Royal Institution of Surveyors Malaysia (RISM) vice president Adzman Shah Mohd Ariffin says the market is evolving. “There are a number of developments in the United States and in Asia. All these events will impact Malaysia.”
Adzman highlighted Indonesia’s rupiah weakening last year and Thailand political demonstrations, now in its second month.
Adzman says the weak rupiah may attract companies to invest there. That will impact Malaysia.
“We seem stable when compared to our neighbours but we have our own issues to settle,” he says.
Adzman, who runs a property and retail consultancy Exastrata Solutions Sdn Bhd says businesses are recalculating their margins with the various price increases involving electricity tariffs, sugar, possibly toll rates and petrol prices.
He draws attention to the recent inflation figures by Standard Chartered Bank South-East Asia regional head of research Edward Lee. Lee says Malaysia’s inflation rate is expected to increase to 3.4% for the first nine months this year from 2.1% in the same period last year. The jump reflects one of the biggest in Asia; it is also the fastest acceleration in almost two years.
Adzman is helping three malls with retail tenancy. Two of them are new while the third is an existing mall.
“Retailers today are cautious about location, their catchment areas and overall expansion. They have been cautious since the middle of last year. There is a lot of focus now on tourism to help bring in revenue but this is limited to cities and tourist areas. Suburban malls are dependent on their respective catchment areas,” he says.
“Most businesses are waiting for first half year figures. This will be a good indication (where we are heading),” he says.
Adzman says retailers are feeling the heat because consumers are not buying.
“Retailers are clearing stock by cutting prices to ensure they are not stuck with old stocks when the market slows. They release space for new stocks in order to create demand,” says Adzman.
The raise in toll, petrol and parking charges may result in people heading to the mall closest to them instead of heading downtown which means downtown malls will be tourist-dependent, he says.
Retail Group Malaysia MD Tan Hai Hsin in a January 2014 report based on interviews with members of the Malaysia Retailers Association says the industy reported a sluggish third quarter for 2013. The July-September quarter grew 3.1% compared with 4.6% in the preceding quarter, and 4.8% for the same period in the preceding year.
Ramadan and Hari Raya, which fell on the third quarter of 2013, failed to lift overall retail sales, he says. This confirms Adzman’s views that on the Malaysia retail industry has been slow since the middle of last year.
In many ways, the retail sector and private consumption are good indicators for the overall economy.
The consumer sentiment index, according to Tan, dropped from 122.9 in the first quarter of 2013, to 109.7 (Q2) and 102.0 (Q3). The next batch of numbers to look out for will be National Property Information Centre (Napic) figures on transaction volume and transaction value.
This is expected to be released in March/April.
The jump in property prices at 30% to 35% a year in some areas since 2010 has changed the sector’s profile and has resulted in an equally stratospheric jump in interest among investors, with 20-somethings piling in.
In many ways, this is reminiscient of the 1990s stock market super bull run when college students and 20-somethings diligently applied for initial public offerings with the hope of a gain. They trotted a similar path in the recent bout of interest in the property sector.
Siva says “these young people are shielded from the international highs and lows of the global economy, and the national ups and downs, and whose trickle down effect is yet to be felt.”
“The introduction of developers interest bearing scheme (DIBS) enabled many to buy properties they cannot afford and don’t need. The question is: Will they be able to get tenants? If not, will they be able to pay the mortgage when payment kicks in?”
The introduction of cooling measures may also result in a shift in interest from the primary back to secondary market when buyers turn to sub-sales instead of buying directly from the developers. In an earlier report by Elvin Fernandez, managing director of Khong & Jaafar group of companies, he said in 2009 and 2010, primary transactions comprised about 12% and secondary market transactions about 87% of total residential transactions of 211,600 in 2009 and 226,874 (2010) respectively.
In 2011 and 2012, primary transactions went up to about a fifth of the total number of residential transactions whereas the secondary market accounted about 79% (or 214,044) and 77% (212,428) respectively. There was a drop in secondary market sales from 214,044 in 2011 to 212,428 in 2012.
Says Elvin: “This means there was a run-up in the primary sector of the market by about 35,000 units a year or close to 3,000 units a month.
The question today is, where will these group of ‘speculators’ turn to in their search for alternative investments?”
With fixed interest rates at about 3% per annum and volatility in the share market, will interest in the property market return to the secondary market? Will all the euphoria of the last several years mark a return to the days before 2009 when property investments were dull and boring? This lack of clarity is the reason why property seminars attract a full house.
