City&Country: ‘Buy now or wait?’

With an unpredictable global economy, spurred by economic turmoil in Europe and the US, along with stricter lending guidelines amid concerns of a property bubble in certain hot spots, cloudy skies are projected for the Malaysian property market after a robust two years. The question on many property investors’ lips is: Should we buy now or wait?

The panellists at the discussion entitled “Buy now or wait?” during The Edge Investment Forum 2012, which had “Investing in uncertain times” as its overall theme, offered their views.

The panellists were Datuk Ahmad Zaini Othman, president and CEO of Malaysia Building Society Bhd (MBSB); Sunway group property development division COO Daniel Lim; and Christopher Boyd, executive chairman of C B Richard Ellis (Malaysia) (CBRE).

Boyd dismissed fears of a property bubble, saying it was not a term that fitted the Malaysian property market. Citing the country’s good economic growth, its natural resources and the federal government’s commitment to increase household income, Boyd expected property values to continue to rise over the next few years.

He also said that now is as good a time as any to buy, albeit selectively. As real estate growth tends to radiate out, Boyd suggested areas such as Setapak and Gombak might be worth a look.
“If you can find an area that has not seen an average growth of 10% per annum in the last 10 years, it indicates that the particular neighbourhood is ready for a growth spurt and you might try to jump in and catch it,” he said, adding that Gombak and Setapak seem to fit the pattern.

Infrastructure, too, can be indicative of potential growth. However, CBRE studies have shown that capital growth only came after the infrastructure had been completed.

Sunway’s Lim agreed that a property bubble was not on the horizon for one key reason — demand is exceeding supply. Putting the annual supply at 500,000 units, Lim expected demand to continue exceeding supply over the next few years as the population continues to grow.

He also anticipated property prices to continue to rise as scarcity of prime land becomes more pronounced and as land prices and building material prices continue to climb. Other factors include rising labour costs and an increase in cross-subsidy for low/medium-cost housing.

While Lim acknowledged that the new Bank Negara guidelines on responsible financing has affected sales in some measure, he said investors would still buy if the properties were located in prime areas and areas with potential growth.

He advised investors and buyers to look at properties in growing areas that are well connected with expressways and amenities, as well as urban redevelopment areas in the Klang Valley, such as the Kuala Lumpur International Financial District (KLFID) in Jalan Tun Razak and the former Pudu jail site.

MBSB’s Ahmad Zaini advised investors and buyers to buy and sell based on fundamentals rather than perception. Keen observation and an understanding of the economy, both local and in key parts of the world like Europe, the US and China, and of trends like production and unemployment, are important in making investment decisions during uncertain times.

He stressed that it was wise to buy from financially sound and established developers, as in an environment of economic turmoil and strict lending, only the strong developers will survive.

Ahmad Zaini cautioned that if the current economic environment persists and bank lending guidelines are kept, they could impact the overall Malaysian economy negatively in the long run.

“The more serious issue is the possible ripple effect. In the long term, it can affect supporting companies in the property sector and eventually the economy. The property sector is an important sector in the growth of the country’s economy. We have to monitor the ripple effect very closely,” he warned.

Read on for more of each panellist’s views on the topic.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 909, May 7-13, 2012

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