THE 22nd NATIONAL DEVELOPERS’ CONVENTION AND GENERAL MEMBERSHIP MEETING GROUNDWORK: SHAPING A SUSTAINABLE HOUSING INDUSTRY
HOUSING THE NATION
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PRESENTED BY : TAN SRI DATUK EDDY CHEN LOK LOI PAST PRESIDENT OF REHDA MALAYSIA, CHAIRMAN REHDA Institute 26 - 27 September 2013, Fairmont Makati, Philippines Towards Sustainable Development
Overview • • • • • • • • •
Malaysia: Quick Facts Malaysian Real Estate Evolution REHDA Malaysia The Malaysian Property Industry Public-Private Partnership, Malaysian Experience Housing Development in Malaysia Issues and Challenges Why Malaysia? Way Forward
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Malaysia: Quick Facts AREA
sq km
MALAYSIA
330,252
Peninsular Malaysia
131,805
Sarawak
124,450
Sabah
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73,997
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Malaysia: Quick Facts 29.3 mil population at 1.3% annual growth Stable GDP growth (5.6% in 2012) Income per capita forecasted (US$ 10,296 in 2013)
Low & stable unemployment rate : 3.2% as of 2012 Source: Economic Planning Unit and Department of Statistic, 2012
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Malaysia: Quick Facts HOUSING STOCK 2009
2010
2011
2012
POPULATION
27.9 mil
28.3 mil
28.6 mil
29.33 mil (f)
HOUSING STOCK
4.34 mil
4.43 mil
4.51 mil
4.58 mil (Q3 2012)
Source: Economic Report 2011/2012, Economic Planning Unit, NAPIC
HOUSING DEMAND (units) Annual Household Formation
142,657
Average transactions per annum
200,000
Average housing completions per annum
100,000
Source: Department of Statistics, NAPIC
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Malaysia: Quick Facts
Stable political environment Rule and enforceability of law Consistent and healthy growth economies Business-friendly environment Easy access to funding & sound banking system Healthy international reserves Low budget deficits and debt Lack of natural disaster High Connectivity
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Malaysian Real Estate Evolution
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MALAYSIA N REAL ESTATE EVOLUTION
THE 60’S – INFANT YEARS OF THE HOUSING INDUSTRY Mass housing development goes back about 40 years ago. Formal and structured housing programs were undertaken in 1966. The Government saw housing as a component of social services to meet the needs of lower income group. Private sector developers purchased and developed properties with active participation by the State Government. Towards Sustainable Development
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MALAYSIA N REAL ESTATE EVOLUTION
THE 70’S – A DECADE OF STEADY GROWTH Housing policy took 2-pronged objectives of the NEP of eradicating poverty and restructuring societies. The then HDA (now known as REHDA) was formed to convey the private sector developers’ input to the Government housing policies. Government’s role was quite substantial with various federal and state agencies actively involved in housing provision.
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MALAYSIA N REAL ESTATE EVOLUTION
THE 70’S – A DECADE OF STEADY GROWTH Private sector developers involved in the development of medium and high end housing. The 70’s witnessed growing interest in the housing sector, led by:
a. Increased in population purchasing power; b. growing economic prosperity of the country Government democracy.
agenda
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to
create
a
housing
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MALAYSIA N REAL ESTATE EVOLUTION
THE 80’S – A DECADE OF CONSOLIDATION Housing programs in urban areas were accelerated with greater emphasis on low cost housing or social housing. To optimize urban land use, subdivided low cost housing was implemented. Mandatory requirement for private sector developers to build at least 30% low cost social houses.
Between 1981 & 1983, tighter credit control for property development and collapse in primary commodities’ prices in 1983 & 1984 impact the housing industry adversely. Towards Sustainable Development
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MALAYSIA N REAL ESTATE EVOLUTION
THE 90’S – A PERIOD OF MATURATION Growing maturity in terms of quality and range of products.
Modern technology, rapid development and scarcity of prime land led developers to build condominiums and develop large townships. In 1997, no Malaysians are without a home.
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MALAYSIA N REAL ESTATE EVOLUTION
THE 90’S – A PERIOD OF MATURATION In 1998, HOC was launched by the Prime Minister to help clear existing housing supply suffered under the 1997 Asian financial crisis. In 2005, squatters were effectively eradicated – moved to projects that were designated as “people’s housing”.
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Real Estate & Housing Developers’ Association
REHDA A Responsive Respected Responsible Relevant NGO
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REHDA • • • • •
•
Association of real estate and housing developers founded in 1970 Recognized as the leading voice of advocacy and governance of the real estate and housing industry REHDA (total 11 REHDA branches) represents about 80% of total active developers nationwide. Number of members as at September 2013– 1036 Members’ involvement in residential, township development, commercial, shopping complexes, golf course etc. Protects the interests of members and promotes sectoral growth via active engagement with the Government, participates in various committees (States and Federal Government), and holds key positions in several regional bodies of an international network.
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THE MALAYSIAN
PROPERTY INDUSTRY
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Malaysia Property Sector – Contributions to GDP Year
2009
2010
2011
2012(e)
GDP (RM mil)
629.9
674.9
709.3
743.5
80.9
107.4
137.8
106.3 (as at Q3 2012)
12.8%
15.9%
19.4%
14.3%
Value of Property* Transactions (RM mil)
Property Transactions / GDP
Residential, Commercial, Industry, Agricultural, Development Land and others.
Source: Economic Planning Unit, NAPIC Towards Sustainable Development
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Property Sector as A Significant Contributor
Linkages to 140 economic activities Towards Sustainable Development
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HOUSING DEVELOPMENT IN MALAYSIA
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Malaysian private housing developers deliver approximately 100,000 units of houses annually
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100 developers listed in Bursa Malaysia are well-capitalized
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MALAYSIA PLANS Performance of Housing Sectors: Private sector driven – mostly exceeded target.
Sources : 3MP – 9MP Towards Sustainable Development
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LOW & MEDIUM COST HOUSINGPrivate Sector’s Performance Private sector’s achievement in delivering low cost & medium cost house – OVER ACHIEVED Low Cost
Malaysian Plan
Medium Cost
Target (Unit)
Achievement (Unit)
Target (Unit)
Achievement (Unit)
7 MP (1996-2000)
140,000
129,598
110,000
206,208
8MP (2001-2005)
40,000
97,294
64,000
222,023
9MP (2006-2010)
77,700
N/A
178,000
N/A
Sources :Property Market Report, 2012 ,NAPIC Towards Sustainable Development
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PUBLIC-PRIVATE PARTNERSHIP (PPP)
MALAYSIAN EXPERIENCE
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PPP in MALAYSIA : Introduction • •
• •
PPP - a substantial contributing partnership to the housing delivery system. PPP in housing started during the administration of the former Prime Minister of Malaysia, Tun Dr Mahathir Mohamad from 1982 to date. Tun Mahathir believes that the private sectors are better placed to deliver some of the nation’s goods and services more effectively. Some of the PPP modes of operation including of:
1. Land Swap
2. Land Sales profit sharing
3. Direct alienation
The above items, all values are determined by government valuers. Towards Sustainable Development
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PPP in MALAYSIA: Land Swap • Land swap in exchange for building for the government as ascertained facilities or buildings. • The former will alienate an equivalent value of government owned land to the developers (JV partner) for housing or any commercial project as the latter deem fit.
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PPP in MALAYSIA: Land Sales & profit sharing • Land sales & profit sharing in exchange for the value of land and a share of the developments future profit (varies from 20% - 30%)
• The government will alienate the same equivalent value of land to the JV partners for housing or commercial project.
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PPP in MALAYSIA: Direct Alienation • Government will alienate the land to private developers on a straight out land premium payment.
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HOUSING DEVELOPMENT – PLANNING & PROCESS
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3 Levels of Governance FEDERAL GOVERNMENT National Housing Policy
STATE GOVERNMENT Land Matters, Land Use
LOCAL GOVERNMENT Zoning, Building by Laws
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Property Development Process
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Process • Residential Properties – Governed under the Housing Development (Control & Licensing) Act 1966 (“HDA”) – Mandatory to use standardized Sale and Purchase Agreement (“SPA”) from HDA – Payment of purchase price is via progressive installments based on stages of work done and – Completion of SPA is within 24 months (landed houses) or 36 months (apartment/condominium/subsidized unit) from date of SPA – Memorandum of Transfer will be executed upon issuance of title to the property.
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Process • Commercial Properties – Market driven agreement – Payment of purchase price is via progressive installments based on stages of work done – Completion of SPA is usually within 36 months from date of SPA – Memorandum of Transfer will be executed upon issuance of the title for the property.
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Financing to House Buyers • Local or foreign banks offer loan packages • High margin of financing (MOF) up to 90% of the property value • Loan approvals subject to the purchaser’s financial standing and credit worthiness • Enjoy loan tenure up to 40 years, or 70 years of age, whichever is earlier
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Acquisition of Property by Foreigner • Properties of RM500,000 and above (USD: 161,300, price differs from one state to another state)
• Requires consents by state authorities • Foreigner also can purchase properties under Malaysia My Second Home Programme (MM2H) • Financing – Local or foreign based banks offer loan packages – Currently, loan are available between 60% and up to a maximum of 90% of the purchase price of the property – Loan approvals subject to the foreign purchaser’s financial standing
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Residential Developments
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Source: Property Stock Report Q4 2011
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ISSUES & CHALLENGES
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CHALLENGES Scarcity of residential development land & high land cost
Non-availability of affordable land
High Cost High Compliance Cost (between 15-30% of GDV) contribution to privatized utilities companies, surrender of land, construction of infra etc.
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High construction cost recent hike in cement, constant increase building materials, labor and machinery
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CHALLENGES Shortage of skilled workers
Demand > supply drive rates up
Labor Reliant on foreign labors
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High cost of labor leads to affordability issues
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CHALLENGES
PUBLIC TRANSPORTATION SYSTEM Ineffective – timing, route coverage, and non-user friendly especially to OKU.
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PUBLIC TRANSPORTATION CAPACITY Lagging behind population
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ADDRESSING ISSUES: Government action Improved plot ratio
Government intervention in infrastructure facilitation funds
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Adoption of IBS mechanization
Aggressive public transport upgrading works
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Why Malaysia?
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Why property is a good asset class and investment proposition in Malaysia? Excellent ownership registration and titles
Land law is based on Australian Torrens System Predominantly FREEHOLD Liberalized policy on foreign acquisition
Competitive commercial property capital values and yields Favorable tax regime
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Way Forward • As a rapidly developing country, property market is one of the key drivers & engines of economic growth spearheading its transformation
• In moving forward to high income nation status, property developers will continuously making effort to respond the needs and current demand of Malaysians and global environment in providing world class real estate Towards Sustainable Development
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Thank You
Responsive | Respected | Responsible | Relevant www.rehda.com
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