City & Country: ‘Lending curbs hurting genuine buyers’

BANK NEGARA Malaysia’s policies to curb property speculation have been successful but they have also made it more difficult for genuine homebuyers to buy houses, says Raine & Horne International Zaki + Partners director Michael Geh.

The tighter lending policies, he says, have resulted in a high loan rejection rate. For projects he has handled, the rejection rate is as high as 50%, compared with about 5% before 2011.

Geh: Bank Negara must distinguish between the real home purchaser and the speculator

“Buyers can’t get loans,” Geh says in presenting The Edge/Raine & Horne International Zaki + Partners Penang Housing Property Monitor for 3Q2013.

“Bank Negara must distinguish between the real home purchaser and the speculator. The market should be differentiated — primary and secondary market, developer and second sale, homebuyer and investor. The market should be distinct — you can’t group all of them together.”

He believes the recently abolished developer interest bearing scheme (DIBS) should be allowed for genuine homebuyers. Geh believes a detailed background check on the individual should suffice to weed out speculators.

While the third quarter of 2013 showed a flurry of activity by developers, the secondary market was also busy.

“There will always be activity in the property market due to the changing situations of families,” Geh explains. “For instance, for an old couple with a large house, their children have left and they need to downsize. Or a couple recently married is looking for a place to start a family. These genuine homebuyers will continue to sustain the market. That is, provided they can get loans.”

While the market is still active, there has been a contraction in the number of units sold. Based on National Property Information Centre (NAPIC) reports, Geh calculates that between 2011 and 2012, the contraction was about 15% year on year (y-o-y). From November 2012 to November 2013, he estimates that the contraction was around 10%. The latest report has yet to be released.

The good news is that Bank Negara has assured that there won’t be further policies to curb speculation. This should auger well for homebuyers looking for houses in the Batu Kawan area, which will be linked to Batu Maung on Penang island by the Second Penang Bridge.

“Batu Kawan will be the new hot spot, up to a radius of 5km,” Geh says. “People with houses there could see values increase about 10% to 20%.”

According to news reports, the new bridge will be opened in February.

1-storey terraced houses
All locations except for Bandar Bayan Baru and Tanjung Bungah showed price growth quarter on quarter (q-o-q). Houses in Sungai Dua and Sungai Ara rose 8.33%, with prices hitting RM600,000 from RM550,000.

“The significant rise is due to the lack of supply for this type of property,” says Geh. “We note that there is no longer new incoming supply of 1-storey terraced houses on Penang island. Thus, this type is the most affordable landed property to own and it will continue to increase in price.”

The lack of supply is the reason for the healthy growth in all locations sampled, with Bandar Bayan Baru (28.89%) and Sungai Dua (28.33%) homes showing the highest growth y-o-y.

“This price trend should continue into 2014,” Geh says. “With low supply and high demand, the price for this type of property is expected to rise.”

Standard 2-storey terraced houses
For standard 2-storey terraced houses, only houses in Green Lane (10%), Pulau Tikus (8.33%) and Seberang Perai Selatan (2.33%) showed price growth q-o-q, with other areas remaining unchanged.

“Pulau Tikus is a high-end residential area located close to Gurney Drive, Tanjung Tokong and the city centre,” Geh explains. “Most of the properties comprise 2-storey terraced houses, 2-storey semi-detached houses and bungalows. The 2-storey terraced houses are more affordable compared with the other properties, and thus shows positive growth in price.

“As for Green Lane, it is an established residential neighbourhood in the middle of Penang island with easy access to the city centre and the Penang bridge,” he says.

These property types are much cheaper in Seberang Perai Selatan on the mainland and demand is on the rise due to the close proximity to the Second Penang Bridge.

There has been strong price growth y-o-y across the board with Pulau Tikus (29.17%) and Green Lane (20%) leading the way.

Geh says there is very little new incoming supply of 2 and 3-storey terraced houses on Penang island as more developers are going for stratified properties, as well as land scarcity. “Thus, the price for this type of property is on the rise, especially in the northeast region of Penang island.”

2-storey semi-detached houses
Houses in Sungai Dua grew 7.14% from the last quarter, followed by those in Sungai Nibong (6.67%) and Island Park (1.18%), but the other areas remained unchanged.

“Many of the 2-storey semi-detached houses are located along the main road with the potential for commercial use, which contributed to the high increment in prices,” says Geh. “For example, 2-storey semi-detached houses in Island Park as well as those along Jalan Masjid Negeri and Jalan Delima, Jalan Sungai Dua in Sungai Dua and Jalan Sultan Azlan Shah in Sungai Nibong have been converted into car showrooms, furniture showrooms and offices.”

The potential for conversion to commercial use were reflected in the strong y-o-y results, with all houses in this category showing a price growth of 15.38% to 50%.

2-storey detached houses
For this category, only Pulai Tikus (11.11%) and Tanjung Bungah (5.41%) showed positive growth q-o-q. “Pulau Tikus is a high-end residential area and one of the prime areas that are located near Gurney Drive, which mostly comprises new luxury condominiums that cost a few million ringgit,” says Geh. This, he notes, has influenced the prices of 2-storey detached houses as buyers who can afford to buy a luxury condo worth several million may opt to buy a landed villa at a similar price.

“Tanjung Bungah — one of the hot spots in Penang island — is located between Batu Ferringhi and Tanjung Tokong. Some of the 2-storey detached houses there are located along the main road and have the potential for commercial use, which contributes to the high increment of prices. Some are located near the beach, which is a value-add for that particular property.”

Y-o-y, all areas sampled showed positive growth of 30% to 57.29% because of strong demand. He points out that there is little speculation on landed bungalows.

Standard 3-bedroom flats and 3-bedroom apartments/condos
In Bandar Baru Air Itam, standard 3-bedroom flats rose 16.67% to RM180,000, from RM150,000. Units in Sungai Dua and Lim Sin Garden (10.71%), as well as Green Lane (6.67%) also showed price growth, while other areas remained stable.

“The standard 3-bedroom flats in Bandar Baru Air Itam showed modest growth as the area is congested with many low-cost and low-medium-cost flats, which do not allow much room for appreciation,” says Geh. “However, there is demand as the prices are affordable and the area is surrounded by amenities.”

Sungai Dua, Lip Sin Garden and Green Lane are doing better for this type of property as most of the flats are medium cost, which are in greater demand than low-cost or low-medium-cost flats, Geh adds.

Y-o-y, standard 3-bedroom units rose by between 10% and 33.33%.

“Most incoming supply comprises high-end properties, which most buyers, especially from the younger group, can’t afford,” he says. “The standard 3-bedroom flats are appealing due to the affordable price tag.”

Q-o-q and y-o-y, 3-bedroom apartment/condo units showed mostly positive growth as younger buyers are able to afford this type of property, according to Geh. Prices grew 3.03% to 11.11% q-o-q, and 3.03% to 28.89% y-o-y.

Rental market and yields
The rental market was fairly flat across the board, q-o-q and y-o-y. Geh points out that the Penang property market is speculative in nature, with investors buying properties for capital appreciation and not so much for the rental income.

In Tanjung Tokong, rentals for 2-storey detached homes dropped by 12% from RM2,800 per month to RM2,500. “This was mainly due to the high number of incoming condominium units in the area,” he says.

Yields for all properties have been receding across the board since 2010 and this trend will continue, with rentals expected to remain flat in the coming year, he says.

This article first appeared in The Edge Malaysia Weekly, on January 27, 2014.

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