Malaysia - Housing

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Consultants: Property market likely to regain momentum post GST

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Accessibility is key for hotspots


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[winston]

House prices unlikely to see huge jump upon implementation of GST

PETALING JAYA: MKH Bhd managing director Tan Sri Eddy Chen does not expect a huge jump in property prices upon the implementation of the goods and services tax (GST) this April.

"To be frank, I don't think house prices will increase by 15% like what some developers claim because some developers have already priced in the tax even before it has been implemented," he said at the 17th Malaysia Strategic Outlook Conference 2015.

He opined that the transition would be smooth.

On the outlook of the sector, he said it might be a challenging year for developers but the demand for housing was still there.

He said land cost was holding well despite the softer outlook in the sector while construction costs had not come down much despite lower commodities prices.

Building material prices are also expected to be impacted by the implementation of GST.

Another challenge manpower due to a shortage in foreign labour, which was the main force of property development.

Source: The Star

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Housing affordability worsens with Sabah top of list, Penang, KL

KUALA LUMPUR: Housing affordability, which is based on the ratio of average terraced house price to average household income, has worsened over the past five years, according to Rahim & Co, Chartered Surveyors Sdn Bhd.

In its survey of the Malaysian property market 2014/2015, the ratio increased from 3.4 in 2009 to 3.6 in 2012 and 2014.

“This essentially means that an average terraced house would cost an average household or family in Malaysia, 3.6 times its annual gross income.

“The least affordable terraced house in Malaysia in 2014 was recorded for Sabah (6.2 times), Penang state (5.9 times) and Kuala Lumpur (5.6 times). Sarawak was fourth with a ratio of 4.4 times,” the survey showed.

Rahim & Co, which is one of the largest real estate consultancy companies in Malaysia, also said in its outlook that transaction activities in the residential sector after expected to soften with the implementation of the Goods and Services Tax (GST) in April 2015.

Other factors are lower crude oil prices, which had collapsed by nearly 50% from a high of US$100 in June to below US$50 now, and a weakened currency.

However, market interest along main transport and infrastructure corridors remains robust spurring new transit-oriented-developments and townships, particularly in the Klang Valley.

To recap, Rahim & Co said that over the past four year, property prices were fuelled by the nation’s development plans, investment concentration and also the rapid growth in Iskandar Malaysia.

“The cautious market sentiment echoes the state of property market in reaching its plateau and reconciliation period is expected in the near future,” it said.

Source: The Star

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Braced for a property glut in Malaysia

Everyone talks about rising residential property prices and high rentals because of rising demand and speculative activities. Now they are talking about the impact of GST too.

Is a glut in residential property or a slowdown imminent? IFCA MSC Bhd chief financial officer Daniel Chow seems to think so.

Chow was an invited speaker at a significant property event last week where one of the key speakers showed that actual sales last year for all the major players in the industry, except for one, was much lower than their forecast.

"Everybody recorded negative. There was only one exception. The fundamental rule on economics is demand and supply. When there is oversupply, this is what happens.

"How much is the population growth in Malaysia? Less than 3 per cent. And how much is your purchasing power growth? On average 6 per cent to 7 per cent year by year.

"But the increase in the supply of property is double digit every year. How can you expect the market to absorb all this? There is a limit," he says in an interview.

For him, the introduction of the GST in April is not going to cause a spike in prices from April to December.

On the contrary, what he sees on the horizon is a glut by year end and the whole of next year.

He says this is when the properties under the (now banned) Developers-Interest-Bearing Scheme are completed and most buyers who paid only the minimum 5 per cent down payment would have to start paying their monthly instalment and service their housing loan when the property is handed over to them.

"Most are just property flippers and their whole intention is to flip it for capital gain. But what if nobody wants to buy? Do they have the holding power? Some were greedy and put in RM10K (S$3,725) into three different units instead of RM30K into one."

So if the person cannot pay the monthly instalment or sell the unit then the bank will do a foreclosure.

"I expect to see cheap sales and bank lelong at the end of the year and early next year for certain types of properties in selected areas," he says.

Chow believes the oversupply will create a downward pressure on the selling price.

As for the impact of the GST on the housing industry, he believes it will be "very minimal".

Chow points out that non-GST factors are the reason the cost of building residential houses is so much higher now compared to five or 10 years ago.

He says developers are now forced to make "contributions" to utility companies like Tenaga Nasional, Indah Water Konsortium, and Syabas.

"It is not a voluntary contribution. And this 'contribution' has been increasing substantially over the last five years. This increase over the last five years has translated into higher overall infrastructural cost and higher cost per house.

"Not forgetting the fact that land cost too has gone up because land owners are greedy. These things have nothing to do with the GST and that increase is much higher than the GST impact."

When the GST is implemented in April, residential property including SoHo will be exempt supply, meaning buyers will not need to pay the GST on it. But commercial property including SoFo, SoVo and SoS would be subject to the 6 per cent GST.

Construction material such as cement, sand and bricks for both residential and commercial properties will also be subject to the 6per cent GST.

So will heavy machinery like cranes.

Chow says property developers normally do not buy the heavy machinery but rent them from the contractor. But this too has to be factored into the construction cost.

He believes the GST will impact the smaller developers less than the bigger players because the smaller ones do the construction themselves unlike the bigger players who engage an external construction arm and outsource their work.

He estimates that the GST would increase cost of houses by 2.1 per cent to 2.2 per cent, which is minimal, but he doubts that "developers have the ability to push prices up by even a single per cent" because of the pressure from the oversupply.

"I have served as an accountant and financial controller in three different property development companies, and I started my career in a tax consultancy firm and I have been in the property and construction sector for 22 years.

"And I can tell you that for a financial controller in a property development company, the biggest fear is not being able to draw down on its bank loan. The draw down depends on the percentage of sale.

"For example, if I am launching 300 condominiums, the first tranche of loan can be drawn, say, when 20 per cent of the units are sold, the next tranche when 50per cent are sold and maybe if I have 60per cent to 70per cent sold I can then draw down 100per cent of the loan.

"If I try to push the selling price higher and my sales drop to a worrying level, I may be stuck on my draw down because that is based on percentage of sales. And developers don't want that."

Source: The Star

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Moody’s expects slower demand for residential property in Malaysia

KUALA LUMPUR: Moody's Investors Service expects demand for residential property in Malaysia (A3 positive) to slow further in 2015, crimped by property cooling measures imposed in 2013 and weak buyer sentiment.

Moody's assistant vice president and analyst Jacintha Poh said: "We expect the anticipation of higher mortgage rates in 2015 and the implementation of a 6% goods and service tax in April to dampen sales in 2015 as buyers take a wait-and-see approach.”

"But the magnitude of the sales impact will depend on Malaysian property developers' target segment of project launches and pricing," she said.

Moody's expects developers focused on residential projects in Johor, Kuala Lumpur, Selangor and Penang, to face the greatest challenge in achieving their sales targets.

Poh said properties in these cities are typically priced above RM1mil and are aimed at high-income households or foreign investors.

“Nonetheless, Moody's expects demand for owner-occupied homes priced in the middle-income range to remain resilient," she said.

Malaysia's average home prices from 2001 to 2013 increased at a compounded annual growth rate of 7.3%, which is faster than the 6.3% for the gross national income per labour.

The five largest listed property developers in Malaysia -- based on their total revenues -- to remain resilient in 2015 despite a slowdown in their sales volumes.

They include Sunway Group Bhd (unrated), SP Setia Bhd (unrated); UEM Sunrise Bhd (unrated); IJM Land Bhd (unrated); and Mah Sing Group Bhd (unrated).

Source: The Star

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Property buyers cautious

More than RM124bil worth of property was transacted during the first nine months of 2014, up 15.8 compared with the same period in the previous year.

KUALA LUMPUR: There is growing evidence of softening demand for residential property priced at RM1mil and above, as buyers turn cautious amid a rising glut in the higher end of the market.

But an expanding working population in growing cities around the country will keep demand in the affordable housing segment steady in 2015, according to speakers at the Property Market Outlook for 2015 seminar.

“The property market is expected to moderate in 2015,” said Valuation and Property Services Department deputy director-general Faizan Abdul Rahman.

“Nevertheless, the residential property market will continue to sustain, underpinned by the growing working population and first-time home buyers.”

According to Faizan, highlights of the housing market would be below RM500,000, while high-end housing priced above RM1mil is likely to wane.

More than RM124bil worth of property was transacted during the first nine months of 2014, up 15.8% compared with the same period in the previous year. Volume, however, expanded at a more moderate pace.

Rating agency Moody’s Investors Service yesterday said it expected demand for residential property in Malaysia to slow further in 2015, crimped by the property cooling measures imposed in 2013 and weak buyer sentiment.

It said developers focused on residential projects in Johor, Kuala Lumpur, Selangor and Penang would face the greatest challenge in achieving their sales targets.

“Currently, there is an oversupply of high-end condominiums and offices,” event organising chairman and VPC Alliance chartered surveyor and director James Wong said.

This was evident, he said, as property developers had been launching fewer projects in recent months. Wong also said there had been a rise in property auctions, while banks were getting stricter in approving housing loans.

“We have been seeing correctional signs since the fourth quarter of 2014. Coupled with the oversupply, we suspect this will not be a good year for the property market,” he said.

The situation as it is, according to one property consultant, is that high-end properties are aplenty, but low-to-middle-income earners are unable to buy a home due to a shortage of supply in affordable housing.

“This is where market correction has to come in. Developers’ products must be more affordable than what they had last launched,” PPC International managing director Datuk Siders Sittampalam said.

“Developers have a statutory requirement to build 30% low-cost housing,” Wong said.

“The way forward is to build affordable homes where both public and private sectors play a part.

“However, since the cost of land in KL City is relatively more expensive compared with the rest of the country, developers would not be able to produce the level of profits that they are used to if they build too many so-called affordable homes.

“Therefore, there should be more incentives provided by the public sector,” Sittampalam said.

To boost the supply of affordable housing, the Government has come out with several initiatives such as the 80,000 units under PR1MA for household incomes up to RM10,000, the 26,000 units under the National Housing Department (Program Perumahan Rakyat), 37,000 units under Syarikat Perumahan Negara Bhd and 5,380 units under the Program Perumahan Penjawat Awam 1Malaysia (PPA1M).

Source: The Star

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Residential

Foo Gee Jen from C H Williams, Talhar & Wong says the number of serviced residences in the Klang Valley has overtaken those of condominium units.

Serviced residences are residentials built on commercial land. Their monthly service charges and utilities will be priced about 25% to 30% higher than a condomium project, which is built on residential land.

In 2010. the ratio between the two was 60% condominiums and 40% serviced apartments. It is now 46% condominium and 54% serviced residences.

He also drew focus on the dire shortage of affordable housing and the two million families who earn RM3,000 or less a month. Their affordable level is RM200,000.

This group represents a third of the country’s household and their needs have not been met even as the Government goes about talking about affordable housing priced at RM400,000 a unit.

Source: The Star

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Slowdown in Klang Valley landed residential market expected BY: TOH KAR INN

Annual growth of landed property in the Klang Valley for 2015 is forecast at 1.5%. “This value is actually very much below the nation’s population growth of 2.8% in the Klang Valley. Hence, supply of landed property was lower than the demand, which in turn put more pressure on the pricing,” said CH Williams Talhar & Wong managing director Foo Gee Jen (pic).


KUALA LUMPUR: The Klang Valley market for landed residential is expected to experience a slowdown in 2015.

Despite that, prices of landed residential properties are unlikely to decrease, especially medium-priced houses where demand is most acute.

Annual growth of landed property in the Klang Valley for 2015 is forecast at 1.5%.

“This value is actually very much below the nation’s population growth of 2.8% in the Klang Valley.

Hence, supply of landed property was lower than the demand, which in turn put more pressure on the pricing,” said CH Williams Talhar & Wong managing director Foo Gee Jen (pic).

“Most new launches at new growth areas like Semenyih are now packaged very small, where developers are launching 150-200 units in each phase instead of 500-1000 units.

“Developers are trying to create more excitement by doing so, as well as ensuring that all units are sold out,” he added.

During the Property Market Report 2015 launch here yesterday, Foo mentioned that the volume of property sale will decrease, due to weak sentiments of buyers.

The impact of goods and services tax (GST) will be minimal, as there will be a 3.5% to 4% increase in residential property prices, stemming from the increase in operational and labour costs.

Apart from that, the trend of high-rise residential property is moving from condominiums to serviced residences, which made up 54% of high-rise residential property in 2014.

The average occupancy rate of high-rise residential property in Kuala Lumpur remained stable in 2014 at 69%.

The completion of new high-rise residential developments in 2015 is expected to decrease the average occupancy rate in 2015 and lower the rental yield. This in turn creates a more competitive rental market, that is favourable to tenants.

Source: The Star