APRIL - JUNE 2020

Strange Times Today,

An Uncertain Tomorrow By Tang Chee Meng

We are living in strange times. When mid 80’s, the Asian Financial Crisis in systems of even developed countries have we ever been told that staying 1997 which preceded the Nipah virus and causing much disruption, misery at home, becoming a couch potato outbreak in 1998, the SARS outbreak in as well as deaths. It is still unsure when watching Netflix and Astro is considered 2002/3 and the Global Financial Crisis the pandemic can be brought under a healthier pursuit than going out to in 2008/9 all pale in comparison with control although there are positive the park, jogging or cycling? Where what we are currently going through. signs that China, due to the disciplined EPL football games are either played The worst thing is that this affects the approach adopted, appears to have in empty stadiums devoid of any whole world, including the two largest turned the corner in its war against the spectators or completely cancelled economies, USA and China as well as Covid-19 virus. altogether. Europe, South America and Africa. The situation in the USA has gotten These are nevertheless trying times. The Covid-19 pandemic which started worse as it has now become the Being a veteran with 40 years of in Wuhan, China (I would not use the country with the most Covid-19 cases involvement in the property industry, word “originated” as there are some whilst Italy remains the country with I have gone through quite a few quarters who believe that the virus was the highest number of deaths. India is property cycles but this is the most brought into Wuhan from the USA) has grappling with the effects of a poorly depressing period that I have ever paralysed the entire world economy executed lockdown which has resulted experienced. The recession in the besides wrecking national health in the poor and homeless being carrying out property viewings and signing of sale & purchase agreements. Some developers and agents have nevertheless claimed to have closed some sales to foreign investors during this period although the numbers are unlikely to be significant.

Stimulus Injections The government has recently announced a RM230 billion stimulus package on top of the earlier RM20 billion package to help the Malaysian economy ride out this difficult period. Plotting from the John Hopkins Coronavirus Resource Center shows that almost every country in the world have infected cases of the Covid-19. The moratorium on loan repayments which includes housing mortgages for displaced and without food whilst daily may be unable to service their loan six months will provide some breathing paid workers employed in the informal commitments and this may lead to space and help affected borrowers sector, being asked to leave their rented an increase in non-performing loans to tide through the current difficulties premises after their employers were (NPLs) which will put a strain on the and hopefully prevent more loans from forced to cease operations during the banking system as well as result in a turning into NPLs. lockdown, came out and congregated further erosion of investor confidence. in large numbers and walked long Nevertheless, there have been distances back to their hometowns. Property developers will be hard put complaints from SMEs, players in the How soon these and other countries to come up with the right strategies tourism industry and others badly are able to get a grip on the situation to address the significant changes in affected by the Covid-19 pandemic and stop the spread of the Covid-19 market conditions and this may lead that the incentives announced by pandemic is anybody’s guess. to developers holding back on new the government are insufficient and launches whilst dropping prices to have appealed for more assistance. In , we have not been spared boost sales. They have also appealed for some as the Covid-19 outbreak has escalated leeway/relaxation to the MCO to since the religious gathering. To sum up, the hope for recovery in the enable industries/service providers Unfortunately, this coincided with the residential property market following who are involved in producing/ period of uncertainty arising from the the success of HOC 2019 is unlikely to transporting essential goods and change of government in Malaysia and materialise and instead, the property foodstuffs to continue and in fact step coupled with the substantial drop in market will face an uncertain and up production and facilitate distribution crude oil as well as CPO prices, this challenging year with sluggish sales of these products. The government has created a triple whammy on the and a further decline in prices, reduction may also perhaps instruct the banks Malaysian economy and property market. in the number of new launches and to defer foreclosure proceedings on an increase in NPLs and number of mortgages which turn sour during this Economic Pressure properties put up for auction. period so that the bad loans situation These unforeseen events will have a does not become a huge burden on detrimental impact on the country Local buyers appear to have adopted the banking system. and bring down economic growth. The a wait and see attitude as they are Covid-19 crisis in particular, has forced worried about the slowdown in the The government has responded to businesses to close temporarily (some economy and the oversupply situation the appeals by topping up another permanently) whilst all industries, in certain market segments eg. service RM10 billion to help SMEs in the form of with the worst hit being the tourism apartments and sohos as well as high- enhanced wage subsidies under the related industries, have experienced end, high rise residences. PRIHATIN package, waiver/discount on supply disruptions, production cuts rentals for premises rented from GLCs, and termination of orders. The longer Foreign buyers have recently also held special PRIHATIN for microenterprises, the lockdown period, the more hard back on investing due to the political reduction in levy payment for foreign hit will be businesses especially SMEs uncertainty and the confusion whether workers and other measures. which have limited cash reserves. This the proposed reduction in the minimum will result in companies adopting pay price threshold for foreign buyers as For the property industry which includes cuts and retrenchments to stay afloat announced in Budget 2020 will be those in the property development and ultimately lead to an erosion of implemented. business as well as those providing confidence and have a big impact not professional services to the industry, it is only on the stock market but also the The travel restrictions implemented by hoped that the government will come property market. the government as well as the Movement up with a comprehensive strategy to Control Order (MCO) to counter the help the industry to get back on its The uncertainties in the political scene Covid-19 outbreak has disrupted travel feet. With the implementation of the have also affected investor confidence plans of potential investors who have MCO, the property industry has more and property investors prefer to stay now delayed or changed their plans or less come to a standstill as no on the sidelines until things clear up to invest in properties in Malaysia and construction works can proceed whilst for the better. Further, some borrowers prevented even local buyers from property sales have come to a halt as developers’ sales galleries are closed payment schemes for projects that they a more important component of the and property viewings are not allowed have launched. This will be a good developer’s marketing plan. to be carried out. time for house buyers and investors with cash to spare to pick up their dream To move ahead with the times, To help the industry tide over these homes at lower prices and with more developers will also improve their difficult times, the government attractive payment terms and sales service levels/interaction with their can continue with the stamp duty packages which they will never dream customers by introducing loyalty exemptions offered during HOC2019 as of getting a few years back when the programmes as well as mobile apps well as lower interest rates on housing property market was still hot. which the customers can utilise loans and relax lending criteria by the to request for information, make banks. They can also consider offering For those with cash reserves in hand, it payments, request for services, set certain incentives to developers such would be a great opportunity to pick appointments as well as search as discounts on statutory contributions up a property or two when the market services like finding nearby restaurants or at least deferred payment schemes is in a slump and prices are down and and other consumer services to help developers preserve their cash hitch on the ride up when the market flow and survive the current difficult recovers eventually. Finally, the recovery of the Malaysian times as well as provide a lower cost property market will greatly depend environment to enable the developers In China, now that the worst of the on how the pandemic pans out not to reduce selling prices. At the same pandemic appears to be over and only in Malaysia but also globally. If time, they should allow developers to the economy is moving into a recovery the situation worsens, it could lead to apply for extension of time to complete mode, the property market in some a global recession and this will lead their projects due to the mandatory cities have shown a rebound with prices to an erosion of confidence and the stoppage of work during the MCO moving back up again. Obviously, we property market will then take a longer period. cannot expect Malaysia’s property time to recover. (The IMF has indicated market which is very much smaller that the Covid-19 pandemic will trigger As for companies involved in providing and less dynamic than that of China a global recession in 2020 which will professional services to the industry, the to recover at the same speed but be worse than the one triggered by government can help by increasing we strongly believe that when we do the Global Financial Crisis of 2008/9). the financial assistance/subsidies to manage to ride out the present crisis, help these firms pay their staff salaries the market would undoubtedly improve If our Malaysian authorities are able as well as providing cash assistance and those who managed to look for to prevent the Covid-19 pandemic to workers without fixed salaries whilst opportunities and take advantage of from worsening and it is brought to an making it less onerous for companies them in the crisis will be the ones who end quickly, our economy will stand a and workers to qualify and make their will benefit tremendously. chance of making a faster recovery. claims. (The Singapore government As it is, Bank Negara Malaysia has has offered a 75% subsidy scheme to Some developers will refocus their just revised the economic growth all companies in an effort to get them attention on launching landed projection for the country for 2020 to retain their staff). This is especially residences which are less affected to between -2.0% and +0.5%. How critical for real estate agents/ than high-rise strata titled residences soon our property market is able to negotiators who are not paid any and property buyers will be able to recover will depend on whether our fixed salaries but depend wholly on avail themselves to more choices economic recovery is U or V shaped. commissions made by selling/renting of landed properties. The landed A U-shaped recovery looks more likely a property. The MCO has prevented properties will obviously be located a in the current context. Nevertheless, these agents/negotiators from carrying bit further from the city centre where as history has proven, the economy out their work, thus resulting in them land prices are able to support lower and market will definitely recover. The having zero income during this period. density developments. Locations which timing is however uncertain as too Tweaking some regulations to enable continue to attract buyers are those many factors are in play. valuers and other professionals to which enjoy good transportation continue working remotely from home networks eg. LRT/MRT/Monorail as well In the meantime, we hope everyone will also help to keep these firms afloat as highways and have easy access will abide by the government’s MCO eg. allowing remote/virtual inspections to amenities like schools, shops and guidelines and duduk diam diam di of properties for the purpose of public recreational facilities. rumah and work from home unless completing valuation reports. you are employed in a sector exempt- Developers will also rethink and remodel listed under the MCO’s schedule of Opportunities? their business plans and possibly essential services and products. For property buyers/investors, there embark on increased digitalisation will be more opportunities available in and use of proptech to enhance their Finally, we at Henry Butcher Malaysia, the auction market as more borrowers business operations and efficiency. would like to express our deepest and could default on their housing loan Having experienced the pain and most sincere thanks and appreciation repayments resulting in more properties inconvenience of closing all their sales to all those dedicated workers at the being foreclosed and put up for sale galleries during the Covid-19 lockdown, front line – the doctors, nurses, other via auctions. the use of virtual show units and walk- health workers, police force, armed throughs as well as sales webinars forces, delivery men, cleaners, rubbish Secondly, on the primary market, and digital payment channels will be collectors and many others for your property developers will be forced to increased and enhanced whilst sales dedication and untiring efforts despite offer more attractive sales packages and marketing promotions through the dangers of being exposed to the including price reductions and easy digital/online platforms will become virus.

APRIL - JUNE 2020 HERALD 1 A Season of Covid-19

or MCO which has restricted people’s economic concerns over Covid-19 movement and most of the commercial in order to stimulate the economy. and industrial activities except those The property market in Seberang essential services. As at the time of Perai would also be affected by this writing this Editor’s Note, we are still pandemic with stiff challenges ahead under the MCO to fight the pandemic. but we foresee property prices of We hope this outbreak can be put those affordable segments remaining under control as soon as possible and firm and resilient. We hope that the people can return to normal life again. stimulus packages and the OPR rate cut would buffer the adverse impact Our country experienced a series As for the property market in Seberang and jump start the economy which of crises during the last two months. Perai, performance was improved in would lend a hand to intensify the First was the sudden change of the first half of 2019. The total volume property market development. government at the Federal level of transactions grew by 2.64% on a from Pakatan Harapan to Perikatan year-on-year basis whilst the total SR FOOK TONE HUAT Nasional which have then led to the value of transactions rose by 17.59%. Senior Manager, Henry Butcher change of government in certain States Market activity across the sub-sectors Seberang Perai as well. This dramatic change of public were mixed with the Residential and administrative power is the first in our Industrial sub-sectors improved whilst history that shocked every nation. After a the Agricultural and Development land few days of uncertainty and conjecture, sub-sectors declined slightly. the eighth Prime Minister and a new Cabinet were finally appointed and Moving forward, 2020 would be formed to govern the country and the another challenging year for the State Administration has since returned property player in Seberang Perai back to normal. We hope this new in view of the Coronavirus outbreak Henry Butcher donated RM5,000 to administration will play an effective and other uncertainties. The MCO the Tabung Khas Covid-19 by the role in helping the country weather has paused almost all economic Selangor Government. The fund is and overcome the current extremely activities and put the economy aimed at equipping the frontliners challenging environment. on a stand still. It would definitely as they stand between the gap for distress our economic performance the country in the battle against The second crisis was the Covid-19 and thus affect the property market Covid-19. pandemic which broke out in our development. Property players are country in early of March 2020. This expected to revisit their outlook and Selangor Menteri Besar YAB Dato’ Coronavirus was first detected in sales volume forecast for the year Seri Amirudin Bin Shari (left) Wuhan in China in late 2019 but has ahead and projects would be further received the mock cheque from since spread to the entire globe in deferred. Henry Butcher’s Long Shi Chuen, February and March 2020. In order to Special Assistant to the COO, on 1 curb the spreading of this deadly virus, Bank Negara has reduced the April 2020 at the official residence our government had no choice but to Overnight Policy Rate from 3.00% of the Menteri Besar. implement the Movement Control Order to 2.00% as a countermeasure to

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2 HERALD APRIL - JUNE 2020 Property Market Report of Seberang Perai 2019/2020

than 1,300 units were taken up out of the 1,530 units available.

On the back of the successful Home Ownership Campaign (HOC) in 2019 which reportedly sold more than RM17 billion worth of residential properties nationwide during the year-long campaign, Seberang Perai’s overhang units also reduced by 17.63% to 1,939 units in Q3 2019 against 2,354 units in Q2 2019.

Given the prevalent soft market in Seberang Perai, the measures announced in Budget 2020 would have The shopping mall of Central Square in Seberang Perai is one of Henry Butcher Seberang proven to be positive mechanisms that Perai’s clients. can sustain the market’s recovery in 2020 if not for the Covid-19 outbreak. Salient The performance of the property was the most sought after residential measures include the liberalisation of market in Seberang Perai improved in district as it registered 42% of the total foreign ownership of condominiums and the first half of 2019 with total volume volume of transactions. This is followed service apartments, the government- of transactions growing by 2.64% on by Seberang Perai Utara at 34% and supported rent-to-own scheme and the a year-on-year (y-o-y) basis from 4,871 Seberang Perai Selatan at 24%. Prices recalibrated Real Property Gains Tax. transactions in H1 2018 to 4,979 in H1 of the residential properties across all 2019. Total value of transactions also three districts were generally firm. Seberang Perai’s residential property increased, rising 17.59% from RM1.68bil transactions in brief: to RM1.98bil. In the first half of 2019, the residential ● The average subsale prices of single sub-sector was rather active as it storey terrace houses at Taman Chai Market activity on the whole was mixed recorded a 6.93% growth in total Leng at Perai and Taman Sejahtera with the industrial sub-sector recording volume of transactions, growing from at Alma remained flat at RM350,000 the highest volume of transactions at 3,116 transactions in H1 2018 to 3,332 and RM230,000 respectively. Similar 12.59% followed by the residential sub- transactions in H1 2019. Total value of houses at Bandar Tasek Mutiara at sector at 6.93%. Development land transactions also grew by 17.76% or Simpang Ampat however inched and agriculture on the other hand RM841 million to RM990 million in the up slightly by 2.65% from an moderated by 14.5% and 10.65% corresponding period. average price of RM257,000 in 2018 respectively. to RM264,000 in 2019. Amidst the soft property market, ● The average subsale prices of Although the agriculture sub-sector demand for affordable homes was still double storey terrace houses at did not record a high volume of considered high. transactions, it however registered the This is evidenced highest value of transactions at 74.48%. from the big crowd This was followed by the commercial witnessed at the (20.53%), residential (17.76%) and unit selection event development land (1.05%) sub-sectors. held over two days Value of transactions for the industrial in April 2019 by sub-sector did not match its active Aspen Group at volume of transactions as it declined by its Vivo Executive 15.46%. Apartments project in Batu Kawan. The Residential estimated built- Seberang Perai is generally classified up area for each into three districts - Seberang Perai apartment is 730 Utara, Seberang Perai Tengah and sq ft onwards Seberang Perai Selatan. Among the and priced from three districts, Seberang Perai Tengah RM238,000. More Source: NAPIC

APRIL - JUNE 2020 HERALD 3 Bandar Putra Bertam at Kepala In terms of supply, Batas appreciated by 5.9% to Bukit Mertajam has RM360,000 in 2019 compared to the highest stock RM340,000 in 2018. Similar houses with 363,522 sqm in Taman Bagan Lallang transacted or 48.82%. This is at RM570,000 or 3.51% higher followed by Perai compared to RM550,000 in 2018. at 130,333 sqm ● The highest value of transaction for (17.50%), Simpang a residential property in 2019 was a Ampat at 103,088 double storey bungalow in Taman sqm (13.84%) and Cengkeh Indah at Bagan Lallang Seberang Jaya at with a land size of 8,169 sq ft. It was 84,916 sqm (11.40%). sold for RM2.3mil. Units at Butterworth, Commercial Seberang Jaya and Like the residential sub-sector, the Jawi enjoy high commercial property market was also occupancy rates of Source: NAPIC vibrant in the first half of 2019 albeit more than 96% while with a smaller number of transactions those at Bukit Mertajam recorded Halaman Indah and Taman Bakap in comparison to the residential market. around 45%. Overall, occupancy Indah in Seberang Perai Selatan. Total volume of transactions increased rate ranges between 45% and 100%, by 15.59% from 340 transactions in influenced by factors like location and The opening of Ikea Store and the H1 2018 to 393 transactions in H1 size as the main considerations. new shops at Aspen Vision City is 2019. Total value of transactions also expected to position this new hub as registered improvement but with a Incoming supply in the near future an emerging CBD in Batu Kawan and larger margin, going up 20.53% from includes the 330,000 sq ft Sunway together, the secondary commercial RM184.05 million to RM221.83 million. Carnival Mall expansion and the property market in Seberang Perai is approximately 1.2 million sq ft anticipated to remain stable in 2020 Performance across the three Seberang GEM Megamall at Perai. With these with prices expected to be solid. Perai districts was however mixed. In additional space, rental for retail in Seberang Perai Selatan, total volume Seberang Perai is expected to come Industrial of transactions recorded close to 44% under pressure. Industrial land and small medium growth while the value of transactions industry (SMI) factories have seen brisk increased even more substantially by Secondary Market - Commercial uptake with increasing demand in the 136.83%. Commercial properties in the pipeline. This has spurred the Penang secondary market are a reflection of State Government to identify new Over in Seberang Perai Tengah, volume the primary market as transactions locations to expand Seberang Perai’s of transactions also improved and were active with prices holding firm in industrial footprint. For example, several went up by 22.88% but its value of 2019. For example, in Bandar Perda, a hundred acres of new industrial land transactions dropped marginally by 3-storey shop office with a land size of will be added in Byram, Nibong Tebal, 2.85%. Market activities in Seberang 2,561 sq ft was transacted for RM1.6 as part of the government’s plan to Perai Utara were rather lacklustre million while another three adjoining fill the current shortage of supply and as both the volume and value of units of 4-storey shop offices with a meet demand in the next two years. transactions declined by 18.63% and land size of 1,646 sq ft in the same 0.42% respectively. area were sold for RM950,000 each. Seberang Perai’s strategic location has also earned it the best growth Seberang Perai’s major commercial Over in at Seberang rate in volume of transactions for property transactions in brief: Jaya, a 4-storey corner shop office industrial properties at 19.58%, ahead ● Two adjoining units of three storey with a total land size of 3,292 sq ft of other sub-sector categories such semi-detached shops at Icon City was transacted for RM4 million while as residential and commercial. The sold for RM3.9mil each; a similar 3-storey shop office at Pusat number of transactions increased ● A four storey shop-office at Bandar Perniagaan Jalan Raja Uda with from 143 transactions in H1 2018 to Sunway sold for RM4mil; and a land size of 1,496 sq ft was sold 171 transactions in H1 2019. However, ● A seven storey shop-office at Juru for RM1.38 million. Another similar in terms of total value of transactions, it Sentral with a land size of 4,660 3-storey shop office with a land size registered a negative growth of 15.46% sq ft and a total gross floor area of of 1,600 sq ft in Taman Bertam Ria from RM252 million to RM213 million. 26.982 sq ft transacted for RM7mil. at Kepala Batas was transacted at RM1.2 million. From the three Seberang Perai districts, Retail the growth rate of Seberang Perai The retail sub-sector in Seberang Perai Aside from the aforementioned areas, Selatan’s volume of transactions was filled with excitement in 2019 with other pockets of active commercial was the highest at 82% followed by the completion of the first northern markets include Taman Samagagah Seberang Perai Utara at 45%. Seberang Peninsular Malaysia’s Ikea Store in Batu and Taman Chai Leng in Seberang Perai Tengah however moderated Kawan. This added the existing supply Perai Tengah, Pusat Perniagaan Jalan by 2.08%. In terms of total value of of retail space by another 39,979 sqm Raja Uda in Seberang Perai Utara transactions, all three districts registered to 744,616 sqm as at Q3 2019. and Bandar Tasek Mutiara, Taman declines.

4 HERALD APRIL - JUNE 2020 Activities were also thriving in the corporate sector where companies New/Under Construction Projects were investing to expand their existing facilities. For example, Hotayi Electronic Begonia Villa @ Pearl City Simpang Ampat (M) Sdn Bhd has committed to reinvest Gated & guarded, duplex villa & double storey terrace houses development RM1 billion to expand its 350,000 sq ft by Tambun Indah Land Berhad production facility in Batu Kawan, RGT Bhd will be investing more than RM20 The Sky @ TriPark, Alma million to expand its manufacturing 3 blocks of luxury high-rise condominium by Sunrise MannerSdn Bhd. operations in Bukit Minyak, Palm Garden, Simpang Ampat Scandinavian Industrialized Building Serviced Apartments by Tambun Indah Group. Systems (SIBS) from Sweden will be expanding a new plant of 46,450 sqm Iconic Point, Simpang Ampat facility in Penang Science Park and 3-storey semi-detached shop-offices & detached shop-office, 4-storey Smith + Nephew will be setting up a boutique hotel & 2–storey drive thru detached shops by Iconic Maison Sdn new high technology manufacturing Bhd and Iconic Development Sdn Bhd. facility in Batu Kawan.

For SMI factories, transactions were sizes from 368 to 371 sqm were sold and Seberang Perai Tengah at -4.74%. active in Taman Industri Permatang for RM630,000 to RM710,000 while In terms of total value of transactions, Tinggi, Kawasan Industri Ringan Sungai over in Taman Industri Beringin Seberang Perai Selatan experienced Lokan, Taman Industri Machang Indah at Juru, similar SMI factories with an increase of 96% followed by (Machang Bubok), Taman Industri land sizes of 790 to 974 sqm Seberang Perai Tengah with a Cherok Tokun and Taman Nagasari. were transacted at RM1.8mil to marginal increase of 3.22% while Prices of these preferred areas have RM1.92mil. Seberang Perai Utara declined by 62%. also held steady and in some cases, ● In Batu Kawan SME Village, a double experienced upward appreciation. storey semi-detached factory with Outlook a built-up area of 675 sqm and Contrary to the well wishes received Seberang Perai’s major industrial land area of 1,491 sqm was sold in the beginning of the year, 2020 is property transactions in brief: for RM3.86mil,making it the highest anticipated to be another challenging ● A factory at Perai Industrial Estate transacted price for a semi-detached year for the property players in with a total land area of 10 acres factory in Seberang Perai in 2019. Seberang Perai primarily caused by was sold for RM21mil. Another Covid-19. The pandemic outbreak has parcel of industrial land in the Development Land led to the Movement Control Order same place with a land size of 10 As far as land earmarked for (MCO) which has halted almost all acres was sold for RM25mil; development is concerned, no major economic activities nationwide. At ● A factory at Taman Industri PERDA transaction was recorded in 2019 as this juncture, property players are Bukit Minyak with a land area of developers held back land purchases expected to revisit their forecasts and 5.27 acres was sold for RM18mil. in view of the uncertain environment. determine if certain selected projects ● In Taman Industri Machang Indah, Most of the transactions that occurred will be further deferred. This is in view Machang Bubok, 1.5-storey in 2019 were of smaller pieces of lands of the weakening Malaysian economy terrace factories with a land size below RM1 million each. Nevertheless, due to Covid-19 despite Bank Negara’s of 284 sqm were transacted at lands suitable for affordable or mid- swift call to reduce the Overnight RM300,000 to RM380,000, recording range housing development are Policy Rate (OPR) from 3.00% to 2.00% an appreciation of 25% to 35% still in demand and this sub-sector as a countermeasure to stimulate the compared to 2018’s average prices is expected to perform at its current economy. of RM240,000 to RM280,000. Similar pace in 2020 and prices are expected factories with a land size of 178 sqm to consolidate further. With the foreseeable challenges in Kawasan Industri Ringan Sungai ahead, Seberang Perai’s property Lokan were sold at RM750,000, a Volume of transactions for development market will likely be affected with the 7% increase compared to 2018’s land moderated by 14.25% in H1 2019. exception of the affordable segment average prices. From 463 transactions in H1 2018, it where prices are expected to ● In Taman Industri Teguh at Permatang dropped to 397 transactions in H1 2019 remain resilient. As the government’s Tinggi, a corner 1.5-storey terrace while the total value of transactions stimulus packages have already factory with a land size of 525 sqm was flattish at RM213 million. been announced within the first two was sold for RM1.25mil, the highest phases of the MCO and the OPR rate transacted price for a terrace From the three districts, Seberang cut already in place, we hope these factory in Seberang Perai in 2019. Perai Tengah continued to be the measures would buffer the adverse ● In Kawasan Industri Ringan Sungai most active with 181 transactions impact and help jump start the Lokan, newly completed 1.5-storey followed by Seberang Perai Utara with Malaysia economy and with that, the semi-detached factories with land 147 transactions and Seberang Perai property market. sizes of 753 to 874 sqm were sold for Selatan with 69 transactions. Despite RM2.2mil to RM2.9mil, with prices the hive of activities, the volume of For more information about holding firm compared to 2018. transactions were actually in a decline Seberang Perai, please contact Henry Similar factories at Taman Industri - Seberang Perai Selatan registering a Butcher Butterworth at hbmperai@ Cheruk Tokun at Alma with land 31% drop, Seberang Perai Utara at -15% henrybutcher.net.

APRIL - JUNE 2020 HERALD 5 Malaysia Retail Industry and Covid-19 Pandemic At the end of 2019, Retail Group Malaysia (RGM) projected a 4.6% growth rate in retail sales for 2020. However, this projection is no longer valid due to an unexpected development in the first three months of this year - the Covid-19 pandemic. At the beginning of April 2020, RGM has revised its growth rate projection from 4.6% to -5.5% for the whole year of 2020.

State of a shopping centre in Malaysia during the Movement Control Order.

Covid-19 Outbreak Retailers dependent on foreign tourists tourism event. For the record, tourism The rapid outbreak of 2019 Novel have been severely affected. These shopping accounts for about 10% of Coronavirus (Covid-19) since January retailers include those operating in total retail sales in Malaysia. 2020 has disrupted the retail growth major shopping districts (such as KLCC potential in Malaysia for this New Year area, area, Chinatown Since the second-wave virus outbreak with the first case confirmed on 25 area), resort islands (Penang, Langkawi, started in late February 2020, the January 2020. The first Malaysian who islands in East Malaysia etc.), theme decline in the number of shoppers at contracted the virus was reported on 4 parks and attractions (such as Genting popular shopping centres became February 2020. Highlands) as well as international obvious. When the virus outbreak airports (such as KLIA, klia2, Penang became severe and spread to all The tourism industry in Malaysia is the International Airport, Kota Kinabalu parts of the country in early March, most affected sector. Since Chinese International Airport etc.). Some of Malaysians became worrisome and New Year at the end of January 2020, these retailers reported drop in sales as rushed to grocery stores to stockpile more than 5,000 tour groups from China much as 80%. on foods and household items. At the were cancelled. It was also reported same time, they had started to avoid that hotels received more than 150,000 This year is Visit Malaysia 2020 and public places, including commercial cancellations from tourists travelling Malaysia targeted to attract 30 million and shopping centres. from China, other Asian countries as tourist arrivals with tourism receipt of well as Europe. Tourists entering from RM100 billion. Unfortunately, these Movement Control Order Thailand and Singapore through land targets can no longer be met due to The Movement Control Order (MCO) transportation declined as well. Some the Novel Coronavirus outbreak. In began from 18 March 2020 and more theme park operators reported 80% March, the Ministry of Tourism, Arts and than 209,000 retail stores were forced decline in visitors during this period. Culture decided to cancel this major to shut down during this period. They

6 HERALD APRIL - JUNE 2020 represent 61% of total retail outlets and Some may choose to close down Recession in 2020 63% of total retail sales in the country. immediately because their current The widespread Covid-19 pandemic financial burden is much higher than has led to a likely global recession in Almost all the non-essential retailers the government incentives. 2020. have zero income. Even the retailers with online platforms are unable to deliver Post-MCO In Malaysia, Bank Negara Malaysia the goods due to the government The current situation will not end after projects GDP growth rate of this year to restriction on vehicle movement for MCO has been lifted and the virus be between -2.0% and +0.5%. Malaysia non-essential items. outbreak has led to an economic crisis. Institute of Economic Research (MIER) expects the national economy to Many retailers feel helpless during Retailers that have been depending decline by 2.9% while world Bank’s this period. This situation is totally heavily on bank borrowing to expand latest estimate for Malaysia is -0.1%. new to a large majority of retailers in their businesses in the last few years will the country. They are caught by the be severely affected. Some will not be For the whole year of 2020, Malaysia’s surprised announcement. They never able to survive beyond this year. retail industry is expected to suffer a experienced this before and are never decline in sales by 5.5% as compared prepared for this. They do not know Retailers that have been overly to last year. what to do. expanded during the last few years will have to slow down their expansion The previous negative growth in They are stuck with stocks that they plan and to consolidate their existing Malaysia’s retail was in 1998 - the first are unable to sell and are not able to retail network. They will have to close year of Asian Financial Crisis. In 1998, generate cash to pay salaries. Large down under-performing retail outlets. Malaysia’s retail industry contracted majority of these retailers occupy shop These include retailers that expanded by 20%. offices and unlike some shopping aggressively using the franchising centre owners, landlords in these shop method. It will take some time for the retail industry offices are not offering free rental or to recover from this unprecedented rental reduction. Even if they wanted Retailers that have been depending crisis. After the MCO is lifted, it will take to apply for bank loans to save their heavily on foreign tourists have to time for retail businesses to recover as companies, they will likely be rejected rethink their business strategies. For we expect consumers’ spending to due to their weak financial records. example, many retail outlets opened in take at least two to three months to Kota Kinabalu during the last 10 years return to the same buying momentum During these six weeks of MCO, grocery were due to the large arrival of foreign like last year. stores, convenience stores, pharmacies tourists. They are suffering greatly now and bakeries have been enjoying due to Covid-19. We can expect about 15% of the total good business. However, the stricter retail supply or at least 51,000 stores to rules imposed on social distancing Retailers that have been sticking to close down in Malaysia within the next (such as must wear a mask, one traditional retailing methods of brick- six to eight months. This crisis will lead person in a household is allowed to buy and-mortar store format have to also to the survival of the fittest. grocery, one metre’s rule, visit stores as reconsider their channel of distribution infrequently as possible, one person in of goods and services. They need to This article is written by Tan Hai Hsin, a car only etc.) since the final week of spend more on social media marketing Managing Director of Retail Group March have affected their businesses. and invest in online shopping facilities. Malaysia and Henry Butcher Retail.

If the situation takes longer time to improve, we will expect many retail shops to close down in the next two to three months. Some have already informed their landlords that they are shutting down after their landlords refused to give rental discounts, others already put their businesses up for sale. Some chain stores too have no choice but to close down selected outlets to save costs.

Last year, there were about 342,588 retail outlets in Malaysia. 97.5% of retail outlets in Malaysia are small-medium enterprises (SME).

Recently, the government has announced a series of wage subsidy schemes, one-off grants and interest- free loans for SME companies. However, not all SME retail companies will get to enjoy these financial assistance. Retailers are now forced to rethink their online strategy to survive.

APRIL - JUNE 2020 HERALD 7 100 Reasons to Never Forget On 15 March 2020, Henry Butcher Malaysian and Southeast Asian Art Auction recorded RM2.3 million in sales in a rather unconventional fashion.

It was the first time ever in Malaysian art auction history that the entire bidding for the art pieces was conducted with no floor bidding, instead bids were carried out via the phone, online and absentee bids. This was nonetheless a last minute change as the Covid-19 situation in Malaysia was worsening just days before the auction, which led to the government imposing a ban on gathering of more than 250 persons.

“As we usually have a crowd of about 250 to 300 people attending, for the interest of all to ensure the people’s safety and health, we switched plans. This was for the bidders to bid safely from the comfort of their homes while minimising the spread of the Coronavirus,” said Sim Polenn, Director of Henry Butcher Art Auctioneers.

In the pioneering model of the auction, 100 artworks were sold, reflecting sustained interest in the high quality Little Things by Datuk Ibrahim Hussein painted in 1995 clinched the top sale of the artworks among keen collectors in auction at RM403,200. Malaysia and the region. A classic piece by Yusof Ghani, Siri Tari, Khalil Ibrahim’s work recorded RM84,000, Top sale of the day was a 1995 from 1993 achieved RM168,000. Ahmad followed by Awang Damit Ahmad’s 1993 masterpiece by Datuk Ibrahim Hussein. Zakii Anwar’s Red Legong, painted in Tenaga Hidup 1 (from the artist’s most Titled Little Things, it was sold at 2004 achieved RM100,800, making it sought after series: Essence Of Culture RM403,200. the third highest sale in the auction. EOC) which achieved RM78,400.

A magnificent piece by Dato’ Sharifah Fatimah Syed Zubir titled Song Of Songs 5 was sold for RM72,800 while Untitled by Dato’ Sharifah also in 1974, which came all the way back from Austria, achieved RM50,400.

An extremely rare Abdullah Ariff piece titled After The Monsoon Cloudburst was sold at RM67,200.

Collectors also took the opportunity to grab important batik works by Dato’ Chuah Thean Teng (widely known as the Father of Batik Art) and Ismail Mat Hussin. Teng’s Come, Sing To Me achieved RM49,280 and Marketplace sold for RM35,840 while Country Folk concluded at RM29,120. Ismail Mat Hussin’s Fresh From The Sea was sold at RM35,840.

Contemporary artists such as Gan Yusof Ghani’s Siri Tari from 1993 was sold for RM168,000. Chin Lee, Zulkifli Yusoff, Ahmad Fuad, Bayu Utomo, Hamir Soib, and Samsudin

8 HERALD APRIL - JUNE 2020 Ahmad Zakii Anwar’s Red Legong from 2004 went home at RM100,800.

Wahab did equally well given the “We would like to take this opportunity market...it was the most challenging change of auction format. Gan to sincerely thank all the Supporters time in recent memories. I’d say we Chin Lee’s Frontal Reclining Nude for (Collectors, Bidders, Consignors, are extremely lucky and blessed to example achieved RM35,000, Zulkifli Artists, Partners, Colleagues, Media, have achieved this encouraging sales Yusoff’s Pahlawan Yang Berani Dari Pasir and Friends) of Henry Butcher Art results,” said Sim. Salak and Ahmad Fuad’s piece were Auctioneers (HBAA). sold for RM26,880 each. “We anticipate more challenging times “Things got tougher in March which ahead but HBAA will move forward with Bayu Utomo’s Infinity II went home started off with the political instability faith and one step a day, to present with the collector at RM24,640, Hamir that weakened market confidence a better art auction in the coming Soib’s Battle Of The Insider achieved followed by the oil price war, crash of the months.” RM20,000 and Samsudin Wahab’s The share market, escalating Coronavirus Last Supper at RM23,520. confirmed cases, the stagnant property For the complete e-catalogue and results of Malaysian and Southeast Asian Art Auction including past auctions’ top performers, logon to www. hbart.com.my.

Dato’ Sharifah Fatimah Syed Zubir’s Song Of Songs 5 painted in 1998 was sold at RM72,800.

Sold for RM78,400, Tenaga Hidup 1 by Awang Damit Ahmad (1993).

APRIL - JUNE 2020 HERALD 9 Business Valuation vs Property Valuation “Business valuation is simple and much like property valuation” – this is a common misconception, but the reality is far from this. By Adie Gupta

Business valuation is a specialised field A business can be perceived as a pool between business valuation and and so is property valuation, but both of income generating assets including property valuation: are very different although the broader fixed assets, sometimes property/real valuation concepts are the same. Let’s estate, working capital and intangible Not easy to compare one business to look at this in more detail from the point assets such as goodwill and brand/ another as highlighted above; of view of business valuation. tradename, customers, software, ● Not easy to access financials of patents, etc. This pool of income private companies whereas Any business or property, in general, generating assets work together to property values are more readily can be valued using one of the three make the business tick. A business available; valuation approaches. These being valuer needs to be cognizant of these if ● Not easy to find sales data market, income and cost. not valuing the assets individually. for business valuations. This is generally not the case for Both business and property follow the Then there are many other aspects in a properties; basic premise of any investment (refer business to be considered including – ● Asking price of businesses is more Figure 1). people/management, product/service, meaningless (can be ridiculous customers, suppliers, market position, at times) than the asking price of V competitors, industry growth and future property; A trends, technology, R&D, regulation, ● Financial statements in many RETURN L RISK environment, financial performance and cases need to be adjusted for U strength, taxation, etc. As such, there are business valuation; and many different aspects to a business ● Business value is impacted by E and by its nature, a business is more numerous factors as highlighted Discount rate / complex and tends to be harder to above and does not always CASHFLOW Capitalisation value and more time consuming than increase over time. say valuing a property in most cases. Figure 1 In conclusion, both business In general, the higher the potential Two businesses operating in the same/ valuation and property valuation are return of an investment, the higher the similar industry with a similar size could specialised fields. However, due to the risk, although there is no guarantee have vastly different business values. nature of businesses and the many that one will get a higher return by different aspects to be considered, accepting more risk. There are various Let’s look at a real-life example, names business valuation tends to be more classes of potential investments, each not disclosed for the purpose of complex. A valuer needs to spend time with their own unique risk-return profile. confidentiality. Two businesses are of a understanding the business, otherwise The general progression of investment similar size but one is valued at almost there is always the risk of over-valuing risk is short-term debt, long-term debt, 30% more. You may ask why and it’s or under-valuing something if it is not property, high-yield debt, and equity (i.e. a perfectly valid question. One of the properly understood. an investment in a business). Businesses businesses has better: tend to provide the highest rate of return This article is written by Adie Gupta, and are more complex than other ● quality of customers i.e. bigger Managing Director of Spring Galaxy, an potential investments, hence more customers who entered into Associate of Henry Butcher Malaysia. complex to value. medium to longer term contracts Adie provides valuation and related on better terms, make prompt advisory services to the corporate The nature of businesses is such that payments and limited bad debts; sector in Malaysia, Singapore and no two businesses are very similar and ● quality of management where they the wider AsiaPac region. He has over this aspect is discussed further below. are working on future proofing 20 years of valuation and corporate On the other hand, two properties of the the business and have invested finance experience. He is a regular same size in a similar location may not substantially in technology to stay speaker at conferences and other differ so much in value as the land value relevant; and forms on valuations, M&A and tends to be a more stable measure ● higher profit margins due to the Intellectual Property (IP) topics. for comparison and the variable quality of customers, use of part can be the building/structure. technology, etc. Spring Galaxy is a corporate So, in general, the comparison advisory firm specialising in business between two properties tends to be These are only some of the differences valuations and transaction support relatively simpler than comparing two but usually, there are many more. services. For more information, please businesses. Let’s now look at some key differences visit https://springgalaxy.com

10 HERALD APRIL - JUNE 2020 Value Map North Kiara

TAMAN PETALING TAMAN SEJAHTERA KAMPUNG FLAT TAMAN MEGAH BENTING

SEGAMBUT TAMAN SEJAHTERA UNITED APT POINT TAMAN NOVA 1&2 PLAZA SEGAMBUT SINAR MANDY BUKIT COURT SRI BINTANG TAMAN FLEXUS SURIA SRI SINAR NILAM PRIMA THE TIARA MANDY CHANGKAT ERA SEGAMBUT1&2 VILLA JAYA AMANDARI KIARA BAYU ANJUNG TVILLAIARA ANJALI CRYSTAL BUKIT SEGAMBUT SEGAMBUT BUKIT TAMAN RESIDENSI INDAH SEGAMBUT MURNI HARMONI LAMAN *ROYALLE 2 SCENARIA CONCERTO VILLABUKIT PRIMAROSVILLA DUTAMAS ORKID PELANGI KOMPLEKS NK KERAJAAN BOUGAIN- RESIDENCES VILLA KIARA KASIH SANJUNG KAMPUNG SEGAMBUT DALAM PUNCAK KIARA

LEGEND Price RM(psf)

Under Construction Below 200 201 - 300 301 - 400 401- 500

QUICK STATS

Built Up (SF) Price (RM PSF) Completed 501 - 600 601 - 700 701 - 800 Above 800 Maximum 2,565 853 Minimum 549 191 * = Asking Price Median 1,152 408

APRIL - JUNE 2020 HERALD 11 ● Segambut falls within Mukim Batu and is a parliamentary ● In 2007 also, condominiums began in Segambut with constituency in Kuala Lumpur. Amandari Condominium pioneering with 1,593sf per condo. ● From 2016, the Segambut constituency has expanded to Thereafter, Rosvilla Condominium, Laman Scenaria, Royalle include areas further away such as Taman Bukit Utara Condominium and Villa Crystal had units between 990sf & Selatan, Bandar Manjalara, Desa Park City, Bukit Lanjan, and 1,615sf while Villa Orkid, Concerto Condominium and Bukit Damansara as well as Taman Tun Dr. Ismail (TTDI) Timur, Anjali Condominium were larger from 1,319sf to 1,893sf. Utara, Tengah & Selatan. ● Developers continued to build larger units with some ● Segambut is located only 9km from . projected for completion in early 2020’s such as the NK ● Leveraging on its proximity to Mont Kiara, and since Mont Residences, Residensi Harmoni 2 and Sanjung Residence Kiara was originally part of Segambut before it was with built-ups between 1,371sf and 2,562sf. rebranded for upscale developments, areas such as Taman ● Segambut’s road accessibility includes Jalan Tuanku Abdul Sri Sinar, Segambut Jaya, Taman Desa Segambut, Bukit Halim (formerly Jalan Duta), Jalan Sultan Azlan Shah Segambut, Bukit Prima Pelangi etc, have been rebranded by (formerly Jalan Ipoh), Jalan Kuching, DUKE (Duta–Ulu Klang developers as North Kiara from 2011. Expressway), DUKE 2 and it is also close to the North-South ● From the 1990’s to 2005, most high rises in Segambut were Expressway and NKVE (New Klang Valley Expressway). flats and apartments with less than 900sf in built-up per unit. ● Public transportation includes Sungai Buloh-Kajang (SBK) Only Taman Sejahtera Apartment, Bougainvilla Apartment MRT Line 1 via the Semantan, Pusat Bandar Damansara and and Mandy Villa were between 1,023sf to 1,066sf. TTDI stations, MRT Line 3 via Mont Kiara and stations, ● The trend for larger units exceeding 900sf began in 2007 and Segambut Komuter station connecting Tanjung Malim with Mandy Court, Prima Tiara 1 & 2 Apartment and Bukit and Port Klang. Segambut Apartment.

Secondary Development (Completed & Built-Up, sq ft)

Completion Project Minimum Maximum Date Amandari Condominium 1,593 NA 2007 Anjali Condominium @ North Kiara 1,319 1,856 2017 Bougainvilla Apartment 1,023 1,066 2000's Bukit Segambut Apartment 995 NA 2009 Bukit Sri Bintang Apartment 657 NA 2000's Concerto Condominium @ North Kiara 1,588 1,838 2015 Flexus Signature Suites 563 NA 2018 Laman Scenaria @ North Kiara 1,019 1,250 2016 Mandy Court 818 NA 2007 Mandy Villa 1,012 NA 2005 Nilam Apartment 678 926 2000's Nova 1 & 2 Apartment 743 893 2014 Plaza Sinar Apartment 818 NA 2000's Prima Tiara 1 & 2 Apartment 915 926 2007 Rosvilla Condominium 1,195 1,356 2010 *Royalle Condominium 990 1,496 2016 Suria @ North Kiara 713 NA 2018 Taman Indah Murni Flat 721 NA 1990's Taman Sejahtera Apartment 1,066 NA 1990's Taman Sejahtera Flat 549 NA 1990's Villa Crystal 1,152 1,615 2017 Villa Orkid 1,577 1,893 2010's * = Asking Price Primary Development (Under Construction & Built-Up, sq ft)

Completion Project Minimum Maximum Date Kiara Kasih* 850 NA 2022 NK Residences 1,435 2,565 2020 Residensi Harmoni 2 1,371 1,656 2020 Sanjung Residence 1,410 2,186 2022 The Era 646 1,302 2021 United Point Residences 667 1206 2021

* Rumawip is a housing project initiative which delivers affordable housing across the Federal Territories of Malaysia.

12 HERALD APRIL - JUNE 2020 Slower Start to 2020 Visibly less new launches in KL and Selangor in Q1 2020 compared to Q1 2019. By Henry Butcher Research ● Q1 2020 presented only 9 project launches compared to Q1 2019 KUALA LUMPUR with 28 project launches. This could be attributed to developers having exhausted all their projects to take advantage of the Home Ownership Campaign in 2019. Highrise ● In percentage terms, there were RM500 - more high rise developments in Q1 1 RM600psf PROJECT 2019 at 54% compared to Q1 2020 at 44%. ● Selangor had more projects launched in Q1 2020 with 67% and Highrise Q1 2019 64% but in terms of units RM500 - MONT KIARA 1 RM600 launched, Kuala Lumpur is ahead PROJECT psf with 70% or 3,317 units in Q1 2020 Highrise RM1330 - and 57% or 6,534 units in Q1 2019. 1 RM1550 ● There were slightly more landed PROJECT psf developments (56%) launched in Q1 2020 although in terms of number of units, landed properties only constituted 18% with the lion share of 82% or 3,885 units coming from the high rise category. ● In terms of total number of units, Q1 2020’s 4,720 units only make up less than half of 2019’s 11,480 units.

No. of New Launches in Q1 2019 2020 Projects 28 9

No. of Units Launched in New Projects 2019 2020 Units 11,480 4,720

Total No. of New Launches by Month Types of Projects

15 10 2019 2020 15 10 9 12 8

9 6

6 7 4 6 4 4 4 3 3 4 2 3 2 1 1 1 1 1 0 0 APARTMENT BUNGALOW CONDOMINIUM SEMI-D SERVICED SOHO / SOFO TERRACE / January February March / FLAT RESIDENCE / SOVO / SOSO SUPER LINK SERVICED APARTMENT

APRIL - JUNE 2020 HERALD 13 ● Service residences or service apartments continue to dominate in SELANGOR Q1 2020 albeit with less launches of only 3 projects compared to Q1 2019’s 10 projects. Landed terrace or super link were the next most popular with 4 projects in Q1 2020 against 9 projects in Q1 2019. ● More than half of the projects in Q1 2020 had built-ups larger than 2,000sf but in Q1 2019, the 800sf to 1,000sf category were more popular with 13 projects, trailing behind with 12 projects were projects exceeding 2,000sf. ● The RM501 to RM750psf category remained the most popular between Q1 2019 and Q1 2020. ● Q1 2019 was dominated by the affordable segment with 60% of the units launched priced below RM400,000 but the scale tipped in Q1 2020 with 78% of the projects launched exceeding RM1mil per unit.

SUNGAI BULOH Location

Landed 3 RM700 - 2 3 Setia Alam 1 RM800psf PROJECT Kajang 2 Klang 2 2 2 Puchong Sungai Buloh 2 SETIA ALAM 1 Highrise Bangi 1 PUCHONG RM800 - Bukit Bintang 1 1 Mont Kiara 3 RM900psf Landed Cheras 1 PROJECTS Landed RM400 - 1 RM400 - 2 RM600psf PROJECT Dengkil 1 RM600psf 1 Kepong Jalan Kuching 1 1 Puncak Alam 1 Sepang 1 1 Setiawangsa Serendah 1 1 Setia Alam 1 Sungai Buloh Sri Petaling 1 1 Taman Melawati 1

2019 2020

Unit Sizes Pricing Price Per by Projects by Projects Square Feet (PSF)

17% Below 600sf 0% 60% Below 11% 47% Below 44% RM400,000 RM500

20% 601sf - 800sf 33%

43% RM401,000 33% 57% RM501 78% 43% 801sf - 1,000sf 33% - RM600,000 - RM750

17% 1,001sf - 1,200sf 33% RM601,000 44% RM751 50% - RM800,000 23% - RM1000 22% 23% 1,201sf - 1,500sf 22%

13% 1,501sf - 1,800sf 11% RM801,000 RM1,001 47% - RM1,000,000 56% 0% - RM1,500 11%

20% 1,801sf - 2,000sf 22%

Above Above 47% RM1,000,000 78% 7% RM1,500 11% 40% Above 2,000sf 56%

NB: The percentages shown in the table are based on our analysis of the projects that we surveyed but they are not computed based on the number of units within those projects. The way to read this table is as follows eg. based on the projects that we analysed, 56% of them 14 HERALD APRIL - JUNE 2020 included units of above 2,000 sq ft in size. It however does not mean that 56% of all the units are above 2,000 sq ft. Each project will probably only have very few units of above 2,000 sq ft in size.