HENRY Butcher Real Estate Sdn Bhd chief operating officer Tang Chee Meng was invited to speak in Mitraland’s Annual Property Talk at the Ibis Styles Hotel in Cheras on March 26.
Titled “Smart Investments During A Property Market Slowdown”, the talk started off with a review of the residential property market performance in recent years, followed by a forecast of the market outlook for this year and ended with helpful advice on how and what to invest in the current soft market.
According to Tang, the current property cycle started in 2009 and peaked around 2012, when a record 272,000 residential property transactions were registered.
The annual transaction volumes for residential properties declined after that. Although the value of the residential transactions continued to go up, the upward trend was finally reversed in 2015 when the value of transactions declined for the first time in 13 years.
The lacklustre performance continued into last year, with the first nine months recording a lower volume and value of residential transactions compared to the corresponding period the year before.
More stringent loan processing by the banks have resulted in higher rejection rates, lower loan margins approved and an overall decline in approvals. To cope with the more sluggish market, there was a noticeable shift by housing developers towards the affordable housing segment where units are priced under RM500,000.
Overall, 2016 was a year of weak market sentiments. Developers shrunk unit sizes to make them affordable and offered many variations of easy payment schemes as well as a host of freebies to entice buyers. The asking as well as transacted prices of condominium and apartment units in the secondary market came down to more realistic levels as vendors took a longer time to find buyers.
In addition, retrenchments that took place in high-paying sectors (O&G, airline, finance) had also affected the rental market.
Moving on to this year, it will remain challenging but unlikely to suffer a drastic downturn. Demand will be relatively stable although lower than previous years. There will not be any drastic plunge in property prices.
Developers will continue their focus on affordable mass-market projects and there will be an expected decrease in new launches of higher priced residences as developers defer launching projects that received lukewarm response during pre-launch registration exercises.
Developers would also become more creative in coming up with innovative sales packages, incentives and easy payment schemes, he said.
He also noted that the following factors could have an impact on the direction of the market:
The economy is expected to be stable, with a projected GDP growth of between 4.5 and 4.8 per cent this year. This will be positive for the property market.
The 2017 Budget focused more on the affordable housing segment with no incentives for the high cost segment. This will lead to even more developers refocusing on the affordable market segment.
Malaysian business and consumer sentiments continue to be weak. This will bear down on sentiments in the property market.
The ringgit’s drastic fall against the US dollar and Singapore dollar. This will increase cost of imported building materials but will at the same time make Malaysian properties even more attractive to foreigners.
China’s increasing investments in the Malaysian infrastructure and development sectors. This hopefully could lead to more individual Chinese investors turning their sights at the Malaysian real estate sector.
The long-term future of Malaysia’s housing market nevertheless remains bright as the country has a sizeable young population within the house buying age group (25 - 54 years old) and the relatively low home ownership rates offers room for growth.
Demand is expected to be weaker for non-landed properties and sales take-up rates will be affected by the more stringent loan processing criteria adopted by banks. The upcoming 14th general election could nevertheless boost market sentiments as the government is expected to offer more goodies to create a feel good factor in the run up to GE14.
Looking at the positive side, Tang feels that the softer market offers those with money, increased opportunities to invest as property developers as well as owners are now more realistic in their pricing and are more willing to negotiate in order to close a sale.
Tang then offered some tips for investors using the acronym PLUSH:
PREPARATION - research before making a purchase.
LOCATION - look for the right locations which could be in the established areas or new growth areas.
UNIQUE - leverage on unique selling points which differentiate the project from others.
STRENGTH - stick to reputable and financially strong developers.
HOLD - be prepared to hold for the long term.
As for where to invest, Tang suggested the following as a guide, under the acronym GET:
GROWTH AREAS - places made more accessible by new highways and developed with new townships.
ESTABLISHED AREAS - mature, popular locations and well-served by amenities and with strong rental demand.
TRANSFORMATION AREAS - areas that will undergo a massive change due to redevelopment or replanning by the Government.
In conclusion, Tang remarked that property is a good hedge against inflation and as long as investors are realistic, attuned to the market and invest time and effort in looking out for the right investment opportunities, the current soft market conditions will not be a deterrent but could actually be a good and rewarding time for investors to invest in the property market.
*Story courtesy of Henry Butcher Malaysia