Posts Tagged ‘Global financial crisis’

Impacts of Global Financial Crisis vis-a-vis Asian Financial Crisis on Penang property sector

Sunday, October 18th, 2009

Despite the onslaught of the global financial downturn, the Penang property sector in general has been resilient and relatively stable with no drastic movement in housing prices. The local housing developers have been better prepared this round to ride through the downturn with the exception of handful housing developers which are forced to slow down their construction activities or delay their project launchings during the height of the crisis. Though there are signs of market softening in 2H 2008 and 1H 2009, market sentiment for Penang property sector in the 2H 2009 has improved remarkably with more buyers/investors flocking back into the market whilst housing developers are beginning to make a come back and roll out more new planned projects in anticipation of improving economy outlook. Transaction activities in both primary as well secondary market are poised to pick up again buoyed by the continued support and lending by Malaysia’s banks with attractive financing packages at low interest rates of 3-4%.

Unlike the previous 1997/98 Asian Financial crisis, the Penang property sector at that time was badly hit due to the credit crunch of the Malaysia banking system and the sudden surge in lending rates to as high as 13%.  As a result, many housing projects were stalled and abandoned, with many developers were either facing cash flow and debt servicing problems and eventually collapsed and wiped off from the marketplace such as Adorna, Penas and Cayman etc. The aftermath of the crisis has crippled the Malaysia housing and construction sector with major property sectors suffered sharp price declines as much as 30-40% from their peak levels whilst the banking system saddled with huge bad loans and high NPLs.

Some notable projects in Penang/Kedah region which have been badly affected since the times of 1997/98 Asian Financial Crisis are mostly retail/commercial and several mega projects, some of which are still in abandoned stage and awaiting revival or resuscitation:-

Penang Island

Bayan Central – An uncompleted commercial complex located at Bayan Bayu which commenced construction in 1997 and subsequently stalled.

Bayan Bay Marina and Leisure Resort by Eternal Resources (joint venture between Anson Perdana and PDC) which was originally scheduled for completed by year 2000 but stalled for several years. This multi-million Bayan Mall (now Queensbay Mall) was successfully revived by CP Group and commenced business in 2005.

Mainland Penang (Seberang Perai)

Plaza utama- A commercial complex comprising 6 storey shopping mall, 213 room-hotel and one office block at Bukit Mertajam town. Plaza Utama development commenced in Nov 1995 and completed in 1997. The commercial complex was opened for business after completion but ceased business after a short stint.

View of Plaza Utama in Bukit Mertajam


City Parade at Jalan Megat Harun, Bukit Mertajam – Another completed commercial building which is similarly affected like Plaza Utama and ceased operation after opened for business for a short period.

Both buildings have long been put up for sale by former Danaharta now Prokhas and still looking for potential “white knight” to revive it.

Fasda Heights (Taman Bidara)- a mixed housing project in Macang Bubok, Bukit Mertajam with about 1,000 units which was not fully completed and handover to the purchasers.

Taman Perindustrian Macang Indah- an abandoned SMI industrial park at Sungai Lembu, Bukit Mertajam.

Leisure Tower- A 11-storey integrated commercial complex at Jalan Kampung Gajah, Butterworth by HCC Group originally schedule for completion end of 1999 but only partially completed and abandoned.

Kristal Golf Resort (Suasa Kristal) - a golf resort located at Sungai Bakap, Southern Seberang Perai, ceased operation several years ago and taken over by Danaharta. The site was reportly sold to a private housing developer.

Others approved commercial complexes which have been launched but failed to take off and subsequently shelved are “Plaza Everise” – a planned 2.3 acre commercial complex at Sungai Rambai Commercial Centre and  “Aseania Mall” at Bandar Perda. Both are located within bukit mertajam area. “Plaza Cayman”, another planned commercial project located adjacent to old MPSP building at the heart of Butterworth town.

Kedah

Padang Meha Parklands by MBF Country Homes and Resort (Alamanda) near Kulim– a proposed RM3 billion housing/resort development near Kulim covering 5,200 hectares launched prior to 1997/98 Asian Financial Crisis which has since abandoned. Latest report disclosed that the developer has been liquidated in year 2005. More related info here: Developer liquidated, 300 land buyers in the lurch. Others include the 160 hectare  residential resort scheme (Diamond Santuary) in Mukim Padang Meha near Kulim Hi Tech Park and the proposed RM1 billion Diamond Creeks Retreats with 800 hectares of land in Ulu Behrang, Perak near the proposed Proton City.

In a nutshell, the magnitude and severity brought about by the impact of the 2008/09 Global Financial Crisis on the Penang property sector is comparatively shorter and much lesser compared to 1997/98 Asian Financial Crisis. A healthier and resilient Malaysian banking system, on-going implementation of Malaysia economic stimulus package, Malaysia’s central bank prudent interest rate policy, relaxation of EPF housing withdrawals and other economic liberalization measures, have helped to cushion the impact of the recent economic downturn on the property sector. Malaysia economy is on track for a full recovery next year.

Global Financial crisis and Malaysia Property Outlook

Tuesday, November 4th, 2008

Global Financial Crisis

The subprime troubles and the ensuing financial crisis in the US has been called the global financial storm. The crisis, which former Federal Reserve chairman Alan Greenspan described as “once in a century credit tsunami” whilst the 2008 Noble Prize Winner U.S. economist Paul Krugman said the crisis bears some resemblance to the Great Depression of the 1920’s.

The IMF has warned of a sharp slowdown in the world economy next year and forecasts that financial sector losses could total US$1.4 trillion(US$1,400,000,000,000.00) whilst as much as twenty million jobs will disappear by the end of next year as a result of the impact of the financial crisis on the global economy, according to UN’s report. The global economic downturn is expected to last two years before it slowly recovers from 2010 onwards as world economy recovery takes time. For visual illustration to the financial crisis, click here.

Malaysia Response

For Malaysia, like other countries in the world, has already felt the impact of the global financial meltdown as Malaysia’s key sectors show signs of slowdown. The Malaysian economy has been resilient in the first-half of 2008, but is increasingly being affected by the global downturn.

According to MIER, Malaysia’s economy may grow at the slowest pace in eight years in 2009 given the dismal outlook for the global economy stemming from the financial turmoil.

In response to the crisis, the Malaysia Government has already announced several measures of economic stabilisation plan ie. a)Bank deposits are guaranteed by the central bank of Malaysia until the end of 2010 and b) Inject RM5 billion into a special- purpose fund Valuecap to support the stock market etc.

To further cushion the effects of the world economy slowdown, Malaysia’s Prime Minister-in-waiting and Finance Minister Najib Tun Razak has announced the RM7 billion Economic Stimulus Package during his Budget 2009 winding-up speech in Parliament on 4th November 2008, details of the stimulus package are here and here.

Impacts on Malaysia Property Sector

Just about 6 months ago, Malaysia’s NAPIC has projected a bullish property outlook for this year. But the property landscape and market sentiments have changed in recent weeks. Recent statements by REHDA’s President as well as commentary of several property industry experts indicating that Malaysia property sectors are showing signs of softening. The weakening of market conditions has also affected the listing of two largest REITs on Bursa Malaysia.

However, the Malaysia property sector is unlikely to face similar degree of market downturn as experienced by Singapore Property Sector. Malaysian property market still remains attractive to foreign investors. Comparatively, properties in Malaysia are still among the cheapest in the region and property investment remains a solid hedge against inflation in the long term.

For property owners and investors seeking for latest update and outlook on Malaysian economy as well as the Malaysia Property Market amidst the global economy slowdown, here are the several upcoming events and seminars by Malaysia institutions of ASLI, MIER and PEPS:-

National Property Housing Summit 2008 by ASLI;
Date : 13 – 14 November 2008
Venue : Sunway Resort Hotel & Spa, Petaling Jaya

National Economic Outlook Conference 2009-2010 by MIER;
Date: 2 - 3 December 2008
Venue : Hilton Kuala Lumpur

Malaysia Property Market Outlook 2009 by PEPS;
Date : 20th January 2009
Venue : Sime Darby Convention Centre, Kuala Lumpur

Update (1/1/2009) : Latest statement by PEPS’s President James Wong on Malaysia Property Market Outlook 2009, here and here.