FUTURE hot spots for residential properties in the Klang Valley over the next 10 years would be near the Guthrie Corridor Expressway area such as Kumpulan Guthrie Bhd's Bukit Jelutong, SP Setia Bhd's Bandar Setia Alam and Road Builders Bhd's Shah Alam II projects.
Property consultant Khong & Jaafar Sdn Bhd managing director, Elvin Fernandez, said other hot spots worth noting would be on both side of KESAS highway heading towards Cyberjaya, including Harum Intisari Sdn Bhd's Bandar Botanic and Hicom-Gamuda Development Sdn Bhd's Kota Kemuning township.
Currently, the high growth areas for residential property are on either side of Damansara Puchong Highway (LDP) including Taman Tun Dr Ismail, Bandar Utama and Mutiara Damansara, as well as Bukit Kiara and Bangsar.
Fernandez told participants at the second day of the National Property Development Conference 2003 in Kuala Lumpur yesterday that despite the overhang for residential properties in Malaysia, there were still factors strongly supporting the residential market.
There is high liquidity in the financial system with banks getting deposits and having less avenues for property lending except for house mortgage loans.
This will likely encourage the middle and upper income group to upgrade by purchasing higher priced residential units in view of the low returns from fixed deposits and the lacklustre outlook in the stock market, he added.
Although net rental returns from houses are only 3% to 4%, he pointed out that if a conservative capital appreciation of 50% over a 10-year period was imputed in the calculation of return at the point of purchase, the overall return could be 7% to 8% net.
According to Fernandez, the overhang in the affordable housing sector is expected to worsen based on the slower take-up rate over the past six months.
I expect this will be reflected in National Property Information Centre (NAPIC) report which is expected to be released by the end of this month, Fernandez said.
NAPIC in its recent report said the overhang of residential properties i.e. unsold residential units in the hands of developers nine months after launch, as at end June last year was 52,419 units with a value of RM7.07bil.
For the Klang Valley alone, the overhang as at June last year was at 10,975 units with a value of RM1.5bil. Of the total, 5,795 units or 53% comprised condominiums and apartments while 1,952 units (18%) comprised two-and three-storey terrace houses.
According to Fernandez, the overhang is essentially in the lower priced property category and the reason for the build-up was due to the oversupply brought onto the market in the mistaken notion that the affordability sector had an unlimited appetite.
He said there was a need to consider the Klang Valley as one area as the current almost uncontrolled urban sprawl arising mainly from multiple jurisdictions by different states - Federal Territory and Selangor - over the area was less than desirable, he added.
CH Williams, Talhar & Wong Sdn Bhd (WTW) director Goh Tian Sui in his paper on the Residential Sector (Kuala Lumpur and Selangor) on Tuesday said the residential sector would continue to be the property markets mainstay this year in view of the strong demand for good locations and innovative products, particularly in the Klang Valley.
Property developers should focus more on research as the key factor in responding to growing market demand, he said.
According to Goh, in the Klang Valley, the demand for high-end properties had been robust over the past two years.
We expect a similar trend this year with new market niches in innovative forms such as the gated community, park homes, resort condominiums, serviced apartments and build-and-sell concepts, Goh said.
On the industrial property sector, KGV-Lambert Smith Hampton (M) Sdn Bhd director Anthony Chua said that demand this year could be slightly lower or about the same as last year.
Demand for industrial property is strongly related to the manufacturing sector, he added.
Currently, the manufacturing sector is faced with two challenges the declining foreign direct investments (FDIs) and the possibility of a shrinking export market due to the global slowdown.
On the other hand, Goh said, domestic investment by local companies in manufacturing had been on an uptrend, registering 35% growth last year.
This may mitigate the downside of FDIs and poor export outlook, he said, adding that domestic investment this year would continue to perform better than last year.
The 3-day conference is organised by Uni-Link Smart Venture Sdn Bhd.