City & Country: Auctioneers see drop in cases in 2H2014

THE number of auctions dwindled in the second half of 2014 with fewer properties available to go under the hammer, according to auctioneers polled by City & Country. Due to the continued strong demand for residential properties, especially in the low and medium-cost range, and house values holding firm, many owners were able to dispose of their homes by themselves.

“Many times, the owners were able to settle their loans, thus there were less forced sale scenarios,” says Danny Tan of Property Auction House Sdn Bhd.

“Currently, things are very slow with a minimal number of cases,” says Abdul Hamid P V Abdu, founder of Ehsan Auctioneers.

The Budget 2014 announcements in end-October appear to have affected the investors more than genuine buyers as the impending rise in the Real Property Gains Tax will erode their chances of making a quick buck.

Low and medium-cost properties are most in demand

Tan says there has been a marked increase in genuine buyers interested in low and medium-cost properties at auctions while Hamid notes that land, houses and shopoffices have become the most sought-after properties in the market.

In general, price is still the main factor with buyers ranking it above other criteria, which means low and medium-cost houses are most in demand while luxury properties are less favoured.

Tan believes more high-end properties will be up for auction in the coming years. The impending increase in various tariffs, reduced fuel subsidies and the implementation of the Goods and Services Tax (GST) in April 2015 have undermined investors’ acquisition spree.

However, according to Foong Chon Wai of Ng Chan Mau & Co, it is still too early for the impact of the newly announced measures to trickle down to the auction market. “Business is still consistent,” says the licensed auctioneer.

He says a lot of successful bids recently for auctioned properties have been above the banks’ reserve prices. End-users are usually more successful than investors in bidding for properties priced above RM300,000, he adds.

Surprisingly, property buyers now do not seem to mind areas that were previously shunned. In fact, demand has picked up for properties in areas in the outer regions of Greater Klang Valley, such as Semenyih, Rawang, Bangi, Klang and Kuala Selangor.

Rawang and Semenyih-Kajang remain hotter than ever, says Foong. As a result of more developments heading south, areas such as Nilai and Seremban are slowly benefitting from the Semenyih boom.

Some banks have also reviewed their lending policies more favourably with regard to these areas, he adds.

Tan, who did a random poll of buyers, found that one of the main factors fuelling the migration to these areas is the anticipated improvement in the transport system and better accessibility. Others include the lower cost of living, the spread of establishments like hypermarkets and shopping complexes to these areas and buyers’ wish to have a different lifestyle.

Apart from that, there have been some big buyers, such as factory owners, who want to turn the properties into hostels as many have shifted their operations to these areas.

Tan believes the auction market will pick up in the near future due to the rising cost of living, the hike in RPGT, new lending policies as well as tighter financing rules.

The auctioneers expect more people to look at auction properties as prices of new properties will increase due to rising construction costs.

They believe it will be a trying year for the commercial and luxury residential sectors. However, there will still be demand for low and medium-cost homes below RM500,000 in the Klang Valley.

Another trend they have noticed recently is the increase in joint purchasers.

Foong believes the market will continue on the same path in the first half of the year. “Depending on how our economy pans out, the second half could get interesting,” he says.

Notable transactions of late include a leasehold 1,300

sq ft 1-storey terrace house in Sungai Buloh that sold for RM82,000 or almost double its RM44,600 reserve price. A 1½-storey shopoffice was sold for RM950,000, about 10% above its reserve price of RM860,000.

This article first appeared in The Edge Malaysia Weekly, on January 20, 2014.

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