A more cautious quarter

According to CB Richard Ellis Malaysia managing director Allan Soo and senior vice-president of research and consultancy Marlene Padan, the secondary property market in the Klang Valley has been affected by the ongoing eurozone crisis. They say investors and homebuyers have taken a more cautious approach to buying property. 

“What became clear after speaking to real estate agents was that the volume of concluded deals on the secondary market in 3Q2011 dropped significantly,” says Padan when presenting The Edge/CBRE Klang Valley housing property monitor for 3Q2011.

She believes this was partly due to the uncertain global economic climate that has spooked world markets. The poor sentiment could continue and lead to a less robust year for the property market in 2012, she adds.

Local factors that contributed to the cautious sentiment and reduced buying activity include the recent spike in housing prices on the secondary market, especially for landed homes in the Klang Valley. While this is good news for property owners, the average homebuyer cannot afford to buy property in the city or in a preferred suburb.

The current quarter is expected to be even quieter. “Fourth quarters are traditionally quiet for residential property due to the holiday season. We expect the same this year,” says Padan.

Although what happens over the  next few months will depend on the global economic condition, the housing monitor for 3Q2011 shows overall growth in prices for all property types in the sampled areas.

The positive q-o-q and y-o-y performances are attributed to the continuation of the growth cycle that started in 2009 in the wake of the economic slowdown, says Padan. The data reveals that the trend continued through 2010 and into 2011.

Soo says there is still strong demand in the sub-RM1 million category and even stronger demand for smaller, lower-priced units. “You can see that small units get sold at prices that go as high as RM800 psf. This is higher than the prices of units in Mont’Kiara in terms of square feet.”

Homes that cost around RM500,000 will be in demand due to the financial ability of, for example, the average middle-class couple that has been working for about five years, Soo adds.

He and Padan agree that the sub-RM1 million semi-detached and terraced homes will be sought after.

As for the property hot spots in the Klang Valley, they highlight Setapak, Klang, Sentul and out-of-city areas like Kajang-Semenyih. Developers have been launching new products in these areas that have been well received.

In fact, top property developers S P Setia and Dijaya Corp have acquired land in Semenyih and Kajang respectively.

S P Setia acquired two tracts in Semenyih for township developments. It bought 1,010 acres for over RM330 million on Aug 12 to develop a township with an estimated gross development value (GDV) of RM4 billion. It bought another 673 acres next to the first tract for RM381.3 million on Oct 3 for a township with an estimated GDV of RM3.5 billion.

Dijaya Corp acquired 198.5 acres in Kajang for a RM2 billion on Sept 5 for a mixed-use development.

Despite the current economic uncertainty, good deals can still be found in the Klang Valley,  says Soo. However, he advises buyers and investors to take note of the general surroundings of their preferred housing developments, the amenities and infrastructure and occupancy levels.

Soo believes the mass rapid transit project might help increase property prices if there is confidence in the implementation and timely delivery of the project.

Buyers need to be very clear about their objectives, says Padan. If the objective is investment, a buyer has to consider if he will be able to hold on to the property, she adds.

According to the housing monitor, prices rose in all the sampled areas, but those for Stonor Park condos in KLCC dropped.

“A number of high-rises in KLCC saw prices come down, not just Stonor Park,” Padan says. “KLCC prices are undergoing a correction for some properties.”

Adds Soo: “Stonor Park was a pioneer and had a lot of push even before the 2008 crisis. Maybe this is just an adjustment or correction. It could also be that some people are trying to cash out or sell because of possible problems next year.”

While Stonor Park dipped 4.76% y-o-y and 6.98% q-o-q, condos in Bandar Sri Damansara, Taman Tun Dr Ismail (TTDI), Mont’Kiara, USJ, Bangsar and Sri Hartamas, and KLCC’s Marc Serviced Residence and Parkview serviced apartments  showed q-o-q and y-o-y price growth. The highest y-o-y growth of 33.33% was recorded at Bandar Sri Damansara’s Menara Damansara, although it did not show q-o-q growth. Q-o-q, the highest price growth was secured by Sri Hartamas’s Sri Putramas — 10.29% — followed by TTDI’s Kiara Park with 8.93%.

Padan says although price growth in the high-rise residential market was not substantial, especially with the softness of the market of late, there are indications that the high-rise market is coming up.

In terms of rent, she says those of high-rises have been relatively stable over the last 12 months and expects downward pressure in locations where large new supply is near completion, such as in Mont’Kiara.

“Some condos saw rents easing off after a period of vacancy and stiff competition for tenants.”
One-storey and 2-storey terraced houses in all the monitored areas showed price growth.

“Such homes generally do well as land is scarce,” says Padan, adding that 1-storey properties do well because developers rarely build such products any more and supply is low.

The housing monitor shows that 1-storey terraced homes in TTDI’s Abang Haji Openg recorded the highest y-o-y price growth of 35.42%, followed by similar homes in Bandar Sri Damansara, which rose 34.62%.

The highest q-o-q price growth was seen in Bangsar’s Lucky Garden — 10.77% — followed by Puchong’s Bandar Kinrara with 8.7%.

TTDI’s Zaaba area showed the strongest price growth for 2-storey terraced houses, rising 45.16%
y-o-y, while 2-storey terraced homes in Bandar Sri Damansara’s SD7 area grew 35.42% in the same period. Homes in TTDI’s Zaaba area posted  the best q-o-q performance with 12.5% price growth, followed by Bandar Sri Damansara’s SD7 area with 8.33%.

Padan says there was generally very little movement in rents for terraced homes in 3Q.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 886, Nov 28-Dec 4, 2011