Glomac to feel heat from cooling measures

KUALA LUMPUR: Glomac Bhd is foreseeing a challenging year ahead as the impact of Bank Negara Malaysia’s cooling measures sinks in curbing speculative demand.

“This year will be a challenging year for, I think, a lot of property developers with the numerous policies that have been introduced, especially by Bank Negara … all these measures have definitely taken a toll on property launches,” said Glomac group managing director and chief executive officer Datuk Seri FD Iskandar Mansor.

FD Iskandar was speaking to the media at a key handover ceremony to purchasers of Residensi Damansara, Glomac Damansara on Monday.

In fact, Glomac scaled down its gross development value (GDV) target for property launches from RM1 billion to RM700 million in the financial year ended April 30, 2014, (FY14) due to cooling measures introduced by the central bank and the federal government under Budget 2014 to prevent a property bubble in the country.

But this year, Glomac is targeting to launch developments with a total GDV of RM1 billion.

The crux of the measures are the increase of the real property gains tax to 30% for properties disposed of within three years of its purchase, imposition of a minimum purchase price of RM500,000 for properties acquired by foreigners, and the abolishment of the developer interest bearing scheme.

However, FD Iskandar believes that Glomac escaped the brunt of the new regulations.

“We are very lucky because our townships are not affected by all these new measures. They are landed properties and are priced below RM500,000. So, the sales have been very strong for the townships,” he said.

Nonetheless, FD Iskandar admitted that land prices had “become more palatable” and “more stable” after the cooling measures were introduced, and Glomac will be on a lookout for new landbank.

FD Iskandar said the goods and services tax (GST), which will come into force on April 1, 2015, will have an impact on Glomac’s sales in FY15.

Under the new tax regime, residential properties and agricultural land are exempted or subject to tax at zero-rate for GST. Commercial and residential properties, however, would be subjected to a GST of 6%.

“My personal belief is that before the start of GST next year, there would be a pent-up demand for properties, especially residential,” he said.

According to FD Iskandar, Glomac has conducted a study with the Real Estate and Housing Developers’ Association (Rehda) on the implication of GST in other countries and how property buyers have reacted to the new tax regime.

“Looking at the trends for countries that introduced GST, we did a group study where we looked at Hong Kong, Japan and Singapore. Six months before the GST was introduced in Japan [and] recently the country raised its GST from 5% to 8% … [There is] a lot of demand for properties.

“[After] GST is introduced or is increased, there will be a lull period of between six and nine months maybe, then the stability will come back to the market,” he said.

Depending on the reaction to GST, FD Iskandar said Glomac would decide on whether to adjust some of its property launch dates at the end of 2014.

For this year, Glomac will launch at least four new developments. They are Sentral V, three more phases of its Lakeside Residences in Puchong, extension of Saujana Utama and Saujana KLIA.

Monday’s key handover ceremony was officiated by Deputy Federal Territories Minister  Datuk Dr Loga Bala Mohan.


This article first appeared in The Edge Financial Daily, on May 14, 2014.