Residential prices hardly fall

There was a lot of talk late last year that property prices will tumble in 2012 after the steep rise in the residential sector over the past few years. So far, we have not seen any of that.

What we are seeing is:

● Bank Negara's tightened guidelines on consumer lending have started to work. Loan applications and loan approvals have fallen in January;

● In certain locations, house prices and rental have started to ease; and

● Developers are offering very enticing terms since the beginning of this year.

Keep your finger on these three factors and let us now take a look at today's launches. In some of these launches, buyers need only to pay about 1% downpayment of the property price instead of the required 10% on signing of the sale and purchase agreement. The stamp duty and legal fees are also waived and they need not pay anything else until after the property is completed. Such schemes have attracted many buyers.

The question to ask is: If the market is as good as many claimed it to be, why are developers offering such schemes? When a property is sold, it is registered as a sale. But the absolute revenue of the unit is yet to be paid.

For easy calculation purposes, 10% of a RM500,000 property is RM50,000. If the first 10% is paid, this RM50,000 is registered as revenue by the developer, but in the sales column, a sale of RM500,000 is recorded. That is why the sales and revenue figures vary considerably.

If a developer allows a buyer to pay only 1% of the purchase price, this does not mean he “loses” that other 9%. He will get it back after a certain period of time. The same goes for the waiver of the stamp duty and legal fees. The developer has to pay the lawyers for services rendered. All these charges and fees are packaged into the deal which the buyer will have to bear in due time. In this case, later rather than sooner.

Developers are offering such attractive terms in order to make a sale. Many of these schemes are offered in condominium projects because there is generally a glut in this segment. While such schemes may attract genuine buyers who need a roof over their heads and who are thankful that they can defer payment, it also attracts those who have no problem forking out that 1% downpayment and take a gamble that they will be able to offload it when the project is completed.

If one were to drive around certain parts of the Klang Valley today, there are some completed high-rise with large mobile numbers plastered on windows. It may not be so easy to offload units when there are so many of them.

What is noticeably absent, and which many would like to see are more launches of landed housing. But this is unlikely to happen. Only the secondary market is offering landed units, which may explain to a certain degree why the secondary market was rather robust last year. It applies not only for the Klang Valley, but for Penang as well and is a reflection of strong domestic demand despite the many negative predictions for this year.

When a developer considers a piece of land, he thinks of how much he can make from it. If he were to build a condominium and throw in various facilities, he can sell more houses than if he were to build landed units. That is why most of the launches today are high-rise projects, be it condominiums or serviced apartments.

Developers are also limited by what they have. Increasinlgy, land in city centres and popular areas are getting smaller. Which explains why in highly dense areas, condominium projects continue to be sprout up in the most congested of areas.

The development of landed units can only take place when there is large tracts of land, which also explains why the big boys like Mah Sing and SP Setia are venturing further away from city centres.

The other obvious factor in today's launches are the size and price of the condominium units. Most of the units are small. Studio apartments may be in the 500 sq ft range or thereabouts while those targeted at families may be three-bedroom units with built-up areas of 1,200 sq ft onwards. Most of the launches today are priced close to RM700,000 onwards. On a per sq ft basis, the price is still going up, whether it is a Petaling Jaya address or a Bukit Jalil one.

So, while sales volumes may stagnate in newly-launched projects (which explains why developers are offering units for sale with a 1% downpayment), on a per sq ft basis, prices does not seem to be stabilising. Developers are trying to maintain affordability by having smaller units, deferring payment and leveraging on low interest rates.

Assistant news editor Thean Lee Cheng is glad that Bank Negara is monitoring the household debt and lending in the property sector closely as this year promises to be an exciting one. - By Thean Lee Cheng (The Star)


March 14, 2012 at 12:10 AMcondomana

Miss Thean,

You are telling people what they already know. I do not know what your point is, and what you said is not helpful at all!!...:))

Maybe you should try to offer something more meaningful, like where you think our property market is heading, what's the socio-economic impact, or, what the authorities should do. Something along that line.

And by the way, when you said "land in city centres and popular areas are getting smaller. Which explains why in highly dense areas, condominium projects continue to be sprout up in the most congested of areas". You're not getting it right.

Yes, land is becoming scarce in city centre, but that's not the main reason developers build condos there. Just imagine you living in a landed residential house located right between G Hotel & Gurney Plaza! F...!. You'd loose your privacy completely! Whereas condos offer the perfect city living, yet not loosing your privacy.

March 14, 2012 at 12:57 PMproperty guy

The blogger of this website is selectively putting articles which suggest price continue to go up :). That is why this article is posted, for their own benefit.

March 14, 2012 at 1:41 PMtwyeow88

She is The Star newspaper editor, not blogger. she is sharing on what is going on in the mkt, nothing on price, up and down. her sharing is informative, maybe not for the pro/insider, but for a lot others who still don't know what is going on. that's the main purpose of newspaper.

March 14, 2012 at 4:00 PMtan

Somebody is selling Platino at loss.

What does it mean?

March 14, 2012 at 4:06 PMHo

The price hardly fall due to speculators. Not because of supply and demand.

Why developers can still build low cost flat at below RM100k on Penang island with the current materials and labour cost? Is it because of cheap land or poor materials, I am sure everybody uses poor materials as much as they can.

March 14, 2012 at 4:18 PMproperty guy

I am not talking about her. I am talking about person who own this blog. He/she is selectively putting articles to suggest prices will continue to increase :)

March 14, 2012 at 4:19 PMproperty guy

Who is selling Platino at a loss? Which unit and how much?

March 14, 2012 at 4:21 PMtwyeow88

i think for 800k, most people would go for landed. demand and supply type mismatch i guess.

March 16, 2012 at 8:59 AMcondomana

Hi twyeow88,

Can you recommend a few landed properties for RM 800k range. Thanks...:)

March 16, 2012 at 10:07 AMtwyeow88


800k range for own stay and capital, prefer to get 2 storey terrace houses in places like island glades, island park, pantai jerjak, sg nibong, lip sin, fettes park, sg ara. spend min. on repair/renovation to move in first. upgrade later when can afford. or for additional 100-150k, get gated and guarded like setia pearl island, one residence, white lily.

for rental, shophouses in mainland eg. juru, BM with existing tenant.

March 16, 2012 at 11:51 AMproperty guy

If you see the run down state of the 800K houses you just mentioned, you won't want to buy.

Setia location is not ideal, which explains they are still quite cheap

March 16, 2012 at 12:56 PMtwyeow88

Property guy,

you made a very good point and explain the thought of most people...being attracted by nice showroom, ad, lifestyle/concept. if you don't bother about capital appreciation at all and don't like to stay in landed and don't foresee selling and moving, this is good. i am not saying condo is not good but land appreciate faster.

choose those in better condition with min repair but original 30 yrs ago design, put in something trendy but not expensive eg. laminated flooring laid over instead of hacking and put marble flooring, iron grill vs stainless steel, paint comtemporary color, paint old furniture or throw and put partition/curtain and make it like walk in wardrobe, have some cheap but nice comtemporary painting/carpet/lighting/hanging shelf from IKEA. no need false ceiling/plaster ceiling. kitchen will cost the most and cannot avoid. then it will be like showroom also.

March 16, 2012 at 2:17 PMcondomana

Hi twyeow88,

Thank you for your feedback. Comparing 2 properties, (1) 2000sqft Platino at RM800k (2) Double-storey terrace house in Island Glades at RM800k.

If you take out the future speculated price from the equation (I call it "speculated" as it has not happened and no one knows for sure what will happen in future), which one do you think is more expensive and why?

March 16, 2012 at 2:55 PMtwyeow88


not quite sure i understand you correctly but terrace house is cheaper coz for that 1400 sq ft plot of land, you are the only owner. for condo 700k, you are sharing with 20+ people on the same stack. and you can add 1 more storey (not sure still can) and extend out for landed house. and supply is limited by the number of units they can create in the mkt.

but personally i would go for gated and guarded for another 100 to 150k more.

March 18, 2012 at 6:29 PMlim

Speculators are selling Zan Villa & Zan Pavillon below valuation.

Check it out in

I guess the pressure is getting more and more intense to the speculators in Sg Ara area. (Especially the landed hse as One Residence and Sunway Merica will be getting OC soon and get into subsale market)

March 19, 2012 at 11:22 AMtwyeow88

below bank valuation but still above their cost, right? it's pretty common upon OC obtained when a lot of investors are trying to exit.

March 19, 2012 at 11:35 AMtwyeow88

something interesting that i just picked up about definition of "AFFORDABILITY". watch the video clip. that explain why people still can afford to buy.


March 20, 2012 at 10:27 AMcondomana

Hi twyeow88,

You reasoning for the 1400sqft land vs 700k condo sounds logical. So in your opinion, why do you think there are people (and lots of them judging by the number of condos IJM is selling) who is willing to pay RM700k for a condo rather than a landed house?

By the way, thank you for the link to the short tutorial. Very systematic explanation, and surely affordability = income + loan interest. That should explain the increase in housing price in Msia over the last 30 years whereby BLR was as high as 13% at some point.

However, while you are surprised by the affordability formula, you should not overlook the other things that were mentioned, namely sentiment, cash flow positive, real demand for occupancy.. etc.

As we speak, please find the link below about what's happening in australia right now which might affect sentiment there.

March 20, 2012 at 11:08 AMtwyeow88

advertisement, showroom, showflat, crowd, sentiment, feature lifestyle, trend, rebate, low payment down and potential capital appreciation upon completion.

March 20, 2012 at 12:07 PMcondomana are probably right twyeow88. Half of the condo demand is from real occupancy due to lifestyle, while the other half is probably speculation (rebates, crowd, sentiment, low down payment, potential appreciation..). With so many units coming into market with OC soon, it should be fun time for the next couple of years...:)

March 20, 2012 at 12:35 PMtwyeow88

i personally like greenlane, pulau tikus coz not many new condos coming up. in fact, belissa court (behind belissa row) still in good demand all these years

i also think govt should revive beach street/banking areas/weld quay and have developers build condo there. coz from weld quay to batu maung factory is only 10-15 mins drive using jelutong expressway, probably faster than sg ara to batu maung.