So will the property markets in prime areas such as Kuala Lumpur, Petaling Jaya and Penang island disappear from the property developers’ radar?

Not quite, but with limited large tracts of prime land, developers have been focusing on niche, higher-end projects.

In the heart of downtown Kuala Lumpur, Mah Sing will develop a 1.7ha parcel at the former Tunku Abdul Rahman flats, better known as the Pekeliling Flats, in Jalan Tun Razak, in a joint venture with privately-held Asie Sdn Bhd and Usaha Nusantara Sdn Bhd. The project, tentatively called M Sentral, is estimated to have a GDV of RM9 billion. Mah Sing acquired the land for RM600 psf, and will look to jointly develop the rest of the former Pekeliling Flats land, which measures 58 acres.

Hua Yang also has several projects in the pipeline in Kuala Lumpur, especially those under its RM840 million One South integrated development located in Sungei Besi, south to the city centre. The project spreads over 16.7 acres and is currently enjoying high take-up rates, with its Phase 1 comprising retail and office units more than 80% sold.

The group has also acquired 1.55 acres of leasehold commercial land in Desa Pandan, which is located near Jalan Tun Razak and the proposed Kuala Lumpur International Financial District (KLIFD). The land was purchased for RM32 million and the group plans to develop it into affordable serviced apartments with pricing in the range of not more than RM400,000, and a GDV of RM160 million.

With limited prime land left in the urban centres, property developers would have to look much further out to build new townships. And that’s where S P Setia went to Hulu Langat, where it hopes to recreate another “Setia Alam” — its successful transformation of a backwater palm oil estate to a thriving township in less than a decade.

S P Setia acquired 409ha of freehold land in Beranang, Hulu Langat, for RM330.1 million, or RM7.50 psf. The oil palm land will be converted into a mixed residential township with an estimated GDV of RM3.5 billion.

Maybank Investment Bank Research said in a report that the property developer is spearheading a new relatively untapped trend of affordable housing development which will provide steady bread-and-butter sales to the group and support its long-term growth. The research house noted that the land could turn out to be another highly successful “Setia Alam” given S P Setia’s track record and expertise in developing townships.

Up north, Penang continues to draw attention. Confidence in the state was summed up by Berjaya Group tycoon Tan Sri Vincent Tan. He said he was impressed with the level of cleanliness in Penang; the state has done very well economically over the past few years, having attained the highest level of investments in the
country last year with RM12.2 billion.

Berjaya Land Bhd acquired 23ha of land in the famed Penang Turf Club area for RM459 million cash, or RM184 psf for a high-end residential property development.

The group said the project, with an estimated GDV of RM1.52 billion, will be a low-density, exclusive gated housing development comprising bungalows, semi-detached units and low-rise condominiums. The development will take five years to complete.

Not only is the Penang island property market red hot now, the same could also be said about the property market on the mainland, Seberang Perai.

Other than Tambun Indah Land Bhd, which has firmly positioned itself on the mainland Penang

property market after successfully building several notable townships such as Taman Tambun

Indah, Juru Heights, Pearl Garden and Pearl Villas, Hua Yang is also making its foray into the market.

According to the group’s chief executive officer Ho Wen Yan, the group is currently scouting for landbanks on mainland Penang as well as in Kota Kinabalu, Sabah. He said that the group is going to raise RM100 million to fund landbank acquisitions in these two key markets.

“Penang is one of the high growth states in terms of economy and population. It is a target market for us to build affordable housing in the state. In Kota Kinabalu, we will look at building high-rise affordable residential property in the urban centres, whereas if it is outside the urban centre, it would be viable for us to build more landed properties,” he said during a press conference after the company’s AGM last Friday .
However, there are concerns over the various property projects in the more mature markets of Kuala Lumpur and Penang island , giving rise to fears that there will be an oversupply of housing.

Penang, for example, has seen a surge in planned projects over the next 10 to 15 years worth RM29.6 billion, according to news reports. At the current level of property purchasing in Penang, which is an all time high, it will take 10 to 11 years for the market to absorb such a large number of projects.

Datuk Jerry Chan Fook Sing, the Real Estate and Housing Developers’ Association (Rehda) Penang chairman, had said property launches should be perfectly timed to suit demand so the many projects would not lead to an oversupply in the island’s property market which will dampen prices/yields.

According to Affin Investment Bank property analyst Isaac Chow, there will always be demand in the medium- and low-cost property markets but the high-end residential property market will see slower demand, as buyers have become more selective and prices will be quite “shaky”, especially for high-rise developments.

“The right property in the right location will see an increase in demand and hence price, whereas the wrong property in the wrong location will see lower demand and the price will decrease,” he said.

He maintained that property prices in Malaysia are still generally affordable as only about 20% to 25% of a buyer’s monthly disposable income is spent on rent or mortgage payments as opposed to buyers in other countries who would have to spend almost 30% of their monthly disposable income on mortgages.

With the recent turbulence in the global financial markets, amid fears of a recession in the US and Europe, developers are still confident in the property market.