Thursday, September 24, 2009

Malaysian market picking up

To some, the fact that the wealthy are once again putting their money in real estate is a sign the market is on its way up

WHETHER it was the triple 8 that did it, I&P's launch of 80 link houses on August 8 in Bandar Kinrara Puchong in the Klang Valley was a sell-out - in three short hours. Of course, the value-for-money proposition for its link houses proved irresistible to house buyers, some of whom, according to reports, had started queuing on July 29, more than 10 days earlier. Many jumped at the pricing for the units with built-up areas of 2,151-2,551 sq ft. Priced at around RM460,000 (S$187,081) - by some estimates a discount of nearly 20 per cent - house buyers obviously thought it was too good a deal to miss.

Price revisions appear to have done the trick for a number of developers in Klang Valley and Penang which have recently seen good take-up rates for new and older launches. Inquiries have picked up noticeably, property consultants say, with attractive financing packages and discounts initially stemming the slide, but now providing some momentum.

One developer launching service apartments in the trendy area of Sri Hartamas next to Mont Kiara recently advertised its terms: RM15,000 downpayment on signing, zero interest during construction, no legal fees for the loan or agreement, and guaranteed returns of 6 per cent for two years.

But all the incentives would mean little if consumer sentiment had not improved. Locals and foreigners are more upbeat, an analyst said, citing her Indonesian clients as an example. Flush with earnings from commodities, a number are contemplating residential units in Malaysia.

Going by the inquiries on Zerin Properties' websites, the Mont Kiara area is popular with Singaporeans, its chief executive Previndran Singhe said, while the Kuala Lumpur City Centre (KLCC) area attracts more of a mixed bag.

The number of daily viewings in the KLCC area has picked up, Terence Yap, the company's head of private wealth confirmed, as has The Binjai On The Park. Located right smack in the KLCC park, the development is considered a trophy asset and although some find its design somewhat dated, few can knock its location.

Caught out by the global financial crisis, the developer had cut prices in June which reduced the average cost to RM2,400 per sq ft (psf) from about RM3,000 psf in August last year. Last month, the developer clinched sales of over RM100 million and although its cheapest units are upwards of RM3.75 million, interest remains encouraging. To some, the fact that the wealthy are once again putting their money in real estate is a sign the market has bottomed out and is on its way up.

Property players are quick to point to SP Setia's Sky Residences and Eastern & Oriental's (E&O) St Mary's Residences as examples. The first tower of Sky Residences was sold at an average of RM680 psf in December; in July the second tower sold at RM730-RM740 psf.

Similarly, St Mary's first block averaged RM1,000 psf in June but its second block is now priced at about RM1,250 psf, its premium owing to its more favourable views facing the KLCC.

E&O executive director Eric Chan says the company has sold about 40 per cent of St Mary's Residences, describing its soft launch of the first block in Singapore as 'very positive and in line with expectations'. Buyers comprised mainly Singaporean professionals and businessmen.

Admittedly, there have not been many primary market launches. Most developers have gone back to the drawing board to revise their original plans to cater to current market sentiments. Those that have priced themselves too high will likely need to re-price their products or put up with sluggish sales.

Ho Chin Soon of Ho Chin Soon Research says that not all developers are positive, and that many are waiting for year-end or next year to launch their projects. Two high- end developments yet to see any significant progress in the KLCC area include Ong Beng Seng's Four Seasons Place (hotel & service residences) and Kwek Leng Beng's Millennium Residences. Property consultants expect the projects to only take off next year. Mr Ho believes the sustainability of the property market will hinge largely on the stockmarket performance given the correlation between the two.

As always, location is crucial, but savvy buyers are increasingly demanding differentiated products, good management and after sales marketing to maintain their investments. For example, one of the more pro-active developers, Bukit Kiara Properties, has plans to air commercials in the cinemas on Verve Suites to promote the development, even as it prepares to hand over the keys to buyers of its first tower block. Two other places where the property buzz is stronger, according to real estate players, are Penang and Kota Kinabalu.

Supply on Penang island being more finite, prices have shown greater resilience - some claim they were hardly dented during the financial crisis - and clean-up efforts by the new Pakatan Rakyat state government have earned it some praise among Penang watchers.

Indeed, landed property on the island in certain locations has seen robust demand. E&O's Mr Chan said a July launch of 33 sea-fronting terraces at Seri Tanjung Pinang saw all snapped up in three hours. The RM1.1 million tag was also a new record for an intermediate terrace unit in the country. Moreover, 150 ballots were received for the four direct sea-fronting units which went for RM1.52 million each.

CIMB Research believes Klang Valley developers promoting new products that appeal to the locals, as well as Kuala Lumpur and international buyers keen on Penang, are sustaining the market.

Kota Kinabalu holds a different attraction. 'KK is rocking,' Mr Singhe declared. The growing numbers of Koreans and Japanese - particularly avid golfers - who flock to the East Malaysian city during weekends for much cheaper rounds of golf have brought a new vibrancy to the place. The rising number of budget flights into the city has made it very accessible and Mr Singhe says more Koreans have been investing in condominiums as a holiday home.

A bull on property, Hwang-DBS Vickers recently told its clients: 'We have seen continued warm response for recent launches in KL and Penang. Developers are now resuming launches (including high-end) compared to their earlier focus on clearing inventories. Selling prices may be raised soon and incentives gradually pulled back, resulting in margin expansion. We expect continued positive news flow, ample liquidity and under-investment in the sector to drive valuations higher.'

Source: Business Times, 24 Sep 2009

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