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Showing posts with label PropertyMarket. Show all posts
Showing posts with label PropertyMarket. Show all posts

Sunday, 17 November 2024

Govt intervention won’t fix housing prices

 

Every adult should sensibly secure a home as everyone needs a roof over their head ■ Residential properties in prime locations undergoing ‘shrinkflation’, with sustained higher prices despite new units getting smaller

Greyscale low angle view of a highrise building with glass windows under sunlight


THE indirect discussion on multiple-home ownership between Housing and Local Government Minister Nga Kor Ming and former Cabinet member Khairy Jamaluddin over various media channels has ignited interest among Malaysians.

The latter wondered on his podcast Keluar Sekejap last week if limiting property purchases could help alleviate the crisis in affordable housing by addressing the surplus of unsold high-end homes that contribute to inflated prices.

Nga countered by dismissing the proposal, arguing it is not the government’s role to restrict investments in the real estate sector, which has proven to be an effective hedge against inflation and a means of wealth preservation.

He cautioned that such restrictions could harm the property sector and negatively impact some 200 industries connected to real estate, including contracting, plumbing, banking and legal services.

From a foreign perspective, if one were to speak to ordinary Hong Kong residents, it would come as no surprise to find that opinions are mixed on tycoon Li Ka-shing, the billionaire founder of CK Hutchison Holdings Ltd.

Although Li – whose name is synonymous with wealth in the former British colony – is a highly regarded businessperson, many in Hong Kong put the blame for the city’s exorbitant property prices on ultra-rich individuals like him, who made their fortunes by flipping properties in the densely populated region.

In fact, there is a local saying that goes:

“The houses in Hong

Kong are not meant to be inhabited.

They are meant to be ‘fried’ (slang for flipping at a higher price in Cantonese).”

This, of course, is in addition to the fact that most

Hong Kong residents live in high-rise units that can feel claustrophobic.

This may explain why many of them enjoy being out on the streets as long as possible, even into the early hours of the morning.

Back home, if one were to drive around our own cities of Kuala Lumpur, Petaling Jaya, Georgetown and Johor Baru, one can’t help but notice the significant number of high-rise residential buildings under construction.

This prompts one to ask a pressing question: Who is actually buying these units?

In addition, it is reasonable to wonder if property investment is truly so lucrative, what will happen to the prices of these high-rise accommodations in the future, especially in view of the government’s goal to encourage homeownership among the youth?

In fact, just a couple of months ago, before Khairy’s comments on his podcast, this writer – who has never advocated for socialist practices in any way – had wondered out loud to his spouse whether the government might need to step in and limit the “frying” of residential property prices.

So, is Malaysia heading in the same direction as Hong Kong?

At first glance, maybe not, but a deeper look may reveal a different story.

Reports in The Star earlier this week indicated that Malaysian residential properties in prime locations are undergoing “shrinkflation”, characterised by a sustained increase in property prices even though new units are getting smaller.

This trend places a heavier burden on buyers, especially on young Malaysians intending to buy their first home.

However, property prices and social responsibilities aside, it is easy to understand why investing in real estate is so attractive: for one, it is more tangible than stocks, bonds or mutual funds, and the thrill of monthly rental collection appeals to those seeking regular returns.

On the other hand, equities and bonds are much easier to liquidate, and there is significantly less legwork involved as members of the public do not normally run the companies whose shares they own, as opposed to property owners who bear the cost of maintaining their assets.

Furthermore, for those interested in steady income, there are blue-chip banking stocks that offer healthy dividend yields, often with lower upfront costs compared to real estate.

Seasoned investor Ian Yoong, whose portfolio regularly achieves a compounded annual growth rate of 23%, believes that Malaysian property prices have increased at a healthy rate over the past few decades.

He points out that restricting residential-property ownership could suppress prices, ultimately discouraging investment in the sector.

“Malaysia’s property market overhang improved slightly in the first half of 2024 (1H24) compared with 2H23, with the total number of unsold units falling by 12.3% and their aggregate value declining by 19.5%.

“The current property overhang itself will cap the rise of residential property prices over the next couple of years.

“The government should therefore not impose any limits on home ownership,” he tells Starbiz 7.

Yoong emphasises that the current property overhang will naturally limit the rise of residential property prices in the coming years.

He advises the government to refrain from imposing any restrictions on homeownership, as doing so could hinder market growth.

A cursory check supports Yoong’s claim, revealing that high-rise residential property prices in many areas of Kuala Lumpur and Petaling Jaya have stagnated compared with 15 to 20 years ago, when the property market was experiencing a boom.

This is despite the completion of both Mass Rapid Transit (MRT) lines 1 and 2 in recent years, which many investors felt could have improved prices, particularly in neighbourhoods near the MRT stations.

While it is understandable that Yoong would prefer to invest in equities given his success and the comparatively less field work, he strongly advises every Malaysian adult to obtain a home.

“Save for a down payment and apply for a bank loan to buy a residential property that is within your means. It matters little whether it is a lowcost flat or a terrace house.

“While this might not be the best investment strategy, it is a sensible move. Every adult needs a roof over their head,” he says.

Yoong says that the monthly loan repayment acts as a form of forced savings.

He stressed that in reality, not everyone is meant to be a successful investor, but almost everyone can be a property owner.

“Once home ownership is out of the way, one can then focus on investing surplus funds in shares, properties, cryptocurrencies and the like,” he advises.

The Star - StarBiz
KEITH HIEW keith.hsk@thestar.com.my

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Friday, 13 September 2024

STRONG PUSH FACTOR FOR PROPERTY MARKET

 

Country’s higher economic growth a feel-good element that is spilling over to the sector

“Inflation levels are benign at about 2% and with the ringgit appreciating against currencies such as the Singapore and Australian dollar, it indicates increased confidence.” Datuk Ho Hon Sang


KUALA LUMPUR: The property market appears to have several strong push factors going for it in the bigger picture, although developers are by and large still cautious despite any broader positivity.

The Real Estate and Housing Developers’ Association of Malaysia’s (Rehda) Property Industry Survey reveals the market is stabilising, amid continued concerns on rising costs on key core cost components such as building materials.

Survey respondents said there was more than a 10% annual increase in the average price for sand, which is used mainly in infrastructure projects, glass and concrete; while costs for steel appear to have declined or tapered off as at June 30.

Unsold units are featured as among the key highlights in the results of this survey whereby half of its respondents reported having unsold completed residential units.

A third of these unsold completed residential units were more than three years old, while about half of them were less than a year old.

A majority or 46% of the survey’s respondents reported that their unsold completed units were priced at RM500,000 and below.

According to survey respondents, the main reasons for this situation were end-financing loan rejection, low demand or interest and bumiputra lots.

The survey, which was done for the first half of 2024 also includes forecasts based on the survey on the market outlook for the second half of this year and the first half of 2025.

It collated responses from 162 out of over 1,500 Rehda members.

According to Rehda president Datuk Ho Hon Sang, the survey only includes a small number of respondents among its larger count of members and does not reflect all launched projects or sales made within the period under review although it can indicate the sentiment on the ground.

“The higher than estimate economic growth thus far gives the country a feel-good factor which spills over to the property market as well.

“Inflation levels are benign at about 2% and with the ringgit appreciating against currencies such as the Singapore and Australian dollar, it indicates increased confidence.

“There are also huge infrastructure projects that are being announced such as the West Coast Expressway which will open up more economic areas,” Ho said at a media briefing yesterday.

“An example is data centres. From 2021 to 2023, there were more than RM76bil of investments into this area, which attracts the established multinational companies.

“This has a very feel-good factor for the property market – as data centres are not just a one-time capital expenditure but provides opportunities during the operations and maintenance period.

“For example, Microsoft has committed to training up to 200,000 talents to maintain DCs,” he added.

Apart from that, there is the stable government and the coming Urban Redevelopment Act that will be focused on the Kuala Lumpur area which will further spur economic activities.

“All these have a part to play in transforming and influencing the sentiment of the people,” said Ho.

Increased demand may also come from increased foreign participation in the property market, although Ho indicated the price threshold is different in the various states and may be too high in some to spur any meaningful foreign buying.

Commenting on the unsold residential units, Ho noted a third of unsold completed bumiputra lots have aged more than three years, which is an issue that the industry needs to address eventually.

“Developers are still treading carefully when it comes to their business operations, despite the improving industry conditions in terms of launches and sales,” he said.

Ho added that this is expected, given the increase in prices for some building materials, which have hit smaller developers harder than larger property development companies.

Rehda also notes that more environmental, social and governance-friendly construction practices such as pre-cast and industrial building systems will increase costs for smaller developers, although it would help to reduce costs for bigger developments.

“For pre-cast panels, the production is centralised and for developments such as high-rises which feature a standard design, it can help to reduce costs on higher volumes with a standard mould.

“For terrace houses with standardised designs, it would be okay but for customised designs it would be difficult for the pre-cast suppliers to do.

“So most developers would still prefer the conventional building style (traditional construction methods) for landed properties.

“But the bigger developers are proceeding with using pre-cast panels even for their landed developments,” Rehda’s deputy-president Datuk Zaini Yusoff told StarBiz.

Zaini said bigger developers usually have their own in house pre-cast manufacturing capabilities.

Commenting on this new construction technology, Ho said it can increase costs for some developers by up to 10% to 15% based on feedback from Rehda’s members.

“This includes transportation costs from the pre-cast plant to the construction site as these costs (diesel) have gone up now and the deployment of skilled labour, since one cannot use normal manual labour to put these together.

“These causes the cost increase,” Ho said.

The survey also indicated that for the next 12 months, respondents look forward to higher optimism for the first half of 2025 compared with the second half of this year.

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Property market and affordability



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