Everyday, we see negative news about the oversupply situation for the property market in Malaysia. At the same time however, we also see news about how some launches of new developments were so successful that the phase being launched was sold out within half a day! Okay, most of the time, these are bookings. These bookings would still have to go through loan applications which meant that some may still not make it to a confirmed sale. As for loan applications, well, some say that it’s getting harder but some would still say it depends on the buyers’ themselves. I think it really depend on the buyer themselves. Many times, many of us try to overstretch ourselves too much into too many commitments that even the banks are worried for us. I think the lending requirements should not be loosened. My personal thoughts? The market is definitely not slowing down because there are far more Malaysians needing homes than there are for the ‘right supply’ of the type of property which we love.
Another reason why I say so? Well, how many times have we read about public listed companies who were not property developers venturing into becoming a property developer? Reported in TheStar was another one, Boon Koon. In brief, the development would be for some serviced apartments and retail lots with Aera Property Group Sdn Bhd (formerly known as Asthetik Property Group Sdn Bhd). There would be two blocks of 29 storeys and a total of 752 units of service apartments. There would be a 8-storey car park too. The land has a leasehold status. Estimated profits for Boon Koon is RM93.5 million while the completion date for the development is 2021. Total gross development value for this would be RM306 million. Who is Boon Koon? Well here are some further readings in i3investor.com. Total market capitalisation is RM125 million which meant that this is not such a huge company. There are no average target price for this stock, indicating lacking of coverage by institutional funds.
This is quite a common piece of news and I think many more public listed companies would love to venture into something new, like property development. So, should we buy properties from these not typical property developer developers? I think it’s worth noting that many of the big property developer names we have today did not necessarily started as a property developer. Many would have started as a construction company first or even other core businesses. Those businesses would have provided them with sufficient funds to venture into something else, for their future. As usual if we intend to buy, then distance, size and location would be the usual three considerations. Of course, do think about WHY instead of just the Where yeah.. Happy following if Petaling Jaya is a favourite spot for you. The development for Boon Koon’sfirst venture is within Petaling Jaya.
written on 30 June 2017
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