Prices of our new projects will rise, not fall

Source: Johor Biz Network
Prices of our new projects will rise, not fall

PUTRAJAYA: IOI Properties Group Bhd, which is planning to launch projects worth a total of RM3 billion in gross development value (GDV) during its current financial year ending June 30, 2019 (FY19), is unlikely to cut prices in its upcoming local projects, according to chief executive officer Lee Yeow Seng.

Lee said a 10% cut in selling price is challenging, with labour and material costs on the rise. He was commenting on Finance Minister Lim Guan Eng’s call for property developers to lower housing prices by up to 10% locally, given the sales and service tax exemption on construction services and building material costs

“It is also not good for house buyers, especially those who committed earlier on [because] if prices fall, valuation of their properties will fall too. We think it’s healthier for our new launches to have a price increase, instead of a drop in selling price,” he told reporters after the group’s annual general meeting here yesterday.

Meanwhile, Lee said the planned launches — encompassing both local and overseas projects — is higher in GDV than FY18’s RM2.8 billion and are premised on strong demand for its projects in China and Singapore.

He said the launches could help the group achieve at least RM3 billion in sales, and lift bottom line by at least 20%.

“Our overseas investments are doing well. In China, our last launch (in September) was almost fully sold out. So we are quite confident our new launches in China going forward will receive very positive response,” he said.

He added that the group still has projects worth 4 billion yuan (approximately RM2.4 billion) there to be rolled out over two fiscal years, which includes mid- to high-rise condominiums and town villas in IOI Palm City, Xiamen.

In Singapore, Lee said the group will be able tap the strong interests for prime Grade A office space with its Central Boulevard project that is strategically located within Marina Bay and the business district.

Lee said the group is looking at a 60:40 profit contribution from overseas and local projects this fiscal year, with overseas to take the lead.

“Malaysia’s [property market] will still be a little subdued for the time being. We don’t expect the market to rebound quickly until the fundamental problems are adjusted, such as the oversupply of office space and affordable housing across Malaysia,” Lee added.

Regardless, the group is still pressing on with its planned launches here. These include phases in township projects IOI Resort City in Putrajaya, Bandar Puteri Bangi in Kajang, as well as Bandar Putra Kulai and Bandar Kempas Utama, both in Johor, he said.

On its property investment division, Lee said phase two of its IOI City Mall here — where the group will be adding one million sq ft of net lettable area by 2021 — has moved past foundation piling two months ago into substructure works.

The group has spent RM100 million so far to refurbish its 20-year-old mall, IOI Mall Puchong. The mall will be re-launched early next year.

The mall component in its IOI Palm City Project in Xiamen, China, too has seen strong leasing momentum and positive rental rates supported by retailers’ sales, he added.

He shared that the group will be bringing the Moxy by Marriott brand to Putrajaya, with an official signing expected this month. Lee said the group is targeting to complete the new lifestyle hotel in three years.

The 40-year-old, meanwhile, dismissed the possibility of a real estate investment trust listing any time soon. “Our priority right now is to increase the occupancy rates further and achieve higher rent. The group will be able to fully benefit from there,” he said.

IOI Properties’ shares rose six sen or 4.8% to RM1.31 yesterday, valuing the group at RM7.21 billion.