Monday, April 23, 2012

KL property mart set to cool

By Lee Wei Lian

April 23, 2012
KUALA LUMPUR, April 23 — This year will be a challenging one for residential property as tighter lending bites into demand, especially speculative buying, property consultancy DTZ said today.
DTZ said in a report that Bank Negara’s new lending guidelines will cool an overheated market that has run up substantially in terms of pricing in the last two years as well as focus developments toward the more affordable housing segment.
The new guidelines, which use net income instead of gross income, will likely lead to slower sales for developers, said the report.
It noted, however, that developers remained upbeat over the year’s prospects.
“Although 2012 will be a challenging year as tighter lending bites into demand especially speculative buying, nevertheless, developers are confident that the demand for residential properties in Kuala Lumpur will remain selectively strong, as developers focus on smaller and therefore more affordable units as well as packaging launches with attractive Developer Interest-Bearing Scheme (DIBS),” said DTZ.
Bank Negara has introduced new lending guidelines, which came into effect in January, in an attempt to put a lid on household debt, currently at about 77 per cent of GDP.
The guidelines have apparently already had the desired effect on loans.
HwangDBS Vickers said in a report last week that mortgage approvals and applications in February were respectively 27 and 18 per cent lower than last year’s peak partly due to the stricter lending guidelines.
It also said the loan approval rate has fallen to 45 per cent from 55 per cent in August last year, while margin of financing has been reduced to 70-80 per cent from 90-95 per cent in the heyday of the property boom.
The residential property market has also been moderating across the causeway with Singapore reporting a sharp drop in transactions following government cooling measures such as a higher stamp duty.
Purchases by Singaporeans slumped 12 per cent in the first quarter, while permanent residents bought 7.5 per cent less and transactions by foreigners dived 78 per cent.
Singapore home prices also suffered their first drop in nearly three years when it fell 0.1 per cent quarter-on-quarter in March.
In terms of Malaysia’s office sector, DTZ said that it is likely to see greater challenges with slower economic growth and an anticipated oversupply in the coming months, as the pressure to find tenants gathers intensity.
It noted, however, that the office rental market was stable with an occupancy rate of 86 per cent.
Rent in prime office space exhibited resilience and stood at RM6.25 per sq ft per month which was unchanged from the last quarter despite weakening market conditions.
DTZ said that while the proposed KL International Financial District was an exciting development, it could heighten concerns of a property glut.
“Whilst it will be exciting for the market to see the emergence of a rival office district to KLCC, it will ratchet up the competitive pressure on rents by several notches at a time when oversupply is a major concern,” said the report.
DTZ said that the retail sector is likely to continue growing moderately supported by relatively cautious consumer spending and tourist arrivals.
It also said that new major retail centres would continue to attract retailers who are selective and would still lease space in centres that are expected to see high footfall.


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Live Long MU Fan said...

Sin Leong,
I know people have been talking of property prices coming down the past few years. However, I think the chances of property prices declining is a REAL possibility. The world seems to be slowing down economically (China, Europe). IF Malaysia is affected, our GDP will go down, but our debts (currently at 54% of GDP will rise higher against GDP). This may trigger downward ratings of Malaysia and hence, interest rate go up! Coupled with vacant units, it will have a DRASTIC IMPACT on property prices, especially if there are people losing their jobs in the slowdown. The question is the probability of such an event and WHEN? What are your views?

sinleong said...

1st of all, if you have bought into a good project at the right price, there should be no possibility of prices falling. At most, prices won't go up. It will just stay stagnant.

Secondly, people have been talking about a property crash since the 97 crisis... We have not really seen a real crash unless you are talking about Bukit Beruntung. In fact, prices kept going up and up and prices went up even higher than before the "crash".

However, I hear that a crash is imminent, especially where the new launches have been so highly speculated. Some projects just wouldn't hold and the number of people who can barely afford it were attracted by the low entry will find themselves in hot soup when they realized they can't sell or rent as easily as they have hoped.