Klang Valley housing rebounds

After a flat 1Q2009, the secondary housing market in the Klang Valley has taken a sort of a U-turn at end-2Q2009. "Property prices spiralled downwards at the start of the second quarter, with prices taking a dip in April and May before picking up again in June," says Marlene Padan, vice-president of research at Regroup Associates.

So far, the positive strides experienced at the tail end of 2Q seem to be continuing. "There has been significant improvement in investor sentiment entering 3Q," says Padan, who presented The Edge/Regroup Klang Valley Housing Property Monitor for 2Q2009.

"Real estate agents are getting an increasing number of enquiries and viewings, and it is the view that sentiment will remain positive until the year-end as more good news comes out," she adds.

The upswing in 2Q is attributed to several factors, notes Allan Soo, managing director of Regroup Associates. He says the encouraging numbers is the result of consumers seeing positive economic recovery in the news, the rallying stock market, a pent-up demand for bargains and the improving regional economies.

Soo advises those looking for properties to invest in to keep expectations low. "Prices are not coming down, so you can't really expect too much of a discount," he says.

In terms of yields for landed properties, Soo says they have been low at sub-5%. Yields for high-rise condominiums also plunged recently as prices shot up post-2005.

"If you had bought luxury condos in KLCC or Mont'Kiara, your yield would have been sub-6% now. The older areas like Bangsar, Damansara Heights and some parts of Mont'Kiara would be above 6%," he points out.

Soo advises homebuyers to look into gated communities since security is a major concern nowadays. However, if location is a priority, then traditional hotspots are still best as prices are firm, and in some cases, still going up. Nevertheless, there aren't any bargains on the market at the moment, he says.

Bargain hunters
Padan notes that bargain hunters are in search of good deals, hence property auctions by banks are seeing high participation rates, especially for landed properties in popular areas, which are sold at bidding prices above their market value.

"The increase in buyer interest was likely a result of improved customer sentiment following the improvement in the stock market and further interest rate cuts, with banks offering financing as low as BLR -2.2%, and more attractive rates for larger loan amounts," says Padan.

"With the lower bank interest rates, investors are looking elsewhere to invest their money and some are turning to properties with very specific requirements on expected yields and preferred established locations like Petaling Jaya and Cheras."

Although buyers are still cautious, a rental upswing was felt in the Klang Valley, with real estate agents noting an increase in enquiries and viewings since mid-June. "In 2Q2009, the bulk of deals closed were rents as opposed to sales," says Padan.

"Rents were noted to be largely local. In the luxury category, they were mostly to expatriates, although the influx of expatriates has slowed or been delayed," she adds.

Landed homes
Terraced houses saw limited movement in rent and capital values, but the action was noticeable for high-rises. For 1-storey terraced houses, most properties were unchanged in terms of rent and capital values.

Bucking the trend was Bangsar Park and Lucky Garden, which saw rents moving up from the 1Q figure of RM1,400 per unit per month to RM1,500. Generally, rents at these two locations were RM1,500 per month from mid-2006 to mid-2008, and only saw a slight dip as a result of the economic slowdown. However, the popularity of these two locations seems to have put it back on the radar screen of potential tenants.

Puchong Perdana saw rental rates drop from RM600 in 1Q2009 to RM500 in 2Q2009, continuing the slide from a high of RM700 per month in 1Q2008.

With regards to capital values, Lucky Garden saw a drop of 2.65% from RM565,000 in 1Q to RM550,000. All other locations remained unchanged.

Property stalwarts are not experiencing great fluctuations. "In areas like Bangsar, Damansara Heights and Taman Tun Dr Ismail (TTDI), prices have not dropped substantially and in some areas, they increased," says Padan. "This is particularly the case of a handful of 1 and 1½-storey terraced houses scattered around Bangsar and TTDI that are currently asking for between RM500,000 and RM550,000. A renovated unit is asking for more than RM700,000," she says, adding that rents for 1-storey dwellings are strong and are taken up quickly.

2-storey homes
In the 2-storey terraced house category, only a handful of locations experienced an increase in rent and capital values in 2Q2009, compared with 1Q2009. Rental rates in TTDI's Athinahapan area rose from RM1,700 per unit per month in 1Q2009 to RM1,800 in 2Q2009, Bandar Utama 1 from RM1,400 to RM1,600 and USJ 6 from RM750 to RM800.

As for capital values, a significant jump was seen in Bangsar, where values rose 7.95% to RM950,000 in 2Q2009 from the previous quarter's RM880,000. This was close to its peak of RM985,000 in 1Q2008. Bandar Sri Damansara, USJ 6 and Bandar Puchong Jaya also experienced price increases of between 3% and 5%.

High-rise apartments
The high-rise market saw rents in most areas increasing slightly, although the bigger gainers were TTDI's The Residence and The Plaza where its 1Q rate of RM3,000 rose to RM3,500 in 2Q. Other areas that experienced a rent rate hike were Villa Flora, Kiara Park, Mont'Kiara Sophia, Lanai Kiara, Sri Penaga, Cascadium and Plaza Damas' Mayfair.

As for capital gains, TTDI's The Residence saw a significant jump of 6.62% from RM680,000 in 1Q2009 to RM725,000 in 2Q2009. Other gainers were Villa Flora, TTDI's The Plaza, Good Year Court 6-10 and Sri Penaga. The only drop in the list (see table) was Stonor Park from RM2,050,000 to RM2,000,000.

Generally, 2Q2009 saw prices of premium products remain stable, even in the KLCC area. "The values at premium properties like One KL, Troika and units with a KLCC view are holding up well," says Regroup's Padan.

This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 768, Aug 17-23, 2009.