Shah Airport, Gambang water park, army camp and public universities apart being not far from Kuantan.

“We also made it a policy so that affordable houses are built to meet the specification of at least 900 sq ft to ensure the comfort of buyers,” she said.

Zuraida said the project was part of the commitment of the government to fulfill the pledge to build one million affordable houses in 10 years as found in Pakatan Harapan’s general election manifesto.

Source: The Edge

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What causes the penny pinch?

Despite Malaysia’s low inflation rate, many still struggle to get by. Why is this so? The World Bank’s latest Malaysia Economic Monitor report highlights areas that may contribute to our high cost of living.

MALAYSIANS say they are struggling to get by financially with the prevailing perception being that that cost of living is cripplingly high.

This is despite the fact that Malaysia experiences consistently low rates of inflation. Headline inflation averaged less than 2% per year since January 2015 and moderating to less than 1 per cent since January 2018 – well below the growth rates of the economy and average nominal incomes.

Why then, are Malaysians feeling the pinch?

In its latest Malaysia Economic Monitor (MEM) report released on Monday, the World Bank Group Malaysia identified four factors that impact the cost of living and may account for Malaysians’ difficulty in making ends meet.

They are (i) inadequate income, (ii) insufficient affordable housing, (iii) high household debt, and (iv) consumer price inflation differentials.

Inadequate income

According to the Gallup World Poll, as of 2018, nearly 30% of Malaysians felt that they do not have enough money for food and 23% reported having inadequate money for shelter.

In fact, the World Bank found that approximately 27% of households in Kuala Lumpur earn less than Bank Negara’s 2016 estimated monthly living wage – RM2,700 a month for a single person, RM4,500 for a couple without a child and RM6,500 for a couple with two children in the city.

Although median incomes continue to outpace inflation, the MEM report found that wage growth for the youth and workers without tertiary education has been slow-moving.

How do we bring down costs?

According to Khazanah Research Institute’s (KRI) director of research Dr Suraya Ismail, government-led social programmes have a positive impact on consumption expenditure by lowering living costs.

“The expenditure for households will be lower in countries where the provision of government services is extensive and cover households’ basic needs. Examples would include universal healthcare, free formal education, subsidised childcare and subsidised mass transportation systems, ” she says in an email interview with Sunday Star.

One way to finance these initiatives is through progressive tax.

“As reported in MEM, the total tax revenue is only 14% of GDP. This is not enough even when compared to international benchmarks. More could be done to increase this percentage, by increasing taxes on personal wealth as well as the top income earners, ” says Suraya.

Apart from progressive tax, the MEM suggests increasing stamp duty on purchases of higher-value properties and widening the scope of the real property gains tax.

Sunway University Business School economist Professor Yeah Kim Leng believes that the issue of low wages can be overcome by raising the quality of the education system, improving industry competitiveness and productivity, and accelerating the shift to higher value, knowledge-based and technology-driven activities.

“This will require sound, prudent macroeconomic management that not only ensure a stable price environment but a well-functioning economy that engenders investor confidence, ” says Yeah, who is also Malaysian Economic Association Deputy President.

“Investor confidence will lead to sustained domestic and foreign investment that in turn generates the demand for skilled and high-paying jobs, thereby creating a virtuous cycle of investment, employment and wage growth that banishes the low wage-high living cost conundrum, ” he explains.

Furthermore, Yeah suggests that given the country’s low labour income share, companies that achieve a certain minimum profitability could be encouraged to adopt the shared prosperity goal.

In this model, B40 employees would be given greater emphasis in salary and wage allocation of company budgets and performance incentives.

“A 10-10 “double happiness” formula of at least 10% annual salary increase and a bonus of at least 10% of the employee’s annual salary would not only address increase employees’ morale but also contribute to a more equitable society, ” he says.

Variation in consumer price inflation

In Malaysia, living costs vary significantly depending on geography. The MEM report found that although household incomes tend to be higher in high-cost areas like Kuala Lumpur, oftentimes the extra income is not enough to fully offset higher prices.

This is why many in urban areas say that they feel especially burdened by high costs.

Suraya explains that costs of living will always be more pronounced in urban settings, hence why the calculation of living wage for families are normally calculated for a specific metropolitan area.

“This is to give an indication to both families and employers the comparatively high costs of living in cities. For families, this the compensation needed to attain a decent life in this area and for firms, this is the price to retain good talent, ” she says, explaining that food, shelter and transportation are the three main contributors to the high costs of living.

She says that the price of housing and food items need continuous monitoring by the government to ensure they remain competitive.

The MEM report also recommends the development of a spatial price index in addition to a cost of living index can also help consumers manage their finances.

Shortage of affordable housing

According to the MEM report, various studies have found that housing affordability has deteriorated over the years to the point that overall housing is considered “seriously unaffordable” in Malaysia using the price-income ratio (PIR) as a measure.

The report found that the lack of affordable housing is particularly severe among households earning less than RM5,000. Furthermore, only 18% of newly-launched home units in 2016 were priced below 200,000.

Apart from prioritising low to middle income households in current housing policies, the MEM points out that Malaysia can strengthen the rental market by enacting the Rental Tenancy Act, establishing a Tenancy Tribunal and developing a rental database and rental affordability indicators.

“The MEM mentioned that since 2004, real growth in employment income for 20-29 year-olds with post-secondary education has been marginal. The ensuing age cohorts; 30-39,40-49,50-59, fared better during the same time. If the trend suggests that wage stagnation occurs during this period for the youth (20-29), it is prudent not to purchase any big-ticket items on debt or loans (cars and houses included), ” says Suraya.

Instead, she illustrates how more can be done to assist this group with the provision of affordable rental facilities and efficacious public transport systems.

The Institute for Democracy and Economic Affairs (Ideas) Senior Fellow Dr Carmelo Ferlito takes a step back and questions whether Malaysia should even implement policies to improve home-ownership.

“How much the problem is a real one and how much a perceived one? Let’s not take PIR in isolation. Let’s look at PIR in combination with the fact that home-ownership rate is 76% and household debt is 82% of GDP, ” he says in an email interview with Sunday Star.

“Should we address the former figure or the latter? Probably household debt is more an issue than homeownership. Have we reflected on the fact that there is a rising number of unsold affordable housing? We should reflect more broadly on the factors of such weakness of demand: how much is really due to prices (as affordable units go unsold) and how much to a change in the system of preferences, which means with new generations preferring mobility to stability, traveling today rather than building a house for tomorrow?, ” he questions.

“I think that if we allow the market to correct itself, rather than trying to interfere with its readjustment process, the market will provide the necessary solutions, ” he says.

However, Ferlito believes that the government should eventually focus on addressing the shelter issue for those most in need, the B10, not by forcing them to get a home loan but by implementing supported rental schemes.

Source: The Star

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RM34.8m maintenance fund for Penang under consideration: Jagdeep

GEORGE TOWN: The Housing Ministry is considering to allocate RM34.8 million from two maintenance funds to Penang, according to state Housing, Local Government and Town and Country Planning Committee chairman Jagdeep Singh Deo (pix) today.

He said that a total of 44 out of 133 housing maintenance projects in Penang were “given commitment to consider an approval” for the funding from the Housing Maintenance Programme (PPP) and the Housing Maintenance Fund (TPPM) during a meeting at Putrajaya on Dec 9.

“Eleven out of 12 projects proposed were considered for approval under the PPP fund for RM23 million.

“Meanwhile, 14 projects from the Penang Island City Council (MBPP) and 19 projects from the Seberang Perai City Council (MBSP) were also considered approval under the TPPM scheme for RM4.8 million and RM7 million respectively,” he said in a press conference here.

He also said that the state government would receive an official response from the federal government by February next year.

“If we do allocate that much based on what’s considered to be approved, Penang might be one of the biggest beneficiaries for the housing maintenance fund,” he added.

Under the Budget 2020 announcement, Finance Minister Lim Guan Eng announced that a total of RM100 million would be set aside for both TPPM and PPP funding scheme altogether.

On Nov 14, Jagdeep said that an application letter was sent to Minister of Housing and Local Government Zuraida Kamaruddin on Aug 30 to request a total funding of some RM100 million comprising PPP (RM28 million) and TPPM (72 million) for maintenance and upgrade of the housing facilities in Penang.

According to him, the maintenance funds would be used to repair, replace and upgrade housing facilities with priorities given to lifts, water tanks and roofs. – Bernama

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Penang airport gears up for upgrade

GEORGE TOWN: The Penang International Airport in Bayan Lepas, already bursting beyond its capacity, is expected to undergo much-needed expansion following the nod given to Malaysia Airport Holdings Bhd (MAHB) from the local authorities.

MAHB received planning permission and early work commencement approvals from local authorities for the airport expansion project, estimated to cost between RM800mil and RM900mil.

Construction work is scheduled to start in March, and is expected to be completed within 36 months.

Announcement on the expansion project is expected to be made by the Penang state government or airport authorities soon.

The Penang Island City Council (MBPP) recently gave its greenlight on Dec 4, and it is expected to approve the building plans next month.

When contacted, a spokesman for MAHB confirmed that the masterplan has been approved by the MBPP.

“However, we are still waiting for the official letter from them.

“Announcement will be made by top management when the official letter is received, ” he said.

It is learnt that MAHB is expected to offer the tender for construction jobs in January.

The expansion will increase the terminal gross floor area to 113,005 sq m from 54,582 sq m.

The new design will have the capacity to accommodate 12 million passengers per annum while the two-way passenger peak hour capacity will increase to 4,391 from 2,553 currently.

The expanded airport will be able to accommodate 25 commercial aircraft.

The Air Traffic Control Tower, Civil Aviation Authority of Malaysia, Meteorological Station, the Airport Fire Rescue Service station and aviation apron will be relocated to the new terminal.

The number of parking bays will be increased to 1,800 bays from 1,218 presently.

The catering complex and MASKargo Complex will remain at the existing terminal.

In July, MAHB chief executive officer Raja Azmi Raja Nazuddin said it is ready to proceed with its plan to expand the Penang International Airport after getting approval from the Ministry of Finance.

He had said MAHB has been working on the expansion project over the past two years, bringing in consultants to draw up detailed construction plans after engaging with the Ministry of Transport (MoT), Malaysian Aviation Commission (Mavcom), the Penang state government and Chief Minister Chow Kon Yeow.

Raja Azmi had also said the plans were ready for submission in July for planning from the MBPP after necessary clearance from Mavcom, MoT and the Department of Director-General of Lands and Mines (Federal) as the landowner, ” he said.

MAHB had said it was discussing with various parties on the options for investment and funding models.

The airport operator said it had submitted an application to fully fund the project under the proposed Mavcom Regulated Asset Base (RAB) framework and was waiting for approval.

Once the necessary plans have been approved by the MBPP, construction should begin in the first quarter of next year, the MAHB had said.

Meanwhile, Penang Freight Forwarders Association (PFFA) honorary secretary-general Ali Ahmad said the airport authorities should consider integrating the Second Cargo Complex in Batu Maung and the MASkargo Complex in Bayan Lepas.

“The two cargo complexes, separated by the runway, has caused inconvenience to freight forwarders.

“Freight forwarders now incur additional charges such as the cost of transferring cargo from one terminal to another, ” he said.

Ali added that the airport and local authorities should explore linking the proposed LRT system with the cargo complexes to reduce the traffic at the cargo complexes.

Source: The Star

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Gurney Wharf public projects to begin early next year

GEORGE TOWN: Work will begin early next year on several components of the Gurney Wharf project, touted as the state’s first reclaimed waterfront.

Among the components are a promenade, a park, a skating rink, a children’s playground and a man-made beach.

State Local Government Committee chairman Jagdeep Singh Deo said the state was in negotiations with relevant parties to finalise some of the agreements.

“We have already been given about 12.4ha of reclaimed land from the developer for work to begin in the southern site, near Jalan Pangkor.

“It will be carried out in stages.

“Finally, we can see this materialising. This will be a real game-changer for Penang in the near future,” he said today.

Reclamation work for the Gurney Wharf project was completed recently by Tanjung Pinang Development Sdn Bhd, a subsidiary of property developer Eastern & Oriental Bhd (E&O).

Of the 52.2ha to be surrendered to the state government, about 24ha will be for various public amenities benefitting the people of Penang.

However, the state government has agreed to reclaim another two water bodies at the site, about 5.8ha, which will also be surrendered to the state government.

Physical work is expected to begin next June and will take about a year to complete.

Gurney Wharf, a new seafront public park, is a state government initiative, with its conceptual master plan by Grant Associates, an internationally-renowned consultant architect firm.

Grant Associates has been involved in various international projects including in the United Kingdom, such as the The Hive, Bristol Harbour Site and Cambridge Accordia, and also Singapore’s Gardens by the Bay.

Jagdeep said Tanjung Pinang Development is expected to surrender the remaining reclaimed land by next year.

“In the subsequent phases, there will also be a wetland, food and beverage outlets, retail outlets and a water taxi pier, all lining the 24ha site,” he said.

He also revealed that about 95 per cent of the public were in favour of the Gurney Wharf project while about four per cent had additional inputs. Only one per cent was against the project.

Meanwhile, speaking on a separate matter, Jagdeep said the Housing and Local Government Ministry (KPKT), during a meeting with state officials yesterday in Putrajaya, had committed to consider approving Penang’s request for funds for 44 critical projects amounting to RM35 million.

Penang had recently requested for RM28.76 million from the Housing Maintenance Programme (PPP) fund and RM72.13 million from the Malaysia Home Maintenance Fund (TPPM) fund for next year.

“There was a commitment from the Federal Government for our requests in yesterday’s meeting.

“I believe Penang will be given one of the highest funding now that the federal and state governments are one and the same.

“If given (the funding), this will be the best New Year gift for the state,” he added.

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Strong interest from mainland Chinese buyers expected next year

CHINESE international property portal Juwai.com, forecast there will be stronger interest from Chinese buyers next year with the lowering of the minimum price threshold for foreign buyers on high-rise property.

In its 2020 budget, the government proposed helping the industry sell some of its unsold new homes by temporarily lowering the minimum price threshold for foreign buyers on high-rise property in urban areas from RM1 million to RM600,000.

The lower threshold will only apply between January 1 and December 31, 2020, after which date the threshold reverts to RM1 million.

Juwai IQI executive boardmember, Kashif Ansari said, the real estate industry views positively the government’s move to temporarily reduce the minimum price threshold for foreign buyers.

That is the conclusion of the Juwai IQI survey of 386 Malaysian real estate agents, conducted between 6 and 21 November 2019, he said.

“With the lower threshold in 2020, we forecast stronger interest from our buyers. Is it good, or is it bad? Nationwide, 71 per cent of surveyed agents approved, calling the lower threshold either “a little good” or “very good.” More than one-third, or 35.1 per cent, of surveyed agents believe the lower threshold is “very good.”

“The fact that everyone agrees upon is that the markets are suffering from an excess of unsold property. By lowering the price threshold for a short time, the government hopes some of these unsold properties will find buyers. Developers will then have the funds to invest in and begin construction on projects more suited to the local buyer in today’s market,” said Kashif.

Kuala Lumpur, Penang, Selangor, and Johor combined have an overhang of 9,315 high-rise units valued at RM6.775 billion.

Data from the Valuation and Property Services Department of Malaysia (JPPH Malaysia) shows that Kuala Lumpur has the highest overhang of unsold completed condominiums and apartments. As at the first quarter of 2019, the high-rise overhang in Kuala Lumpur stood at 2,544 units, worth about RM2.338 billion, followed by Penang with 2,684 units valued at RM2.13 billion, Selangor (2,113 units; worth RM1.144 billion) and Johor (1,974 units; RM1.163 billion).

According to Kashif, the property market was most positive about the lower thresholds in Kuantan, Penang, Melaka, and Sarawak.

Kuantan had the highest rate of approval, with 75 per cent of agents from that state calling the initiative “very good,” he said.

In every state with sufficient survey responses for analysis, at least 62.5 per cent of respondents consider the lower threshold to be “a little good” or “very good.”

The states with the highest number of negative responses, in which agents call the lower price thresholds either “a little bad” or “very bad,” are Melaka (15.8 per cent), Kuala Lumpur/Selangor (7 per cent), and Sabah (8.1 per cent). Nationwide, 8.6 per cent called the change “a little bad” or “very bad,” said Kashif.

Malaysia a good market for mainland Chinese

Kashif said, recent reports by Juwai found that mainland Chinese buyers accounted for RM8.4 billion (US$2 billion) of total Malaysia residential property sales per year, and less than one per cent of all transactions.

He also said, Chinese buyers made 16.5 per cent more enquiries on Malaysian property in the third quarter of this year than in the same quarter of 2018.

In the first half of 2019, Malaysia was the fifth most popular country for Chinese property buying inquiries in the world, he added.

“Malaysia is especially appealing to buyers motivated by lifestyle, retirement, or education. It has affordable standards of living, high quality of life, medical facilities, and accessible educational institutions. Malaysia consistently ranks among the best places to live,” he said.

Kashif said the trade war encourages global corporations to relocate their operations to Malaysia due to the country’s productive labour force and strategic location.

These new investments in factories and distribution centres also lead to a certain amount of housing investment as foreign business people move to Malaysia.

“Malaysia is an essential player in the Belt and Road Initiative, as 80 per cent of China’s trade moves through the Straits of Malacca. The difficulties in Hong Kong have contributed to a strong increase in demand from Hong Kong. Total numbers of Hong Kong buyers will not be as large as some imagine because Hong Kong itself has a relatively small population,” he said.

Source: News Straits Times

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Penang seeks design ideas for its three man-made islands, offers RM510,000 as prize

The Penang government is offering RM510,000 prize money for five finalists in a competition to gain design ideas for its plan to build three artificial islands in the Straits of Malacca.

Penang Chief Minister Chow Kon Yeow who made the announcement today said the competition is meant to get design ideas from qualified and registered architects and town planners for three man-made islands under the Penang South Reclamation (PSR) project.

He said the state government has set aside RM5 million overall for the competition, including for its publicity campaign and for the RM510,000 or approximately US$125,000 honorarium money each of the five finalists will get.

He said the PSR will be known as Penang South Islands (PSI) for the competition.

“There will be main guidelines on the design for the three islands such as Island A will focus on industrial park to complement the Bayan Lepas Industrial area,” he told a press conference here.

He said the design for Island A will have to include the next level of technology, such as the Internet of Things and be Industry 4.0 ready.

“The final winner will work on the details of the design for the three islands including the phases of implementation,” he said.

Chow said the designs submitted will have to comply with all 18 conditions by the National Physical Planning Council (NPPC) and will also have to include green spaces, transportation, affordable housing and sustainability.

He said participants can form a consortium to submit their application for the competition as the project was for three islands covering a total of 4,500 acres.

“The original masterplan for the islands can be used as a guideline for participants but they do not have to follow it, they can submit their own proposals and designs,” he said.

He said the winner will also be asked to suggest names for the islands.

The closing date for the competition is November 25.

The five finalists will be picked by April next year and the final winner will be announced subsequently.

The final winning submission will be the Lead Master Plan Designer and will be in charge of the full design of the whole project.

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Affordability, overhang and foreclosures

JOHN is interested to buy a RM1.2mil property. Together with rebates and all, the real value of the house is RM1mil and John is aware of that.

John goes to the bank, and based on the sales and purchase agreement, applies for a bank loan of RM1.08mil, or 90%.

But the bank gives him an 80% loan amounting to RM960,000. John walks away from the purchase.

The developer blames “stringent financing rules” for the aborted purchase. To the bank, it has approved the loan.

For the past couple of years, developers and banks have their own definition of loan rejection. Developers say the loan rejection rate is as high as 70%. According to Bank Negara statistics, loan rejection is 25.4%.

At a media briefing on “Household debt and house financing in Malaysia” on Oct 24, Bank Negara’s Financial Surveillance Department director Qaiser Iskandar Anwarudin said 54.4% of household debt is for housing as at June 2019.

If non-residential properties were to be included, this rises to 60.9%. This is the debt carried by Malaysian households, or families, for the purchase of properties.

Qaiser says 84% of housing loans are extended by banks, while 16% are by other lending, but non-bank, institutions.

“About 70% of a bank’s income is generated by its lending activities. It is in their best interest to lend and housing loan is a significant portion, ” Qaiser says.

The Real Estate & Housing Developers’ Assocation Malaysia (Rehda) has a different definition of loan rejection/approval.

Rehda (Selangor branch) chairman Zulkifly Gharib says a developer has a register of potential buyers who apply for financing, and a register of those who make successful purchases.

“If there are 100 prospective buyers, but 70% walk away from a purchase, to us, that is a 70% rejection, ” says Zulkifly, who is GLOMAC BHD’s chief operating officer.

Zulkifly says “technically” the loan may be approved, but it did not result in a sale. As long as a sale is not concluded, that is considered as a rejection.

A source says Rehda has “never disputed” Bank Negara’s approval rates of more than 70%.

“But we are concerned about the high number of potential buyers who do not carry on with the purchase because they do not have sufficient downpayment, ” the source says.

The source says most buyers want a 90% loan margin.

In order to ensure a sale goes through, the source says a minimum 10% rebate is given during the current Home Ownership Campaign but the real price is not stated in the sales and purchase (S&P) agreement.

The source says although John’s real price is RM1mil, the developer has listed it in the S&P agreement as RM1.2mil “to help the buyer cover the downpayment.”

“Some buyers cannot even afford a RM50,000 downpayment, ” the source says.

“Let us look at the situation from the perspective of the potential buyer, from the bank’s perspective. And from the developer’s.

“As a developer, we ask ourselves… what can we do to help out. We understand the risk from the bank’s perspective, but look at the industry and its linkages to other industry, ” the source says.

Strict financing versus high house prices

While developers blame “stringent” lending/financing rules for the slow sales, Bank Negara’s surveillance department says it is the high price of housing that remains a “major hurdle”.

Qaiser says the main issue is housing affordability. Based on Bank Negara estimates, most Malaysians are able to buy up to RM280,000. But the average price of new properties launched nationwide is significantly higher, at RM420,000. The level is higher at individual state level.

This affordability issue is supported by the median multiple ratio, says Qaiser.

“A house is considered affordable if it is not more than three times the household income. In 2012, it was 3.9 times and in 2016, it was 4.8 times.

“This indicates that houses in Malaysia are seriously unaffordable, even by international standards, ” Qaiser says.

He says debt levels have moderated from the 2015 peak of 86.9% of GDP and recent growth in debt has been more aligned with income growth. However, the aggregate level of indebtedness among Malaysian households remains high relative to regional and rating peers, and high-income countries like Hong Kong, Japan, South Korea, Britain, New Zealand, Australia and the United States.

Widespread affordability issues

He adds that the affordability issue is widespread. It is not “contained” in certain areas but is most obvious in Selangor, Kuala Lumpur, Johor and Penang. This has contributed to the elevated levels of unsold properties in Malaysia, Qaiser says.

Qaiser says 73% of unsold properties are considered as not affordable, according to the different states, based on data from the National Property Information Centre (Napic).

According to Napic’s latest figures in Property Overhang 2Q19, the ringgit value of unsold completed housing, including serviced apartments and small offices home offices is RM35.1bil.

Qaiser says the main reasons why Malaysians cannot afford a house are:

> Properties not aligned to what people can afford; and

> A mismatch between income growth and property prices.

He says although there is a downtrend seen in the Malaysian House Price Index, and more units priced below RM300,000 are making their way into the market, “this rebalancing will take some time”.

Giving his perspective on the financial system, Qaiser says there are pockets of risk in the financial system.

There are those earning less than RM3,000 a month who only have 0.6 times assets to their debt.

This group is particularly vulnerable, although at aggregate level, it looks all right.

Qaiser says housing loans impairment remains low at 1.3%. Bank Negara is seeing a slight pick-up in default among properties valued at more than RM500,000 and among those with variable income.

“There is an uptick. We started seeing this last year and we continue to see it this year, ” he says.

Rising foreclosures

Analysing the foreclosure property market, AuctionGuru.com.my executive director Gary Chia said in its 3Q19 report that overall foreclosure cases have expanded further to 9,294 cases versus 8,760 a year ago, representing a 6% rise. This includes commercial, residential properties and land parcels.

In ringgit value, it is an increase of 31.6%, RM5.19bil (3Q19) versus RM3.9bil (3Q18).

On a nine-month basis to September 2019, the total number of foreclosure cases rose to 26,563 versus 23,658 a year ago, a 12% increase.

In value terms, the total aggregate foreclosure reserved value stood at RM14.38bil, a rise of 32% compared to a year ago. This supports Bank Negara’s findings that the central bank is seeing an uptick in foreclosure cases involving properties priced RM500,000 and above since last year.

Residential comprises the largest volume of foreclosure cases, at 22,196 out of the total 26,563 cases, or 83.56%, for the period ended Sept 30,2019.

Chia said the growth in the foreclosure property market appeared to be “relentless”, as evidenced by the double-digit growth recorded across the various property segments.

He expects “a strong and robust” foreclosure market going forward in the foreseeable near term amid headwinds in the domestic and external macro economy outlook, coupled with the overhang situation facing the primary property market.

The proactive measures taken by the government to reduce the property value ceiling to RM600,000 for foreign property buyers may provide relief by reducing the excess property stock in the primary market, Chia says.

Source: The Star

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