Wednesday, April 29, 2009

Housing in Hard Times

Mr. Ho Chin Soon talked mainly about the slowing, but not (yet?) collapsing demand for houses. But what about supply?

He did produce an interesting slide about oil prices last year.



The sharp spike in oil prices brought with it steep increases in building materials.



This was a bewildering time for developers, quantity surveyors and, yes, architects - we had never seen prices go haywire before.

The problem of building costs going up hurts most when it costs more to put up a new building compared to just buying an existing one available in the market; at that point, the cost of building new houses exceeded the market price of existing houses, and there was no shortage of properties for sale as highlighted in Mr. Ho's talk. No surprise - projects for new housing slowed down or simply stalled.

One year on, this problem has persisted although circumstances has changed. The price of building materials have come down, following the plummet in oil prices, but demand has dipped too.




Thestar online

By my own (unprofessional economist) reckoning, the cost of building new houses is still above what similar properties, already built, can be bought for. It is generally true in Malaysia, and probably true all round the world.

Is there hope?

The overall picture is dire, but here and there, some are able to do better than others. Sime Darby Properties launched anaggressive sales campaign. They started with clearing out their existing inventory of unsold properties, but from the latest reports, they are selling newly launched projects too.


Thestar online

It helps that houses are not a commodity; savvy developers market them as highly differentiated products, very much unlike whatever else there is on the market. They compete on location, some design feature, brand name, and so on, not just on price.

As someone promoting Tessellation Planning, it helps that the Honeycomb houses – the sextuplex, quadruplex and duplex units – are genuinely unlike anything else that is currently available on the market. We will soon see when the Maran and Nongchik projects finally get launched in a few months!

Another thing that can help is technology - a cheaper and better way to build. A friend of mine, Chou Kan Yin has developed a building system for walls and floors that doing that will be the subject of my next post...

Sunday, April 26, 2009

Prospects for property in Malaysia


I love maps, but there is another Malaysian who loves them even more. That person is Ho Chin Soon. A valuer by profession, he has made maps his business. But more of that in a later post.

In March , I had the chance tom see him speak at a property exhibition in the Mid Valley Mall in Kuala Lumpur. He talked about the prospect for property market in Malaysia during this global recession.



His message was very simple:

Yes, times are bad in the States with the financial crisis. There is usually a six month delay between happens in the real economy in the US and Malaysia. Seeing that a large part of the crisis in the States has stemmed from a property bubble, how will Malaysia be affected?

In his opinion, the property in Malaysia has been largely flat since the last recession in 1998.He suggests that the local events in the past couple of years had kept down the values of stocks and properties, whilst Singapore and many other countries enjoyed a boom.






He pointedly drew contrast the large rises in the rents and prices of properties in Singapore in the last decade and the measly increases here.






There are exceptions of course, and the development around KLCC is one. There is at least least one project where work has been deferred indefinitely.



“No bubble here” is his conclusion. That is not to say that we are immune to financial stress; certainly the reduction in export incomes will affect the economy. The level of bank’s non-performing loans has not shown a substantial increase. Nor has he noticed an increase in properties for auction. Both these things will take time to work through the system. Prices will fall, but not as much as has fallen in Singapore.

Meanwhile, the main bargains to be had are those on offer from big developers who are keen to unload their unsold properties.



Thursday, April 23, 2009

Starting again

I started using Google blogger in March, 2007 and spent about three months feverishly building up a series of ‘blogs’ on “Tessellation Planning”. They were not really blogs, but websites about different aspects tessellation planning and some of the on-going projects that just happened to be set up using the blogger tool. I was able to link them all together under a single title, “Tessellar”, a navigation bar and a uniform look.

I then discovered that my websites weren’t really attracting many people! It is something that hits any beginner.

So I started blogging as a way to get more readers. I picked “vernacular architecture” as a theme. This was a topic that interested me. But also I was keen to pick up readers from as many countries as possible, and I hypothesized that if I wrote about say, mud-huts in Africa, I might pick up interest from Africans. As it turned out, I picked up readers from all over the world.

But putting up two to four posts each week was very time-consuming. By May 2008, I stopped.

Economists in the US now trace the beginning of the current recession to the 4th quarter of 2007, but most people got its first inkling only in September, 2008 when the US government let Lehman Brothers go belly-up. Here in Malaysia, people in the housing industry got our first wind of bad, bad times in early 2008 when building prices went haywire. Construction costs seemed to be going up and up with no end in sight, and developers just stopped in their tracks. Work for architects and town-planners started to dry up, and practices like mine have had to hunker down and wait till the storm blows over.

Many on my staff left to further their studies, a few others resigned, and the ones still with the firm understand that times are hard. Happily for me, in the past year I had been able to grow lean without too much heartache. The storm is still not over yet, but I see specks of light in the far horizon: architects like me are in the futures business.

It’s time to start blogging again!