Feb 06, 2016 Last Updated 4:48 AM, Feb 2, 2016

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PETALING JAYA: The market for condominiums in the Klang Valley is expected to be more challenging over the next two years, due mainly to the large incoming supply scheduled for completion this year and in 2017.

Henry Butcher Real Estate Sdn Bhd chief operating officer Tan Chee Meng said the demand for non-landed properties is expected to be weaker than that for landed properties.

This would also be compounded by the fact that the tight credit situation would continue to affect sales.

“Transaction volume is expected to decline further,” he said at the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the private sector, Malaysia seminar recently.

 

He added that while residential property prices would soften, they, however, were not expected to dip significantly.

“The market will be challenging in the first six months of 2016 but could pick up in the second half, provided the country’s economy is not adversely affected by any external shocks.

“As the next general election has to be held before August 2018, the market could see stronger improvements from the second half of 2017, on the basis that the ruling government will boost the economy and offer more goodies in the run-up to the elections.”

CH Williams Talhar & Wong (WTW) in its Property Market Report 2016 concurred that the condominiums market in the Klang Valley was expected to be more challenging in the next two years.

“The infrastructure developments such as MRT SSP Line and East Klang Valley Expressway are likely to spur more condominiums developments in the prime as well as suburban areas.

“However, developers are advised to maintain a cautious stand. The rental market is expected to be a tenant’s market with more units coming onstream this year.”

Citing the Real Estate and Housing Developers Association’s industry survey for the first half of 2015, Tan said sales of high-rise properties dwindled 9% during the period compared with 2014.

“Only 4,373 or 40% were sold out of the 10,877 units launched, of which 10,550 were residential units. Apartment and condominium sales were dismal, with only 779 (18%) of the 4,259 units launched being sold.

“The number of unsold units rose 14% to 78% in the first half of 2015 from 64% in the same period in 2014.”

WTW said 8,374 units of condominiums and serviced residences were launched in 2015.

“The second quarter of 2015 saw more new launches especially in the Embassy Row (Ampang Hilir/U-Thant) and the Golden Triangle. The majority of the new launches were serviced residences (69%), with small built-up areas and targeted at young working professionals or expatriates.”

WTW added that while transaction activities in the luxury condominiums market was less active in 2015, the average transacted prices rose.

“Luxury condominiums in the Golden Triangle were transacted at RM1,500 per sq ft on average, whereas secondary areas remained firm at RM920 per sq ft on average.

“The average occupancy rate for condominiums and serviced residences developments remained at between 77% and 80% in Golden Triangle and the secondary area, it was between 60% and 65%.”

In light of the challenging outlook for the high-rise sector over the next couple of years, Tan said he expected a weak rental market for high-end condos and apartments.

“The will likely be an increase in non-performing loans and a more active auction market. Developers’ margins will be cut by higher marketing costs and additional incentives offered to buyers. We believe they (developers) will focus on smaller-sized units to lower absolute selling prices.”

 

PETALING JAYA: The medium-term prospects for the Malaysian property market still looks promising, despite the challenging headwinds ahead.

Independent economist Lee Heng Guie said that while property prices would be easing further, a sharp fall in property prices would be unlikely.

“This is because Malaysia is not heading for an economic recession,” he said during a presentation at the 9th Malaysian Property Summit last week.

“The softening property market renders the buyers the opportunity to purchase property. For foreigners looking to invest in real estate in Malaysia, the weaker ringgit comes as a boon,” he said.

Lee said the local property market was still hampered by affordability issues, weak economic growth as well as cautious sentiment.

“The prospects of higher domestic interest rates in 2017 may be a dampening factor.

“Likewise, the banks are expected to maintain vigilance in the evaluation of property loans while ensuring the good credit-worthy borrowers will continue accessing to home financing.”

Lee said he hoped that the property cooling measures would stay for now.

“The right time to adjust some of the measures is when the market equilibrium is a lot more certain and sustainable. An over-adjustment of the property sector must be avoided for now.”

He added that the authorities should monitor closely the supply and demand conditions to avoid over-building in some segments, as well as prevent systemic risk to the banking sector, in an event of a severe correction in property prices and prolonged economic slowdown.

“While ensuring a sustainable property sector, Bank Negara should ensure the banking institutions continue to lend to those eligible borrowers.

“Fiscal incentives such as stamp duty relief and developers’ interest bearing schemes should consider for the first time home buyer and for the property priced below RM1mil,” Lee said.

PETALING JAYA: Well managed property development companies are unlikely to drastically drop the prices of their properties as they have comfortable profit margin buffers already in place, said MKH Group group managing director Tan Sri Eddy Chen said.

Speaking at the sidelines of the 18th Malaysia Strategic Outlook Conference 2016, Chen, who is also a patron of the Real Estate & Housing Developers’ Association Malaysia (Rehda), told StarBiz that most local developers worked on the basis of having profit margins of between 15%-18%, or even 20% if their projects were in choice locations. Hence it is unlikely for such developers to have to drop their prices very much.

“The only reason for them to lower their prices would be for the generation of cashflow perhaps to finance land cost commitments or other such priorities.

“There may be some developers who reduce their prices for this purpose but I don’t see many doing so in the next 6 to 12 months,” he said.

He agreed that a growing secondary market of properties will have an impact on primary market prices by capping price increases in the latter this year.

“But many in the secondary market were bought at prices lower than what’s available in the primary market today, perhaps at what the developer is selling. They too cannot reduce their prices by much, marginally below developers price at best,” Chen said.

Currently, Malaysia has one of the highest rates of household debt in the world, leading to housing loans being rejected.

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