Last year saw property buyers and aspiring house owners being plagued with negative sentiments especially with the falling Ringgit. As we start the new year, the top-most question on everyone’s mind – where is the property market heading?
iProperty.com consulted some industry experts and developers to learn what the property industry has in store for the ‘Year of the Monkey’.
Warrick Singh – Director of Business Development/Training of Asian Realty Sdn Bhd, Asian Land Auctioneers Sdn Bhd/Starfish Training Sdn Bhd
As we move into 2016, the ‘cloud of uncertainty’ hanging over the Malaysian economy would settle somewhat preceding several recent capital measures, such as the purchase of Malaysian bonds, intra-trade in Chinese Renmimbi instead of US Dollar and the offer of RMB50 billion of a protected Chinese capital market.
Also, the development of the LRT/MRT lines which enhances connectivity to Greater Klang Valley including Seremban, Rawang and Klang will bode well for the residential and commercial property market. Malaysia generally has a young population where 80% of Malaysians are below the age of 50, which means the demand for houses is only going to increase as more young adults come into the workforce and are looking to settle down.
Seremban with improved roads and rail connectivity as well as within reach of Kuala Lumpur would see considerable activity growth in the residential segment especially for newly launched gated and guarded residences.
Besides that, educational hubs such as the Alice Smith School in Seri Kembangan, Selangor; Epsom College at Bandar Enstek, Nilai, Seremban and Bandar University Pagoh near Muar, Johor would see a fair amount of investments to develop these townships into “holistic developments”.
Similarly, the commercial sector will “piggyback” on the spin-off of these new growth areas as when there is substantial population, commercial properties will automatically attract investors, both passive and speculative.
2016 appears relatively promising for the average Malaysian hence, quite a few would now be shaking off the ‘wait and see’ stance adopted last year. Moreover, the substantially weakened Ringgit will see many foreign investors utilizing the opportunity of the higher exchange rate to pick up residential and commercial properties.
Khalil Adis – iProperty.com‘s brand ambassador (Iskandar Malaysia) property speaker and author
This year’s primary residential property market will be driven by affordable homes as outlined in Budget 2016. With RM200 million allocated under the First House Deposit Financing Scheme which will be established by the Ministry of Urban Being, Housing and Local Government and RM1.6 billion to be spent to build 175,000 units of PRIMA homes, we can expect this sector to dominate 2016 as housing is a basic necessity that needs to be met.
The Kuala Lumpur residential property market will be a challenging one this year due to a medley of factors – the falling ringgit, political uncertainty, the property market’s cooling measures and the oversupply issue. Prospective investors must tread with caution while those who are already in the market must find solutions to counter the challenges ahead. Also, the expatriate market is dwindling as many foreigners have turned to other ‘greener pastures’ in Asia. Property sellers are advised to set realistic asking prices and even be prepared to sell at a loss. For buyers, there are plenty of good deals in the market. Auction properties are on the rise and from an investment point of view; these are attractive for the following three reasons:
1. They are undervalued, translating to savings.
2. These units are completed and might only need minor renovation.
3. Should you decide to rent them out, high rental yields could be obtained.
The commercial property market will be better off this year. Properties such as hotel suites and retail units will be popular investment choices as they provide a regular rental income. Whereas, the secondary market for commercial properties will be driven by institutional investors who are looking to buy office space in the heart of KLCC where such units are in limited supply. It will be a challenging time for the office market with there being fewer expatriates as potential buyers. On the flip side, this means that buyers and renters could obtain good deals as quite a few sellers and landlords will be in desperate need to sell off or rent out their property. Hence, this would be a good time to start stating your terms and agreements!
Gary Chua – CEO of Smart Financing
This year’s property market will continue to be soft especially with the challenges we are facing both internally and externally. This year will see a high volume of new properties, with many residential and commercial properties being completed. It will take some time for the demand to catch up to the impending supply of properties, hence the bearish market.
The property market dynamic in the country will continue to experience the revolution where more Malaysians are now favouring value-added properties, especially lifestyle properties. These properties are equipped with facilities and are surrounded by amenities, which allows for a more comprehensive and comfortable lifestyle. With most young urbanites searching for work-life balance, the lifestyle living concept is fast gaining a foothold in the country.
This lifestyle concept was not really introduced before and thus, there may be a lack of supply of such developments. As Gen-Ys is the biggest population group in Malaysia, where it comprises 10.8 million or 38.2% of the Malaysian population, the demand for lifestyle properties will continue to increase in the near future as many will begin to look for a place of their own to settle down.
The most challenging facet in 2016 will be securing mortgage from banks. Financing is only going to get tougher, be it for first-time house buyers or for property investors. This is because banks are currently facing a high asset to deposit ratio on top of the weakening Ringgit and higher banking costs. All these translates to less funding available as banks will be tightening their reins even further to ensure that they obtain the best and safest return on investments.
On the bright side, the uncertainties in the market could result in emerging good deals, which would not be present in an otherwise healthy market. As it is a ‘buyers’ market now, developers are willing to offer discounts to entice purchasers. It might be challenging to secure financing from the bank but knowing and preparing ahead will keep the savvy investor at the top of the game as well as allowing for the accumulation of greater wealth in a weak market.
Chang Kim Loong – Honorary Secretary General, National House Buyers Association (HBA)
The primary property market is expected to experience a further drop in sales volume. With the current economic climate, more financially-savvy working professionals will adopt a wait-and-see attitude, especially if developers continue to sell at the current steep prices. Banks will also embrace a more prudent financial checks and as a result, applicants in the borderline category who got their loans approved during better economic times will not be as lucky this year.
Even though developers are not expected to reduce selling prices; they may offer more ‘freebies and rebates’ to entice new house buyers. Developers with deeper pockets will probably defer further new launches as they wait for the economy to recover. Thus, it can be expected that the 2016 primary property market will see fewer launches.
On the other hand, the secondary property market (sub-sales) is bound to be more exciting this year. With the economy showing no signs of improvement, property speculators who entered the market when the Developer Interest Bearing Scheme (DIBS) and so-called Zero Entry Cost (ZEC) systems were still in place, will be greatly affected.
In consideration of some of these property speculators not being able to afford to service their mortgage instalments upon completion of said properties, they will be compelled to sell off their units. With more secondary properties entering the market, some of these speculators may have to settle for selling prices that are lower than the original purchase price in order to secure a buyer.
For those who are unable to flip their properties, however, will eventually default on their loans and in turn, banks will be forced to auction off their properties – that is why HBA foresees an increase in property auctions in 2016.
HBA has always advised aspiring house buyers to take to heart the adage ‘Buy what you can see and not a pie in the sky‘ by taking advantage of the secondary properties and auction properties available in the market. They should make an effort to hunt for ‘hidden gems’ as there are good properties that could be obtained at a bargain.
Khoo Boo-Khuan – Full-Time Property Investor & Author of “The 9 to 5 Property Millionaire”
I believe that the residential property market is going to be relatively stable this year. It will always be a resilient sub-sector of the market as housing is a basic need and people who need a place to live will continue to purchase properties.
They may not be able to buy exactly what they want, but I do believe that most purchasers will be content as long as they are able to buy a house of their own that is within their budget.
However, the primary market will not pick up much unless developers start launching products that are more affordable to the masses. As it was seen last year, while there were many new launches that received lukewarm responses, there were some launches that did amazingly well as the developers had their products well positioned.
The secondary market is where most of the excitement is going to be. Prices in the secondary market are much more reasonable, which makes it more attractive to house buyers and savvy investors. Another plus point is that less guesswork is involved when buying in the secondary market.
The fact that you can view the property “as-it-is, where-it-is” enables you to make better judgements on how good a property is as of today.
For the commercial property market, I do foresee that it will be quiet in general. This is because many businesses have adopted a “wait-and-see” approach and will focus more on business continuity rather than expansion during these challenging times. In a nutshell, 2016 is definitely going to be another challenging but exciting year for the property market.
Adrian Wee – Founder of www.idkingacademy.com
It will definitely be a very challenging year ahead, especially after the Chinese New Year celebrations. However, with each challenge lies opportunities! One has the option to adopt the wait and see strategy depending on how they perceive the property market to be half glass full or half glass empty.
There are always queries by property buyers of when will be the best time to purchase a property and the best advice to them will be to buy now. The bargaining power is still strong in the Malaysian property market and buyers can effortlessly build their net worth as well as their assets if they invest for the long-term because investors always ‘win’ in the long run.
In regards of what types of property to buy this year, it is all about asset selection. Depending on the stages and the cash position buyers are in, active buyers and investors alike can opt for undervalued assets. However not every property is suited for everyone and not every other bargain is suitable for every stage in life.
Properties are a double edged sword where it can cut and harm you, but it can also make you wealthy effortlessly. It is important to equip ourselves with the financial fundamentals as well as investment intelligence. I predict that the interior designer and renovation industry will be a game changer this year because not only can add it value to properties, but it is also because the property market will be slowing down.
Knowledge is power and if we mastered such intelligence, anytime is a good time to purchase properties. Property investment is a long term game, and investing into long term markets will guarantee you great returns.
The questions posed to developers were:
1. What is the outlook for the property market in the next 12 months?
2. Which areas/states and what kind of properties do you think will garner strong interest and demand from property buyers in 2016?
3. What advice would you give to property home buyers and investors in 2016?
Tan Sri Dato’ Sri Leong Hoy Kum – Managing Director of Mah Sing Group Berhad
1. Real demand will continue to be strong both for property buyers who are looking for a place of their own or for investment purposes. Despite the challenging market conditions, the Group remains confident of delivering sustainable performance for the financial year, supported by a solid track record, right market positioning, as well as a healthy liquidity profile. In line with the younger generation making up the most of Malaysia’s population, Mah Sing will continue to focus on the demand for beginner homes.
2. Property hotspots such as Klang Valley, Penang, Johor and Kota Kinabalu will continue to do well. That is why Mah Sing continuously strives to provide the public with uniquely conceptualized products in these areas.
For example, in the Klang Valley, we have M City in Jalan Ampang which features a thematic hanging garden; Lakeville Residence in Taman Wahyu which highlights lakeside living in the heart of the city itself and D’Sara Sentral in Sungai Buloh, an integrated development strategically located opposite an upcoming MRT station.
In Penang, Mah Sing’s The Loft@Southbay which offers low density, secured resort living lifestyle is strategically located 1km away from the Penang’s second bridge, while in Iskandar, Johor, The Meridin@Medini offers an integrated living experience with both residential and commercial products of various build-ups.
3. Real estate has always been one of the best hedges against inflation and is one of the most preferred asset class for wealth preservation in Malaysia.
There are so many great properties out there that would serve the average Malaysian as either a dream family home or a great investment vehicle.
Aspiring property owners must make the effort to study the market and equip themselves with the necessary information to ensure that they obtain returns in terms of capital appreciation and rental yield.
Dennis Ng – Executive Director of UMLand
1. Johor has become an important hub for the industrial, tourism and commercial sectors in southern Malaysia. Therefore, we believe that any development which relates to tourism is at its highest rate at this moment and is expected to continue over the years.
2. Iskandar Malaysia should be a steady source of both commercial and residential projects. With the impact of government’s new policy on the property market, it should be positive over the longer-term as it will help reduce speculation from some segments in the market.
3. In certain states of Malaysia, capital appreciation has been as high as 35%, exceeding the annual expectations of 25%-30%. Expectations in the following years are expected to continue at a conservative rate of 20%-30%.There are also numerous options in Malaysia when it comes to financing, from conventional to Islamic which are becoming increasingly popular amongst foreign investors.
Savvy foreign buyers and investors have found the pricing of luxury seafront properties in Malaysia extremely attractive, affording them access to prime properties that would otherwise be unattainable in their home countries.
Eric Seow – General Manager of Sales and Marketing, Macrolink International Land (M) Sdn Bhd
1. In line with the lacklustre 2016 Budget and with the continuous cautious lending practice by local banks, most developers foresee a somewhat bleak property market this year.
2. The demand for high-end properties has dwindled considerably since the end of 2014, as interest shifted towards more affordable properties. This year will only see the affordable to mid-range price properties receiving even more interest from property buyers. Mid-sized apartments and 2-storey terrace houses are still on top of the list for aspiring homeowners. Most prospective buyers are targeting properties located in well developed and connected locations, especially with public transportation. The deciding factors for purchasing will be right pricing, a good development concept paired with a trusted brand.
3. We would advise the public to take the opportunity to purchase properties now either for own use or for investment purposes. This is because most prices for properties being launched at the moment have been “fine-tuned” to reflect the current slow market. Furthermore, developers are now placing extra caution in fixing selling prices for soon-to-be-launched projects, in order to remain competitive and to attract buyers. In other words, the market price has already been modified and it is worth investing now even more than before.
Andrew Tan – Senior Marketing Manager of Country View Group
1. The 2016 property market will still be a challenging one, especially for the high rise residential segment and for certain commercial projects. This is due to the oversupply in the current market along with the aftereffects of the Goods and Services Tax (GST), lower commodity prices and stricter home loan approvals. I expect the market to pick up only in the second half of 2017, provided that these conditions improve by then.
2. The areas that will command strong interests this year will still be Klang Valley, Penang and Iskandar Malaysia besides new growth areas such as the refinery and petrochemical integrated development project (RAPID) in Pengerang, Johor. Malaysians aged 40 years and below represents 70% population and this group will be driving the demand for new homes in the years to come. Consumers’ demand will be skewed towards landed residential properties priced below RM1 million and strategically located commercial properties.
3. That is why Country View is now shifting gears to focus on the mid-range price market, where we have adopted the strategy of “sell what the people want to buy”. Product design, competitive pricing and product differentiation are being implemented to complement this strategy as current property buyers are now hunting for competitively priced products in strategic areas, which would provide return on investments in terms of capital appreciation or rental yields.