Prices and rentals for residential properties in the Klang Valley should stabilise this year due to credit-tightening measures by banks and investors' cautious sentiment after prices of houses rose by 6.6% last year, according to property consultants.
However, they point out that property developments in selected locations, especially in areas where the proposed Klang Valley My Rapid Transit (MRT) and Light Rail Transit (LRT) stations are, would still perform well in terms of capital appreciation.
Property consultancy CB Richard Ellis (M) executive director Paul Khong says price increases in the Klang Valley residential market had slowed down slightly in the last two quarters.
“Property developers are offering more incentives and freebies to push sales, ranging from free SPA (sales and purchase agreement), stamp duty, free air-conditioners to even trips to Hong Kong,” he says.
Khong says that this year, buyers are more cautious as prices are currently toppish.
“Loans are now getting difficult to secure. Larger numbers of buyers especially investors, have now taken a more conservative stand.”
Some heat has been taken out of the speculative end of the property market in recent months, says property consultancy Khong and Jaafar managing director Elvin Fernandez.
“Speculation is an accepted and needed element in any market, excessive speculation is not,” says Fernandez.
One property research analyst says the residential property market is set to take a breather, and prices should be flat in 2012 and 2013.
“Last year was a sterling period when property prices went up a lot, especially for new development launches.
“So, we are coming off from a very high base set in 2011. Can the market maintain this kind of momentum?
“We do not think so as there are no major catalysts and banks are cooling down the residential property sector,” he says.
The property analyst also says a lot of residential properties launched in 2010 would be completed this year.
“Many owners will try to flip' their units. So, there will be affordability issues if prices keep going up.”
According to data on Bank Negara's website, the number of loans applied for purchases of residential property increased by 17% year-on-year in the first two months of 2012 to RM26.7bil.
The amount of residential property loans approved during the period was RM12.25bil, which was 2.7% higher compared with a year earlier.
Meanwhile, the amount of loans applied for purchases of non-residential property increased by 15.3% year-on-year in the first two months of 2012 to RM13.83bil.
The amount of non-residential property loans approved during the period was RM6.83bil, which was 8.4% higher compared with a year earlier.
Another property research analyst says the central bank's data shows that credit-tightening measures are working to cool down the property sector. “This year to date, demand is still very strong, and has in fact increased substantially, especially for residential properties.
However, the amount of loans approved was not substantially higher compared with the same period last year,” he says.
Fernandez says there is evidence that the run-up in prices for the various “hot spots” of housing in the Klang Valley and in Penang, have been arrested due to cooling measures undertaken by Bank Negara and the tightening on housing loans by banks.
Effective this year, banks have started using net income instead of gross income to calculate the debt service ratio for loans.
Fernandez also points out that coming out of the holiday season this year, there was a distinct slowdown in enquiries for mortgage valuations and house purchases in the secondary market.
“The Government has said it was serious about preventing a property asset bubble. So, even if banks start to loosen the lending guidelines in the later part of the year, how much can property prices go up before measures such as increasing the real property gains tax (RPGT) are imposed?”
The 2011 property market report, compiled by the Finance Ministry's Valuation and Property Services Department, says the Malaysian All House Price Index had surged to 156.9 points in the fourth quarter of last year compared with 147.2 points a year earlier.
The report also says the demand for high-end units priced above RM500,000 had increased in the country, with 21,905 transactions last year (compared with 16,782 in 2010).
“This could be attributed to the increase in affordability level and supported by the ease in borrowing as well as attractive loan packages offered by the financial institutions,” says the report.
Khong says this is also largely due to the fact that there is a substantial increase in the number of units priced above RM500,000 in recent times within the Klang Valley.
“Many residential properties have gone beyond this price level. So, a lot of sales done would largely be in this category now.”
Khong points out that nowadays, it is virtually impossible to buy a landed property at RM500,000 or below in good locations in Petaling Jaya and Kuala Lumpur.
“A terrace house in Taman Sri Hartamas is already above RM1mil and even one in SS2, Petaling Jaya or Bandar Setia Alam, Shah Alam has also moved up above this RM500,000 range.”
The report noted that last year, prices of houses continued to consolidate, with landed housing in general on an upward trend.
Across the board, terraced houses in Kuala Lumpur recorded price increase of 8% to 13%.
For example, the prices of single-storey terraced houses in Lucky Garden, Taynton View and Salak South Garden rose by 8.1% to 11.9% while double-storey terraced houses in Bandar Tasek Selatan saw price increases of 11.7%.
However, the prices of high-rise developments in Kuala Lumpur showed mixed trends.
Low-cost flats in Taman Batu Permai recorded price increases of 11% due to strong demand while the prices of low-cost flats in Bandar Baru Sri Petaling dropped by 5% due to competition from other stratified buildings in the area.
Apart from that, the prices of condominiums at Casa Kiara II and Mont Kiara Pines rose by 12.8% and 13.3% respectively.
Residential housing prices in Selangor were also influenced by projects such as the MRT and Light Rail Transit, with single and double-storey terraced houses in locations such as Petaling Jaya, Subang Jaya and Bandar Utama registering double-digit increases of 14% to 34.3%.
In the high-rise segment, it is noted that apartment units in Bandar Puchong Jaya and Taman Puteri Impian recorded price increases of 3.3% and 21.5% respectively.
Meanwhile, in Putrajaya, prices of residential properties also recorded strong growth.
Prices of double-storey terraced units in Precinct 11 increased by 18%, with the highest price registering at RM430,000 (against RM370,000 in 2010) while prices of low-cost flats in Precinct 9 rose by 10%.
The report also points out that the 55km Sungai Buloh-Kajang MRT alignment, which is expected to be completed in 2017, could result in an appreciation in property values within the areas served by the project such as Taman Tun Dr Ismail and Phoenix Plaza.
“Those who have parcels of developed or undeveloped land along the alignment are poised to enjoy the spillover effects of the rise in property values.”
Across the board in the country, the rental rate of both landed and stratified residential properties is stable.
However, there are exceptions particularly in the Klang Valley.
In Bandar Utama, Selangor, rental of two and two-and-a-half storey terrace houses grew by 30% and 36.4% respectively with rental ranging from RM1,900 to RM2,900 per month.
Rentals for single-storey medium cost terrace houses at Bandar Sri Damansara increased strongly by 35%.
Meanwhile, in Kajang, single-storey terrace houses in Taman Cheras Jaya and Taman Bukit Mewah showed rental growth of 9.1% and 5.3% respectively due to their strategic location near the exit to SILK Highway.
Increases in rentals are also seen in low-cost flats and apartments in Damansara Damai, Bandar Puchong Jaya and Taman Kinrara.
Double-digit rental growth is seen in condominiums at Bandar Baru Ampang, Taman Pandan Mewah, One Ampang Avenue and Pelangi Damansara.
In Kuala Lumpur, rental increase of 4% to 13% is seen for single and double-storey terrace houses in Danau Kota, Happy Garden, OUG and Salak South Garden.
Rental of apartment units were generally stable, except for certain high-rise developments in Kuala Lumpur, the Petaling district and Ampang which increased by 5.5% to 18.2%.
However, Fernandez says rental yields for ubiquitous two-storey terrace houses in selected areas in the Klang Valley are getting lower.
“The trend has been towards lower returns, slipping below the critical 3% benchmark. Below 3% is a cause for concern as houses should return between 3% and 6% (all risks net return) depending on house type, and whether it is landed or strata.”
One property analyst also says it is getting tougher for residential property buyers to obtain decent rental yields.
“Rentals will always be area specific. But generally, how many people in the Klang Valley can afford to pay rental of RM2,000 a month with the exception of foreigners. Typically, young professionals and couples are paying rentals in the range of RM1,000 to RM1,500 a month.”
Boom for shops
In Kuala Lumpur as well as the Petaling and Batu districts, prices of shops increased by 2.9% to 21.4%.
Those in Taman Alam Damai (Damai Niaga) recorded the highest average price change, from a range of RM895,000 to RM910,000 in 2010 to a range of RM1.1mil to RM1.2mil last year.
Notable price increases for shops are also seen in Happy Garden (8%) and Salak South Garden (11%).
In Selangor, shop prices increased by 18% and 42.4% in the central town prime areas in Subang Jaya and Kota Damansara respectively as positive expectation from the proposed MRT and LRT projects spurred the commercial segments.
Meanwhile, rentals for commercial shops showed optimistic performance last year.
Rental of ground floor shops in Jalan Masjid India, Kuala Lumpur continued to be the highest at RM20,000 to RM25,000 per month.
Ground floor shops rental that showed double-digit increases include Kuchai Entrepreneurs Park and Taman Connaught at 16.6% and 11% respectively.
For Selangor, good areas in Petaling Jaya recorded rental increases of 13.3%.
Khong says shop rentals will continue to escalate slightly this year, reflecting the high prices that investors paid for such shops.
“In areas where commercial activities are bustling, rents will be good as well. Rents may not fairly match the capital values in many cases.”
However, he points out that shophouse rents will depend largely on the actual commercial performance of the individual centre.
One property analyst says shop owners in new housing projects where there is population growth will benefit.
“Remember, there are limited supply of shop lots. And, those who buy shop lots tend to have holding power, so they can afford to wait for better times.”
Other states doing well
Johor's property market performed well last year, with 52,946 transactions worth RM17.1bil.
Compared with 2010, Johor's property market volume and value increased by 9.1% and 44.6% respectively.
The report says Johor's residential property prices are generally stable with instances of mixed performance.
Single-storey terraced houses within areas in Johor such as Taman Puteri Wangsa, Taman Ungku Tun Aminah, Taman Bukit Indah and Taman Perling see price increases of 2.9% to 11.1%, with prices ranging from RM125,000 to RM220,000.
Houses in areas within Nusajaya such as Taman Nusa Idaman and Horizon Hills record price increases of 6.4% to 9.1%, with prices ranging from RM392,000 to RM448,000.
In Johor's high-rise residential segment, developments such as Straits View Condominium in Bandar Baru Permas Jaya saw price increases of 5.2%, with transactions done at RM470,000 to RM570,000 while Taman Perling Apartments registered the highest price increase of 23.3%, with transactions done at around RM220,000.
However, prices in Tanjung Puteri Apartment declined by 12.6%.
Property analysts are confident that the property sector in the Iskandar Malaysia economic growth corridor will perform well.
“The boom area will be Iskandar Malaysia. Lately, many major property developers have made forays there.
This is what happened with areas like Cyberjaya and Puchong, Selangor in the past,” they say.
Meanwhile, Penang's property market had an outstanding year with 39,415 transactions worth RM13.1bil, thus registering growth of 51.7% and 39.5% respectively compared with 2010.
It is noted that Penang's residential property prices are also on an upward trend, due to the scarcity of land on the island.
For example, double-storey terrace and semi-detached houses at Island Park see price increases of 13.4% to 30.8%, as the area is buttressed by neighbourhood developments such as Tesco hypermarket, Queensbay Mall, hospitals and schools.
As for Sabah, the property market improved slightly last year, with 10,321 transactions worth RM4.43bil, thus registering growths of 1.4% and 12.8% respectively compared with 2010.
In Sabah, prices of residential properties were generally unchanged, with a few exceptions.
For example, double-storey terrace houses in Seri Millenium Kingfisher, Kota Kinabalu are transacted at higher prices of RM400,000 to RM450,000 due to the area's proximity to the city centre.
In Sandakan, similar property in Taman Indah Jaya and Taman Fajar witnessed 20% and 14.6% price increases respectively.
The high-rise segment in the state also recorded price increases, and highlights included condominium units in Grace Ville and One Borneo Tower A in Kota Kinabalu, where prices increased by 17.9% and 10.8% respectively.