WTW: Investment potential in REITs and plantation land

KUALA LUMPUR (Feb 10): Property investors can opt for Real Estate Investment Trusts (REITs) and plantation land as alternative investments, suggested Foo Gee Jen, managing director of CH Williams Talhar & Wong Sdn Bhd (WTW).

Besides directly owning residential, office or retail properties, investors can take another route by investing in REITs and plantations, said Foo during WTW's Property Market 2012 presentation on Friday.

"These are not aggressive investments for speculators," he said. "Compared with putting your money in fixed deposits (FD) that would get you 2%-3% returns, it may be better to invest in REITs, which could give you returns of 7%-10%."

During the presentation, Foo explained that Malaysian REITs commanded a global capitalisation worth of US$1.5 million (RM4.5 million) ranking higher than Germany and South Korea. REITs gave investors a higher yield rate of 7.3% in 2011, compared to the Employees Provident Fund (EPF) at 5.8%.

As for the plantations sector, Foo said the agricultural sector has been supporting the country's economy for the past 15 years and agriculture land is naturally, a very lucrative form of investment. Malaysia has a total acreage of 4.85 million ha of palm oil plantation with 51 palm oil refineries in operation that produces 18.9 million tonnes of palm oil annually. Meanwhile, Malaysia has one million ha of rubber plantations which will increase by 30,000 ha annually over the next five years.

In 2011, the volume of property transactions reached 400,000, translating to RM101 billion, and — according to Foo — the Malaysian property market in 2012 will see further growth albeit at a slower pace.

"This growth factor relies heavily on the cost of construction," he said. "This year, we are looking at a growth closer to 10% in overall value, but not more than 10% in volume."

He added that housing will remain the driving sector in the industry spurred by a population growth of 2.5% annually and the migration of rural occupants.

Foo explains that within the housing sector, the condominium sector will be a buyers' market this year with close to 50%-60% of new supply in high-end condominiums.

"With new supply coming into the market, landlords will be competing for tenants," he said. "Either they have to accept lower rentals, or accept buyers at a lower price."

Foo also mentioned it is a good time for purchasers and investors to start bargain hunting and to start looking at areas like KLCC, Bangsar and Damansara.

"Prices between new and old properties are quite substantial making it easier to pick up old condo units," he added. "You may not get the infinity pool the newer more luxurious condos have, but some of the older condos are more mature with regards to their landscaping."

Foo is also seeing a rise in demand for warehouse space and expects a growth of 10% in the sector.