IF you plan to purchase property, there is a lot more to be done than just meeting the loan criteria. Knowing the property hotspots will help you make a better decision on which areas have the potential for capital appreciation and for development.
Capital appreciation is largely driven by the surrounding development as amenities, facilities and infrastructure begin taking shape to accommodate the growing population. However, if you buy into a low-density area, development comes slowly, thus the existing properties take a longer period to experience capital appreciation.
In 2019, the spotlight was on the primary market in a bid to clear the mounting overhang of residential property via the Home Ownership Campaign and several other incentives. However, in 2020, the secondary market is poised to resurge due to the revision on the Real Property Gains Tax (RPGT) from the base year of Jan 1, 2000 to Jan 1, 2013. As the economic cycle bottoms out, the property market is expected to rebound, albeit moderately.
Raine & Horne International Zaki + Partners Sdn Bhd projects this year will see the highest number of transactions in the residential property sector since 2016 at 204,840 units valued at RM71.03 bil. This is an increase of 7,455 transactions from last year.
According to the National Property Information Centre (Napic), a total of 99,922 transactions worth RM34.65 bil were recorded in 1H 2019, an increase of 6.1% in volume and 9.5% in value. Kuala Lumpur recorded the highest uptrend in transactions at 7%, followed by Selangor with 5.8%, Johor 1.2% and Penang 0.5%. Perak, however, saw a decline in sales volume, but recorded the highest number of new launches in the country, capturing nearly 20.0% or 4,557 units of the national total.
Johor recorded the second-highest number of new launches at 4,233 units, accounting for nearly 18.0% of the national total. It is also the state with the highest property overhang accounting for close to 19% of total property overhang followed by Perak at 17.7%, Selangor 12.9% and Penang 12%.
With efforts to revise agreements with Singapore on the Rapid Transit System (RTS) underway, this will hopefully increase the attractiveness of housing in Iskandar Malaysia and revive the residential market towards a recovery in 2020/2021. The lower foreign ownership threshold from RM1 mil to RM600,000 between January and September 2020, is also expected to be a saving grace to ease the high overhang condition in the high-rise residential market in both Johor and Penang.
WHAT THEY SAY:
Datuk Christopher Boyd, consultant director, Savills Malaysia
Boyd emphasises that property is long-term investment and is likely to eventually pick up over time.
“The residential market has been depressed for five years now, and the big question is when it will pick up. To me, that is no longer the question. Taking a long-term view, almost any residential property you buy sensibly now, will appreciate over the next seven years,” he suggests.
Boyd, however, stressed the importance of seeking out properties with the potential to provide reasonable yield and will not be too difficult to manage.
“The Tun Razak Exchange (TRX) is one such. The impact of this development on the pattern of commercial values in the city has still not been fully appreciated,” he points out.
Boyd believes that the residential units that have come up or are in the pipeline within the development and those within its proximity, or one stop away on the MRT will be very lettable. Adding to its attractiveness is the dedicated MRT interchange stations, direct access to Jalan Tun Razak, MEX and SMART Highways, as well as the upcoming DUKE 3.
Another up-and-coming area, according to Boyd is Sungei Buloh, which he describes as “under recognised”.
Boyd draws attention to the Kwasa Land development which has two MRT stations and a new highway access as potential magnets. Another pull factor in the area, he adds, is the new EPF headquarters which will lend this area a good future for home buyers.
“If you have time on your hands, hunt for bargains in Bangsar, in the secondary market for terraced houses. But remember to factor in a realistic renovation cost for older rundown properties,” Boyd advises.
Siva Shanker, CEO of Rahim & Co
Mont Kiara, Damansara Heights, Bangsar, Subang Jaya and USJ as well as all areas around Petaling Jaya are currently top picks among buyers, observes Siva.
He foresees a 3-6% improvement in the property market next year with the fringes coming under the spotlight due to a boom in infrastructure and connectivity. He predicts Cheras, Kajang and Klang to attract more demand while fringe locations like Semenyih, Rawang and Banting will also see more buyer interest as they become more accessible.
Another push factor will be the more affordable prices of homes in these locations which are in the range of RM350,000 to RM500,000.
“You can’t find a house in the primary areas in the Klang Valley for under RM500,000, so this will push the buyers to the fringes and with improvements in accessibility, some of these areas along the MRT lines will emerge as the new hotspots,” Siva points out.
“There is a pessimistic outlook towards the political scene, but buyers must realise the economy is another thing altogether. If you wait for the political situation to be resolved, you will end up waiting forever,” he opines.
Siva believes that buyer sentiments in the market are closely linked to the political climate, and a resolution of the political uncertainties will see an upsurge of buyers across the board.
“There is a lot of pent-up demand in the market, with people adopting this wait-and-see attitude. With political clarity, this pent-up demand will burst and we will see an upward trend,” he says.
Leong Yin Peng, head, sales and marketing, Cornerstone Xstate
Despite the challenging times, Leong finds that demand is still “reasonably healthy’ in certain areas, with a segment of local buyers who have the purchasing power seeking luxury homes.
“As a sub-sale residential agent, I find in certain areas such as Mont Kiara and Desa Parkcity, selected developments are experiencing higher demand than units supplied,” she observes.
She adds that this is driven by the salient attraction points of the development itself, such as proximity of amenities, the quality of the development and the value the developer adds to these developments.
“In Desa Parkcity, for instance, the attraction is the lifestyle it offers, with the lake and commercial areas, and landscaping. The developer has invested a lot in the landscaping and it offers a unique tranquillity yet within proximity to major highways like DUKE and areas like 1Utama,” Leong explains.
Other key areas with good demand are in and around Taman Tun Dr Ismail, says Leong, who finds the sub-sale market there moving fast. She notes that the market is still very price sensitive but any property priced at market rate, moves fast.
Apart from the key mantra of location in property purchase, Leong advises home buyers, especially in the primary market, to look for developers who offer value such as quality, surrounding roads, amenities and conveniences. She explains that certain developers have a branding and a certain following and their launches are often quickly snapped up.
“Whether for investment or capital appreciation, always look at the unique points in the place and ask what amenities are offered. Areas like Taman Tun, Desa Parkcity and Mont Kiara are tailored for own stay, but have a higher entry point. But you can’t go wrong when you buy here,” she points out.
Chan Wai Seen, director, CCO & Associates
Chan observes that areas in Kuala Lumpur and Petaling District which include Petaling Jaya, Damansara and Subang Jaya, are in high demand among home buyers.
“Buyers largely seek terraced houses and well-managed condominiums or serviced apartments at established neighbourhood,” he elaborates, adding that this has contributed to a marginal increase in prices for landed residential houses in established areas while high-rise properties have remained largely stable.
He forsees a continuous demand for reasonably priced projects located near LRT or MRT stations, while properties located along the West Coast Expressway, namely Kapar in Klang and Jeram will benefit from the completion of the highway.
“In our opinion, 2020 will be a buyer’s market. Although the Home Ownership Campaign for the primary market is expected to end by end-2019, 2020 is still a good year for home buyers, especially since prices of some properties have corrected to a reasonable level and developers will continue to offer attractive incentives,” he says.
Chan also opines that properties located at established locations and near LRT or MRT stations will be able to generate consistent rental income. However, Chan cautioned buyers to ensure they are financially ready in the event of an economic slowdown owing to the uncertain economic environment.
Ihsan Ibrahim, acting branch manager, Suleiman & Co, Ipoh branch
Ipoh, the midway city between the booming north and the nation’s administrative state, is seeing a rise in interest particularly in the landed residential segment. Ihsan notes that there is keen interest in terraced homes in Meru Raya due to rapid development of the commercial and residential sectors.
“However, the locals do not seem to take to high-rise development, preferring instead landed residential units,” he observes.
According to Ihsan, there are several PR1MA developments struggling to attract buyers, such as [email protected] which has an occupancy rate of only about 20%.
“People just prefer landed properties. Or maybe the price of landed homes in the sub-sale market circa RM200,000 for a double-storey terraced home, while single-stories are transacting at approximately RM100,000, is still affordable to the general public,” he points out, adding that new launches are priced above RM250,000, still within the affordability of the general public.
“Most of the residents here are middle-class, therefore the demand for landed property is still buoyant,” he observes.
Ihsan also draws attention to areas such as Tambun, which is seeing a high rate of transactions owing to its proximity to the city centre and the water theme park. Bercham is another area which is attracting home buyers due to its facilities and connectivity to the town centre and commercial areas such Kinta City mall.
Tan Ka Leong, director of CBRE WTW Johor Bahru branch
Areas down south seeing much activity are the Tebrau Corridor, Iskandar Puteri and Senai-Skudai localities which have registered a higher number of transactions in the sub-sale market accounting for a market share of 30%, 20% and 20% respectively, says Tan Ka Leong of CBRE WTW, director, Johor Bahru branch.
He notes that the residential schemes which recorded higher transactions are Taman Bukit Indah, Taman Nusa Bestari and Taman Perling in the Iskandar Puteri locality; Taman Johor Jaya, Taman Setia Indah and Taman Daya in Tebrau Corridor; and Taman Mutiara Rini, Taman Impian Emas and Taman Universiti in Senai-Skudai locality.
“In the primary market, most of the newly-launched projects are also located in the above-mentioned localities that achieve healthy take-up rate. Notably, Neighbourhood 9 @ Bandar Dato Onn, scheduled for completion in 2020, has achieved a take-up rate of 95%. It has a selling price of RM600,000 to RM750,000,” he says.
Tan adds that Iconia Garden Residences, Phase 3 located in the Senai-Skudai area saw a take-up rate of 90%. Scheduled for completion in 2021, it is priced above RM600,000 for built-up areas of 2,012 to 2,053 sq ft.
According to Tan, single- and double-storey terraced houses are the most sought-after in the residential market.
“Over the past few years, we have noted a marginal annual growth of approximately 2% to 5% for these types of houses in the above-mentioned localities. However, we are of the view that the market acceptance level for prices of single-storey terraced houses are from RM400,000 to RM500,000 while for double-storey terraced houses, their prices are in the range of RM550,000 to RM750,000. Projects with selling prices that are higher than RM750,000 have seen a slower sales rate,” he explains.
Tan describes strategic locations as areas that are well-connected with several major highways or main roads and are developed with matured township developments and in close proximity to renowned retail outlets, medical facilities, institutions and public amenities. These localities are also likely to benefit upon development and completion of the Iskandar Malaysia Bus Rapid Transit (IMBRT) system.
Michael Geh, senior partner, Raine & Horne International Zaki + Partners Sdn Bhd
By the end of 2019, Geh foresees the Penang residential market recording its highest number of transactions since 2016, estimated at 12,956 units worth RM5.5 bil. In the primary sector, he sees an increase of 984 transactions from last year’s 11,952 transactions worth RM5.02 bil. The secondary sector is expected to record 11,669 transactions, up 882 transactions from 2018 to a value of RM5.03 bil.
“The Home Ownership Campaign and the reduction of threshold price for foreign purchasers will continue to spur the residential property market,” he notes.
According to Geh, 18% of the properties transacted comprise two- to three-storey terraced houses, while flats make up 17%, condominiums and apartments, 16% and single-storey terraced homes 11%.
“Most of the properties transacted, or about 32%, are in the northeast district of the island, followed by 25% in the Central Seberang Perai district. The other popular areas are North Seberang Perai, South Seberang Perai and southwest district on the island,” he elaborates.
Bucking the national trend, Geh notes that Penang has a large number of overhang units in the condominium and apartment market. At least 90% of the unsold residential units under construction are also in this category.
“The overhang situation is due to many of the units being located in undesirable areas away from town or suburban areas with less connectivity and public transport,” he explains.
“Properties in such locations may take more than two to three years to be sold as people do not want to live in faraway places with poor connectivity,” he adds.
Geh says most of the overhang units or 40% are located in the northeast district, while 36% are in the southwest. On the mainland, Central Seberang Perai recorded the largest number of overhang units or 16%. These are also the areas with the largest number of unsold units that are under construction.
The northeast district comprises George Town, Batu Feringghi, Paya Terubong, Ayer Itam and Tanjong Tokong. It borders the southwest district which includes Bayan Lepas, Balik Pulau and Telok Bahang.
Liaw Lam Thye, principal consultant, Taylor Hobbs Chartered Surveyors
Liaw describes the Kota Kinabalu property market as very quiet with a small number of transactions in the residential and commercial segments, particularly shophouses. He observes that the Kota Kinabalu market is largely driven by investors, as opposed to purchase for own stay. He spots the most transactions in the high-rise sub-sector comprising condominiums, serviced apartments and SoHos, driven by the rising demand for short-term rental stay in the tourist-popular city.
“Hot areas include Forest Hill, Sutera Avenue, the Loft and any residential development in proximity to the city centre that allows short-term rental activity like Airbnb,” he points out.
Liaw explains that the pure residential segment is still moving rather slowly as short-term rental is prohibited and the buy-to-own market is rather depressed.
“Nevertheless, the prices of new launches, largely condominiums are holding at about RM550 to RM650 psf. Occupancy rates are also reasonable at approximately 50-60%,” he notes.
He says the secondary market is seeing a marginal correction in prices of about 2-5%, but otherwise the market “is holding in line with the holding power of local buyers”.
Liaw’s advice to those seeking to buy homes in 2020 is to look for good bargains and property with capital gain upside such as those in the high-rise market with short-term rental potential.
“You will not see the kind of capital gains from seven to 10 years ago, but anything with positive returns potential is worth purchasing,” he says. – Jan 5, 2020