The global financial meltdown has left many quivering and wondering if the market has bottomed out. Unsurprisingly, the property market is not spared as buyers tend to adopt a wait-and-see approach and placing their trusts on the liquidity of cash.
Towards the second-half of 2008 in Malaysia, developers have chosen to defer the launch of new projects. This is not unexpected because of a high supply of properties from ongoing as well as completed projects.
In an opinion piece published in The Edge Malaysia by Kumar Tharmalingam, the chairman of property advisory company Hall Chadwick Asia, he said that Malaysia had a total of 4,193,150 units of housing at the end of 2008. Within that year, a total of 130,309 homes were completed, with Kuala Lumpur and Selangor accounting for 48 per cent of that amount.
Tharmalingam has also indicated that the national incoming supply of homes is 144,154 units with 107,856 units already under construction. The total planned supply is a further 673,871 units. As for property transactions, Tharmalingam has noted that there were a total of 216,703 transactions for residential properties in 2008 with the largest transacted numbers were in the RM100,000 to RM150,000 range. He summed that these numbers indicate that the property market needs to be readjusted to the spending power of consumers and maybe subsidies should be given to first-time home buyers.
Tharmalingam has also said that in 2007, only 45 per cent of the 52,664 total residential units launched were sold. In 2008, only 44 per cent of the 48,830 units launched were sold.
Property consultants, Knight Frank has published in their 2nd half 2008 Real Estate Highlights: KL, Penang and Johor Bahru that in 2008, the total supply of high end condominiums in Kuala Lumpur has increased by about 22 per cent compared to 2007. This is mostly due to the completion of several high-end projects. This supply is set to increase due to the expected first half 2009 completion of several projects which has resulted in lower asking prices and rentals for them due to jittery sentiments of owners. Because of this, Knight Frank’s property outlook says 2009 will see corrections in the prices and rentals of luxury condominiums as more supply is expected.
What the local developers are saying
Mr Ricque Liew, managing director of Paramount Property Development Sdn Bhd and Paramount Property (Utara) Sdn Bhd, has similar views about the cautious approach during the first half of 2009 by developers.
He said, “Generally, developers throughout the country have in Q1 2009, either deferred their launches or were launching them in lesser units. Because of the cautious approach adopted, the supply/demand situation was very well balanced with prices maintaining at stable levels. Prospective purchasers were adopting a wait and see attitude as they were both uncertain about the economic impact if the worldwide slowdown and to hang on for better offerings from developers.”
Ricque Liew has added that there was a flurry of excitement and activities when developers started offering 5/95 schemes, zero entry cost and a host of other goodies that have never been offered before in Q2 2009.
The group managing director of I&P Group Sdn Bhd, Dato’ Ir. Jamaludin Osman has also reaffirmed that property purchasing incentives currently in the market are attracting buyers. These incentives are such as are free sales and purchase agreement (SPA), free memorandum of transfer (MOT), free stamp duty, zero interest packages during construction and more.
I&P Group recent Bandar Kinrara terrace houses launch saw 90 per cent sold during the first day itself. Subsequently, within a month, all of the units were taken up. There were 110 units on offer during the launch.
Meanwhile, Mr Ho Wen Yan, chief operating officer of Hua Yang Berhad, a listed company that is focused on the affordable, mass market residential market, have reported strong take up rates during the first half (1H) of 2009. Their flagship project in the Klang Valley, Symphony Heights have seen 45 per cent sold and another 15 per cent booked as of May 2009.
Mr Liew said that the take-up rate for their Kemuning Utama and Surian Industrial Park launches during 1H 2009 was buoyed due to their Paramount Home Benefit scheme which offered plenty of subsidies to buyers.
On whether if this trend will continue for the second half (2H) of 2009, Mr Liew hopes that it will continue. Meanwhile, Dato’ Ir. Jamaludin and Mr Ho has more positive views of a recovering, albeit slowly, property market from 2H 2009 onwards.
Mr Liew has remarked that for investors it is a good time to buy properties as they are the best hedges against inflation. These properties, however, need to be the right type and in the right locations.
“Currently buyers have better and more choices. However, the current situation may not persist as developers adjust their supply in accordance to the market situation. Generally, developers in Malaysia have matured considerably and are able to financially withstand this downturn and adjust their products and supply quite quickly. Furthermore, the low-interest environment we enjoy now may not persist in the longer term,” Mr Ho said on whether it is currently a buyers or sellers market.
On the same subject, Mr Liew has said, “Depending on property type and location, it is generally a buyer’s market that we are currently experiencing. This is especially so in the previous ‘hot’ locations like the upmarket KLCC and Mont Kiara condominium units where property prices had shot up to above RM1,000 per sq ft.”
Mr Liew added that, “Bucking the trend will be those landed properties in places like Bangsar, Taman Tun Dr Ismail and Bandar Utama where it is still a seller’s market with prices still on the uptrend.”
The hottest area for properties is still within the Klang Valley followed by Penang and Johor Bahru. In Q4 2009 till Q2 2010, the Hua Yang Group has in the pipeline four projects with a total GDV of RM816 million to be launched. They are their Sungai Besi mixed development (Q4 2009), Seremban Country Heights (Q4 2009), Senawang Industrial Development (Q2 2010) and Polo Park, Johor Bahru (Q2 2010).
For the I&P Group, launches within their Bandar Kinrara, Alam Impian, Alam Sari, Temasya Glenmarie and Bayuemas townships are expected to continue in 2H 2009 and 2010.
When asked about the demand for luxury properties, Mr Liew said that, “Most of the high rise luxurious property buyers are high nett-worth investors, both foreign and locals, who are looking for either recurring rental income/yield or potential profits on disposal. A classic example will be some of the earlier KLCC properties like Marc Residences where purchasers paid something like RM600 per sq ft and subsequently disposed of them upon completion at RM1,200 per sq ft.”
“Earlier property owners of the Mont Kiara condominiums had also enjoyed double-digit rental yields from their properties and more than a hundred per cent capital appreciation on disposal,” adds Liew.
What to expect in 2H 2009
It has been reported that SP Setia Berhad had hit RM1.04 billion in sales as of 30 June 2009 and its success has been attributed to their 5/95 programme which started in 19 January and ends 19 July. The 5/95 home loan package allow buyers to just pay the initial five per cent of the house price. The legal fees and stamp duties on the sales and purchase agreement are taken care of by the company.
Other developer sentiments remain positive for the upcoming months due to encouraging sales from their recent project launches.
Mr Ho of Hua Yang said, “We are of the opinion that Malaysia is in a good position to weather this global economic downturn, and the property market will fully recover in due time. We are also confident about our properties and take up rates. The owner-occupier and mass housing residential segment continues to remain strong. Our price point of below RM400,000 is attractive in this market. It is expected that the market to remain stable for 2H 2009 with an up-side towards the end of 2009 and 2010 onwards.”
Meanwhile, Mr Liew of Paramount Properties commented that, “I foresee that the property market will continue picking up momentum as people begin to realise that the Malaysian economy is holding up well against the initial apprehensions of a worldwide recession. At the same time, people know that their RM value is fast shrinking and as such, they need to protect themselves by hedging on properties as a priority as compared to their other investments.”
Has the dust settled?
Many are keen to look for the first green shoots indicating that the global market have seen the worse but there are no definitive signs of an immediate recovery. In the Malaysia property market, there are indications that consumers are still buying despite the ‘slowdown’, partly due to attractive never before offered incentives.
While consumer spending is generally tighter due to the economic decline, investors might find that the old adage, ‘invest in bricks and mortar’, seems to hold true. With low barriers of entry, the buyers incentives from developers are keeping the demand for properties in balance with the supply, but how long will this situation persist? What if the economic situation remains flat in the upcoming months? Will buyers and developers be able to sustain costs?
Only time will tell...
