Malacca Looks To Steal The Spotlight From KL

Malacca Looks To Steal The Spotlight From KLDespite what some would call an overheated market, fresh cooling measures targeting speculators and loud charges of corruption in the wake of the tragic disappearance of a Malaysia Airlines jet, Malaysia has its devoted fans. Kuala Lumpur and Penang have been two of Asia-Pacific’s hottest markets over the last few years, and as the country gears up to launch a massive development in Malacca, the question becomes one of whether the market can support another “hot spot”.

Leader Board
Sitting on the Straits of Malacca, the state of Malacca is only slightly larger than Penang and is home to just over three-quarters of a million people. A sultanate until the arrival of the Portuguese in the early 16th century — followed by the Dutch, the British and the Japanese — Malacca now is an industrial district with a small but growing tourist industry that takes advantage of the UNESCO-certified historic town centre in Malacca City, the state capital.

Currently Malaysia’s major markets are wildly varied. In its late-2013 market report, Knight Frank predicted Kuala Lumpur’s residential prices would correct over the following year, with the retail and office markets in KL, Penang and Johor Bahru remaining active. But new cooling measures — increased capital gains taxes on property sold within five years, a minimum increase to MYR1,000,000 (HK$2.4 million) for foreign buyers, banks basing loans on net selling price and abolishment of the Developer Interest Bearing Scheme — have tempered transaction volumes

Knight Frank’s report said the Kuala Lumpur high-end residential market would remain challenging in the coming months, particularly with interest rates expected to rise in the next year. Of Penang, the outlook was for continued consolidation, with the luxury sector expected to take a considerable hit, though the Second Penang Bridge will likely lead to improved prospects in the southern part of the island and the mainland. In Johor, neither the new 2 percent levy on foreign purchases nor the raised investment floor will be crushing influences. Most residential properties with foreign investor appeal are already priced above that limit, and retail and office activity at Iskandar is expected to underpin the market.

Launching a new project in this climate is risky, and Malacca may be a little too far off the beaten path. “We are unable to make any comments as we are not that familiar with the Malacca market,” says David Jarnell, senior vice president of Jones Lang Wootton in Malaysia. “But I would not describe it as ‘the hot spot for new development in Malaysia’.”

Chief Minister Idris Haron would disagree, citing Malacca’s ideal location between KL and Singapore, its long history as a business and culture hub, government support for investment and green technology policy that complements its manufacturing, automotive, aerospace, biotechnology and Halal-based industries. Idris goes further, adding Malacca has advantages over investor favourites. “Doing business in Malacca is considerably cheaper than [in] Penang and Kuala Lumpur. While the cost of living is quite low in Malacca, it is of a middle- and upper-middle class standard … The state government’s pro-business policy and long track record of political stability make Malacca a better place to work and live compared to not only other parts of Malaysia but Southeast Asia itself,” he finishes.

Breaking New Ground
So Malacca may have what it takes. KAJ Development is maximising Malacca’s history and waterfront location with Melaka Gateway, a 609-acre project with retail, leisure, residential and tourism components, not surprising given tourism’s 42 percent contribution to the region’s growth in 2012. “Melaka Gateway is an innovative tourism product and is projected to attract an additional 2.5 million tourists over the span of 12 years,” states KAJ CEO Michelle Ong.

Melaka Gateway comprises one natural and two man-made islands with a 60-acre theme park, the Malaysia Eye (think London Eye) and luxurious residences, among other features, on 15 kilometres of waterfront. Key is the planned international cruise terminal and what will eventually be Southeast Asia’s largest private marina. The cruise terminal will accept the swelling cruise liner numbers and also have the capacity for three mega-carriers at once. New infrastructure will connect passengers with the town centre and Melaka Gateway’s planned entertainment district. “Many cruise ships are seen along the Straits of Malacca and without a port of call the state is ‘missing out’ on many of its cruisers/passengers coming into the city for excursions,” notes Ong. “The Straits of Malacca has multiple destinations within overnight sailing distance of each other, making Melaka Gateway an ideal destination for cruise itinerary planners.”

The marina, meanwhile, is set to host over 600 berths, with 100 for superyachts. In a region where yachting is on the rise and berths are increasingly hard to come by, “The importance of offering high-end products and services continues to grow and is in demand,” says Ong.

Among the condominiums and villas are marina villas with private berths, LOHAS living at the Lohas Park Residences and Sunrise Beach homes, and condos will be available at Skyline Condominiums and Gateway Beacon Tower, which will also house a seven-star hotel; Melaka Gateway expects the residential segment to appeal to investors looking to enrol in the popular Malaysia My Second Home programme. Ultimately Ong sees a bigger picture. “Malaysia offers attractive incentives and with the entry of foreign investors and international industry leaders, Melaka Gateway will offer a dynamic business growth in the state of Malacca.”