According to Ishmael Ho, in order to gauge the property market in Malaysia, one has to look at the economic activities. “For example, if you analyse different districts in Selangor from 1991 to 2000, there are only 7 out of 12 districts where the population growth is very strong. The whole of Peninsular Malaysia recorded 12 districts with high population growth, and 7 out of this is in Selangor,” shares Ishmael.
“When investing in property, look at the population growth rate. In fact, we should be thankful for traffic congestion because this shows that there is active growth and economic activities in the area,” he explains. Ishmael shares an example of the city of Detroit in the US, whereby it has lost 60% of its population, leaving property prices extremely low.
He explores the map of major cities in Malaysia and explains about the extensive infrastructure availability which fuels the property market. Ishmael advises, “If you can afford it, always go for first tier properties, such as those in greater KL. Second tier properties are cheaper but relatively further away from the city.”
“For more affordable options in the first tier, one can opt for high rise properties, however, if you want more capital appreciation, go for landed properties,” he shares.
In fact, the greater KL region which also includes Seremban has tremendous prospects with unlocked corridors waiting for development such as in the vicinity of the Seremban highway, the Maju Expressway and the KESAS highway.
Ishmael shares that the future master plan for Selangor presents the extension of the LRT services that spreads across the state. With the MRT, High Speed Rail (HSR) and LRT 3 coming up, Greater KL is set to be one of the key areas that will fuel economic growth. “Developers are capitalizing on this to develop townships,” says Ishmael.
He asks, “How big is the impact of rail-based transportation located 500 meters from home?” Before answering that question, Ishmael first dissects the environment. “In Malaysia, the target is to get 40% of the population to use public transportation. However, presently, the numbers are still well below this figure,” he notes.
“In the years to come, if you have rail-based property, it is still a good proposition. Properties with rail-based services have higher capital appreciation compared to those that do not have,” he shares. With the development of the HSR, properties that are located close to rail services will enjoy easy access to the HSR through interconnecting rail lines.
From the perspective of highways and access roads, the upcoming Setiawangsa Pantai Expressway (SPE) will benefit those in that area. Aside from this, the DUKE (Duta Ulu Kelang Expressway) is also being extended. “Jalan Jelatek is known for its congestion, but with the extension of the DUKE, it will be less congested,” says Ishmael.
The Selangor master plan which has yet to be gazetted has a good selection of rail-based services lined up which include the KTM Komuter Services; the MRT second line; the LRT 3 from Bandar Utama to Klang; the LRT line that connects Rawang, Shah Alam and Putrajaya; and the MRT extension that will connect Sungai Buloh to Klang.
By far, Selangor and Kuala Lumpur are still the best places for property investments in Malaysia.
Ishmael debates two statements that most Malaysians have heard spreading like wildfire in recent years. One is “the property market is currently oversupplied” and the other “The property market is currently undersupplied”. Ishmael argues that both statements have their nuances – in order to accurately address these statements one has to consider the area, price range and product. He explored the disparity in product, price and location in the market.
Answering these two questions basically boils down to research of different areas and the types of properties available. Ishmael chose to discuss the affordable housing segment. According to data from the government’s affordable homes initiative, PRIMA, the target is to produce 175,000 affordable homes in 2016 with a budget allocation of RM1.6 billion. In 2015, the target was to build 80,000 homes with a budget of RM1.3 billion, and in 2013, 80,000 homes were to be built with a budget of RM1 billion.
According to PRIMA, as of end 2015, less than 1,000 homes have been completed and delivered nationwide under the PRIMA initiative, whilst 75,000 are said to be still under construction. PRIMA hopes to achieve 500,000 units by 2018. “If you ask me, I would say that the property market is grossly undersupplied where affordable homes are concerned,” says Ishmael.
Ishmael provides an overview of the property sector, stating that market trends reveal that property prices in Wilayah Persekutuan (WP) hover around RM700,000 to RM800,000 for condominiums. Super high-end properties are tagged at RM3000 per square feet making a 1,000 sq ft unit cost RM3 million.
His advice to investors is to purchase properties in areas of high economic activity in order to enjoy attractive capital appreciation and high rental yields. “The values will be solid, will hold and will improve with all prospects to economic activities opportunities,” opines Ishmael.
“You can buy a wonderful product but if it is in a place where nobody is working, chances are not good,” he adds.
In terms of growth and increase, Kuala Lumpur has remained strong over the years compared to other areas. “If I can afford it and find a good product, I would put my money in Kuala Lumpur,” says Ishmael.
GDP per capita
According to Ishmael, in order to wisely invest in properties, investors should consider GDP per capital. The most productive state so far is Selangor. However, the areas with the highest GDP per capita remains to be Kuala Lumpur and Nilai. This is followed by Sarawak, whilst Penang, Selangor and Melaka are very close in terms of per capita. Although Penang may be a small island state, Ishmael adds that its per capita is very high. “These are the areas where real estate prospects are high.”
An overview of the future
Ishmael notes that the sales of existing industrial units in KL stand at 6%, whilst Johor is also a strong contender, followed by Perak and Penang. The other states put together arrive at almost 20%. “Where industrial is concerned, Selangor takes the largest piece of the pie, followed by Johor, Perak and Penang,” explains Ishmael. In terms of industrial land development, Johor is performing strongly due to the activities in Iskandar Malaysia.
Ishmael states that in order to gauge the market well, one has to do some research and not just rely on hearsay.
“In fact, there may be truths to both sides of the coin, so it is always good to do some homework and garner accurate information before making an investment in property.”
This article was first published in the iProperty.com Malaysia June 2016 Magazine. Get your copy from selected news stands or view the magazine online for free at www.iproperty.com.my/magazine. Better yet, order a discounted subscription by putting in your details in the form below!