Slower high-end property sector

The Malaysian Institute of Estate Agents (MIEA) expects a slowdown in the high-end residential property sub-sector this year as potential buyers are likely to maintain a cautious approach in light of the economic uncertainties in Europe and the United States.

“There is a lot of caution now due to the uncertainty in Europe and the United States. With fear of a potential spillover effect, most buyers are adopting a wait-and-see' approach,” said MIEA president Nixon Paul.

“We don't expect to see any slowdown for property transactions within the RM300,000-to-RM600,000 range and believe there will still be a lot of activity within this segment.”

Paul said the various “checks and balances” by Bank Negara to control the increase in household debt would also affect residential property transactions.

Starting this year, banks have been using net income instead of gross income to calculate the debt service ratio for loans.

According to reports, this is a pre-emptive move by Bank Negara to contain the rise in consumer debts. The guidelines cover housing, personal and car loans, credit cards, receivables and loans for the purchase of securities.

The MIEA is the authorised body representing all registered estate agents in Malaysia.

Paul said there was an over-supply of condominium units in the country and that rental rates for such units could be affected.

Despite this, he said, it would be a good time now to invest in the high-rise market for long-term investors.

“We are one of the cheapest in the region and if you are looking to invest over the long term, say 10 years, now is a good time to get into the condominium market. Over the next decade, prices will appreciate.

“But if you're dependent on rental income to service your loan, I wouldn't advise it.”

Paul noted that rising property prices in Malaysia had forced many people to buy homes further away from the city.

“I do feel sorry for the average guy, but if you look anywhere else in the world, it's a natural progression. Those who can't afford it live further away from the city.

“It's happening in cities all over the world. Out of necessity, you'll see more people buying condominiums instead of landed property.”

Paul said one of the main issues facing residential property transactions today was the big disparity between the intended property price and valuation price.

“A buyer and seller might agree on a particular price but the valuation might not be the same. When that happens, the loan application procedure becomes a problem and the deal ends up getting aborted,” he said.

Separately, Paul said the commercial property sub-sector would be buoyant this year.

“It's going to be a buzz! Most investors are shifting to commercial from residential because they feel this sub-sector is more resilient, especially in a downturn,” he said, adding that there was pent-up demand for commercial property in Malaysia.

“We believe that the industrial sub-sector will also be quite active. Property prices in Bukit Jelutong and Glenmarie are at an all-time high.”

Paul said the office sub-sector might face a slowdown due to oversupply in space.

“There is an oversupply of office space. Rentals in prime locations such as KLCC may not be affected but not those located in the outskirts of the city,” he said, adding that major shopping complexes, especially within Kuala Lumpur, would continue to experience good take-up this year.

Despite the global uncertainty, Paul said that property was still the “best place to invest in.”

“It's still the safest place to put your money in. These days, a lot of people are shifting their investments into property. You can hedge yourself well against inflation when you invest in property,” he said. - By Eugene Mahalingam (The Star)

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