Secondary market continues to be stable

THE primary market for real estate was healthy when various incentives, such as the developer interest bearing scheme (DIBS), were available. However, after the abolition of DIBS and the tightening of housing loans, people have been holding back on purchasing new homes, say property consultants.

The primary market, which accounts for 70% of total property transactions, started to slow down after the federal government announced the cooling measures in November last year to reduce speculative activity, and weakened further after Bank Negara Malaysia recently increased the base lending rate (BLR) to 3.25%.

“Although the secondary market also saw a slowdown, it was marginal. This segment of the market continues to be stable,” says Zerin Properties CEO and founder Previndran Singhe.

Metro Homes Sdn Bhd director See Kok Loong believes the 0.25% rise in BLR is too small to adversely affect the market. “There has been no movement in the BLR for about three years. I believe the impact is minimal. Moreover, the secondary market has always attracted owner-occupiers and long-term investors.”

Sub-sale home prices

Property consultants expect transactions on the secondary market to increase 10% to 15% from last year.

Siva Shanker, CEO of PPC International Sdn Bhd and president of the Malaysian Institute of Estate Agents, notes that in 2012, the transaction volume nationwide was 427,520 with a total value of RM142.8 billion. Last year, the volume dropped about 10% to 381,180, although the value increased 7% to RM152.4 billion. “From this, we see that even though demand is slowing down, the average asking price increases about 10% per annum.”

According to Siva, secondary market homes are popular in Puchong, Cheras and Kajang. “Although these places are known for their heavy traffic, people still want to move there because the prices of 2-storey homes are much more affordable than elsewhere in the Klang Valley. In Puchong and Cheras, 2-storey terraced homes are going for between RM600,000 and RM700,000, but in places that are closer to the city, like Bangsar and Mont’Kiara, such homes are priced above RM2 million.”

He believes that with more people migrating to the city, homebuyers are willing to tolerate long distances. “Look at Semenyih. It wasn’t a well-known place a few years ago, but now with S P Setia, EcoWorld and several other big developers entering the market there, people are crowding their showrooms.”

However, Previndran says homebuyers are keener on Bangsar and Damansara because of the “primary home address”, although he notes that these places are becoming pricier. “The asking price for condominiums in Kuala Lumpur, such as Suria Stonor, is as high as RM1,000 psf now compared with RM750 psf three years ago.”

Metro Homes’ See says the asking price for condos in Petaling Jaya has risen to RM600 to RM700 psf from RM450 to RM500 psf three years ago while Previndran notes that at Bangsar’s One Menerung, the asking price is as high as RM1,600 psf. “However, in Bangsar, most older condominiums are going for between RM600 and RM800 psf, depending on age, facilities and demand,” he adds.

Linked houses in Medan Damansara are being transacted at between RM1.6 million and RM1.8 million compared with RM1.2 million three years ago while in Taman Desa, they are being sold at RM1.4 million compared with RM1 million over the past three years.

According to Previndran, the latest transaction at Suria Stonor was above RM850 psf. “Units in Suria Stonor are generally larger in size. Also, a unit with a view in One Menerung was transacted at RM1,600 psf. This may not reflect the actual price level there, but it is a good gauge as some homebuyers are willing to pay steep prices. Three years ago, prices there were generally between RM1,000 and RM1,300 psf.”

Outlook and impact of GST

Overall, property consultants are optimistic about the secondary market despite the low volume of transactions over the past three years because the prices are healthy and stable and will not be much affected by the implementation of the Goods and Services Tax in April next year.

“Potential purchasers may turn to the secondary market for bargains. With the same outlay, you can choose better locations and see the finished product. Some may even enjoy immediate yield from rent,” Previndran says.

When asked if the secondary market will be a more popular option for home purchases after the implementation of GST, Metro Homes’ See says, “Genuine investors will definitely buy homes on the secondary market as a lot of them are brand new and in good locations. Besides, financing for end-users is still easy.”

The consultants agree that the secondary market may not be affected by speculators. Siva, for example, believes the market will be more popular with genuine homebuyers than speculators because it does not give the latter enough time to speculate on the prices.

Homes on the secondary market may not be directly affected by GST, but the services provided by the lawyers and banks will be. “Still, we don’t see a big impact because the cost of purchasing properties on the market is relatively low,” says Previndran.

He advises homebuyers to consider terraced homes as developers can no longer afford to build them, no thanks to steep land prices. He suggests areas such as Taman Desa, Bangsar, Sri Hartamas, Medan Damansara and some parts of Petaling Jaya.

This article first appeared in The Edge Malaysia Weekly, on August 4, 2014.