Housing market set for a period of moderation

KUALA LUMPUR: The greater KL housing market is poised for stabilisation, with the significant growth in capital values seen since 2009 being replaced by an era of more gradual increases, according to CB Richard Ellis Malaysia’s (CBRE) latest market view report.

CBRE partly attributed the growth of capital values in many areas of Greater KL since 2009 to a decline in new starts. The supply growth of residential properties in Greater KL since the end-2012 is less than 1%, which has been a wider slowdown since 2006.

Due to the rapid growth of KL and its suburbs, development land has become increasingly scarce, driving up the capital values of properties even further. The transaction value of a 2- and 3-storey semi-detached house or bungalow averages at RM2 million per unit in KL.

The second quarter of 2013 (2Q13) saw an increase in new developments, with 196,092 units in incoming supply, of which 95.1% is under construction. CBRE suggests that this increase in new starts will moderate the housing market in the future.

While development in the overall market has been slow, there has been a steady increase in luxury high-rise projects (valued at RM800 psf and above) and this trend is expected to continue. It is estimated that as many as 6,484 high-end condominium units will be completed in KL during the second half of 2013 (2H13). Upcoming developments in the KLCC vicinity include the anticipated KL Trillion serviced apartments by Sim Lian Group Ltd and Verve Suites KLCC by Bukit Kiara Properties Sdn Bhd.

The secondary market remained moderate in 1H with a slight increase in the average price for secondary transactions of condominiums in KLCC, Bangsar and Mont’Kiara. This trend is expected to continue in 2H. Despite the ongoing speculation that Bank Negara Malaysia may restrain the developer interest bearing scheme (DIBS), which will slow down sales in the primary market, CBRE believes there will only be a slight boost in the sale of secondary units.

Total loan applications for purchases of residential properties in 1H reached a record high of RM112.7 billion, an increase of 16.5% from the previous year. Loan approval rates also reached an all-time high of 49%, a drastic increase of 21.9% from 1H12.

Among the newly launched projects in 1H are the Four Seasons Place at KLCC by Venus Assets Sdn Bhd, The Horizon Residences in Jalan Tun Razak by Hap Seng Land Sdn Bhd and Pavilion Hilltops in Mont’Kiara by Permata Cermat Sdn Bhd, a joint venture between Pavilion Group and Kuwait Finance House.

Most of the new launches recorded strong take-up rates and CBRE may see a new price benchmark with Four Seasons Place being priced at an average of RM2,750 psf and Pavilion Hilltop in Mont’Kiara reported to reach RM1,000 psf.

CBRE Malaysia is a consultancy firm that compiles market research on local real estate conditions and trends. The market view report was compiled on the greater KL area for 2Q13.

This article first appeared in The Edge Financial Daily, on October 11, 2013.

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