EUPE remains bullish about Kedah

Beh: 'Land cost in Kedah is relatively low and there is a lot of potential for future development.'

EUPE Corp Bhd might not be at the tip of one’s tongue when it comes to listing down some of your well-known developers.

However, the low-profile, Kedah-based company, which has been developing projects there for nearly three decades, still believes that there are growth opportunities in the northern state.

“We have a big presence in Kedah but we’re still looking for land there to expand,” says group managing director and chief executive officer Datuk Beh Huck Lee.

The company has about seven projects with a combined gross development value (GDV) of over RM1bil in Kedah.

Beh believes that the Kedah property market is still far from being saturated.

“Malaysia has a relatively high natural population growth rate. In Kuala Muda, for instance, the growth is around 2.6% per annum. More than 70% of the population comprise bumiputras and have large families.”

Beh adds that many people in Kedah are also staying in rural areas and that the Government is trying to encourage urban migration.

“The Government is creating industrialisation and there are going to be plenty of job opportunities. The multiplier effect is going to be great and those are the areas where we’re not going to have sufficient houses.”

Beh says that there are some locations in Kedah where developers are not achieving the sales target that they had initially set.

“In Sungai Petani alone, there are seven or eight listed companies with projects. But we are already one of the bigger boys in Kedah. The growth by percentage (for Eupe) is, of course, going to be slightly limiting.

“But land cost in Kedah is relatively low and there is a lot of potential for future development. I believe that over the next few years, Kedah will benefit from the spillover development of Penang.”

According to property consultant CH Williams Talhar & Wong Sdn Bhd (WTW) in its 2014 property market report, Kedah yielded a fairly strong performance in 2013 with the landed residential, shop-office and industrial sectors registering uptrends while other sectors were relatively more stable.

Firm demand

“Overall demand across the board remained firm as evidenced by the increase in property prices largely due to the positive outlook of our current economy and favourable Government policies such as My First Home scheme, which support young buyers in buying their first homes,” it says.

According to WTW, there were four noteworthy residential launches in Alor Setar in 2013.

“Amansuri Residence was launched from RM350 per sq ft. The condominium units ranged from 1,249 to 3,492 sq ft in size. Taman Budiman 2, developed by Teguh Harian Sdn Bhd, mainly comprises 700-sq-ft terraced houses. They are selling from RM165,000.

“Taman Gunung Bongsu (Phase 5) is another development by Teguh Harian which consists of semi-detached and terraced houses. The 1,400-sq-ft terraced houses are priced at RM192,000 to RM280,000 while the semi-detached are priced at RM311,000 to RM369,000.”

Market outlook

On the outlook for the Kedah property market, WTW believes that the increase in petrol price and the shortage of labour may lead to higher construction costs and, as a result, property prices might increase further.

“However, the less than optimistic global economic situation, especially in the United States and Europe, and Bank Negara’s policies to tighten property financing might cool the market further.

“Overall, the impact of these factors will cause the property market to continue to grow but at a slower pace than 2013 and possibly stabilising towards the end of 2014.”

Founded in 1986, Eupe has constructed nearly 20,000 homes in Kedah. According to the company’s website, Eupe was formed in response to the Kedah state government’s call to the private sector to undertake the development of low-cost houses during the recession of the mid-1980s.

Its first project was the development of Taman Ria, with the construction of 3,376 homes, making it one of the largest mass housing projects in northern Malaysia at the time.

This was followed by the 6,249-unit Taman Ria Jaya in 1988, as well as the Cinta Sayang development in 1988 – which pioneered the concept of living within golf greens.

Beh believes that the Kedah property market is also more stable compared with Kuala Lumpur.

“In 1998, during the peak of the Asian financial crisis, we received cancellations of up to 15% but we very quickly recovered those lost sales. We managed to sell everything back within four months.

“The Kedah property market might not be as exciting as KL but it is more stable.”

KL-bound

Despite the opportunities he sees in Kedah, Beh says Eupe is eyeing projects in KL.

“Everyone is going to the bigger cities. The mobility of people is actually also getting higher. So we think that in the future, the imbalance of supply and demand of properties in KL is going to get more drastic.

“If you look at statistics from the Government department, the addition of supply of properties in KL is less compared with the natural growth in population itself,” says Beh.

According to him, the company expects to launch its maiden Kuala Lumpur projects with a combined GDV of RM720mil this year.

Beh says Eupe is planning residential projects in Cheras and Bangsar, with a tentative GDV of RM260mil and RM460mil, respectively, adding that the projects would start contributing to the company’s earnings in the financial year ending Feb 28, 2016.

He admits that there are “barriers” to entry into the KL market – especially for a developer from another state.

“The production resources, such as buying land and borrowing money, that is not where the challenge is.

“The barriers are things such as information about the market, your business linkage and networking. Those are the challenges and in that aspect, I do not expect a quick solution to it. It takes time, especially for a developer that is based out of KL,” he said. - The Star