A challenging industry landscape, triggered by costlier fuel and building materials, has not dampened sentiment among Malaysian real estate players who believe property demand in the country will continue to be sustainable as long as banks are prepared to dish out loans to buyers and investors.
This comes amid anticipation of more property transactions as new players continue to jump onto the real estate bandwagon, and introduce more products into the market at prices deemed competitive among regional peers.
However, property purchasers and investors, analysts cautioned, should be well informed of the dynamics of the sector where different market segments across various locations nationwide had their own stories to tell.
“Malaysia’s property sector is good and sustainable,” Real Estate and Housing Developers’ Association (Rehda) president Ng Seing Liong told The Edge Financial Daily recently. Rehda represents some 1,000 developers in Peninsular Malaysia.
Cement and steel bars make up about 40% of real estate construction cost, according to William Wei, president of the Sarawak Housing And Real Estate Developers’ Association, which has about 300 property firms in the state as members.
Based on estimates by research house CLSA Asia-Pacific Markets, building material prices rose by an average 12% last year, and the trend was expected to continue this year. Vulnerable entities will be mass-market developers who have no pricing power, according to a note dated Feb 18 from the research house.
CLSA said the growing supply of high-end condominiums was also a concern as rental take-up rates were not matching supply, hence, winners in the category would be iconic projects in prime locations.
However, demand for Grade A office space, spurred by Middle Eastern investors’ oil income, is expected to drive up prices and rentals of commercial entities.
“Investors should stay selective in Malaysia’s property. We have lowered our forecast for residential take-up rates, and mass-market margins (but) office (is) still looking good,” said the research house, which favours Malaysian Resources Corp Bhd, Bandar Raya Developments Bhd, and Sunway City Bhd.
CLSA expects supply of condominiums in the Kuala Lumpur City Centre where Petronas Twin Tower sits, to more than triple (250%) to about 6,700 units in three years from some 2,600 homes now. Local Grade A office benchmark price, which surpassed RM1,000 per sq ft early this year, is forecast to exceed RM2,000 per sq ft during the year, while rentals could surge by 10% within two years.
From a geographical standpoint, TA Securities Holdings Bhd analyst Kamarulzaman Hassan said developers in Penang generally had the bargaining power to dictate prices due to land scarcity on the island.
The story, however, is different in Johor where buyers have the upper hand due to the abundance of land. Home demand is expected to come from Malaysians with higher disposable income due to their employment in Singapore.
“It is an issue of location, besides demand and supply,” said Kamarulzaman. He also said demand for properties on the outskirts of the Klang Valley like Puchong and Sungai Buloh had increased due to better consumer sentiments amid a healthy, economic climate.
Meanwhile, real estate agency Zerin Properties chief executive officer Previndran Singhe said: “2008 is a good year with active transactions and good movement in the property market due to entry of new players and products.”
Industry experts are anticipating the emergence of more small-scale and high-end niche property developers in prime spots following the Securities Commission’s latest ruling which allows private real estate firms to be listed on the local exchange without having to fulfil the minimum 200ha landbank criterion.
Benchmark prices of high-end condominiums in KLCC, already ranging between RM2,000 and RM2,200 per sq ft, are still lower than rates in neighbouring Singapore where prices per sq ft are between S$4,000 (RM9,160) and S$5,000, according to estimates by Zerin which operates offices in Singapore, Sydney and New Delhi.
Previndran expected the Malaysian benchmark rates for residential and commercial units to be breached, boosted by factors including a resilient local economy with strong domestic demand, besides the country’s growing tourism sector.
“Malaysia still offers good value for money as the cost of living and doing business here is low,” he said. - By The Edge Daily
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