Property: Spending slows but values hold steady

The market is abuzz with the recent announcement of the imposition of a 5% real property gains tax (RPGT) from Jan 1, 2010. Marlene Padan, vice-president of research at Regroup Associates, in presenting The Edge/Regroup Klang Valley Housing Property Monitor for 3Q2009, however, is unsure how this will affect investor sentiment, although she observes that real estate agents are detecting some anxiety among some sellers who are keen to reduce prices if the deal can be completed before year-end. “The impact [of the RPGT] will not be immediate and market reaction to this is better assessed over the next six months,” she says. She adds that although the rationale behind the RPGT is to partly help curb speculation, the waiver of the RPGT in 2007 was seen as a form of savings by investors, who now have to contend with lower earnings than before.

Allan Soo, managing director of Regroup Associates, agrees that it is still too early to say how the RPGT will affect the market. “At the very least, investors will be scared off as there does not seem to be any consistency in the policy guidelines,” he says. Even so, Soo’s advice to investors is that it is a good time to buy property. “When the market is slow, sellers may be more desperate. There may be a rise in yields, so prices may be at a discount.”

He also advises investors to go for long-term assets instead of looking for short-term, speculative gains considering that prices in 2010 should hold steady.

However, sellers with property in good locations may want to hang on. “In some cases, the prices may still go up as the demand seems to be selective, so waiting for a better market is not a bad idea despite the RPGT,” says Soo.

Slowing Activity
Meanwhile, the positive sentiment felt in the Klang Valley property market in 2Q2009, which spilled over into 3Q2009, was tapering off at the end of the quarter and the months ahead may be a slow period again for the property sector.

At the beginning of 3Q2009, many real estate agents were inundated with enquiries, while transactions saw mainly local buyers. “Driving demand was the perceived uptrend in the economy at that time and the attraction of low finance rates,” says Padan.

“Some foreign parties have indicated interest in Malaysian property possibly because they want to snap up the bargains before the price restriction for foreign acquisitions is increased to a minimum RM500,000 per unit in 2010,” she adds.

However, things slowed somewhat at the tail end of 3Q2009 and this probably will result in a quiet 4Q2009. “I think 4Q2009 will be slow as the last quarter has always been linked to the holiday and festive seasons,” says Soo.

“Many are hoping that 1Q2010 will be better as the stock market may stage another rally. I think the market will move then,” says Soo, adding that next year is tough to predict as the global economic picture  is still unclear. However, he notes that if there is liquidity in the market and the government continues with measures to stimulate the economy, the market may respond positively.

“From a regional point of view, Malaysia still looks like a good hunting ground for institutional investors and we are seeing more serious enquiries coming back this time round for residential assets. This could be translated into 2010’s deals of the year,” says Soo.

Rents
House rents in the areas surveyed have remained mostly unchanged from 2Q2009 to 3Q2009. “Across-the-board rents in established locations are still steady and this is likely to continue into 4Q2009,” says Padan. “Unless the unit has been vacant for a long time or is in poor condition, we do not see landlords buckling or significantly reducing rents.”

Furthermore, Padan expects landlords to see fewer enquiries towards end-2009 due to the school and public holidays.

Performance in 3Q2009
In 3Q2009, established locations, such as Petaling Jaya and Cheras, were in demand. In general, prices in Kuala Lumpur City Centre remained stable. Owners in the city centre hung on to their properties and did not reduce prices. Moreover, areas such as Puchong and Putra Heights, where the extended light rail transit line runs through, saw an increase in enquiries and a noticeable hike in asking prices for both residential properties and shops. Auctions were also rather active. “Auctioned properties in good locations have seen bid prices exceed the reserve price, on some occasions, up to 20% above market price,” says Padan.

In September, the bullish run slowed. “Investors turned cautious and the quarter ended on a quieter note. Compared to the preceding months, there appeared to be another cooling-off where sentiment was less buoyant and the news from the West less encouraging,” says Padan. Adds Soo, “The slowdown in the property market has to do with a general lack of clarity in the global markets.”

While transactions in June in selected areas featured higher-end products and larger sizes, third-quarter action saw lower-range products being snapped up.

“In Mont’Kiara, smaller condominiums of 1,200 to 1,400 sq ft saw sales and buyers included owner-occupiers and investors. There were not many foreign investors compared with the June period,” says Padan.

One reason investors have put the brakes on their spending recently are the competitive offers in the UK, Australia and Singapore. Yields there, says Padan, are higher and the exchange rates, especially in the UK, are favourable. “Even where it is less favourable, hedging against further increases in the Aussie and Singapore dollars were a major consideration for investors,” she adds.

Terraced houses
Looking at 1-storey terraced houses sampled for the housing property monitor, there was hardly any price growth from 2Q2009 to 3Q2009 except for houses on Jalan Aminuddin Baki in Taman Tun Dr Ismail (TTDI), which went up by 2.13%.

Compared with the same period last year, prices in TTDI’s Abang Haji Openg and Jalan Aminuddin Baki have risen 4.78% and 2.13% respectively. Houses in Bangsar Park also saw a 1.85% increase in price the past one year.

However, prices of 1-storey terraced houses were down from a year ago in TTDI’s Burhanuddin Helmi and Puchong Perdana (down 2.17% and 2.03% respectively).

Prices of 2-storey terraced houses remained stable from 2Q2009 to 3Q2009 except for Bandar Utama’s BU1 and BU12 that increased 1.89% as did houses in Puchong Jaya (1.72%). However, the surveyed houses generally showed price appreciation from a year ago in all areas except in Puchong’s Pusat Bandar Puchong (Taman Wawasan). Bangsar Baru saw the highest price increase, with 6.74% and the lowest was TTDI’s Jalan Datuk Sulaiman (0.65%).

Prices of high-rise homes remained unchanged from 2Q2009 to 3Q2009. Year-on-year, TTDI’s The Plaza dropped 1.43% as did KLCC’s Parkview Serviced Apartments (1.43%), Stonor Park (4.76%) and Marc Serviced Residence (10%). Prices of other properties either rose or remained unchanged.




This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 780, Nov 9-15, 2009.