PETALING JAYA: The implementation of the IAS 23 Borrowing Costs is only a timing difference in recognising the borrowing costs and will have no impact on cash flows of property developers, according to AmInvestment Bank which maintained a neutral call on the property sector.
Although initial rough estimates suggested the new approach will reduce the FY20–FY21 bottom line by between 10% and 20%, the research house is not making changes to its earnings forecasts at this juncture pending further information from property developers.
“Thus we are keeping our valuations unchanged no matter how much revision to be made into our earnings forecasts in the future,“ it said.
It added that developers are still assessing the effect on the change in accounting policy, therefore it is still early to determine the real impact to earnings.
On March 20, 2019, the IFRS Interpretations Committee issued an Agenda Decision – Over Time Transfer of Constructed Good (IAS 23 Borrowing Costs).
Following the agenda decision, the Malaysian Accounting Standards Board has decided that an entity shall apply the change in its accounting policy as a result of the Agenda Decision on IAS 23 Borrowing Costs to financial statements of annual periods beginning on or after July 1, 2020.
IAS 23 states that borrowing costs directly attributable to the acquisition, construction or production of a “qualifying asset” (one that necessarily takes a substantial period of time to get ready for its intended use or sale) are included in the cost of the asset. Other borrowing costs are recognised as an expense.
When a project is ready for sale, borrowing costs which have been previously capitalised subsequent to the launch will need to be unwound and recognised as expenses in the income statement including the borrowing costs previously capitalised unsold units classified under inventories.
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PETALING JAYA: Tropicana Corp Bhd’s net profit was flat at RM46.06 million for the first quarter ended March 31, 2019 compared with RM46.4 million in the same quarter a year ago.
Revenue for the quarter declined 53.7% to RM209.77 million from RM453.01 million, attributable to lower sales recorded in FY18 that had a carry-through effect on the results for FY19 as well as the completion of two development phases at Tropicana Aman in 2018.
Nevertheless, these were partly offset by the completion of the disposal of a piece of leasehold land in Bandar Damansara which contributed RM42.2 million to revenue and RM37.2 million to profit before tax.
The property developer has declared an interim dividend of 2.78 sen per share.
As at March 31, 2019, Tropicana delivered total unbilled sales of RM736.9 million, anchored by 14 ongoing projects and an existing landbank of 1,071 acres with a total potential gross development value (GDV) of RM48.6 billion.
Despite the challenging outlook of the property industry due to global and regional economic headwinds, the group believes that there will still be demand for properties in prime locations with attractive pricing.
“Moving forward, the group has in place a strong pipeline of future projects amounting to a GDV of approximately RM3.0 billion within its existing and new signature townships are expected to drive stronger performance.”
KAJANG: Finance Minister Lim Guan Eng has called for a transparent standard operating procedure (SOP) to narrow the gap between property valuations derived by the government and the private sector.
“I always hear that there is a difference between the valuation figures provided by the government sector and the private sector valuers. We need to see how the gap can be narrowed,” he said in his opening speech at the launch of the Property Market Report 2018 today.
He said the differing values are due to different valuation methods used, for instance, the comparison method employed by the Valuation & Property Services Department (JPPH).
However, he said the cost and depreciation method may be more suitable in some cases and recommends more engagements between JPPH and the private sector in order to streamline the methods used.
“I believe if there are clear SOPs, then the gap in property prices will not be so wide,” he added.
JPPH director general Ahmad Zailan Azizuddin said the cost and depreciation method is the last resort used by the department, because the cost of a development is not the same as the value of a development.
“We normally use the comparison method. He (Lim) has suggested to use the cost and depreciation method, which is our last resort because cost does not equal value. Cost and value are very different from each other. Value is based on transactions in the market, whereas cost is based on facts,” he said.
Although the cost and depreciation method could be used for affordable housing, Ahmad Zailan said government intervention is needed to ensure transparency in development costs.
He said the government should draw up a policy to compel property developers to reveal the actual cost of development for their projects. At present, there is no transparency in the components of development cost and the department relies on estimates when carrying out valuations.
He said the government and private sector valuers carry out valuations based on the same principal and standards but there could be differences in opinion and interpretation of the standards, which leads to differing valuations.
HONG KONG: Hong Kong’s private home prices, one of the world’s most expensive property markets, rose in March at their fastest pace since September 2016 on strong pent-up demand and improved sentiment.
Home prices in the densely-populated city gained 2.9 percent last month, the third straight rise and accelerating from February’s revised 1.6 percent increase, government data showed on Tuesday.
Hong Kong’s home prices fell from August to December last year weighed by U.S.-China trade tensions and higher interest rates after rising for 28 consecutive months, but then quickly rebounded since the beginning of this year.
“The rise is higher than expected,” said Thomas Lam, executive director of Knight Frank. “If the index continues to rise in the next two, three months and there are no other negative factors, housing prices will see another uptrend in the short term.”
Over the past decade, ultra-low interest rates, limited housing supply and large capital flows from mainland Chinese buyers into the financial city on China’s doorstep pushed housing prices up more than 200 percent, angering many Hong Kong residents who could not afford to jump on the bandwagon.
Property consultancy CBRE named Hong Kong the least affordable housing market for the eighth year in a research report published earlier this month, with an average property costing $1.2 million or $2,091 per square foot. That compares with Singapore, ranked the second priciest, at $874,372 and $1,063, respectively.
Another consultancy JLL said on Monday the drop in stamp duties levied on non-first time and foreign homebuyers in the first quarter suggested the bulk of buyers were local first-time purchasers.
As the property market starts to revive, developers are selling new launches at higher prices than a few months ago.
Last week, New World Development and Henderson Land launched their joint high-rise residential development in Kowloon at a floor price 10 percent higher than the neighbourhood. Analysts expected developers will offer less attractive selling prices than last year going forward.
In the first quarter, developers sold a total of 5,532 new flats in the first three months, the highest in 10 quarters. The figure was up 70 percent from the previous quarter and 44 percent from a year earlier.
Property developers also became more active in land auctions. A land plot in the New Territories received 11 tenders last week, according to Hong Kong media, a high in recent months despite the record-asking price of the area.
KUALA LUMPUR: There should be a price control mechanism for residential properties to avoid the escalation of prices, suggested National House Buyers Association vice-president Brig Gen (R) Datuk Goh Seng Toh.
“We believe price control is feasible. We control the prices of sugar, cooking oil, petrol and a whole host of other things but yet we allow a laissez-faire situation to persist in the housing arena,” he told reporters after a panel discussion on “Housing in Malaysia: Policy Discourse” organised by Khazanah Research Institute (KRI) here today.
Goh emphasised that a roof over one’s head is more important than sugar and cooking oil, for example, where consumption of these items can be cut, and yet the country has allowed property developers to call the shots in setting house prices and let prices go up to dizzying heights.
“We’re practising certain limit and price control when we dictate the prices of affordable houses and low-cost houses so it’s a matter of extending that. Drastic measures need to be done before we end up with a homeless society,” he added.
According to KRI’s latest report “Rethinking Housing: Between State, Market and Society” launched today, housing affordability worsened significantly between 2012 and 2014 as supply did not cater to demand.
During this period, the median multiple affordability increased from 4.0 to 5.1, while the median house price increased at a compound annual growth rate of 23.5% from RM175,000 to RM280,000.
Based on the median multiple affordability, Malaysia’s housing market is categorised as “seriously unaffordable” and “severely unaffordable”, exceeding the 3.0 threshold for housing affordability.
The report also cited data which indicate that house prices in Malaysia have almost doubled since 2008 while construction costs have only increased slightly in the same period. Due to the lack of housing development cost data, the difference between normal profits and excess profits cannot be determined. The relationship between speculation, land price and house price also cannot be empirically tested without land data.
National Housing Department director-general Jayaselan K. Navaratnam said its ministry has never planned to implement price control of house prices as it is an open market where there is fair trade.
Any move to launch price control will also impact the economy and deter investments, he added.
However, he clarified that all states are already doing their own “price control”.
“It’s not to bring down the price but to manage the price,” Jayaselan said, citing Malacca, which sets a suitable price for houses.
KRI chairman Dr Nungsari Ahmad Radhi disagreed with the idea of price control, saying the setting of a ceiling price will also bring about a floor price, resulting in developers not offering anything below the floor price.
Instead of price control, KRI director of research Dr Suraya Ismail pointed to the need for regulations to deter abuse of market and the monopoly of high house prices dictated by some developers, adding that regulations must create a competitive market.
KUALA LUMPUR: There should be a price control mechanism for residential properties to avoid the escalation of prices, suggested National House Buyers Association vice president Brig Gen (R) Datuk Goh Seng Toh (pix).
“We’re practising certain limit and price control when we dictate the prices of affordable houses and low cost houses so it’s a matter of extending that,“ he said during a panel discussion on “Housing in Malaysia: Policy Discourse” by Khazanah Research Institute (KRI) here today.
He said the country is stringent on controlling the prices of cooking oil and sugar, for example, but yet in the housing arena, it has allowed property developers to call the shots in setting house prices.
According to KRI’s latest publication “Rethinking Housing: Between State, Market and Society”, housing affordability worsened significantly between 2012 and 2014 as the housing supply does not cater to demand.