Kuching recorded the highest number of property transactions for residential properties at 761 transactions, followed by Kuala Baram at 360 transactions and Kemena at 243 transactions.
Colin Wong, Manager at H. SIMON Real Estate comments that these areas are popular among homebuyers and investors as they are established residential localities. Kuching being the state’s capital sees a growing workforce, thus receiving the highest interest. Also, properties in Kuching have shown to give a very stable return to investors – there is a steady 4-8% annual growth in property prices.
Meanwhile, Kuala Baram located roughly 30km from Miri and Kemena, situated slightly north of Bintulu are up and coming areas, as they are supported by commercial components or educational establishments, complete infrastructures and amenities.
The Kuala Baram Industrial Estate along the Baram river is one of the largest shipyards in Miri and is the base of many shipbuilding companies. Curtin University is also only 20 minutes away.
Likewise, there is an industrial estate in Kemena coupled with surrounding amenities and facilities. These include the Park City Mall and commercial centres such as Berjaya commercial centre, Kemena commercial centre and Medan Jaya commercial centre.
On top of that, the recent upgrading of infrastructure works in the area have improved the connectivity and accessibility of Kemena. The existing Sibu-Bintulu Road, from the Kemena Industrial Estate to the access road leading to the new Bintulu Airport was recently upgraded and improved, including the construction of a new bridge crossing the Batang Kemena river.
Hence, it is no wonder that these areas with booming economic activities are property investors’ favourites as they would they would be the safest kind of investment instrument with high tenant potential.
SLOWER GROWTH IN CAPITAL APPRECIATION AND RENTAL YIELD
However, Colin notes that currently, generally the Sarawak property market, is witnessing a stagnation in terms of take-up rates, even though there is a demand for residential properties in the state.
In the period of 2010-2014, new developments in the prime areas (as shown in table) sold like hotcakes, but there was a noticeable slowdown in transaction activity beginning early 2015.
This is because the prices of properties in the state have risen faster than the average household income in the past few years, making them unaffordable to the mass market.
Developers are finding it more difficult and take a longer time to sell their properties as the property prices in a lot of these areas are considered too pricey when compared to the incomes level of most potential buyers.
According to Colin, the previous 5 years have seen purchasers enjoying capital appreciation rates of 10- 15%. Moving forward, the growth in property prices will be moving at a slower pace as prices stabilise and the market slowdown readjusts.
The one notable change Colin have witnessed so far is that an increasing number of people are looking into sub-sale properties due to the affordability factor.
Similarly, he foresees that the rental market for both high-rises and landed properties will not see much growth and will remain stable for at least the next three years.
The total number of transactions for landed properties in Sarawak was 2606 with an average price per sq ft of RM124. Colin says the price trend reflects the current stagnant buying activity where the number of transactions and price per sq ft have remained pretty much the same in the review period.
The past year has seen buyers and investors being more cautious in buying properties and many are now adopting a wait and see attitude on the back of the negative sentiment of the local economy. It should be noted, however, that reasonably priced properties in prime areas, especially Kuching are still being snapped up by buyers.
Touching on market’s challenges, Colin believes that it will be tough for the younger generation or fresh graduates to buy a property that they call their own. He shared that an increasing number of young working adults are giving up their dream of purchasing a home in the near future and depend on their parent’s accommodation instead.
Current property prices have doubled from 5-6 years ago. Most terrace homes in popular areas of Kuching that cost RM300,000 five years are going for more than RM600,000 now. This translates into an additional RM1,500 for monthly instalment payments for a 30-year home loan. Further compounding the issue is the passive movement in median salary growth, making it difficult for young adults to cough up the sum required for a down payment.
The average transaction per month for high-rise is 50, only 17% of that of the landed properties’ average. Nonetheless, Colin predicts that the number of transactions for non-landed properties will be experiencing an increase in the coming year.
This is attributed to the upward movement of land prices as well as the scarcity of land plots in good locations. In turn, more developers are opting to build condominiums instead of landed homes.
As can be seen in Kuching, most of the semi-D homes have exceeded the RM 1 million mark. This is notable because as compared to other cities in West Malaysia, Sarawak has a lower density development guideline.
High-rise properties are slowly gaining favour as the younger generation in Sarawak are selecting to purchase condominiums and apartments instead of landed homes.
Furthermore, a growing number of the older population whose children have left the nest are opting to sell off their landed homes and move into condominiums. The conveniences of facilities and security of high-rise units serve as added incentives.
For Kuching in particular, there will be an incoming supply of roughly 6,500 units of non-landed properties in the next few years. At the same time, there has been a decline in the number of units of landed properties being launched of late – a sign that the state’s property trend is evolving.
With the current market’s sentiment, Colin believes that there are more opportunities in the secondary market. In lieu of the escalating property prices, he urges the state government to bring in more affordable housing developments for the working class.
This 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!