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“Connecting the …… dots between economy, demographic trends and current-new property hotspots” REI Group of Companies - Presentation by Dr. Daniele Gambero

“Today we shouldn’t look at tomorrow but at a tomorrow that is 10 years from today”

Malaysia Economy and Property Market: 2014 Economic Outlook

and Upcoming Property Hotspots

DISCLAIMER AND COPYWRITE To the best of our knowledge, all information included here falls under the fair use or public domain guidelines of copyright laws. We strive for accuracy but cannot be held responsible for any errors in information featured in the slides or incorrect attributions. REI Group of Companies uses reasonable efforts to include accurate and up to date information however REI Group of Companies makes no warranties or representations as to its accuracy. REI Group of Companies assumes no liability or responsibility for any errors or omissions in the content. The quotes, articles, news and views are not necessarily representative of the views of REI Group of Companies and its directors and Management. This Presentation has been shared for personal use and knowledge ONLY. Any inappropriate use will be prosecuted according to the law and any total or partial use of this presentation for public viewing or publishing must be pre-authorized in writing by REI Group of Companies.

CONSULTANCY - Strategic Marketing - Property Market Surveys - Property Market Reporting - Property Market Analysis - Branding - Creative

- latest information on future

market trends in property development

- insights on developers information, new forthcoming hotspots and proposed infrastructures

Gambero Property Market Intelligence (Gambero PMI) - access updated information & data on both Regional

& Local economic indicators

…………What we do

AGENDA

Globalization and the Malaysian Economic Performance

Malaysian Demographics now and future

Market Sustainability

Strategically Sustainable Location

Strategically Sustainable Locations: the Future Gold Mines

Malaysian Economic and Property Market Performance: 2013 Outlook

Malaysian Economic and Property Market Performance: 2013 -2014 Outlook ……. Are we in the bricks?

GLOBAL & MALAYSIAN ECONOMY - FACT FILE

USA EU JAPAN AUSTRALIA UK MALAYSIA

GDP Growth 2.10% -0.90% 0.90% 0.55% 0.63% 4.70%

Gov debt as % of GDP 101.60% 90.60% 218% 21% 92% 54.80%

Gov deficit as % of GDP -8.50% -3.7% -9.2% -3.1% -6.3% -4%

Balance of current acc -440 USD Bil 25.9 USD Bil 60 USD Bil -57 USD Bil -93.5 USD Bil 18.6 USD Bil

Inflation 1.5% 1.10% 1.10% 2.20% 2.70% 2.50%

Unemployment 7.20% 12% 4.10% 5.60% 7.70% 3.10%

Business confidence 56 -1 12 12 7 115.2

consumer confidence 73 -14 45.2 108 -18 125.3

GLOBAL & MALAYSIAN ECONOMY - FACT FILE Balance of current account world map

GLOBAL & MALAYSIAN ECONOMY - FACT FILE Balance of current account world map

MALAYSIAN DEMOGRAPHIC - FACT FILE

+1.6 M

+3.6 M

+2.6 M

+6 M

MALAYSIAN MIGRATION FLOWS - FACT FILE

2012: 21,000,000 Malaysians live in urban areas 3.5% growth every year

2012: 72.5% of the Malaysian population lives in urban areas

15,000,000.00

16,000,000.00

17,000,000.00

18,000,000.00

19,000,000.00

20,000,000.00

21,000,000.00

22,000,000.00

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

MALAYSIAN FLOW

Malaysian Migration Flow Urban to Rural Areas

Source: World Bank Statistics

FEW CONSIDERATION ON MALAYSIANS WEALTH:

Malaysian average per capita income (2012) – Source IMF

USD10,304 per year = RM3,000 (per month)

Malaysian Wealth Distribution

Lowest 20% - 5% Highest 20% - 40%

=

Median 60% share 55%

MALAYSIAN WEALTH DISTRIBUTION - FACT FILE

18,000,000

MALAYSIAN PROPERTY MARKET SUSTAINABILITY

House - Income trend 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

House price index 100.0 101.1 103.5 107.5 112.4 115.0 117.2 123.1 128.6 130.5 138.8 151.2 167.2 178.4

Income statistics 213.0 232.1 238.2 244.2 250.0 260.8 271.5 282.2 294.6 307.0 330.0 352.9 375.8

How House Price Index and Per Capita income index are strictly correlated,

what is this comparison showing?

House price index growth 2000 – 2012 = +67%

Median income growth 2000 – 2012 = +175%

MALAYSIAN PROPERTY MARKET SUSTAINABILITY

House - Income trend 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

House price index 100.0 101.1 103.5 107.5 112.4 115.0 117.2 123.1 128.6 130.5 138.8 151.2 167.2 178.4

Income statistics 213.0 232.1 238.2 244.2 250.0 260.8 271.5 282.2 294.6 307.0 330.0 352.9 375.8

How House Price Index and Per Capita income index are strictly correlated,

what is this comparison showing?

House price index +67%

Median income +175%

MALAYSIAN PROPERTY MARKET SUSTAINABILITY

MALAYSIAN BUDGET 2014 - SUSTAINABILITY

STRENGTHENING ECONOMIC RESILIENCE ACCELERATING TRANSFORMATION

Today we shouldn’t look at tomorrow but at a tomorrow that is 10 years from today

MALAYSIAN BUDGET 2014 – POSITIVE SIDE

ATTRACT MORE DOMESTIC AND FOREIGNER INVESTMENT - 70% of the World Islamic Capital Transaction are done in Malaysia

- Promotion of Malaysia as a Market for Social Responsible Investment (SRI)

- 2014 Visit Malaysia Year and 2015 Year of Festival (Tourism)

- Kuala Lumpur already 4th world wide as Preferred Tourist Destination for

Shopping after New York, Tokyo and London

- Jan – July 2013 25 million Tourists / Jan – July 2014 28 million Tourists

MALAYSIAN BUDGET 2014 – POSITIVE SIDE

ATTRACT MORE DOMESTIC AND FOREIGNER INVESTMENT - 70% of the World Islamic Capital Transaction are done in Malaysia

- Promotion of Malaysia as a Market for Social Responsible Investment (SRI)

- 2014 Visit Malaysia Year and 2015 Year of Festival (Tourism)

- Kuala Lumpur already 4th world wide as Preferred Tourist Destination for

Shopping after New York, Tokyo and London

- Jan – July 2013 25 million Tourists / Jan – July 2014 28 million Tourists

MALAYSIAN BUDGET 2014 - MOBILITY

ONGOING INFRASTRUCTURE PROJECTS

- Second link to Penang Island - Extension of LRT line 1 and 2 - MRT Line 1 - MRT Line 2 - Various Klang Valley’s highways and

expressways - HSR - Kuantan Port

MALAYSIAN BUDGET 2014 - MOBILITY

ONGOING INFRASTRUCTURE PROJECTS

MALAYSIAN BUDGET 2014 - MOBILITY

ONGOING INFRASTRUCTURE PROJECTS

MALAYSIAN BUDGET 2014 - MOBILITY

NEW INFRASTRUCTURE HIGHWAYS AND DOUBLE TRACKING ROADS

West Coast Expressway Banting-Taiping 250 km

MALAYSIAN BUDGET 2014 - MOBILITY

NEW INFRASTRUCTURE HIGHWAYS AND DOUBLE TRACKING ROADS

Double tracking JB – Gemas existing road 175 km

MALAYSIAN BUDGET 2014 - MOBILITY

NEW INFRASTRUCTURE HIGHWAYS AND DOUBLE TRACKING ROADS

Double tracking Ipoh-Padang Besar existing road 250 km

MALAYSIAN BUDGET 2014 – EAST COAST CORRIDOR NEW INFRASTRUCTURES AND O&G INVESTMENT

Kerteh - New integrated petrochemical complex

Gebeng - New integrated petrochemical complex

RM2.3 Bil for Kuantan port expansion as East Gate of Malaysia

MALAYSIAN BUDGET 2014 – GST IMPLEMENTATION

GST WILL BE IMPLEMENTED EFFECTIVE APRIL 1st , 2015 GST RATE HAS BEEN FIXED AT: 6%

- Not imposed on basic food items

- Not imposed on piped water and first 200 units of electricity (domestic use)

- Not imposed on Services provided by the Government

- Not imposed on transportation services: bus, train, LRT, taxi, highway toll

- Not imposed on education and health services - NOT IMPOSED ON SALE AND PURCHASE AND RENTAL OF RESIDENTIAL

PROPERTIES

MALAYSIAN BUDGET 2014 PROPERTY MARKET SUSTAINABILITY

RPGT REVISION EFFECTIVE JANUARY 1st, 2014

MALAYSIAN BUDGET 2014 PROPERTY MARKET SUSTAINABILITY

RPGT: HOW IT WORKS?

THIS IS WHY RPGT WILL NOT AFFECT THE PROPERTY MARKET BUT

ONLY PENALIZE UNSCRUPULOUS SPECULATORS.

CAN SELL

WITH NO TAXACTUAL HOLDING PERIOD

CURRENT LOCK-IN PERIOD IMPOSED BY BANKS

ON CONVENTIONAL FINANCING

Under

construction

Delivery

Vacant Poss.

RPGT @

20%

RPGT @

15%

RPGT @

0%

RPGT @

30%

RPGT @

30%

RPGT @

30%

Year 1 Year 6

Under

construction

Year 2 Year 3

Under

construction

Year 4 Year 5

MALAYSIAN BUDGET 2014 PROPERTY MARKET SUSTAINABILITY

MINIMUM PURCHASING VALUE FOR FOREIGNERS RAISED TO RM1,000,000.00

- Properties priced RM900,000 and below will be not at all affected by this new regulation.

- The only properties which values might be pushed up by developers to attract possible foreigner purchasers are the ones priced RM900/950,000 and above

- In Iskandar Malaysia, considered to be the hottest Property Market in Malaysia for foreigners, less than 8% of the transactions in 2013 have been actually done by foreigner purchasers.

MALAYSIAN BUDGET 2014 PROPERTY MARKET SUSTAINABILITY

BUDGET 2014 – PROHIBITION TO OFFER DIBS PROHIBIT DEVELOPERS FROM IMPLEMENTING PROJECTS THAT HAVE FEATURES OF

DIBS. FINANCIAL INSTITUTIONS ARE PROHIBITED FROM PROVIDING FINAL FUNDING FOR PROJECTS INVOLVED WITH DIBS

HOUSING PRICES DIBS COST FOR DEVELOPERS REPRESENTS ROUGHLY A 5/5.5% OF THE HOUSE VALUE,

CONSEQUENTLY PRICES OF PROPERTIES SHOULD DROP A GOOD 4 TO 5% SINCE JANURAY 1st 2014…

UNLESS CREATIVE DEVELOPERS WILL COME OUT WITH….

MALAYSIAN BUDGET 2014 PROPERTY MARKET SUSTAINABILITY

HOUSING PRICES DIBS: BUDGET 2014 “PROHIBITING” ITS USE

THEN

DIRS = DEVELOPER INTEREST REFUND SCHEME

OR

DISS = DEVELOPER INTEREST SUBSIDY SCHEME

OR

ICS = INTEREST CAPITALIZATION SCHEME

OR

3% TO 4% CASH BACK TO PURCHASERS DURING CONSTRUCTION

MALAYSIAN BUDGET 2014 PROPERTY MARKET SUSTAINABILITY

THEN THE WORST HAPPENED….

MALAYSIAN BUDGET 2014 – SUSTAINABILITY AND THE LOW AND MEDIUM INCOME GROUP

IMPLEMENTED SINCE JANUARY 1st, 2014

Increased transparency in property sale prices with clear display of all the benefits and incentives offered such as: • free legal fees, stamp duty, sales agreements

cash rebates and freebies

NOVEMBER 15TH, 2013

MALAYSIAN BUDGET 2014 – SUSTAINABILITY HOW DOES “TRANSPARENCY” APPLY?

MALAYSIAN BUDGET 2014 – SUSTAINABILITY 950 sq ft Unit

2+1 bedroom

ONLY

399,000

DREAMLAND CONDOMINIUM SPECIAL OFFER

10% LOW DEPOSIT 39,900

3% YEARLY CASH BACK DURING CONSTRUCTION:

399,000 * 3% = 11,970 * 3 years35,910

SPA FREE (being developer to request the buyer to

accept his SPA lawyer this makes sense to be left

for free and it has always been offered)

FREE

LOAN AGREEMENT AND S&D FREE 4,763

KITCHEN CABINET INCLUDED 8,000

3 AIRCON + 2 WATER HEATER INLUDED 6,000

CLEAN HOUSE VALUE 304,427

INCLUSIVE OF VALUE

MALAYSIAN BUDGET 2014 – SUSTAINABILITY

SPA VALUE

399,000

MARGIN OF FINANCING = 90%

359,100

NET VALUE

AFTER

DEDUCTION OF

FREEBIES - LTV

304,427

273,984

MALAYSIAN BUDGET 2014 – SUSTAINABILITY

10% deposit 39,900

credit note (39,900)

Cash out 0

SPA VALUE 399,000

Free-free-not

so-free54,673

Loan approved 273,984

SPA VALUE 399,000

10% deposit

given for FREEEE(39,900)

Differential

amount to BE

PAID

85,116

EFFECT OF THIS MOVE House prices will re-adjust in the short term

to more reasonable Values!

EXPECTED VALUES

ADJUSTMENT +2% and

-5 to 6%

MALAYSIAN BUDGET 2014 – “The Aftermath”

MALAYSIAN PROPERTY MARKET SUSTAINABILITY

MALAYSIAN PROPERTY MARKET SUSTAINABILITY

Kuantan: the new commercial port, the already committed investment from Chinese, European and American Multinational Corporation

Kota Baru: the Northern Educational Hub with 15 Local and International Universities already working to establish a northern campus

Penang: the 8th destination worldwide to retire.

Ipoh: retirement homes and health tourism

Klang Valley: the Northern, Southern and Western Corridor and the Megaprojects

Iskandar Malaysia: the most Strategically Sustainable Location in the region (SEA)

KLANG VALLEY AND THE SOUTHERN CORRIDOR

KLANG VALLEY AND THE SOUTHERN CORRIDOR

KLANG VALLEY AND THE SOUTHERN CORRIDOR

KLANG VALLEY AND THE SOUTHERN CORRIDOR The return of Cyberjaya: boundaries

KLANG VALLEY AND THE SOUTHERN CORRIDOR The return of Cyberjaya: undeveloped land (Yellow)

KLANG VALLEY AND THE SOUTHERN CORRIDOR The return of Cyberjaya: ongoing/completed development (Blu)

LRT 3

KLANG VALLEY AND THE WESTERN CORRIDOR

KLANG VALLEY AND THE WESTERN CORRIDOR

Damansara – Shah Alam (DASH) highway alignment

KLANG VALLEY AND THE WESTERN CORRIDOR

KLANG VALLEY AND THE WESTERN CORRIDOR

MALAYSIAN PROPERTY MARKET

ISKANDAR MALAYSIA

THE MOST STRATEGICALLY SUSTAINABLE LOCATION

OF THE REGION (SEA)

MALAYSIA’S PROPERTY MARKET MOST EXCITING LOCATION

MALAYSIA’S PROPERTY MARKET MOST EXCITING LOCATION

MALAYSIA’S PROPERTY MARKET MOST EXCITING LOCATION

Malaysian Property Market – 2013 Outlook Iskandar Malaysia – Expressways

Malaysian Property Market – 2013 Outlook Iskandar Malaysia - Interchanges

Malaysian Property Market – 2013 Outlook Iskandar Malaysia – KTM, MRT, LRT …..

Malaysian Property Market – 2013 Outlook Iskandar Malaysia

Malaysian Property Market – 2013 Outlook Iskandar Malaysia

Malaysian Property Market – 2013 Outlook Iskandar Malaysia

Malaysian Property Market – 2013 Outlook Iskandar Malaysia

Malaysian Property Market – 2013 Outlook Iskandar Malaysia

Malaysian Property Market – 2013 Outlook Iskandar Malaysia Sustainability

Malaysian Property Market – 2013 Outlook Iskandar Malaysia Sustainability

Malaysian Property Market – 2013 Outlook Iskandar Malaysia Sustainability

Malaysian Property Market – 2013 Outlook Iskandar Malaysia Sustainability

Malaysian Property Market – 2013 Outlook Iskandar Malaysia – Committed investment

Malaysian Property Market – 2013 Outlook Iskandar Malaysia – Committed investment

Malaysian Property Market – 2013 Outlook Iskandar

Malaysian Property Market – 2013 Outlook Iskandar

Malaysian Property Market – 2013 Outlook Iskandar

FEW CONSIDERATION ON MALAYSIANS WEALTH:

Malaysian average per capita income (2012) – Source IMF

USD10,304 per year = RM3,000 (per month)

Malaysian Wealth Distribution

Lowest 20% - 5% Highest 20% - 40%

=

Median 60% share 55%

MALAYSIAN WEALTH DISTRIBUTION - FACT FILE

18,000,000

ISKANDAR MALAYSIA STRATEGIC SUSTAINABILITY Red color – High-end areas (overpriced at the moment) / Green color – Affordable areas RM60 psf and below

Thank you

For questions and further information, please email to: daniele.g@reigroup.com.my

Or long into: www.reigroup.com.my and www.facebook.com/REIGroupMY

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