Stability in sub-sale prices of properties over the past year indicates sector still in a healthy state
FOR the past couple of years, Penangites are used to hearing about the soft property market situation in the country.
Moving into the second half of 2016, it is unlikely that the local property market situation would immediately improve, although there is speculation that the sector, which has slowed down since late 2014, would recover by 2018.
The Malaysian Property Summit Mid-Year Review 2016 committee is not anticipating a recovery in the second half of 2016 due to oversupply and weak property market sentiments.
The committee expects the property market to be stable and flat in 2017, projecting 2018 as the recovery year for the property market.
There are also good reasons why it is not unreasonable to expect a pick-up by 2018 or even sooner.
In the first place, the property market has not plunged to a point where recovery in two years is impossible to conceive.
The stability in sub-sale prices of properties over the past 12 months is an indication that the property sector is still in a healthy state.
According to Raine & Horne senior partner Michael Geh, the present sub-sale price of high-rise properties in the South-West District on the island hovers at around RM450 per sq ft (psf) and RM600 psf, depending on the location and the condition of the units.
Prior to the slowdown in late 2014, the price of high rise properties ranges between RM450 psf and RM600 psf in South-West District, while in the North-East District the selling price hovers around RM700 psf to RM1,000 psf.
Since late 2014, the price has softened to RM450 psf and RM600 psf in the South-West District and in North-East District RM600 psf and RM700 psf.
Those who bought high rise properties before the slowdown in late 2014 at around RM400 psf and RM500 psf have not registered any losses yet.
The difference is that prior to 2014, the quantum of appreciation is between 5% and 10% per annum, while now it is between 0% and 2%, due to an oversupply of new and sub-sale properties in the market.
According to Geh, due to the slowdown, the prices of properties sold directly from developers have also been adjusted.
“You can now see in certain strategic locations of the North-East District new condominiums priced at around RM450 psf, compared to RM600 psf and RM1,000 psf prior to the slowdown.
“Due to the availability of new property schemes in the market, the house prices have not taken a giant leap.
“This is heathy as primary property prices have now become more affordable due to an oversupply of properties in the market and competition from the secondary sector,” Geh adds.
The other positive news is that banks are under pressure to revise their interest rates downwards, following Bank Negara’s move to cut overnight policy rate (OPR) by 25 basis points to 3%.
According to analysts, interest rates of banks are likely to be adjusted to around 4.25% from about 4.4%.
“This is among the lowest in the region and among the lowest in the history of housing loans in the country.
“This means those eligible for loans are encouraged to borrow to purchase properties.
“This should help to clear the excess property situation in Penang and in the country,” Geh says.
Real Estate and Housing Developers’ Association (Rehda) Penang past chairman/adviser Datuk Jerry Chan says although the new launches have slowed down by about 30% this year, we still see varieties in the market.
“On top of the affordable range (RM300,000 to RM400,000) targeting first-time house buyers, we now have another range of high-rise units with built-up areas of 1,000 sq ft, priced from RM450,000 and above.
“Then there is also competition from ongoing integrated projects by Kuala Lumpur-based developers on the island that help to provide choices to house hunters and stability to prices,” he says.
The other good news for the property market is that the weakening of the ringgit has also increased the appeal of local properties to foreigners, particularly those from Singapore, Chan adds.
“The price of steel has stabilised at around RM2,000 per tonne, compared with about RM2,800 per tonne a couple of months back when there was a shortage.
“This ensures stability of construction costs and housing price.
“There is no longer a shortage of steel bars as there is ample supply coming from China,” Chan says.
Despite the weakened property market, Kuala Lumpur-based property development companies in Penang are expecting sales contributions from the state to increase significantly for 2016.
Mah Sing, for example, expects Penang to contribute 9% of its revenue for the fiscal year ending Dec 31, 2016 compared to 1% for the previous financial year.
“With no project launches in 2015, our properties in Penang contributed 1% or RM26mil to our total sales of RM2.3bil last year, leveraging on the take-up for projects launched before 2015.
“The group has set a target of RM2.3bil for 2016 for all our properties throughout the country and Penang is expected to contribute 9% of the revenue for the current financial year.
Ringgit at attractive level
“With the value of the ringgit at an attractive level, we foresee strong buyer interest, particularly from foreigners, who represent 30% of our purchasers in Penang, as well as locals,” Mah Sing group managing director Tan Sri Leong Hoy Kum says.
Ecoworld expects its projects in Penang to generate RM600mil this financial year ending Oct 31, 2016, compared with RM200mil in the previous year.
Ecoworld (North) general manager Khoo Teck Chong says the targeted revenue for the 2016 financial year is RM4bil, compared with RM3bil in 2015.
“The contribution in Penang would come from Eco Terraces in Paya Terubong, which is 40% sold, and Eco Bloom, scheduled to be launched soon.
“The Eco Terraces (RM380mil gross development value or GDV) and Eco Bloom (RM280mil GDV) are priced at over RM850,000 and below RM400,000 respectively, which are still considered as affordable given the strategic locations of the projects,” he says.
IJM Land is expecting its projects in Penang to generate RM240mil revenue for the current financial year ending March 2017, compared with RM168mil in the last financial year.
Its senior general manager Datuk Toh Chin Leong says the projects to be launch this year are The Trehaus (RM64.7mil GDV) in Bukit Jambul, The Senjayu (RM69mil GDV) in Jawi, South Seberang Prai, and The Waterside Residence (RM260mil GDV) for the second phase of The Light Waterfront.
“These projects should help the group realise its RM240mil sales target,” Toh says.
E&O also expects the contribution from Penang to improve significantly this year compared to a year ago.
Its marketing and sales general manager (Penang) Christina Lau says the group believes there will be sustained interest in its Penang projects comprising existing launches such as 18 East at Andaman, The Tamarind, and its landed super-luxe terraces Amaris and Andorra, which collectively tally an estimated GDV of RM1bil.
Lau says sales of the last financial year exceeded RM1bil.
“The sale of these properties coupled with upcoming launches on the remaining plots within Seri Tanjung Pinang Phase 1 (STP1) will keep us busy, as STP1 approaches its maturity, evolving since the maiden launch of the Ariza courtyard terrace homes in 2005.
“Now in its eleventh year, STP1 has developed into one of Penang’s most preferred addresses with a vibrant community of more than 20 nationalities,” she adds.