BNM Implements Measures To Curb Rising Household Debt

KUALA LUMPUR, July 5 (Bernama) -- Bank Negara Malaysia (BNM) is implementing a set of measures, effective immediately, to curb the rising trend of household indebtedness and to reinforce responsible lending practices by key credit providers.

Governor Tan Sri Dr Zeti Akhtar Aziz said the measures were limiting maximum tenure of personal loans to 10 years and properties financing to 35 years, and prohibition on the offering of pre-approved personal financing products.

Also included was the setting of prudent debt service ratio that allowed sufficient buffer to deal with income volatility and other costs, she said.

Zeti said as of March this year, the ratio of household debt to gross domestic product (GDP) in Malaysia grew by 13 per cent to 83 per cent from 70 per cent in 2009, the highest level for developing countries in Asia.

"Given that the economy is now growing in the range of four to six per cent, we believe this level of indebtedness is not sustainable and that is why we are introducing these measures," she told a media briefing here Friday.

She said compared household debt to GDP in other developing Asian countries, Thailand stood at 30 per cent, Indonesia 15.8 per cent, Hong Kong 58 per cent, Taiwan 82 per cent, Japan 75 per cent and Singapore 67 per cent.

Zeti said the countries that have higher household debt to GDP were the US at 91.7 per cent, Australia 113 per cent, New Zealand 91 per cent, UK 114 per cent and South Korea 91 per cent.

The governor said central bank was putting in place responsible borrowing lending practices and prudent borrowing behaviour by the household sector.

She said the measures were aimed at ensuring a more sustainable household sector over the medium term, and gave an assurance that the sector contribute to growth of Malaysian economy in a sustainable manner.

"We decided to focus on household sector for these measures, so that there will be no confusion in the outcome that we want to achieve, which is sustainability of the household sector because it is such an important driver to our economy," she said.

Zeti said one of the factors contributing to the higher pace of household debt was the rising trend of personal loans which increased at an annual average rate of 20 per cent.

She said the rising role of non-bank financial institutions, which were supplying nearly 60 per cent of the personal financing to the households, was also a contributing factor.

"Of the total financing, 16.9 per cent are personal financing. In terms of growth rate of personal financing by non-bank financial institutions, last year it grew 29 per cent compared to the banks which grew 9.1 per cent.

"Aggressive competition in personal financing market has also contributed to lower financing rate that are not reflective of the associated risk," she said.

On the lengthy loan period, she said, while the longer tenure might reduce the monthly repayment, in the long run it will increase the overall debt burden of households.

Using housing loans as example, she said: "The tenure of housing financing has been lengthened to 45 years, though the monthly installment might be lower, but in the end it will cost 20 per cent more."

She added that such a practice encouraged excessive debt accumulation by households and increased the vulnerability of the sector.

Zeti said BNM has also urged financial institutions to give greater emphasise on affordability assessment as compared to repayment history and collateral which largely dominated the lending decision even when affordability assessment indicated potential future vulnerability.

"The affordability assessment is still not as robust as what we want to see.

"Our recent supervisory review of financial institutions' compliance with the guidelines are falling short of expectations, in a number of respect, resulting in lending decisions that are inconsistent with the obligation to ensure that financial products offered are affordable," she said.

Complementing the responsible lending guideline which was issued last year, the new measures applied to all financial institutions regulated by BNM, credit cooperatives regulated by the Suruhanjaya Koperasi Malaysia, Malaysia Building Society Bhd and Aeon Credit Services (M) Bhd, she said.

She said the limits on financing tenure will not affect applications made before today.

Extracted from BERNAMA, July 5, 2013

Shopping malls still in demand in Shah Alam

FILLING up shops in malls is not a problem in Shah Alam due to the limited supply in the area, despite the fact that this sub-segment of the property sector has reached its saturation point.

“The industry has reached its saturation for over the last 10 years. We are in an oversupply situation but we still have developers who are interested to build malls,” says Henry Butcher Shopping Centre Consultants Sdn Bhd managing director Tan Hai Hsin.

“However, Shah Alam does not face any serious oversupply (situation). One of the reasons is because cinemas were not allowed to operate in Shah Alam until last year,” he adds.

Tan tells StarBizWeek that generally in the Klang Valley, the occupancy rate for shopping malls is 85%.

“Some malls are very well occupied and some are empty. It depends on how it is set up, the type of properties and the management,” he says.

A mall that is 100% owned by a single owner tends to do better than a mall that is strata titled, as all the retail shops in the mall are individually owned, Tan opines.

“(The shops or outlets) are individually owned; it is difficult to manage because you are dealing with hundreds of owners, each of them chooses their own tenants.

“Hence, there is no control on tenant mix. This factor tends to effect the success of a shopping mall,” Tan says.

Meanwhile, Tan believes the upcoming CentralPlaza@i-City shopping mall has huge success potential, because of its location.

To date, there are only two other shopping centres on the whole stretch of the Federal Highway, one is Mid Valley which is in Kuala Lumpur and the other one is a cluster of shopping malls (examples are Empire and Subang Parade) in Subang.

“The next mall on the Federal Highway will be the CentralPlaza@i-City located in Shah Alam. It will cater to a sizeable market close to 700,000 of Shah Alam’s population and some 900,000 of Klang’s population,” Tan says.

He says that upon completion, the CentralPlaza@i-City shopping mall will be the largest shopping centre in Shah Alam. It is due for completion by end of 2016 with a gross floor area of around 1.5 million sq ft and net leaseable area of around 1 million sq ft.

“When it comes to malls today, size matters,” Tan says, adding that the Klang Valley “urban family” prefers to go to bigger shopping centres, particularly during weekends.

“They want to go to a place where they can spend hours, at least half of the day, there, because it offers various choices in one place for all the family members,” he says.

Having said that, shoppers between Shah Alam and Klang will soon enjoy more options because CentralPlaza@i-City is going to adopt a Thai retail concept.

Previously, according to Tan, most of Malaysia’s shopping malls adopted the Japanese retail concept, where the hypermarket, or supermarket, is located below and retail shops above it.

“Nowadays, we are moving away from that concept, although we still have a hypermarket in a mall. However, with hypermarkets mushrooming in Malaysia, more people prefer to make a short trip to a hypermarket, or to smaller malls to run their daily errands and utilise their weekend to enjoy the environment of a bigger mall,” he explains.

Nonetheless, Tan notes that having Thai retail in the country is a “refreshing” concept, because most of international brands that come to Malaysia will start their journey in South-East Asia in Singapore first, as seen in brands such as Topshop, Uniqlo and H&M.

“Brands usually establish themselves in Singapore before they come to Malaysia.

“However, many Malaysians and Singaporeans like to go to Thailand for shopping, not because of the brand but for its design and value for money,” he says.

I-Bhd signed a memorandum of understanding with Thai-based mall designer specialist Central Pattana Public Co Ltd (CPN) last year to jointly build a mall at i-City.

I-Bhd through its unit i-City Properties Sdn Bhd intends to hold 40% stake and CPN, through its local subsidiary, the remainder in the joint venture company.

The mall will be designed to cater to the needs of Thai retailers.

“Klang Valley people have always opined that most of the new malls share similar concept. Hence, Central Plaza will be able to offer a refreshing concept,” Tan says.

Adding to that, he says the accessibility of Central Plaza will be a further catalyst for its success. “They are going to build a ‘fly-over’ that will be directly linked to the mall, similar to Mid Valley.”

According to I-Bhd representative, the design for the mall is expected to be ready within a month. It will be managed by CPN.

In terms of retail space within the i-City township, Tan believes that both the commercial space outside of the mall and the retail space within will be able to complement each other.

“Some retail shops operate more suitably outside malls and this adds variety within the township,” Tan explains

Source The Star, June 22, 2013

A new bright spot for Cheras

THE integrated mixed project known as Sunway Velocity that Sunway Bhd has embarked on along Jalan Cheras, Kuala Lumpur, will emerge as a bright spot in that vicinity.

In the neighbourhood of Jalan Cochrane, redevelopment efforts have given a new lease of life to the area.

Sunway central region property development division executive director Ong Ghee Bin says in an interview with StarBizWeek that the Velocity project where people can live, work and play under one roof will further enhance the area.

He concedes that the selling prices of the properties, both residential and office, are at record high in that area, which was once considered “run down”.

“With this regeneration, we are able to transform the whole area,” he adds.

CH Williams Talhar and Wong Sdn Bhd managing director Foo Gee Jensays: “With the Sunway brand name, selling prices are at a premium, taking into account Sunway’s reputation for reliable quality of design, materials used and workmanship.”

He also says that expectations have always been high that redevelopment of the Jalan Peel and Jalan Cochrane area will offer investors the opportunity to own a property with high rate of capital appreciation, based on the track record at nearby Taman Maluri.

“Jalan Peel/Cochrane was originally a government housing area. Jabatan Kerja Raya (Public Works Department) workshops and the government printer were established in this area. This was followed by other private light and medium-scale industries surrounding the residential area,” Foo elaborates.

Among others, Malton Bhd has introduced Amaya at Maluri, a mixed development which sits on a 2.7-acre leasehold land with a gross development value (GDV) of RM215mil, which was launched at RM450 per sq ft (psf).

“In comparison, the current average asking price at Amaya Maluri is about RM700 psf … but it will not have the convenience of being integrated with 1 million sq ft retail space and office suites,” says Foo.

He points out that older developments like Pertama Residency and Plaza 393 cannot be compared with Velocity because they were built much earlier.

It is also worth noting that the 23-acre freehold land neighbouring some of Cheras’ mature townships like Taman Maluri, Taman Shamelin Perkasa and Taman Pertama is a rare find.

Sunway Velocity

Sunway can increase the attractiveness of integrated mixed development by improving traffic flow.

Besides having the two future mass rapid transit (MRT) stations Cochrane and Maluri that are 100 meters and 220 meters away respectively from the project, the developer has planned a tunnel with direct link from Jalan Cheras to the shopping mall basement carparks and an underpass from Jalan Cheras to Jalan Peel.

The builder has also proposed an elevated and covered walkway to link the upcoming MRT stations.

“We want to do things properly and we don’t mind paying extra for the infrastructure for people’s convenience,” says Ong.

On top of the connectivity of the project via various roads and through the MRT stations which are expected to be completed by 2017, the idea of a self-sustained development becomes even more seamless with all the planned covered walkway for people to go from one place to another within that locality, he adds.

The project is a joint venture with landowner Fawanis Sdn Bhd and has a GDV of RM3.8bil. It comprises three phases. Phase one and three consist of serviced apartments, retail shops and office suites.

There are several types of offices to cater to different business needs. For instance, its designer suites are popular among start-ups while its signature office blocks target small and medium enterprises, Ong says.

The designer offices, with a built-up area of 600 sq ft, are 85% sold and boasts of facilities like swimming pool and gym.

Serviced apartments known as V Residence, meanwhile, come in varying sizes. There are 564 units, of which 411 are studios and 204 small office home office (SoHo) units.

When launched last year, prices of the residential units started from RM750 psf.

Ong says subsequent launches of serviced apartments were priced at RM900 to RM1,000 psf. There was overwhelming demand.

“We have studio units to cater to the young adults or couples, apartment sizes ranging from 800 to 1,000 sq ft for smaller families and 1,000 to 1,500 sq ft for medium-sized families,” he says, adding that 334 units will be launched in August.

Phase two of Velocity, which includes a 1.4 million sq ft shopping mall, a 284-room four-star hotel, office tower and corporate office collectively worth RM1.5bil, will be owned and operated by Sunway.

The mall, slated for opening at the end of 2015, is going to be an exciting lifestyle mall, he says, adding that the management will time its opening for the year-end festivities.

After the shopping mall, it will launch its hotel, and subsequently the office tower, Ong adds.

“Many of our existing tenants (from Sunway’s other malls) are interested to come over as it will have an interesting concept,” he enthuses.

He also says the group’s expertise to run and manage shopping malls, hotels and offices would bolster investors’ confidence.

“Owners of the retail shops can capitalise on visitors coming to the shopping mall as they will have to go pass the shops before arriving at the mall,” he explains.

There is also a two-acre recreational park.

Two property analysts tells StarBizWeek that selling prices for the project are rather high considering that it is not a “high end” area.

“The location does not warrant this kind of high prices,” quips one.

Foo says the rate of capital appreciation of the serviced residences will depend on the success of the retail mall.

“The challenge faced by Sunway is to establish a megamall in that locality similar to the success it achieved with the Sunway Pyramid in Bandar Sunway.”

However, real estate investment consultant Gavin Tee Swee Heng says the prices are reasonable, given the amenities and connectivity. Both these features will boost the rental market.

“The live, play and work concept will have a premium. It is a concept that is popular in large cities like Beijing and Jakarta. In Kuala Lumpur, the trend has just started,” he says.

He also notes that the place is good for owner occupiers whereas investors may have to hold the property for three to five years to see meaningful gains.

“Investors might not see immediate returns in terms of price appreciation but they do not have to worry about renting out the units as there will be demand,” he adds.

In terms of progress, phase one is 50% to 60% completed whereas phase two is 20% completed. Meanwhile, work for basement structure of phase three has begun.

The entire project is expected to be completed in 2018.

Source : Star, June 22, 2013