City & Country: Landed home prices to maintain uptrend

The values of landed properties in the Klang Valley will continue to grow strongly while those of high-rises will remain steady, says Allan Soo, managing director of CB Richard Ellis (Malaysia).

Presenting The Edge/CBRE Klang Valley Housing Property Monitor for 2Q2010, he says those looking for investment opportunities in landed properties should not only study the local scene but also look at the bigger picture.

“We believe it is still too early to make a judgement on the recovery of the overall economy and the property sector in particular, but we are pleased with the positive signs we have seen so far.

“Higher prices of crude oil, crude palm oil and rubber augur well for the Malaysian economy. We are also seeing higher levels of activity in the property market, which is an indication that confidence is returning,” Soo explains.

“Although the recent price increases are unprecedented, we believe the market will continue to grow for a while as landed property development is not outstripping demand. The regional markets are also growing and will help pull up our property market for the foreseeable future.”

Soo believes that the high-rise market will continue to hold steady in the coming quarters.

“There have been reports of high-rise projects performing well in Mont’Kiara and the KLCC area, such as The Verve Suites by Bukit Kiara Properties,” he says. “This suggests that quality and positioning is the name of the game as it provides differentiation in an increasingly crowded market.”

Although values are expected to remain firm in the Mont’Kiara area, Soo expects some dilution to creep in by 2012 when incoming supply is realised. As of 2Q2010, there were 8,055 condo units available in Mont’Kiara and by 2012, about 3,008 units will be completed.

Yields, meanwhile, fluctuated in 2Q2010. “Yields for residential properties tend to fluctuate more than those for commercial properties, as we have seen in recent quarters,” Soo says. “This is due to both purchases and rents of residential properties being more of a ‘personal response’ than for other types of property. Increases in supply have had an effect on yields as well.”
Interest rates have gone up lately but Soo is not losing sleep over it. He says this will have no impact on property prices or demand due to the low base.

As to further increases in interest rates Soo says, “It depends on the global situation. Also, the government won’t come in as they don’t see an oversupply or boom.”

Landed property
The monitor reveals that 1-storey terraced houses in all areas surveyed showed impressive capital gains.

“In general, Malaysians prefer landed property to high-rises,” Soo explains. “Pent-up demand since the onset of the global crisis, combined with easy credit and a lack of good alternative investment opportunities, have pushed up capital values in the greater Klang Valley.”

The prices of 1-storey link-houses sampled in Puchong Perdana rose 9.68% from the previous quarter and recorded the highest increase of 17.24% y-o-y.

“Our data for this area is based on two transactions that occurred during 2Q2010 after a year of relative inactivity in the area,” Soo says. “Current asking prices in the area for 1-storey units are now around RM200,000.”

In the 2-storey terraced house category, all areas in the survey showed capital values gaining,  with Bangsar Baru leading with a 15.79% y-o-y increase, while q-o-q, Bandar Sri Damansara led the pack with an increase of 10.26%.

“The price increases we are now seeing partly stem from a lack of transactions over the past year, as both buyers and sellers took a wait-and-see stance during the economic crisis,” Soo says.

He believes Bangsar’s location and combination of F&B outlets, accessibility and other facilities will continue to be key factors in the area’s strong price growth. “However, future movements in prices will partly depend on the direction of development elsewhere, and whether or not viable competing developments emerge.”

As for 2-storey houses in Bandar Sri Damansara, Soo says the price increase could be due to the township’s proximity to Desa
ParkCity and its good layout. “Bandar Sri Damansara is a well-planned township and is noted for its environmental aspects and greenery,” Soo explains. “Prices, when compared to similar units in nearby Desa ParkCity and Sunway SPK Damansara, are still relatively low.”

High-rises
Soo does not see values of high-rise units spiking in the short term.

“The high-rise market in Malaysia is handicapped by the country’s low population density, which makes it possible for a greater number of homebuyers to afford landed property,” says Soo. He does not see prices taking a beating either. “With encouraging take-up rates being reported at luxury projects under construction and a number of high-profile projects set for completion between now and 2012, we expect the high-rise market to hold steady.”

A luxury high-rise that did well in 2Q2010 is Plaza Damas (Mayfair) in Sri Hartamas. Prices rose 8.11% y-o-y and 5.26% q-o-q.
“Some newer developments have not been captured in our survey, especially Bukit Kiara Properties’ recent launch of The Verve, which has achieved average prices of RM1,250 psf to over RM1,500 psf for some units,” says Soo. “Plaza Damas is perhaps a case of catching up.”

Other locations with good capital values are Taman Tun Dr Ismail’s Villa Flora, USJ’s Goodyear Court and KLCC’s Stonor Park, with prices rising 5.13%, 5.56% and 5% y-o-y respectively. The q-o-q figures were the same.

“The bulk of price appreciation in these three areas started this year while in other areas prices fluctuated over the past year,” explains Soo. “There are no specific reasons for the performance in these areas, outside of the location and quality of the developments.”

Meanwhile, some high-rises surveyed did better than others on rents. Menara Damansara and Sri Putramas saw y-o-y increases of 7.1% and 8.3% per month respectively while Mont’Kiara’s Lanai Kiara and Bangsar’s Sri Penaga experienced drops of 13.7% and 9.5%. Kiara Park and Villa Flora enjoyed a 4.3% increase in their y-o-y rents per month.

“The units in Mont’Kiara and Bangsar are quite dependent on demand from expatriates,” says Soo. “Over the past year, this demand has weakened with a drop in the rental budget of some expatriates or some of them moving out of these areas.”

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 819, Aug 16-22, 2010.