The slew of large-scale infrastructure projects is set to transform older and hitherto unheralded localities into new property hotspots. – Chan Ai Cheng

n the last couple of years, the country has been abuzz with big tickets and ambitious infrastructural projects on a scale that we have not seen before.
What is more exciting is the fact that many older neighborhoods or undeveloped localities around the country are set to benefit from the spillover effects that these developments could bring.

Infrastructure redevelopment for major hot spots

New major infrastructure projects in Penang, Greater Kuala Lumpur and Iskandar Malaysia, Johor, for example, have presented several new investment hotspots for prospective real estate investors. From our projection, properties in close proximity with the MRT stations will certainly see increases in values of 15% to 25%, depending on the locations.

Why is this such? Just like any other infrastructure developments, property prices tend to rise when locations become more convenient and easily reached. When this happens, the demand for property close to the station will increase, as people will opt for the MRT as opposed to driving to get around and to save on parking, petrol etc.

The urban redevelopment areas in the Klang Valley currently include areas such as the Rubber Research Institute (RRIM) land in Sungai Buloh, the former military airport in Sungai Besi, the Kuala Lumpur International Financial District (KLFID) in Jalan Tun Razak, former Pudu jail, as well as Jalan Cochrane and Jalan Peel.

It is also worth pointing out that four new highways coming up within Greater KL, namely the Damansara Shah Alam Highway (DASH), The Kinrara-Damansara Expressway (KIDEX), the Serdang-Kinrara-Putrajaya Expressway (SKIP), and the Sungai Besi-Ulu Klang Expressway (SUKE).

Properties in areas leading into these new highways would benefit from the better accessibility and connectivity. These are the areas that are set to benefit most from the infrastructure redevelopments in Klang Valley.

At this point, I would think that most would have already adjusted their property price in line with the confirmation of the Klang Valley MRT and its locations. Already, many new projects are featuring this as a key selling point for the project. For those who have already own something within those locations, they would see better returns and in
some locations a windfall, as a once-inconvenient location will now turn into a central location, thanks to these developments.

Just like highways, you don’t want to be too close to it (i.e. right next to the station) unless it is a commercial centre. The concern of noise, vibrations and possible high-tension cables usually follows within a few metres from the development and this would actually affect property value. A 10-minute walk distance would be the most ideal.

Moderating Outlook

In 2011, volume of transacted properties recorded an increase of about 14.26% more than 2010, with an emphasis on residential properties. Most of these buying and selling activities are in urban areas – not necessarily within the city centres but around it.

But since the end of last year, many foresee a growth in the property market in the coming months. According to some research, the price of a typical 2-storey link house in Bandar Utama has seen appreciation of over 80% or 100% per annum between 2004 and 2011. Growth over the past three years between 2008 and 2011 has been 63% while growth over the preceding three years between 2005 and 2008 was 11%. The average annual growth between 2004 and 2008 was just 2.8%.

Property investors should no longer buy or sell based on perceptions but on the fundamentals in uncertain times. Buying and selling on fundamentals means you must observe not only our economy but also in other parts of the world like Europe, the US and China, and study the trends such as the unemployment and production.

Uncertain global economy and Bank Negara’s guidelines on responsible financing, which dictates banks to assess loan applications based on net disposable income, can affect the country’s economy in the long-term.

The immediate impact is a cautious market where investors may take a wait-and-see approach, which will dampen the market. This in turn will cause the developers to be very selective with new launches and projects. Some may expect developers to sell under pressure, offer more affordable properties or withhold launches as signs start showing a slowdown in high end properties, pending rule on higher deposit for new projects expected before the end of the year.

However, on the other hand, a lot of projects being launched and marketed lately are possibly capitalising on the strong market sentiments for new properties with good packaging, probably to capitalise on the market before the elections and before the obligation of higher deposits for property developers is implemented. There will definitely be an impact on the industry and developers will have to have better upfront cash flows to fulfill the new requirements, of which most strong brand developers have.

Current selling trends in Malaysia

What sells now is the easy entry package, DIBS, hassle free packages where buyers just pay a small sum of money and nothing more till the completion of the property which at that point can be sold or rented out. This eases the burdens of buyers to service the loans during construction of the property when they receive no returns.

Smaller-sized properties like the SOHO and SOVO concepts have been well received also. Despite the growing interest in such projects, there will a point in time and price where buyers will stop demand for such units, and it is important for developers to be aware not to go overboard of pricing. The overall quantum price is within very acceptable range i.e. RM200,000 – RM500,000.

I do advise buyers to be cautious when making investment decisions especially in the selection of projects to buy in. Do not forget the basic rule of investing given the attractive packaging and designs.