Property market in a wait and see mode
Published on: Monday, April 13, 2015
Kota Kinabalu: Time and tide wait for no men, but the cautious public with eyes on the local property market is watching the situation intensely after nearly one third of the year gone."The most profitable business this year is dealing in chairs," jests lawyer Chris Tan, "because most people interested in the property market, is just sitting, watching and waiting for sure signs of direction.""The market is due in for a correction, said a property valuer who indicated that the local property scene is quiet at this point in time.
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The President of the Malaysian Institute of Estate Agents opined that the property market would be flat first half of this year gradually recovering by 2018 when the upswing in the cycle would rise.Some property investment clubs are still active, smelling out deals to be acquired at lower costs to hedge for future capital appreciation given the potential of the state and country with a young growing population.Kuala Lumpur is a very good example of speculative purchasing. The market in Klang Valley was supposed to only have a demand of 10,000 houses per year. Unknowingly, the demand spiked to 50,000 houses in a year, with all available units on sale purchased. This begs the question: where did the additional 40,000 units demand came from?There are typically two types of people who are buying property now – those who need a place to stay, and predominantly, those who do not and purchase for investments.
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The latter only makes a purchase for profits – this speculative purchasing causes overheating in the market and may lead to a property bubble, ultimately bursting.Bank Negara has made it compulsory for banks around the country to request for buyers' taxable income. If the buyers do not declare enough to prove their ability to finance a property, a purchase will not be able to take place, hence many have to wait and see.
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The government is controlling speculative buying through financial measures – borrowings.Property investors come in all level of society and income levels. Some do not fit the image of the egoistic rich and famous driving posh cars, planters, tycoons and young and old professionals.The oddest case in Sabah was that of a retired civil servant living in a small room on top of a block of shops that he owned in Damai, besides his collection of many other types of real estate property. He hardly comes across as rich and famous driving post cars.He was considered an attack official of the Inland Revenue authorities on a wait and see mode to be unleashed by the government of the day on anyone who substantial who fell of favour with the establishment. He would investigate thoroughly and find any income tax offence to prosecute.The latest news was that the authority has set up a social media to look into all the bragging egos of the children of the rich and famous parents in the country to see evidence of the lifestyle and local and overseas property photographs posted in the internet that might need to be investigated for tax assessment to satisfy a government in need of more public funds.Greece is a good example of a country that went bankrupt despite implementing GST. The moral of the story is that it matters how the tax monies are used.Petronas CEO Shamsul Azhar Abbas has indicated a cut in Petronas dividends payable to the government.Petroleum income tax alone constitutes 21 percent of the federal government's direct tax revenue. That does not include other forms of revenue contributed by Petronas.In this era of GST, it is better to assume that such attack official of the Customs will sooner than later also be known to be probing on offenders.Bank Negara put GDP growth for 2015 at between 5pc and 6pc and point to "moderating trends."Those involved in the oil and gas industries will suffer a slowdown inpacting the rental market, especially for condos.They had invested at the time when oil prices were high, hoping to repay loans from the proceeds of the sale of products.With low product price they will need to sell more in a weak market to acquire funds to repay loans. Contractors will find payments delayed or requests for revisions. Some contracts may have to be cancelled.The depreciation of the ringgit will affect the repayments of loans taken in US dollars.Imported raw materials and components would cost more.There may be a demand for wage increases as MPs get their income hike.Inflation will be higher and for the general public there will be a lowering of the purchasing power of their incomes when acquiring imported goods or when abroad.Many projects due for launching this year are also on hold as the developers watch and wait out the unsure development situation in the country.Tuaran's first shopping mall by the Chiew Kim Boon Group is reported on hold, pending the search for a partner in the development. Bina Puri Group had sent a team from West Malaysia to assess the situation. Bina Puri was the contractor for the Imago Mall and The Loft.Analysts and experts are mixed in their property market outlook for 2015 due to the uncertainty that is the Goods and Services Tax (GST) implementation.While many are expecting the property sector to dip, MIDF Research property analyst Ahmad Annuar Rahman said property prices are expected to hold and grow marginally for all residential types."We don't expect the prices to fall but to remain flat for the low and middle range with a softening in the luxury property range instead."While the House Price Index is showing a slower growth at 6.6 per cent, the sector should remain sustainable as most of the potential buyers are in it for the long haul."We foresee that the property demand will remain, if not slightly increase," he added.The Housing Price Index was averaging at about 3.77 per cent from 1997 until 2014, according to Bank Negara Malaysia.Property experts, however, are anticipating tough times ahead and are urging potential buyers to leverage on the lower prices. Property author Milan Doshi said the best time to buy a property is usually when others fear to do so."That is the time when you can get good deals, which normally don't come by during better times. As long as you know the locations that are good to invest in, you can secure good financing and can negotiate good deals. There would be many opportunities to benefit from."A smart investor should possess the know-how and the know; the two main ingredients to be a good property buyer," said Milan a 2015 Property Outlook Conference recently.On the implementation of GST, Ahmad Annuar said there should not be any increase in property prices post-GST as the taxes have already been factored."Properties usually have two to three years to be developed, so the GST should not be a reason for property price hikes."While pricing might continue to grow and the sticker price might be slightly higher, units on sale might be reduced. However, it is always wise to meet the buyers halfway as obvious price increases would deter them from buying, and it also depends on the marketing strategies developers are adopting to attract buyers," said Ahmad Annuar.On the marketing strategies developers are adopting to attract buyers, the most unusual according to analyst Fa Abdul was: "I remember going to a Halal Expo. I was pretty interested in one of the booths at the expo, promoting real estate on Halal Homes."I asked the consultant at the booth what it meant to have a halal home."A housing area which is built on halal land, using quality products and situated in a good location, far from haram activities such as factories producing haram goods and pig farms" – that's more or less how he described."According to him, a halal certificate will be issued to the house buyers to certify the home is halal."My parents live in a Chinese village in Penang, our house is neighbouring a Chinese graveyard, a huge Chinese temple and a small morning market selling pork. But my parents are very pious people – they pray more than five times a day and the sound of "azan" and Quran recitals are always heard in my house. But we do not have a halal certificate for our house, does that make it haram?" Fa Abdul asked.The consultant smiled and whispered, "It's just a marketing tactic."Meanwhile, property investment in Manila with prices half of that in Kota Kinabalu is attractive to many property investors.Nevertheless, Philippine developers like Ayala Land, Inc. is eyeing the Malaysian market for real estate projects. The move into Malaysia is the firmest so far as Ayala Land looks elsewhere in the region for opportunities. The company has been in talks with City Mart in Myanmar over a residential project, and continues to scout for partners in Vietnam, Indonesia and Thailand.The company informed that its subsidiary Regent Wise Investments has acquired a 9.16 per cent stake and one of seven seats on the board in MCT Consortium.With a market capitalisation of around $450 million, MCT specialises in mixed-use projects comprising retail spaces, offices, hotels and less expensive residential developments - very much the same portfolio profile Ayala Land has evolved in the Philippines. Ayala Land was the biggest property firm in the Philippines until SM Group consolidated its real estate assets into SM Prime Holdings in 2013, turning the mall developer into a real estate conglomerate.Property price increases are due to a basic controlling mechanism, which is the law of demand and supply.When a developer launches a project with every units sold, the price of the next project will definitely increase. Conversely, if the developer launches a project, but only manages to sell few units after a long period of time, the developer will delay future launches and will hold off on an increase in price.Stay up-to-date by following Daily Express’s Telegram channel.
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