City&Country: The Edge/CB Richard Ellis Klang Valley Housing Property Monitor (July-Sept 2010)

Landed home prices still on an uptrend


Housing prices in the Klang Valley, especially for  landed homes on the secondary market, will continue to rise for the rest of the year and into 2011.

CB Richard Ellis (CBRE) Malaysia managing director Allan Soo foresees prices continuing to increase in the short term, possibly stabilising only at end-2011 or beyond.

In presenting The Edge/CBRE Klang Valley Housing Property Monitor for 3Q2010, Soo notes that nearly all 1 and 2-storey homes as well as condominiums sampled showed significant positive growth in prices y-o-y, some by more than 20%.

“The third quarter results carry on a similar trend from the second quarter where landed properties have become more popular, primarily because of liquidity in the market,” says Soo.

While data shows that landed property prices are rising, “feedback on the ground is that the number of transactions on the secondary market isn’t very big,” says Soo.

While talk is rife about a possible property bubble in the Klang Valley, Soo does not see that happening any time soon. “I can’t say there is a bubble because a bubble means an oversupply in properties, which is not the case,” he explains.

“First, there has not been any reduction in the margin for borrowing like in Singapore and Hong Kong ... I don’t think there should be [any]  because I don’t see an oversupply. Secondly, I don’t see cracks happening such as a major default syndrome. Third, speculative purchases are there but it isn’t a major problem. Also, supply coming onstream is slow, so there is no risk of an oversupply in the short term,” he says.

He believes the property market is generally healthy. In the future, the monitor may look at prime property indicators in areas such as Kota Damansara, Mutiara Damansara and Damansara Perdana, which are currently not covered.

1-storey terraced houses
At Puchong Perdana, prices of 1-storey terraced houses remained steady in 3Q from the previous quarter but showed a 17.24% increase y-o-y to RM170,000 from RM145,000. Over at Bandar Kinrara, 1-storey homes saw more robust growth y-o-y of 11.11% to RM200,000 from RM180,000 last year, while q-o-q, there was a  5.26% increase in prices from RM190,000 in the previous quarter.

The rental market for 1-storey houses in most areas held steady except for Taman Tun Dr Ismail’s Jalan Haji Openg area, where rents rose 30% y-o-y to RM1,700 per month from RM1,300 a year ago. Single-storey homes in Bandar Sri Damansara, Bangsar Park and Puchong Perdana increased slightly from the previous quarter.

2-storey terraced houses
Prices for 2-storey terraced houses in Bandar Sri Damansara’s SD 10 area saw growth of 26.32% from the same period last year, led by a q-o-q growth of 11.63%. Similar houses in Bandar Sri Damansara’s SD7 rose 14.29% to RM480,000 from RM420,000 a year ago while recording a 2.13% increase q-o-q from RM470,000 the last quarter.

Soo explains that Bandar Sri Damansara is doing well because of the spillover effect from nearby Desa Parkcity. “The area is not congested, low density and more affordable...” he notes.

In Bandar Utama, prices of 2-storey homes in BU1 and BU12 increased by 20.37% to RM650,000 from RM540,000 a year ago while prices appreciated 6.56% from RM610,000 in 2Q.

As for Bangsar Baru homes, prices rose 21.05% to RM1.15 million from RM950,000 a year ago. Q-o-q, prices increased 4.55% from RM1.1 million.  The limited supply,  location, mix of F&B, retail and other services nearby, Soo explains, makes Bangsar a hot spot with expatriates and affluent Malaysians.

In terms of rents, 2-storey terraced houses in all areas surveyed in the monitor held steady from the last quarter. In TTDI’s  Jalan Athinahapan,  rents rose 11.11% to RM2,000 per month y-o-y from RM1,800 while Bandar Puchong Jaya rents also increased by 25% over the year to RM1,000 per month from RM800.

Condominium
Condominium prices have stagnated somewhat from the previous quarter although y-o-y growth was generally seen across the board. The condo market’s performance y-o-y, Soo explains, was in response to the rising prices of new developments that spurred the secondary market.

Plaza Damas’ Mayfair condo saw an 8.11% increase in price to RM200,000 from RM185,000 the previous year. This is followed by Kiara Park units, which appreciated 6.67% to RM480,000 from RM450,000 last year.

“The secondary market is doing quite well because they are more affordable than the new ones launched,” Soo says. “Besides, condominiums on the secondary market are not that old anyway.”
However, Soo expects the market to be more competitive as new supply enters the market with a possible negative impact on pricing, one indicator being the unchanged q-o-q price performance of nearly all condominiums sampled in the monitor. Rents have also generally come down.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 831, Nov 8-14, 2010