Friday 11 April 2014

Why has another Iskandar launch faltered?

Since the latter part of last year, we have written extensively on the anticipated slowdown of the property market in Malaysia.

We paid particular attention to Iskandar, Johor. From literally plantation estates and nothing more, it became the “Promised land” to many developers, investors and property owners.

Over the last few months, there has been a series of mega land deals, some involving land reclamation. This has shocked the market and changed sentiment.

A photo of Puteri Harbour Masterplan obtained from UEM Sunrise Sales Gallery

The latest launch last weekend is by Singapore-based Pacific Star Development Pte Ltd in Puteri Harbour, Iskandar. The Puteri Cove project comprises three 33-storey residential towers with almost 1,000 units on 7.8 acres of land.

Tower 1, with 329 units, was launched several months ago and currently has a roughly 70% booking rate.

Tower 2, also with 329 units and 33 storeys, was launched last weekend. It attracted a booking rate of only about 25%.

The poor response to Puteri Cove is in sharp contrast to the launch of the nearby Teega project by UEM Sunrise Bhd in late 2012, which was 98% sold within a month of its launch.

Apart from the now weaker overall market sentiment, there may also be some other reasons for the poor take up at Puteri Cove.

One major reason could be pricing. The “sea view” units are priced at between RM1,300 to RM1,450 psf. The “marina view” units are priced at between RM1,500 to RM1,600 psf.

These prices are higher than the top end of the market in terms of new launches in the area, in a now weaker environment.

Meanwhile, there is also the issue of design. A property investor commented that the design layout of the building looks like flats, with long corridors and up to 14 units per floor served by four central passenger lifts and a service lift.

It remains to be seen whether Puteri Cove’s poor launch take-up rate is due more to the weaker property market or its pricing or other issues.

Whatever the case, it highlights two important lessons.

One, Iskandar is like the goose that lays the golden egg. Don’t kill it by over-expanding development and supply.

Two, a more challenging market means developers must offer their customers a better all-round value proposition.

Read more on this in The Edge this week. 

Tuesday 8 April 2014

First world infrastructure with third world mentality

Anyone coming back to Kuala Lumpur via the KLIA faces this parking chaos, if you are being picked up by car. There are actually five lanes outside the arrival gates. The inner two are reserved for airport taxis. Yes, two lanes. Take a closer look next time.

The other three lanes are reduced to a single lane with cars double parking. Look around and you see traffic cops standing nearby. Take out your camera and start clicking. The cops will soon come around, blow their whistle and ask parked cars with drivers inside to move on. 

If my memory serves me right, this “parking on driveway” chaos happened since 1998 when this airport was first opened. I remembered Kadir Jasin wrote about this “first world infrastructure with third world mentality” observation.

15 years has passed and not much has changed.

Does this also happen elsewhere? Yes, it does in some places. But it is equally true to say that it does not happen in many places too.  Even in places like Taipei, Yangon, Port Moresby and Ho Chi Minh, drivers are better disciplined.

If this observation of Malaysian behaviour is endemic and symbiotic, perhaps we need to work harder on the mindset of the people, the software, rather than continue investing on hardware?

Perhaps there is much gain in productivity that can be achieved out of our existing assets? It is one way to reduce the Government’s budget deficit.

Friday 4 April 2014

Spending beyond its budget

Overspending the supply budget has been a trend in Malaysia. Since 1968, the government has gone to Parliament at least twice a year to ask for additional funds. Supply expenditure, along with charged expenditure, makes up the government’s operating budget. 

This year, the Ministry of Finance (MoF) tabled a bill on March 24 seeking an additional allocation of RM 2.4 billion to cover overspending in the 2013 supply budget. As a result, supply expenditure for 2013 has risen by RM 16.5 billion or 10.2% to RM 179.1 billion. Therefore, to spend within its 2014 supply budget of RM174.8 billion, the government will have to cut expenditure by 2.4% or RM4.3 billion.

However, there is urgency to cut spending this year, especially since international rating agencies have been calling for Malaysia to reduce its expenditure to avert a credit-rating downgrade. 

Will this spur the government to spend within its 2014 budget or should we expect another supplementary budget again?

Will there be sufficient cost savings from the subsidy rationalisation measures to buffer the impact of the overspending in supply budget?

Will the rising inflation cap the government’s ability to implement further subsidy cut in 2014?

Read the full article in The Edge this week.

Thursday 3 April 2014

Three Cities, Three Eateries

I was travelling much over the past two weeks. Here is a quick review of three of the many restaurants I visited. 

Hakka Restaurant in Kuala Lumpur, opposite the Pavilion.

It was one of my favorite restaurants back in the 1990s. I love Hakka dishes. My grandmother was a Hakka and an excellent cook.

The food turned out to be a major disappointment. Even the most basic Hakka dish, the braised pork with preserved vegetable in soya sauce (“mui choy kau yok”) was dry and tough.

The place was busy and my observation is that it is now more a place for tourists.

Hashida Sushi, Mandarin Gallery, Singapore

This is an authentic Japanese restaurant in the upmarket Mandarin Gallery, with excellent sushi. Set meals are offered in the menu but you can always order ala carte, for a price.  A piece of toro costs S$45. It was excellent, but yes, too expensive.

Chef Hung, Taipei

Somewhere in Taipei, Taiwan, is this really good Taiwanese beef noodle store. The beef noodle costs approximately RM26 a bowl.  The restaurant was extremely crowded when I was there, with busloads of tourists and locals alike.

The crowd outside the restaurant, as shown in the photo, were patrons waiting to get in.  Inside, people literally wait beside you for a seat.  But try you must when you are in Taipei next.

Tuesday 1 April 2014

An evening with the homeless in KL

On March 15, about forty of us from The Edge and related companies spent an evening with Kechara Soup Kitchen, handing out food to more than 800 homeless folks in and around Kuala Lumpur.

Everything was well organized and volunteers from Kechara have impressive knowledge and familiarity with these people. Their sincerity was admirable.

What touched me most was the fact that there were so many kids involved and some of the elderly were in very poor health.

I will not attempt to articulate the reasons for homelessness. The various Government agencies and support groups such as Kechara are best equipped and they do an excellent job.

But I would recommend spending an evening with them. It does give life a little better perspective.

I would add however, that homelessness in Kuala Lumpur is neither unique nor worst than elsewhere. I was in Taipei and as I walked the park in the early hours, there were many homeless there too. And in Vancouver, despite excellent social safety nets and the very cold weather at times, there are many homeless folks too.