Tuesday, 21 February 2012
Friday, 17 February 2012
Property Prices Trending Now
Strategies for developers, investors and homebuyers
By Peter Yee
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It is envisaged that KLCC and Mont’ Kiara properties will experience a price correction and yield lower rental rates this year. |
This development can be attributed to the simultaneous financial measures adopted by countries near and far, during the global financial crisis of 2008-2009, namely:
- the quantitative easing QE1 of US$1.3 trillion and QE2 of US$600 billion by the US
- economic stimulus package of US$570 billion by China
- Singapore’s US$13.7 billion
- Malaysia’s RM67 billion (US$21.4 billion)
The simultaneous financial measures and economic stimuli flooded the supply of money and increased global liquidity. This caused the real value of money to depreciate relative to property. As such, the real value of money is getting “smaller” in comparison to property.
High liquidity, low interest rates and higher costs of land and construction materials are some of the factors pushing up property prices in Malaysia.
Curbing effects
Recently, property prices in China and Hong Kong have begun to decline due to measures to curb speculative buying by their governments.
Singapore has imposed an extra stamp duty of 10% on homes bought by foreigners in early December 2011.
In Malaysia, since Nov 2010, the maximum loan-to-value ratio of 70% for the third and subsequent property has affected housing loan borrowings.
Real property gains tax as outlined in the 2012 budget has increased to 10% for the first two years and 5% from the third year to the fifth year.
Bank Negara has also introduced guidelines to rein in Malaysian household debt by assessing potential borrower’s nett income in their evaluation process from Jan 1st this year.
Gross Domestic Product (GDP) is estimated to be around 4.8% for 2012. Household debt to GDP ratio is expected to balloon to above 78% in 2012. Household financing facilities account for more than 55% of the total banking system’s loans.
Oversupply
Malaysia’s property market has begun to cool down during the second half of 2011 due to an oversupply of high-rise properties in the Kuala Lumpur City Centre and the Mont’ Kiara area.
General market sentiment has also cooled due to the slowdown in China, Europe’s debt crisis, stagnation in Japan and the US economic crisis.
The general trend for Malaysia’s property market in 2012 will be a slowdown due to declining liquidity, borrowing capacity and sentiment. It is likely the KLCC and Mont’ Kiara area will experience a price correction and lower rental rates for 2012.
Demand for newer, high-end landed residential properties such as semi-detached and bungalow units with prices above RM1mil may also decline in 2012. This is partly due to the relative rental yield to investment which does not justify the monthly loan repayment. For example, a RM2mil bungalow fetches only a monthly rental of about RM5,000 while the monthly bank repayment is approximately RM12,000 (depending on the duration of the loan).
Property prices in the city and its fringes may be stable but property located far from the city, may decline in price as the property market extends outward from the city during a booming market and contracts inwards towards the city during a market decline. The right type of property located in a good location will be stable in prices.
Investment strategies
There are certain property investment strategies that developers, homeowners and investors in Malaysia can adopt.
For developers, the demand for properties above RM500,000 from foreigners is likely to reduce, due to property prices “correcting” in their own country, such as China and Hong Kong.
Properties priced above RM500,000 is beyond the affordability of most Malaysians whose average monthly income is about RM6,000.
The Malaysian population by July 2011 was 28.7 million. The new wave of baby boomers born during 1979-1985 (aged 26-32) are now in the workforce. Currently, 60% of the population is below 30. Low interest rates of 3% and the low unemployment rate of 3% will sustain the demand for properties below RM500,000 in 2012 by this generation. Developers may choose to develop more properties priced below RM500,000, phase out development to avoid oversupply, build property with attractive and innovative design, give more freebies to attract purchasers or build and sell a few years later.
Rent now, buy later
For homeowners, the strategy may be to rent first in a preferred or selected area and buy later. They may also selectively, “bargain-hunt” the secondary residential market for renovated property below market price or buy from established developer with all the freebies.
In recent years, most investors invest for capital gain, for 2012, the probability for capital gain is reduced due to the high prices and changing global economics which has dampened sentiment.
Buy-and-hold
The upside for capital gain may be limited for 2012. Property investors may consider changing from a capital gain strategy to a cash flow strategy - change from buy- and-sell to buy-and-hold for rental income.
Investors can choose to reduce or sell property that have appreciated in value, such as no-income property or low-income yield residential properties such as vacant land, bungalow lots, super-link, semi-detached and bungalow homes.
They can then choose to reinvest in high-rise residential properties (apartments and condominiums) with yield of more than 8% in a high-occupancy area. Reinvest in commercial properties which can yield more than 6% in a high-occupancy area such as shop-offices, shophouses, shoplots, retail lots and factories.
Financial defence
The above observations and proposed measures to adopt are only my opinion of the probable trend in the property market.
However, during times of uncertainty, one’s financial defence measures become more important.
For a developer, a contingency financial plan should be in place for the worst-case scenario.
A specific and targeted group of purchasers and their needs should be identified. And the suitability of a project location with innovative design and quality building materials should be vital points to consider to attract various segments of purchasers.
For a home buyer, the monthly loan repayment should preferably, be less than 30% of one’s household income.
And one should also allocate money for an emergency fund to cover three to six months of one’s expenses.
Credit line
For a property investor, a specific credit line such as over-draft facility should be in place for a period of low occupancy. There is always opportunity in property, if you know how to prepare and match your own financial capacity with the possible changes in the property market in 2012 and beyond.
We cannot change the direction of the property market but we can adjust our property investment fund and portfolios to prevent possible setbacks and capture the opportunities that arise from the changes in the property market.
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Over the years, Peter Yee has taken on many roles including as a management consultant, stock broker, restaurant owner, property investor and investment coach. Yee is the author of You Can Become Rich in Property and The Certain Way to Life’s Riches.
Star Property
Strong property demand in Q4
Strong property demand in Q4
 |
| Metro Homes has about 500 representatives including real estate agents and negotiators. |
The first quarter of the year would be “quiet”, pointed out See, 41, a director of Metro Homes Sdn Bhd. The nett income of most people such as property buyers would not increase substantially. But banks were likely to be more stringent in assessing borrowers due to prevailing economic factors. (See related article on “Property prices trending now” in StarProperty.my )
Price increases
Therefore, property transactions in the second and third quarters of the year would generally be quite “flat”. In the past two years, there have been quite substantial increases in property prices. So, property prices were already quite high compared to what the market could afford, explained See, who holds a master’s degree in business administration as well as an accounting degree from Universiti Malaya.
The costs of construction material and development land would not likely come down, he added. Faced with a soft market situation, the bigger developers who were financially strong, might delay any project launch this year.
But the last quarter of the year, would see a significant price movement – upwards, predicted See.
And due to such a scenario this year, he rationalised that the more speculative type of property purchases including high-end condominium units will be affected.
But he advised property buyers who intended to buy for their own use or “with a purpose” to proceed.
“The supply side is still plentiful. Projects that were launched in 2009 and 2010 would have been completed or are nearing completion by now, therefore contributing to quite a significant supply.”
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| Prestij @ Kota Damansara is another project marketed by Metro Homes. It offers three-storey, semi-detached shop-office units with an average starting price of RM3.8mil. The units come with individual titles with lift facility and private parking space and land. |
See said that every completed project would take time before buyers or tenants started to occupy the units. The occupancy rate would initially be low due to the time lag. Therefore, property buyers shouldn’t be unduly influenced by such a situation when assessing a project to buy in.
“Everyone in the industry worry about the occupancy rate,” said See, when asked to comment on the seemingly high number of vacant units in many high-end condominium developments in the Klang Valley.
“If there is 30% occupancy rate in the first year of the project’s completion, the developers would be very happy.
“Normally, the rate would increase to 60% to 70% in the second and third year.
“Our property market is not as active as in Singapore or Hong Kong. Over there, residents will start moving in within two weeks of vacant possession or when the property is ready to be occupied as the rental market is active.”
See explained that many people who buy such condominium property were cash rich. And therefore, were not in a hurry to occupy the units or to rent out.
“Such property purchases represent only a small investment in their total portfolio. And some would be only waiting for capital gains.”
Infrastructure
When it comes to picking the right developments or areas to invest in property, See advised prospective buyers to look at the overall picture.
All prime areas were popular and one should also look at the infrastructure of the developments. For instance, Damansara, Puchong and Cheras represent the more matured areas.
When linked-houses were launched in Puchong a couple of years back, the price was RM600,000 per unit, now the asking price is about RM1mil.
Buyers of newer areas of development have to take greater risks.
For example, demand for Setia Alam property in Shah Alam were rather slow between 2006 and 2008 but the market picked up later. The township was launched in 2003 and subsequently, the New Klang Valley Expressway was opened in 2006. Today it is quite a popular residential area with access from the Federal Highway and Klang Town via Jalan Meru.
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| Each Metro Homes representative has at least 50 property listings, says K.L. See |
See, who is licensed by the Board of Valuers, Appraisers and Estate Agents in Malaysia, said property agents and negotiators needed to be trained in order to provide professional services.
“We have close to 500 representatives including agents and negotiators. And each of them has at least 50 listings. While other agencies have franchised their business, we don’t do that. We are stakeholders of our branches and we own the operations. So, we are able to mobilise all our offices for any marketing project,” said See who cited economy of scale as one his company’s advantages in operation.
Since Metro Homes was established in Petaling Jaya in 1995, it now has offices in Sri Hartamas, Damansara Utama, Kota Damansara, Subang, Puchong, Shah Alam, Cheras, Klang, Setia Alam, Serdang as well as Penang and Kota Kinabalu.
“Last year, we conducted a fair bit of project marketing by bringing developments from here to East Malaysia. For instance, we were involved in projects by Glomac and Mah Sing. We are exclusive agents for such projects in East Malaysia,” said See whose company also market projects by smaller developers and overseas properties.
“Our business comprises 70% transactions involving property in the secondary market and 30% from new developments. We also have special teams to handle luxury property as well as industrial projects and property put on auction.”
See advised property owners to have a written agreement with agents tasked with selling their property, stating whether it would be an exclusive, ad hoc or joint listing.
Owners need to check the relevance of the information on their property. They cannot leave it to the agent with a “freehand”.
- StarProperty
Sunday, 1 January 2012
Property Market Outlook 2012 by Ho Chin Soon
Rapid speed transportation linking key growth areas of Malaysia will propel demand for properties in locations currently deemed less desirable or accessible.
Speaking on “Property market outlook 2012” and “Why you should buy now,” at the recent Star Property Fair in Kuala Lumpur, well-known map maker, research consultant and author Ho Chin Soon pointed out key indicators to detect locations where demand for properties would likely to go up.
The foreseeable and probable factors that could affect the property market next year, include:
-the proposed high speed rail link between Greater KL to the southern tip of the peninsula
-the proposed MRT link between Singapore and Malaysia
-the stock market
Ho Chin Soon presenting his talk on "Property Market Outlook 2012 & Why You Should Buy NOW"at Star Property Fair 2011
MRT link
Ho highlighted the Entry Point Project (EPP) under the Economic Transformation Programme ( ETP) which will focus on new MRT lines and MRT stations.
With the completion of such transport facilities, residents will have access to almost every major development site of Greater KL where you are not able to enjoy for the time being.
The proposed MRT line will not just pass through major residential developments to your work place but will also be connected to major commercial and entertainment centres such as 1Utama shopping centre. However, such details have yet to be confirmed.
This development will be made possible when MRT Co, a government-linked company under the Ministry of Finance - overseeing the proposed MRT line - finalise details.
Citing from his book, Greater KL: The Rise of Bukit Bintang, Ho was optimistic of the further growth of Bukit Bintang, due in part to the proposed MRT stations to be built at:
Bukit Bintang-Pudu (West Bukit Bintang )
Pavilion (East Bukit Bintang)
and most importantly, an interchange station in the Kuala Lumpur International Financial district.
According to Ho, with a more convenient mode of transportation, property prices in those areas will be “healthy”.
High-speed rail
Another key factor under the Entry Point Project is the reduction in travelling time to Singapore from Greater KL via the high-speed rail. Ho envisaged that with a train travelling up to 350km per hour, one would be able to reach Johor Baru in 70 minutes.
He said high speed rail transportation will be crucial in the development of a mega region comprising Greater KL, Iskandar Malaysia in Johor and Singapore. Such a region will have a combined population that could reach 20 million. Formerly known as the Iskandar Development Region and South Johor Economic Region, the Iskandar Malaysia site is the main southern development corridor in Johor.
With charts to illustrate cross-border traffic data, Ho pointed out that up to 126,000 vehicles cross the Johor-Singapore Causeway daily where 70% of them are Singapore-registered cars.
He highlighted the fact that Singaporeans own up to 40% of the properties being constructed in Iskandar Malaysia.
Malaysia will likely experience greater spillover effects from Singaporeans travelling here, especially when the proposed rapid transit system linking Tanjung Puteri in Johor Baru to Singapore commences operations in 2018.
Compound Annual Growth Rate
On determining property value, Ho said a useful tool would be the Compound Annual Growth Rate (CAGR) calculator, essentially to calculate the annual growth rate of an investment over a period of time.
Using the calculator and the housing price index spanning 10 years - provided by Valuation and Property Services Department - Ho concluded that the best Compound Annual Growth Rate last year was surprisingly registered in Sabah with 8.06% and not Kuala Lumpur, which only came in second place, with 4.75%.
The lowest growth rate tabulated was in Johor, with minus 0.2% due to an oversupply situation in the south which depressed property prices.
In Sabah and Sarawak, it was a different scenario because people there benefited from their respective state government policy that emphasised cultivating agricultural land that brought good returns. Another factor was due to the increase in palm oil prices, and astute Sabahans used the money to invest in property.
Crash
On the price levels for various types of property in Malaysia, Ho found that condominium prices were mostly flat and stable due to ample supply. But landed property prices continued to increase and if this situation continues in 2012 than a crash in landed property prices could likely occur.
Ho said property prices would normally be on the rise if the stock market was doing well and vice versa, citing the 1997 Asian Financial crisis as an example.
Speaking on “Property market outlook 2012” and “Why you should buy now,” at the recent Star Property Fair in Kuala Lumpur, well-known map maker, research consultant and author Ho Chin Soon pointed out key indicators to detect locations where demand for properties would likely to go up.
The foreseeable and probable factors that could affect the property market next year, include:
-the proposed high speed rail link between Greater KL to the southern tip of the peninsula
-the proposed MRT link between Singapore and Malaysia
-the stock market
Ho Chin Soon presenting his talk on "Property Market Outlook 2012 & Why You Should Buy NOW"at Star Property Fair 2011
MRT link
Ho highlighted the Entry Point Project (EPP) under the Economic Transformation Programme ( ETP) which will focus on new MRT lines and MRT stations.
With the completion of such transport facilities, residents will have access to almost every major development site of Greater KL where you are not able to enjoy for the time being.
The proposed MRT line will not just pass through major residential developments to your work place but will also be connected to major commercial and entertainment centres such as 1Utama shopping centre. However, such details have yet to be confirmed.
This development will be made possible when MRT Co, a government-linked company under the Ministry of Finance - overseeing the proposed MRT line - finalise details.
Citing from his book, Greater KL: The Rise of Bukit Bintang, Ho was optimistic of the further growth of Bukit Bintang, due in part to the proposed MRT stations to be built at:
Bukit Bintang-Pudu (West Bukit Bintang )
Pavilion (East Bukit Bintang)
and most importantly, an interchange station in the Kuala Lumpur International Financial district.
According to Ho, with a more convenient mode of transportation, property prices in those areas will be “healthy”.
High-speed rail
Another key factor under the Entry Point Project is the reduction in travelling time to Singapore from Greater KL via the high-speed rail. Ho envisaged that with a train travelling up to 350km per hour, one would be able to reach Johor Baru in 70 minutes.
He said high speed rail transportation will be crucial in the development of a mega region comprising Greater KL, Iskandar Malaysia in Johor and Singapore. Such a region will have a combined population that could reach 20 million. Formerly known as the Iskandar Development Region and South Johor Economic Region, the Iskandar Malaysia site is the main southern development corridor in Johor.
With charts to illustrate cross-border traffic data, Ho pointed out that up to 126,000 vehicles cross the Johor-Singapore Causeway daily where 70% of them are Singapore-registered cars.
He highlighted the fact that Singaporeans own up to 40% of the properties being constructed in Iskandar Malaysia.
Malaysia will likely experience greater spillover effects from Singaporeans travelling here, especially when the proposed rapid transit system linking Tanjung Puteri in Johor Baru to Singapore commences operations in 2018.
Compound Annual Growth Rate
On determining property value, Ho said a useful tool would be the Compound Annual Growth Rate (CAGR) calculator, essentially to calculate the annual growth rate of an investment over a period of time.
Using the calculator and the housing price index spanning 10 years - provided by Valuation and Property Services Department - Ho concluded that the best Compound Annual Growth Rate last year was surprisingly registered in Sabah with 8.06% and not Kuala Lumpur, which only came in second place, with 4.75%.
The lowest growth rate tabulated was in Johor, with minus 0.2% due to an oversupply situation in the south which depressed property prices.
In Sabah and Sarawak, it was a different scenario because people there benefited from their respective state government policy that emphasised cultivating agricultural land that brought good returns. Another factor was due to the increase in palm oil prices, and astute Sabahans used the money to invest in property.
Crash
On the price levels for various types of property in Malaysia, Ho found that condominium prices were mostly flat and stable due to ample supply. But landed property prices continued to increase and if this situation continues in 2012 than a crash in landed property prices could likely occur.
Ho said property prices would normally be on the rise if the stock market was doing well and vice versa, citing the 1997 Asian Financial crisis as an example.
Property sector to correct
The steep increases seen in the last two years expected to sputter to a halt on weak global sentiment
THE overall weak global sentiment is expected to cast a pall over the property sector, which is expected to undergo some downward correction next year, agents, property consultants and developers say, with the steep increases seen in the last two years sputtering to a halt. Virtually all segments of the property market will be affected.
International Real Estate Federation (Fiabci) Malaysia president Yeow Thit Sang says the slowdown, though gradual, will be seen in the pricing and take-up rate of all housing segments, particularly more so in the high-end category.
“Whether it is Penang or the Klang Valley, we don’t have that many multinational companies coming in to occupy some of our high-end properties. Rentals with yields of between 6% and 8% are no longer achievable,” he says.
This slower rate of growth is expected to be more apparent after the new ruling by Bank Negara kicks in. Effective Jan 1, new lending guidelines require banks to use net income to calculate the debt service ratio for loan approvals.
The new guidelines cover all consumer loan products including housing loans, personal loans, car loans, credit-card receivables and loans for the purchase of securities.
While this latest round has the objective of reducing overall household debt, it will affect the property sector, a branch manager of a local bank says.
Previous lending guidelines capped monthly mortgage repayment at 1/3 of net pay instead of gross pay. This new ruling, and the requirement to have a 30% downpayment on the third and subsequent property, introduced in 2010, will result in the banking sector being more stringent when it comes to mortgage loan approvals. The re-imposition of the real estate property tax, at 5% flat within five years of purchase, was another measure to curb speculation.
These measures, together with the global concerns over the United States and the eurozone, will affect sentiment. However, there will be opportunities in the affordable housing segment, which is part of the Government’s Economic Transformation Programme.
Says Ireka Corp Bhd executive director Lai Voon Hon: “We see strong growth potential in these ‘under-served’ sectors such as mid-market residential and commercial as well as ‘green’ developments located close to infrastructure nodes. Market movement in recent months had observed major developers acquiring parcels of land outside the Klang Valley such as in Kajang, Semenyih and Nilai which are destined to be the next “hot spots”.
“With 65% of the Malaysian population falling under 35 years old, we trust that the demand will pick up as consumer confidence recovers. Close to 10 million people are expected to work, live, learn and play in the Greater KL metropolis by 2020.
“Burgeoning young and middle-class population also means the demand for mid-market properties will remain steadfast,” Lai said, adding that the mid-market will receive strong support in terms of demand, and this will be Ireka’s primary focus in 2012.
Other developers to move into affordable housing include the Sime Darby group and Mah Sing group. Sime Darby recently launched affordable housing in Bandar Ainsdale in Seremban. Mah Sing Group Bhd, too, is moving away from high-end housing to go into the affordable housing segment.
Mah Sing group managing director and group CEO Tan Sri Leong Hoy Kum says: “The high-end sector, both landed and high-rise, will be more challenging with the RM4mil and above units taking longer to sell.”
Ireka’s Lai says the company will be developing a 28-acre freehold land in Bandar Nilai Utama, Negri Sembilan into a trendy mid-market neighbourhood, consisting of landed houses and apartments. Another five acres of prime land in Kajang will be developed into a mixed development. consisting of two mid-market apartment blocks and a retail precinct.
Ireka will also embark on a modern industrial park development on its 21-acre freehold land in the established Sungai Chua industrial area near Kajang.
Aside from these three mid-market developments, in the pipeline is the launch of its boutique hotel and serviced residences project in Jalan Kia Peng, within the Kuala Lumpur City Centre (KLCC). This 30:70 joint development project between Ireka and Aseana Properties Ltd is slated for launch in the second half of next year.
On the overall market, Lai says launches and sales take-up rate will be generally slower. However, Malaysia’s property sector (will be) resilient, he says.
Property consultant DTZ Debenham Tie Leung’s executive director Brian Koh says “properties will have to be sensibly priced” with smaller units (if they are condominiums), selling better than larger ones. DTZ will be launching Naza TTDI Sdn Bhd’s Platinum Park around the KLCC area next year.
Over in the office segment, the current glut is expected to persist into next year which will put pressure on rentals.
The overall view of property professionals is that the office market in Kuala Lumpur will remain soft next year unless the global economy recovers sufficiently to spur business expansion to take up the current supply in the city. With the eurozone the way it is, that seems unlikely.
Y. Y. Lau of YY Property Solutions expects Grade A office buildings in KL (existing and new) to face intense competition to secure tenants next year.
“Demand for prime Grade A office buildings held up well last year. But we are expecting an estimated five million sq ft of office space to come onstream in the Kuala Lumpur Commercial Business District and city fringes by end-2012, with KLCC and the Golden Triangle area providing over 90% of the new supply in the first half of next year. “In the second half, the bulk of the supply will be coming from the fringes of Kuala Lumpur.
“We opine that KL Sentral, Bangsar South and Mid Valley City will play a catch-up game in attracting eminent companies seeking MSC status and green building features, as well as conveniences in terms of availability of public transportation, ample eateries and amenities, and upgrading of corporate image. Good building quality and property management services provided are expected to attract companies to set up its businesses here,” Lau says.
Star property
THE overall weak global sentiment is expected to cast a pall over the property sector, which is expected to undergo some downward correction next year, agents, property consultants and developers say, with the steep increases seen in the last two years sputtering to a halt. Virtually all segments of the property market will be affected.
International Real Estate Federation (Fiabci) Malaysia president Yeow Thit Sang says the slowdown, though gradual, will be seen in the pricing and take-up rate of all housing segments, particularly more so in the high-end category.
“Whether it is Penang or the Klang Valley, we don’t have that many multinational companies coming in to occupy some of our high-end properties. Rentals with yields of between 6% and 8% are no longer achievable,” he says.
This slower rate of growth is expected to be more apparent after the new ruling by Bank Negara kicks in. Effective Jan 1, new lending guidelines require banks to use net income to calculate the debt service ratio for loan approvals.
The new guidelines cover all consumer loan products including housing loans, personal loans, car loans, credit-card receivables and loans for the purchase of securities.
While this latest round has the objective of reducing overall household debt, it will affect the property sector, a branch manager of a local bank says.
Previous lending guidelines capped monthly mortgage repayment at 1/3 of net pay instead of gross pay. This new ruling, and the requirement to have a 30% downpayment on the third and subsequent property, introduced in 2010, will result in the banking sector being more stringent when it comes to mortgage loan approvals. The re-imposition of the real estate property tax, at 5% flat within five years of purchase, was another measure to curb speculation.
These measures, together with the global concerns over the United States and the eurozone, will affect sentiment. However, there will be opportunities in the affordable housing segment, which is part of the Government’s Economic Transformation Programme.
Says Ireka Corp Bhd executive director Lai Voon Hon: “We see strong growth potential in these ‘under-served’ sectors such as mid-market residential and commercial as well as ‘green’ developments located close to infrastructure nodes. Market movement in recent months had observed major developers acquiring parcels of land outside the Klang Valley such as in Kajang, Semenyih and Nilai which are destined to be the next “hot spots”.
“With 65% of the Malaysian population falling under 35 years old, we trust that the demand will pick up as consumer confidence recovers. Close to 10 million people are expected to work, live, learn and play in the Greater KL metropolis by 2020.
“Burgeoning young and middle-class population also means the demand for mid-market properties will remain steadfast,” Lai said, adding that the mid-market will receive strong support in terms of demand, and this will be Ireka’s primary focus in 2012.
Other developers to move into affordable housing include the Sime Darby group and Mah Sing group. Sime Darby recently launched affordable housing in Bandar Ainsdale in Seremban. Mah Sing Group Bhd, too, is moving away from high-end housing to go into the affordable housing segment.
Mah Sing group managing director and group CEO Tan Sri Leong Hoy Kum says: “The high-end sector, both landed and high-rise, will be more challenging with the RM4mil and above units taking longer to sell.”
Ireka’s Lai says the company will be developing a 28-acre freehold land in Bandar Nilai Utama, Negri Sembilan into a trendy mid-market neighbourhood, consisting of landed houses and apartments. Another five acres of prime land in Kajang will be developed into a mixed development. consisting of two mid-market apartment blocks and a retail precinct.
Ireka will also embark on a modern industrial park development on its 21-acre freehold land in the established Sungai Chua industrial area near Kajang.
Aside from these three mid-market developments, in the pipeline is the launch of its boutique hotel and serviced residences project in Jalan Kia Peng, within the Kuala Lumpur City Centre (KLCC). This 30:70 joint development project between Ireka and Aseana Properties Ltd is slated for launch in the second half of next year.
On the overall market, Lai says launches and sales take-up rate will be generally slower. However, Malaysia’s property sector (will be) resilient, he says.
Property consultant DTZ Debenham Tie Leung’s executive director Brian Koh says “properties will have to be sensibly priced” with smaller units (if they are condominiums), selling better than larger ones. DTZ will be launching Naza TTDI Sdn Bhd’s Platinum Park around the KLCC area next year.
Over in the office segment, the current glut is expected to persist into next year which will put pressure on rentals.
The overall view of property professionals is that the office market in Kuala Lumpur will remain soft next year unless the global economy recovers sufficiently to spur business expansion to take up the current supply in the city. With the eurozone the way it is, that seems unlikely.
Y. Y. Lau of YY Property Solutions expects Grade A office buildings in KL (existing and new) to face intense competition to secure tenants next year.
“Demand for prime Grade A office buildings held up well last year. But we are expecting an estimated five million sq ft of office space to come onstream in the Kuala Lumpur Commercial Business District and city fringes by end-2012, with KLCC and the Golden Triangle area providing over 90% of the new supply in the first half of next year. “In the second half, the bulk of the supply will be coming from the fringes of Kuala Lumpur.
“We opine that KL Sentral, Bangsar South and Mid Valley City will play a catch-up game in attracting eminent companies seeking MSC status and green building features, as well as conveniences in terms of availability of public transportation, ample eateries and amenities, and upgrading of corporate image. Good building quality and property management services provided are expected to attract companies to set up its businesses here,” Lau says.
Star property
Property market welcomes new group of buyers
BEGINNING tomorrow, new guidelines from Bank Negara Malaysia to curb rising household debt are going to kick in. The guidelines cover all consumer loan products including housing, personal and car loans, credit card receivables as well as loans for the purchase of securities.
Instead of loan approvals being based on gross pay, they will be based on net pay, after income tax, social security deductions and the Employees’ Provident Fund contributions. These are the three main items. The objective of this ruling is to reduce the household debt which has been on the rise.
In all likelihood, property sales will be affected but what is interesting is, how this ruling will affect an increasingly younger generation of buyers who are entering the market for the first time.
In the last 24 months, developers have seen a new group of buyers. They are young and aggressive, upbeat and have a huge appetite for risk. Many of them are in their 20s or early 30s. Many buy with joint names and they are not related to each other. They buy studio units and two-bedroom condominiums, with a built-up of between 600sq ft and 800sq ft with a price tag of averaging RM500,000. When the mortgage payment kicks in, that RM450,000 loan (based on a 10:90 scheme) will equate to a monthly repayment of about RM2,500.
A developer says this scenario is due to a combination of factors. The steep rise in property prices the last two years, coupled with the gains, have spurred this young group of buyers to take on the responsibility of shouldering this long-term commitment.
More than 10 years ago, during the stock market bull run of the 1990s, the market was on an uptrend for a good number of years before the Asian Financial Crisis hit the region. At that time, many young people, including college students, began dabbling in the stock market. Just as that period prompted young people to learn about stocks, the last two years have introduced them to another investment instrument. The difference between the two is the outlay, and the duration of that commitment with stocks needing a smaller capital and more liquid.
Developers say there are essentially two groups of young people who have entered the market in the last two years. The first group are those who, seeing the gains made by earlier purchasers, enter the market with the objective of making a quick gain. Another group ventures into the market before prices go up further and they plan to hold the property for the longer term.
A major factor that encourages this group of aggressive young buyers is the availability of easy credit. The introduction of the 10:90 schemes induces them to make the decision. Many of them hope they will be able to flip that property on completion and make that 25% to 30% gain.
For this group who are buying to flip, they may find the gains not worth the while for the simple reason that the premise of making a 25% to 30% gain is based on a rising market. Prices are today stabilising and there is a glut of high-rise condominiums.
Lawyers and property professionals say investors are unlikely to make that 20% gain going forward. Furthermore, the 5% real property gain tax will also shave off gains. In the event they are unable to off load their units fast enough, they will have to rent them out, but they may encounter another problem – a glut of condominiums and few tenants.
Star Property
Instead of loan approvals being based on gross pay, they will be based on net pay, after income tax, social security deductions and the Employees’ Provident Fund contributions. These are the three main items. The objective of this ruling is to reduce the household debt which has been on the rise.
In all likelihood, property sales will be affected but what is interesting is, how this ruling will affect an increasingly younger generation of buyers who are entering the market for the first time.
In the last 24 months, developers have seen a new group of buyers. They are young and aggressive, upbeat and have a huge appetite for risk. Many of them are in their 20s or early 30s. Many buy with joint names and they are not related to each other. They buy studio units and two-bedroom condominiums, with a built-up of between 600sq ft and 800sq ft with a price tag of averaging RM500,000. When the mortgage payment kicks in, that RM450,000 loan (based on a 10:90 scheme) will equate to a monthly repayment of about RM2,500.
A developer says this scenario is due to a combination of factors. The steep rise in property prices the last two years, coupled with the gains, have spurred this young group of buyers to take on the responsibility of shouldering this long-term commitment.
More than 10 years ago, during the stock market bull run of the 1990s, the market was on an uptrend for a good number of years before the Asian Financial Crisis hit the region. At that time, many young people, including college students, began dabbling in the stock market. Just as that period prompted young people to learn about stocks, the last two years have introduced them to another investment instrument. The difference between the two is the outlay, and the duration of that commitment with stocks needing a smaller capital and more liquid.
Developers say there are essentially two groups of young people who have entered the market in the last two years. The first group are those who, seeing the gains made by earlier purchasers, enter the market with the objective of making a quick gain. Another group ventures into the market before prices go up further and they plan to hold the property for the longer term.
A major factor that encourages this group of aggressive young buyers is the availability of easy credit. The introduction of the 10:90 schemes induces them to make the decision. Many of them hope they will be able to flip that property on completion and make that 25% to 30% gain.
For this group who are buying to flip, they may find the gains not worth the while for the simple reason that the premise of making a 25% to 30% gain is based on a rising market. Prices are today stabilising and there is a glut of high-rise condominiums.
Lawyers and property professionals say investors are unlikely to make that 20% gain going forward. Furthermore, the 5% real property gain tax will also shave off gains. In the event they are unable to off load their units fast enough, they will have to rent them out, but they may encounter another problem – a glut of condominiums and few tenants.
Star Property
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