Party in property sector only just begun

Property sector
The public display of the approved Blue Line (Sungai Buloh-Kajang) should start soon, in order to gain feedback from the general public. Sneak previews for residents' associations began last month. The government's decision on the proposed Circle Line (around Kuala Lumpur city) and Orange Line (Ampang-Klang) may be announced by mid-2011, once consultant Halcrow reverts with its study in April-May.

The Circle Line will likely be approved, given its significance in the integration of all existing railway networks in KL. Although there could be alignment changes, we believe the MRT will need to pass through high-density high-commercial value areas to be viable (KLCC-Bukit Bintang, KL Sentral, Pusat Bandar Damansara-Damansara Heights, KL Eco-City-Midvalley, Sentul); along with major government projects (Warisan Merdeka, KLIFD, RMAF@Sungai Besi, Matrade, Kampung Baru).

The first construction tender could be called by April, with groundbreaking in July (targeted completion by 2016-2020). But property prices will start moving ahead as developers price in improved accessibility and higher traffic from the MRT. Policies will likely remain accommodative to attract foreign/private investment to support the government's initiatives.

S P Setia Bhd's RM6 billion KL Eco-City is the first project to be marketed as a potential transportation hub with an MRT stop, commanding about 30% premium over neighbouring properties. The strata offices soft launch at end-January chalked up 80% take-up despite a premium average selling price (ASP) of RM1,100 psf (RM1.1m/unit). Its boutique offices, sold en bloc (RM60 million per quadrant), are already 75% booked, while indicative response to the first condominium tower (711 units, 650 to 850 square feet) to be launched in March/April is overwhelming even with ASP raised by 20% to RM1,200 psf.

Other upcoming launches to watch: (i) YTL Land's Capers condo at Sentul East (RM700 psf, 460 units); (ii) Selangor Properties' Batai condo in Damansara Heights in 1HCY11 (RM1,000psf); and (iii) Guocoland's RM2 billion Damansara City in 3Q11 (RM1,000 psf, first high-density mixed development at Pusat Bandar Damansara).

S P Setia got the ball rolling by buying two plots of land in January (prime 40-acre Jalan Bangsar land swap, 266-acre township land in Tebrau, Johor). There could be more landbanking on the cards (especially in the Klang Valley) as S P Setia beefs up its balance sheet with RM1.1 billion placement proceeds in March. The master plan for the 2,680-acre RRIM@Sungai Buloh (MRT Blue Line terminal station) may be unveiled as early as mid-2011, which could see tenders called in 2HCY11. Front-runners include Malaysian Resources Corp Bhd, S P Setia and Bolton Bhd. The Cochrane and former Pudu jail sites could also see news flow in 1H11. We do not discount the possibility of more M&A and joint ventures as large landowners look for partners with execution track record and vice versa. — HwangDBS Vickers Research, Feb 9