City & Country: Prices continue to trend upwards

HOUSE prices in Kota Kinabalu are expected to keep rising as in the last couple of years, says Rahim & Co Research director Sulaiman Saheh.

After a subdued start to the year caused by a decline in crude palm oil prices and market concerns before the general election, property prices in the secondary market rose strongly both quarter on quarter and year on year in 2Q2013.

“Our sampling of 2-storey terraced houses in Kota Kinabalu showed 8.9% growth y-o-y in 2Q2013, up 2.69% from 1Q2012,” Sulaiman says when presenting The Edge-Rahim and Co Kota Kinabalu Housing Property Monitor for 2Q2013.

“The prices of 2-storey terraced houses grew 3.93% — the highest q-o-q growth recorded in the past eight quarters reviewed,” he points out.

Rahim and Co Sabah branch manager Max Sylver Sintia says based on the market performance in 2Q2013, “we see stable price growth this year. Prime and established areas with good accessibility, such as Luyang, Damai, Jalan Lintas and Jalan Bundusan, will continue to be hot spots.”

Demand in suburbs remains strong
In Luyang, Damai, Jalan Lintas and Jalan Bundusan, the prices of both landed and stratified homes went up, especially in the secondary market. Asking prices for 2-storey terraced houses in these areas were as high as RM900,000. However, average asking prices hovered at RM450,000 to RM650,000, comments Sintia.

The selling prices of some houses in these established residential areas have appreciated more than 100% from 5 to 10 years ago, he adds. Demand for houses in the suburbs of the northern and southern parts of Kota Kinabalu remained strong despite higher prices, especially in Menggatal, Inanam, Penampang, Kepayan and Putatan.

Two-storey houses in Jalan Tuaran in Bandar Sierra, in the northern part of Kota Kinabalu, are priced as high as RM400,000 in the secondary market compared with RM240,000 six years ago — a more than 40% rise. In the primary market, the selling prices of similar houses start at about RM420,000 while the take-up has been encouraging.

According to the monitor, there was a slight y-o-y growth of 0.85% in 2Q2013. The average y-o-y growth is 8.9% or about RM32,000 while the average q-o-q growth is 3.93% or about RM15,000. Ujana Kingfisher, Taman Indah Permai, Taman Jindo and Millenium Height all registered above average y-o-y growth.

Taman Indah Permai, located north of Kota Kinabalu, led the way with a y-o-y price growth of 13.79% or about RM40,000 — the highest in the township in the last three years.

Sulaiman: In some cases, the asking prices of older stock have not only caught up with prices of new properties but also surpassed them

Prices of older developments continue to play catch-up
The prices of older developments have continued to play catch-up with those of newer projects with some gaining more than 100% within a few short years.

“In some cases, the asking prices of older stock have not only caught up with prices of new properties but also surpassed them — indicating a buoyant mood in the secondary market,” says Sulaiman.

The bigger the price gap between the older houses in the secondary and primary markets, the faster the pace of growth and vice versa.

Older houses, especially in the outskirts, will continue to perform well in terms of price growth as there is still a gap between the primary and secondary markets, says Sintia.

In Putatan, for example, the asking price for 2-storey terraced houses, completed more than 10 years ago, is now RM500,000 compared with just RM250,000 five years ago. Newly completed 2-storey houses in the area are priced at between RM400,000 and RM450,000.

In 2Q2013, the highest prices for 2-storey terraced houses were recorded in Golden Hill Garden (RM580,000 in 2Q2013 and RM570,000 in 1Q2013 ), Luyang Perdana (RM470,000 and RM455,000) and Taman Sri Borneo (RM410,000 and RM400,000). These three areas registered the lowest y-o-y growth during the review period of between RM20,000 and RM25,000.

A sampling showed that 1-storey terraced houses grew at an average of 11.39% (about RM26,000) y-o-y in 2Q2013, indicating an increase of 5.49% from 1Q2013. Average growth q-o-q was 3.92% (RM10,000 more or less).

Taman Sri Kepayan, strategically situated in the Kepayan area off Jalan Pintas Penampang, continued to lead in price growth, rising RM40,000 and RM20,000 y-o-y and q-o-q respectively.

The prices of 1-storey houses in Luyang, Kepayan and Putatan area are expected to enjoy higher capital appreciation due to their location and their affordability compared with 2-storey terraced houses.

Sintia says most of the new developments are now focusing on 2-storey houses, resulting in limited supply of 1-storey houses.

Sintia: Most of the new developments are now focusing on 2-storey houses, resulting in limited supply of 1-storey houses

High-end condominiums doing well
Meanwhile, high-end condominium developments continue to perform well in both the secondary and primary markets. An example is Tropicana Landmark in the established Bundusan area. The 19-storey condominium by Tropicana Corp Bhd has a gross development value of RM101 million and comprises 149 units with facilities that include an indoor swimming pool, sky lounge, sky garden, gym, sauna and squash court.

Soft-launched in 2Q2013, an informal enquiry with the developer revealed that the take-up rate is almost 70%, says Sulaiman. The average selling price is RM520 psf — a new benchmark for high-rises in the Bundusan area, he adds. The project will be officially launched in 4Q2013.

The average price of condos in Kota Kinabalu rose from RM399 psf in 2Q2012 to RM431 psf in 1Q2013. The pace of growth, however, dipped 1.59% from 9.82% y-o-y recorded in 2Q2012.

A reason for the slower growth in condo prices is the large number of new units in the primary market, says Sulaiman.

A sampling showed y-o-y growth of 8% to 11% except for Likas Square, Radiant Tower and Marina Court, which recorded an increase of 6%, 5% and 4% respectively, he adds.

The price growth of Jesselton Condominium and Bayshore Condominium was the highest y-o-y at 11%. “We anticipate further increases in Jesselton Condominium’s prices due to its exclusive location in the Damai area, which caters to middle to high-income earners. The prices of new condominiums in the area in the primary market are hovering at RM500 psf to RM700 psf,” says Sulaiman.

Marina Court in the Kota Kinabalu city centre registered only 4% y-o-y growth — the lowest since 2011.

Demand for condos is expected to stay high, especially that for smaller units with affordable prices. Condominium developments are coming up in the northern and southern parts of Kota Kinabalu.

The average price growth of the whole sampling was 1.71% q-o-q, down 1.18% from 1Q2013 and slower by 0.44% compared with 2012.

Alam Damai Condominium, priced at RM290 psf in 1Q2010, has continued to rise steadily through the years. It leads price growth this quarter with 4.8% to RM440 psf from RM400 psf in 1Q2013.

The quarterly growth in the prices of other condominiums ranged from 2% to 4.8% with the exceptions being Marina Court, 1 Borneo Condominium and Likas Square, which did not see any change.

Gross yields
Growth in rents for 2-storey terraced houses was stable, averaging 9.25% y-o-y — more or less the same as last year’s. Luyang Perdana registered the highest growth rate of 14.29% or from RM1,600 per month in 2Q2012 to RM1,700 in 2Q2013.

Most of the sampled properties recorded rental growth of between 5.88% and 8.33%. The average gross yield of the 2-storey terraced houses rose 0.13% y-o-y from 4.17% in 2Q2012 to 4.3% in 2Q2013. The exceptions were Taman Sri Borneo, Ujana Kingfisher and Luyang Perdana, which saw rents increasing more than 11%.

“Our sampling of 1-storey terraced houses registered an average rental growth of 14.76% y-o-y. This indicates an increase of 9.47% compared with the 2Q2012-2Q2013 review,” says Sintia.

Taman Sri Kepayan rose 18.18% (RM1,100 per month in 2Q2012 to RM1,300 per month in 2Q2013), followed by Taman Nelly and Taman Tuan Huat with an increase of 15% and 11.11% respectively. The average q-o-q rental growth was 7.62%.

The average rental growth of condos was 7.88% y-o-y and 2.98% q-o-q while the average gross yield in 2Q2013 was 5.02%, down 0.03% from 2Q2012.

ALL CHARTS - Note: Prices shown are averaged and based on transacted deals. Rents shown are averaged and based on asking rentals observed for unfurnished unit. Relevant adjustments have been made where necessary for variations in size, specific location, design, condition and improvements made.

This article first appeared in The Edge Malaysia Weekly, on Oct 21, 2013.