City&Country: Demand surges for affordable condos

Faced with rising residential property prices in the Klang Valley, price-conscious folk are turning their attention to the auction market as an alternative to the secondary market.

Auctioneers tell City & Country that popular picks are moderate-sized condos between 1,000 and 2,000 sq ft priced below RM500,000. The noted hot spots in the Klang Valley are in the established townships such as Petaling Jaya. There has also been a surge of interest in areas along the proposed mass rapid transit (MRT) line and light rail transit (LRT) extension lines, while condo units located on higher floors are fetching better prices. 

Clarence Fernandez, an auctioneer at MMR Auctioneers Sdn Bhd, says, “The market is generally good. Naturally, properties sited in better neighbourhoods are pulling in more crowds. Locationwise, the more popular areas are Damansara, Taman Tun Dr Ismail, Damansara Perdana, Subang Jaya and USJ.”

Property Auction House Sdn Bhd executive director Danny Loh says, “The MRT and LRTplays a crucial role in the recent interest in the auction market — buyers are now paying attention to established neighbourhoods along the proposed MRT and LRT extension lines such as OUG, Subang, Kepong and Puchong.  

“Some of these areas have seen a 30% price increase. For example, a 1,300 sq ft condo in Bukit OUG, which had a reserve price of RM180,000 six months ago, is now starting at RM240,000.”
On the flip side, interested parties have been facing difficulties in obtaining mortgage loans.

Auctioneers say the banking sector has little interest or confidence in providing loans for auctioned properties, in particular those priced below RM50,000. 

They say the banks’ lack of flexibility has cost them business — many a deal has had to be called off, leaving auctioneers with a glut of lower-end properties. Auctioneers also note a sluggish market for condos priced above RM1 million.

Loh says there has been a 5% drop in prices for high-end condos. “As an example, the reserve price for a condo in Kuala Lumpur City Centre, which had an asking price of RM1 million, is now priced at RM800,000 to RM900,000,” he adds.

According to statistics collected by Auction Data Sdn Bhd, the total number of residential properties put up for auction in the country in September was 4,300 units while 4,804 units were available for bids in October. In the Klang Valley, 1,838 properties went under the hammer in September while in October this was 1,969 units. Some 893 of the residential properties up for auction in September and 992 in October were condos and apartments.

Landed homes (especially terraced) and shophouses have been doing equally well on the auction market while demand for office space has been slow.

Given the relative affordability of auctioned properties, auctioneers say the market will continue to thrive in the coming months as savvy investors keen to snap up good bargains will still flock to auction houses while property prices on the secondary market stabilise. They also believe that the global economic slowdown as well as the change in the Real Property Gains Tax (RPGT) announced in Budget 2012 will have minimal effect on the auction market.

City & Country surveyed some condo units for auction in the Klang Valley priced above RM170,000  from September to Oct 28.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 884, Nov 14-20, 2011