Property Market: What Could Be On The Cards In 2017?

Property Market: What Could Be On The Cards In 2017?

Industry Experts

 

Sarkunan Subramaniam, Managing Director of Knight Frank Malaysia Sdn Bhd says:

“Malaysia will be nursing a property overhang in 2017 – The market’s condition will be the same as or even worse than what it has been last year. I foresee that the brunt of the slowdown will be towards the middle of the year. It will be very subdued across all sectors, transaction activity for residential properties including SoVo and SoHo units as well as developers’ projects will be especially slow.”

On the other hand, the commercial property market will see a hive of activity; reasonably priced sub-sale units, namely shop offices that bear high tenant potential will enjoy good sales.

The fate of the Ringgit and the market moving forward rests in the hands of the next general elections, which may happen later this year. Should the opposition claim victory, it may take longer for the market to recover as transitional period calls for higher political and economic volatility, resulting in higher uncertainty among buyers and sellers.

Conversely, if Barisan Nasional succeeds to maintain its political position, investors will continue to question the Ringgit’s position and in turn, their purchasing power. Ultimately, I feel that the market fundamentals would not overshadow the political sentiment and we can expect a market recovery as early of Q1 2018. Personally, I believe if there is a change in the way the Malaysian government is run and particularly with the corruption issue being addressed, the local property market will rebound exponentially and come back even stronger in 2018. 

My main piece of advice for property purchasers in 2017 is to proceed with caution. Home buyers must carry out their due diligence – research the developer’s background, previous projects’ and construction quality when making purchasing decisions. Take extra care to evaluate promotional packages being offered to avoid succumbing to a marketing gimmick.

Meanwhile, property owners or vendors have to be more realistic with their pricing – they should be aware that it is currently a tenant’s market, thus rental rates should be price accordingly. Alternatively, they could throw in perks, such as full unit furnishing to sweeten the pot for potential renters.

 

Tang Chee Meng, COO of Henry Butcher (M) Sdn Bhd says:

“The Malaysian property market is expected to continue to be soft in 2017 with lower transactional volumes and values due to slower economic growth, higher cost of living and weaker consumer sentiments. Housing developers will continue to be plagued by higher withdrawal rates as buyers face challenges in securing financing up to the required margins.

The residential market will focus on affordable homes, i.e. housing priced RM 500,000 in suburban locations as well as smaller sized units closer to the city. Property developers will come up with more innovative sales packages as well as designs to boost sales in a challenging market. Property prices may dip in the face of slower sales take-up rates but this is not expected to be significant and overall, the property market is expected to be stable.

We may see some market recovery in the second half of the year as the government is expected to announce some goodies in the period leading up to the general elections which may help to boost the property market. Investors should look at established locations or upcoming areas with strong growth potential and buy from reputable and financially sound developers. I would urge them to invest with a longer-term outlook in mind instead of focusing on short-term speculation.”

 

 

 

Adrian Un, CEO of Skybridge International Sdn Bhd says:

“This year’s overall market is expected to be flat, with property prices in certain segments declining slightly on the back of a weaker sentiment. Considering property cycles, the market condition is normal as it is currently at the bottoming end before it picks up again in the next 1-2 years. I would safely say that the market will recover from 2019 onwards.” 

For the residential market, sales of high-end condominiums will continue to straggle behind, especially for units in the Kuala Lumpur city centre. The bungalow sub-sector will also be stagnant as the prices are out of the range of most buyers. Also, not many are willing to spend large amounts at the moment.

Meanwhile, one of the ‘high-performers’ for 2017 will be landed homes in the Klang Valley region, within the RM800,000 – RM1.2 million price range. With it being a buyers’ market and developers/owners pricing their properties accordingly;  many working couples will be taking this opportunity to upgrade to bigger homes. Semi-detached homes especially will do well. 

Besides that, developers who launch residential projects costing between RM400,000 and RM700,000 can expect a good take up rate.

Property owners are in for a tough time – with the oversupply of properties, it will be challenging securing a tenant or buyer. In order to cope, owners will have to stand out from the competition by furnishing their unit or by incentivising realtors to push for their properties.   

Grade A offices, on the other hand, will still generate demand from tenants. However, owners will have to accept a lower rental yield. The rental price per sq ft in prime areas such as KLCC, Bangsar South and KL Eco City have recently seen an average decline of RM1 – RM1.50. As there have not been many new launches for 2-3 storey shop offices, units with good visibility and frontage will perform reasonably well as well.

 

Samuel Tan, Executive Director of KGV International Property Consultants Sdn Bhd says:

“In view of what is prevailing in the local and regional economies, the 2017 consumer sentiment will likely remain cautious. Transaction volume and value will remain thin but the figures will certainly be better than 2016’s. Developers will shift their attention to more affordable housing although niche developments with higher-end price tags will still be in demand in choice locations.”

For homebuyers, stay invested and be on the look-out for opportune buys as eager sellers will be surfacing in the secondary market. The primary market will present more choices of properties tagged within the affordable range, namely between RM250,000 to RM500,000. More freebies and incentives will be offered too – all this translates to savings for homebuyers. 

My advice to those looking to get their foot up the property ladder is to set aside funds in order to capitalise on such opportunities. Those who are asset-heavy should monetise them should the need for cash arise. My one tip for house hunters is to be well-networked with property agents; they will alert you prime opportunities in the market before these good deals are snapped up.

 

Miichael Yeoh. CEO & Founder of GM Training Academy PLT says:

“Investing in properties today is not the same as it was 5 years ago – the time where investors could gain easy profit by buying and flipping properties is over. Bank Negara Malaysia (BNM)’s stringent regulations have certainly dulled the property market – the continuing biggest challenge for potential property purchasers will be getting their loan approved.”

Hence, we can anticipate the following trends among developers who will be launching new projects in the near future:
a)    Building of smaller units, with price tags hovering around RM500,000
b)    More innovative marketing strategies to entice potential buyers, including promotional packages and special discounts. 

2017 will continue to be a buyers’ market. There are a lot of good deals out there as the prices of most primary properties have been fine-tuned to reflect the current slowdown. The sub-sale market will ride this wave as well – owners will be offering attractive prices to remain competitive. I would advise buyers to polish their negotiation skills. 

Purchasers of new projects’ on the other hand must ensure that they have the financial capability or sufficient holding power as challenging securing a tenant upon the property’s completion will prove challenging.

Also, should the Ringgit continue to slide, we will see an increasing number of foreign purchasers investing in Malaysian properties considering that they will now enjoy lower entry points.

 

Alan Poon, Managing Partner of Superior Wealth Mastery says:

“The 2017 property market will see another subdued year in line with the current cautious sentiment. This will be depicted in the primary sector especially in urban areas, where developers would continue to market the bulk of their unsold stocks rather than launching new projects. “

However, the secondary market will see an uptick in activity as distressed owners will be forced to reduce their asking prices in the hope of luring purchasers who are on the look out for value deals. 

The auction market is often overlooked by buyers due to the fear of getting into a bad deal. Nevertheless, even if more people take an interest in auction goods, only educated and persistent ones will stand to gain from these ‘hidden’ real estate gems. 

My advice for aspiring home buyers is this – DO NOT WAIT AND SEE, take action now. However, do not blindly listen to unverified sources or claims by desperate marketeers. Buyers will have to be prudent with their pickings and put in the effort to thoroughly study any deal before committing to a purchase. 

On that note, I have always believed that one cannot go wrong by investing in oneself particularly in real estate education through books, seminars and workshops.

This is also the time for investors to reassess their portfolio – while it may seem like a no-brainer for those with strong financial positions to take advantage of the market, a prudent approach in tenant management is even more crucial against the backdrop of a highly competitive tenant market.

 

Gary Chua, CEO of Smart Financing says:

“On the loan approval front, banks will continue to maintain stringent measures for home loan applications. Last year, the approval rate for both residential loans and commercial loans dropped to a new low in 10 years, averaging at 42% and 39% respectively compared to over 50% in the prior year.”

In an effort to boost economic activities, 2016 saw the following measures being carried out by BNM – a reduction of the Statutory Reserve Requirement (SRR) from 4% to 3.5% and a loosening of the Overnight Policy Rate (OPR) by 25 basis points.  

For 2017, I am anticipating that the government will announce more easing measures to boost the financial market and consumers sentiment. A few possible changes include:  
i) Reducing the SRR to 2-3% to improve liquidity in the domestic financial system, thus enabling banks to give out more loans to consumers, especially home loans. 

ii) Further reduction of the OPR to ease debtors’ monthly obligations and in turn, improve consumers’ affordability.

iii) Increasing the number of home loan approvals especially for applicants who earn less than RM5,000 per month.

My foresight for the 2017 market is slightly optimistic and I expect that it will perform better than the previous year considering the 14 MOUs signed with China in late 2016. These agreements, worth RM144 billion (S$47.9 billion) pledges closer cooperation between the 2 countries, signaling a potential strategic shift particularly a significant inflow of foreign direct into Malaysia.

 

Dato’ Pretam Singh, Partner at Pretam Singh, Nor & Co says:

“2017 will have a fundamental change in the way property dealings take place with several amendments to the Stamp Act 1949.”

This amendment, among many other things, introduces the charging of ad valorem duty on any contract or agreement for the sale of any property including stock or marketable securities of any estate, equitable estate or interest and matters incidental to it to be chargeable on conveyance. This means that Stamp Duty has to be paid at the signing of the Sales & Purchase Agreement (SPA, notwithstanding that the property has not been constructed and strata titles have not been issued yet. 

As a result, purchasers will have to possess this additional finance at the time of the SPA signing, which will certainly curb speculative buying. Besides that, it will relieve the huge burden faced by developers in dealing with house buyers who default on collecting their strata titles due to insufficient funds for the stamp duty payment. 

The current Section 21 of the Act is substituted as follows:

“Certain contracts to be chargeable as conveyances on sale

21.(1) Any contract or agreement made in Malaysia for the sale of any —
(a) equitable estate or interest in any property;
(b) estate or interest in any property; or
(c) stock or marketable securities,

shall be charged with the ad valorem duty to be paid by the purchaser as a conveyance on the sale of the estate, interest in any property, stock or marketable securities contracted or agreed to be sold.

(2) Subsection (1) shall not apply to a transaction where there is no contract or agreement made in Malaysia and the transaction is effected by an instrument whereby any—
(a) equitable estate or interest in any property;
(b) estate or interest in any property; or
(c) stock or marketable securities,

is conveyed or transferred to any person, and such instrument shall be charged with the same ad valorem duty, to be paid by the purchaser, as if it were an actual conveyance on sale of the estate, interest in any property, stock or marketable securities contracted or agreed to be sold.

(3) Any contract or agreement made in Malaysia for the sale of any of the following shall not be deemed as an instrument of conveyance on sale:
(a) property situated outside Malaysia;
(b) goods, wares or merchandise; or
(c) ship or vessel, or part interest, share or property of or in any ship or vessel.

(4) Subject to item 1 of Part 1 of the First Schedule, where the purchaser has paid the ad valorem duty under subsection (1) and before having obtained conveyance or transfer of the property, enters into a contract or agreement for the sale of the same, the subsequent contract or agreement shall be charged with ad valorem duty in accordance with item 1 of Part 1 of the Schedule as if it were an actual conveyance on sale to the sub-purchaser.

(5) Where any purchaser or sub-purchaser or any other person on his behalf or by his direction, has paid duty according to the value upon any assignment, contract or agreement under subsection (1), the conveyance or transfer made to the purchaser or sub-purchaser, as the case may be, shall be chargeable with a fixed duty of ten ringgit.

(6) Subject to subsection (5), the ad valorem duty paid for any such contract, agreement or assignment may be refunded by the Collector.

(7) The application for refund by the purchaser or sub-purchaser shall be made within twelve months—

(a) after the contract, agreement or assignment has been rescinded, annulled or cancelled; and

(b) the instrument in respect of such contract, agreement or assignment has not been registered in accordance with any written law.

 

Developers

 

Sarena Cheah, Managing Director of Sunway Berhad Property Development Division (Malaysia and Singapore) says:

“With the current economic climate, we are cautious and selective about the products we launch in this environment to meet current demand. Meanwhile, we are also looking at openings and investments apart from what we already have.”

That having said, our brand has been in the market for a long time and our strong track record has garnered long standing loyalty and support from our customers as well as many potentials. As our communities’ growth partner, our steadfast commitment to our communities’ long-term success is evidenced in our master-planned townships, which are; Sunway City, Sunway City Ipoh, Sunway Penang and Sunway Iskandar. 

Our townships offer key components such as educational institutions, leisure hotspot, healthcare and recreation. Residents moving into their homes in the future will have amenities ready to live, learn, work and play with their families. In addition, new products with exciting and unique concepts will be unveiled so property home buyers and investors could expect more options among the market. 

Developers with strong standing will bring the best to their investors, homeowners and community, and they will stay for the long term and co-invest to foster the growth of the development.

 

Dato Sri’ Jacky Ker Cherk Yee, Chairman of Premier Plus Marketing Sdn Bhd says:

“The property market in Malaysia is expected to remain flattish this year in lieu of the global economic downturn. Malaysia especially has been hit with the drastic fall in the Ringgit, hence most of the sectors will slow down, including real estate.” 

Developers will have their work cut out for them in offering more value for money deals to cater to aspiring purchasers who are seeking affordable homes. In addition, the Ringgit drop might result in an increase in construction costs.

Nevertheless, 2017 presents a good opportunity to investors looking to purchase Malaysian properties. There has been considerable capital inflow into the country from China, in various sectors and more Chinese companies are setting up shop here in Malaysia. This will definitely boost Malaysia’s standing as an investment hub and in turn, increase the demand for local properties.

IM, especially has been the recipient of numerous foreign investments, hence I foresee that the development corridor will continue to generate job opportunities and enhance economy growth. I would advise investors to look at properties around the Coastal Highway Southern Link (CHSL). Once completed, the CHSL will provide a direct connection between the Second Link Expressway and Medini, the central business district of Iskandar Puteri. Moreover, Iskandar Puteri will contain one of the stations of the upcoming HSR project, further increasing connectivity and consequently, the value of properties in the surrounding area.

 

Jim Woon, General Manager of Horizon Hills Development Sdn Bhd says:

“Johor’s overall economic outlook is positive with the state gross domestic product (GDP) projected to grow by 5%-5.5% this year. A rumour of oversupply in property development projects has been circulating concerning the Iskandar property market. However, this perception of oversupply is mainly over strata or high-rise properties; the demand for landed property is still positive, depending on the location and property developer.”

Despite the current economic challenges, property prices will never depreciate in the long term, hence for this next year, property investors and home buyers should take the opportunity to invest in properties. Real estate investments are still flush with liquidity and the current selling prices for most homes are very reasonable despite there being a rise in labour and construction material cost.

With the weak Ringgit and significant fluctuations in our currency, property investment is THE asset to withstand inflation. When making a property investment decision, one must always consider the location of the development, accessibility, connectivity to major highways and surrounding catalyst developments, among a few.

Furthermore, the Federal Government has maintained its commitment in Iskandar Malaysia(IM) to ensure that Malaysia’s first economic growth corridor will take shape as planned. Catalytic projects such as the High-Speed Rail (HSR), FASTrack Iskandar, new theme parks and more universities in EduCity will all lead to an increase in job opportunities and economic growth. The inflow of people and capital will in turn spur demand for residential and commercial properties.

 

 

 

 

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