Light at end of tunnel for property market

PUTRAJAYA: The property market may start to see some improvement in the second half of this year as demand is still strong, said IOI Properties Group Bhd executive chairman Tan Sri Lee Shin Cheng.
"Generally the outlook for property in 2015 was bad. For 2016, I think the first quarter will still be slow. By second half of the year, I think we should be able to see some light for improvement," he told reporters at its EGM yesterday.
"Demand is still there. It's a matter of location. If the location is good, people will still want to buy. Hopefully, by the second half, our country's economy also will turn around and banks will probably be more relaxed, they will give more loans to house purchasers," he added.
Shin Cheng said due to high construction, labour and land costs, margins have also been a bit lower, with some areas experiencing quite significant drop in margins. He declined to share specific details.
Despite the soft market, the group is confident of achieving its sales target of RM2 billion for the financial year ending June 30, 2016 (FY16). To date, it has achieved slightly over RM1 billion in property sales.
"We are reasonably confident of achieving the target ... we are on track to achieve the target because we have quite a number of projects in different locations including Singapore and China. Our China projects are still selling very well," said its CEO Lee Yeow Seng.
"Overseas will contribute quite significantly but we also have a number of projects in Malaysia. All these projects will be able to contribute quite well for our group. Overseas projects currently contribute about 30% to 40% (to overall sales)," he added.
Last year, it achieved RM1.9 billion in property sales. Its current unbilled sales totalled RM1.5 billion which will be realised over the next 1½ to two years.
"For FY16, we have no less than 10 projects which are ongoing. For FY16, we are budgeting about RM2.5 billion of projects which are under development," said Yeow Seng.
Yesterday, shareholders approved the acquisition of 399.7 acres of land for RM1.58 billion from Shin Cheng and his wife Puan Sri Hoong May Kuan. The resolutions were carried with 99.995% voting in favour of the land injection.
The land, located within IOI City Resort and adjacent to IOI City Mall, will be used to develop Phase 2 of the shopping mall.
"Immediately we are going to do Phase 2 of the shopping mall. The first phase response is very good. We've been opened for about a year and the occupancy rate is about 93%. So it is time for us to do an extension with the second phase," said Shin Cheng.
Yeow Seng said it is still reviewing the construction cost of Phase 2 but estimates the investment size to be some RM500 million. Phase 2 of the mall will add on one million square feet of net lettable area over four storeys of retail.
"We are starting with the design and planning and it will be ready before year-end...we will proceed with construction before year-end. Construction will take about two to three years," he said.
The land injection will bring the group's landbank to a total of 10,000 acres.