House prices finally coming down?

“House prices will never go down” is probably what we hear whenever we are told to invest in a residential property. And property developers have enforced that time and again, citing the rising cost of construction and strong demand from a growing population.

However, the latest data from the Valuation and Property Services Department’s Property Market Report 2016 showed that the Malaysian House Price Index (HPI) had in the fourth quarter of 2016 (4Q2016) stood at 243.3 points, down by 1.8 points, or 0.7%, against 3Q2016.

This is the first quarterly decline since 4Q2008, when the HPI contracted by 2.4 points, or 1.83%, to 129 points from 131.4 points in 3Q2008. Since then, the index has been reflecting an escalation in prices, until now.

The report stated that the quarterly dip in 4Q2016 was attributed to the downtrend in prices experienced in most states, with the HPI in these states seeing negative growth of between 0.1% and 3.2%. Other states that have recorded a dip in the HPI include Penang (-3.2%), Sarawak (-1.9%), Sabah (-1.4%), Kuala Lumpur (-1.4%), Pahang (-1.2%), Perak (-0.9%), Kelantan (-0.5%), Selangor (-0.2%), Kedah (-0.1%) and Perlis (-0.1%).

Only three states — Johor (0.9%), Negeri Sembilan (0.9%) and Terengganu (1.8%) — recorded positive growth. Price movement in Melaka was unchanged.

Henry Butcher (M) Sdn Bhd chief operating officer Tang Chee Meng says the quarterly drop in 4Q2016 does not surprise him, considering the current soft market.

“When the HPI records a decline, it means prices have registered a drop, so one can conclude that on the whole, prices have declined in 4Q2016 from the previous quarter, which is clearly a manifestation of the soft market condition,” he tells TheEdgeProperty.com.

He adds that the price dip could also be attributed to the lower net prices of some new property projects due to discounts via rebates, freebies and interest-free easy payment schemes offered by developers, although their official prices may not have dropped.

Looking ahead, Tang says it remains to be seen whether the drop in 4Q2016 is just a temporary blip or the start of a downtrend over the next few quarters. “My personal view is that the HPI will recover in 1Q2017 but will remain fairly flat through the year.”

However, Metro Homes Sdn Bhd director See Kok Loong thinks the HPI will continue to see gradual downtrend due to the soft market condition, which has also seen property owners lowering their asking prices.

“The increase in stamp duty for real estate transactions priced above RM1 million from 3% to 4% starting January 2018 and the impact of the goods and services tax (GST) as well as the China government’s curbs on capital outflows are expected to have an impact on the market,” he says.

See adds that there have been slightly more buying enquiries recently but for high-end properties, most people are still taking a “wait-and-see” stance as they believe the next general election will happen soon.

“Therefore, we believe that the high-end segment will remain soft until after the election, whereas affordable properties will continue to perform well,” he continues.

Is the worst over?

Nevertheless, to MIDF Research analyst Alan Lim, the market seems to be looking up and the drop in the HPI in the last quarter is only temporary. His confidence lies in the 5.6% growth recorded in the Malaysian economy in 1Q2017 — the fastest growth recorded in two years — against the 4.1% recorded in the same quarter last year.

“As the economy improves, income levels and visibility tend to be higher. Hence, we expect consumers to have higher confidence in buying property,” he says, adding that the rise in consumer confidence is expected to boost property sales and help sustain overall property prices going forward.

MIDF Research’s report on May 11 noted that the HPI grew by 5.6% y-o-y to 243.3 points in 4Q2016, although the growth was slower than the five-year average growth of 9.1%.

“There is some decline q-o-q but we think this should be temporary as the Malaysian economy has picked up. The outlook for property price growth is better in Greater KL (Selangor and KL) due to the urbanisation factor,” read the report.

The report also pointed out that the 1Q2017 consumer sentiment index (CSI), which improved to 76.6 points from 4Q2016’s 69.8 points and 1Q2016’s 72.9 points, suggests that the demand outlook for property among the potential buyers has improved and this should translate into better sales in 2017 as consumers are generally more optimistic and have indicated their cautiously ambitious spending plans.

House prices in Johor trend upwards

Despite the drop in transaction value and volume of residential property, house prices in Johor continue to rise.

The state recorded 26,186 residential property transactions in 2016, down by 15.69% from the previous year. The value of transactions also fell by 7.6% to RM8.58 billion from the previous year. The HPI for Johor grew 7.7% y-o-y in 4Q2016 and 0.9% q-o-q.

Metro Homes’ See opines that the increase in Johor house prices could be due to newly completed projects that were transacted at a higher price. However, Tang points out that the marginal rise in the HPI cannot be taken as an indication of a hot market for Johor, in view of the declines in both volume and value of residential transactions in the state last year.

He notes that all states registered declines in volume and value of residential property transactions in 2016, with the exception of Kelantan, which interestingly recorded a 16.4% increase in volume of transactions and a 7.2% increase in value of transactions.

“Perlis, which recorded a marginal 1.2% drop in volume of transactions, actually registered an 11.6% increase in the value of transactions,” he adds.

Residential property market yet to bottom

Going forward, Tang says the residential market in all states will remain soft in 2017. He thinks the market has yet to bottom and the soft market conditions will persist for the rest of this year and possibly the first half of next year. He says the decline in the volume and value of residential property transactions only just started in 2013 and 2015, respectively.

According to the National Property Information Centre’s data, the number of residential property transactions in 2013 was 59,210, down 8.06% from the 64,402 in the previous year, although the value was up 7.19% to RM16.22 billion in 2013.

The number of residential property transactions in 2015 was 59,490, an increase of 1.23% while the value of the transactions dropped 11.34% to RM10.35 billion.

“The outlook for the overall residential property market will remain soft in 2017 with continued declines in both volume as well as value of transactions, but prices are not expected to dip significantly,” Tang says.

According to the Property Market Report 2016, the volume of residential property transactions in Malaysia dropped by 16.61% last year to 49,608 transactions from 59,490 transactions in the previous year. Total transactions value in 2016 was down 9.51% to RM32.97 billion from RM36.46 billion in 2015.

Tropicana Aman / Eco Sanctuary / Bandar Rimbayu

Tropicana Aman is a 863-acre, RM13 billion development.

Sinaria Shop Offices

Eco Sanctuary is a 309-acre, RM8 billion development.

Bandar Rimbayu is a 1,879-arce RM11 billion development..

 Blossom Square Shop Offices

Canal City Background 

The Selangor state government is set to gain an additional RM550 million under the new terms of agreement signed with Tropicana Corporation Berhad over the sale of an 1,172 acre land in Kuala Langat for RM1.3 billion in April 2013.

Mentri Besar Mohamed Azmin Ali said the state government is now entitled to a 9% share of the Gross Development Value (GDV) of the land, the payment period was shortened from 20 years to 12 years, and that Sapphire Index Sdn Bhd (SISB), wholly owned subsidiary of Tropicana, is barred from selling the land to third parties.

"Under these new terms, Mentri Besar Incorporated (MBI) estimates that the state government can gain an additional RM550 million in returns," Azmin told the state assembly today.

He said the estimated returns are calculated based on Tropicana's submission to Bursa Malaysia that the land, formerly known as Canal City, in Kuala Langat near Kota Kemuning has a GDV of about RM20 billion.

The land was initially sold for RM587 million at a value of RM18.50 per sq ft payable in 12-year installments, with the state government entitled to 5% GDV share and 3% profit share, amounting to a total of RM1.3 billion payable over 20 years.

However, 11 months after the sale and purchase agreement was signed between MBI and SISB, the latter sold 308.72 acres of land to Prominent Stream Sdn Bhd, a wholly-owned subsidiary of Eco World Development Sdn Bhd, at a value of RM35 per sq ft or RM470 million, with a net profit of RM170 million.

Azmin said the old agreement was lopsided to the advantage of Tropicana and the new MBI management had reviewed the terms so to better safeguard the state's interests.

"The new MBI management reviewed the terms so that the interests of the state government are protected, with fairer returns that are secured and guaranteed within a more acceptable period," he said.

More homes on auction but few takers

The number of homes that went under the hammer has been rising over the last few quarters, reflecting the overall property market slowdown. But for auctioneers, the auction market has been woefully uneventful with little interest from bidders. Is there cause for concern?

According to data from online auctions listings platform Auctionguru.com, auction residential properties have risen 14.4% to 6,225 cases in 1Q2017 from 5,442 cases recorded in the same period last year. In terms of value, the figure has climbed 31% to RM1.8 billion from RM1.375 billion in the first quarter of 2016 (1Q2016).

The uptrend has been gradual since 2Q2016, following a steep fall of 17% to 5,442 cases in 1Q2016, from 6,543 cases in 4Q2015.

In 2Q2016, there were 5,505 cases, a slight increase of 1.16% from the previous quarter. The figure climbed 5.7% the following quarter with 5,818 auction cases. In 4Q2016, the number had risen to 6,154 cases worth RM1.797 billion. In 1Q2017, the volume and value of auction cases increased slightly by 1.15% and 0.3%, respectively.

Last year, a total of 22,919 homes worth RM6.26 billion went under the hammer compared with 19,132 cases valued at RM3.66 billion in 2015. There were 24,806 cases worth RM4.1 billion in 2014.

Overall, comparing annual figures, the number of auction cases has been decreasing over the past three years. There were 26,101 properties worth over RM9 billion put up for auction in 2016 compared with 28,750 valued at RM7.63 billion in 2015. In 2014, there were 35,577 cases worth RM7.9 billion.

Auctionguru.com executive director Gary Chia tells TheEdgeProperty.com that although there are more residential properties on offer for buyers, the market has been lacklustre as buyers are cautious and are staying on the sidelines. He notes that not only has the crowd that attends the auction events become smaller, but the number of bidders has also shrunk.

“I have seen some good deals in the [auction] market as some properties have seen their reserve prices go significantly lower than the market price, especially high-rise properties in Kuala Lumpur city centre, but they still face difficulties in finding buyers,” he says.

For instance, a 2,444 sq ft apartment at The Troika in KL city centre was put up for bid with a reserve price of RM2.4 million in January this year with an average price of RM948 psf, which is 22.6% lower than its average transaction price of RM1,272 psf in 2016, according to TheEdgeProperty.com data.

Another example is a 3,750 sq ft serviced apartment at The Oval in KL city centre, that had a reserve price of RM4.1 million in January this year (RM1,093 psf), which is about 16% lower than last year’s average transaction price of RM1,306 psf.

“During market boom times, it’s normal to see more than 20 bidders for one property, but now, it would be lucky if five to six people would bid for one property as it has become a norm now to see just one or two bidders, or sometimes none,” he adds.

The report also showed that among the 6,225 auction cases in 1Q2017, about 50% or 3,094 properties are repeat cases, which means that these properties have been put up for auction for two times or more. Notably, there were 3,131 new cases valued at RM8.24 billion registered in 1Q2017 alone.

Chia believes the current slumber will continue into the subsequent quarters due to the cascading effect emanated from the secondary market, where more property owners will be selling to realise their capital gains and restructure their investment portfolio.

“Thus, market supply will increase and it will be harder for owners to cash out. Consequently, some of the property owners who encounter financial constraint may eventually be forced to abandon their monthly financial commitment for their leveraged properties,” he explains.

Selangor, Johor and Perak top the list

Among all the states and federal territories — including Putrajaya and Labuan — Selangor, Johor and Perak have topped the list with the highest number of properties that went under the hammer in 1Q2017.

Selangor dominates with 2,272 properties worth RM784 million being put up for auction, making up about 36% of total auction cases in 1Q2017.

Johor and Perak registered 817 cases worth RM227 million and 656 cases worth RM61 million, respectively, making up about 13% and 11% of the total cases. Putrajaya, Labuan and Perlis have the least number of auction cases, with just 6, 8 and 12 auction cases, respectively.

In terms of value, Selangor, KL and Johor led the pack. KL had 484 properties worth RM336 million, while Penang had 558 properties valued at RM128 million put up for auction in 1Q2017.

Chia notes that Selangor has recorded the highest number of foreclosures in the residential property segment as the state is highly developed and is the most densely populated in Malaysia. Therefore, property transactions in the state will tend to be higher.

He also spotted a rising number of luxury landed homes and newly completed high-rise homes being put up for auction.

“Our records showed that quite a number of units at The Raffles Suites located at Bandar Uda Utama in Johor, which was completed about one year ago, were being foreclosed in 1Q2017.

“Some of the reserve prices stipulated for units in that property were almost equal to or below the initial purchase price,” he notes.

According to Auctionguru.com’s records, the first auction of a unit from The Raffles Suites was seen in January, and since then, there have been 32 units put up for auction.

Launched in 2013, the 311-unit freehold condominium was selling from RM389,400, or an average of RM570 psf. The recent auction listings in May showed that the reserve price is about RM467 psf.

A more realistic approach to market price

Chia opines that the reserve price of an auction property more or less reflects the real value of the property.

“The reserve price is based on bank valuation where the land value and future growth potential are the main considerations,” he explains.

For luxury properties that were set at an exorbitant price previously, their price valuation will be challenged if their future growth potential is questioned.

“However, the reserve price may not always go downwards, even for repeated cases. In some cases where the property is located in prime areas, the reserve price can increase in tandem with the land value,” he emphasises.

For example, a 3,294 sq ft duplex condominium in One KL located at Jalan Pinang, KL city centre has a reserve price of RM4.25 million, or an average of RM1,290 psf, in February this year. TheEdgeProperty.com transaction price data showed that One KL’s average selling price in 2016 was at RM984 psf.

Chia perceives the current situation positively as such market “adjustments” are necessary for the market to recover. He opines that the local residential market is relatively resilient and the segment is fairly shielded from economic fluctuations.

“Challenging business conditions, coupled with negative sentiments on the local front, may prolong the expansion of the foreclosure market. However, for bargain hunters, there are more opportunities on the market,” he concludes.

Going for homes under the hammer

Looking for bargain properties? Some people may consider looking at properties that are being auctioned off.

Especially during a property market slowdown like now, the auction market could be a place to find a bargain, especially for high-end properties.

“There seems to be more high-end condominium units valued at more than RM1 million put up for auction now. If the economic situation continues to be sluggish, we may see more owners of high-end homes defaulting their loans,” says Property Auction House Sdn Bhd executive director Danny Loh.

However, keep in mind that even though you may be interested in a certain unit up for bid, as a buyer, you may still face a problem getting financing right now.

“[Also], many investors are reluctant to commit [into buying a property] now as they foresee a further downside of the property market. Fewer qualified buyers mean that the same property may need to go through more than one round of auction before it can be sold off,” he concludes. The reserve price goes down 10% after every round of auction.

Properties on auction are sold on an “as-is-where-is” basis. Thus, one should have a clear picture on the property’s value.

AuctionGuru.com.my executive director Gary Chia says bidders need to understand the sale conditions of a particular unit on auction as each case may come with different conditions.

Besides, some properties may have a private caveat attached to them. This means that the property has been secured by other bidders but is still qualified to be auctioned. A property with a private caveat will not be financed by financial institutions. However, the caveat can be removed by filing an application to the court. This will take about two to three months, says Chia.

In fact, purchasing a foreclosed home is not a simple process and there are many things that one should be aware of. You certainly do not want the property you purchased to turn out to be more trouble than value.

Here are the good and bad about purchasing auction properties in Malaysia.

Pros:

1. Fixed selling/auction dates

2. Selling price, seller’s particulars and property details are open for all to see

3. Possibility of purchasing a property below market value

4. Equal competition among potential buyers during auction

5. Wide range of property selections (commercial, residential, land)

6. Seller may benefit from higher selling value due to competitive bidding

Cons:

1. No sales track record of the auction property

2. Complex sale conditions and bidders may not know what they are getting themselves into. Bidders are advised to always obtain a copy of proclamation of sale and conditions of sale from the auctioneers or lawyer, and read it through carefully and to understand what charges are undertaken by financial institutions and what are not.

3. Private caveat on property. A property with a private caveat will not be financed by financial institutions.

4. No vacant possession – the current occupiers of the property may refuse to vacate the property and the successful bidder may have to vacate the occupiers at own cost

5. Outstanding or hidden charges, such as maintenance charges, will have to be settled by the successful bidder as these charges are not borne by the financial institutions

6. Unable to view the interior of the property prior to auction

7. Bidder may overbid when caught up in a competitive bidding environment. Bidders should always be aware of their budget and check with the bank on the maximum loan amount available.

Steps to purchasing a foreclosed home:

1. Identify the property — Take note of the property description, the address and other relevant information. Set your objectives first. What are the purposes of buying? For own occupation, renting or long-term investment?

2. Inspect the property — You are not able to view the interior of the property because the bank does not have the keys to the property, but you can view the exterior and surrounding area.

3. Talk to auctioneer or sales agent — Interested buyers are encouraged to engage auctioneers or estate agents familiar with the property for more details.

4. Prepare bank draft — Prepare a bank draft equivalent to 5% deposit of the reserve price for Loan Agreement Cum Assignment (LACA). For non-LACA properties, the deposit is 10%. Also, be prepared to top up the difference between the deposit of the reserve price and the deposit of the final sold price immediately after the auction.

5. Read the fine print before the auction commences — Take your time to read and fully understand the terms and conditions of sale. If you need any clarification, seek guidance from the auctioneer before the auction commences.

5 things you need to know about a private caveat

A PRIVATE caveat is a formal legal notice to the world that you have an interest in a particular property or land. For example, a purchaser who has paid a deposit under a sale and purchase agreement could enter a private caveat on the land to prevent any further dealings related to the land, thus securing his or her interest in it.

1 THE PURPOSE

A private caveat is a creature of statute under the National Land Code 1965. The purpose of a private caveat includes:

i. To maintain the status quo pending court proceedings where then is a dispute over the land title or interest in the land;

ii. To protect a claim of registrable title or interest pending registration; and,

iii. To give actual notice of the caveator’s claim.

Private caveats can offer interim protection of rights to the title or other registrable interest in the land that is under dispute. For example, if there are  two persons claiming interest on a piece of land, and if one has lodged a caveat on the land and the other has not, then the one who lodged the caveat will prevail, all things being equal.

2 THE APPLICANT

One can apply to the Registrar for entry of a private caveat when:

i. Claiming a land title or the right to the land title; or,

ii. When claiming registrable interest or the right to registrable interest on a piece of land.

Basically, whoever has a ‘caveatable’ interest has a right to lodge a private caveat. In order for the interest to be caveatable, it must be capable of being registered. Circumstances where a caveatable interest is present include:

i. A purchaser under a sale and purchase agreement claims a right to the land title;

ii. When there is an option to purchase under an unconditional binding contract;

iii. Once a deposit is paid; a paid deposit is sufficient to give rise to a caveatable interest even though no contract was concluded; and,

iv. Equitable chargees can enter into private caveat pending registration of the charge.

Situations such as a tenancy; the owing of the balance of the purchase price, where the option of purchase has lapsed; and where the vendor has validly terminated the sale and purchase agreement, will not give rise to any caveatable interest.

3 THE PROCEDURE

The application for a private caveat must be in Form 19B and be accompanied by the relevant prescribed fee. The application must state the nature of the claim on which the application is based on and whether the caveat is to bind the land itself or is only of a particular interest.

The Registrar who receives the application will then exercise a purely administrative function which means the Registrar would not be concerned to enquire into the validity of the claim. In other words, the Registrar has no power to reject the application of a private caveat. As long as the claim of the caveator to an interest in the land is prima facie good, the caveat shall then be registered.

4 EFFECT AND DURATION

A private caveat has the effect of prohibiting the registration, endorsement, or entry of any instrument of dealing to be executed by or on behalf of the registered proprietor. The caveat, under the Torrens system, has often being likened to a statutory injunction of an interlocutory nature restraining the caveatee from dealing with the land pending determination by the court of the caveator’s claim. A private caveat will be in force for a period of six years unless it is withdrawn by the caveator, or lapses, or removed by the Registrar pursuant to an order of the court.

5 REMOVAL

Firstly, a private caveat may be withdrawn at anytime by the caveator by submitting the necessary and required form for withdrawal. Thereafter, the Registrar shall cancel the entry of the caveat in the register document and issue a notice to the caveatee regarding the withdrawal.

Secondly, the Registrar can remove a private caveat. Only the person or body with registered title or interest can apply to the Registrar for removal by submitting Form 19H together with the prescribed fee. The Registrar will then serve on the caveator a notice of intended removal in Form 19C. The caveat shall lapse and be of no effect at the expiry of two months specified in the notice unless the caveator applies to the court for an extension order before the expiry date. In deciding whether to allow for the extension, the court will use a three-stage test, which includes:

i. Whether the caveator has a caveatable interest;

ii. Whether the caveator’s claim raises a serious question to be tried; and,

iii. Whether on a balance of convenience, it would be better to allow the caveat to remain until trial.

Thirdly, a private caveat may be removed by an order of the court. Applicants for the removal by court order could be any person or body aggrieved by the existence of the private caveat. The caveatee bears the responsibility and obligation to prove to the court that there are sufficient grounds for him or her to apply for the removal. Once the caveatee is successful in proving this, it is then for the caveator to prove that the caveat should remain by satisfying the three-stage test above.

10 steps to buy an auction property

1. Identify your desired property according to your preferred location and budget. Take note of all relevant information about the property.
2. Conduct an external inspection of the property to ascertain the condition of the property.
3. Conduct an official search with the relevant land office and make general enquiries with the developer or management office.
4. Get a copy of Proclamation of Sale (POS) and Condition of Sale (COS). Interested bidders are required to register their details with CIMB Property Mart prior to the auction.
5. Take note of the auction time, date and venue. Prepare a bank draft or cashier’s order for the deposit amount, equivalent to either 5% or 10% of the Reserved Price, before the auction date.
6. On the auction day, ensure that you reach the auction venue early and register at the auctioneer registration counter.
7. The auctioneer will announce the commencement of the auction, and then provide a briefing on the bidding process, read out the important clauses in COS and the property information.
8. The bidder is to raise his/her bidding card to indicate the bidding price. The bidding process will stop when the highest price is called out three times by the auctioneer and no further bids are made. At the fall of the hammer, the property is sold.
9. The successful bidder is required to sign the Contract of Sale and pay the difference in the deposit, if there is an increment in the bidding price.
10. The balance of the purchase price must be paid within the time frame given. If you are not the successful bidder, you may redeem your bank draft or cashier’s order at the registration counter immediately after the auction.

UTAR New City Campus @ Bandar Sg Long

There is a great demand for private tertiary education among the Chinese community in Malaysia whose has great barrier to enter public university.

UTAR is building a new city campus at a pieces of land which is 3 times bigger for its phase 3 expansion at Bandar Sg Long, Kajang, Selangor.

The existing student population of around 9000 has created a great demand for accommodation and create a boom to property value at Bandar Sg Long.

The market price of the condominium within the walking distance around phase 1 & 2 of UTAR campus has shot up 200% to 250%. The rental has gone up 2 to 3 times.

The same is going to happen to Forest Green Park condominium which is located right next to the new campus.

The market price for the condo has move up gradually in the recent month as investors are getting aware with this latest developments.

Premium Of Leasehold Land

The Valuation and Property Services Department (Jabatan Penilaian dan Perkhidmatan Harta) will value the property to determine the market value of the land.

The premium is calculated differently in each state and the rules applicable in Selangor is under 7 of the Selangor Land Rules 2003 and Selangor Quarry Rules 2003 entitled “Premium” which is calculated as follow (excluding the price of the building constructed on the Land) :-

Premium = 1/ 4 X 1 / 100 X Market Value of the Land X Number of Years of Renewal X Land Area (in Square Feet)

Malaysian property prices remain steady

House prices have remained steady despite a slowdown in property sales and a huge overhang of unsold units.

According to the Valuation & Property Services Department’s (JPPH) Property Market Report 2016, prices of residential property continued to grow, albeit moderately despite the current market glut.

“The Malaysian House Price Index (MHPI) continued its moderating trend. As at the fourth quarter of 2016, the MHPI stood at 243.3 points, up by 5.5% on an annual basis.

“The responsible lending measures by the central bank have shown a positive outcome in ensuring sustainable price growth in years to come.”

On quarterly movements, the report, which was launched here yesterday had shown a contraction of 0.7% in the fourth quarter of 2016.

It added that the slow market absorption of the primary market led to the increase in the residential overhang.

“There were 14,792 overhang units worth RM8.56bil, up by 43.8% in volume and 70.7% in value, against 2015. About 42% (6,052) of these overhang units were in the price range of RM500,000 and above.

“By state, Johor saw an increasing overhang market share of 24.8%, which mainly was made up of two- to three-storey terraced houses priced at RM500,000 and above (43.2%).”

It said unsold units under construction and not constructed had also succumbed to an increase of 29.3% and 44.7% to 64,077 units and 11,622 units, respectively.

“Selangor, Johor and Penang held more than half of these unsold under construction units, which were predominantly made up of double-storey terrace and apartments/condominiums priced at RM500,000 and above.

“As for the unsold units not constructed, Kuala Lumpur (27.2%) and Penang (25.1%) held the most, which were mainly apartment/condominium units.”

According to JPPH, the Malaysian property market would endure another challenging year in 2017 as the enduring global political uncertainty and low domestic economic growth will continue to have an impact on the sector.

However, it said the performance of the local property market will continue to be sustained with the implementation of various property-related incentives and accommodative monetary policy.

At the launch of the Property Market Report yesterday, JPPH director-general Rahah Ismail said developers would need to come up with the right product and pricing to withstand the property market slowdown.

“The main segment would be the affordable housing segment. That is what is most in demand and the developer has to respond to that need,” she said.

According to JPPH, affordable houses continued to be in demand last year, with more than 65% of the residential transactions within RM300,000 and below.

Deputy Finance Minister I Datuk Wira Othman Aziz did not provide a timeline of when he expected the local property sector to improve, saying only that the market is cyclical and should recover over time.

“It’ll take a while, and will depend on the global performance.”

According to the Property Market Report 2016, the local property sector recorded a 11.5% decline in volume and a 3% drop in value last year compared with 2015.

“The residential sub-sector dominated the overall market, with a 63.4% contribution in volume and 45.1% in value.”

There were 203,064 transactions worth RM65.57bil last year compared with 235,967 transactions worth RM73.47bil in 2015. The performance of all states recorded declines in market activity except for Kelantan.

New launches in the primary market dropped 9.8% to 52,713 units last year, with sales performance hitting a low of 31.4% compared with 42.1% in 2015.

“By property type, condominiums/apartments formed the bulk (37% share), followed by two to three-storey terraced houses (36.2%), which were mostly priced in the range of RM500,000 to RM1mil,” said JPPH’s report.

It said all states saw substantial declines in their new launches last year except for Johor, Penang, Melaka, Terengganu and Sabah.

“For Kuala Lumpur, nearly all its new launches comprised condominiums/apartments, whilst Selangor saw a fair share of two to three-storey terraces and condominiums/apartments. Both states saw sales performance below 40%.”

The report said construction activities remained on a low tone, which reduced by 15.1% to 121,326 units.

“All major states except Kuala Lumpur recorded lower commencements. Completions were up by 9.3% to 78,216 units, whilst new planned supply units saw an 11.3% increase to 120,089 units.

“As at end-2016, there were 4.95 million existing residential units with nearly 830,000 in the incoming supply and 600,000 in the planned supply categories.”

The report also said the residential rental market in Kuala Lumpur portrayed mixed movements.

“Residential units that are within the vicinity of the LRT and MRT routes as well as higher learning institutions experienced rental gains, whilst those in older neighbourhoods saw downward rentals.

“Similar upward trends were seen in Selangor, where schemes located along the MRT routes have the advantage of fetching higher rentals.”

In the office and retail sector, vacancy continued to increase, with Kuala Lumpur and Selangor recording 2.74 million sq m of vacant office space, an increase of 16% compared with 2015.

Vacant retail space also increased to 2.7 million sq m, which was an increase of 11.9% against 2015.

Luxury condos in KLCC going ‘cheap’ on secondary market

“Buy low sell high” is the golden investing rule of almost every investor but it is easier said than done. When is it “low” enough for one to buy? Especially when we speak about exclusive addresses like Kuala Lumpur City Centre (KLCC).

It is well known that the secondary market for the luxury segment of non-landed residences in KLCC has been rather quiet lately with transacted prices on the downtrend, real estate consultants and agents concur.

Putting the spotlight on large-size units with asking prices of above RM1 million, Henry Butcher Malaysia chief operating officer Tang Chee Meng said the consultancy’s data have revealed an estimated 20% drop in the number of transactions of such homes in KLCC in the first half of 2016 from a year before and by the following quarter, 3Q2016, transactions had dropped by 23%.

Local buyers were cautious when buying these high-end high-rise units while foreign investors were almost absent from the market, says Tang.

According to TheEdgeProperty.com’s data, the market for KLCC’s non-landed residences tagged RM1 million and above has begun to slow down since 2014.

The data showed that in 3Q2014, the average transacted price for this property segment peaked at RM1,084 psf for the period 2012 to 2016. A year later, in 2015, the average price had dropped 4.3% to RM1,037 and by 3Q2016, it had fallen a further 7.2% to RM962 psf.

Meanwhile, transaction volume over the past five years peaked in 3Q2013 with 94 transactions. Sales saw an average 33.5% drop per annum till 3Q2016.

While the current KLCC secondary high-end high-rise residential market may not sound favourable to those who bought it during its peak, it could possibly be more attractive to those looking to invest in an iconic address.

“Despite the downtrend, many owners of these properties appear to be holding strong and have not reduced their asking prices as seen in the asking prices of properties listed for sale. On the ground, however, we find that owners are now more prepared to negotiate and reduce their asking prices in order to close a sale,” Tang notes.

He adds that owners are usually prepared to discuss and drop their prices by between 5% and 10%, or even more especially in cases where the sellers are desperate to cash out, or when they meet a serious buyer.

Real estate negotiator Janet Chong who is a team manager at Hartamas Real Estate (OUG) Sdn Bhd has observed that there are more “value for money” deals in the KLCC luxury condo market now.

“Generally, prices of KLCC luxury properties on the secondary market have dropped around 10% to 15% from two years ago,” says Chong who is a KLCC area specialist.

She cites for example units at ViPod Residences @ KLCC which used to be sold at an average of RM1,600 psf two years ago. Recently, she closed a deal there at RM1,200 psf. Developed and delivered by Monoland Corporation Sdn Bhd in 2013, ViPod Residences is a freehold luxury condominium at Jalan Kia Peng off Jalan Raja Chulan. The 1-bedroom (635 sq ft) unit was selling at RM668,000 or RM1,052 psf during its launch in 2010.

“Of course, some projects are still holding up well, but if there is a serious buyer, the seller may not mind giving a bigger discount. Yes, [sellers] are more realistic now but they are also savvy investors and certainly know the value of their property. They will not go any lower than what [the property value] should be,” Chong notes.

According to her, there is a lot of interest coming from locals but only a small number of units are sold to them.

“While the locals hope prices will go further down, foreigners are happily shopping in KLCC. To them, current prices are somewhere at the bottom and are worth buying now. Almost all my deals closed recently were sold to foreigners including those from Indonesia, Dubai and China,” she offers.

Where is the bottom?

Henry Butcher’s Tang, however, is not as optimistic. “The prevailing soft market is not expected to recover within this year. So there could be more buying opportunities coming along later,” Tang suggests.

He cites the Malaysian Institute of Economic Research (MIER), which projected the country’s economy will be at a slow pace this year, due to uncertainties both locally and globally, including the new era of a Trump US presidency and Brexit. Investors will continue to be cautious, he opines.

“We foresee that the secondary market for luxury apartments/condominiums in KLCC, and even in the entire Klang Valley, will not see any immediate improvement and will drift downwards although we do not see any drastic fall in prices,” Tang says.

“There is no need to rush into buying anything,” he adds.

On the other hand, he stresses that there is no “absolute good timing” in buying a property especially when it is for one’s own occupation.

“If you are buying a home for yourself, anytime is a good time to buy if you come across a property which meets your requirements and matches your expectations of a dream home. If you find the right property that you like and the price is fair and within your budget, do not wait but go ahead and buy it,” Tang concludes.

VPC Alliance Malaysia Sdn Bhd managing director James Wong also holds a cautious view as there is too much uncertainty looming which may affect the economy.

“With the Malaysia General Election around the corner, buyers are adopting a wait-and-see attitude,” says Wong.

“Besides, the KLCC luxury condo market will continue to be soft this year as there is still plenty of existing stock in the market which will take some time to be absorbed,” Wong says, adding that things may look better by mid-2018.

KLCC high-end high-rise residential rental market takes a dive

In ECA International’s Accommodation Survey released in January 2017, Kuala Lumpur ranked as the 28th most expensive location in Asia for high-end high-rise rental accommodation.

ECA Internationl has been conducting research on accommodation rentals for more than 20 years. The survey compares rental accommodation commonly leased by expatriate staff in more than 230 locations worldwide.

ECA International’s regional director (Asia) Lee Quane tells TheEdgeProperty.com that KL’s high-end high-rise residential rental market has been on the downtrend over the past 12 months, partly driven by the fact that the oil and gas industry, which is one of the major employers of expatriates in Malaysia, was hit by the fall in oil and gas prices.

“This has impacted the number of expatriates employed in this sector in Malaysia. As demand has fallen, asking rents have also fallen,” Quane says.

He explains that in the context of companies moving executives around the world, employee mobility normally lags behind an improvement in the economy by one to two years.

“It is widely understood that an oil price of US$60 per barrel is the inflection point for the oil industry — the price at which most activities are deemed to be profitable. Therefore, the oil price will need to recover to this level and stay there for a while before we see more companies sending staff to KL once again,” Quane adds.

While the fall in rents may slow or cease, an upward correction seems unlikely, he says.

Hartamas Real Estate (OUG) Sdn Bhd team manager Janet Chong says generally, rents for high-end high-rise residential properties in KLCC have dropped 10% to 20% since two years ago.

“Personally, I feel the rental market is doing worse than the resale market as more stock has been released into the market since the plunge in oil prices. Oil and gas companies are either moving farther away from KLCC to lower expatriate accommodation cost, or opt for smaller units,” she explains.

Rents vary depending on the age of the property, location and other aspects (furnished/unfurnished, facilities and amenities).

“I can’t give you an average because it will not be accurate. However, the rental market has never been this bad for a very long time. Some rentals are seeing a drop in rents of up to 40%,” she says, citing a luxury, centrally-located residential unit which used to fetch a rent of RM10,000 per month for a mere 1,000 sq ft unit. It was recently let out at RM6,500 per month in February.

“It used to be a popular accommodation for expats and enjoyed very good rents. However, some owners are losing their holding power and just want to rent out their units even at a much lower rate than before to ease their burden,” Chong shares.