City&Country : Most buying for own occupation

Auctioneers report that business has been booming in the Klang Valley in the first six months of the year against a backdrop of the economic turmoil in Europe and the stringent lending environment locally.

Bank Negara Malaysia’s new lending guidelines have taken a toll on many speculative investors. Auctioneers reveal that the bulk of new purchases are for own occupation compared with in the past where a larger portion was for investment purposes.  Landed homes priced below RM500,000 remain a favourite. Apartments and flats priced below RM250,000 are faring equally well, with auctioneers noting that interest has spilled over into the outer fringes of the Klang Valley.

According to Auction Data Sdn Bhd, about 25,264 properties were registered for auction in 1H2012 nationwide, with almost half of these located in the Klang Valley (10,603 units).

Landed homes, especially terraced homes in gated and guarded neighbourhoods, remain the most popular. “If we do have a house to be auctioned in any of the mature and well-planned townships in the Klang Valley, the turnout would be really good and it would usually be snapped up very quickly,” says Danny Loh, an auctioneer at Property Auction House Sdn Bhd.

“Due to the lack of land in Kuala Lumpur and its surrounding suburbs, more people are looking to purchase properties in areas further away from the city centre, such as Cheras, Kajang and Klang,” says Abdul Hamid P V Abdu, the founder of Ehsan Auctioneers.  Loh agrees, saying that the buying interest has spilled into areas as far as Rawang and Serendah.

“ The starting prices of new properties at recent launches were all above RM300,000. Affordability has become a huge issue among the low to middle-income earners. Those earning below RM3,000 who have not been able to successfully secure a home loan [in the primary or secondary markets] have turned to the auction market,” he says. Hamid adds that the lack of homes catering for the low-to-middle incomers in the primary market can be felt as far away as Bukit Beruntung. “Recently, we sold more than 90% of the 76 apartments that were put up for auction in the area.”

J Thilagamraj Auctioneers Sdn Bhd managing director Raj Yogan Pillai observes that auctioneers have established that there are generally three kinds of buyers now. “Approximately 70% of them are buying to keep or to live in. This is followed by 20% of property investors who are acquiring units for rental yields. Last but not least, we have the smallest category — buyers who plan to refurbish and then sell the units for a profit when the time is right,” he says.

However, the market for upscale condominiums has been weak, says Loh, who explains that interest in such properties has been steadily dropping since last year. He expects this to continue and possibly worsen as more new condo projects are completed by year-end. “Investors are now staying away from such properties as it is very hard to get tenants nowadays,” he explains.

The auctioneers have a positive outlook on the auction market for the rest of the year despite the coming general election and uncertain global economic conditions. Recent notable transactions included an upscale 3,010 sq ft condominium in Taman Nusa Tropika, Ampang, which was sold at its fourth auction for RM1.5 million, RM100,000 higher than its reserve price. Another freehold 1,224 sq ft condo at Vista Komanwel in Bukit Jalil with a reserve price of RM145,000 was transacted at RM370,000.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 917, July 2-8, 2012