BTO: M'sia property: Waiting out the crisis

Business Times - 26 Mar 2009

M'sia property: Waiting out the crisis

Malaysia's property players expect the sector to consolidate this year following decent gains in the past few years. PAULINE NG reports

 

THE Malaysian property market was relatively bullish at the start of last year, but as economic problems in the United States mounted and spread, interest headed south.

 

Many launches were put on ice. In the popular Klang Valley, for example, the launch of new residential units declined by 57 per cent from 2007 to 6,747 units in 2008. Holding back made sense given the over-supply - especially in the luxury and serviced condominium segments, noticeably in the prime Kuala Lumpur City Centre (KLCC) and Mont Kiara areas.

 

According to property consultants CH Williams Talhar & Wong (WTW), an additional 1,000 new luxury condos and 7,000 serviced apartments (some 10 per cent more) came on-stream last year, when occupancy rates were already inching down to around 80 per cent from 86 per cent in the first half of the year, even before all the new units were delivered.

 

On average, the developer selling price for units launched last year ranged from RM650 (S$270) per sq ft to RM1,180 psf for luxury condos, and RM800 psf to RM1,300 psf for serviced apartments.

 

Prices have generally held because they had not run up as much. But poorer sentiment and increasing supply have led to prices dipping in selected areas. In the KLCC area, which saw more feverish building over the past few years, prices have dropped by an estimated 15-20 per cent. In contrast, landed properties are holding firmer given the more limited supply.

 

But promoters with bigger wallets and risk appetites are taking advantage of lower commodity prices to push ahead. In the Klang Valley, the Four Seasons Place, located within a stone's throw of the Petronas Towers, is scheduled for completion in 2012.

 

Developed by businessman Syed Yusof Syed Nasir, together with his partners the Sultan of Selangor, Sharafuddin Idris Shah, and Singapore's Ong Beng Seng, piling works have been completed on the 65-storey tower mixed development comprising a hotel, apartments and a mall.

 

Design changes resulted in some delay but Mr Syed Yusof has said that contractors would proceed in the third quarter.

 

Property consultants had thought the Four Seasons Place apartments might set a new benchmark of RM3,000 psf for the city. But that was last year. Mr Syed Yusof recently indicated that the estimated 140 apartments would sell for about RM2,500 psf.

 

Another prestigious project within the KLCC vicinity is gearing up. Ground-breaking has begun on the 450-room Grand Hyatt hotel. The Brunei Investment Agency's 40-storey mixed development includes apartments and commercial offices, and is expected to be completed in three years.

 

The economic slump aside, property consultants say Malaysians have the buying potential but prefer to wait out the economic and political uncertainties. However, they might be tempted if attractive bargains come along - preferably at fire-sale prices.

 

According to a recent survey by iProperty.com, two-thirds of 137 respondents surveyed were of the view that there was a high likelihood that property prices would decline over the next six months. Ninety per cent of Singaporeans surveyed were of a similar view while in Hong Kong only 14 per cent agreed, the rest believing prices would not drop much further.

 

Website activity remains high, iProperty executive chairman Patrick Grove said. 'People are still buying, selling and renting, and are definitely on the lookout for great bargains and opportunities.'

 

In the main, property players are resigned to the sector consolidating this year following more than decent gains in the past few years - the last more applicable to the Klang Valley and Penang.

 

Leisure Farm Resort senior sales and marketing manager Koh Boon Teng told BT that the number of inquiries has 'definitely dwindled' but he is counting on the company's established name to continue to pull in buyers, nearly all foreigners, including Singaporeans. The Johor-located resort-style development has not reduced prices - currently about RM50 psf for land -'but if buyers are sincere we can consider giving construction rebates', Mr Koh said.

 

Constructed bungalows start from RM1.5 million.

 

While Iskandar Malaysia has reportedly attracted RM47 billion in investments - a substantial chunk from Middle East investors - local businessmen complain that there has not been any discernible pick-up in business activity.

 

Mr Koh concedes the lack of activity, but believes the special economic zone will deliver in the longer term. For now it has rendered a new lease of life to infrastructure projects in Johor, WTW said, pointing to the start last year of infrastructure developments such as the 8.5 km Eastern Dispersal Link joining the Customs, Immigration and Quarantine (CIQ) complex to the North-South Expressway, the 15 km coastal highway linking Johor Baru and Nusajaya, the 9 km Second Pernas Bridge and road to Pasir Gudang, and the Ulu Tiram flyover.

 

But patience is crucial. Johor recorded the highest percentage change value per transaction last year - likely because of much higher prices obtained for some land transactions in Iskandar, WTW managing partner Goh Tian Sui said. However, he cautioned that the overall data indicated the state 'is not an interesting market at the moment'.

 

One state which did reasonably well last year, recording a 27 per cent increase in value per transaction over the previous year, was Penang. Its residential sector was the dominant driver on the island as well as the mainland.

 

The electronics slump has hurt industries in Penang and created uncertainty, but the state is one of the more, if not most, creative in Malaysia. A Unesco World Heritage Site listing last year for its capital Georgetown, together with Malacca, gave it a tremendous boost, while the on-going construction of the second Penang bridge will make the state more accessible in the future.

 

Developers are admittedly more cautious now, but there are pockets of interest. WTW noted that the shophouse and residential property sub-sectors are relatively resilient, sought more for owner occupation as well as for investment.