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City & Country: Lack of supply boosts prices on secondary market

THE property market in Kota Kinabalu was quiet with no new launches in the third quarter of the year. However, the secondary market continued to be active during the period.  

“We expect the secondary market to continue to perform well in 4Q2014 with the prices of properties in good locations still trending upwards,” says Max Sylver Sintia, Rahim & Co’s Sabah branch manager in presenting The Edge/Rahim & Co Housing Property Monitor 3Q2014.

He attributes the rise in secondary market prices to limited supply in the primary market and expects the latter to remain stagnant in the last quarter of the year.

Another factor driving up secondary market prices is the scarcity of land in coveted areas such as Damai, Luyang and Likas. Developers are beginning to develop more condominiums and apartments instead of landed homes, particularly in the city, because of high land costs.

However, landed homes are still the preferred choice of most Sabahans and with demand outstripping supply, prices are skyrocketing.

Young families and first-time homebuyers are the most affected by expensive homes — a 2-storey house on the secondary market is going for an average of RM600,000 to RM900,000. On top of this, due to stringent lending criteria, many are not able to obtain housing loans.

Rahim & Co opines that first-time homebuyers and young professionals need to be prudent when choosing their first property and not be too choosy. Most of them aim for established areas in the city centre, such as Damai, where terraced houses cost as much as RM700,000 whereas in the outlying areas, such as Bandar Sierra, houses cost about RM450,000.

It would be good for these buyers to also look at Menggatal, Tuaran or Kinarut, where homes are more affordable than in the city centre, says Max.

“Young buyers could also consider apartments as an alternative as these are cheaper than landed properties. They should not be choosy as property prices appreciate over time.”

Prices on the rise

The primary market is seeing the construction of more condominiums with notable projects such as Unicorn Tower in Bundusan and Riverside Residence @Sodomon at Ganang in Kepayang by Kinsabina Group.  Unicorn Tower offers 768 units with built-ups of 1,000 to 1,200 sq ft and priced from RM428,000. According to the developer, 20% of the units were sold within two months.

Riverside Residence is a low-density development with 133 condos, the built-ups of which range from 956 to 1,182 sq ft and prices start at RM430,000. The developer started selling the condos early this year and has sold 60% thus far. Both developments are scheduled for completion in 2017.

On the primary market, the average price of 2-storey terraced houses rose 7.58% y-o-y in 3Q2014, or an average RM32,000, compared with 6.35% y-o-y in 2Q2014. This was the highest growth since 2Q2013. By comparison, the y-o-y growth recorded in 3Q2013 was 7.36%. This means growth from 3Q2013 to 3Q2014 was about 0.22%.

On the secondary market, the prices of 2-storey terraced houses grew an average 7.85% y-o-y in 3Q2014, up 1.23% from the 6.35% y-o-y growth in 2Q2014.

The prices of 1-storey terraced houses rose 8.48% y-o-y, an increase of 1.91% from 6.56% y-o-y in the second quarter of the year. Condo prices were up 6.32% y-o-y, rising 0.54% from the previous quarter.

Max points out that investors on the secondary market are buying houses, especially those in mature areas such as Taman Sri Borneo, at higher prices. Due to its strategic location in Jalan Lintas, the area saw prices climb 9.76% from RM410,000 in 3Q2013 to RM450,000 in 3Q2014.

Luyang Perdana, Millenium Height and Taman Jindo, which are located in Jalan Lintas, Luyang, Jalan Bundusan and Hilltop, also saw growth of 8.51%, 7.89% and 7.69% respectively. The limited supply of 2-storey terraced houses on the primary market makes the secondary market attractive to buyers who do not mind paying more for good locations.

Ujana Kingfisher and Taman Indah Permai continued to do well despite being located outside the city centre. Most of the new residential developments are moving towards the greater north and south of Kota Kinabalu, such as Jalan Tuaran, Menggatal, Inanam, Tuaran, Putatan, Lok Kawi, and Kinarut, which is even further away from the city.

Despite strong y-o-y growth, on a quarterly basis, the prices of 2-storey terraced houses on the secondary market dipped 1.56% to 1.7%. Taman Sri Borneo saw the highest q-o-q growth of 4.65%, followed by Golden Hill Garden (1.64%). The rest of the areas sampled by the monitor recorded below average q-o-q growth. Taman Sri Borneo also recorded higher transactions for renovated and extended intermediate units.

This area is expected to continue to perform well due to the rapid commercial developments within its vicinity that will spur demand for houses there. The latest commercial developments in the area are the already completed Metrotown and upcoming Latitude 6.

On the secondary market, the prices of 1-storey terraced houses rose 8.48% y-o-y and  1.91% q-o-q. Taman Nelly PH 9, Taman Sri Kepayan and Taman Tuan Huat recorded y-o-y growth of 8.62%, 8.47% and 8.33% respectively.

Average q-o-q growth was 2.49% with the highest recorded by Taman Tuan Huat (4.08%) while Taman Nelly PH 9 and Taman Sri Kepayan registered 1.72% and 1.67% respectively.

While houses in Taman Nelly PH 9 are expected to continue to be much sought after due to its location, there are concerns about the high asking prices in the area, which far exceed market value. One-storey houses are seen to keep appreciating due to the higher prices of 2-storey houses.

Condominiums

The strong sales of condos in Kota Kinabalu, including luxury development The Loft, suggest that prices will continue to rise. Average prices rose from RM434 psf in 3Q2013 to RM464 psf in 3Q2014, an increase of 6.92%. However, this was still 1.05% lower than the average growth of 7.79% recorded in 3Q2013.

Alam Damai was the best performer with an increase of 11.4% y-o-y. With the exception of Bayshore Condominium, 1Borneo Condominium, Likas Square and Jesselton Condo, all recorded more than average growth. Marina Court saw an improvement in 3Q2014 with an increase of 8%. The condominium’s appeal was boosted by the Oceanus Waterfront Mall , which is situated opposite the condominium and is nearing completion. The mall, which is touted as the KLCC of Kota Kinabalu, is expected to increase the demand for Marina Court upon its completion.

Condominiums in Jalan Bundusa and Kepayan are expected to be popular with young professionals looking for affordable small units in the city centre. The prices of condos on the secondary market are seen trending upwards due to the limited supply of landed properties.

Prices in 3Q2014 rose 0.39% q-o-q to 1.15%. Marina Court, Bayshore Condominium, 1Borneo Condominium and Alam Damai registered q-o-q growth of 1.9% to 2.9%.

Rental growth and gross yield

Rental growth for 2-storey terraced houses averaged 8.3% y-o-y. Ujana Kingfisher came out tops with an increase of 12.5% y-o-y, followed by Taman Jindo and Taman Indah Permai with 10% and 9.09% respectively.

One-storey terraced houses recorded an average growth of 8.8% y-o-y with Taman Tuan Huat recorded the highest of 10%. Average rental growth q-o-q was 2.98%. Taman Tuan Huat and Taman Nelly PH 9 saw an increase of 4.17% and 4.76% q-o-q while there was no change for Taman Sri Kepayan.

The average rental growth for condominiums was 6.96% y-o-y.

Average gross yield for 2-storey houses rose from 4.28% in 3Q2013 to 4.3% in 3Q2014. Growth was the same q-o-q. Taman Jindo saw the highest yield of 4.71% and Ujana Kingfisher the lowest of 3.86%.

One-storey houses saw a marginal increase in average gross yield, from 5.02% in 3Q2013 to 5.03% in 3Q2014. Quarterly, it rose 0.02% from 5.01% in 2Q2014.

The average gross yield for condominiums in 3Q2014 was 5.08%, up 0.02% from 5.06% in 3Q2013. The highest yield was registered by 1Borneo Condominium (6.41%) and the lowest by Bayshore Condominium (3.94%).

This article first appeared in City & Country, The Edge Malaysia Weekly, on November 17 - 23, 2014.

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