The residential sub-segment of the property market is expected to go through a period of consolidation with developers withholding launches, with interest expected to return in the second half of the year, said managing director Elvin Fernandez from valuers Khong & Jaafar group of companies.
“With the speculators weeded out, there will be a slow down in terms of sales, resulting in a drop in the mortgage market. But this situation will consolidate. When we move into the second half of the year, there will be a GST-effect (goods and services tax),” said Elvin. He was commenting on the HwangDBS report “Rocky Road Ahead”. “People will want to buy before the GST sets in. In Australia, people bought pre-GST but post-GST, it was like a property recession,” said Elvin. “We will go sideways for first half and in the second half of the year, any possible weaknesses in the market will be ameliorated by the GST in the second half,” he said.
As for the commercial market, there will be an oversupply in the office market. “That market will bleed quietly,” Elvin says.
The main thrust of the report was the possible increase in interest rates.
The Consumer Price Index, which measures the rate of inflation rose to 3.2% for the month of December while the overnight policy rate, a key benchmark interest mark, remains at 3%.
This means that the inflation rate is higher than the savings rate, bringing about a negative interest rate situation. Sunway REIT Management Sdn Bhd said they have already factored in a possible 50 basis points (bps) increase in their business plan.
“If it (interest rates) does not move, it will be savings for us,” said Sunway REIT chief executive officer Datuk Jeffrey Ng. He is of the view that the interest rates will not impact the overall property market as much as the availability of credit.
“The loan margins provided by the banks are more impactful than the interest rate increase on the sector, especially in the residential segment.
“Up to a certain point, with continual employment and salary increases, buyers will be able to absorb the interest rate increase, up to a point,” he said. C H Williams, Talhar & Wong managing director Foo Jee Gen said 2014 will be a “crucial year”, particular for high-rise shoebox-sized units commonly known as small office, home office (SoHos) or variances of it.
Foo said there were about 4,000 such units in the Klang Valley with a built-up of about 500 sq ft.
“Are you going to find 8,000 people, on the ratio of two to a unit, to occupy these 4,000 units?” he asked, adding that there might be a “war on rental”.
And even if there is rental, will it be enough to pay the instalment as many of these units were sold with just 5% or 10% downpayment. This means a loan of 95% or 90% of the unit price.
