Housing starts rise for first time in seven years

KUALA LUMPUR (Mar 1): Housing starts are marginally higher in 2011, compared to levels seen in 2009 and 2010 — a first in seven years reported, data supplied by the Valuation and Property Services Department (JPPH).

The data, published in a report by CB Richard Ellis (Malaysia) Sdn Bhd (CBRE), mentioned that although the numbers are higher, the growth is still only 40% of 2007 starts at the end of 2011.

The report stated that the Klang Valley's total existing housing stock registered about 1.72 million units — the equivalent of an annual growth rate of 1.4% from 2010 — while new completions stood at 39,400 units. Serviced apartments, apartments and condominiums account for 21.5% of the total existing housing stock in the Klang Valley.

Landed residential properties — such as terraced houses, cluster houses, semi-detached houses and bungalows — accounted for 746,300 units, or 43.4% of the total supply. Serviced apartments and condominiums stood at 369,700 units, or 21.5% of total residential accomodation.

About 75.6% of the total residential units in the Klang Valley reside in Selangor, with the remaining 24.1% located in Kuala Lumpur. Putrajaya accounts for 4,500 units, primarily housing civil servants.

The total residential supply in the Klang Valley since the end of 2008 has grown by 8.8% (approximately 118,200 units), with Selangor growing 9.2% (92,200 units), and Kuala Lumpur growing 7.6% (25,400 units).

Incoming supply (ie, units for which construction permits have been approved) amounts to 177,317 units, while units under contruction stood at 167,367 units — which implies that construction has begun on 94.4% of units with approved construction permits. From this amount, a total of 128,259 units, or 76.6%, are located within Selangor. The new housing starts outnumber the total for 2009 and 2010, but not significantly.

It was reported that out of the nearly 37,200 condominiums and serviced residences in Kuala Lumpur valued at RM350 psf and above, only 24% are considered "luxury" (ie, valued at RM800 psf and above). The remaining supplies are split almost evenly between the mid-range market (at RM350 psf to RM499 psf), and the high-end market (RM500 psf to RM799 psf).

The high-end subsale is less attractive than the new launches, as it has to compete with the attractive incentives offered by developers of new launches. Comparing the prices year-on-year (y-o-y), high-end condominiums have increased slightly in the KLCC, Bangsar and Mont'Kiara areas, ranging between 0.80% to 2.47% since 4Q2010. However, the report further states that there is a decline in capital values for some properties in KLCC and Mont'Kiara of anywhere between 1% to 3% quarter-on-quarter (q-o-q).

The average asking rental rates of luxury condominiums in KLCC, Bangsar and Mont'Kiara declined slightly during 4Q2011 to RM3.42 psf — a decrease of 1.6% q-o-q and 1.4% y-o-y. The average rental rates in KLCC stood at RM3.94 psf/month, while Bangsar and Mont'Kiara stood at RM3.25 psf/month and RM3.08 psf/month respectively. The report said the weak elasing market for larger residential units — especially of the type commonly seen in KLCC and Mont'Kiara — is partly to blame for the decline in asking rental rates.

Several new projects were launched or previewed during the quarter under review. The developments include The Sentral Residences at Kuala Lumpur Sentral (average price RM1,100 psf); Rimbun Condominium at Jalan Ampang Hilir (RM1,100 psf); The Residence Suites of M-City at Jalan Ampang (RM1,000 psf); and the G Residence at Desa Pandan (RM600 psf). Interest is still strong in new launches, the report said, especially for units priced below RM1 million.

Mirage Residence and The Face Serviced Apartment in the KLCC area were soft-launched, the report said. Mirage Residence offers 102 units priced at RM1,200 psf to RM1,600 psf. It offers buyers units with sizes ranging from 850 psf to 3,100 psf, with an average size of 1,400 psf. The Face Serviced Apartment has a price of RM1,350 psf, with units ranging from 850 psf to 1,400 psf. It reportedly has a take up rate of 70%.

Mah Sing Group Bhd secured the sale of 96 units of its serviced residences in Icon Residence Mont'Kiara in October 2011, for a total of RM220.8 million (or RM1,200 psf). The purchaser was a mainland Chinese corporation. Icon Residence Mont'Kiara comprises 260 units in three towers, housing between two to six units per floor, with take-up exceeding 60%.

The report also included that Bank Negara Malaysia (BNM) had revised lending guidelines, leading to more stringent guidelines on loan approvals. This means that the maximum allowable debt service ratio for a loan applicant will be based on net income instead of gross income, to better reflect funds available to the applicant for loan repayment. CBRE expressed fears that this will lead to slower launches and take-ups of more affordable properties, as well as uncertainty regarding how banks would interpret the guidelines in the short term, although it stated that the revision was a sensible measure.