CBRE – WTW Sabah & Sarawak Property 2016 Report

CBRE - WTW Sabah & Sarawak Property 2016 Report

SABAH

Property Overview

A softer property market in 2015, for Sabah and Kota Kinabalu, across most sectors. Tighter bank lending policies put in place in previous years coupled with the delay in obtaining development plan approvals for developers, amongst others, also saw fewer new property launches and moderated transaction activities.

Notwithstanding which, there has been no evidence of a drop in property prices. The scenario is anticipated to be little changed going into 2016. As Kota Kinabalu is State Capital and the administrative, commercial, education and tourism hub and the gateway into Sabah, property prices are envisaged to be sustained, provided that there be no major changes to macroeconomic conditions and government policies.

Notwithstanding which, the State Cabinet’s approval of an earthquake resistant buildings guideline in November 2015 following the June 5 Ranau earthquake may see an increase in construction costs and property prices if implemented. Overall, good, developable lands in proven locations would continue to be safe bets in the long term given the current lack of new roads to open up new areas and as Kota Kinabalu continue to expand with development densities increasing and moving away from the centre.

Property prices are envisaged to be sustained going into the 2016 – provided also that there be no major changes to macroeconomic conditions and government policies

Landed Residential

There were no significant new launches during 1H 2015 in Sandakan. Transaction activities were lack-lustre in 2015 but prices remained firm. Typical 2-storey terraced houses were transacted at RM420,000 per unit. Approximately 570 landed residential units launched in 2014 are at various stages of construction.

At Tawau, demand for medium cost housing priced below RM400,000 per unit remained significant. The medium cost housing segment is expected to see more supply coming on stream in the next two years with the launches of the first PR1MA project in 4Q2015 and the second project in 1Q2016 at Mile 10 Jalan Apas by Princip Hasil Sdn Bhd. The launch of high-end residential development projects at Jalan Sin On and Jalan Bunga Raya in 2015, is expected to face strong headwinds in the market.

Landed residential developments in Keningau are mostly medium scale, ranging from 30 to 100 units per development. The transacted price for a 2-storey terraced house increased about 20% in 2015, to RM367,000 per unit on average. The growing population is expected to spur demand.

In Lahad Datu, the lower commodity (oil palm) prices and oil palm crop production had reduced the spending power of the population. The majority of purchasers faced difficulties in submitting their loan applications with proper financial documents while a number of them were over-geared.

The negative impact left over by the Sulu intrusion has caused many developers to hold and scale back their residential projects. Despite the poor market sentiment in Lahad Datu, Hap Seng Properties had launched Phase 4 of Palm Heights consisting 100 double-storey semi-detached and Villa Perdana with 44 units of high-end double-storey semi-detached houses.

The market is expected to remain little changed going into 2016 and developments in established locations and near to urban centres should continue to fare well.

KOTA KINABALU (LANDED RESIDENTIAL)

Completed landed residential developments mainly consisted of double-storey terraced and semi-detached houses. Transactions in the sub-sale market are noted to be stable in 1H 2015 year-on-year with no evidence of a decline in prices.

Generally, a more muted landed residential sector in 2015 where new launches are concerned, with fewer new developments initiated compared to previous years. New landed residential launches in 2015 comprised mainly double-storey terraced houses. These include:

Completed landed residential developments mainly consisted of double-storey terraced and semi-detached houses. Transactions in the sub-sale market are noted to be stable in 1H 2015 year-on-year with no evidence of a decline in prices.

Generally, a more muted landed residential sector in 2015 where new launches are concerned, with fewer new developments initiated compared to previous years. New landed residential launches in 2015 comprised mainly double-storey terraced houses. These include:

The market is expected to remain little changed going into 2016 and developments in established locations and near to urban centres should continue to fare well.

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High Rise Residential

In Sandakan, some 220 units condominiums units Utama South Condominiums were completed in 1H2015. The transacted price of condominiums was around RM330 per sq ft.

In Tawau, the high-rise residential market was relatively quiet with no new launches in 2015. As compared to the landed residential sector, high-rise residential sector did less well across the board. Typical condominiums units were transacted around RM330,000 per unit, an increase of 3% since 2014.

KOTA KINABALU (HIGH-RISE RESIDENTIAL)

New supply of high-rise residential developments is anticipated to continue to outperform its landed counterpart, in the near foreseeable term.

New condominiums launched in 2015 consist of the following:

There were also other condominium projects opened for pre-launch registration of interest and these include Maya@Likas, Kingfisher Putatan, Kingfisher Inanam and Bukit Bantayan Residences. 2015 saw the completion of 828 condominium units from The Loft (Blocks C, D and E) in Sembulan, The Suritz in Kolombong, Seri Manis in Lintas Luyang, Canggih Heights off Jalan Tuaran Bypass, Aman Sari Lofts in Manggatal and Bay 21 in Likas Bay bringing total new supply to some 6,831 units in Kota Kinabalu.

In the sub-sale market, the volume of transaction activities for 1H2015 eased further from 2014 although transacted prices have so far been sustained. Given the increasing land price and building costs, a new supply of high-rise residential developments will continue to outperform its landed counterpart, though, for the near foreseeable term, interest is likely to lean towards mid-market condominiums given softer market conditions and tighter bank lending policies.

Sarawak

Property Overview 

The overall property market for Sarawak is seen to be generally lacklustre due to the weak buying sentiments. The anticipation of higher mortgage rates in 2015 and the increased inflationary pressure with the implementation of 6% GST in April 2015 have further dampened property sales for 2015 as buyers took on a wait-and-see attitude. On the positive side, this cautionary approach may have also resulted in some market corrections.

Despite residential property being exempted from GST, the rise in costs of construction have pushed up the prices of residential property, generally between 3% to 6% for the year. Notwithstanding the less conducive climate, the property sector remains stable especially for those in prime locations. Residential properties priced below RM400,000 are still in good demand but properties on the upper end of the scale have been affected by slower sales.

With a large number of new commercial units coming into the market, shophouses are also experiencing a much slower take-up rate and falling occupancy. In the face of a slackening economy, developers are offering attractive sales packages whilst investors are moving cautiously.

Sarawak’s maintaining of the foreign ownership’s minimum pricing requirement at RM350,000 per property instead of the RM1 million minimum purchase price per property for foreign ownership by its West Malaysian counterparts could make it a more attractive option. The announcement by the Sarawak Chief Minister that subsidiary land titles shall follow the land tenure of the original parent title augurs well for the property sector as the interests of owners and purchasers are protected.

If market conditions continue as it is, the coming year 2016 is expected to see a further slowdown in all property sectors, although demand will very much be determined by the types and prices offered, with perceived attention shifting to the secondary market which is less subject to the effects of current economic measures such as the GST. High-end residential units including luxury condominiums are expected to see slow sales.

However, the residential sector will continue to dominate the market, comprising still about 80% or more of the overall property stock. There will still be good demand for affordable housing of not more than RM250,000 per unit with a recommended built up area of 850 sq ft. It is perceived that the majority of residential units would and should be focused on low-cost and affordable housing as the way forward.

The market is anticipating an overload of commercial properties and only those in prime locations and with good income earning potentials are expected to sell well. Industrial properties will remain low key except for those in established and prime areas.

Overall, the market outlook for 2016 will be bleak and uncertain. Developers will be compelled to build what the market wants and can afford rather than what developers prefer to build in terms of profitability. As the economy is expected to be slow and even recessive, developers will be hard pressed to survive in an increasingly competitive market. The next couple of years will certainly be a true test of the “Survival of the Fittest”, as we expect lots of challenging times ahead and thus, lots of changes to cope with the challenges.

Landed Residential

Supply of landed residential units in Sibu has slowed down as transaction activities and take up rates have contracted. Generally, newly launched intermediate terraced and semi-detached houses have command prices above RM400,000 and RM600,000, respectively.

In Miri, selling prices of newly launched residential properties were higher mainly due to inflation and the impact of GST. Transactions activity and take-up rates are expected to slow down in 2016 due to the overall slowdown of Malaysia’s economy. With Miri sprawling north and south, current and new projects are moving to outlying areas where the land cost is relatively lower. Housing units under construction are the highest in Lutong-Kuala Baram area (927 units), largely contributed by Desa Senadin developed by Miri Housing Development Realty Sdn. Bhd.  Luak-Bakam and Taman Tunku-Taman Jelita which have seen increasing housing activity in recent years are expected to maintain their momentum in the next few years. Generally, it is expected that the Miri housing market will continue to be stable but with noticeably fewer launches and completions.

Prices of residential units in Bintulu in 2015 were higher compared to 2014. However, the market was stable in general due to the current on-going SCORE Projects in Bintulu but it is expected that the transaction volume and take up rate for new projects may experience a downward trend due to overall economic slowdown.

KUCHING (LANDED RESIDENTIAL)

2016 is expected to reflect a similar scenario with a slowdown in new sales but good transaction activities in the affordable housing sector.

The residential sector in 2015 saw more units completed, due to a large number of launches in previous years. On the other hand, the number of landed residential launches for 2015 has dropped considerably, due to a softer market and also because of the shift to high-rise residential units, which have been launched in significant numbers.

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Except for continuing phases of some major developments such as Tabuan Tranquility and Bandar Samariang and more affordable mass housing such as Green Gate and Lotak Villas in Batu Kawa and Taman Sri Permai in the outer Dewan Bandaraya Kuching Utara (DBKU) area, most of the developments are piece-meal and small, comprising less than 50 units per project.

New launches were noted to be more active in the outlying suburban areas, basically prime secondary areas such as Batu Kawa, Jalan Kuching Serian and Matang, due to increasing land costs in and around Kuching city which has pushed newer developments to the outer areas in efforts to maintain affordability.

Double-storey terrace houses continue to dominate the landed residential sector followed by 2-storey semi-detached houses. Prices of housing units in prime locations remain high, recording over RM550,000 for 2-storey terraced units and more than RM1,000,000 for semi-detached units. Take up rates for new housing projects seem to be slower in 2015 but market transaction activities in the secondary market have increased. Demand for reasonably priced housing below.

RM500,000 remained strong. Housing areas recorded high occupancy rates at around 90% and rentals were maintained as the previous year.

High Rise Residential

Since the last five years, developments of high-rise residences have picked up in Miri with five projects completed and four new project launches that will be completed in the next one to two years.

Likewise in Sibu, stratified residential properties were picking up in recent years, due to increasing land cost and scarcity of land in prime locations. Selling prices of newly launched apartments have been rising fast after gaining popularity.

In Bintulu, the condominiums/apartment market was weak in 2015. The number of high-rise residential units is expected to increase with nine projects, totalling 783 units slated for completion within the next three years. Moving forward, 2016 is likely to see fewer transaction activities.

KUCHING (HIGH-RISE RESIDENTIAL)

Whilst sales of the condominiums sector are expected to slow down further in 2016, prices are still expected to increase although at a lower growth rate.

There were fewer units completed for the condominiums sector after a record year in 2014. Some projects completed were the 72 Residences at Jalan Song and Greenwich South at Jalan Batu Kawa. However, with another 6,500 or so units either under construction or undergoing earthworks, the next couple of years would see even more high-rise apartments and condominiums coming into the market. This sub-sector is taking up an increasing share in the residential sector of Kuching and has even overtaken landed housing in the Kuching urban areas in terms of numbers completed for the past 2 years.

The number of units launched for the year is almost on par with the year before. However, most of these are part of mixed commercial developments. 80% of the high-rise residential units launched are located in the Kuching urban areas such as BUA and Matang areas, and units offered at these developments range between 1,000 sq ft. and 3,000 sq ft. Rentals remained competitive at between RM1,500 and RM3,000 per month, depending on the furnishings and unit size. Due to the increased number of units available and coming into the market, the rental markets are expected to be competitive and very much a tenants’ market.

Prices for condominiums units continued to record growth of around 10% or so for the

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