Business News

Saturday, 20 May 2017

It’s a rail gain

The gain may not be seen straightaway as property is a long-term investment

THE time of reckoning is finally here. After all the hullabaloo about improving public transportation in the Klang Valley, the mass rapid transit (MRT) will finally be fully operational by July.

While that is being looked forward to with much anticipation, the last several years have also created a lot of hype surrounding properties that are located along the 51-km Sungai Buloh-Kajang MRT line.

Against the current backdrop of the last six months when the MRT was partially operational between Sg Buloh and the Kuala Lumpur suburb of Damansara Heights, a distance of about 20km covering 12 stations, agents specialising in the for-sale and rental market in the Kota Damansara area have not been particularly euphoric, but they are positive that in time, these “jewels in the rough” will shine.

The general contention is that it may still be rather “premature” and to be patient.

Property consultancy Savills Malaysia managing director Datuk Paul Khong says residential units in the mid- and mid-high segments, retail malls and office buildings near MRT stations will perform “extremely well” and appreciate as the MRT heads towards full completion.

“When the MRT is fully operational with 31 stations, there will obviously be positive appreciation in valuations,” he says in an email.

“We envisage that higher premiums exist for these properties which lie near MRT stations, as ‘connectivity/infrastructure’ is the main buzzword now after ‘location’ in terms of capital appreciation,” he says.

The MRT, with the full completion of all three lines in the future, will link up the entire Klang Valley neighbourhoods with one complete and comprehensive rail network integrating the existing light rail transit (LRT), monorail, Keretapi Tanah Melayu Bhd lines and the Express Rail Link (ERL).

The first MRT line, known as the Sungai Buloh-Kajang line of 51km, will be fully operational by July this year. It has been partially operational since December 2016.

“This time around, the MRT got it right by connecting all the heavily populated areas like Cheras, Maluri and Kajang to the affluent established residential neighbourhoods of Damansara Heights, Taman Tun Dr Ismail and Mutiara Damansara to the commercial locations such as the Tun Razak Exchange and Bukit Bintang,” says Khong.

 

Poor sentiment

Khong’s enthusiasm runs against the current poor sentiment. Agents on the ground are reporting stagnant prices and low rental enquiries.

SK Brothers general manager Chan Ai Cheng says the MRT, when it becomes fully operational by the middle of this year, is just one factor determining property prices.

“While it is a plus factor and will put a property in a better position, the current sentiment and the broader economic climate are also influencing the market.

“The MRT impact on the property market is determined by demand. The past six months, the line was only partially operational. Once the line enters the different parts of the city, you will see more ridership. People are not feeling the full impact and benefit of the MRT just yet.

“Once they know the benefit of the MRT, rental demand and prices will improve,” she says.

She was commenting on several agents’ feedback that prices are flat even in brand new properties that enjoy direct access to MRT stations via covered linked bridges. Some of these properties remain unoccupied although they were completed two years ago.

Rental is based on demand and supply. And in that particular area, the supply is great, she says.

“When rental picks up, hopefully, prices will also pick up accordingly,” she says.

As for the for-sale market, Chan says while it is true that prices are “flat” today, it is important to examine its causes.

“When developers launched their projects years ago, they had then already priced in the MRT system, which accounts for prices of nearly RM1,000 per square foot (psf) in Petaling Jaya today. In that sense, prices of properties have already increased tremendously.

“So, it is unrealistic to expect prices to go even higher now that the MRT is operational. The MRT factor had already been priced into the unit years ago.”

Property consultancy PPC International managing director Datuk Siders Sittampalam says he noted the dramatic rise in property values around the-then proposed stations when the MRT was first announced in 2007 until the MRT project was awarded in 2011.

“In the Bandar Utama locality, some even achieved a rise of as much as 80%,” he says.

Savills’ Khong says the MRT has impacted prices positively since 2009.

“With its actual construction, capital values moved northwards. Property transactions were notably higher in price during this construction period between 2011 and 2016,” Khong says.

Prices reached equilibrium during the MRT construction period and on its partial completion today, Savills has noted their nominal values.

Between the MRT’s partial opening in December 2016 and today, the average asking price of properties along the route today has not differed much from those of 2016, which confirms comments from agents servicing the for-sale market that prices are stagnant.

There is “no noticeable jump in prices” and “no rush to buy properties near these 12 MRT stations,” says James Wong, who heads property consultancy VPC Alliance.

Wong says this may be partly due to the Klang Valley MRT line being unlike the Hong Kong and Singapore MRT lines.

“There is good connectivity of MRT stations built into the buildings and shopping malls, whereas for the (Klang Valley’s) MRT line one, many of the stations are standalone ones.

“Ridership is expected to improve when the line enters the city and goes into more populated areas like Cheras and Kajang.

“However, whether the properties close to the MRT stations will see a material increase in property prices is yet to be seen.

“To increase ridership, in my opinion, the MRT management should consider improving connectivity to the existing buildings close by covered walkways, covered bridges and escalators,” says Wong.

Click on image for larger view

Tenant’s market

The other factor affecting sentiment is the looming general election.

Both developers and buyers are adopting a wait-and-see attitude, he says.

Also, with so much supply covering so many sectors of the property market, both the primary and secondary markets are expected to be subdued for the rest of the year, he says.

Chan says tenants have a lot of choices today and advises owners not to be emotional about their properties.

“The first six to 12 months may not be an issue. After that, when the full mortgage payment and monthly maintenance fees kick in, owners will come under pressure if they continue to hold out for higher rental,” says Chan.

Her suggestion: “Just get the unit rented out and adjust the rental when the good times return.”

Agents specialising in the rental market say a majority of owners in high-rise residentials in the Kota Damansara area want between RM2,500 and RM2,800 a month for their fully furnished studio or one-room units in Kota Damansara, Petaling Jaya.

“Some owners have dropped their rental to RM2,000 but there is no demand. They may have to lower the rental by about 30% to RM1,700 or RM1,800,” he says.

He says the project he is specialising in is about 10% to 20% occupied and was completed about two years ago.

The same situation applies to the commercial retail and office market, as quite a number of these projects are mixed integrated developments.

Going forward, the MRT will have a positive impact on liveability.

It all goes back to the old investing dictum that property is a long-term investment. Vincent Ng, who heads Kim Realty, says there are “jewels to be had”.

When all the 30-odd stations are operational, people will see the benefits of properties with direct or close access to MRT stations.

“They do not see the benefits now because it is not yet fully operational and because the weak sentiment is clouding their judgement,” he says.

In other words, the weak sentiment is “bigger” than the MRT factor.

Consider Twins@Damansara, he says. That project was sold at less than RM1,000 per sq ft a few years ago. Despite its location in Pusat Bandar Damansara and the MRT stations there, Twins@Damansara became a students’ market.It is common, says Ng, to find six to eight students occupying a three-room unit that costs about RM1.3mil to RM1.4mil today because there are no expatriates renting the place.

Rental for a three-room unit is about RM3,500 to RM4,000, says Ng, but in time, rental and value for that location will pick up.

When DC Residency was launched, prices went beyond RM1,500 per sq ft. Now, says Ng, the Malton group is expected to launch more serviced apartments.

A check with the Malton group reveals a range of between RM1,600 and RM1,800 (psf). Just as the MRT is expected to change valuations in time to come, the regeneration of Pusat Bandar Damansara is expected to change the scene at Damansara Heights. So, Twins@Damansara is a jewel, says Ng.

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Tags / Keywords: property , mrt

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