The
Malaysian property scene experienced drastic changes in 2008, moving
from a boom at the end of 2007 to uncertainties in the midst of general
elections and increasing construction costs, and slowing into a
relatively quiet market towards the end of last year.
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.
