Mayan calculations and popular culture hype aside, could 2012 really see the end of the world as we know it in terms of overall economic growth that drive the take-up rates for property market offerings? We checked with Mah Sing’s Group Managing Director cum CEO, Tan Sri Dato’ Sri Leong Hoy Kum, for his views on what lies ahead in 2012.

As the clock ticks down to 2012, and talks of uncertainty in the property market swirl around, we huddled around to talk about what lies ahead. Tan Sri Dato Sri’ Leong Hoy Kum, at the helm of Mah Sing Group gave us a breakdown of what lies ahead.

General Market Outlook

According to Tan Sri, the general outlook of the market remains cautiously optimistic as property demand in Malaysia is fueled mainly by two factors: job security and market sentiments.

For Malaysia, having a growing population with a predominant young population base (between the ages of 18-65), have both new household formation and high saving rates that continue driving the demand for properties. Furthermore, property is viewed as s good hedge against inflation. In terms of job security, the unemployment rate is still very low, at 3% p.a. while the projected Gross Domestic Product (GDP) for Malaysia remains positive with a minimum of 5% achieved for 2011 while a 5-6% for this year
is projected.

As the property market in Malaysia is mainly driven by domestic consumption, and for Mah Sing with most of their buyer base made of locals who buy for own residential purposes and for investment (not speculation), there will be a continued demand for these products. These are the serious buyers who enter the property market looking for good locations and concepts by renowned developers.

It has to be said that the general sentiment is dependent on a couple of factors, one being the impending general elections and its outcome. While there are no announcements yet, there will always be a pre- and post-election uncertainty that impact property sales.
Burst My Bubble

As for the popular saying that there is a property market bubble building that will burst this year, Tan Sri’s sentiments were echoed by the rest in the market. “In the first place, we do not believe there is a property bubble as price increases over the past few years have been selective and only in good locations where demand outstripped supply.”

There is only one real rule in property purchase, and it would be location. This is the real reason why instead of generalizing, Tan Sri’s recommendation to look at the individual segments of the property market as a better gauge as to whether there is a property bubble forming or reaching bursting point soon.

“In the below RM 1 million market, property offerings should do well as demand will be maintained at the same momentum for products above RM 1 million in good locations. In fact, continued demand for landed residential units in good locations, especially those in gated and guarded schemes proves that there is no real slowdown in the market.”

“As for smaller units of serviced apartments which are both affordable and meets the buyer’s needs will still be in demand. Meanwhile, commercial products such as SoHo and SoVo continue to be popular thanks to the affordable price points and lack of supply in selected locations especially in integrated development projects.”

Whither the Real Price of Real Estate?

Concerns over the escalating property prices have been a long standing issue for most purchasers that are related to market sentiment and confidence. However, as Tan Sri mentions, land is a scarcity and construction costs will rise over time, albeit in manageable doses. Hence, it is inevitable that properties in good locations will continue to appreciate as astute buyers would want to lock in their investments at today’s prices before it rises tomorrow.

In fact, from my personal observation, the developer bears a heavy cost to hold onto a completed project. While 2011 was deemed to be a soft market, the take-up rate for properties launched in established locations with good packages, like those with DIBS or low down payments, all experienced brisk sales. When it comes to the pricing of properties, market forces are still the best gauge.

For example, in Bandar Utama, a 2-storey terrace house that cost RM700,000-RM800,000 in 2010 would easily cost RM1million – RM1.1million while a renovated intermediate unit could easily go for RM1.3million. Real estate agents specializing in this area would never have imagined it hitting the RM1million mark just three years ago, but market demand dictates the terms at the end of the day.

As developers have their finger on the pulse of a certain area, matching market demand to the operational costs of land and construction costs are among one of the specialties of their trade. Hence, when it comes to pricing, most developers have made it easier on the public by coming up with creative packaging to make home ownership as easy and hassle-free as possible. In 2011 alone, DIBS has been one of the most attractive incentives for buyers whether for investors or for personal use.

What Lies Ahead

For Mah Sing, 2012 is shaping up to be an exciting year with a sales target of RM2.5billion to achieve via planned launches throughout the year. Tapping into pent-up demand from selected sectors and introducing new phases in existing projects like Icon City (PJ), M City (Jalan Ampang) and Garden Plaza (Cyberjaya) as well as new projects like M Residence in Rawang are all in the pipeline for the company. As Mah Sing’s enthusiasm for good take-up rates is based on the strategic locations, creative concepts that meet the needs of the public, it seems that there need and demand will be the order of the day, especially for projects under the RM1million mark with the right package to accompany it.