City&Country: 2012 to be more subdued

Riding on positive sentiment and confidence in the economy, the local property market kicked off 2011 on a high note. However, overall demand for residential and commercial properties softened in 2H2011 as persistent economic woes in Europe and the US began to affect sentiment and the Malaysian government introduced measures to halt the escalating property prices.

For 2012, consultants polled by City & Country paint a sombre picture. Anticipating slower economic growth and the influx of new supply, particularly in the office sector, most consultants foresee a more subdued property market. However, they believe property values will remain stable given the historically resilient and less volatile Malaysian market.

For properties in prime areas however, demand is expected to remain consistent and prices to be maintained. In the Klang Valley, locations close to the proposed mass rail transit (MRT) and the extension of the light rail transit (LRT) are viewed as good investments.

Landed properties are expected to continue to drive the residential sector, with gated communities being the most sought after. As for high-rise properties, those priced in the mid to upper range in good locations outside the city centre will be preferred.

Other recommendations include industrial properties such as logistics and warehousing facilities in the Klang Valley, Penang and Johor Baru, and for longer-term investment, agricultural land between Seremban and Melaka.

With no new supply of industrial sites in the states mentioned and continuing market demand, CH Williams Talhar & Wong Sdn Bhd foresees industrial rental rates to increase in 2012. Meanwhile, CB Richard Ellis contends that development will follow infrastructure and flow out radially, and that it is a matter of time before Seremban and Melaka become part of urban Kuala Lumpur.

More affordable housing is expected to be built, spearheaded by the government, under such initiatives as My First Home Scheme (MFHS) and 1Malaysia Housing Programme (PR1MA).
Concerns remain however, particularly over the effective implementation of government projects, including the MRT, LRT expansion and various projects under the Greater KL plan.

The property market in 2011
According to Zerin Properties, the property market grew  18% by number of transactions and 30% by total value in 1H2011 compared with 1H2010. The residential sector, especially landed properties, saw strong sales. Based on figures from VPC Alliance (KL) Sdn Bhd, transactions  from 1Q2011 to 3Q2011 increased 11% compared with the same period the year before.

Landed homes in gated communities were of particular interest to buyers, while large-sized high-end condominiums and apartments in areas such as the Kuala Lumpur city centre (KLCC) and Mont’Kiara struggled. DTZ Nawawi Tie Leung Property Consultants Sdn Bhd notes that interest in both residential and office properties bloomed outside of the Klang Valley in Penang, Cyberjaya and Iskandar Malaysia in Johor.

While the office-leasing market was active in 2011, rents have remained flat due to oversupply. Rahim & Co reported that seven new office buildings, providing a total of 2.34 million sq ft of space, were completed in 2011. The new completion affected not only the rents but also the occupancy rate, which dropped to 79.6% in 3Q2011 from 81.2% in 2010. This forced landlords to come up with attractive terms and competitive rents to entice tenants.

YY Property Solutions Sdn Bhd notes that the Grade A leasing market in the Klang Valley received better-than-expected enquiries, most of which came from the oil and gas,  financial institution, FMCG, service, IT and business process outsourcing (BPO) sectors.

Other commercial properties such as shophouses and strata offices fared better. Henry Butcher Marketing Sdn Bhd cited strong sales of office products such as small office home office (SoHo), small office flexible office (SoFo) and small office versatile office (SoVo) as examples.

Read on for the consultants’ views on the property market in 2011 and their wish list for 2012.

Tang Chee Meng
Chief operating officer
Henry Butcher Marketing Sdn Bhd

The property market in 2011
The residential market was very active in 2011, especially in the first half, continuing the robust performance in 2010. The landed residential market was strong while the condominium market was stable. Demand for large-sized, high-end condominiums in KLCC and Mont’Kiara was sluggish while demand for small-sized units was better.

The market appears to have softened in the second half of the year due to a number of factors: the government’s measures to avoid an asset bubble [such as the] 70% loan-to-value (LTV) cap, 10% real property gains tax (RPGT), weaker investor sentiment due to worries of a global economic slowdown, less attractive yields and difficulty in securing tenants.
For the commercial market, occupancy and rental rates of office space softened slightly due to additional supply coming onto the market and worries of a glut. A bright spot is the strong sales performance of several office suite projects launched in Kuala Lumpur and Petaling Jaya innovatively marketed as SoHo, SoFo and SoVo.

Outlook
The property market is expected to slow down further due to the anticipated slower pace of economic growth in 2012, and the tapering off in government spending post elections, which will be held during the year. However, we believe that the market will be stable and there will not be any significant change in prices. Developers will shift some of their focus to developing affordable medium-priced housing and smaller-sized products.

The office market will face additional pressure on occupancy and rental rates in 2012 due to more office space coming onto the market.

Potential investment
Landed homes will still enjoy good demand due to the better capital appreciation. Smaller-sized apartments/serviced apartments in good locations, which enjoy strong rental demand, will also be attractive investment options.

Favourable locations for investment will include areas along the proposed MRT route from Sungei Buloh to Kajang and the proposed LRT extension — Bandar Kinrara, Puchong, Putra Heights and Subang. This is due to improved public transport as well as urban renewal, where large-scale projects have been planned and major infrastructural improvements are expected. These projects include the Unilever land redevelopment in Bangsar, the old airport redevelopment under 1Malaysia Development Bhd in Sungei Besi, and some established parts in Petaling Jaya.

Any delays or hiccups in the implementation of the infrastructural projects in these areas will delay their growth. If some of the planned projects are not implemented properly — such as if the commercial buildings built in any of the government’s announced projects under the 10MP are not carried out based on demand and are thus not occupied fully when completed — this will give the impression of a failed project and the area surrounding it may not take off as anticipated.

Wish list
•    The government to monitor the situation properly before implementing any further measures to curb market speculation. While it is good to prevent an asset bubble from building up, it is also important not to kill the market by overreacting.
•    The government to study the supply and demand situation before carrying out some of the proposed commercial projects as the additional supply of office and retail space could exacerbate the oversupply situation.
•    The government to do more to assist the middle income group to own houses by providing land for joint-venture projects with the private sector to carry out affordable housing.
•    The government to implement more measures to deal with or eradicate abandoned projects.


Chris Boyd
Executive chairman
CB Richard Ellis (Malaysia) sdn bhd

The property market in 2011
Both the residential and office markets did well. By October this year, the quantum of approved housing loans in Malaysia was already RM80.17 billion, RM3 billion more than the whole of last year, a clear illustration of continued market growth.

Outlook
Residential turnover will remain strong but prices will moderate and there will be some weakness at the top-end condominium market in certain locations. Office [market] will see more weakening, while retail will remain strong.

We believe the residential market will slow down next year as more supply comes onstream and banks take a more cautious approach to end financing. However, this is inevitable and demonstrates how the market can find its own equilibrium without the severe peaks and troughs seen in other countries.

The office market has been very active with a level of demand in excess of last year and rents and capital values have been steady. There will be some weakening next year in the face of increased supply. Retail rents are strong and the retail market is looking good for 2012.

Potential investment
For longer term investment, look for agricultural land anywhere between Seremban and Melaka.
The contention is that development will normally spread out radially from the city centre, following infrastructure. Over time, we have seen cities expand in this fashion as population growth pushes the boundaries further and further away. People who bemoan missing out on buying in Bangsar in the 1970s or Cheras in the 1980s or Sungai Long in the 1990s should maintain their faith in the future and look further afield for cheap agricultural land that one day — not tomorrow or even this decade — could be in the path of new development.

It is not difficult to imagine one day, Kuala Lumpur and Seremban will join as one massive urban conurbation. If you think that is impossible, then remember that Petaling Jaya in the 1960s thought it was comfortably insulated from Kuala Lumpur by the little green belt at Bukit Gasing.

After Seremban has been joined to Kuala Lumpur in this way, then where will development proceed? Melaka will grow radially, and so will Seremban, so that ultimately agricultural land between the two may be taken up for residential development. This may not happen in our lifetime but ultimately it will. And the bonus is that the yields from planted agricultural land can be quite attractive.

Wish list
•    Huge progress with the MRT construction and LRT extension.
•    Strong signs that the Economic Transformation Programme is kicking in and creating plenty of new jobs in financial services.
•    At least two major industrialists shifting to Malaysia from a neighbouring country.
•    Five major multinationals establishing massive back office centres in Malaysia.
•    An even bigger airport announced for Kota Kinabalu.
•    A blockbuster movie set in Malaysia and filmed locally.


Previndran Singhe
Chief executive officer
Zerin Properties SDN BHD

The property market in 2011
Both markets [commercial and residential] fared tremendously well in the first half with double-digit growth in terms of total number of transactions (18%) and total value (30%) compared with 1H2010. For the second half of the year, there was growth compared to 2H2010, albeit at a slower pace. Both markets were active.

In terms of office space leasing, the market was active with rents being flat. The hospitality market fared well with an increase in both occupancies and average room rates.

Outlook
The market will see fewer transactions than in 2011 but values will hold. Post first quarter, [there will be an] increase in transactions as global markets settle down and prices of prime properties can be expected to edge up slightly.

The office market will see flat rents, with vacancies increasing at stable levels of mid-70%. Barring any external events, the hospitality market will fare well again with stable occupancies and increase in average room rates.

Potential investment
Iskandar Malaysia in Johor will really take off next year with increased interest in actual business space usage, which will translate into more real estate activities within major nodes there. Kuala Lumpur, Penang and Kota Kinabalu are the preferred picks for property investment.

On big-ticket investments, retail and hospitality assets, together with selected data centre/call centre properties will be the pick for funds next year.

Wish list
•    Firmer decision making by the government, and projects such as the MRT, Warisan Merdeka need to get started. In short, just get things going.
•    A concrete plan for traffic control in Kuala Lumpur and a cohesive action plan by the police and City Hall.
•    Kuala Lumpur City Hall taking positive action to clean up the city and making it greener, Malaysian style. We need to live up to being a true Garden City.
•    More parks, more community centres or activity centres in Kuala Lumpur and Johor Baru.
•    Implement a No Car Day, like what is being done in Penang, for Kuala Lumpur, Kota Kinabalu and Johor Baru.
•    No taxes for cars, so I can finally get the Ferrari!


James Wong
Managing director
VPC Alliance (KL) Sdn Bhd

The property market in 2011
The performance of the residential and commercial property market in 2011 was moderate.

There is still demand for newly launched landed residential properties especially for gated communities and even for existing landed residential properties. However, in the secondary market, the demand for upmarket condominiums and even midmarket condominiums is slacking owing to oversupply. It has affected the rental market for condominiums.

The 70% LTV cap imposed in late 2010 for the third and subsequent home loan did not dampen the demand for residential properties. However, it affected housing loans, which only grew by 12.8% in the first seven months of this year, slightly lower than the 13.2% increase recorded last year. The number of transactions in 1Q2011 to 3Q2011 for the residential sector increased by 11%, from the corresponding quarters of the previous year.

In the commercial market, the performance of the purpose-built office sector was moderate in 2011. The average occupancy rate in Malaysia declined marginally to 83.2% in 1H2011 against 84.1% registered in both halves of 2010. The demand for offices is affected by the oversupply.

Outlook
Landed residential properties will be more resilient than high-rise residential properties due to buyer preference for the former and an oversupply of the latter.  Demand for luxury condominiums in the city centre and Mont’Kiara will soften due to oversupply and weak rental demand.

The new year will witness less bullish housing sales by developers due to the global economic slowdown and declining liquidity. With initiatives such as MFHS and PR1MA,  more affordable housing will be built.

On the commercial front, the performance of the office sector in Kuala Lumpur will be sluggish as occupancy rates and rents will remain soft in 2012. Demand too will dampen as more supply enters the market.

The overall net absorption rate could further slow down in 2012, with further decline in the global economy. Demand for the retail sector is expected to remain strong in the established shopping centres such as Suria KLCC, Pavilion, Mid Valley City and One Utama but neighbourhood malls will find it challenging next year, thus impacting rental rates.  Another 1.9 million sq ft of new retail malls are expected to be offered in 2012, contributing to more supply.

Potential investment
Condominiums and apartments in Cyberjaya have good potential.  New projects such as Mirage by The Lake by OSK Properties, GardenPlaza by Mah Sing Group, Shaftsbury Square by Shaftsbury Capital, and more will be launched to capitalise on its location as the nucleus of the Multimedia Super Corridor (MSC).

Opened in December 2007, Maju Expressway (MEX) provides better accessibility for Cyberjaya. The increasing student population at Multimedia University, Limkokwing University and Cyberjaya University College of Medical Sciences will generate more housing demand in this area.

Shopoffices and serviced apartments along the Ampang and Kelana Jaya LRT Extension Line and MRT Line also have good potential. The Summit in Subang and Putra Heights Commercial Centre will benefit from the extension of LRT Line to Putra Heights. The proposed 55km MRT Line linking Sungai Buloh to Kajang will provide opportunities to develop shopoffices and serviced apartments, especially near the main MRT stations.

Investors looking for consistent and stable income can consider Pavilion Real Estate Investment Trust (REIT). The largest retail REIT in Malaysia fetched RM1.03, a 13.3% premium over its institutional price of 90 sen when it debuted on Bursa Malaysia in early December. Its high occupancy rate at 99% with a diversified tenant base and average rental rates of RM17 psf for retail space and RM6 psf for office space, will provide stable income.

Wish list
•    More affordable housing scheme by the private developers.
•    More incentives apart from the current government initiatives such as MFHS and PR1MA to assist more rakyat to own affordable housing.
•    Further incentives for the adoption of Industrialised Building System (IBS).
•    Reduce REIT withholding tax from current 10% to 5% for residents and non-residents, individual and institutional investors.
•    Developers to integrate seniors housing to cater for retirees and senior citizens within a housing development.
•    To build more student housing accommodation.


Lim Lian Hong
Executive director
Raine & Horne International Zaki + partners Sdn Bhd. Petaling Jaya Branch

The property market in 2011
Residential prices have risen tremendously from March 2011, recording a jump of up to 50% over the last 12 months. For example, a terraced house in SS2 shot up to RM800,000 from RM500,000 earlier in the year.

The price escalation is driven by the number of investors looking to park their money in tangible assets rather than banks and other forms of equity. Another contributing factor is the low interest rates, which promotes confidence.

A few good areas to look at are residential areas that are gated and guarded in locations such as Damansara Heights and Bangsar.

The commercial market has also seen a substantial increase in price. Prices of shophouses in SS2, Petaling Jaya, increased by more than 10% in the last 12 months. Commercial properties in SS2, Bangsar and Subang Jaya are also seeing considerable growth in transacted prices.

Outlook
Because prices in prime locations have gone up so much, they will likely  remain flat for a while. There may still be increases in price but they will not be substantial. However, interest in prime area properties in both residential and commercial will still stay strong.

Potential investment
Locations with good access to highways and public transport, and those close to the proposed MRT line will be much sought after. Areas outside the city such as S P Setia’s Setia Eco Park in Shah Alam will also generate interest, though prices are already on the climb there.

Wish list
•    No stamp duty.
•    No RPGT.
•    Lower interest rates.


Brian Koh
Executive director
DTZ Nawawi Tie Leung Property Consultants Sdn Bhd

The property market in 2011
Generally, the market had a good run until mid-year when the gathering external storm in Europe put the brakes on runaway price escalation and sentiment, especially in the residential sector. Prices in the commercial sector held well and rental was stable, with demand for purchase of both shops and strata office bullish.

There was also more excitement outside the Klang Valley in Penang and Iskandar Malaysia in Johor which picked up momentum of their own. Even Cyberjaya is seeing strong demand for residential suites, strata offices and higher-end landed properties with various developers launching new integrated projects.

Outlook
The outlook for 2012 will be more sombre with projected slower economic growth and as new supply pipelines work their way into the market, it will cast a shadow on occupancy and rental rates in the commercial sectors.

Historical trend provides comfort that the Malaysian market is less volatile and more resilient, but takes much more time to recover. Banks, developers and investors are generally well capitalised and should be able to weather short-term declines, so there is not likely to be a major crisis. It is hoped that any contagion effect from Europe will be minimal and indirect.

Potential investment
Given the current pricing level, 2012 will be more a period for consolidation for local real estate, but investment opportunities could arise if there are forced sale situations.  Penang and Iskandar Malaysia could continue to be new areas of growth for hospitality and medical facilities. This is assuming political stability is maintained and foreign investors’ sentiment remains positive, regardless of who wins the next general election, which is very likely to be held during the year.

Wish list
•    Malaysians will rise to the challenge of globalisation and meet the targets set by the New Economic Model, thereby creating an affluent and sustainable society.
•    Quality and affordable homes be accessible to most, if not all Malaysians.


Y Y Lau
Director
YY Property Solutions Sdn Bhd (in association with Cushman & Wakefield)

The property market in 2011
The Grade A office leasing market in Kuala Lumpur received numerous enquiries from corporations mainly backed by expansion in the oil and gas industry, the IT sector as well as the financial sector.  Hence, rents of premier office buildings in Kuala Lumpur have remained resilient during the year.  During the first nine months of the year, net rents remained stable at between RM6.20 psf and RM6.50 psf, while occupancy was between 83% and 85%.

In the KL fringe area, KL Sentral and Bangsar South continued to attract tenants.  Gross asking rents stood firm at RM5.50 to RM7 psf and as high as RM8.80 psf for newly completed buildings with green features and MSC status.  

Demand for good quality office space in the decentralised area, mainly in Bandar Utama, and Damansara Uptown and strategic locations such as Section 13 and 19 in Petaling Jaya remained high.

With limited supply of good quality and large floor plate office buildings in Mutiara Damansara and Damansara Perdana, demand surged for such office space here.  Gross asking rents reached record highs of RM4.30 to RM5.50 psf for Grade A buildings in these locations.

Of note in the investment market is Bangkok Bank’s purchase of eight levels of office space and two levels of retail space for its banking hall at Berjaya Central Park Corporate Suites in KL for a total of RM100 million or RM944 psf. 

Office buildings in Cyberjaya also drew interest including from AmFirst REIT which acquired Prima 9 & Prima 10 at RM608 to RM647 psf which is comparable to the selling price of Menara Multi-Purpose and Wisma Goldhill in the KL CBD.

The Klang Valley residential market was buoyant during the first half of the year, especially for landed property in prime locations. Entering 3Q2011, with the prolonged sovereign debt crisis in Europe, market sentiment turned cautious. Mass housing on the other hand, fared better due to pent-up demand. Housing units priced between RM300,000 and RM500,000 are sought after by middle-class young couples due to their affordability.

Some luxury condos in KLCC and Mont’Kiara have been seeing price correction as a result of the oversupply. Current prices range between RM750 and RM2,000 psf. Rents have also remained flat in the two areas. Prices for condos in other areas experienced positive price growth in general.

Outlook
The relatively slow take-up of office buildings in the city, coupled with the expected huge incoming new supply in the next two years, is expected to exert  downward pressure on rents. New buildings at strategic locations with MSC Status and/or Green Building Certification are expected to gain better positions in securing tenants.

The government has been aggressively promoting the ETP and “Invest KL”, with the aim of attracting foreign multinational companies to Malaysia.  The potential influx of MNCs into Klang Valley will be able to reduce the oversupply but results may only be seen in the medium term.

The luxury condo market in KLCC and Mont’Kiara are expected to remain soft in 2012. Affordable housing units will be the main focus in the residential market supported by pent-up demand for this category and the MFHS launched in March this year.  The scheme allows 100% financing for first-time house buyers earning less than RM3,000 a month to purchase homes below RM400,000.

The introduction of guidelines by Bank Negara to rein in household debt by assessing potential borrower’s net salary in their evaluation process from Jan 1, 2012, may impact the higher-end segments of the market as financing availability gets narrower. Overall, price growth will be more gradual next year.

Potential investment
KLCC vicinity, KL Sentral and Bangsar South will continue to draw office investments because of easy accessibility, corporate image and high concentration of business activities in these locations. KL Eco City, launched recently by S P Setia, will be a barometer test for office investment market in the KL fringe area.  With the anticipated slowdown and the large incoming supply in 2012, investors will seek investment bargains in good quality and strategically located office buildings.

Landed properties in Shah Alam, Puchong, Kajang and Sungai Buloh and mid- to upper-mid range condos in Mutiara Damansara, Segambut Dalam, Petaling Jaya and Subang Jaya are expected to be sought after in 2012.

Wish list
•    More MNCs to set up new offices, or continue to expand in Klang Valley.
•    More liberalisation in the REIT sector so that more funds are available for investment in office buildings.
•    Interest rates continue to remain low to support housing market


Foo Gee Jen
Managing director
CH Williams Talhar & Wong Sdn Bhd

The property market in 2011
The property market in 2011 was stable across all sectors except for some signs of over-heating in selective locations of the residential and shopoffice market segments.

The housing sector continues to be the primary driver of the Malaysian property market and all towns and cities reported that development projects continued at an active pace with strongsales and rising prices.

A resilient office sector exists in Kuala Lumpur but in Johor Baru, Penang, Kota Kinabalu and Kuching, the market for purpose-built offices continues to experience weak demand and consequently low rental rates. As a result, the bulk of office space demand in most cities is being met by shopoffice developments. Shopoffices remain the office premises of choice of small and medium-sized enterprises based primarily on cost considerations and location.

Outlook
In 2012, we expect the office demand-supply situation to deteriorate slightly due to the entry of new supply without corresponding new demand. We also expect the condominium sector to moderate compared to 2011 but to still continue on an uptrend.

In the Klang Valley, condominium prices may flatten out or go downwards in 2012. There will be fewer new launches compared to 2011 and the trend is likely to be a higher percentage of smaller units.

There continues to be market demand for industrial sites in popular locations by long established manufacturing companies in Malaysia that are seeking to expand their operating capacities as well as by new manufacturers investing in Malaysia, where a highly educated work force is needed.

However, there is virtually no new supply of industrial sites. There is a shortage of logistics and warehousing facilities in the Klang Valley, Penang and especially Johor Baru. Due to this shortage, the outlook is for industrial rental rates to trend upwards in 2012.

In 2012, the Malaysian property market will see further growth, albeit at a slower pace than in 2011. Prices, occupancy rates and sales rates will be maintained or improve slightly. We anticipate downward pressure on office rents in the Klang Valley and high-end condominiums.

Potential investment
We like investments in prime property locations and developments by developers with proven track records of which we would identify only a handful. We would advise following the development projects of these developers especially their entry into new locations around urban centres in the Klang Valley.

We believe that the upside potential for capital gains is probably much higher in areas other than the Klang Valley, such as Rawang, Cyberjaya, Putrajaya, Nilai, Kajang and Seremban.

We have no preference whether to invest in residential, commercial or industrial property. However, it is time to go back to fundamentals and our advice is that investors need to base their buying decisions based on prospective yields or returns on their investment.

Consider these questions — can the property be rented out and at what price? Is this rate better than the yield on a blue-chip company and close to the bank’s fixed deposit rate? Otherwise the latter investments may be the way to go.

Wish list
•    Planning of a comprehensive Klang Valley Public Transport Plan.
•    Adoption of the KL City 2020 Plan and strict adherence to these guidelines for DBKL approvals including planning approval process within three months.
•    Reduction and standardisation of bumiputera housing quotas to 10% to 15% in line with liberalisation.
•    Availability of long-term end financing for mega property development projects.


Eric Ooi
Managing Director
Knight Frank (Ooi & Zaharin Sdn Bhd)

The property market in 2011
The residential and commercial property sub-sectors performed well in 2011. As in previous years, the residential sub-sectors led the market in 1H2011 with volume of 62.39% and 46.76% of value of transactions. The volume and value were higher by 23.12% and 30.31% respectively when compared to 1H2010 figures.

On a half-yearly basis, the average value per residential transaction improved marginally by 1.22% while the average value per commercial transaction registered a 4.25% growth.

The volume and value of transactions also trended higher for the commercial sector by 12.29% and 17.31% respectively against 1H2010 figures.

Outlook
Driven by scarcity of land and rising construction costs, the property market is expected to continue showing gains in 2012, albeit at a cautious pace amid an increasingly challenging external environment.

The implementation and roll-out of high impact projects under the ETP such as the integrated transport system for Klang Valley augurs well for the local property market.

The residential sub-sector is expected to remain the market’s most active property sub-sector in terms of both volume and value of transactions. Prices, particularly of landed homes in established locations and popular suburbs, are expected to continue rising, though at a slower pace of 5% to 10%.

The measure by Bank Negara to tighten lending effective Jan 1, 2012, may have a negative impact on the property market as demand turns cautious.

Potential investment
Due to limited supply, landed homes within the Klang Valley have and will continue to perform well. More niche/boutique projects within gated and guarded communities will be launched given its appeal to a growing catchment of discerning purchasers and upgraders. 

Investors and purchasers looking for growth potential and capital appreciation may be drawn to landed homes by proven developers in growing KL fringe areas and popular suburbs such as Sungei Buloh-Damansara, Jalan Kelang Lama-Kuchai, Puchong-Seri Kembangan, Bukit Jalil-Kinrara, Kajang-Semenyih, Wangsa Maju-Setapak and Cyberjaya

Developers will continue to offer innovative residential lifestyle products, focusing on smaller and midsized units in KLCC and the city fringe to tap into the current demand, trend and affordability level.

High-rise residences in established and new growth areas which enjoy good accessibility, particularly along the proposed new MRT route, appear to have further room for capital appreciation as they become a more attractive proposition towards home ownership. Recent launches of such projects in the city fringe and popular suburbs set benchmark pricings.

SoHo units now also marketed as SoFo and SoVo are gaining popularity. The growing trend of working from home has prompted many developers to roll out these projects to boost sales and improve cash flow amid an increasing competitive office market. These small units which are usually less than 500 sq ft in size translate to a lower quantum pricing and appeal to a wide range of purchasers and investors due to their affordability level, flexibility in usage and ease in leasing when compared to larger-sized units.


Sulaiman Akhmady Mohd Saheh
Director of Research Services
Rahim & Co (an international associate of savills)

The property market in 2011
The residential market saw renewed interest in established suburban locations, especially with the high prices of newly launched units driving the market to re-assess their preference for existing stocks.

Landed residential prices are expected to remain strong, though the growth may slow down from the current 15% to 25% to 5% to 10% for the year. The condominium market, especially the high-end tier, may continue to consolidate but to a smaller extent as the market had gone through a correction phase in 2008/2009 where prices then had reconciled by 20% to 30%.

The year 2011 saw the completion of seven new office buildings supplying a total of 2.34 million sq ft of office space, including One Mont Kiara and Dijaya Plaza. Due to the increasing supply, the overall average occupancy rate of offices in Kuala Lumpur declined from 81.2% in 2010 to 79.6% in 3Q2011.

Stiff competition for tenants was noted due to wider choices available in the market. Rental rates came under pressure and we noted a decline in average rental rate as owners continued to offer attractive rates to maintain higher occupancy rates. The average rental rate in Kuala Lumpur for the Golden Triangle area and CBD stood at RM5.91 psf in 3Q2011, compared with RM6.05 psf in 2010. Similarly, Petaling Jaya recorded a lower average rental rate at RM3.47 psf in 3Q2011 compared with RM3.74 psf in 2010.

Outlook
There is a strong sentiment within the general market that prices have peaked over the last two years. Pressure for a further price increase in 2012 may be subdued due to the influx of new spaces in the coming year in the office and residential sectors. Some 7.6 million sq ft of office space is expected in Klang Valley alone, and more than 2,500 units of high-end condominiums in the Golden Triangle area are coming into the market in 2012. The European debt crisis and the recent concern over China’s economic growth to slow from 10.4% in 2010 to 9.2% in 2011 validate the market’s cautious approach coming into 2012.

Nevertheless, as proven over the years, real estate in prime and established areas should command a rather consistent demand — be it for capital value or rental value. However, building cost factors will continue to play a role in inflating property prices.

Looking at the overall outlook, our economy and the property market have somewhat been resilient in the past decade due to domestically driven demand and some Keynesian intervention in our economic policies. Coupled with the multitude of government projects under the ETP which include the MRT and Greater KL projects, interest in the property market will remain strong, provided these programmes are implemented.

Potential investment
Popular and established areas will maintain their appeal and prices, especially those driven predominantly by local demand. Future investment potential will be strong in areas along the proposed MRT routes and the LRT extension lines, on top of the areas near new urban projects.

The KLIFD Project near Jalan Tun Razak will spur interest in new developments on any available landbank in Cochrane and Pudu, and this will probably flow southwards towards Bandar Malaysia in Sungai Besi. Areas to watch also include those along transport lines such as Sungai Buloh, Kota Damansara, Subang north and Sri Damansara in the northwestern part and Cheras-Kajang corridor in the southeastern end. There probably will be renewed interest in existing neighbourhood commercial hubs in those areas that will push prices further. An area to look at would also be in Petaling Jaya where commercial developments will continue to gain momentum as public transport improves, fuelling further suburbanisation trends seen in +recent years. Also, do keep a keen eye on Cyberjaya which could see the long awaited boost of market interest in both residential and commercial sectors.

Wish list
•    Strengthen urban regeneration programmes and incentives in major cities.
•    Proper implementation of major public projects to complete within time frame and budget.
•    Improve processes and corporate governance so that the country is seen and proven to be a great place for business at international level.
•    The ETP and the like to progress and gain faster momentum.
•    High-speed rail project to boost growth of the west coast urban growth corridor.

 

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 890, Dec 26-Jan 1, 2012