Various groups with vested interests in the property sector are still dissecting the multi-faced measures announced a few months ago in Budget 2014. They are concerned about the impact it will have on the market and are trying to make the best of the situation.
The measures to cool the market underscore the Government’s resolve to curb property speculation and promote a more healthy and sustainable market. A focused policy on affordable housing is also one of the main thrusts of the Government initiatives. The new budget measures apply to all property projects nationwide except those in the Medini enclave in Iskandar, Johor, which has been declared a special economic zone.
Property consultants concur the unveiling of the budget measures have jolted both developers and buyers, especially speculators, and there is bound to be a short-term consolidation as they wait out to see the impact of those measures on the market.
Needless to say, developers are feeling the heat. Many are concerned the imposition of the full real property gains tax (RPGT) regiment may stall buying interest and impact sales.
The hike in pricing threshold for properties that foreigners can buy from RM500,000 to RM1mil is also a cause of concern for developers with projects targeting foreigners.
Meanwhile, potential buyers and investors are keeping their fingers crossed for better deals in the form of more innovative product offerings at more competitive pricing as the new year unfolds.
Real Estate and Housing Developers’ Association president Datuk Seri Michael Yam sounded the alarm when he said that “Budget 2014 has an adverse impact on the property market and will cause negative sentiment to permeate in the market place.”
“The industry and the consumers would take a more conservative approach in respect of sales launches or a buying decision. Going forward, developers would need to be more careful with its market research to ensure there is high probability of take-up in their project launches. Buyers are also expected to adopt a wait-and-see attitude with the hope of a fall in prices, while sellers are holding on to their prices waiting for an opportune time to sell,” he surmised.
Yam suggests developers do more indepth research and test the market before deciding to sell, or if necessary defer launches. He notes that this will likely lead to further imbalances in the supply and demand.
Despite envisaging a slight negative impact on the market, executive director of property consultancy CB Richard Ellis Malaysia, Paul Khong expects a fair and stable outlook for the property market next year.
He says investors hoping to flip their properties for short term gains will now be compromised if they do not dispose off their properties by this year due to the latest RPGT guidelines. The new RPGT regime is effective from Jan 1, 2014.
“Buyers will now have to revisit their investment criteria carefully. As for developers, they also have to work much harder to conclude more sales in 2014.
“With the abolishment of developer interest bearing schemes, the number of pure speculators and short term investors will drop in tandem,” Khong observes.
He says project launches will continue in 2014 as developers still need to develop as property development is their core business.
“But the project launches will be targeted more towards the mass market and will be at more reasonable price levels.”
Khong says in a more competitive environment, developers may need to provide higher quality products and more trendy developments to entice buyers, and buyers can look forward to better deals and hopefully greater value for their money.
On the average market, players will take three to six months to digest the impact although they will continue to invest with different objectives in mind.
The RPGT basically follows the principle of “No gain, No tax”, so it lessens the quantum of gain in the overall picture and does not penalise actual buyers, Khong says.
“The budget measures basically eliminate short term investors who are looking for high and quick gains in the local property market and force the market to stabilise and investors to take a longer term view on their investments,” Khong concludes.
DTZ Nawawi Tie Leung executive director Brian Koh says the tapering of bond purchase by the US Federal Reserve may result in a more challenging market outlook for the local property market.
“The market is likely to be more challenging given the related effects of rising interest and a tighter credit environment. It is likely to take a breather with new supply and launches likely to be delayed in the first few months of the year as developers tread cautiously to test the impact from the cooling measures of Budget 2014,” he explains.
Koh says it will be “a sort of reset for the market, so that the various parties are brought back to review their basic assumptions and expectations on more fundamental issues such as sustainability of trend, affordability and potential risks/returns going forward.”
“Developers are likely to launch less projects, downgrade specifications, reduce sizing, squeeze on construction costs, and accept lower margins.
“As for buyers, speculators who are caught in the new changes will have the most to lose, if they do not have the holding power,” Koh points out.
So what type of projects will be popular in this new environment?
Rehda’s Yam says the perenially popular types of housing would be guarded and gated landed houses, double-storey terraced housing, semi-detached and detached houses, small size condominiums in prime locations including those on top of or in the vicinity of MRT stations.
“For retirees and lifestyle living, properties on the island of Penang, beach resort and parts of Iskandar will be sought after,” Yam concludes.
Khong says inner city integrated developments like Pavilion and Tropicana Mall or the newly launched Damansara City and Damansara Uptown Phase 2 will lead the pack on the strata residences sector, followed by the ever green landed terrace houses (guarded and gated concept) in good locations.
He believes branded residences with good amenities such as MRT stations nearby and fully fitted/furnished units will also go far with buyers.
“As for projects targeted at the foreign buyers, they will now have to be more high-end driven following the higher price threshold of RM1mil imposed on foreign buyers from January 1,” Khong adds.
Koh says the market can expect more projects that cater to the family and for owner-occupation.
