Poor sentiment but prices still holding

Sentiment matters. But there does not seem to be “much documented evidence” that property sales are as bad as painted out to be, according to a few property consultants, some of whom declined to be named.

Using figures by the National Property Information Centre (Napic) as well as figures from a survey among developers, they concluded that although there is a time lag in Napic statistics, the situation may not be as bad as some quarters make it out to be.

In a nutshell, it may come to that, but it’s not there yet.

“If the property market is as bad as it is made out to be, there would be evidence of it even in the first quarter, and there is not. In fact, there was a marginal increase in sales in the first quarter of this year,” says one of them.

Secondly, much of the blame have been squarely laid on the introduction of the goods and services tax (GST) that came in the second quarter and tight lending.

There was a 6% drop in transactions for the second quarter this year from 64,063 units transacted compared to 59,973 units sold this year, according to Napic figures.

“I will wait for the third quarter results, which would be out pretty soon,” says S K Brothers general manager Chan Ai-Cheng.

C H Williams Talhar & Wong managing director Foo Gee Jen says there is a time lag of between three and five months in Napic figures as the numbers are only recorded at the point of completion of sale, and not at the signing of the sales and purchase agreements.

The background

Early last month, the Real Estate and Housing Developers Association Malaysia released their survey results and created a storm in a teacup.

The thrust of the Property Industry Survey 1H2015 was out of 10,550 residential units launched, only 4,218 - or about 40% - were sold.

However, if one were to use the same Rehda figures, only 43% launched units were sold a year ago, a difference of only 3%.

The second thrust of the survey was out of 4,772 units of high-rise residentials, only 879 units - or 18% - were sold compared with 54% sold last year.

However, this so-called sharp drop is due to an increase of high-rise residentials being launched in the first half this year. Excluding serviced apartments, there was a 125% increase in condominiums units launched in the first six months of this year compared to the same period last year. In definite figure terms, 1,890 compared to 4,259 units.

The appetite for high-rise residentials is limited, which explains why landed units continue to be popular.

If one were to group condominiums and serviced apartments for the first six months of both years, in percentage terms, there was a 35% increase in high-rise residentials launched units this year.

Developers and local authorities alike need to take cognizance of the fact when they plan and approve units into the stratosphere, demand is limited.

In terms of the number of transactions involving new launches and direct deals with house owners, the drop for this year is a marginal 2.6%, according to Napic figures. There were 122,830 transactions for the first half of 2014 compared to 119,599 in first half of this year.

In terms of ringgit value, about RM38bil was done this year compared with RM40.3bil last year, according to Napic.

Says Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) Datuk Siders Sittampalam: “The slowdown we are talking about does not seem to be translated into figures.”

Siders, who is also PPC International managing director, says there is no doubt more properties have been put up for sale in locations like Bangsar and Damansara Heights today than in recent years.

Das Gupta, the principal of property consultancy Stocker Roberts & Gupta Sdn Bhd says people are “selling their silver.”

Siders says there has never been “so many choices” before but this is largely due to sellers wanting to sell high and buyers to buy low. So the stock from the previous month is added to the current month.

This may means price sustainability on the part of sellers for now. The natural forces of demand and supply will have to come in, says Siders.

“The overall sentiment is not buoyant. The main issue is poor sentiments. They have the ability and the desire to buy but their perception is that, they should not be buying at that price. That prices are too high,” says Siders.

On the stringent lending conditions, Siders says this has contributed to the situation but given the high debts faced by young people and households in general and the steep property prices that costs RM500mil for a small bachelor pad, it stands to reason why potential buyers want to see a drop in prices.

“Supply without effective demand will have an effect on pricing and the rental market,” he says.

He says prices have not really declined but there will come a time when prices will “find its level.” He says there is an increase in auctions but this is “not alarming”.

Siders say it will be a concern when there are more job lay-offs, followed by an increase in non-performing loans (NPLs).

According to Affin Hwang, there is “no stress in the banking system” and NPLs are manageable. Another research house, UOB-Kay Hian in its October report says “the NPLs remain benign. Absolute NPLs inched up a marginal 1% year on year for the month of August.”

SK Brothers Realty Sdn Bhd general manager Chan Ai-Cheng says the current situation is separating the better developers from the rest. The better developers are “holding out well” because of the concept, design, overall packaging, location and pricing. Those below RM500,000 are doing well.

S K Brothers is helping developers with their launches and she says developers sales have been fine. She says there is more interest in developers’ units because buyers benefit from the sales rebates and other goodies. These advantages are not available when buying directly from property owners.

“We found that potential buyers took a longer time to decide especially for commercial properties, not so much residential sales,” Chan says.

Buyers are balancing between size (or built-up) and affordability. They may want the space but with that comes a higher price.

Some buy in order to hedge against inflation with the current weak ringgit.

Chan says some interesting projects have come their way and these sold well. To underscore that there are people who have the means, she says S K Brothers will be offering overseas properties on a greater basis.

“We have been offering overseas properties the last two years, but we plan to offer Australian properties soon,” she says.

Landed units, choice schemes and prime locations will be able to hold their own, says C H Williams Talhar & Wong managing director Foo Gee Jen.

Prices in prime locations and choice schemes are “still holding strongly due to limited supply,” he says.

On whether prices will recede, Foo says this is “highly unlikely for landed and medium-cost apartments.”

This segment of the residential properties are only “expected to trade sideways with minimum upward movement.”

He said condominiums are likely to have “a price correction in the secondary areas due to moderately over supply situation.”Small office, home office (SoHo) units are in danger of a “bubble” due to low occupancy and over supply, Foo says.

It will be interesting to see what is round the corner. - By Thean Le Cheng (The Star)

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