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City & Country: Slower growth recorded in Sabah capital

January 24, 2014 | Updated 10 years ago

Last Updated: May 11, 2015

ALTHOUGH property prices continued their upward climb in Kota Kinabalu (KK) in 3Q2013, the growth rate has been decelerating — a trend that has been observed since the start of 2013.

Sentiment varied between cautious and buoyant in the period between the 2013 general election and the announcement of Budget 2014, says Sulaiman Saheh, director of Rahim & Co Research, in presenting

The Edge — Rahim & Co Kota Kinabalu Housing Property Monitor 3Q2013.

While most of the properties sampled continued to record positive growth year on year, growth was slower quarter on quarter.

Demand for homes to remain strong
According to Sulaiman, 2-storey terraced houses recorded an average y-o-y growth of 7.36%. However, q-o-q, the pace dropped by 0.4% from the 3.93% recorded in 2Q2013.

Areas to watch out for include Putatan, Lok Kawi, Kinarut, Menggatal, Inanam and Tuaran — Sintia

Slower growth was observed on a y-o-y basis. Condominiums recorded an average y-o-y growth of 7.79% in 3Q2013 compared with 10.01% in 3Q2012, indicating a slower pace of 2.22%.

Demand for houses in the suburbs of KK remains strong despite the higher prices, says Max Sylver Sintia, branch manager of Rahim & Co Sabah.

Demand, he says, is driven both by genuine buyers who intend to occupy the homes and investors who aim for capital appreciation.

New launches
In Putatan, 2-storey terraced houses in Taman Desa Ketiau, priced at RM427,000, recorded strong sales. The second phase has yet to be launched.

“Though the starting price was rumoured to be around RM440,000, we anticipate further success in sales performance despite prices being slightly higher than [similar] existing houses within the area,” says Sintia. The upgrading of the Petagas-Lok Kali highway into a three-lane carriageway will spur further growth, he adds.

Meanwhile, Desa Height Residences, comprising two blocks of 15-storey condominiums, is set to be launched in early 2014 in the Ketiau precinct, also in the Putatan district.

According to Sintia, this development will offer 528 units at prices starting from RM320,000 for a 980 sq ft unit (RM326 per sq ft) and RM340,000 for a 1,040 sq ft unit (RM363 per sq ft), effectively setting a new benchmark in the Putatan area.

Another condominium development in KK, Bay 21 TOO, will also be launched soon. Offering 286 units ranging from 395 to 1,800 sq ft, indicative selling prices range from RM680 to RM700 per sq ft.

All units will be pre-installed with built-in cabinets, light fittings, air conditioners, fully-fitted bathroom and a pantry with a sink, built-in hood and hob, plus a microwave oven.

Slower growth expected for landed homes
According to Sulaiman, slower growth in landed home prices due to the surge in supply over the last 18 to 24 months. Prices would have to be supported by actual occupation or tenancy demand to be sustainable in the long run.

“Nevertheless, fluctuations in price growth rates do occur and generally, prices are still climbing,” he adds.

Developments north and south of KK will continue to be targeted by genuine and first-time buyers due to their affordability — Sulaiman

An average y-o-y growth of 7.36% (about RM27,000) was recorded during the 3Q2013 review, slower by 1.54% compared with 2Q2013. The average y-o-y growth for the same review period in 2012 was 8.41%, indicating slower growth of 1.05%.

Taman Indah Permai continues to lead price growth for the second consecutive review period with an average growth of 11.67% y-o-y (about RM35,000) in 3Q2013.

Q-o-q, the area recorded 1.52% growth — up RM5,000 from RM300,000 in 2Q2013. Values for homes in Taman Indah Permai, which currently hover at RM450,000 to RM500,000, are set to catch up with those of neighbouring developments such as Taman Bukit Sepangar as they are marginally lower.

According to Sintia, a similar scenario is seen in Taman Jindo, which recorded 11.43% growth y-o-y in 3Q2013 — up RM40,000 from RM350,000 in 3Q2012. In comparison, y-o-y growth for the same period during the previous year was 7.69%.

Two-storey terraced houses are priced from RM450,000 to as high as RM1 million.

Ujana Kingfisher recorded 9.72% y-o-y price growth in 3Q2013, slower by 1.71% and 1.05% compared with 2Q2013 and 3Q2012 respectively. For other sampled properties, y-o-y growth was between 3.57% and 4.44%, all below the average y-o-y growth for the current review.

Single-storey terraced houses saw price growth of 10.22% y-o-y (about RM25,000), slower by 1.06% compared with the previous quarter. Compared with 3Q2012, however, growth rose 3.65%.

Taman Sri Kepayan was the only area to record q-o-q growth (1.72%) — up RM5,000 from RM290,000 in 2Q2013.

Strategically situated in the Kepayan area, off Jalan Pintas Penampang, Taman Sri Kepayan continues to lead the price growth chart with 18% growth y-o-y, or about RM45,000. Though homes there are sought after because of the good location and accessibility, the higher asking prices makes it hard for potential buyers to obtain loans.

Taman Tuan Huat recorded an average y-o-y growth of 9% — higher by 2% compared with 2012, while Taman Nelly Ph9 recorded 4% growth, the same as last year.

Condominiums to perform well
The strong sales performance of condominiums in the city, including the “100% sold out” luxury Pelagos Designer Suite (priced at almost RM1,000 per sq ft) as well as The Loft (prices start at an average of RM700 per sq ft), suggests the market will continue to perform well, according to the report.

Overall, the outlook for the condominium market has been positive over the last five years, especially in some of the earlier schemes such as The Peak Condominium, where values rose 56% to about RM500 per sq ft, Sulaiman says. Some renovated units were transacted for as high as RM700 per sq ft.

The second best performing condominium development was Alam Damai, which saw prices increasing 51% in three years (from RM290 to RM440 per sq ft).

The average price for condominium units in KK rose from RM403 p in 3Q2012 to RM434 per sq ft in 3Q2013 — an increase of 7.79%. This was, however, slower by 0.44% compared with the average growth of 8.23% in 2Q2013 and down 2.22% compared with the 10.01% recorded in 3Q2012.

The sampling registered a y-o-y growth of between 4% and 11%. Likas Square was the best performer (11% growth) while Alam Damai continued to impress (10% growth). With the exception of Radiant Tower and Marina Court, the other samples recorded more than average growth.

Marina Court registered 4% y-o-y growth, which is the same as 2Q2013 and the slowest pace since 2011.

Although newly launched condominiums have been known to be launched at RM700 per sq ft (The Loft), the price appreciation for units in Marina Court was rather sluggish despite being located in the town centre, says Sintia.

This, he adds, might be due to the large number of new units in the primary market, leaving buyers spoilt for choices. Another factor may be a new development, Ocenus Waterfront Mall, which is under construction, will block the sea view once enjoyed by Marina Court.

Steady growth in rental yields
Rental growth for 2-storey terraced houses averaged 12.72% y-o-y, 3.47% higher than that recorded in 3Q2012.

Taman Indah Permai registered the highest growth rate at 22.22% (from RM900 per month in 3Q2012 to RM1,100 per month in 3Q2013). This was followed by Ujana Kingfisher with 20% growth y-o-y (up RM200 from RM1,000 per month in 3Q2012).

Overall, rents for 2-storey terraced houses are still growing, with all samples recording y-o-y growth of more than 6%. The average gross yield for 2-storey terraced houses rose 0.19% y-o-y, from 4.09% in 3Q2012 to 4.28% in 3Q2013. However, q-o-q, rents slowed by 0.02%.

For 1-storey terraced houses, even though there was no significant growth q-o-q, growth in rents averaged 14.76% y-o-y — 9.76% higher compared with the same period last year.

The best performer was Taman Sri Kepayan with 18.18% growth y-o-y (up RM200 from RM1,100 per month). This was followed by Taman Nelly and Taman Tuan Huat with a 15% and 11% increase, respectively. The average gross yield registered for 1-storey terraced houses rose 0.19% y-o-y, from 4.82% in 3Q2012 to 5.02% in 3Q2013.

For condominiums, the average rental growth was 9.66% y-o-y and 1.62% q-o-q. The average gross yield for condominiums in 3Q2013 was 5.06% — a marginal decline of 0.07% from 3Q2012.

Outlook
Sulaiman expects prices for 2-storey terraced houses in KK to continue to perform well, albeit at a slower pace than the previous quarters due to the narrowing of the price gap between the primary and secondary markets. Older houses in the outskirts will continue to appreciate.

“Due to the higher prices for 2-storey terraced houses , we anticipate further price appreciation for 1-storey houses,especially for older houses in Inanam, Luyang and Putatan,” Sintia says.

He points out that as most of the new developments comprise 2-storey units, the supply of 1-storey houses is limited. This is evident from the asking prices in the outskirts, where prices have risen more than 40% compared with five years ago.

For example, a 2-storey terraced house in Bandar Sierra was priced at around RM250,000 in 2008. A similar house in the area was sold recently at around RM380,000 — an increase of 52% within five years, equivalent to an average rise of 10.4% per annum.

According to Sulaiman, developments north and south of KK will continue to be targeted by genuine and first-time buyers due to their affordability.

Areas to watch out for include Putatan, Lok Kawi, Kinarut, Menggatal, Inanam and Tuaran, says Sintia. Both Sintia and Sulaiman believe prices should continue to move positively as there is still a price gap between the primary and secondary markets.

Condominiums in the vicinity of Likas, Damai and Signal Hill are expected to remain popular with young professional buyers looking for smaller units at affordable prices within the city area.

Overall, the upward trend in house prices in KK is anticipated to continue but at a slower pace, especially within the city area, says Sintia.