City&Country: Slowdown but prices won’t fall

Be selective, investors told

No thanks to constrained lending and a still uncertain global economy, the current environment is posing a challenge to local property investors and players alike. The property market is expected to see slower growth this year, although prices are not likely to fall, especially in the prime areas where demand remains high.

Real estate experts at The Edge Investment Forum on Real Estate 2012, which was held on April 28 with the theme “Investing in uncertain times”, painted a subdued picture of the property sector in the days ahead, citing the impact of the government’s anti-speculative measures and world economic uncertainties. Nevertheless, there are some good investments out there and the advice to investors is: take a long-term view and be selective.

The forum began with two lively sessions with speakers Previndran Singhe, the CEO of Zerin Properties who gave an overview and outlook of the Malaysian property market, and Ho Chin Soon, the director of Ho Chin Soon Research Sdn Bhd who looked at the upcoming transport infrastructure in the country in his talk entitled “Infrastructure growth in Greater Kuala Lumpur, Iskandar and Penang: Where to put your money”.

First speaker Previndran drew laughter from the audience with his presentation, but his message was clear: investors have to be cautious about the days ahead as the property market will see moderate growth in the coming months. “There may be a 15% to 20% drop in transactions but property prices will hold.

“The key to investing over the next few years would be ‘long term’. I don’t think there will be short-term play,” he said, giving the names of areas investors could look at, including Nusajaya and Iskandar in Johor; Penang; Melaka; Kota Kinabalu; and Kajang, Jalan Ipoh and Selayang in the Klang Valley.

Ho opined that the new major infrastructure projects in Penang, Greater Kuala Lumpur and Iskandar Malaysia presented several investment hot spots for prospective real estate investors. The projects include new highways, bridges and tunnels as well as the mass rapid transit line coming up in Greater Kuala Lumpur. Ho also pointed out four new highways coming up within Greater Kuala Lumpur, namely the Damansara-Shah Alam Highway, the Kinrara-Damansara Expressway, the Serdang-Kinrara-Putrajaya Expressway and the Sungei Besi-Ulu Kelang Elevated Expressway. Properties in areas served by these new highways would benefit from better accessibility and connectivity.

In Johor, he named Nusajaya, Danga Bay and their respective vicinities as new hot spots, thanks to the new Coastal Highway. Ho also predicted better prospects for Desaru’s tourism projects due to the Senai-Desaru Expressway. Meanwhile in Penang, there is the Second Penang Bridge that will be completed soon.

The forum also heard Christopher Boyd, executive chairman of CB Richard Ellis (Malaysia); Datuk Ahmad Zaini Othman, Malaysia Building Society Bhd (MBSB) president and CEO; and Daniel Lim, COO of Sunway Group’s property development division, speak at a panel discussion with the theme “Buy now or wait?”

Focusing on the Klang Valley residential market, Boyd told investors to make selective purchases in the landed homes segment.

“Landed home prices in the Klang Valley have generally doubled in value in the last 10 years or so,” he said, referencing the prices of 2-storey link houses in Bandar Utama that have appreciated 80% or an average of 10% per annum between 2004 and 2011. Hence, if one can find areas that have not seen an average growth of 10% per annum in the last 10 years, they could be ready for growth. Boyd named northeast Kuala Lumpur such as Gombak and areas between Melawati and Setapak as some of those with potential.

Ahmad Zaini said property investors should look beyond the local economy to other parts of the world. “Study the unemployment and production trends. We no longer live in a fish bowl economy.”
He also warned that the current uncertain global environment and Bank Negara Malaysia’s guidelines on responsible financing, which dictates banks to assess loan applications based on net disposable income, can have an adverse effect on the local economy.

As the current investment climate has caused investors to be cautious and developers to be selective about launches and projects, in the long term, this could crimp the property sector and eventually the economy. “The property sector plays an important role in the growth of our economy. We have to monitor the ripple effect closely,” said Ahmad Zaini.

“In this environment, only the strong developers will survive. You will have to be careful because projects could fail.”

Lim felt that property prices would continue to rise due to increasing construction costs as land and building materials become more expensive. He added that based on the young demograpics of our population, demand will continue to exceed supply in housing.

Held at the Sime Darby Convention Centre in Bukit Kiara, Kuala Lumpur, the forum attracted more than 600 people despite road closures in the Klang Valley due to the Bersih 3.0 rally that day. Organised exclusively for The Edge readers, the sixth annual event was presented by MBSB and supported by Sunway Property.

In her opening speech, The Edge managing director Au Foong Yee had this to say: “Real estate is a hot topic. Astute investors, and I am sure there are many among us this morning, will tell you that there is no such thing as a good or bad time to invest in property. Any time is a good time if you know how.”

Forum attendees also took the opportunity to check out the latest products at the booths of Ho Chin Soon Research, MBSB and Sunway Property.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 909, May 7-13, 2012

Looking for properties to buy or rent? With >150,000 exclusive listings, including undervalued properties, from vetted Pro Agents, you can now easily find the right property on Malaysia's leading property portal EdgeProp! You can also get free past transacted data and use our proprietary Edge Reference Price tool, to make an informed purchase.