The middle to high-end residential market here is expected to self-correct in the next six to 12 months, following the implementation of cooling measures by the government aimed at curbing speculative activities, according to property consultancy Knight Frank.
In its research report, Knight Frank also anticipates lower property transactions volume in the Klang Valley.
The overall outlook is expected to remain challenging due to the cooling measures, softening demand and the expectation of an interest rate hike.
It said developers are adopting a “wait-and-see” approach to assess the impact of the new cooling measures.
“We expect to see developers offering greater discounts and more freebies in view of the abolishment of DIBS (developer interest bearing scheme) in order to push sales and remain competitive in the primary market,” it said in its Second Half 2013 Real Estate Highlights in Kuala Lumpur, Penang and Johor Baru report, released yesterday.
Knight Frank said some developers are starting to focus on township developments in upcoming suburban locations, such as Rawang and Kajang, where demand for affordable housing remains strong.
It expects landed houses priced at between RM600,000 and RM800,000, as well as high-rise residential properties priced below RM500,000, to continue to attract strong demand, particularly from first-time home buyers and upgraders.
Meanwhile, the office market here had remained stable in the second half of 2013 despite mounting pressure on occupancy and rental rates as supply continued to outstrip demand.
Knight Frank said amid a challenging leasing market environment with a high supply pipeline, several developers have adopted a cautious stance by deferring the construction of their projects, only commencing works when they have secured pre-leasing commitment from potential anchor tenants.
“Going forward, the investment market is expected to remain challenging due to the lagging rental market with yields continuing to be compressed,” it said.
In retail sector, many prime malls in the Klang Valley continue to undertake asset enhancement initiatives in order to remain competitive and to brace for the high impending supply of retail space expected in 2014 and beyond.
In Penang, the property market is anticipated to remain in its consolidation mode.
“With the new measures introduced in the 2014 Budget, the high-end residential sector is expected to be affected to a higher degree, while the commercial sector should remain relatively stable,” Knight Frank said.
However, the soon-to-be-opened Second Penang Bridge and the state government’s efforts to spur developments in the southern parts of both the island and the mainland, will likely lead to better prospects in these locations.
The second bridge, which links Batu Maung on the island to Batu Kawan on the mainland, has spurred development in the surrounding areas.
On the island, new areas in Batu Maung, Teluk Kumbar and Teluk Tempoyak are expected to see more development.
In Johor, Knight Frank expects the strong Singapore dollar and growing interest from foreign purchasers, especially in Nusajaya and Medini, to continue to drive the growth of the residential market.
