No property slump

The music has turned sentimental after the jive we had in the property market over a year ago. Although the music had threatened to stop, especially during the height of the subprime crisis in 4Q2008, the country’s property sector is more resilient than some people think.

The real estate consultants who spoke at The Edge Investment Forum on Real Estate 2009 with the theme “Residential property values: How low can we go?” on April 4 were more optimistic about the property market outlook today than they were a few months ago.

Transactions may be slow and prices for certain types of properties in certain locations have dipped but there is no property slump. Indications are that buyers are returning to the marketplace, motivated by the low lending rates, the more realistic asking prices and the difficult-to-resist investment deals offered by developers.

About 600 people attended the half-day forum held at the Sime Darby Convention Centre in Kuala Lumpur. This is the third such forum organised by The Edge and presented by UOB Malaysia.

Speakers at the forum were Previndran Singhe, Zerin Properties CEO, who gave his predictions about the property market; Ho Chin Soon, director of Ho Chin Soon Research Sdn Bhd, on property hot spots in a recession; and Chris Tan, Chur Associates managing partner, on the legal recourse for landlords faced with tenancy problems.
The Edge's managing director and editor-in-chief Ho Kay Tat (far left) and executive editor Au Foong Yee (far right) with the speakers (from left) Previndran, Tan, Kam, Ho, Ooi (third from right) and Tew (fourth from right) and UOB Malaysia's senior head of personal financial services Tay Han Chong (second from right) and personal financial services sales management head Khoo Chock Sean at The Edge Investment Forum on Real Estate 2009.
A discussion on the topic “Property investment strategy in a recession with hyper-inflation — where should you put your money?” was also included, with panel members comprising Eric Ooi, Knight Frank Malaysia managing director; Kam Wei Tsung,  independent property investor; and Stephen Tew, Hectares & Stratas managing partner.

The forum opened with a speech by The Edge editor-in-chief and managing director Ho Kay Tat, who said the speakers were invited to provide some insights into and perspectives on property investing in the midst of a global financial crisis. “... Malaysia will slip into a recession this year. We should start asking questions about the future. What will happen over the next 12 to 24 months or the next three to four years will depend on your own investment horizon. Where are the opportunities amidst the crisis? What are the risks?”

Previndran, the first speaker, was his usual bullish self when he predicted that the next property market upcycle or a “mini-boom” can be expected in 2011 and 2012.

“Transactions may be slow but they are happening. There is new capital inflow trickling in,” he said. While the property market is expected to be gloomy this year, it is up to consumers to determine the state of the market. “The market is flat now. People have money to buy real estate but are waiting it out to get a fair deal,” Previndran said, while naming some safe havens for investors.

Master mapmaker Ho was also optimistic about the market, citing news reports on sales achieved by developers through various innovative campaigns in recent months. He also presented transaction data showing how prices have held for landed properties in prime areas although the prices of condominiums have seen some correction.

Recession or otherwise, Ho said the Klang Valley will remain the country’s top growth area, with Kuala Lumpur and Petaling Jaya continuing to be the central focus.

Chur Associates’ Tan, who spoke on the topic “Nightmares of a landlord — the legal recourse”, provided some tips on how landlords can prevent tenancy problems. One way is to set up a landlords’ association, he said. Tan, who is a member of the International Real Estate Federation (Fiabci) presidential task force dealing with constitutional and policy matters, contributed to the blueprint of Malaysia Property Inc, an initiative that promotes Malaysia as an international property investment destination.

Kam shared pointers on what one needs to consider when investing in property. He spoke from experience, having acquired 24 residential properties and RM8.3 million worth of commercial properties within a short period of three years. He is also the director and founder of Platinum Property Ventures Sdn Bhd.

Kam said an investment strategy in times of recession is to buy property at below market value. It is also important to decide on the objective of an investment — whether one is buying to keep or sell.

Knight Frank’s Ooi provided the lowdown on the high-end high-rise residential market in the Klang Valley, particularly in the KL City Centre (KLCC) area. With the dip in asking prices for high-end and luxury condos by 10% to 20% in general, he said he was beginning to see more commitment from buyers. “This could signal the end of the wait-and-see period. Sales are starting to take place because buyers see that the prices of the properties they had been eyeing have dropped to a level they like,” said Ooi, who has 27 years’ experience in real estate professional services and consulting. In recent years, he has led in the marketing and sales of more than RM1 billion worth of condominiums and serviced apartments in KL.

Nevertheless, Ooi pointed out that real demand in the KLCC area will only be known this year as more supply comes onto the market.

Hectares & Stratas’ Tew, who began his talk with a call to the audience to “get ready to get rich!”, spoke about investing in industrial and commercial properties. He said industrial properties are relatively good investments as they can provide an average yield of about 8% to 10% per annum. Tenants tend to be substantial and longer term compared to residential ones. Tew is one of the founding shareholders of Axis REIT — Malaysia’s first real estate investment trust.

As time was limited, forum participants were invited to email questions to the speakers and their answers are on Pages 17, 20 and 22.

Participants also took some time checking out the latest products and sale packages at the booths of UOB Malaysia and developers S P Setia Group, Sunway City Bhd, Mah Sing Group, IOI Properties Bhd and Island & Peninsular Sdn Bhd. Participants also took home Ho Chin Soon Research wall maps, worth RM36,000, in a lucky draw.

This article appeared in City & Country. the property pullout of The Edge Malaysia, Issue 750, April 13-19, 2009.