After years of focusing on high-end properties, developers are likely to turn their attention to more affordable housing, reports PAULINE NG
(KUALA LUMPUR) Malaysia’s real estate sector is expected to be more subdued this year with property transactions seen slowing particularly in the first quarter as buyers adopt a wait-and-see attitude to the eurozone crisis and softening global economy, say realtors.
|Bigger picture: Kuala Lumpur attracted the bulk of foreign buying and key government-led initiatives under the Greater KL plan to revitalise the capital city can be expected to add to the city’s attractiveness when completed
Also, more stringent guidelines on lending are expected to rein in the exuberant borrowing of the past.
On the brighter side, after years of focusing on high-end properties, developers are likely to turn their attention to more affordable housing where demand is still robust.
According to Zerin Properties’ chief executive Previn Singhe, asking prices on the secondary market are also becoming more realistic because the market is expected to remain relatively stagnant. ‘Condominiums in Kuala Lumpur will be flat but we see some good deals in KLCC (Kuala Lumpur City Centre) and Mont Kiara now.’
Barring further external shocks, the property consultant is projecting an increase in demand and transactions in the second quarter, with the former nudging prices up especially in the landed market. Landed properties in established areas of the Klang Valley will continue to hold up well, but Mr Singhe is bullish about Puchong as well as the up-and-coming locations of Serdang and Bukit Jalil.
International Real Estate Federation Malaysia president Yeow Thit Sang had previously observed that multinational companies have not put down roots in the country quickly enough to occupy many of the luxury properties built, with the result that rental yields have dipped to below 6 per cent.
Foreign ownership of the residential sector is also minimal at about 2 per cent, but Malaysian Property Incorporated (MPI) is working to get more buy-in.
‘RM1 million (S$412,560) is usually the pain barrier,’ quipped its chief executive Kumar Tharmalingam in reference to the average price threshold for Singaporean purchasers.
Established in 2008 as a government initiative to attract real estate investments into the country, the MPI seeks to brand Malaysia’s real estate in key markets including Singapore, Korea, Indonesia and China.
Mr Tharmalingam believes foreign interest is picking up. Of RM110 billion spent on real estate last year, RM12 billion or 11 per cent was by foreign investors. Developers at MPI’s Malaysia Property Gallery in Singapore sold a total of RM115 million worth of residential properties last year, 15 per cent more than their target of RM100 million.
Invariably, Kuala Lumpur attracted the bulk of foreign buying and key government-led initiatives under the Greater KL plan to revitalise the capital city – such as the Mass Rapid Transport system, Kuala Lumpur International Financial District, and River of Life project (rehabilitation of the Klang River) – can be expected to add to the city’s attractiveness when completed.
Foreign interest in Johor residential properties is, however, on the increase. A quarter of the 40-odd residential units costing RM1 million or more sold in the southern state in the first half of last year were bought by foreigners. In contrast, foreign buyers made up only 11.5 per cent of the 900-odd units sold in Kuala Lumpur.
‘Iskandar has finally turned the corner,’ Mr Tharmalingam observes, noting that even Chinese developers were in the special economic zone – thought to be building with an eye to their home market. ‘Johor is near enough to Singapore but cheaper than Singapore.’
Recent queries indicate sustained foreign interest, he adds, noting that a group of 26 Japanese industrialists are scheduled to meet him in March on a mission: In the aftermath of Thai floods last year which crippled many business operations, the Japanese are on the look-out for 40 hectares for an industrial park in Malaysia.
There is also an emergence of European and US funds into South-east Asia, including Malaysia, in search of opportunities to invest in real estate, added Zerin Properties’ Mr Singhe.
At the same time, the Malaysia My Second Home (MM2H) scheme appears to be attracting a new wave of buyers. Mr Tharmalingman noted the growing trend of Iranians, Pakistanis and Bangladeshis using the MM2H scheme to secure residency in Malaysia – viewed as a moderate Islamic nation – as an insurance should conditions at home deteriorate.
Real Estate and Housing Developers’ Association Johor chairman Simon Heng agrees that more job opportunities have been created in the state because infrastructure projects are getting off the ground, and this has in turn created greater housing demand.
Another consequence has been the doubling of prices over the past two years in areas such as Nusajaya, with high-end apartments going for RM600-800 per square feet compared to RM280-300 psf previously, he said.
Because land prices have also soared – outside of Nusajaya leaping to RM15-25 psf compared to RM8-10 psf in 2009-2010 – developers have turned to high-rise developments.
Mr Heng said that some 60-70 apartment projects are believed to have been approved by the local council – a significant jump when one considers that two to three years ago, there would have been fewer than 20 projects in the pipeline, and those too were mainly landed developments.
‘Location counts. If all these projects are launched together, it could take a while for the market to absorb,’ he cautioned. A proposed MRT link between Johor and Singapore will make properties in the state much more desirable but the infrastructure is only expected to be launched in 2018 at the earliest.
But local demand for landed properties in Kempas, Skudai, Tebrau, Austin and Kulai costing less than RM500,000 – foreigners are restricted to properties over RM500,000 – remains steady, he said.
The anticipated slowdown notwithstanding, Penang continues to look good because the island is popular with a growing number of locals and foreigners. MPI’s Penang Week attracted 60 people last year, all Penangnites working in Singapore who snapped up some RM40 million worth of properties.
Asked to comment about Penang real estate, Mr Singhe surmised: ‘Penang Island is hot!’
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Source: Business Times 23 Feb 2012