Notwithstanding the gloomy outlook, the Malaysian property market has been notably slow compared with those in the rest of the region, says Allan Soo, managing director of Regroup Associates Sdn Bhd.
“We were branded as laggards, and effectively, we really only had a boom from 2007 compared to Singapore, which had prices sky-rocketing from 2005. Our euphoria was very short-lived as well, so prices have not really had a chance to go crazy although you could say that supply of some sub-sectors, like high-end condominiums, does look like a ski slope,” explains Soo.
With banks tightening their loan terms, obtaining loans for development, factories and shop-houses have been difficult in the last three years. All these, says Soo, suggest a soft landing without any major drop in prices for land, retail centres and landed properties.
“We expect a drop in prices for high-end condominiums in areas where there was more activity in the last two years, as the supply of condominiums would more than double in these areas in the next three years,” he says.
Soo feels that land prices would not drop substantially, as banks will not be able to process defaults until 2010 at the very least. Therefore forced sales will not be the order of the day as far as development land opportunities are concerned. “However, it may be that some smaller players may give up later this year and such opportunities may be worth considering then,” he adds.
Executive director of Knight Frank Malaysia, Sarkunan Subramaniam, expects a slowdown with property prices decreasing by five to 10 per cent from the first quarter, as the slower economy brings down demand and some good bargains arise in the later part of the year.
“The feeling (for the first half of 2009) is down. The property market in 1H 2009 will be very quiet and slow as developers are delaying major project launches due to the lack of market demand. Property purchasers are holding back in the hope that prices will come down further or search for fire-sales,” explains Sarkunan.
While prices may fall, Soo does not foresee any opportunities for bargain hunting. “Prices won’t crash to the floor as they have not gone through the roof previously. You could wait a little to pick some nice condominiums in the best locations at a good discount, although it will be hard to predict how much the quantum will be,” he explains.
Klang Valley property scene
The Klang Valley property scene has been slow in the past two to three months; there were many enquiries for fire sales but zero transactions, says Sarkunan. According to him, there will be more pressure on the rental market, especially in the high-end residential properties within the vicinity of KLCC and Mont’ Kiara due to the numerous newly completed projects within the area.
As for the office sector in Klang Valley, Sarkunan reveals that the office rental rate has stabilised between RM7 psf and RM9 psf for prime offices in the city. There is also a new trend in the Klang Valley office sector where increasingly, office developments are adopting green features such as energy saving, reduction of wastage and water usage, as well as the use of environmentally friendly materials.
Meanwhile, the performance of shopping malls in Klang Valley has been on the slow side, with most centres experiencing a decline in shopper traffic, by as much as 10 per cent since March last year.
“Everyone is expecting that after Chinese New Year, the worst will be seen and it is likely that some centres will drop rents just to fill up space and of course, sales will be the order of the day. The fact that 4.2 million sqf of space was added to the already massive supply of 33 million sqf in 2007 meant that the market was saturated by the end of 2007 and for most of last year.
“Fortunately, there were no major openings planned last year, so only a fraction (just over one million sqf) was added last year. Another 1.5 million will come on stream this year, but this will not impact the rest,” says Soo.
The Malaysian REITs sector has been performing well, although the market is not excited due to small portfolios and the odd properties some of them have, says Soo.
“Of greater significance is that both Sunway and CapitaLand abandoned their respective plans to list their REITs, which were the largest ones as market sentiments were deemed too weak last year,” he says. Sunway’s listing would have included Sunway Pyramid, the hotel and commercial buildings, while CapitaLand’s listing would have included Gurney Plaza, Sungei Wang and The Mines.
“This year may be a difficult year for REITs as rents will be impacted in most cases and the resultant yield or dividend may not show a rise as expected of REITs,” adds Soo.
This year would also most likely be a tough year for the property industry. “General sentiments are understandably weak and the market can be described as lacklustre, but some are expecting the market to become active by the second half,” says Soo.
Source: iproperty
