According to Chai FJ, a local industry player, Kota Kinabalu (KK) being the state capital and centre of economic activities, it is no wonder that it tops the list in terms of highest number of property transactions and highest average price per sq ft.
Its popularity is driven by natural demand arising from the role KK plays as the administrative and economic centre of Sabah, besides it housing a major percentage of the state’s population. Property demand is also augmented by the Sabah Development Corridor (SDC) plans, an economic corridor initiative that spans throughout the state. It aims to promote and accelerate the development of Sabah into a leading economic region and a choice investment destination for investment, work and living.
However, Chai notes that the average price per sq ft figure could be misleading as the review period (JanSept 2015) recorded a bigger weightage of sales of lower-end properties. Providing an example, Chai says that the average price of landed properties falling within the upper-middle to high-end class in Penampang is actually closer to RM600 per sq ft.
It was reported in the C H Williams Talhar & Wong (WTW) Property Market 2015 Report that Sabah bagged the ‘most unaffordable state in Malaysia’ title with a multiple of median house price over annual household income of 9.7. House prices have escalated rather steeply in the past few years – Chai attributes this factor partly to the housing supply issue. Being a linear city facing the sea-front, there is limited land supply in between the coastline and the mountainous Crocker range. Also, the latest land reclamation guidelines are much stricter in regards to environmental concerns, coupled with the costly price of the whole procedure.
Another key matter to consider for the development of high-rise properties is the height restriction imposed due to the proximity of the Kota Kinabalu International Airport (KKIA) – further constraining the supply figure. Besides that, the general infrastructures in KK is somewhat lacking as compared to its West Malaysia counterparts. Better road connectivity is required to open up new areas for development as the population in KK continues to expand. Until then, it will be difficult for the population to shift outwards, as witnessed in Greater Klang Valley, where numerous suburbs have sprung up in the past few years as properties in the KL city centre became too pricey for the mass market.
Chai points out that given the geographical limitations, land scarcity and connectivity issues, it is only expected that demand for properties in KK will far surpass the market supply. Her take on the outlook for the near term is on the bearish side. As with most state capitals in the country, KK is currently experiencing a slump in property activity due to the slowdown in the economy and negative buying sentiment.
The local property market is currently going through a rough patch given the shaky global economy due to reasons ranging from the depreciation of the Chinese currency to Brexit. On a micro level, the languishing oil and gas industry and rather weak oil palm prices have also contributed towards the downward pressure on property demand. Nevertheless, Chai shared that landed properties in prime areas in KK and Penampang have been holding their value well. Even though there has been a decrease in the number of transactions, property prices have remained stable and there has not been any discernible fall in value at all.
Penampang has been the preferred choice for owneroccupiers and business owners since decades ago. The town has grown alongside KK and its population is known to be predominantly Chinese. Hence landed properties there have been enjoying strong demand in the past years and of late, more high rise developments are sprouting up despite Penampang being quite a distance away from the KK city centre. When compared with median income levels, the value of properties in Penampang is on the steep side. As such there are now up and coming locations vying to challenge Penampang as a residential hotspot.
Areas like Tuaran, Talipok, Papar and other suburban areas where property prices may be significantly less than that in Penampang are fast becoming popular among homebuyers. Especially since these new developments fall within the affordable housing segment.
On the contrary, landed properties in Penampang will continue to receive steady demand. Meanwhile, developers looking to penetrate the high-rise market must be more cautious of the market demands and strive to create thoughtfully designed developments in strategic locations.
SANDAKAN, TAWAU & LAHAD DATU
Demand for properties located along the east coast have been particularly hit due to security issues arising from the infamous kidnappings that occurred last year. As long as the security concerns are not convincingly addressed, the negative sentiment will remain and these towns will eventually witness an increasing outward shift in the population, especially among the affluent.
The total number of transactions for landed properties in Sabah in the review period was 1180. The number of transactions averaged at 131 per month while the average price per sq ft stood at RM185.
Meanwhile for non-landed properties, the number of transactions totalled 918 and averaged at 102 transactions per month. The average price per sq ft was RM307.
Even though areas like KK and Sandakan are experiencing challenging times , Chai points out that this does not mean that there are no opportunities for property investors – as a matter of fact, these are opportune times for them. Chai’s advice for potential purchasers is to keep a lookout for gilt-edged good value properties. Developments in locations with strong fundamentals are worth investing in – location, pricing and the product packaging are imperative.
DISCLAIMER: The source of data on brickz.my is from the Valuation and Property Services department (JPPH) which officially records a property transaction once the stamp duty for the Sales and Purchase is paid. Analytics are based on the data available at the date of publication and may be subject to revision as and when more data becomes available.
his article was first published in the iProperty.com Malaysia August 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!