KUALA LUMPUR, Jan 13: Growth in the property market is expected to remain flat this year, with the industrial segment being the only bright spot for the year, said property consultancy firm CH Williams Talhar & Wong Sdn Bhd.
The industrial segment is the only segment to record growth in the Klang Valley and Penang last year and is expected to continue growing this year in both locations.
Managing director Foo Gee Jen said the industrial market in the Klang Valley has been a neglected market with not much incoming new supply but demand remains strong with ongoing infrastructure developments projected to sustain momentum in the segment for the next few years.
“Industrial is underrated but strong growth is anticipated especially in terms of rental and prices. The logistics and warehousing sectors have been neglected but we will see more development of areas within the city centre for outsourcing businesses such as central kitchens for food delivery businesses,” he told reporters at the launch of the Property Market 2016 report yesterday.
Director Peh Seng Yee who leads the Penang office said the short-term outlook for the industrial segment in Penang is expected to be cautious this year, as companies are expected to closely evaluate market demand for their products as well as their production capacity before any reinvestment.
“On the long-term outlook, the industrial market is expected to be encouraging especially for companies involved in the ‘smart’ segment, as the state government has been promoting industries such as medical devices, solar, LED and aerospace. These industries can capitalise on the spillover benefit of the strong presence of electrical and electronic companies in Penang,” he said.
He added that the convergence of the manufacturing and services sectors is expected to enhance the potential of Penang in becoming a Global Business Services hub.
However in Johor Baru, the industrial segment was flat last year and is expected to remain lacklustre due to softer market conditions. The average transacted value of industrial properties in the state took an 8% dip last year from 2014, averaging at RM300-RM400 per sq ft (psf) in the sub-sale market.
While growth in the rest of the segments is expected to remain flat this year, the high-rise residential segment remains an area of concern across all three locations this year.
“For high-rise residential, there is a mismatch between supply and demand. There are far too many small shoebox units having been built and I always believed that it is not what the purchaser wants,” said Foo.
He said it will be a challenge to fill up the empty shoebox units, which he reckons will take a year or more to do so. There are close to 12,000 empty shoebox units currently.
Foo said overall residential transactions in the Klang Valley will be flat or may even see a small decline this year, in terms of value and volume of transactions.
“Moving forward, there are far too many headwinds in 2016. There are a lot of uncertainties, people are being cautious; even first time home buyers will be a lot more cautious. There is uncertainty in the job market. These are things that will impact many buyers,” he said.
However, he does not see any oversupply situation in the landed residential segment and apartments in certain locations like Puchong and Kelana Jaya. He said these apartments, sized between 1,000 sq ft and 1,200 sq ft priced around RM500,000 will continue to do well.
Meanwhile, the secondary market, despite being more active than the primary market, will see less activity compared with two to three years ago due to an anticipated slowdown in upgrade activity.
In Penang, Peh expects transaction activities to slow down this year in the high-rise residential market.
“With more affordable flats and apartments being launched and under construction, a spike in the existing supply is expected within the next three to five years,” he said.
Director Tan Ka Leong who leads the Johor Baru office said the property market has been experiencing a slowdown since the second half of 2014, especially in the high-rise residential sector. Last year, there were fewer new projects introduced and take-up rates were slow.
“The average transaction value in the sub-sale market was about RM400 psf in 2015, 10% lower than 2014 but about the same in 2013,” he said, adding that the lower transaction value was due to soft demand.
He said the market will remain subdued in the near future with less new launches as developers review their projects and hold back launches.