By Lemmy, editor, PropertyReviews.MY Magazine (email@example.com)
The general consensus regarding the Malaysia property vertical in 2013 is that it’s going to be the buyer’s market. The first half of 2013 may prove to be challenging to developers and property sellers as buyers adopt a “wait-and-see” attitude regarding property investments in lieu of the general election. Also, uncertainties surrounding the Bursa Malaysia and the economy as a whole is also a strong contributing factor. This view is supported by many authorities in the Malaysia real estate market, notably Milan Doshi (author of real estate investment books), Datuk Michael Yam (president of REHDA – Real Estate and Housing Developers’ Association of Malaysia) and Datuk Mani Usilappan, the former director-general of the Valuation and Property Services Department (JPPH).
A Quieter Property Market In 2013?
There could well be fewer real estate transactions in 2013 given the following factors –
- Tighter financing criteria adapted by banks where net income is used to compute loan eligibility (instead of gross income previously); 70% cap on the loan-to-value (LTV) value for those applying for a loan for their third property and beyond. Multitudes of loan applications have reportedly gone unapproved.
- Introduction of GST – the goods and service tax – later in the year
- A developer cost structure which is getting rather uncompetitive with rising building costs as well as minimum wages
- General malaise in the business community
- Higher RPGT (real property gains tax) to curb speculators – to 10%
Certain areas in Greater KL are already showing some signs of cooling down after a period of rising asking and transacted prices for the past two years. Luxury condominiums in the Kuala Lumpur City Centre (KLCC) enclave are now seeing rather flat or reduced asking prices. This trend is consistent with other locations with condominiums on the higher end, notably Bangsar and Mont Kiara. As such, there are pockets of opportunities in lower-priced developments – particularly those which are below RM1 million.
However, there are some positive developments which will drive the real estate vertical in 2013, namely mega infrastructure projects such as the MRT (Mass Rapid Transit) and also the newly announced high speed rail project, linking Kuala Lumpur to Singapore. Developments in the Iskandar Region and the East Coast Economic Region are also positive for the property market and the economy in general. The country’s economy is projected to grow between 4.5% to 5% in 2013 according to Bank Negara.
Where Are The Opportunities?
With the residential property market remaining flat for most of the year, there are opportunities in the real estate market driven by the following factors –
- Areas which are directly impacted by rapid development of infrastructure – for example, residential areas along the MRT lines. This is going to be a major driver going forward as the traffic situation in the Klang Valley is getting worse. Also, locations which are getting tremendous influx of investments (particularly the Economic Transformation Plan or the ETP) and buzz – for example, the Tun Razak Exchange
- Strong property conceptual differentiation will be crucial to drive take-up rate of newly launched development
- Sweet spots in terms of both pricing and also unit size (typically less than 2,000 sq ft and priced below RM1 million)
According to Tang Chee Meng of Henry Butcher, prices of residential properties will continue to rise but at a slower rate – possibly in the single digits. Also, a report released by DTZ Malaysia indicated that there is a possibility of influx of foreign funds into the Malaysia property market in the coming months. This could be very likely as the property prices in Malaysia is still cheaper compared to Hong Kong and Singapore.
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