Market Outlook: Where are we at the curve?Kuala Lumpur Real Estate & Residential Market Overview

April 2016

Contents

1. What are the experiences in the past?

2. Where are we now?

3. What will happen?

4. Should an investor wait?

5. Where are the opportunities?

6. Comparison between KL, Penang, Johor

What are the experiences in the past?

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%19

86

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015G

DP

Gro

wth

% y

-o-y

4

Global Crisis

2008Asian Financial

Crisis 1998

Malaysian Economy, 1986 to 2015

Source: BNM

Asian Financial Crisis: Period in which financial contagion hit Asian currencies starting from Thai Baht

followed by the ringgit.

Global Crisis started from the subprime crisis in the US & it escalated to a crash in the world US stock

market.

Value of Property Transaction for All Sectors shows

Sharpest Drop in 1998

5

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

500.00

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

p

Cha

nge

in V

alue

(%

)

Vol

ume

of tr

ansa

ctio

n (‘0

00)

Volume of Transaction ('000) Change in Value (%) y-o-y

Source: NAPIC

Global Crisis

2008

Property Values

fell 8.3%

Asian Financial

Crisis 1998

Property Values

fell 47.6%

• The most severe drop in property prices was experienced during the

Asian Financial Crisis when values dropped by 47.6% in 1998.

• The Global Financial Crisis in 2008 did not have as severe an impact on

property prices with values falling by 8.3% in 2009.

• We think that the drop will lie between the two because:-

1. Malaysia is still growing and not in a recession

2. The other 2 periods were that of a Crisis and negative growth

3. Overhang in property was the worst during the Asian Financial Crisis

4. Overhang situation improved since 2008

6

How severe will be the drop in property prices?

No. of Residential Property Overhang

7

National Property Information Centre

(NAPIC) defined “property overhang”

as units which were completed and

issued with Certificate of Fitness for

Occupation (CFO) or Temporary

Certificate of Fitness for Occupation

(TCFO) but remained unsold for

more than nine months after it was

launched for sale on or after 1 January

1997.

The percentage (%) shows the

percentage of residential units

overhang from the total of new

launched.

Source: NAPIC

0%

5%

10%

15%

20%

25%

30%

35%

0

5000

10000

15000

20000

25000

30000

2008 2009 2010 2011 2012 2013 2014

Per

cent

age

of o

verh

ang

No.

of O

verh

ang

(uni

t)

Residential Overhang Malaysia Residential Overhang KL

% of Overhang in KL

Where we are now?

Where are we now?

Economic Growth

• Still seeing positive growth and not negative

• Bank Negara sees 4% to 4.5% in 2016; JLL concurs

Property Market

• Property Market Volume has fallen 8% in 2015

• Volume continues drop in 2016

• Prices of distressed asset by as much as 20% to 22% for luxury, high end properties that are older, less well maintained

2016

11

What will happen?

How will the recovery be – V or U-shaped?

The Experience of 1986 recession, Asian Financial Crisis 1998 and Global Crisis 2008

1986 1998 2008 2014

Commodity Low prices High prices High prices Low prices

Oil Low prices Low High prices Low prices

Ringgit Strong

RM2.50:US$1

Weak

Pegged for 5

years

RM3.80:US$1

Moderate

Did not weaken

below peg

Weak

• Unlikely to see a V-shaped downturn and recovery

• Recovery is likely to be U-shaped but with a shallow downturn that is

prolonged similar to 1986

19

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

0

50,000

100,000

150,000

200,000

250,000

300,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Tran

sact

ion

Val

ue (

RM

mill

ion)

Res

iden

tial T

rans

actio

n V

olum

e (u

nit)

Residential transaction volume (unit)

Residential transaction value (RM million)

Source: NAPIC

Increased RPGT rate, since Jan 2010 to

Jan 2014 and RFG -Home loan 35 years

Increased foreign floor price,

RM500,000 per unit,

Jan 201070% Loan-to-value (LTV)

for third property,

Nov 2010

Increased foreign floor

price RM1 mil per unit,

DIBS abolished

Annulment of RPGT

End of DIBs in Budget 2014 presents Market Opportunity Now

Implementation

of GST 6%

20

Weak demand because higher loan rejections

Source: BNM

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

0

10000

20000

30000

40000

50000

60000

70000

80000

1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Loans Approved %Loans Applied

Pre-GST

21

How can you improve your chances of obtaining a loan?

• Check your CCRIS by retrieving your CCRIS report at BNM. Banks rely on CCRIS report – a central credit bureau residing at BNM that has information on credit of individuals.

• Reduce unnecessary number of credit cards, pay up other debt asap

• Apply jointly with spouse or parents who earn income to increase combined income

• Show other forms of income eg dividends from shares, income from Fixed Deposits, show bonus on top of payslip

• Easier if you already have a good relationship with the bank

• Have a standing instruction to pay any debts on time

22

2016 will be the window of opportunity for investors

• The removal of DIBs will be fully felt in 2016.

• Higher loan rejections prevent buyers from entering market.

• Economy is fundamentally sound - The current economic slowdown is not

as severe as imagined.

• There will no recession – only slower growth at 4% to 4.5%.

• Economic recovery expected next year.

23

More Upside in Horizon

Upside

1. Economy recovers as commodity prices rise & manufacturing improves, ringgit recovers

2. Post-GST, demand for properties normalizing

3. Demand for housing loans still rising – Government likely to help genuine first time house-owners

4. Market to rerate as sentiment was concerned over higher interest rates

Downside

1. Bank continues to hold back lending to real estate & reject loan applications .

2. US raise interest rates & more foreign funds flow back to the US

3. Political uncertainty

24

Reversal in Outflow of Net Portfolio Investments

Outflow of net portfolio

investments (RM billion)

1997 (First 9 months ) -30.0

2008 -83.2

2010 48.5

2012 63.9

2014 -38.5

2015 -28.2

2016 (First 3 months) 5.6

Source: Bank Negara, Monthly Statistical Bulletin

26

Should an investor wait?

Should an investor wait?

• Unlikely to see as severe a price drop as seen during the Asian

Financial Crisis (AFC) in 1998.

• Current prices already reflect the drop in transactions & economic

slowdown. In fact, economy growing at 4.5% whereas during Global

Crisis economy grew at -1.5%

• Investor should make a move in 2016 to take advantage of those

caught by DIBs trying to unload their properties

28

Where are the opportunities?

Greater Kuala Lumpur New Infrastructures & Megaprojects

30

Sg Buloh

Kajang

Kelana Jaya

Bukit Jalil

Putra

Heights

36

54

2

KLCC

1

1

GDV: RM15 bil

Site: 76 acres

Area : Mont Kiara

GDV: RM6 bil

Site: 19 acres

Area: KLCC

GDV: RM15 bil

Site: 76 acres

Area: PJ

Naza KL Metropolis

2 KL 118 (Warisan Merdeka)

3 PJ Sentral

GDV: RM40 bil

Site: 70 acres

Area: KLCC

GDV: RM8 to

RM10 bil

Site: 19.4 acres

Area: KLCC

GDV: RM150 bil

Site: 486 acres

Area: Sg. Besi

4 TRX

5 BBCC

6 Bandar MalaysiaLRT Extension

Ampang Line: 13 stations

Kelana Jaya Line: 12 Stations

RM 10 bil

(2016)

MRT 1

51 km

RM 32 bil

(2017)

MRT 2

52 km

RM 28 bil

(2022)

• The megaproject developments will provide more job opportunities. With better accessibility through infrastructure projects, it will increase potential residential hotspots in the city hence push up the property price.

• It also reducing travel times for residents living along the Ampang and Kelana Jaya lines significantly (more convenient).

• Residential property developments located near key stations along the two LRT lines will perform well, for example Subang Jaya-USJ, Putra Heights, Kinrara, Puchong, Kelana Jaya and Glenmarie.

• There are three key hotspots highlighted for potential outperformance which are Puchong-Kinrara, Bukit Jalil and Subang-Sunway.

22

How infrastructure project affect Residential

Property Market?

Example of projects

23

Bukit Jalil

IOI Puchong

Cheras

Project Park Sky Residences

Property type Condominium

Development Pavillion Bukit Jalil City Mall

DeveloperAset Kayamas Sdn Bhd

(Malton)

Status Under Construction

Completion

Year2019

Near Vicinity

Asia Pacific University,

Pavillion Bukit Jalil Mall and

400m away from Bukit Jalil

LRT Station.

Total Units 1,062 units

Built up size 1,100 sq ft – 1,300 sq ft

Launch price From RM510 psf

Project V Residences Suites

Property type Services Apartment

Development Sunway Velocity

Developer Sunway Property

Status Under Construction

Completion

Year2017

Near Vicinity

Velocity mall that opening

soon, 250 m away from Maluri

MRT & LRT interchange

station and Pantai Cheras

Medical

Total Units 268 units

Built up size 624 sq ft – 883 sq ft

Average

Launch priceRM1,200 psf

One Utama

The Curve

Quick Comparison of KL, Penang and Johor

KL is the best performing

25

Kuala LumpurPenang

Johor

Source: JPPH

Property Prices Comparison Between Penang, KL and

Johor Baharu

26

Property Prices Comparison Between Penang, KL and Johor Baharu

Penang Johor Baharu Kuala Lumpur

Mortgage as Percentage of

Income:69.64% 108.95% 73.54%

Gross Rental Yield (City Centre): 2.98% 3.26% 4.77%

Gross Rental Yield (Outside of

Centre):4.15% 5.53% 4.83%

Source: Numbeo

Mortgage as Percentage of Income is a the ratio of the actual monthly cost of the mortgage to take-home family

income (lower is better). Average monthly salary is used to estimate family income. It assumes 100% mortgage is

taken on 20 years for the house(or apt) of 90 square meters which price per square meter is the average of price in

city centre and outside of city centre.

Gross Rental Yield is the total yearly gross rent divided by the house price (expressed in percentages). Higher is

better.

KL offers better rental yields in city centre

1. It is easier for someone in Penang & KL to repay his monthly

house mortgage based on his monthly income than if he were in

Johor.

2. KL Property has better rental yields in city centre

3. For investments in the suburbs, Johor offers the best yields

27

COPYRIGHT © JONES LANG LASALLE IP, INC. 2015

Thank you

About JLL

JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and

investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 230 corporate offices, operates in more

than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio

of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business,

LaSalle Investment Management, has $56.4 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated.

For further information, visit www.jll.com.

JLL has over 50 years of experience in Asia Pacific, with over 32,000 employees operating in 83 offices in 16 countries across the region. The firm was named ‘Best International

Property Consultancy’ and ‘Best Property Consultancy Asia Pacific’ at the International Property Awards Final 2015 as well as number one real estate advisor in Asia at the 2015

Euromoney Real Estate Awards. www.jll.com/asiapacific.

JLL Property Services (Malaysia) Sdn Bhd (640511-U)

(Formerly known as YY Property Solutions Sdn Bhd)

Tel: +60 3 2260 0700

Fax: +60 3 2260 0701

YY Lau

Country Head

Malaysia

yy.lau@ap.jll.com

+603 2260 0709