LIKE most of Malaysia during 2016 and 2017, the state of Perak — or more specifically Ipoh — had a slow year in terms of property market activity.
According to Khaw Eng Leng, director of Henry Butcher Malaysia (Perak) Sdn Bhd, developers are adapting to the current market, adjusting their pricing to make for more palatable purchases.
“We can still see prices dipping slightly, in order to attract people into buying. I would say that it’s because the launching prices were high, and people weren’t buying them. Nowadays, the focus is more towards affordable housing, with initiatives like PPA1M (1Malaysia Civil Servants Housing Scheme) and PR1MA (1Malaysia People’s Housing Programme).”
Citing an example, Khaw said that pricing for studios and serviced apartments in one project was around RM500 per sq ft during the launch. However, prices have currently stabilised to around RM300 per sq ft.
“Now, launch activity has slowed down for serviced apartments, and the prices are a sign of developers easing out. Current economic conditions — the tightening on financing criteria and regulations — are also part of the slowdown and stabilisation.
“What you can see in 2017 is that developers are now going for medium-cost apartments. A few years back, you wouldn’t be able to see an apartment with a launch price of RM150,000. That’s not the case now. In a way, I think developers sense the current market sentiment, and are adjusting accordingly.
“A slow and stable market also presents an opportunity to buy without worrying about sudden pricing fluctuations, as we’ll see later.”
Affordable retirement
Mainly known for its food, Ipoh is also known for its better quality of life. In fact, it has become an ideal destination for retirees, with a slower pace of life coupled with easy traffic on the roads and affordable property prices.
Recent efforts by the state government and developers to gear towards eco-tourism help bolster its reputation as well.
Based on that, Khaw comments that a lot of buyers purchase residential properties in Ipoh in preparation for their retirement.
“A lot of the buyers are also from other states. Even good areas like Canning Garden are very affordable (about RM250,000). In a way, people will buy for their retirement. There’s no hassle with traffic congestion.”
Higher wages with comparatively lower property prices incentivise buyers to look at Ipoh as well.
“For Ipoh, wages are slightly lower than Penang and Kuala Lumpur, so they usually travel to these areas or Singapore to work. When they come back, they will probably buy a unit here for their future, as it’s too pricey to buy in Kuala Lumpur, Penang or Singapore.
In Kuala Lumpur, if you can’t get a semi-detached house, you can get one here . It’s a good place to stay, with better air and water quality, and it’s not as congested.”
Opportunity cost
Khaw takes us through memory lane, recalling a price surge in the years before the current slowdown started.
“For the past three or four years, prices went up a lot. A 2Ω-storey semi-detached unit used to fetch RM300,000, then went up to RM550,000, and new units are priced at RM600,000 to RM700,000. Bungalows a decade ago were less than RM1 million, now they’re RM1.8 million to RM2 million.”
Then, the economic slowdown came, and recent banking regulations further slowed down market activity, causing buyers to pause and thoroughly weigh their options before purchasing, with some deferring or changing their decision to purchase.
This helped to rein in the rapid price increases and in fact resulted in a drop in the prices of some of the high-rise apartments.
“Terraced houses are still the most popular residential property for buyers, because of their relative affordability. Apartments are also popular, but again, there’s an opportunity cost attached — do you buy an apartment, or opt for a landed property in the subsale market?”
The reasoning behind the focus is simple — logistics.
“It’s hard to compete with Penang and Selangor, with their existing ports and infrastructure. That’s why Perak is leaning more towards eco-tourism as well, with Sunway being a big player in this.”
Khaw compares the offerings of Sunway Bhd — a big player in the state capital Ipoh and the Klang Valley.
Sunway Bhd is developing Sunway City Ipoh — a mixed-integrated township. Among the township’s luxurious developments are Serene Villas, which comprises two-storey cluster homes and two-storey superlink houses.
“The environment (in Ipoh) is good, with a lot of greenery. A lot people from Kuala Lumpur like to come to Ipoh during the weekends and spend half a day here whereas Sunway’s attractions in Klang Valley feature a lot of rides, their attractions in Ipoh are less on rides, and more on enjoying their surroundings. You’d think that there would be nothing much, but it’s done very well!”
With a focus on tourism comes an increase in accommodation, as Khaw points out.
“Hotel projects have mushroomed over the past four or five years, whether it be boutique or budget. All in all, we observed about 20 such projects.”
Ipoh is home to several attractions, the aforementioned MAPS (Movie Animation Park Studios) being one of them. Positioned as Asia’s first animation theme park, MAPS features 23 attractions and 15 rides. Spanning 52 acres of land, local and global animation icons are the theme park’s pull factor, living up to its name.
Aside from MAPS, local conglomerate Sunway Group is also thinking big in Ipoh, fully capitalising on the tourism angle as well as Ipoh’s natural hot springs.
Currently, there are two key attractions from the group: Lost World of Tambun and The Banjaran Hotsprings Retreat. The former is a combination of a theme park, hotel and spa catering to families, while the latter is marketed as Malaysia’s first luxury natural hot springs wellness retreat targeted at the affluent tourist.
With Sunway Group’s eye on Ipoh — the tourist attractions and an Ipoh campus of Sunway College — perhaps the conglomerate is seeing the bigger picture of elevating the state; an attempt to bring Bandar Sunway to Ipoh would not be out of the equation.
Industry talk
Ipoh’s exports are mainly natural resources (specifically calcium carbonate, used in toothpaste), derived from quarries.
“For the industrial market, prices have not moved significantly, unlike the residential and commercial market. However, land prices have improved, from RM3 to RM4 per sq ft four to five years back to RM7 to RM8 currently. It’s not very active, but it has shown improvement,” Khaw observes.
Infrastructure plays a part in industry and logistics, and Ipoh’s isn’t as comprehensive as Kuala Lumpur or Penang.
“For industrial players, logistics and transport play a part in making purchasing decisions. In Ipoh, the nearest port is quite far away — an hour’s drive if you’re using a normal vehicle, longer if it’s a lorry.
“Perak comprises many separate small townships, which only came together, infrastructure-wise, recently. When infrastructure improves, delivery times improve as well, which translates to potential. That’s why you see movement in the industrial market.”
That said, upcoming developments could improve infrastructure significantly.
“The West Coast Expressway, expected to be completed by 2019, is perhaps the most significant update in infrastructure. The much-hyped HSR (KL-Singapore high-speed rail) is also another thing to look out for.”
Market challenges
“The main problem with the oversupply is sustainability — in Kuala Lumpur, say you build a township of 200 houses, you would build around 10 shop offices, with the shop offices relying on the demand of the neighbourhood to sustain itself. For Ipoh, there is a higher concentration of shop offices in one spot, which makes it harder for businesses to sustain themselves.”
As for the rest of the year, Khaw isn’t expecting any major shakedowns.
“I’m not expecting things to be easy, considering the stringent financing requirements. The market is expected to be slow for the time being. If your cash flow is good, then any time is a good time to buy.
“If it was me, I’d go for the subsale market, as prices are lower than new launches. Just be mindful that your returns won’t be as bountiful. If you’re looking for high returns, stick to Kuala Lumpur; if you’re buying for retirement, start here.” (Story courtesy of Henry Butcher Malaysia)