Klang valley property monitor Qtr 2, 2012

City&Country: The Edge/CB Richard Ellis Klang Valley Housing Property Monitor (2Q2012)

ByWong King Wai of The EdgeMalaysia Sunday, 02 September 2012 00:00

The prognosis for the residential property market continues to be positive judging from how it performed in the second quarter of 2012. Nevertheless, the tightening of loan application rules, glum global news and the upcoming general election will see homebuyers and investors being more “picky” about their purchases in the coming months.

“For the rest of year, we expect the market to stabilise, with limited increase in capital values. It is understandable that potential buyers are hesitant to commit to new purchases, given the uncertainty over the global economy, as well as Malaysia’s upcoming general election,” says CB Richard Ellis Malaysia’s vice-president of research and consultancy Nabeel Hussain when presenting The Edge/CB Richard Ellis Klang Valley Housing Property Monitor for 2Q2012.

While the global situation is still somewhat fragile, Nabeel doesn’t see this affecting Malaysia’s housing market too much. “There will continue to be a certain level of activity in the housing market, since this is a market that is mostly dependent on genuine local demand, and many buyers do understand that real estate is a long-term investment that will inevitably experience short-term fluctuations. However, it is likely that we will see a decrease in the number of speculative or investment purchases over the next few quarters.

“We have seen a slowdown in secondary transaction activity from the last quarter. We do not view this as a sign of an impending crisis, but we understand that some owners or investors may be concerned, especially after enjoying an extended period of capital value increases. Real estate is a long-term investment, and we would advise homeowners to keep this in mind.

“Capital value growth for landed residential properties in the sample areas has been healthy over the past year, with many areas reporting double-digit percentage growth. More recently, however, we have seen a slowdown in price growth, partly due to tighter lending conditions and an overall reduction in market activity.

“Year-on-year growth in capital values for high-rise residential property has generally been restricted to certain sample areas, such as Goodyear Court, The Plaza TTDI and Sri Putramas. However, similar to landed homes, activity has slowed down over the past quarter, leading to limited movement in prices.”

Rental values have, for the most part, not increased in tandem with capital values, whether over the past year or the past quarter. “Generally speaking, we have seen greater growth in rental values for 2-storey terraced homes compared with 1-storey terraced homes and condos, as they provide adequate space for a family,” says Nabeel.

Terraced homes According to the monitor, 1-storey homes in Taman Tun Dr Ismail (TTDI) came out ahead, with those in Aminuddin Baki showing a price growth of 7.69% q-o-q, followed closely by those in Burhanuddin Helmi which saw a growth of 7.14%. Y-o-y, the top performer for 1-storey homes was Bandar Kinrara in Puchong with a price growth of 39.13%. This was followed by Bangsar Park in Bangsar with a growth of 29.41%.

For 2-storey homes, Puchong Jaya in Puchong achieved a price growth of 16.28% in 2Q compared with the previous quarter. Meanwhile, Athinahapan homes in TTDI saw a 10% price hike.

Y-o-y, prices of 2-storey homes in Puchong Jaya grew 33.33% from the same period last year, while Pusat Bandar Puchong saw a 31.58% price increase, followed by Subang’s USJ 4 (30.95%) and USJ 6 (29.41%).

“The Malaysian preference for landed properties is well known, especially for schemes with good infrastructure, security, amenities and other benefits, including nearby retail outlets — which many of the properties in our sample offer,” Nabeel says.

Overall, he says, in certain areas, landed properties will continue to do well even though prices are expected to stabilise further. “Prices will remain stable for the most part, perhaps with the exception of very prime areas that have limited new supply, such as TTDI and Bangsar.”

As property prices within the sample areas have increased rapidly over the past few years, investors and buyers are looking elsewhere for homes. “As prices in prime areas rose steadily between 2006 and 2010, buyer interest and new developments radiated outwards into areas that were previously less popular, resulting in a general increase in values for new landed property across the Klang Valley,” says Nabeel.

“The 2-storey terraced homes in areas such as Shah Alam, Kota Kemuning, Denai Alam and Setia Eco Park have performed well. We have also seen good demand for 1-storey terraced homes in places such as Setia Alam. These are considered ‘new’ residential areas and they offer a number of benefits, including good access from major highways. The presence of other facilities, such as retail and education — schools and universities — are also a plus.”

Other areas which Nabeel thinks are worth looking at are Rawang, Kajang and Nilai.

Rents of 1-storey homes held steady, while those of 2-storey homes rose about 15% on average from a year ago. The biggest gainer was Pusat Bandar Puchong which saw a rise of 26% from a year ago, to RM1,200 from RM950 previously.

Areas outside the sample that showed strong rental performance, says Nabeel, are Setapak, Wangsa Maju, Taman Desa, Kuchai Lama, Happy Garden and Bukit Jalil. “These locations offer good access to the city centre and KL’s main commercial areas, along with retail outlets and other facilities nearby.”

High-rises For high-rise residences, about half the sampled condos showed a positive price growth from 1Q, while the rest remained unchanged. “There is limited activity within the high-rise market, which suggests that prices in the sample developments are beginning to stablise. Many of the properties within our sample now represent good value when compared with the prices of new launches in secondary areas,” says Nabeel. “As a result, we saw an increase in demand and transactions for many of those in our sample over the past year, especially since they are located in more mature areas with better facilities. Low borrowing cost, especially earlier in the year, may have had an impact as well.

“Over the past two years, we have seen supply in the KLCC and Mont’Kiara areas outstrip demand, leading to a decline in prices for some units. Much depends on the unit sizes, with smaller units currently in greater demand. Furthermore, newer condominium developments in Ampang, such as The Elements, M Suites, M City and Seri Ampang Hilir, now represent a viable alternative for expatriates wishing to live in the city centre.”

In 2Q, Marc Serviced Residences showed a price growth of 8.11% q-o-q, while Lanai Kiara recorded a price growth of 9.09%.

The apparent softness in the Mont’Kiara and KLCC high-rise markets should not be seen as all-encompassing.

“Price movements of high-rises in Mont’Kiara and KLCC are not necessarily indicative of the overall market,” says Nabeel. “New launches in secondary areas, such as Petaling Jaya, have reached prices that would have been difficult to imagine two to three years ago. For example, Uptown Residences achieved RM800 to RM1,100 psf, Icon City Serviced Residences RM950 to RM1,000 psf and Damansara Foresta about RM500 psf. Typically, projects enjoying this level of success benefit from limited competing supply within the area and offer greater facilities and amenities than surrounding developments.”

Rents in high-rises all held steady compared with the previous year and quarter, except for Stonor Park which, Nabeel says, stems from its difficulty in renting out its large units. Rents for Stonor Park have dropped to RM8,000 a month from RM8,500 a year ago. Goodyear Court was the only one to see an increase in rent, at RM950 a month from RM900 a year ago.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 922, Aug 6-12, 2012

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