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The Edge Investment Forum on Real Estate 2010
This year will be a good one for the property market, said CB Richard Ellis (Malaysia) Sdn Bhd managing director Allan Soo at The Edge Investment Forum on Real Estate 2010 on April 10.
“It is generally accepted that the market is getting from warm to pretty hot right now,” Soo said in his presentation entitled “Malaysian property market outlook in 2010 — Is the picture clearer?”
Speaking to a more than 500-strong crowd of The Edge readers, Soo, the first speaker of the day, presented a broad overview of the Malaysian residential-property market as well as specific overseas markets, including Singapore, Hong Kong, Australia and the UK.
“The Malaysian property market has certainly been lagging behind others, although we saw a major upturn somewhere in June last year,” said Soo.
The upturn happened sometime in June 2009 with people queuing up at launches to buy what some may deem “expensive” houses in Kuala Lumpur and Penang, he said, referring to past reports in City & Country.
“The same situation was reported in the Hong Kong and Singapore property markets,” he added.
There was another sudden upswing in buying interest after Chinese New Year in February this year, which Soo attributes to pent-up demand accumulated during the economic downturn.
“Somehow, people began rushing to buy properties due to pent-up demand. Last year, we even saw people queuing up for more than 10 days to buy new properties. However, the market is still selective about quality products and good locations,” said Soo, adding that high-end, gated properties were the hot favourites.
“There was a huge interest in gated properties and superlinks, with long queues that made a lot of developers happy last year.”
In addition, banks offered low interest rates and there was a regional push. This has continued until today and 2010 will be a good time to examine the good properties, Soo said.
The prices of landed properties are going up, he said, citing the latest launch of semi-detached homes in Ara Damansara. The units, priced around RM2.8 million, were snapped up.
“The secondary market is also active now, even in KLCC, but this is against the backdrop of a shrinking expatriate tenancy market. Therefore, you will find rents being reduced compared with the previous lease terms. Luxury condos are still being repurchased,” said Soo.
He estimates that there are 30,000 to 50,000 expatriates here in the Klang Valley against 100,000 in Bangkok.
As at 3Q2009, there were 1.63 million housing units in the Klang Valley, with 188,961 units of incoming stock, according to the National Property Information Centre (Napic).
“The population in the Klang Valley is about seven million, with an average of 4.5 to 5 people per house. Thus we need about 1.6 million houses for this population. Considering the current supply of homes, demand and supply is pretty much at an equilibrium,” said Soo.
“In the Klang Valley, there are about 80,000 to 100,000 units of incoming supply every year. At the same time, transactions are hovering at around 80,000. So we are quite balanced in terms of supply and transactions.”
The crash that didn’t happen — 2009
As for the high-end condominiums priced at above RM350 psf, Soo estimates that there would be about 42,245 such units in the Klang Valley by 2012.
“In 1990, there were only 1,344 high-end condos in the market and today we have about 30,628 units,” he said.
While he seems sure about demand, given the rising number of expatriates in the country, Soo pointed out that not all expatriates are willing to pay high rents.
Breaking the facts down, he said there are now 9,444 high-end condos in the Mont’Kiara enclave and 5,671 in the KLCC area.
It is worth noting that the KLCC area will see 4,769 units coming on stream compared with Mont’Kiara’s 3,853 units over the next few years. “There will be more supply coming into KLCC in the next few years compared with Mont’Kiara. Very little supply will be coming into the Bangsar and Damansara Heights markets because there is not much land for development there,” Soo said.
The market seems to be heading for a situation of more supply than demand. So, the question is, will prices hold or come down?
Soo believes the prices of luxury condos peaked in 2007 before the economic downturn in the following years. “We expected a major drop in prices during the downturn, like in Singapore and Hong Kong, but that didn’t happen. You could say that 2009 was the crash that didn’t happen. We experienced a mild drop but prices in places like Bangsar even went up. Mont’Kiara saw a gradual, minor drop but prices at some projects are still relatively high,” he observed.
Prices rose faster than rents
On yields, Soo noted that the average rent for luxury serviced apartments and condominiums in KLCC, Mont’Kiara and Bangsar rose to a peak of RM5 psf in 2007 but have now fallen to about RM4.50 psf, which Soo describes as “quite decent”.
“However, this is not in tandem with selling prices if we take the RM2,000 psf price as a benchmark for RM4.50-psf rent, leading to net yield of lower than 5%. Compared with a few years ago, net yields were between 8% and 12% for condos. This is because prices have risen much faster than rents,” said Soo.
This, however, is not indicative of an unhealthy market as it shows that people are prepared to take lower yields for residential units. “In some ways it’s good because it simply means prices are stronger,” Soo explained.
He said recent launches that did well include The Pearl @ KLCC, which saw a 60% take-up rate for units priced at RM870 psf, and St Mary Residences, which saw a a take-up rate of 50% for units priced at RM1,300 psf.
“These were some of the better ones. Last year, The Light Waterfront in Penang reached about RM600 psf, which is very high as people don’t usually pay so much in Penang. Thus, we can see that the market is recovering,” Soo said.
Market strong in UK, Singapore and Australia
As for the international scene, Soo said the Singapore housing property market recovered in 2009, with prices on an upward trajectory. Units selling at S$5,000 psf attracted a lot of buyers even from Singapore itself, although there was a lot of focus on units below S$3,000 psf, which attracted regional buyers including Malaysians. In fact, half of the buyers were Malaysians while a big percentage was from Indonesia.
In Hong Kong, the luxury-apartment market performed well in 4Q2009 due to strong investor confidence, low interest rates and a lack of new supply. “Just like in Singapore, the prices shot up like crazy,” said Soo.
In Australia, the market is “very hot” right now, with a lot of Malaysian money flowing in, he noted. The Australian market is starting to see an upswing, particularly in Melbourne, Sydney and Perth.
“Today, Asians are buying condominiums in Melbourne, something unheard of a few years back. In addition to that, you are seeing Malaysian developers going into development there. You can expect to see a mini-Malaysia there,” Soo pointed out.
As for the UK, he said there is a bigger tenancy market now, with people there now renting more than buying.
“Housing prices in the UK went down, then went straight up again. Now, there could be a price bubble. We also see a lot of Malaysians buying properties there due to the weaker pound. Proof of this is when we see sales at some launches of UK properties here,” Soo said.
The UK market, he opines, may be overpriced but it is fuelled by strong demand from international buyers.
He also expects more local launches of property in London and Melbourne over the next few months and said these would attract much interest. Investors are diversifying into foreign residential properties as currencies weaken, he added.
This year will be a good one for the property market, said CB Richard Ellis (Malaysia) Sdn Bhd managing director Allan Soo at The Edge Investment Forum on Real Estate 2010 on April 10.
“It is generally accepted that the market is getting from warm to pretty hot right now,” Soo said in his presentation entitled “Malaysian property market outlook in 2010 — Is the picture clearer?”
Speaking to a more than 500-strong crowd of The Edge readers, Soo, the first speaker of the day, presented a broad overview of the Malaysian residential-property market as well as specific overseas markets, including Singapore, Hong Kong, Australia and the UK.“The Malaysian property market has certainly been lagging behind others, although we saw a major upturn somewhere in June last year,” said Soo.
The upturn happened sometime in June 2009 with people queuing up at launches to buy what some may deem “expensive” houses in Kuala Lumpur and Penang, he said, referring to past reports in City & Country.
“The same situation was reported in the Hong Kong and Singapore property markets,” he added.
There was another sudden upswing in buying interest after Chinese New Year in February this year, which Soo attributes to pent-up demand accumulated during the economic downturn.
“Somehow, people began rushing to buy properties due to pent-up demand. Last year, we even saw people queuing up for more than 10 days to buy new properties. However, the market is still selective about quality products and good locations,” said Soo, adding that high-end, gated properties were the hot favourites.
“There was a huge interest in gated properties and superlinks, with long queues that made a lot of developers happy last year.”
In addition, banks offered low interest rates and there was a regional push. This has continued until today and 2010 will be a good time to examine the good properties, Soo said.
The prices of landed properties are going up, he said, citing the latest launch of semi-detached homes in Ara Damansara. The units, priced around RM2.8 million, were snapped up.
“The secondary market is also active now, even in KLCC, but this is against the backdrop of a shrinking expatriate tenancy market. Therefore, you will find rents being reduced compared with the previous lease terms. Luxury condos are still being repurchased,” said Soo.
He estimates that there are 30,000 to 50,000 expatriates here in the Klang Valley against 100,000 in Bangkok.
As at 3Q2009, there were 1.63 million housing units in the Klang Valley, with 188,961 units of incoming stock, according to the National Property Information Centre (Napic).
“The population in the Klang Valley is about seven million, with an average of 4.5 to 5 people per house. Thus we need about 1.6 million houses for this population. Considering the current supply of homes, demand and supply is pretty much at an equilibrium,” said Soo.
“In the Klang Valley, there are about 80,000 to 100,000 units of incoming supply every year. At the same time, transactions are hovering at around 80,000. So we are quite balanced in terms of supply and transactions.”
The crash that didn’t happen — 2009
As for the high-end condominiums priced at above RM350 psf, Soo estimates that there would be about 42,245 such units in the Klang Valley by 2012.
“In 1990, there were only 1,344 high-end condos in the market and today we have about 30,628 units,” he said.
While he seems sure about demand, given the rising number of expatriates in the country, Soo pointed out that not all expatriates are willing to pay high rents.
Breaking the facts down, he said there are now 9,444 high-end condos in the Mont’Kiara enclave and 5,671 in the KLCC area.
It is worth noting that the KLCC area will see 4,769 units coming on stream compared with Mont’Kiara’s 3,853 units over the next few years. “There will be more supply coming into KLCC in the next few years compared with Mont’Kiara. Very little supply will be coming into the Bangsar and Damansara Heights markets because there is not much land for development there,” Soo said.
The market seems to be heading for a situation of more supply than demand. So, the question is, will prices hold or come down?
Soo believes the prices of luxury condos peaked in 2007 before the economic downturn in the following years. “We expected a major drop in prices during the downturn, like in Singapore and Hong Kong, but that didn’t happen. You could say that 2009 was the crash that didn’t happen. We experienced a mild drop but prices in places like Bangsar even went up. Mont’Kiara saw a gradual, minor drop but prices at some projects are still relatively high,” he observed.
Prices rose faster than rents
On yields, Soo noted that the average rent for luxury serviced apartments and condominiums in KLCC, Mont’Kiara and Bangsar rose to a peak of RM5 psf in 2007 but have now fallen to about RM4.50 psf, which Soo describes as “quite decent”.
“However, this is not in tandem with selling prices if we take the RM2,000 psf price as a benchmark for RM4.50-psf rent, leading to net yield of lower than 5%. Compared with a few years ago, net yields were between 8% and 12% for condos. This is because prices have risen much faster than rents,” said Soo.
This, however, is not indicative of an unhealthy market as it shows that people are prepared to take lower yields for residential units. “In some ways it’s good because it simply means prices are stronger,” Soo explained.
He said recent launches that did well include The Pearl @ KLCC, which saw a 60% take-up rate for units priced at RM870 psf, and St Mary Residences, which saw a a take-up rate of 50% for units priced at RM1,300 psf.
“These were some of the better ones. Last year, The Light Waterfront in Penang reached about RM600 psf, which is very high as people don’t usually pay so much in Penang. Thus, we can see that the market is recovering,” Soo said.
Market strong in UK, Singapore and Australia
As for the international scene, Soo said the Singapore housing property market recovered in 2009, with prices on an upward trajectory. Units selling at S$5,000 psf attracted a lot of buyers even from Singapore itself, although there was a lot of focus on units below S$3,000 psf, which attracted regional buyers including Malaysians. In fact, half of the buyers were Malaysians while a big percentage was from Indonesia.
In Hong Kong, the luxury-apartment market performed well in 4Q2009 due to strong investor confidence, low interest rates and a lack of new supply. “Just like in Singapore, the prices shot up like crazy,” said Soo.
In Australia, the market is “very hot” right now, with a lot of Malaysian money flowing in, he noted. The Australian market is starting to see an upswing, particularly in Melbourne, Sydney and Perth.
“Today, Asians are buying condominiums in Melbourne, something unheard of a few years back. In addition to that, you are seeing Malaysian developers going into development there. You can expect to see a mini-Malaysia there,” Soo pointed out.
As for the UK, he said there is a bigger tenancy market now, with people there now renting more than buying.
“Housing prices in the UK went down, then went straight up again. Now, there could be a price bubble. We also see a lot of Malaysians buying properties there due to the weaker pound. Proof of this is when we see sales at some launches of UK properties here,” Soo said.
The UK market, he opines, may be overpriced but it is fuelled by strong demand from international buyers.
He also expects more local launches of property in London and Melbourne over the next few months and said these would attract much interest. Investors are diversifying into foreign residential properties as currencies weaken, he added.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 802, Apr 19 - 25, 2010
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