1001 Commemorative issue: Property prices to climb higher - Invest Duit


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Monday, June 13, 2011

1001 Commemorative issue: Property prices to climb higher

Housing property prices are expected to continue rising in the next 12 months, especially for landed homes. However, the increase for landed homes will be at a slower pace compared with 2010, at an estimated 5% to 10%. In 2010, a minimum 20% in prices was recorded in certain hot spots in the Klang Valley, according to property consultants polled by The Edge Financial Daily.

Among the contributing factors cited are pent-up demand and limited supply compared with high-rises. KGV-Lambert Smith Hampton puts the number of incoming landed houses in Wilayah Persekutuan at 1,575 units and apartments/condominium at 17,922 units.

The high-end condominium market is expected to remain stable with some price increase, though at a slower rate than landed homes due to oversupply and a slow rental market. 

Some consultants believe the high cost of landed homes may drive buyers, particularly first-time home buyers, to more affordable condominiums. This is likely to benefit the mid-market condominium segment the most.

Two noteworthy trends have emerged in the past few years — the growing popularity of gated and guarded homes, and smaller, more affordable luxury high-rise units.

Consultants also caution that further interest rate hikes and the cooling measures may dampen the property market.

From 2007 to the present, the property market has seen significant changes, none  more significant than the growth in the landed homes segment.

The global financial crisis in 2008 had minimal impact due to better regulation by the central bank and the domestic-driven property market.

Luxury high-rise residences, which were performing well prior to 2008 with strong take-ups and rising capital values, were more effected by the crisis but are on the road to recovery.

Landed homes, however, held steady throughout the crisis and have shown tremendous growth since. Transaction volume and value hit record highs in 2010 with over 376,000 transactions valued at RM107.44 billion, of which RM10 billion was in the Klang Valley, which remains the most active market in the country.

Michael Yam, president of the Real Estate and Housing Developers’ Association, said developers held back launches in 2008 during the financial crisis. Better market sentiments returned as the world economy began to recover, pushing up demand for housing.

“Due to the long lead time for construction, housing could not be supplied upon demand, resulting in rapidly rising home prices, particularly in urban areas where demand and costs, particularly land, are high,” he said, adding that the situation was exacerbated by rising oil and steel prices.

“Based on the five major cost components that make up selling prices — cost of land, materials and labour, interest cost, approval process and profit margin — prices of properties, particularly landed homes, will continue to rise,” Yam said.

Coupled with inflationary pressures and fundamental demand underpinned by the socio-demographics of our population, rising costs and prices are here to stay, he added.

Read on for the property consultants’ views on the performance and outlook of the Malaysian residential market.

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