City & Country: Greater KL/KV growing in all directions

Pier construction along Jalan Damansara near Taman Tun Dr Ismail

COME Sept 25, it would be three years since the launch of the Economic Transformation Programme (ETP) and its 12 National Key Economic Areas (NKEA), which includes Greater Kuala Lumpur/Klang Valley (GKL/KV).

According to the government, says James Wong, managing director of VPC Malaysia, GKL/KV is synonymous with the Klang Valley and comprises the areas under the administration of 10 local authorities namely Kuala Lumpur City Hall, Klang Municipal Council, Kajang Municipal Council, Subang Jaya Municipal Council, Petaling Jaya City Council, Selayang Municipal Council, Shah Alam City Council, Ampang Jaya Municipal Council, Perbandaran Putrajaya and Sepang Municipal Council.

“Totalling 2,900 sq km, these local authorities have been identified as the highest density economic centres within the country. However, the original definition of Klang Valley was the linear development between Kuala Lumpur and Port Klang. With GKL/KV, it has grown in all directions,” says Wong.

“While the Klang Valley is a geographical footprint drawn up for orderly physical development, GKL/KV is more focused on transport integration, accessibility, quality of life, business, talent, innovation and economical sustainability with set targets for population and per capita income growth by 2020,” says Datuk Seri Michael Yam, president of the Real Estate and Housing Developers’ Association of Malaysia (Rehda).

As more GKL/KV projects get underway and the economic climate changes, we speak to a few consultants and industry players on its impact on the property market, the challenges ahead, and the winners and challengers.

Wong: The huge supply and scale of the upcoming mega projects in GKL/KV will create oversupply in the property market and affect property values

James Wong
Managing director
VPC Malaysia

Who are the key players in the development of GKL/KV?
As GKL/KV covers a wide area, many developers are interested to develop the GKL/KV particularly in KL city centre. (See table 1 for a list of big players in GKL/KV. )

Who will be the beneficiaries of GKL/KV and who will stand to lose?
The biggest beneficiary will be 1Malaysia Development Bhd (1MDB) due to its vast, strategic landbank in KL. It is supported by the government’s effort to attract 250 multinational companies (MNC) by 2025.

Two of its biggest projects are Tun Razak Exchange (TRX) and the Sungai Buloh-Kajang mass rapid transit (MRT) line. Incentives have been offered to accelerate the development of TRX. They include 100% income tax exemption for 10 years; stamp duty exemption on loan and service agreements for TRX status companies; Industrial Building Allowance and Accelerated Capital Allowance for TRX Marquee Status Companies; and 70% income tax exemption for five years for property developers in TRX.

What are the positive and negative impacts of GKL/KV on the property market?
The upcoming MRT and light rail train (LRT) extension will form the spinal cord of KL’s public transportation system. Investors and buyers will buy residential and commercial properties nearby and along the stations. If both projects materialise, the values of residential and commercial properties are expected to increase, and open up new development areas.

Recent surveys conducted by World Bank show that Malaysia’s target to become a high-income country by 2020 is possible and the country can aim for income per capita of US$20,000 by 2025. If Malaysia is able to become a high-income nation by 2020 with income per capita of USD 15,000, more people can afford to own a house in the Klang Valley.

On the flip side, the huge supply and scale of the upcoming mega projects in GKL/KV will create oversupply in the property market and affect property values. All projects have to take into consideration the supply and demand of the property market.

Where are the investment opportunities?
With the completion of the MRT and LRT extension, developers have the opportunities to build apartments near the stations, and develop properties along the routes. More houses will be built in the outskirts.

As for the KL-Singapore high-speed rail, foreign companies in Singapore may be attracted to operate in KL as the costs are lower. Demand for office space will increase and rents are expected to follow.

What are the biggest challenges to the realisation of GKL/KV projects such as the mass rapid transit (MRT), Tun Razak Exchange (TRX), River of Life (ROL) and the KL-Singapore high-speed rail (HSR)?
GKL/KV is under the jurisdiction of 10 local authorities and there is no coordination between them. Planning approvals in each municipality do not take into consideration the planned and approved developments in the neighboring municipalities. One previous drawback was the lack of approvals for affordable housing.

There should be a central planning authority covering the 10 municipalities to provide overall planning guidelines, and to have a master record of approved projects, so that supply and demand in GKL/KV can be better regulated.

In terms of foreign direct investment (FDI), Malaysia is the only country in the region with continuous negative net FDI since 2007. In 2012, Malaysia’s net FDI declined by more than 50% against 2011. The GKL/KV plan was launched in 2010, and yet there was only a US$1 billion or 11.2% increase in foreign direct investment inflow from 2010 to 2012. Meanwhile, Malaysia’s FDI outflow from 2010 to 2012 has increased by US$3.7 billion or 27.7%. The lack of local and foreign investors will be a key challenge of realising Greater KL/KV.

Koh: Property value will increase; whether it’s negative or positive depends on a person’s perspective

Brian Koh
Executive director
DTZ Nawawi Tie Leung Property Consultants Sdn Bhd

Who are the key players in the development of GKL/KV?
They are the major listed developers and government-linked companies (GLC) with big landbank such as Sime Darby Property Bhd, Permodalan Nasional Bhd and IOI Properties Bhd.

Who will be the beneficiaries of GKL/KV and who will stand to lose?
It will benefit the residents, landowners, developers and businesses in general. However, those who do not currently own properties will lose out. Also, the urban poor will not be able to capitalise on the higher end job creation.

What are the positive and negative impacts of GKL/KV on the property market?
Property value will increase; whether it’s negative or positive depends on a person’s perspective. Too many commercial and economic activities are concentrated in Kuala Lumpur. This comes at the expense of other parts of the country.

Where are the investment opportunities?
There will be enhanced development opportunities as well as spin-offs of retail and other businesses.

What are the biggest challenges to the realisation of GKL/KV projects such as the MRT, TRX, ROL and the KL-Singapore HSR?
Attracting new businesses to the country in the midst of a slowing external economy could be a challenge. Another is ensuring there are sustainable demands to support all the projects so that the investments yield positive overall returns without becoming white elephants.

Tong: There aren’t any losers as the GKL/KV projects are designed to enhance the lifestyles of all who will live in the region

Datuk NK Tong
Group managing director
Bukit Kiara Properties Sdn Bhd
National treasurer, Rehda

Who are the key players in the development of GKL/KV?
Any developer in GKL/KV.

Who will be the beneficiaries of GKL/KV and who will stand to lose?
There aren’t any losers as the GKL/KV projects are designed to enhance the lifestyles of all who will live in the region. Everyone including residents, workers and visitors will benefit as the infrastructure and services continue to improve.

Those who commute regularly and over larger distances will benefit if they take advantage of the increased MRT network. This will also take the pressure off the road networks as fewer cars will fill our roads. There will also be an improvement in the quality of living in KL. Being able to move around faster will free up more time for us, which can be spent on recreational opportunities.

Like the transformation in Melaka city centre, KL will be able to showcase its riverfront with ROL, and compete for attention with the likes of Clarke Quay in Singapore, Cheonggyecheon in Seoul, or other popular riverfronts in major cities throughout the world.

We can only just begin to imagine the extent of the recreational facilities and opportunities along both sides of the 10km stretch of ROL. Once this proves successful, I am sure the authorities will consider enhancing larger sections of the riverfront.

What are the positive and negative impacts of GKL/KV on the property market?
The property market will benefit from the rejuvenation projects, and see values enhanced. Those who already own properties in the high urbanised areas will benefit but others may find it less affordable. However, because of the MRT system, people will be able to find affordable homes further from the city and still be able to commute easily to their workplaces in the city, or people may choose to live and work in suburban areas.

As the region gains in vibrancy, businesses will also be attracted to set up their regional headquarters and provide more employment opportunities.

Where are the investment opportunities?
When projects within GKL/KV are executed well, there will be a ripple effect throughout the region.

Projects located near MRT stations are likely to have an immediate impact and will be the most obvious investment opportunities. However, improved public transportation will create investment opportunities throughout GKL/KV as more will find it more livable.

What are the biggest challenges to the realisation of GKL/KV projects such as the MRT, TRX, ROL and the KL-Singapore HSR?
The biggest challenges will likely be in the funding, coordination and execution of these projects. While it would be great to have everything happen all at once, the authorities are taking a measured approach to ensure an orderly delivery of these projects. Even with this in mind, there will still be some teething problems like additional traffic congestion during MRT construction. This is expected, but the final rewards are worth the temporary inconvenience.

Foo: The rolling out of ETP projects is expected to boost the growth of the Malaysian capital market as large sums of capital are needed to implement these GKL/KV projects

Foo Gee Jen
Managing director
C H Williams Talhar & Wong Sdn Bhd

Who are the key players in the development of GKL/KV?
The establishment of GKL/KV will lead to the opening of new residential hubs in suburban areas and also expand the existing market catchment areas of commercial developments. (See table 2 and 3 for some notable developments under construction within GKL/KV.)

Who will be the beneficiaries of GKL/KV and who will stand to lose?
With the improved public transportation and road networks, urban and suburban residents can enjoy a higher quality of life and improve their household income.

The residential sector will benefit as GKL/KV will have an estimated population of 10 million by 2020. Property developers have started looking into areas where they can develop mass townships.

The agriculture sector will lose out as demand for development land grows, while the industrial sector is evolving to remain compatible with nearby residential townships by focusing on clean non-polluting industries as well as more storage, distribution and logistics activities.

The big corporate winners are the infrastructure construction companies such as IJM Corp Bhd, WCT Bhd and property developers such as Sime Darby, Mah Sing Group Bhd and Sunway Bhd. Companies driven by mass consumer demand like mega shopping malls, banking and financial services and healthcare will also benefit.

However, small neighbourhood shops will be unable to compete in providing consistent quality and fast delivery at competitive prices to the growing population.

What are the positive and negative impacts of GKL/KV on the property market?
Previously sluggish suburban areas such as Rawang, Kuala Selangor and Semenyih are being promoted by property developers as land prices in urban areas rise to unaffordable levels for most people. Competitiveness has pushed developers to deliver better quality and designs products.

However, the cost of housing and living has skyrocketed. While the infrastructure projects are in progress, traffic congestion is expected, especially along the MRT lines.

Where are the investment opportunities?
Areas such as Damansara, Shah Alam, Cyberjaya and Kajang have become new hotspots for developers. Interest has grown or revived in Klang, Kuala Selangor and Rawang.

The rolling out of ETP projects is expected to boost the growth of the Malaysian capital market as large sums of capital are needed to implement these GKL/KV projects. There will be more IPOs and growth of the bond market, particularly Islamic financing.

 

This article first appeared in The Edge Malaysia Weekly, on September 23, 2013.