Slower subsale market, challenges ahead

PETALING JAYA: The subsale housing market in the Klang Valley which has generally slowed down in the past six months is expected to face more challenging times ahead and prices may soften due to a variety of factors, said real estate agents.

“It will soon be a buyers’ market. Prices won’t plunge, but they will gradually soften,” said Kim Realty CEO Vincent Ng.

The secondary housing market in certain areas is due for a price correction and prices are expected to come down to a more reasonable level.

“There is a gap between asking prices or what people are willing to pay and the valuers’ valuations,” he said.

Sellers have to eventually reduce their asking prices because their properties are now being valued lower as property valuers are unable to justify the prices without at least two or three transactions to back them up, Ng explained.

As banks will only give out loans according to valuations, buyers will have to fork out more in cash to bridge the gap between what is covered by the bank loan and the rest of the purchase price.

Ng: Price won't plunge, but they will gradually soften.
Paul: Sales will be sensitive to price, location and property type.
See: With limited new launches, buyers may turn to the subsale market.

“Let’s say the asking price for a house is RM900,000, but the valuers find that it is only worth RM800,000, the bank will only give out a 90% loan based on the RM800,000. There is a RM100,000 differential which is a lot of money,” said Ng.

This would dampen sales and eventually some sellers will just withdraw while most will gradually lower prices, he added.

Metro Homes director See Kok Loong said newer properties in the secondary market usually receive more attention as they come with features such as 24-hour security.

See believes such landed homes in the subsale market will continue to do well.

“Buyers may opt for these properties because they are already built, with no ‘history’ and offer features unavailable in older homes. These homes are also usually located closer to the city centre compared with current launches that are further away. Besides, with limited new launches, buyers may turn to the subsale market, giving it a boost,” he said.

“Prices and yields of older properties may drop (due to incoming supply) but there are other factors to consider. The Klang Valley is a strange market as there is always demand due to migration. Demand might lag behind supply by six months to a year, but it will always be there,” See added.

However, Malaysia Institute of Real Estate Agents president Nixon Paul said although most prospective purchasers have adopted a wait and see approach in anticipation of selling prices going down,  “property prices coming off are highly unlikely”.

There will, however, be less demand for certain types of property such as condominiums, office spaces, retail spaces and shops in non-prime locations, bungalow lots in outlying areas and high-end bungalows in prime locations.

Paul said the subsale market will continue to be active in selected areas and selected property types. For instance, bungalows in Petaling Jaya with prices ranging from RM1.5 million to RM2.5 million and shopoffices in densely populated areas such as Cheras and Puchong will still see active sales.

“However, if prices of property in an area keep escalating to levels where the returns on investment fall below 4% annually, then we can anticipate investors and end users to shy away from these locations,” he pointed out.

As for new launches, the agents expect a slowdown in the first half of the year as Bank Negara Malaysia’s stricter rules on bank loans kick in and cautious sentiment is expected to prevail due to the uncertain global economy.

According to See, this year will be less exciting as the local market has come off a good three-year run.

“The big developers are still very healthy financially and they still have a lot of unbilled sales whereby they may delay launches if the market is less attractive and hold back new supply.  With that, prices will be stable,” he said.

However, he said the pent-up demand built over these few months may push up the market in 4Q.

Ng said although sales may drop slightly, the market will still be sustainable.

Paul pointed out that “sales will be sensitive to price, location and property type”.

High-end and luxury-styled properties will see slower sales due to an oversupply situation in the Klang Valley, he added.

“Launches in the outlying areas such as Rawang and Kajang have done reasonably well due to the fact that these developments are affordable. Most terraced houses, semi-detached bungalows and bungalows with prices ranging from RM350,000 to RM800,000 have enjoyed brisk sales,” he noted.

This article appeared on the Property page, The Edge Financial Daily, February 24, 2012.

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