Property market: Transformation in progress

Property market: Transformation in progress

Teoh Eng Poh, General Manager of MCT Bhd

YOUTH OF THE NATION

The future of Malaysia is anything but conventional based on a new demographics data that this country has an average age of 27.4 years old among the population of more than 30 million. The shades of younger faces in the country should be something to look forward to and it is time for the younger generation to inherit Malaysian economics.

It is a lifelong journey for investing in the property market and it is high time that the young is developed to be property investors and be the successors of the market.

Since 2007, the percentage of income increment just could not catch up with the house price index. Fresh graduates today may only get between a monthly salary of RM2,000 to RM3,000. Ironically, 10 years ago, the pay was almost the same.

Hence it also fair to say that there will be any increment is a tough note. It creates a question if the property market in Malaysia is sustainable.

When fresh graduates, who are today’s Gen-Y cannot afford to own a property, the older generation, such as Gen-X and the Baby Boomers hold most of the properties in Malaysia because the property prices were very much cheaper at that time.

Most of the time, it’s the Baby Boomers or the Gen-X who leave their properties to their children. But if they are not left with any inheritance, Gen-Y will definitely have difficulties in financing their first property. A generation can create three generations of assets – therefore it is time for the older generations to invest in properties now for the sake of their future generations.

It is the parent’s responsibility to build a solid financial platform for their children and teach them financial intelligence, because according to a survey statistic by HSBC Bank, 67% of today’s retirees are still funding their children and this is not healthy.

 

Malaysian age demographics in 2014. Source: indexmundi.com

 

PROPERTY MARKET TRENDS SINCE 1990

In 1993, the property market was quite stagnant and townships became decentralised. Property developers then were moving out of Kuala Lumpur to develop other townships like USJ, Bandar Sunway, Sungai Long, and Bandar Utama.

Back then some property developers used the connectivity factor to sell their properties e.g. via the North-South Highway and North Klang Valley Expressway (NKVE). Those who develop projects further away from Kuala Lumpur city centre, such as Bukit Beruntung will find it challenging to sell their properties due to poor connectivity. At that time too, developers began to market their residential developments as ‘super-link houses’, a supposedly improved version of link houses. Hence, developers need to adopt leisure elements such as golf courses to market these less connectivity developments.

By 2004, as these townships become more matured, developers began upgrading these settlements, buying pocket of lands and building higher-class residential houses. Developers started to bring in foreign investments such as from the UAE and Singapore.

More residential homes were built during this time, such as gated and guarded, strata landed super link houses, semi-detached houses, high-end luxury condominiums and even strata offices.

By 2010, the integrated development era began with several townships within the Klang Valley region being absorbed into the Greater Kuala Lumpur, expanding the geographical boundaries of metropolitan Kuala Lumpur. During this time, more new types of developments started to surface, like small officehome office (SoHo), small office-flexible office, small office-versatile office, and boutique units.

In 2015, an emerging trend of world class of integrated metropolis developments began to surface in Kuala Lumpur with the planned Tun Razak Exchange (TRX), Bukit Bintang City Centre and world class branded hotels as well as luxurious serviced residences. I predict, with the lesser pocket of land banks in the city center, developers will once again create townships in suburban areas for the mass market demand. A new cycle of property trend will then begins with decentralization.

 

TRANSIT-ORIENTED DEVELOPMENTS

More developers are shifting their interests to the southern of Klang Valley (Southern Corridor) region due to escalating land prices in and around Petaling Jaya and Kuala Lumpur as it is hard for developers to build affordable housing projects within the metropolis.

With the planned development of the High-Speed Rail Link connecting Kuala Lumpur and Singapore, it will be a game changer in the property industry where the Southern parts of Malaysia will be experiencing bigger and better developments.

Other than Kuala Lumpur and Singapore, the rail will have stations positioned in Seremban, Ayer Keroh, Muar, Batu Pahat and Nusajaya, and this will connect two major South-East Asia financial centres within 90 minutes. There are even talks of another high speed rail connecting Kunming in China and Kuala Lumpur, giving opportune developments to the Northern states as well as Thailand and Laos.

Connectivity is the key to creation of new benchmark townships. While roads and highways can be a big boost to townships and developments, the new trend of the property market will soon be on the train rails.

High speed rails will provide non-stop services to major regional centres and intercity services. Source: Channel News Asia 2014.
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