Ishmael Ho highlighted opportunities for future homeowners and investors as well as the impact of the upcoming MRT lines 1, 2, 3 on property values. He spoke at the Starfish Training Sdn Bhd’s third quarter review for the property market.
Beginning his presentation with a quick snapshot of how the property scene is in Greater KL, Ishmael touched on some of the interesting areas that investors should look out for before moving on to explain the impacts of the upcoming MRT Lines on property values. To enable the audience to understand the derivation of the future hotspots, Ishmael first presented current updates relating to the property market as featured below:
House Price Index (2005-2014)
Ishmael presented the documented house price index from 2005 to 2014 in Kuala Lumpur and Selangor, which clearly showed capital appreciation for all types of residential properties. As of 2014, the average index stood at 209 for Kuala Lumpur and 176 for Selangor.
He highlighted that Malaysia has a very young population, as the bulk of it consists of Gen Ys and Gen Xs. As shown in Diagram 1, the biggest percentage of our population comes from the age group 20-24. As explained by Ishmael, all this translates to future demand. In 5 to 10 years’ time, these are the people who will be coming into the work force and wanting to buy a house.
Property Transaction Statistics in Kuala Lumpur (Q1 2015)
Moving on to describe the current property market activity in Kuala Lumpur, Ishmael then presented property transaction statistics for the first quarter of 2015. The data which consisted of the number and percentage of transactions for residential properties revealed that 54.69% of total residential transactions in Kuala Lumpur are above half a million.
Transacted Average Values for Condominiums in Kuala Lumpur
He mentioned that potential homeowners who are looking for residential property below half a million ringgit in KL will have a hard time as this bracket is but a small percentage among the available condominiums in the area. This includes new and old properties, as in both the primary and secondary market.
As shown in the diagram above, major locations in Kuala Lumpur, namely the locations – WP, KL, Petaling, Cheras, Setapak, Ulu Kelang, Ampang and Batu – have an average transaction value of RM 700,000.
Affordable Housing: A Double-edged Sword?
Ishmael then spent some time explaining how affordable housing affects purchasers. He stressed that potential investors and homeowners need to know what is happening in the sector as it is the people’s money that is being allocated for all the government’s’ affordable housing initiatives.
As elaborated by Ishmael, two years ago, the government arm, PR1MA was allocated RM1 billion to provide 80,000 PR1MA units for the rakyat. The recent budget stated a further allocation of RM 1.6 billion for another 175,000 units.
Presenting to the audience the current standings of each affordable housing project, (Diagram 2), Ishmael implored the audience to form their own conclusion based on the performance so far.
The report clearly shows that there is a huge gap between demand and supply, with over 800,000 people registered for PR1MA scheme and less than a 100,000 being completed.
Ishamel opines that affordable housing is a bit of a double-edged sword in some ways as politics can be an issue. PR1MA is a federal government’s initiative, with a certain monetary budget being allocated to it. However, as Selangor is governed by the opposition party, all PR1MA developments have to go through the usual protocol, including the request for certain landbanks and planning permissions. Some would argue that it might not be in the state’s political interest to champion PR1MA’s projects, more so with the Selangor having its own initiative, the Rumah Selangorku project.
Besides that, developers with prime land banks who are planning to build townships might be instructed by the state to apportion part of the development for Rumah SelangorKu. This translates to higher costs for the developer, who then pushes it to the other “non-affordable housing” units, resulting in prices being pressed upwards.
Using the Ho Chin Soon’s tier structure (Diagram 3), he helped the audience identify which areas are profitable. He explained that purchasers will not go wrong when acquiring properties that are in the first tier radius (20km), regardless whether primary or secondary, as this is where the city is. With 90% of the medical facility in this area, the location is second to none. Purchasers will get cheaper property outside the second tier as it gets a bit further from the city centre. Up north and towards the east there are geographical obstacles, hence the city’s growth here is limited.
He directed the audience’s attention to growth areas that are influenced by highways, namely – Lekas highway, Seremban highway, Maju Expressway, South Klang Valley Expressway and Kesas.
Ishmael explained that highways are used as a beacon for developments as it opens up new areas by connecting somewhere far closer to the city. Using South Klang Valley as an example, he mentioned how IJM’s Bandar Rimbayu capitalizes on its connectivity. To the East there is Cyberjaya, to the north is Kota Kemuning, and 5km to the north of Kota Kemuning is industrial land. The development draws on the natural transpiration that when there is economic activity and thriving businesses, the nearby residential area will prosper.
Reminding the audience on the earlier mentioned data which saw landed property having the best capital appreciation, he mentioned that almost all of the products in the market situated in areas not too far from the city are landed properties. Citing the north-west area of Greater KL as a hotspot, he exemplified Low Yat Group, which leveraged on the soon to be opened LATAR expressway by developing a township in Bandar Tasek Puteri, Rawang.
Another area he highlighted as a future hotspot was the south-west of Greater KL, especially to the south of Rawang, where major developers are staking their presence. Some of them include Sime Darby Property in the north, Kuala Lumpur Kepong Bhd’s Bandar Seri Coalfields, and EcoWorld Development Sdn Bhd, which recently bought a lot of land in the area.
Future hotspots along MRT Lines
Ishmael then shared with the audience how Greater KL is the place to focus on as this area is being targeted by the government itself as highlighted in the 2011 Economic Transformation Programme. This is of course evidenced by the upcoming MRT Lines which will equip Greater KL with an integrated urban rail system as well as the future High Speed Rail connecting KL with Singapore.
There has been some talk in the market regarding the selling point of areas along MRT Line 2 and 3. Some people opine that the MRT Line 2 and 3 will not have a unique selling point (USP) upon completion as compared to the first one.
Ishmael dispels this fact by stating that the current public transportation penetration rate in Malaysia is below 30%, where 2 out of 10 people use public transportation. This is much lower as compared to Singapore where 8 out of 10 people use public transportation as it has a penetration rate of 50%.
He further elaborated by stating that by 2035, when all the rails are completed and functioning, Malaysia’s penetration will still be less than half , at 40% – hence ALL THREE MRT Lines will still have a USP.
However, he cautioned future homeowners to do their homework before making any decisions to invest as developers may fail to mention investment-sensitive information. For instance, some developers will market their project as being within a 1km radius of an upcoming MRT station but might fail to mention that the MRT station is blocked by a highway, thus disrupting its access.
Ishmael reminded the audience to continuously keep themselves abreast with industry updates especially on the development of MRT Line 2 and 3. As he aptly puts it, a successful investor is a savvy one.
DISCLAIMER: The opinion stated in the article is solely of Ishmael Ho and is not in any form an endorsement or recommendation by iProperty.com. Readers are encouraged to seek independent advice prior to making any investments.
This article is first published in iProperty.com Malaysia December 2015 Magazine. Get your latest copy in selected bookstores and newstands or go to www.iproperty.com.my/magazine to subscribe.