City&Country: The Edge/Rahim&Co Kota Kinabalu Housing Property Monitor (2Q2012)

Prices continue to rise but at slower pace

Housing prices in the Kota Kinabalu property market, which has seen impressive growth in the last few quarters, continue to climb in tandem with the robust performance of the Sabah economy, albeit at a slower pace.

“Our sampling shows an average growth of 1.37% [between RM5,000 and RM15,000] in the prices of residential properties overall in 2Q2012 compared with 2.98% in the previous quarter.

Year-on-year growth was 8.05%, about 3.96% slower than in 2Q2011,” says Max Sylver Sintia, manager of business development and client service at Rahim & Co Sabah, when presenting The Edge-Rahim & Co Kota Kinabalu Housing Property Monitor 2Q2012.

Sintia attributes the more subdued market to Bank Negara Malaysia’s tighter lending policies and the rising number of upcoming developments. The prices of 2-storey houses on the city’s secondary market are also reaching their peak, he says.

Economic indicators
In 2011, Sabah recorded an export value of RM49.4 billion and a trade surplus of RM16.6 billion, up from RM37.2 billion and RM11.2 billion respectively in 2009.

Palm oil accounted for about 38.8% of total exports while crude petroleum comprised 32.9%. The unemployment rate, as reported by the Sabah Statistics Department, stood at 5.2% in 2011 while there were 1.64 million people in the labour force, marking an increase of 3.14% from the previous year.

Sabah was the biggest contributor to Malaysia’s agricultural output in 2011, delivering RM13.21 billion or 24.7% of the total RM53.45 billion. In the manufacturing sector, it contributed 4.1% to total output or RM34.1 billion while in the construction sector, it recorded an output of RM7.4 billion — the fifth highest in the country.

Sabah’s tourist arrivals surged to 1.134 million from January to May this year, an increase of 3.7% from the previous corresponding period.

“About 27.6% of the tourists are from Asia and we foresee the continuous positive growth benefiting the Malaysia My Second Home (MM2H) programme,” says Sintia, adding that based on Rahim & Co’s observations, South Koreans have been showing interest in the local property market. Tourist arrivals from the country rose 20.7% to around 30,137 between January and May this year compared with 24,974 previously. Sintia says the opening of the luxurious Gaya Island Resort by YTL Hotels will further boost the tourism industry. The resort was built at an estimated cost of RM75 million and boasts 120 villas.

Government initiatives
Recently, Sabah Chief Minister Datuk Seri Musa Aman announced the development of the first phase of a RM38 billion, 25.3km pedestrian walkway in Kota Kinabalu. The state government is hoping that the sheltered walkways will boost tourism and improve exposure to local commercial and retail businesses.

Developed as part of the Sabah Development Corridor (SDC), the project is one of the state government’s three tourism initiatives for Kota Kinabalu. The other two are the restoration of the Atkinson Clock Tower and the park recreational project of Sembulan River.

The government is also allocating RM4.5 million to develop the state’s infrastructure. Announced by the Sabah Ministry of Resource Development and Information Technology, the implementation of 74 public infrastructure maintenance and basic infrastructure projects will benefit the property market, particularly in Kota Kinabalu, as well as areas in its vicinity such as Inanam, Karambunai, Likas, Api-Api, Luyang and Tanjung Aru.

Sintia expects these projects to have a positive impact on nearby housing developments. “The high-end residential market in some of these areas, which has seen an encouraging trend in the past few quarters, is poised to expand further as both local and foreign interest is likely to remain strong.”

Trends
The prices of homes on the secondary market have been playing catch-up with newly launched properties in recent quarters.

“In Putatan, for instance, which is located in the southern part of Kota Kinabalu, a newly launched 2-storey terraced house with a land area of around 1,500 sq ft is priced at RM400,000. A similar type of property on the secondary market in the same area is now selling for RM390,000 compared with RM350,000 last year,” says Sintia.

He believes things are looking up for condominium projects because strata-type developments seem to be gaining acceptance, judging from the positive take-up of those unveiled recently.
“We expect further price growth for condominiums on the secondary market, especially for those located in the Kota Kinabalu city centre, Damai and Likas due to the spillover effects of newly launched projects there,” says Sintia.

While houses in more established areas such as Luyang Perdana, Golden Hill Garden and Taman Seri Borneo are attracting foreign buyers, the majority of purchasers are still locals with families buying for their own occupation or investment. Meanwhile, cash-rich oil palm estate owners are set to continue to be the biggest investors of the Kota Kinabalu property market.

Most of the 2-storey terraced houses sampled registered a 9% to 10% (RM5,000 to RM40,000) increase in prices from a year ago. The exceptions were houses in Taman Indah Permai, which saw an increase of 7.41%, and Golden Hill Garden, which recorded the lowest price rise of 0.91%.

Millennium Height, which is located in the mature residential area of Jalan Bundusan, led the price growth for 2-storey terraced houses in 2Q2012, posting a rise of 4.48% or RM15,000. The prices of similar properties in Taman Indah Permai and Luyang Perdana remained stable. 

With the limited supply of 1-storey terraced houses on the primary market, the asking price of renovated units on the secondary market  was as high as RM350,000, especially in the Kepayan and Putatan areas.

The prices of 1-storey terraced homes in Taman Sri Kepayan led the way, posting a y-o-y growth of 9%, followed by 5% in Taman Tuan Huat. Q-o-q, Taman Sri Kepayan registered 4% growth while both Taman Tuan Huat and Taman Nelly Ph 9 registered 2% growth.

Sintia says this house type is still highly favoured in the market, especially by low to middle-income buyers.

The condominiums sampled registered an overall average y-o-y growth of 9.82% while q-o-q, this was 2.15%, down 0.34% from 1Q2012. 

Bayshore Condominium, Alam Damai and Radiant Tower lead y-o-y growth with an average capital appreciation of 13% each. The price of units in Alam Damai and Radiant Tower rose to RM400 psf in 2Q while in Bayshore Condominium, this was RM380 psf.

The Peak Condominium in the exclusive residential area of Signal Hill and Marina Court in the heart of the Kota Kinabalu city centre registered the highest quarterly growth of 4.35%, followed by Alam Damai in Damai with 3.9%.

1Borneo Condominium, The Peak Condominium and Likas Square recorded the highest gross yields among the condominiums sampled — 5.75% to 6.25% per annum. The overall average gross yield for 1-storey and 2-storey terraced houses was 4.9% and 4.17% respectively.

In terms of rent, 2-storey terraced houses posted an average 9.25% y-o-y growth, commanding RM900 to RM1,800. The 1-storey terraced houses fetched rents of RM900 to RM1,100 while the condos charged an impressive RM1,500 to RM3,000. High rents were observed in established locations with a good public transport system, for example Signal Hill, Kepayan and Penampang.

Notable developments
Sintia says The Bay Residences is set to add to the mushrooming of condominium developments in the Signal Hill and Likas areas. This high-end project is located in Jalan Tuaran and offers views of the South China Sea.

“Launched in the middle of 2Q2012, the development offers 82 modern condos with sizes ranging from 1,986 to 4,370 sq ft. The selling price is between RM450 psf and RM500 psf. The take-up rate is encouraging with an 83% take-up recorded within a month of its launch.”

Other notable residential developments in Kota Kinabalu include SCP Group’s gated and guarded Damaisari@Kolombong and Taman Rimba by Wah Mie Group.

Damaisari@Kolombong is now open for registration and the price of its 3-storey terraced houses is expected to start at RM800,000. Taman Rimba consists of 2-storey terraced houses in Bandar Sierra in Jalan Tuaran. A typical unit is around 1,357 sq ft and has a price tag of RM398,000 — a new benchmark for residential developments in Jalan Tuaran.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 927, Sep 10-16, 2012