Last weekend, about 1,600 participants attended a property seminar called Property Outlook Conference 2014 in Kuala Lumpur.
Organised by an event organiser, speakers comprised property consultants, developers and property gurus. Participants comprised largely investors and investor-wannabes, property professionals from companies and real estate agencies, a sprinkling of analysts and the media.
One of the speakers says it was one of the largest groups he has ever spoken to when it comes to a local property seminar. Usually, the turnout hovers between 600 and 800, he says.
An executive director of an international property consultancy who was there says he felt as though he was attending “a multi-level marketing seminar.”
The fact that an event manager organised the seminar single-handedly, albeit with developers as sponsors, underscores the leverage offered by the property sector.
Secondly, the turnout underscores the investing public’s hunger for information, says two property professionals. Early bird registrants paid RM200 per pax, a couple paid RM499 while latecomers paid between RM800 and RM1,000 per pax. They were “hungry” because since the introduction of the cooling measures in October, coupled with the various price increase involving toll charges, petrol, electricity tariffs, cut in sugar subsidy, the sector has become rather opaque.
Says Malaysia Institute of Estate Agents (MIEA) president Siva Shanker: “Both developers and investors did not know what hit them post-Budget 2014. The last three months of 2013 were bad. The sector went into a tailspin.”
Siva says in the last four years, prices in some areas went up 30% to 35% in the span of a year – an unhealthy situation because the fundamentals were not there. On a national basis, the issue of house prices is not an issue, it is only in certain areas that prices have gone up multiple times in relation to annual household incomes, he says. He likens the property market before the budget to a car about to crash as it careens downhill, if the cooling measures were not introduced.
“If the car does not slow down, it will crash,” he says.
Siva says of all the sub-segments in the property sector, he is most concerned about the residential sub-segment, the main driver of the sector.
Siva says there is a huge oversupply in Kuala Lumpur, Penang and Iskandar Malaysia in Johor, including serviced apartments which are developed under commercial status.
The 2013/14 slowdown
Siva says not many may have realised it, but the property sector slowed down in 2013. “We think 2014 will see a slowdown of the sector, but that actually started in 2013.
“Sales are expected to be slow for the first two quarters. We expect to see sales going up in the second half of this year and find its own level, barring external factors. Sales will not be great, but it will not be as bad as first two quarters of this year,” says Siva.
“The goods and service tax (GST) due in April 2015 will create another bout of uncertain. Although most of the countries in the region – with the exception of Brunei and Malaysia – have some form of GST or value added tax (VAT), we have yet to experience its effect. We expect some knee-jerk reaction which will result in a price increase but it is 2016 that I expect prices to climb,” he says.
But before 2016, there is 2014 to deal with.
“2014 will be Iskandar Malaysia’s tipping point. (But) there is also a huge oversupply in Penang and the Klang Valley, especially high-rise projects, be there condominiums or serviced apartments,” he says.
Stocker Roberts & Gupta Sdn Bhd valuer Das Gupta who runs a firm about 10 minutes walk from the Petronas Twin Towers says the slowdown actually started in 2012.
“Many missed the signals,” he says. “Land and property prices around here (Kuala Lumpur City Centre) have been stagnating since 2012.
“That was a slow year. High-end properties around the KLCC and in Mont’ Kiara stopped moving forward the past one year in terms of both capital appreciation and rental.
“In some cases, rental and prices have dropped a notch or two,” he says.
How does one account then for the sale of a parcel of land sandwiched between Wisma Central and a Chinese temple fronting Jalan Ampang sold to Singapore-listed developer Oxley Holdings Ltd by Loke Wan Yat estate?
The 1.25 hecatres (3.1 acres) parcel was sold in December for a record RM3,300 per sq ft or RM446.7mil.
“That was an exceptional parcel because of its location and size. It is not the market norm and should not be used as a measure of overall property sector performance,” he says. Das says while land deals belong to the big boys’ arena, it is the ordinary people that he is most concerned about. “Nothing hits the rich,” he says.
Das says suburban vacant land with demand potential have become exorbitantly high. Some of these owners are second or third generation owners. They have no liabilities on these real estate. “Developers have to price their end products very high in order to justify paying such high prices. (So) they rather walk away.”
