OCTOBER 2010 ISSUE

Budget 2011: Strengthening Public-Private Partnerships

Spotlight on the Hospitality Industry Property Transactions Update Greater KL Conurbation Residential Property Price Trend Investor Highlight: Singapore
Table 1: Major development projects in Malaysia

Real estate sector to benefit from Budget 2011s infrastructure push The 2011 Budget unveiled on 15 October 2011 saw more pump priming initiatives to ignite economic growth. The government estimates real GDP growth of 7.0% in 2010 and 5%-6% in 2011. The Budget pushes on with the governments agenda for increased publicprivate partnerships notably through more announcements of significant infrastructure and development projects. With the public sector setting these projects in motion, this is seen as a promising step and positive acknowledgement of the private sectors role in driving foreign investments into the country. The 5 notable high impact infrastructure projects announced will cost an estimated total of RM81b (US$25.1b) (Table 1). Beneficiaries of these projects will benefit from improved accessibility, enhanced infrastructure and possible appreciation of land value in areas in its vicinity. These include areas such as Puchong and Subang in Selangor, Kampung Baru and Pudu within KL City Centre, Batu Kawan and Balik Pulau in Penang and Johor Bahru City Centre in Johor. Exciting days ahead for the Hospitality industry Malaysias continued rise in tourists and business travelers are seen as main drivers for the local hospitality industry. Total tourist receipts increased to RM53,368m in 2009 compared to RM49,561m in 2008. The Ministry of Tourism records a total of 180 4-star and 5-star hotels in Malaysia as at end 2010, with total room supply of 54,175 rooms. Foreign investors own 58% of the 4-star and 5-star hotels in Malaysia. There are no restrictions on foreign ownership of hospitality assets in Malaysia. Besides KL, other local thriving hospitality markets are Penang, Johor, Sabah, Melaka and Langkawi Island. According to Mr. Previn Singhe of Zerin Properties a leading speacilist in the sale-purchase of hotels in South East Asia says, the outlook for the hospitality sector will continue to be strong moving into 2011. New trends in the industry are limited service hotels, serviced apartments, spa resorts, budget and branded budget hotels. He believes on the continued strength of hotel rates and occupancy levels, fueled by factors such as growth of the tourism market, opportunities for varied products. There is still lack of prominent international hotel brands. (Fig. 1-5)

Major Infrastructure Projects Announced Major Infrastructure Projects Announced Kuala Lumpur International Financial District (KLIFD) Mass Rapid Transit in Greater KL Malaysian Rubber Board land, Sungai Buloh Warisan Merdeka (100 Storey Tower) Corridor Development Iskandar Malaysia Northern Corridor Economic Region East Coast Economic Region Sarawak Corridor of Renewable Energy Sabah Development Corridor
Source: Ministry of Finance

Cost Cost (RM'billion) (US$'billion) Completion Date 26 40 10 5 0.34 0.13 0.18 0.09 0.11 8.06 12.4 3.1 1.55 0.11 0.04 0.06 0.03 0.04 n/a 2020 2025 2020

Between 2020 - 2025

Figure 1: Tourist Arrivals and Receipts to Malaysia

RM' million 60,000 50,000 40,000

(in' millions) 25 20 15 10 5 0
2003 2004 2005 2006
2007 2008 2009

30,000
20,000 10,000 0

Receipts (LHS)
Source: Tourism Malaysia

Arrivals (RHS)

OCTOBER 2010 ISSUE

Figure 2: Average Room Rates of 3 to 5-Star and Budget Hotels in KL, 2005-2010
450

Figure 3: Occupancy Rates of 3 to 5-Star and Budget Hotels in KL, 20052010

80% 75%

Average Room rate (RM)

400 350
300 250 200 150 100

Occupancy Rate
2005 2006 2007 2008 2009 2010

70%

65%
60% 55%

50%
45% 40% 2005 2006 2007 2008 2009 2010

50 0 3 star 4 star 5 star Budget

3 star

4 star

5 star

Budget

Figure 4: Total Average Room Rate & Occupancy Rate for Hotels in Penang, 2008-2010

Figure 5: Total Average Room Rate & Occupancy Rate for Hotels in Johor, 2008-2010

142

300

60% 50%
40% 30% 20% 10%
Occupancy Rate

Average Room Rate (RM)

140 139 138

Occupancy Rate

40% 30% 20% 10% 0% 2008 2009 Average Room Rate (LHS)

Average Room Rate (RM)

141

50%
250
200 150 100 50

137
136 135 134

133
132
0
2008 2009 Average Room Rate (LHS)

0%
2010 Occupancy Rate (RHS)

2010 Occupancy Rate (RHS)

Source: Zerin Properties Research

OCTOBER 2010 ISSUE

Property Transaction Update Jan-July 2010 data from NAPIC recorded a total of 4,815 transactions with a value of RM14.4b (US$4.6b) in the 4 major states tracked by MPI; Kuala Lumpur, Selangor, Johor and Penang. The residential sector continues to be robust throughout the year in Kuala Lumpur, Selangor and Penang. A total of 1,066 transactions (RM2.45b/US$0.79b), 998 transactions (RM2.25b/US$0.73b) and 278 transactions (RM0.50b/US$0.16b) were recorded in Kuala Lumpur, Selangor and Penang respectively. Transactions in Johor remain dominated by the industrial sector. The development of Iskandar Malaysia is seen to be the main driver of further growth for the states industrial sector. A total of 105 industrial land amounting to RM0.32b/US$0.10b changed hands. (Fig. 6-9) Greater KL Conurbation Residential Property Price Trend

Note: US$/MYR = 3.1 Source: MPI Research

Notwithstanding existing favourable conditions such as low lending rates and high margin of financing available to property purchasers, limited supply of land and innovative product offerings are noteworthy factors that are influencing price premiums of residential properties in Kuala Lumpur (KL) and to some extent, Penang island. Rental rates for landed property in KL is observed to be moving faster than the stable rentals for high rise units, currently averaging between RM2,800 RM3,000 (US$620 - US$930) per unit. Average gross yields for double storey terraced houses and high rise units in 2Q10 are stable at 3.3% and 6.6% respectively. A trend in pricing tiers emerges from the difference in asking prices of suburban areas such as Puchong, Shah Alam and Rawang moving inwards towards the heart of KL city. Both landed and high rise property in outer areas have the potential to command up to 70% of the value of each inner tier, giving rise to the potential that properties in the outer fringes of KL could appreciate even further. The new Mass Rapid Transit plan to increase connectivity will also contribute to further price appreciation in the suburban areas. Currently, residential properties in Tier 3 and Tier 4 are purchased by first time home buyers.

OCTOBER 2010 ISSUE

Infrastructure Update New highways in the pipeline under budget 2011 With further major developments proposed within KL city centre, new highway works announced in Budget 2011 aim to alleviate traffic to and from the suburbs around Kuala Lumpur. Currently, Malaysia has 23 toll concessions with volume growth on the uptrend contributed by local travellers and cross-border traffic. According to latest figures from the countrys largest highway concessionaire, PLUS Expressways Bhd recorded RM2b (US$620m) toll collection on the back of traffic volume growth of 7.1%. Operators PLUS PLUS PNB PNB Kumpulan Europlus n/a Project Sungai DuaJuru Highway Damansara-Petaling Jaya Highway Ampang-Cheras-Pandan Elevated Highway Guthrie-Damansara Expressway Pantai Barat-Banting-Taiping Highway Paroi-Senawang-KLIA Highway) Location Penang Greater KL Greater KL Greater KL Selangor - Perak Negeri Sembilan

Residential Sector Update Outlook from the countrys leaders in property development The recent, The Edge Property Excellence Awards 2010 saw top developers rewarded for their achievements in providing quality and innovative products to the Malaysian market. Industry players are optimistic of the property market scene citing ample liquidity, steady employment rate, low mortgage rates, tax incentives and high saving rates as primary factors that will sustain the robust domestic market. In selected areas, property prices are even estimated to increase by 10% or more within the next 12 months. Property players are increasingly cognizant of Malaysias consumer market as demands have become more sophisticated over the years. Projects on the winners portfolios show increased emphasis on provision of facilities such as security features, improved customer service, quality assurances and convenient access to basic amenities such as schools, parks and retail space.

OCTOBER 2010 ISSUE

Commercial Sector Update En-bloc Purchase: The Crest, Kuala Lumpur A Singaporean investor recently acquired 31 units at The Crest at the value of US$25.6m (RM80m). A Grade-A 26-storey office tower situated on Jalan Sultan Ismail, The Crest office tower comprises 143 office units with nett lettable space of 190,430 sq ft at a total gross development value (GDV) estimated at US$67.8m (RM212m). The Crest development also includes The Crest Residence, a 44-storey high end residential tower and a 6-storey podium comprising 842 parking bays.

Source: Company Website

Details The Crest Office Tower, SKN Land & Development Sdn. Bhd

Property Block B

Location KLCC, Kuala Lumpur

Estimated GDV US$67.8m (RM212m)

Completion Date & Details 4Q 2011

Construction Sector Update Greater KL MRT plan The proposed 150km Mass Rail Transit (MRT) within Greater Kuala Lumpur will begin construction in 2011 at an estimated development cost of US$13.76b (RM43b). Components of the MRT plan includes three main lines that run around a 20km radius of central Kuala Lumpur, further land acquisition and development of underground commercial space. This proposed plan stretches over nine years and would be integrated with other rail transport providers. The proposal that has been put forward by Gamuda Bhd and MMC Corp Bhd is currently undergoing technical study.

Source: The Star

Details of proposer Gamuda Bhd & MMC Corp Bhd

Property 150km MRT system

Location Greater Kuala Lumpur

Development Cost US$13.76b (RM43b)

Completion Date & Details Expected in 1Q 2020

OCTOBER 2010 ISSUE

Industrial Sector Update Kulim Hi-Tech Park: Malaysian-German Joint Venture A joint venture involving QT Hightech (M) Sdn. Bhd. and its German partner, Lfoundry GmbH indicated an initial investment of US$68.48m (RM214m) to build five the wafer fabrication clusters. Situated at the Kulim Hi-Tech Park within the Northern Corridor Economic Region (NCER), these clusters will be set up in the next 10 years. This venture is expected to generate gross income in the excess of US$1.3b and contribute an estimated 8,500 job opportunities.

Joint Venture Details QT HighTech (M) Sdn.Bhd / Lfoundry GmbH (Germany)

JV Value US$68.48m (RM214m)

Location Kulim Hi-Tech Park, Kedah

Date & Details 3Q 2010 (fabrication industry)

Bayan Lepas: Construction of new US$40m manufacturing facility National Instruments (NI), headquartered in Texas, will begin construction of its US$40mil manufacturing facility located on a 17-acre site in Bayan Lepas, Penang. NI manufactures computer-based measurements, automation software and hardware products catering to industries such as automotive, defense and telecommunications.

Company National Instruments (NI), USA

Land Area 17 acres

Location Bayan Lepas, Penang

Date & Details 1Q 2011 (manufacturing facility)

Investment Value US$40m

Hospitality Sector Update Malaysian developers foray into hospitality sector: Launch of Premiere Hotel WCT Bhd recently launched its first hotel hotel in Klang, Selangor, comprising 250 rooms with a price point ranging from US$49 (RM155) to US$155 (RM480). Built at a cost of US$23.25m (RM75m), this hotel is part of BBT_ONE, a development comprising office towers and retail space.

Owned by WCT Bhd

Property Premiere Hotel

Location Klang, Selangor

Price USD23.25m (RM75m)

Date & Details 3Q2010 (mixed use property)

OCTOBER 2010 ISSUE

Investor Potential: Singapore Recent measures to slow down rising prices of residential properties with the directive from the Singapore authorities have affected residential sales at a decrease between 10%-20% as both buyers and sellers are watching the market to assess the implications of government announcements. The directive prohibits Singaporeans who owns to non-subsidised HDB flats to concurrently own an HDB flat and a private home within the minimum occupation period of five years. Overall, the Singapore property market will remain robust; DTZs May 2010 report indicates increasing interest from Chinese buyers, now the number three overseas buyers in the city-state. Domestic investor outlook is also promising; the Economist Intelligence Unit forecasts private consumption to continue to expand by an average of 4.1% up to 2011. For Malaysian developers to tap into the Singaporean property market the following points may help: Assure the investor by using se warranties, access to authorities for queries or redress and offer credible property management services. Cater to standards that Singaporean investors are used to: Highlight certifications such as the Green Building Index, BCAs Green Mark, major property awards, etc. Can leverage on sales in Singapore by using MPIs Malaysia Property Gallery.

Table 2: Statistics of Singapore Investments into Malaysia, 2008 2008 value (S$m) 24,341.5 21,321.4 661.8 2008 value (US$m) 18,573.42 16,277.74 505.2 YOY Change (%) 6.8 7% n/a Notes 8.2% of Singapores total direct investments for 2008 8.6% of Singapores total direct equity investments for 2008 2.7% of Singapores total direct investments into Malaysia for 2008

Direct Investment into Malaysia Direct Equity Investment into Malaysia Direct Investment into Malaysian Real Estate, Rental & Leasing Sector

Note: SGD/US$ = 0.7634 Source: Singapores Investment Abroad 2008 (published April 2010), Singapore Department of Statistics

OCTOBER 2010 ISSUE

Property Transactions above RM1 million from Jan July 2010 (Selected States in Malaysia) Figure 6: Number and Value of Transactions by Sub-Sector in Kuala Lumpur
Development 74 (US$247.99m / RM768.75m) Residential 1066 (US$789.31m / RM2.45b)

Figure 7: Number and Value of Transactions by Sub-Sector in Selangor

Industrial - 47 (US$191.62m / RM594.03m) Commercial 723 (US$691.96m / RM2.15b)

Industrial - 338 (US$486.85m / RM1.51b)

Development 149 (US$127.63m / RM395.66m)

Residential 998 (US$725.23m / RM2.25b)

Commercial 649 (US$740.26m / RM2.30b)

Total Transactions: 1910 Total Sales Volume: US$1.92b / RM5.95b

Figure 8: Number and Value of Transactions by Sub-Sector in Johor
Residential - 31 (US$19.49m / RM60.43m) Commercial 71 (US$64.68m / RM200.51m)

Total Transactions: 2134 Total Sales Volume: US$2.08b / RM6.45b

Figure 9: Number of Value of Transactions by Sub-Sector in Penang
Development 49 (US$48.61m / RM150.69m)

Development 62 (US$71.60m / RM221.96m)

Industrial - 35 (US$68.59m / RM212.63m)

Industrial - 105 (US$103.93m / RM322.19m)

Commercial 40 (US$89.95m / RM278.85m)

Residential - 78 (US$160.45m / RM497.39m)

Total Transactions: 269 Total Sales Volume: US$259.71m / RM805.09m

Note:

Total Transactions: 502 Total Sales Volume: US$367.6m / RM1,139.55m

Transactions in Selangor comprise districts of Petaling, Gombak, Sepang and Hulu Langat only. Transactions in Kuala Lumpur comprise municipalities of Batu, Seksyen 1-100, Kuala Lumpur, Ampang and Petaling only. Source: NAPIC

OCTOBER 2010 ISSUE

For further information and up-to-date tracking of Malaysian real estate data, visit: www.malaysiapropertyinc.com For further enquiry, write to: info@malaysiapropertyinc.com
This report contains information that is publicly-available and has been relied on by Malaysia Property Incorporated on the basis that it is accurate and complete. MPI is not liable if the case proves to be otherwise. No warranty or representation, express or implied, is made to the accuracy or completeness of the information contained herein, and the same is submitted subject to errors, omissions, change of price, rental or other conditions, withdrawal without notice, and to any special listing conditions imposed.