Auction graphic

THE total value of land plots put up for auction in the first nine months of 2016 (9M2016) has almost doubled from the total value recorded during the same period last year, according to data compiled by online auction house AuctionGuru.com.my.

Although the total volume of land cases has decreased to 639 in the first three quarters of 2016 from the 770 cases put under the hammer during the same period last year, the total value of these cases has surged to RM1.19 billion from RM582 million.

AuctionGuru.com.my executive director Gary Chia says land is always in demand and one seldom finds large parcels of land being put up for auction as most land could easily be sold on the normal market.

He says there were some large plots of land in strategic locations with attractive reserve prices put up for auction this year.

These included a 338.5-acre leasehold land in Gua Musang, Kelantan with a reserve price of RM7.67 million and a 235-acre leasehold land in Selayang, Selangor with a reserve price of RM120 million.

Chia

“The main reason these lands were put up for auction is because of defaults on loans by financially straddled companies or owners,” he says.

He noted that most investors or developers are taking a wait-and-see approach in landbanking due to the current soft market condition. Thus, financial institutions are disposing the lands via auction or through tender.

In the first three quarters of 2016, Chia has noticed that both the number and value of auction land cases have seen a gradual rise. In 3Q2016, there were 236 land cases worth about RM540 million while there were 214 cases worth RM347.9 million in the previous quarter. In 1Q2016, there were 189 land cases worth RM304.5 million.

Comparing 9M2016 with the same period last year, the total value of auction land has jumped 105%.

As the market outlook remains challenging, Chia says property developers are cautious about launching new projects or accumulating land as they want to maintain a healthy cash flow.

“Nevertheless, despite the market uncertainties, demand for land is always strong. Buyers are just waiting and hoping to get the best land deal in this gloomy property market,” says Chia.

Indeed, in current market conditions, developers and investors should take the opportunity to look for good land deals in the auction market, he tells TheEdgeProperty.com.

Overall market in 3Q2016

Overall, the Malaysian property auction market has seen a total of 19,163 properties worth about RM6.39 billion going under the hammer in the first nine months of this year. This works out to an average of 2,219 properties a month. In terms of volume, the number of auction cases has decreased 10.9% or 2,337 properties from 21,500 cases worth RM5.26 billion recorded in the same period in 2015.

For 9M2016, 85% of the auction properties were from the residential segment while commercial and land cases made up 11% and 4%, respectively.

In 3Q2016 alone, there were 6,827 properties put up for auction worth a total of RM2.01 billion made up of 5,818 residential properties and 773 commercial properties as well as 236 land cases. Of the three segments, residential properties had the highest value at RM1.63 billion followed by land cases at RM540 million and commercial properties at RM510 million.

Looking forward, Chia anticipates more land to be put up for auction if the property market remains sluggish.

Graph 1

He also expects more high-end properties in prime areas being put up for auction due to the challenging market conditions.

“New housing launches are moving towards the affordable segment to cater to current market needs. The holding power of high-end property owners will be challenged as buyers will have more affordable choices in the market,” he says.

Chia advises property investors to exercise caution in making their buying decision as the overall property market is expected to remain subdued, especially for commercial and office buildings due to pessimistic business sentiments and constraints on household income.

“However, deeply undervalued properties may emerge during this period of adjustment which will attract investor interest,” he says.

Central and northern region remained the highest

During the quarter under review, the central and northern regions were the top two regions with the highest number of auction properties.

The central region saw 3,633 properties worth RM1.65 billion being put up for auction while the northern region had 1,749 properties worth RM410 million put up for bids.

In East Malaysia, the number of auction cases has increased to 638 properties valued at RM194 million, compared to 468 properties worth RM109 million in 3Q2015.

The southern and east coast region’s auction markets have seen 665 properties (worth RM377 million) and 142 properties (worth RM52 million) being put up for bids.

For the first nine months of this year, the northern, central and southern as well as the east coast regions have seen a downtrend in the number of auction cases except for East Malaysia.

Chart 1

In East Malaysia, the number of properties increased to 1,446 in 9M2016 from 1,099 cases in the same period last year. Total value of the auction properties also surged 74% to RM468 million from RM268 million.

In 9M2016, there was a reduced number of auction properties (354) in the east coast region but the total value of auction properties increased significantly to RM166 million, a jump of 80% compared to RM92 million for the same period last year.

The value of auction properties in the southern region also rose 35% to RM808 million from RM595 million during the same period last year. The region had 2,062 auction cases in 9M2016.

In the central and northern regions, values also rose 29% and 21%, respectively. There were a total of 10,382 cases of auction properties worth RM4.52 billion from the central region, while the northern region had 4,919 properties worth RM1.09 billion.

This story first appeared in TheEdgeProperty.com pullout on Dec 2, 2016, which comes with The Edge Financial Daily every Friday. Download TheEdgeProperty.com pullout here for free.

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