Adoption of BTS will affect supply, prices

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KUALA LUMPUR: Malaysians can expect to see housing supply decline and housing prices spike should the build-then-sell (BTS) method of property development be implemented, said members of a panel discussion on the topic “Build-then-sell: The impact on property prices” at The Edge Investment Forum on Real Estate 2011 last Saturday.

The panellists were Bandar Utama township developer See Hoy Chan Holdings Group director Datuk Teo Chiang Kok, Real Estate and Housing Developers Association (Rehda) Youth member Sam Tan and Kevin Lam, managing director and country head of personal financial services of UOB Malaysia.

The forum, organised exclusively for The Edge readers, was presented by UOB Malaysia and supported by S P Setia Bhd, the No 1 ranked developer in The Edge Top Property Developers Awards 2010.

The government is expected to make the BTS system mandatory by 2015, with the aim of reducing the number of  abandoned projects.

Teo said BTS will have a huge impact on developers’ cash flow, and only those with deep pockets will survive.

“As the number of developers reduces, the number of houses built will also reduce dramatically. Demand will exceed supply,” Teo said, adding that BTS is more suitable if there is no housing backlog.

“In theory, BTS is ideal but in practical terms it is not sustainable yet,” said Teo. Some of the phases in the Bandar Utama township in Petaling Jaya were developed via the BTS method.

Rehda Youth’s Tan concurred, saying, “Supply for new housing will shrink and house prices will soar as BTS is very capital intensive, especially with the escalating cost of building material and land.

Tan, the executive director of Ken Holdings, said BTS could also affect the delivery of affordable housing. “Supply of houses in the rural areas and suburbs will be compromised. A developer who was able to build 300 houses under sell-then-build would only be able to build a third of that under BTS, he explained.

UOB’s Lam said BTS would require developers to have much deeper pockets. “When the exposure is open for a duration that is much longer than what it is now, it’s likely that the risk and cost of financing to developers will go up and developers will only be able to focus on one project at a time,” he said.

“Considering the near-term impact of reduced supply and changes in property prices, who will this benefit?” he asks.

He also urged all stakeholders to work together to support the long-term sustainable growth of Malaysia’s property market.

Earlier, three other speakers had taken to the rostrum. Sharing his views on the residential market in the Klang Valley, property consultant CB Richard Ellis (Malaysia) executive chairman Christopher Boyd predicted a “soft landing” for Malaysia with the current trend of price increases likely to plateau within the next few years.

Given his expectations of single-digit growth in the housing market, he advised investors to “buy cautiously with the long term in view. Don’t sell and hold on to what you’ve got”.

Speaking on the commercial market focusing on shopoffices, Reapfield Properties Sdn Bhd senior vice-president Gerard Kho told participants  that in order to maximise returns on their investments, they should hold on to their shopoffices for three years after handover by developers.

He based this on the real estate agency’s prior transactions, which showed that shopoffices appreciated by a whopping 105% after three years.

“Shops tend to appreciate by 56% upon handover and by 67% a year later,” Kho said.

Cartographer Ho Chin Soon of Ho Chin Soon Research, who spoke on the proposed mass rapid transit (MRT) line in the Klang Valley and the related potential real estate hot spots, said areas where MRT interchanges are located are poised to enjoy a greater boost to their values compared with sites close to interchanges between MRT lines and light rail transit (LRT) lines.

He identified three sites tipped for the MRT-to-MRT interchanges as the car park at HELP University College in Pusat Bandar Damansara; an area near Bangsar Shopping Centre and the proposed Kuala Lumpur International Financial District (KLIFD) in KL’s Golden Triangle.

Going strong into its fifth year, the forum themed “Buy, Sell or Hold?” attracted about 750 attendees.

For full coverage of The Edge Investment Forum on Real Estate 2011, read the April 18 issue of City & Country, the property pullout of The Edge weekly.
This article appeared in The Edge Financial Daily, April 11, 2011.