KUALA LUMPUR: The mid -to high-end residential market in Kuala Lumpur is expected to “self-correct” in the next six to 12 months, with the impending implementation of more cooling measures aimed at curbing speculative activities, said international property consultant Knight Frank Malaysia.
“Overall, the slew of cooling measures is anticipated to dampen speculative activities,” said Knight Frank, referring to the increase in real property gains tax (RPGT) for disposals made within five years of the purchase of the property and the ban on Developer Interest Bearing Scheme (DIBS).
Other cooling measures include increasing the minimum price for properties to be purchased by foreigners from RM500,000 to RM1,000,000, and requiring banks to give out property loans based on net selling price (after discounts and rebates) rather than on gross selling price.
“While we expect lower volume of transactions going forward, property prices, in particular for landed residential units, are expected to remain competitive with positive growth for those located in selected, established or upcoming areas, albeit at a slower pace — mainly due to limited existing or incoming supply, and higher land cost,” it said in its report Real Estate Highlights for Kuala Lumpur, Penang and Johor Baru for the second half of 2013.
The global property consultancy firm also noted that more property developers are now adopting a “wait-and-see” approach to evaluate the impact of these new cooling measures.
“Going forward, we expect to see developers offering greater discounts and more freebies in view of the abolishment of DIBS in order to push sales and remain competitive in the primary market.
“Some developers are also starting to focus on township developments in upcoming suburban locations, such as Rawang and Kajang in Selangor, where demand for housing with affordable price remains strong.
”We expect to see more housing developments in these areas, particularly those with potential access to public transport links such as the light rail transit extension and the upcoming Klang Valley mass rapid transit lines,” it said.
Meanwhile, Knight Frank believes that landed houses priced between RM600,000 and RM800,000, as well as high-rise residential properties priced below RM500,000 will continue to attract strong demand, particularly from first-time home buyers and upgraders.
The overall outlook is expected to remain challenging, impacted by the various cooling measures, softening demand and the expectation of interest rate hike next [this] year which will dampen sentiment,” it said.
On the Kuala Lumpur office market, Knight Frank sees tenants being spoilt for choice as supply continues to outstrip demand, with landlords offering attractive incentives to retain existing tenants and attract new tenants to maintain and improve their levels of occupancies.
It also noted that several property developers have adopted a cautious stance by deferring the construction of their office projects, with work to commence only when they have secured pre-leasing commitment from potential anchor tenants.
“(But) the concerted efforts by InvestKL to attract multinational corporations (MNCs) to set up their regional hubs in Kuala Lumpur are expected to help cushion the high level of office supply. As at November, nine MNCs had committed to set up or expand their operations in Malaysia,” it added.
Additionally, Knight Frank has a cautious optimism on the Klang Valley retail property sector as consumers are expected to tighten spending ahead of further government subsidy rationalisation measures as well as a hike in electricity tariff and toll rates.
Nevertheless, the Kuala Lumpur hotel market is set to remain resilient with concentrated efforts from the government to ensure that the tourism sector remains at the forefront of the country’s economic development.
On Penang’s property market, Knight Frank said it is expected to remain in its consolidation mode.
“With the new measures introduced in Budget 2014, the high-end residential sector is expected to be affected to a higher degree while the commercial sector should remain relatively stable.
“On the other hand, the impending opening of the Second Penang Bridge and the Penang government’s efforts to spur developments in the southern parts of both the island and the mainland will very likely lead to brighter prospects in these locations,” it added.
The Johor Baru property market is also expected to remain firm in the medium term with more Malaysians and Singapore-based developers expected to venture into Iskandar Malaysia.
“Development activities will continue to be concentrated within the city centre, Danga Bay, Nusajaya and Medini locality within Zones A and B of Iskandar.”
Knight Frank said besides high-end condominiums and apartments, the Iskandar region is expected to see more retail malls and purpose-built offices coming up in the skyline.
This article first appeared in The Edge Financial Daily, on January 07, 2014.
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