Property prices in Malaysia to continue to increase, says REHDA

Property prices in Malaysia will continue to increase due to the supply and demand factor as well as the high land cost, according to Real Estate and Housing Developers Association (Rehda) president Datuk Seri FD Iskandar Mansor.

Notably, the average annual housing completion stood at 100,000 compared to the average annual household formation of 140,000, revealed the National Property Information Centre.

According to Iskandar, who also serves as managing director and chief executive officer of Glomac Bhd, the public have the misconception that developers are responsible for the rising property prices.

He explained that it is impossible for developers to maintain or lower the selling price for new launches due to land cost and high conversion premium, which has recently increased by up to 300 percent.

He also noted that the cost of doing business has been expanding each year, and, unlike before, developers no longer enjoy the 30 percent profit margin.

In fact, developers now only make around 15 percent profit margin because of high development and infrastructure charges, compliance cost, stamp duty and quit rent.

Moreover, land is getting scarce and more expensive.

“In early 2007, when Glomac bought land nearby the Petronas Twin Towers, the seller asked for RM1,000 per square feet (psf) but we wanted to pay only RM600 psf. I knew what we wanted to build on it so we paid RM1,000 psf,” said Iskandar.

“Now, that same piece of land is worth RM3,500 psf and the value of the building has risen. Land cost has tripled in the last seven years.”

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Malaysia's property market to take a breather in 2014 and 2015

PETALING JAYA: The property market might need at least two years to digest and recover from the various cooling measures that came into effect this month, but expect it to surge again in 2016, say industry officials.

According to Malaysian Institute of Estate Agents president Siva Shanker, 2014 is expected to be a tough year for sales, but the market will find its footing next year and catch the next upcycle in 2016.

“The market ground to a standstill after Budget 2014. There was a knee-jerk reaction in sales.

“It will probably stay in the doldrums for the first half of 2014. The second half may be better,” Shanker, who is also CEO-Agency of property consultancy PPC International Sdn Bhd, told StarBiz by phone.

Shanker believes that speculation over the past few years in the primary market, resulting in “far more properties bought than needed”, had been put to a stop by the new curbs.

“The days of 20%-40% appreciation in property prices after only a few years is over, ” he said.

Even so, Shanker sees the secondary market, which he said had languished for years, regaining its lustre.

“A new launch in Bangsar could set you back RM1,500 per sq ft, compared to RM800-RM1,000 per sq ft for an existing property. The discount goes up to 50% in some prime areas,” he said.

An analyst with TA Research said that unlike previous years, many listed developers have held back on their 2014 sales targets – a departure from their usual forward guidance in December – until a clearer picture emerges from the effects of Budget 2014 and other tightening measures.

The exception is Mah Sing Group Bhd, which is aiming for a 20% increase in sales this year to RM3.6bil.

According to the analyst, policy uncertainty on several fronts – such as whether Iskandar Malaysia’s Medini is exempt from real property gains tax, or the pricing of bank loans using the net selling price of a property – remains an overhang on the market.

“The sector’s fundamentals are intact, but in terms of share prices, the catalysts are lacking,” she said.
Property players have noticed a marked slowdown in sales since the various curbs were put in place, although it is unclear by how much.

A number of high-end launches were also shelved, as developers switch their focus to the affordable segment of the market, where demand is more resilient.

Some of the projects launched post-Budget 2014 include block B of YTL Land & Development Bhd’s Fennel@Sentul East condominiums, which saw a take-up of 80% soon after it was opened for sale in mid-November, while tower A and B of Sunway Bhd’s Geo Residences were 85% sold within two weeks, HwangDBS Vickers Research noted.

In Iskandar Malaysia, however, the response to UEM Sunrise Bhd’s Almas Suites and WCT Holdings Bhd’s Medini Signature Tower 2 have been lukewarm, Maybank Research said in a report last week.

The brokerage’s only “buy” call is Glomac Bhd, even though the firm has cut its own sales target for the year ending April 30, 2014 by 18%.

CIMB Research is more upbeat. It expects buying interest to return in the first half of this year, albeit gradually, when potential homeowners realise that prices are unlikely to fall, and that inflationary pressure from the impending goods and services tax, along with other subsidy cuts, leads to higher prices.

“As these macro prudential and policy measures are meant to curb speculation and not restrain genuine demand, the impact (though negative in the short term) should be positive over the longer run because they should help to remove froth from some segments of the market.

“Also, affordability remains close to its highest ever. Robust sales by developers should provide impetus for a re-rating of property stocks,” the research house told clients earlier this month.

Hong Leong Investment Bank Research, which believes the market will stage a recovery in the second half of the year, advocates a buy-on-weakness strategy for shares amid trough valuations.

Contributed by John Loh The Star/Asia News Network

Malaysian property sector no immediate bubble risk

PETALING JAYA: The Malaysian property sector is not in any immediate risk of experiencing a bubble, according to property consultant CBRE Malaysia executive chairman Chris Boyd.

He said despite rising residential property prices, houses in Malaysia were still among the cheapest in the region.

“Residential property prices increased at a constant pace in Malaysia until 2009, but have been accelerating until recently.

“However, prices are not as volatile as those observed in Hong Kong and Singapore,” he said in a presentation during the 16th National Housing and Property Summit 2013.

“In comparison with selected Asian luxury residential prices, Kuala Lumpur remains one of the cheapest cities in the region,” said Boyd.

According to him, the average luxury residential property in Hong Kong costs nearly US$3,000 (RM10,200) per sq ft, compared with US$250 (RM850) per sq ft in Kuala Lumpur.

He pointed out that to overcome the issue of rising property prices, the Government had launched two schemes to make houses affordable, namely the Malaysia My First Home Scheme, which was introduced in 2011, and the 1Malaysia Housing Programme, which came into effect in 2012.

Meanwhile, Universiti Putra Malaysia Housing Research Centre professor Datuk Abang Abdullah Abang Ali said the recent Government initiatives were addressing the issue of rising prices but added that it was not clear if that was enough.

He said artificial increase in prices would create a bubble, noting that there was a serious mismatch between income and property prices, especially in the Klang Valley.

“This indicates that affordable homes are not being built to cater to the general market and most buyers in the Klang Valley are likely to be investors or speculators.

“As market prices head for a correction and speculation decreases, there may be an oversupply of properties above RM550,000.”

Urban Wellbeing, Housing and Local Government Minister Datuk Abdul Rahman Dahlan, in his opening speech, said the Government had to mitigate excessive investment and speculative activity in the property market so as to prevent a property bubble.

“Moving forward, the Government would not hesitate to further tighten the fiscal policies in order to curb property speculation and ensure reasonable and affordable property prices in the country.”

Abdul Rahman said the low real property gains tax, which was increased from 5% to 15% last year, had not been effective in preventing the increase in house prices.

Contributed by EUGENE MAHALINGAM  The Star/Asia News Network

Malaysian property market sentiment after GE13

With the dust having settled after the 13th General Elections, all eyes are now on the freshly elected government for strategies for the real estate sector.

While other issues such as increasing the minimum purchase price for foreign buyers and reducing lending rates and stamp duties are also on the wish list of most Malaysians, latest figures released by PropertyGuru Group highlighted a continuing call for the government to address the issue of home affordability.

In the latest Property Sentiment Survey (Q2 2013) by the leading online property group, 76% feel that the government is not doing enough to curb the current price increase. This is more acutely felt in regions that have experienced a high foreign demand for residential properties, namely Johor (69%) and Kuala Lumpur (81%).

While 35% out of the total of 851 respondents claim that the outlook of the local property market will remain positive, four in five expect prices to increase further in the next six months.

Respondents also seem to favour stricter market restrictions on property ownership by foreigners, with nearly half supporting an increase in the minimum purchase price from RM500,000 to RM1 million for overseas buyers and investors wanting to buy properties in Penang and Johor.

Despite the growth in price, 74% of respondents intend to buy at least one property type (either residential or commercial) within the next six months, an increase of 10% as compared to the previous quarter. This is because of the perception that the more expensive a property becomes, the higher capital appreciation it will bring in the long term.

“There is a dilemma at play for Malaysians. As they see property prices spiral up, they also see their assets appreciating in value. But in the long term, they are also finding it more challenging to own properties,” Added Value Singapore managing director Raymond Ng says.

“Affordability is also a bigger concern for the younger adult population. There is no doubt that there are enough local funds to fuel the market and allow the government to control prices a bit better without relying on foreign investments. The challenge is finding the sweet spot that will entice locals to invest locally while not turning away all foreign investments.”

The survey was conducted by PropertyGuru Group in collaboration with Added Value-Saffron Hill, a Singapore-based independent professional research agency.

Conducted since 2010, it is the only independent local survey to measure property sentiments and expectations about the property market amongst Malaysians.

It is also carried out across the group’s four key target markets of Singapore, Malaysia, Indonesia and Thailand, attracting 4,062 online respondents aged 21 to 69 who are influencers or decision makers on property.

“The results are consistent with figures from previous quarters where 75% of Malaysians find property to be expensive.

Kho says Malaysians want more affordable homes and are looking to the government to deliver. 

“The message is clear; Malaysians want more affordable homes and are looking to the government to deliver. PR1MA is a step in the right direction, but Malaysians want more measures and existing measures to be expedited, PropertyGuru.com Malaysia country manager Gerard Kho says.

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Penang residential prices to rise 8%

RESIDENTIAL property prices in Penang are likely to rise by 7% to 8% by the first half of 2013 due to the steady demand and a stronger gross domestic product (GDP) projection for 2013.

< Geh says new properties launched with a bundled-up financial package would be most popular.

According to the latest Finance Ministry report, the GDP forecast for 2013 is between 4.5% and 5.5%, riding on the growth in the agriculture, construction, mining, manufacturing, and services sectors.

Raine & Horne Malaysia director Michael Geh says new properties launched with a bundled-up financial package would be most popular.

“This is why this segment will perform better than those properties in the sub-sales market, where the buyer and seller have to do more paper work,” he says.

Saw says harder loans may be cause of lower volume.>

Currently, the price for terraced property in prime locations such as Tanjung Bungah and Tanjung Tokong is around RM1.2mil to RM1.5mil.

The selling price of development land in prime locations ranges between RM450 and RM1,000 per sq ft.

“The stringent guidelines for housing loan, now based on the evaluation of net income rather than on gross income and the difficulty in obtaining the desired valuation report will mean that the sales of condominiums in the secondary market will face more challenges,” he says.

The new guidelines from the Penang government for foreign purchasers to buy only high-rise and landed properties priced from RM1mil and RM2mil respectively will impact adversely on foreign property transactions in Penang, according to Geh.

“More foreigners will prefer to rent than to buy, thus one can expect rental yield in the state to increase gradually,” he adds.

According to the latest National Property Information Centre's (Napic) property market report, total transactions for residential properties in Penang hit around 18,316 for the first nine months of 2012, with a transacted value of RM5.2bil.

The whole of 2011 saw the state registering some 30,674 residential property transactions valued at RM7.7bil.

Geh says the total volume of property transacted for 2012 was unlikely to catch up with 2011's.

“That the total value of property transactions has risen although the volume transacted has decreased is not surprising, as this is normally the trend,” he adds.

PPC International Sdn Bhd director Mark Saw says the lower volume of transactions may be because housing loans are harder to obtain nowadays.

“Another reason could be that the preferred choice of properties might not be available,” he says.

Malaysian Institute of Estate Agents deputy president Siva Shanker says Malaysia is unique as property prices have not dropped following the decline in transactions.

“In fact property prices will hold and then shoot up when times are good again,” he says.

Penang Master Builders & Building Materials Dealers Association president Lim Kai Seng says construction cost will likely be maintained in the first quarter of 2013.

“Although sand prices have gone up, the smaller volume of construction jobs available is offseting the impact of rising sand prices.

”Due to the competition for jobs, construction cost will be maintained,” he says.

The price of sand per load of 30 tonnes is around RM1,200, compared to about RM800 in early 2012.

Since the price of cement went up in August, the cost of construction has increased by about 3%, Lim says.