By Sharen Kaur
MALAYSIA'S residential property segment is improving, albeit at a moderate pace. While the effect from the global Financial Crisis had trickled down on the market last year and in early 2009, the situation is seen to be improving, especially in the second half of the current year as countries worldwide took to launching stimulus packages to uplift their respective economic.
Because of the financial meltdown, interest on luxury condominiums in the Kuala Lumpur City Centre (KLCC) had weaken with property prices declining by 15-30 per cent from its peak more than a year ago.
But James Wong, director of VPC Alliance Realtors (KL) Sdn Bhd, an international real estate valuer said this is no longer the case now. Having said, he believes the market for luxurious condominiums in KLCC has not bottomed out yet and prices were expected to drop further this year by 10 per cent more due to weak market sentiments.
But even then, the drop will not be as hurtful as in Singapore where a prime property in Orchard Road worth S$3,500 (RM8,365) per sq ft, is now 45 per cent less. Prices of properties in other neighbouring countries such as Hong Kong and China have also dropped similarly.
"Malaysian properties are still far less cheaper than neighbouring countries and this has attracted many buyers from overseas markets. In Singapore, two luxury condo projects launched in 2008 were priced at S$2,900 and S$3,500 psf, respectively. In Kuala Lumpur, our most upmarket condominiums had peaked at RM2500 psf."
"But compared to Thailand and the Philippines, our pricing may be only about 5 per cent lower but for Indonesia, the price of properties are lower than Kuala Lumpur. So luxury properties in Malaysia are still a better bet," James said.
James said although there was new supply of 1,500 condominium units in 2008, and another 4,000 more expected this year, transactions had been slow and the trend may continue for the rest of the year.
"The secondary residential market in KLCC is now weaker due to the high supply. And, to a large extent, these properties are purchased based on speculation, and for investment," James said.
James cautioned investors adding that if one is buying a property for occupancy, then it was still a good time to do so. However, if you are buying for investment or speculation, it was more advisable that you don't as the market was still heading downwards, he said.
"The best time to make an investment would probably be in the fourth quarter of 2009," added James.
In general, some 30 per cent of properties within the KLCC enclave are purchased by foreigners, either to stay, or as an investment.
Locals meanwhile, buy luxury properties at the KLCC area mainly to lease to expatriates who are in Malaysia for work.
But since the US-led subprime crises, employees of these expatriates are asking them to stay in cheaper properties in Kuala Lumpur, which has now affected rental yields.
James said the leasing market for properties in the KLCC area will continue to stay weak.
"Peak rentals in Mont’ Kiara was RM3.50 – 4.00 psf but it is now experiencing a 10 per cent drop. With economic slowdown including retrenchment and pay cuts, these have affected the expatriate market for leasing," James said.
Nevertheless, despite the slow market, James said there was still a mix of locals and foreigners buying, but on a cautious note.
He said foreigners that were buying are those mainly from Asia and the Middle East and Europe, including expatriates working locally who have made Malaysia their second home.
To woo foreign buyers, some developers have taken to holding road shows in Europe, South Korea, Japan, Taiwan, China, India and Australia to take advantage of the competitive pricing.
James said there are foreigners who are buying to participate in the Malaysia My 2nd Home Programme, which has been less affected by the global crisis.
Likewise, James said the luxurious condominium market in Mont’ Kiara and Sri Hartamas was also experiencing a drop in prices.
"Buyers are spoilt for choice with another 2,000 condo units entering the Mont Kiara/Sri Hartamas market in 2009," he added.
James said landed residential properties in popular hotspots such as Damansara, Bangsar, Taman Tun Dr Ismail (TTDI), Desa Park City, Bandar Utama and parts of Puchong continues to be resilient with property prices still holding.
This was due to the limited supply and stronger demand in these choice locations.
En bloc deals were also slow to come, he said, adding that the last deal that took place involved Korean investors in early 2008. Since then, such purchases have not been repeated, he noted.
Government initiatives introduced recently is getting buyers back into the market.The most recent was the announcement by Prime Minister Datuk Seri Najib Tun Razak, that all property transactions, including those between foreigners and non-Bumiputeras, will no longer require Foreign Investment Committee (FIC) approval.
The FIC approval will only be required for property transactions which involve a dilution of Bumiputera or government interest for properties valued at RM20 million and above. For example, a dilution of Bumiputera interest refers specifically to the instance where a property currently majority held by Bumiputeras and as a result of a transaction ceases to be owned by a majority Bumiputera entity.
Transactions no longer requiring the FIC approval fall into two categories, with the first relating to any transactions involving sale by non-Bumiputera or foreign majority interest. Secondly, any transactions involving purchase by Bumiputera-controlled entity and this will include a Bumiputera-owned company acquiring property from another Bumiputera-owned company.
This deregulation was expected to facilitate greater property transactions and investments, including acquisitions of commercial properties by foreign interest.
Datuk Mani Usilappan, former director general of the valuation and property services department, Ministry of Finance Inc, said developers may face tough times selling residential blocks with strata titles in the Klang Valley, unless they have buyers with money in their pockets.
Although there are available properties in the Klang Valley, there have been no real buyers in the past one year despite property prices in Kuala Lumpur dropping by 15-20 per cent since a year ago.
"We have small price bubbles in the KLCC and Mont' Kiara area, but there is no major asset bubble. So buyers in general should not worry too much," Mani said.
Asset bubble is a situation where the prices are not underscored by sustainability in terms of income or demand.
Mani said he does not foresee property prices dropping beyond 30 per cent as it did during the crises in 1980s. Property prices then fell by 40 per cent.
Malaysia Property Inc was established recently to promote Malaysia as a property investment destination and it will definitely heighten interest among foreigners. Properties around the KLCC area are expected to be the biggest beneficiary from this initiative.
(ends)
No comments:
Post a Comment