City & Country: Market buoyant after a stable 2013

THE Kota Kinabalu property market is buoyant after having remained stable last year. The secondary market — which rose marginally in 4Q2013 following a slow performance in 3Q2013 — is expected to continue growing.

Rahim & Co Sabah branch manager Max Sylver Sintia says a sudden influx of people looking for a better lifestyle and job opportunities have added to demand, which needs new supplies to cater for it. Prices on the secondary market will continue to play catch-up with the primary market, he adds.

“The primary market is moving towards the northern and southern part of Kota Kinabalu’s conurbation due to a shortage of land. This has led to an increase in prices on the secondary market in these areas,” Sintia says in presenting The Edge-Rahim & Co Kota Kinabalu Housing Property Monitor 1Q2014.

Despite the increase in the Real Property Gains Tax and the abolition of the developer interest bearing scheme (DIBS), the primary market continues to thrive with new launches, comprising mostly condominiums, at prices of RM450 to RM1,000 psf, and 2-storey terraced houses.

Kota Kinabalu’s mature catchment, good accessibility, facilities and developed infrastructure are expected to boost the current upward trend in housing prices.

Sintia believes property development, palm oil, oil and gas, and tourism will continue to be the catalysts for Sabah’s economy and “will help boost the property market”.

The secondary market will continue to perform strongly, especially on the outskirts of the metropolis. The areas to look out for are the northern and southern parts of Kota Kinabalu, such as Putatan, Penampang, Kinarut and areas in Jalan Tuaran. House prices in these areas are gradually increasing, although they have yet to catch up with prices on the primary market.

“Some houses in the established residential developments, especially those located within the city with good catchment, accessibility and facilities as well as developed infrastructure, are selling on the secondary market at more than 100% capital appreciation compared to prices 5 to 10 years ago. Nevertheless, we also observed that the primary market is doing well, especially those with attractive pricing, which is usually between RM450,000 and RM500,000,” says Sintia.

Limited existing supply in Kota Kinabalu means that there will always be strong demand on both the primary and secondary markets, he adds.

Stratified properties continue to be a favourite of the locals. Harrington Suites, to be officially launched in the middle of this month, has achieved a take-up rate of 60% since sales began four months ago. The development in Jalan Maktab Gaya comprises 116 luxury units with built-ups of 2,445 to 3,445 sq ft and prices of RM1.88 million to RM2.89 million or an average of RM750 psf.

Another upcoming project is Jesselton View condominium in the Hilltop area in Jalan Lintas. Sales of the project, which comprises 80 units of between 809 and 2,922 sq ft, began in November last year and have since reached 50%. The average selling price is RM580 psf.

The properties sampled in the monitor have also experienced positive growth year on year and quarter on quarter with the 2-storey houses recording a marginal increase of 0.86% y-o-y in 1Q2014 compared with 0.41% in 4Q2013.

Landed homes

Single–storey terraced houses recorded a y-o-y price decline of 1.12% to 8.99% or about RM23,300. Prices rose 2.94% q-o-q for an increase of 1.68% from the last quarter.

The preference for 2-storey houses and condominiums saw their prices grow at a slower pace. Taman Sri Kepayan retained its top spot with prices rising 15% y-o-y compared with 13% in 1Q2013. Asking prices in the area were as high as RM450,000.

Meanwhile, the prices of 2-storey houses recorded an average increase of RM7,100 q-o-q, more than the 0.84% recorded in the previous quarter. This was, however, lower than the 2.12% rise seen in 4Q2012 to 1Q2013.

Prices in Luyang Perdana, Taman Jindo and Taman Sri Borneo grew an average of RM10,000 with those of 2-storey houses rebounding from an average of 0.87% in 4Q2013 to 1.71% in 1Q2014.

Prices in Taman Sri Borneo went up the most — 2.38% q-o-q or RM10,000 from the previous quarter’s RM390,000.

Taman Indah Permai saw the highest price increase y-o-y for the fourth consecutive quarter — 11.29% in the quarter under review. It is expected to see continuing growth due to the price gap between similar properties narrowing in the neighbouring areas. Recently, newer 2-storey terraced houses in Taman Bukit Sepangar were valued at RM400,000 to RM500,000 and transacted at between RM520,000 and RM600,000.

Ujana Kingfisher and Taman Jindo both recorded an increase of 8.11% y-o-y while Taman Sri Borneo saw a 7.50% jump in prices. The other sampled areas also saw increases of between 3.51% and 5.49%, all below the average y-o-y growth.

Condominiums

Condo prices in Kota Kinabalu rose from RM424 psf in 1Q2013 to RM455 psf in 1Q2014, an increase of 7.37%. However, y-o-y growth in 1Q2013 was considered slow compared with an average growth of 8.68% recorded in 1Q2012.

Alam Damai saw the highest price increase y-o-y of 14.3% or RM480 psf compared with RM420 psf a year ago and 6.7% q-o-q. Prices are expected to continue their upward trend in the area due to its exclusive location in the Damai neighbourhood as well as its middle to high-income residents. The area also offers good infrastructure facilities and services, such as schools and private and government hospitals.

Condo prices on the secondary market are expected to continue to do well with many new launches. Condominiums in the Kota Kinabalu city centre and the vicinity of Jalan Lintas, Likas and Signal Hill are expected to remain popular.

Addressing the challenges

Although the property market seems to be faring well, the kidnapping incidents of late have cast Sabah in a less appealing light. Will this impact the property market? Sintia “does not think the recent kidnappings are affecting the demand for and prices of residential property in Sabah”.

While the discovery of oil off the shore of Sabah by Petroliam Nasional Bhd, Shell Malaysia and ConocoPhillips lately could spur demand for housing, Sintia does not see property prices and demand rising in the short term.

He expects the market to slow down in the next quarter due to the more stringent rules imposed by Bank Negara Malaysia on housing loans.

“The market is still active despite stringent loan approvals by Bank Negara. Yes, it will cause the market to slow down, but so far, the effect has been minimal as we can see that prices are still going up.”

There will be challenges going forward, he says. “Although demand is strong, high asking prices have made it difficult for buyers to purchase houses on the secondary market. This will lead to differing loan margins.”

He gives an example: “Let’s say your property is valued at RM800,000 but you want to sell only at RM1 million. The buyer will only get a loan based on the valuation and not the transacted price, and will thus have to fork out more cash.”

That means potential buyers will come under pressure to come up with more cash to purchase a property because the asking price could be higher than the price it is valued at.

This article first appeared in The Edge Malaysia Weekly, on June 02 - June 09, 2014.