Property market to moderate in 2011

KUALA LUMPUR: The property market was sizzling hot last year with the value of transactions surpassing RM100 billion, the first-time ever in history. Both transaction volume and value enjoyed double-digit growth of 11.4% and 32.4% respectively in 2010.

Deputy Finance Minister Datuk Donald Lim Siang Chai expects property prices to continue to climb, but he also foresees buying to moderate this year as government measures to curb speculation take effect.

Lim estimates housing prices to rise 10% to 20% this year.

While noting that there is no property bubble, Lim stressed that the government would continue its efforts to prevent the local real estate market from inflating a bubble.

"We observed that prices went up last year, though construction activity was reduced. The government is taking initiatives to ensure prices don't go too high," Lim said on Wednesday at the launch of Malaysia's 2010 property market report.

"We are taking measures to ensure that the property bubble doesn't happen in Malaysia," he said.

The deputy minister attributed the brisk property sales to the ease in getting mortgages, noting that 36% of total loans distributed by banks were housing loans with an accumulated value of RM240 billion.

Apparently, the property market charted high growth exceeding 15% in the first half of 2010, in terms of sales volume. The first quarter registered a 16.2% growth and 18.1% in 2Q.

Nonetheless, the growth lost some steam in the second half of the year with 3Q recording growth of 8.5% and 4.8% in 4Q.

The National Property Information Centre (Napic) said the slowdown in new purchases was partly due to the increase in the average lending rate (ALR) implemented by Bank Negara Malaysia later in the year.

Napic director Datuk Abdullah Thalith Md Thani said, "This is the first time the property market has surpassed the RM100 billion mark in terms of transaction value.

"This is a significant improvement for the property market given that in 2008 and 2009, the subprime crisis permeated throughout the world."

He added that the rise this year would be smaller.

In terms of volume, upward trends were registered across the board with the highest increase of 22.1% recorded by the industrial sub-sector. This was followed by development land (20.8%), commercial (19.4%), agricultural (16.8%) and residential sub-sector (7.2%).

Residential property continued to dominate the overall market, capturing 60.2% of total volume and 47.1% of the value of transactions. The year saw 226,874 residential property transactions worth RM50.65 billion.

Both volume and value charted an increase of 7.2% and 21%, respectively, compared with that in 2009, Napic said in the annual report.

According to Napic, the Malaysian All House Price Index, which measures residential property prices, rose 8.9 points to 140.7 in 2010, with Kuala Lumpur, Selangor and Sarawak recording the highest house prices.

The average price of a house rose to RM199,636 from RM184,574 in 2009.

Houses priced below RM150,000 represented 57.1% of total residential transactions, with the bulk of 17.3% covered by residential properties priced between RM100,000 and RM150,00.

Despite the active property market, the take-up rate for new launches of residential units fell to 45.7% or 21,799 units in 2010 from 47,698 compared with 48% the year before. Selangor had the highest number of new launches, followed by Johor and Perak.

Going forward, Napic said for 2011, it expected the property market to benefit from the various economic initiatives undertaken by the government.

Projects such as the Kuala Lumpur International Financial District (KLIFD), mass rapid transit (MRT) in Greater KL, Warisan Merdeka, the development of the Malaysian Rubber Board land in Sungai Buloh and the redevelopment of Pudu prison land are expected to have positive spillover effects.

Napic added that foreign purchasers are expected to benefit from the high-end housing segment.

"Given that foreigners are only allowed to purchase commercial and residential properties priced above RM500,000, it is anticipated that more transactions will be recorded in the high-end housing units particularly in well sought-after neighbourhoods" said Napic.

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