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Kota Kinabalu residential market to remain resilient

SintiaFOLLOWING the overall soft residential market in Kota Kinabalu last year, opinions are mixed on how the market will perform this year, Rahim & Co Sabah branch manager Max Sylver Sintia says when presenting The Edge/Rahim & Co Kota Kinabalu Housing Property Monitor 1Q2016.

“This year will see buyers, investors and developers remain cautious but, at the same time, hopeful for better things to come. We expect the Kota Kinabalu property market to see moderate activity and we remain cautiously optimistic that its residential prices are sustainable.”

Sintia believes the cooling measures implemented by Bank Negara Malaysia have removed the majority of property speculators from the market. “Thus, we expect market activity to be driven mostly by genuine property buyers, particularly those from the other districts and states who are working in Kota Kinabalu, who are purchasing for their own occupation.

“In the long term, the residential market in Kota Kinabalu will remain resilient, driven by strong market fundamentals, investments in tourism infrastructure and the government’s efforts to provide the right infrastructure and to spur foreign and domestic investments,” he says.

Budget 2016’s allocation of RM1 billion for the development of Kota Kinabalu’s bus rapid transit and RM12.8 billion for the Pan Borneo Highway will improve accessibility in the state capital once both projects reach their completion, which is estimated to be in 2020 and 2025 respectively.

According to Sintia, infrastructure upgrades in the conurbations will lead to residential property prices in Kota Kinabalu staying on an upward trend. “This is evident from the secondary market price appreciation of older houses in areas impacted by the widening of Jalan Putatan-Lok Kawi,” he says.

He adds that more roads are needed to open up new areas for development as Kota Kinabalu continues to expand. The state capital’s development density is increasing and moving away from the city centre, towards the north and south.

Meanwhile, as buyers are showing more discernment in their property purchases, developments in locations with strong fundamentals are expected to perform well, Sintia remarks. “But it is not just the location — the price, packaging and product also matter.”

According to him, Manhattan Suites (a development by Sabanilam Enterprise Sdn Bhd) was fully sold in the first three months of its sales. It has a small office/versatile office (SoVo) concept and is part of the International Technology and Commercial Centre Penampang integrated development. The 19-storey condominium will have 295 units, which will come in two sizes of 771 and 510 sq ft. The selling price starts at RM600 psf. The development will have a swimming pool, 24-hour doorman, concierge services and a resident manager, among others.

Capital values

Rents

Another example is Kingfisher Inanam (by Hap Seng Land), which has achieved 60% take-up within two months of its sales, says Sintia. Located in the Inanam area, the development will have 739 condos and three types of units, with sizes of 865, 905 and 1,160 sq ft respectively. The selling price starts at RM448 psf. Facilities will include a swimming pool, jogging track and basketball court.

Sintia highlights a land transaction that took place during the quarter under review, which involved the acquisition of a commercial parcel measuring 79,222 sq ft along Mile 5, Jalan Penampang, for RM12 million or RM151 psf. “The transaction will certainly lead to some landowners marking up their land prices, which, in turn, will further increase property prices and raise the cost of owning a property in the future.”

Landed homes still popular

At present, land suitable for landed residential developments in the conurbations of Kota Kinabalu is in short supply while the number of high-rises is growing, especially near the city centre, says Sintia.

Even so, genuine buyers — particularly families buying for their own occupation and upgraders from apartments or smaller houses — prefer landed properties to condos, despite the lifestyle and facilities the latter offers, he points out. He expects the price and demand for 2-storey terraced houses on the secondary market to remain strong and stable.

Sintia says older residential developments in the vicinity of Jalan Bundusan, Luyang and Jalan Lintas are popular as these are mature residential areas near the city and have amenities such as schools, commercial areas, public transport and good infrastructure.

Meanwhile, older houses in the southern and northern fringes of Kota Kinabalu such as Lok Kawi, Putatan, Inanam, Menggatal, Telipok and Tuaran will see their prices continue to appreciate as new housing developments come to the areas.

“Some of the older houses in these areas, especially those that have been nicely renovated and extended, enjoy greater capital appreciation because of the higher prices of new developments in the vicinity,” says Sintia. “Even though the prices of older houses in these areas are increasing progressively, they are still lower than those on the primary market.”

Yields

For example, older 2-storey terraced houses in the Putatan area are currently valued at RM400,000 to RM450,000, while newer homes in the immediate vicinity are selling at RM500,000 and higher on the primary market.

According to Sintia, the quarter-on-quarter price growth of 2-storey terraced houses rebounded 0.15% to an average of 1.92% or RM9,286 in 1Q2016 from an average of 1.77% or RM8,500 in 4Q2015.

Luyang Perdana recorded the highest price growth of RM20,000 during the period under review. This was followed by Taman Indah Permai, Taman Jindo and Millenium Height, which saw a price growth of RM10,000 each, and Ujana Kingfisher, Taman Seri Borneo and Golden Hill Garden, whose prices grew by RM5,000 each.

On a year-on-year basis, the 2-storey terraced houses sampled recorded an average price growth of 7.69% or about RM35,833 in 1Q2016. The pace of growth was 0.55% slower than that in 1Q2015 at 8.24% y-o-y, but higher than that in 4Q2015, 3Q2015 and 2Q2015, which stood at 7.44%, 7.17% and 6.58% respectively, says Sintia.

“This shows that the residential property market in Kota Kinabalu was rather subdued in 2015, but showed a slight improvement in 1Q2016 in both q-o-q and y-o-y growth,” he explains.

Meanwhile, 1-storey terraced houses sampled recorded an average price growth of 10.76% y-o-y or RM33,333 in 1Q2016. The y-o-y growth rate improved by 1.4% compared with that in 1Q2015, but was slower by 0.36% than that in 4Q2015.

The highest y-o-y growth was seen in Taman Tuan Huat (+12.73% to RM310,000), followed by Taman Sri Kepayan (+10.45% to RM370,000) and Taman Nelly Ph 8 (+9.09% to RM360,000).

In terms of q-o-q price growth, 1-storey terraced houses saw an average growth of 2.99% or RM10,000 during the period. Taman Tuan Huat recorded the highest q-o-q growth (+3.33%), followed by Taman Nelly Ph 9 (+2.86%) and Taman Sri Kepayan (+2.78%).

“Despite the mixed performance when comparing the q-o-q and y-o-y price growth of 1-storey terraced houses, we can conclude that growth has remained stable and consistent, in the past seven quarters at least, averaging at a 9.66% growth y-o-y,” says Sintia.

He adds that prices of 1-storey terraced houses are stable due to the localised and limited supply in the market.

“Although most homebuyers prefer 2-storey terraced houses, the affordable price of 1-storey terraced houses make them attractive and the preferred choice of those in the lower to middle-income bracket.

“Besides, most of the 1-storey residential developments in Kota Kinabalu are situated in mature and strategic areas with public transport, such as Luyang, Kepayan, Kolombong and Putatan. Hence, they are always attractive to buyers looking to invest.”

Stable condo prices

Condos in Kota Kinabalu recorded an average price growth of 3.98% y-o-y in 1Q2016. This was 0.61% slower compared with the y-o-y growth seen in 1Q2015, which stood at 4.59%.

The highest y-o-y growth was recorded at Jesselton Condominium (+6.5% to RM575 psf). This was followed by Alam Damai (+6% to RM530 psf), 1 Borneo Condominium (+5.6% to RM380 psf), Likas Square (+4.1% to RM385 psf), Marina Court (+3.6% to RM570 psf), Bayshore Condominium (+2.2% to RM460 psf) and The Peak Condominium (+1.7% to RM600 psf).

The q-o-q price growth for condos was 0.91% during the quarter.

“Due to the escalating cost of land and buildings, and the scarcity of suitable land in Kota Kinabalu for landed residential developments, the price of condos on the secondary market will remain stable,” says Sintia.

Kota Kinabalu

He adds that despite landed property being the preferred choice of homebuyers, the lower quantum price of condos (compared with the quantum price of 2-storey terraced houses), coupled with the facilities, safety and lifestyle offered at condominium developments, make them an ideal choice, especially for first-time homebuyers and young families.

Meanwhile, Sintia says property sellers are trying to narrow the price gap between condos on the secondary market and those on the primary market.

For example, Harrington Suites by Interland Properties Sdn Bhd, which is located in the Luyang area and is expected to be completed this year, is being sold for between RM700 psf and RM900 psf, while older condos in the area are being sold at RM500 psf to RM600 psf.

Nonetheless, Sintia does not expect the price appreciation of condos to go as high as that of landed properties.

Rent performance

In 1Q2016, rents of 2-storey terraced houses saw an average growth of 5.49% y-o-y, 0.51% higher than the 4.98% y-o-y growth recorded in 1Q2015.

The highest growth rate was seen at Taman Indah Permai at 8.33%, followed by Ujana Kingfisher (+7.14%), Taman Seri Borneo (+6.25%), Millenium Height and Taman Jindo (both +5.88%), Luyang Perdana (+2.63%) and Golden Hill Garden (+2.27%).

For 1-storey terraced houses, rents grew at an average of 7.47% y-o-y, slower than the y-o-y growth of 11.31% in 1Q2015. The highest growth rate was seen at Taman Tuan Huat at 8.33%, followed by Taman Nelly Ph 9 (+7.41%) and Taman Sri Kepayan (+6.67%).

The average gross yield registered during the quarter for 2-storey terraced houses was 4.18% (down 0.97% compared with the yield in 1Q2015), while for 1-storey homes, it was 5.02% (slower by 0.16% compared with the yield in 1Q2015).

Condos saw an average rental growth of 6.45% y-o-y, an improvement of 3.94% compared with 1Q2015, while the average gross yield remained unchanged from 1Q2015 at 4.97%.

The condominium with the best yield was 1 Borneo Condominium at 6.22%.

Gross yield performance

This article first appeared in City & Country, a pullout of The Edge Malaysia Weekly, on June 27, 2016. Subscribe here for your personal copy.

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