Category: Media Room - Page 2

Jul 28

Bandar Malaysia revival hinges on sustainable economic recovery

By koizumi Media Room

PROPERTY analysts believe the Bandar Malaysia project could resume once there is a clear path to sustainable economic recovery to support new demand and expansion of existing businesses.

This article first appeared in themalaysianreserve.com. View source here.

Nawawi Tie Leung Property Consultants Sdn Bhd ED and regional head of research and consulting Saleha Yusoff said due to the scale of the Bandar Malaysia project, its development time frame could stretch between 20 and 25 years or longer, subject to market demand, and by then, the market will be in another property cycle.

“So, the developer has to adopt a smart-development approach with a master plan flexible enough to adapt to potential changes in market drivers, lifestyle and requirements.

“The development has to be phased (in stages) given the oversupply situation in almost all commercial sectors and the gross floor area to be released must reflect the potential market absorption at each stage,” she told The Malaysian Reserve (TMR) in an email reply.

The Bandar Malaysia development appears to have stalled after the sale of a 60% stake in Bandar Malaysia Sdn Bhd (BMSB) to IWHCREC Sdn Bhd (ICSB) by TRX City Sdn Bhd lapsed on May 6, 2021.

According to a joint statement by the Ministry of Finance, TRX City and ICSB, the parties agreed to mutually terminate the share purchase after the conditions precedent in the agreement were not fulfilled within the condition precedent period and no extension was sought.

At the time of writing, TRX City did not respond to questions sent by TMR.

Saleha said Bandar Malaysia’s future will also depend on how the project will be executed and by whom, given the political risk of the country, as well as how it will be funded.

She noted projects like KL (Kuala Lumpur) Sentral and KLCC have been successful without the benefit of having a high-speed rail.

“The potential of value to be created by the KL-Singapore high-speed rail (HSR) project is to be gained in the future (as the construction will take about seven years).

“We do not think the success of Bandar Malaysia relies solely on the HSR project as even now it already has the connectivity needed to attract investment,” she added.

Saleha said the Bandar Malaysia project has yet to be marketed commercially and there is no mental image of Bandar Malaysia as a product, as such, buyers’ sentiment will not be affected per se.

“Foreign buyers are niche markets and we expect their market share is less than 10%. Hence, the impact is minimal.”

Juwai IQI group co-founder and CEO Kashif Ansari said the project site land still carries a significance to it as deals come and go.

“There are structural hiccups here and there, but it does not mean that land has lost its value on the basis of one transaction. Maybe the economic transaction cost of the land differs from the players perspective and due diligence option.

“The most important question is when the stakeholders will be ready to move in terms of economic benefits for all once the deal is struck in future. For every land transaction, economic cost is involved whereby stakeholders view from the long-term position.

“In our opinion, Bandar Malaysia has huge upside and potential for long-term investors who view the value of land and economic benefits for all,” he told TMR.

CCO & Associates (KL) Sdn Bhd ED Chan Wai Seen does not expect prices for the surrounding area to drop due to the stall in the project because the overall property market in the Klang Valley has already undergone a price correction.

He said the surrounding areas are already established and matured areas, and are ready for development even without the HSR.

“However, the current market sentiment does not augur well for the development of Bandar Malaysia, especially with the cancellation of HSR. The overall development needs to be overhauled, maybe starting with reviewing the land value of Bandar Malaysia.

“It will be quite challenging to come out with viable development plans for Bandar Malaysia if it continues to carry high land costs and currently there are quite limited development options for Bandar Malaysia. The alternative plan is to shelve the development until the market sentiment improves,” he told TMR.

Transportation consultant YS Chan opined the mega project will not resume in the foreseeable future as the world has been changed drastically by the Covid19 pandemic.

“Until the pandemic is fully under control, there won’t be any mammoth projects till the economy is back to its pre-pandemic days. This could easily take a decade. In any case, without constructing the HSR to Singapore, Bandar Malaysia will not be an attractive proposition for investors,” he told TMR.

Jul 04

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Ripe for rejuvenation

By koizumi Media Room

KUALA LUMPUR (July 4): As Sea Park or Seksyen 21 in Petaling Jaya is almost fully developed, there has not been any major development in the area except for the upcoming Seapark Residences, also known as Ruby Seapark, by Midas De Sdn Bhd.

This article first appeared in theedgemarkets.com. View source here.

The 2.32-acre project is sited on the former Ruby Cinema and comprises 406 units of serviced apartment in two blocks of 29 and 24 storeys. “The project will lead to more traffic in the area and may attract younger buyers and families to the mature and older neighbourhood,” says Metro Rec Sdn Bhd managing director Ng Weng Yew.

According to CCO & Associates (KL) Sdn Bhd director Chan Wai Seen, Sea Park may offer some redevelopment potential. “Empty land used as car parks and several adjoining old bungalows can be amalgamated, and old commercial buildings can be redeveloped, as old buildings are deemed to be economically obsolete and not optimally utilised.

“The increasing prices and high plot ratio or density have also made the redevelopment of older properties attractive.” He adds that in some cases, an area needs fresh projects for its rejuvenation.

Meanwhile, Nawawi Tie Leung Real Estate Consultants Sdn Bhd managing director Eddy Wong notes that properties in Sea Park, particularly the one-storey terraced houses, are ripe for transformation as they have a more accessible price point. “The fact that the properties are old may actually be a positive [thing] for those who like the flexibility of renovating them according to their own preferences. The land being freehold is an added appeal,” he says.

Read more about it in The Edge Malaysia weekly July 5 2021 edition.

May 25

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Streetscapes: Busy Jalan Sultan Azlan Shah in need of redevelopment

By koizumi Media Room

Jalan Sultan Azlan Shah, previously known as Jalan Ipoh, is a major trunk road that connects Kuala Lumpur to Ipoh. It is about 5km, with the northern end linking to Jalan Besar Kepong/Jalan Kuching, and the southern end to Jalan Pahang/Jalan Tuanku Abdul Rahman, says Nawawi Tie Leung Real Estate Consultants Sdn Bhd managing director Eddy Wong.

This article first appeared in theedgemarkets.com. View source here.

The early stretch of Jalan Sultan Azlan Shah mainly comprises older 2-storey shoplots and pockets of newer 3- and 4-storey shopoffices. They are occupied by offices, retailers and eateries such as Restoran BBQ, Restoran Son In Bak Kut Teh, Restoran Ras Balouch and Restoran Pakistan.

Other businesses along that stretch include Buku Sin Lian (KL) Sdn Bhd, ST Auto Spares Sdn Bhd, clinics such as Qualitas Health — Klinik Reddy and Klinik Kok Kai Yan, and Damai Service Hospital (HQ).

Data provided by Nawawi Tie Leung shows that the 2-storey shoplots, with built-ups ranging from 1,585 to 1,851 sq ft, were transacted at RM1.3 million to RM1.9 million, or RM756 to RM1,035 psf, in 2018 and 2019.

Rents for ground floor units range from RM3 to RM5 psf per month, and for the upper floor units, from RM1 to RM1.50 psf per month. These translate into an annual yield of 3.5% to 4%.

Wong notes that there have not been any transactions for the 3- and 4-storey shopoffices in recent years.

“There is no doubt that the Covid-19 pandemic has affected the overall property market, including these shopoffices. In particular, an older commercial property in a standalone location may be more affected than the newer ones with a large population base close by to support commercial activities,” he adds.

Amy is a frequent customer of Restoran BBQ, which is well known for its barbecued meat and wantan mee. “I always opt for the char siew wantan mee. The chewy egg noodles, with dark soy sauce and a generous amount of dumplings, are served in a flavourful chicken broth,” she says.

The Chinese restaurant also serves wantan mee with mushroom and chicken feet, curry mee, char siew (barbecued meat), siew yoke (roast pork belly), chicken/duck rice, char siew duck noodles and dry curry chicken noodles.

As for nearby residential properties such as Titiwangsa Sentral Condominium and Bistari Condominium, Wong says units with built-ups of 1,044 to 1,324 sq ft were sold at RM430,000 to RM660,000 in 2018 to 2020. Rents range from RM1,900 to RM2,200 a month, giving an annual yield of 4% to 4.5%.

Jalan Sultan Azlan Shah is also connected to Jalan Tun Razak and Jalan Kuching — major roads that link to the Duta-Ulu Kelang Expressway. Amenities nearby include KPJ Sentosa KL Specialist Hospital, AC Hotel by Marriott Kuala Lumpur, Dynasty Hotel, Sunway Putra Hotel and Sunway Putra Mall.

“Like the rest of Jalan Sultan Azlan Shah/Sentul neighbourhood, this area is due for redevelopment because of its age. A redevelopment would be appealing, due to its proximity to the Kuala Lumpur city centre,” says Wong.

Apr 07

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Jalan Peel to ride development wave of Taman Maluri

By koizumi Media Room

For long-time Cheras resident Emmanuel, the Taman Maluri and Jalan Peel of the 1990s were very different from what they are today. “There used to be some rumah papan in Taman Maluri, near Jusco, that housed two popular yong tau foo stalls. Back then, Jusco Maluri was super small — it had only two floors and was one of the few supermarkets in Cheras,” he says.

This article first appeared in theedgemarkets.com. View source here.

“Next to Taman Maluri, there used to be a development called Queenstown. Sunway Bhd later bought the land, along with a few factories, to develop Sunway Velocity.”

Covering an area of about 703 acres, Taman Maluri is one of the most prominent suburban locations in Kuala Lumpur, says CBRE | WTW group managing director Foo Gee Jen. It sits on the border of the city centre, adjacent to Pudu and Chan Sow Lin. Kampung Pandan, Pandan Jaya, Jalan Cochrane and Shamelin Perkasa are nearby.

“Maluri was part of the Chan Sow Lin industrial area but is now readily viewed as the suburb closest to Kuala Lumpur’s Golden Triangle. JKR workshops and depots as well as the government printer were originally located in the area,” says Foo.

According to Nawawi Tie Leung managing director Eddy Wong, there are government quarters on Jalan Cochrane and public housing (PPR Laksamana) on Jalan Peel, which is reflective of the general demographics of the residents here. In the 1970s, workers started to move out of these government quarters as the trend of homeownership gathered momentum.

“Consequently, part of the area was alienated to a property development company called Syarikat Maluri Sdn Bhd, which eventually launched Taman Maluri, which has become one of the most successful development schemes in Kuala Lumpur. Small businesses emerged as the population increased, followed by commercial centres and malls,” says Foo.

Wong notes that Taman Maluri is known as the location of the oldest Jaya Jusco store (now rebranded as AEON) in Malaysia, which opened in 1989. “Meanwhile, Jalan Peel is known for its eateries, which attract the office crowd that work in the city and are looking for alternative lunch venues.”

Riding the wave of Taman Maluri’s development, the Jalan Peel-Jalan Cochrane area was next in line for urban regeneration over the last decade and is primed to become one of KL’s newest residential and lifestyle hubs, says Foo.

Massive transformation

The area was originally home to low-level government workers, notes Foo. “This changed when Taman Maluri was launched and middle-income households began to move into the locality. The change in demographics came about with the redevelopment of the government quarters to accommodate the lower-middle-income households in Taman Maluri,” he says.

He also notes that the presence of public, private and international schools, most notably Taylor’s International School, is an indication of the rise in income levels.

“The population comprises mostly the working class segment, but this is rapidly changing with the redevelopment of the area and influx of new well-designed developments targeting the higher executive-class segment of the market,” says Wong.

“The area is undergoing massive transformation. The completion of the mass rapid transit (MRT) Kajang Line with two stations in the area — Cochrane and Maluri — and improved connectivity have raised the appeal of this location.

The development of Sunway Velocity, an integrated development with residences, a mall and medical centre by Sunway Bhd, and MyTown (anchored by IKEA), which is jointly owned by Boustead Holdings Bhd and Ikano Pte Ltd, has transformed the area into a development hotspot, he says.

Sunway Velocity and MyTown mall have about 1 million sq ft and 1.1 million sq ft of net lettable area respectively.

“These developments have brought in developers that recognised the potential of this neighbourhood. There are 8,000 units of residences under construction. They are scheduled for completion over the next few years,” says Wong.

To Foo, what has changed the most in the area has been public transport. While Taman Maluri was already well developed with these amenities, the construction of the light rail transit (LRT) in the 1990s and the recent MRT line have made travelling from Maluri to other parts of KL very convenient, he says.

The Cochrane and Maluri MRT stations are located about 300m apart and near the Maluri LRT station. Other MRT stations within a reasonable distance include Taman Pertama and Taman Midah.

Several roads near Taman Maluri have also been upgraded. “The opening of the new Besraya Eastern Extension Expressway has effectively linked areas such as Serdang with Cheras,” says Foo.

Farther south and east are a plethora of high-rise developments: Vistaria Residensi, Villa Seri Puteri, Pertama Residency, Villa Tropika @ Pudu Impian, Sky Vista Residensi Condominium, Bukit Pandan Condominium, Pandan Heights Condominium, Vista Perdana, Astaka Heights, Perdana Villa Deluxe and Perdana Villa. With the new MRT line giving the area a boost, Foo expects to see more high-rise projects.

“Taman Maluri will be a major KL retail hub. With a gleaming reputation, sufficient public facilities and new lifestyle developments, it is expected to attract more investors, homeowners and consumers,” he says.

Growing property values

With new developments and new infrastructure, the area is seeing more demand.

“A testament to the strong demand is V Residence in Sunway Velocity, which has achieved prices above RM1,000 psf at launch. This has set a new benchmark in an area that used to command about RM400 psf not too long ago,” says Wong.

“Prices have appreciated because of several factors. The location is very central, being close to TRX (Tun Razak Exchange), which is planned to be the new financial centre for KL. TRX is only one train stop away from the Cochrane station. As such, the area is primed to enjoy spillover demand for residences arising from those working in the TRX financial centre.”

According to data provided by CBRE | WTW, as at December 2019, the average price for 1-storey terraced houses was RM420,000 versus RM267,500 in 2010, a price appreciation of 5.1% a year. Meanwhile, the average price for 2-storey terraced houses was RM826,500 in 2019, versus RM400,000 in 2010, a price appreciation of 7.4% a year.

In 2010, CBRE | WTW had records for only two high-rise residences, Amaya Maluri and Bam Villa, which commanded RM431 psf and RM180 psf respectively. Prices for Amaya Maluri and Bam Villa have appreciated to average RM685 psf and RM352 psf respectively, reflecting a capital appreciation of 5.3% and 7.7% a year.

“Prices for more recent launches such as Sunway Velocity have been volatile. Developer prices have been much higher than the prevailing prices of Amaya Maluri and BAM Villa. Current market sentiment has been further dampened by the pandemic,” says Foo.

Meanwhile, semi-detached houses were sold at an average of RM1.6 million in 2019 compared with RM880,000 in 2010, an annual capital appreciation of 6.9%. According to Foo, some of the ongoing developments are Mah Sing Group Bhd’s M Vertica (from RM560 psf), Eupe Corp Bhd’s Parc 3 and, farther away, Beverly Group’s 28 BLVD.

He notes that Parc 3 was redesigned and relaunched after the incorporation of smaller unit configurations at affordable prices to cater for a broader buyers’ market. The development will benefit from the nearby Taman Maluri LRT interchange and MRT station, and the Pandan Jaya LRT station.

“Several residential projects are being developed on pockets of land amid the mega projects, including Trion by Binastra Land, Lavile Kuala Lumpur by Orando Holdings Sdn Bhd, UNA Serviced Apartment by Selangor Dredging Bhd and One Cochrane Residences by Boustead Properties.

“Looking at the wider area, more residential units are expected in the coming years, with major residential developments planned at the southern city fringe in Cheras and Sungai Besi, stretching along Jalan Loke Yew and Jalan Sungai Besi,” says Foo.

CBRE | WTW estimates that 10,000 units will come into the market between 2021 and 2023. The completion of M Vertica, slated for 2023, is expected to bring in 3,684 units.

Future growth

Wong believes that, while factors such as capital appreciation and improved infrastructure are exciting news for the rejuvenation of an area, the downside is that existing residents may be crowded out by the increase in property prices. “The challenges are the usual macro factors of an oversupplied market with poor affordability affecting the demand,” he says.

“Those buying for their own use will be less affected with the low interest rate environment expected over the next couple of years, while it will help to make property purchases a little more affordable. Investors buying with the intention of renting out their units may find it challenging, with the large number of units being completed around the same time.”

He adds that traffic congestion is another issue, owing to the increasing number of residents moving into the area.

Foo expects the rental levels to remain weak because of the sizeable number of units coming onstream in the next few years and the economic slowdown brought about by the Covid-19 pandemic. He notes that there are other downsides to development.

“The loss of open spaces and parks can result in a concrete jungle. The high density is likely to cause service deterioration of essential utilities such as water, sewerage, waste disposal and electricity,” he says.

Foo observes that traffic congestion has increased rapidly over the years, which was mitigated by the Ampang LRT line, followed by the road upgrades upon the development of TRX and Sunway Velocity.

“However, the two underground MRT stations — Cochrane and Maluri — may not be enough to cater for the growing shoppers traffic and the expected new population from the upcoming residential high-rises as well as future developments in the locality. With many of the new projects being mixed-use developments, the issue of upkeep and maintenance fee allocation for such projects may require better solutions. It is a problem to be faced by all integrated developments in the Klang Valley,” he says.

Despite these issues, Foo believes that Taman Maluri will become a major suburban location in KL, fuelled in part by the spillover demand for residences as TRX develops into a new financial district in the city centre.

“With the numerous retail and commercial components [in and surrounding Taman Maluri], job opportunities will attract workers to the area. Taman Maluri will be an ideal place to reside, owing to its proximity to the city centre, ample amenities and convenient public transport,” he says.

“The younger generation are also attracted to the vibrancy and convenient access offered by the MRT and modern highways. In addition, the Putrajaya MRT Line and the Setiawangsa-Pantai Expressway will attract more visitors and residents to the area.”

Wong is very positive about the future of this area. “The strategic location, proximity to TRX, access to amenities and connectivity are plus points for those looking for a good property to own,” he says.

On a wider scale, Foo believes the urban regeneration of Taman Maluri, along with Imbi and Pudu, are steadily contributing to the modernisation of KL. He expects to see more high-end residences and transit-oriented developments emerge in these localities.

Mar 03

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Good location, good returns

By koizumi Media Room

Terraced houses and condominiums enjoyed some of the best returns and capital appreciation prior to the influx of high-rise units in the Klang Valley property market in the mid-2000s, says PPC International Sdn Bhd managing director Datuk Siders Sittampalam. Rents generally declined owing to the increased supply, he adds.

This article first appeared in theedgemarkets.com. View source here.

“Owing to the rising cost of land, developers adopted vertical development. The growing population and demand for housing led to the growth of high-rise developments, and land for development became scarce and costly,” Siders says.

On top of the persistent soft market, last year had been challenging to both the economy and the property market generally, owing to the Russia-Saudi Arabia oil price war, US-China trade war, change in government in Malaysia and the Covid-19 pandemic, Siders notes. “The real estate market [saw] declining sales volume, capital values and rental returns or yields.

“Prior to all these [events], rental yields for high-rise residential properties could go up to 6% to 8%, whereas that for landed properties were between 3% and 5%. Currently, the average rental yields that can be achieved are 4% to 5.5% for high-rise residential properties and 2% to 4% for landed properties,” he notes. “Properties with higher asking rents and lower asking prices will usually have higher rental yields. These properties are normally in mid-end residential developments with good locations and accessibility.”

Nawawi Tie Leung Real Estate Consultants Sdn Bhd managing director Eddy Wong observes that interest in buying property for rental returns has diminished owing to the market slowdown. “Nowadays, property purchase is likely for one’s own use as the rental market has slowed for the past several years,” he says.

Nevertheless, there are still properties and locations with a reasonably healthy rental demand.

Good, established locations

According to Siders, there is a high correlation between location and properties with good rental demand. “It can be said that high-rise residential properties in good, established locations have always commanded a higher rental yield than landed residential properties, although in recent years, the disparity in yields between the two is narrowing owing to [the high] supply of available high-rise developments in the market.”

Siders opines that a good location tends to give good returns, irrespective of the property type, although traditionally, high-rise properties derived higher yields than landed properties but the latter recorded higher capital appreciation compared with the former.

According to Siders, a good location essentially comes with amenities and facilities such as malls, international schools, private and public educational institutions, financial institutions, commercial hubs, entertainment zones, good transport and infrastructure systems such as rail networks, highways and expressways. “Residential properties with good access to public transport such as KTM, LRT and MRT stations, or transit-oriented developments, generally command higher returns.

“Properties with these attributes attract both buyers and tenants who prioritise smooth and cost-efficient commutes to their workplaces and educational institutions. This is very much evident in transit-oriented developments, where rents and prices of development tend to be relatively higher,” he says.

Meanwhile, a good rental property, according to Eddy, is generally one that rents out quickly with low vacancy periods (periods in which the unit is vacant in between tenancies). “The rental yield is a function of the annual rent over the selling price. As such, if the property is able to command a higher rent, and therefore gives a higher yield, its price will correspondingly appreciate to reflect the higher demand owing to the improved cash flow.

“As a result of the now higher price, the yield will swing back mathematically and gravitate towards a ‘market yield’ reflective of the macro attributes of the property vis-à-vis its market segment and location. In other words, an equilibrium situation will be achieved in the medium term as any yield ‘premium’ will be absorbed and reflected in its higher prices,” he explains.

According to Siders, properties with good rental demand in KL can still be found in established and older residential neighbourhoods such as Damansara Heights, Bangsar and Taman Tun Dr Ismail, residential developments along Jalan Klang Lama including Taman OUG, Taman Gembira, Taman Desa and Taman Kanagapuram as well as Taman Maluri and Bandar Sri Damansara.

“These projects were developed in the early days and were mainly low-density developments comprising terraced and detached houses. With land becoming scarce in these areas, the cost of development land has escalated, and developers have started building high-rise residential developments in the pockets of lands left vacant within these schemes.”

Based on data from PPC International, a 784 sq ft unit in Gaya Bangsar with a current asking rent of RM2,200 to RM2,600 per month can enjoy average gross yields of 4% to 4.2% based on the current asking price of RM660,000 to RM750,000. At Glomac Damansara in Taman Tun Dr Ismail, a 1,100 sq ft unit with an asking rent of RM2,500 to RM3,000 and price of RM860,000 to RM880,000 can get average gross yields of 3.5% to 4.1%.

As far as good rental properties are concerned, Nawawi Tie Leung’s Eddy says two city centre developments stand out — Pavilion Residences and The Manhattan in Jalan Raja Chulan, KL.

“There is also an active rental market for Infiniti Residences units in Wangsa Maju, reflecting the shift in market demand from predominantly expatriates to locals, who are opting to rent instead of buy owing to affordability issues as well as market uncertainty as a result of the pandemic,” he adds, noting that the rental yields of these properties generally range from 4% to 4.5%.

“In addition to being well designed with good amenities, these developments enjoy a locational advantage with good connectivity or, in the case of Pavilion Residences, it is part of the Pavilion Kuala Lumpur development, with direct access to the mall,” says Eddy.

Pavilion Residences caters to a niche luxury segment of the market by offering larger units, with two-bedroom units ranging from 1,234 to 1,509 sq ft and three-bedroom units of between 2,013 and 2,645 sq ft. Transactions in 2019 saw prices ranging from RM2.1 million to RM2.3 million for two-bedroom units and from RM2.8 million to RM3.9 million for three-bedroom units, according to Eddy.

Investment properties that enjoy a healthy rental demand have traditionally been located in areas with a large expatriate population, such as the city centre, Taman U-Thant and Mont’Kiara, says Eddy. “Locations on the periphery, such as Jalan Ampang or Wangsa Maju, may enjoy the spillover effect by offering a lower-cost alternative to areas like KLCC,” he adds, noting that yields in popular expatriate locations are typically 4% to 4.5%.

“These locations appeal to expatriates owing to their proximity to international schools, their workplaces and the availability of amenities such as speciality stores and supermarkets that sell groceries they are familiar with in their home countries,” Eddy remarks.

Capturing the student market

According to Savills Malaysia director of research and consultancy Amy Wong, areas located near universities and colleges are usually a good starting place to look at for investment properties. “These areas include Setapak, Wangsa Maju, Kerinchi, Kota Damansara, Subang/USJ, Bandar Sunway and Shah Alam,” she says.

“Typically, investors can expect a rental yield of between 4% and 4.3% for a three-bedroom apartment in these areas — except in Shah Alam, where a two-bedroom unit would yield only about 3.9% per annum,” she says.

Based on data from Savills Malaysia, three-bedroom units in Setapak/Wangsa Maju and Kota Damansara can command average rents of RM1.60 and RM1.70 per sq ft respectively whereas those in Kerinchi, Subang/USJ and Sunway are RM2.20 per sq ft. In Shah Alam, average rents of two-bedroom units are RM1.60 per sq ft.

“Other plus points for these areas include [being] near malls, offices and public rail transport,” says Amy, noting that any return above bank deposit rates is considered a good rental yield.

According to Metro Homes Realty Bhd executive director See Kok Loong, areas such as Bandar Sunway and Subang’s SS15, which target the student market, can give a good yield of 6% to 7%, depending on the capital value, whereas other better-performing areas such as Damansara, Ampang Jaya and Kota Damansara are looking at yields of 4% to 5%.

“Properties in these areas have been performing well because of the surrounding amenities such as private colleges and hospitals.

“Yields at Bandar Sunway are mainly contributed by the student market now as students have the highest disposable income from their parents,” says See.

He notes that the medium-term outlook for the areas he mentioned is stable because of the schools and universities in the vicinity. “For example, Bandar Sunway is a long-term [development] for which there has been demand in the last 15 years.”

According to him, a good rental yield generally gives a net 6% or a gross 10% from the capital value. “I use net [yields] because some of the student accommodations in areas such as Bandar Sunway have rents inclusive of utilities. For properties that are fully furnished with utilities included, a net yield above 6% is considered good,” he explains.

See also notes that in Bandar Sunway, many operators have been renting the units and renovating them before subletting to foreign or outstation students over the past decade.

Other locations with good rental demand are near MRT stations and cater to young professionals, he says. “These properties are usually in the mid-end segment of the market or are selected projects in the high-end segment. The high-end segment of properties is mainly located in KL and targets the foreign expatriate community from the oil and gas, finance and banking industries — which have not been doing well in the last few years.”

Mid-end segment of the market

According to Kim Realty CEO Vincent Ng, there are two segments of properties with more rental activity — those that command a monthly rent of RM2,000 and below as well as selected high-end condominiums and branded residences.

“While better-performing properties are from the mid- to high-end segment of the market, the high-end segment of the market is currently facing challenges, with few foreigners renting owing to border restrictions,” he says. He adds that more affordable properties in the market could help boost yields in the future as the population continues to grow.

Ng also notes that most tenants would prefer properties near MRT or LRT stations that are less than 1km away. “Properties with better yields are always near transport infrastructure and conveniences and are usually high-rise properties. Although the location is very important, last-mile connectivity is still a problem in Malaysia.”

According to Ng, areas such as Mont’Kiara, KL city, Bangsar and parts of Petaling Jaya are still sought after. “In today’s market, people will be happy with yields of 4% to 5%. Of course, those who have entered the market years ago would be getting yields of 6% to 7% in areas such as Mont’Kiara, whereas current yields are closer to 3% to 4%. Now, because the interest rate is so low, the yield is around 4%, and [owners] are waiting for better days.”

Meanwhile, areas such as Puchong and Bandar Sunway could see yields improving to 5% to 6% from the current 3% to 4%, depending on the proximity of the property to infrastructure, as commercialisation of these areas progresses, says Ng. “These areas also cater mainly to the middle-income group,” he notes.

Other areas such as Ampang, Kota Damansara and parts of Kajang with new connectivity are also seeing good rental activity, says Ng. “Although high-rise properties get better yields than landed ones in general, linked houses in good locations can still command yields of 2% to 3%, especially those in gated and guarded communities. For example, linked houses in Kota Damansara that are gated and guarded are still sought after, as there are fewer high-rise properties in the area,” he adds.

Feb 02

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Strategic location, connectivity draw developers

By koizumi Media Room

Located 5km north of the heart of Kuala Lumpur, Sentul is a juxtaposition of pre-war buildings with their old-world charm and futuristic skyscrapers that punctuate the skyline.

This article first appeared in theedgemarkets.com. View source here.

Steeped in history, the former railway hub went through a period of decline before YTL Land & Development took over the 294-acre Sentul Raya development from Taiping Consolidated Bhd and unveiled the Sentul Masterplan — comprising Sentul East and Sentul West — in 2002, which turned the place around.

Fast forward to today, Sentul is especially well-known for the Kuala Lumpur Performing Arts Centre (klpac), which opened in 2005, and the Sentul Depot event space, which was officially opened by YTL Land in 2018. The area is also fast becoming a desired address to live in with iconic condominiums such as The Capers and The Fennel in Sentul East, and the upmarket The Maple condominium, which is situated in a park.

Nawawi Tie Leung Real Estate Consultants Sdn Bhd managing director Eddy Wong notes that the Sentul neighbourhood today looks very different from some 20 years ago. “The Sentul skyline now boasts iconic high-rises of 40 to 50 storeys and the prices of condos [in the area] have more than doubled from five to 10 years ago, reflecting its increased appeal and demand.”

According to him, Sentul’s close proximity to the city centre further boosts its appeal, and infrastructure improvements — the completion of the DUKE Highway and the LRT Sentul and Sentul Timur stations as well as the soon-to-be-completed MRT Sentul Barat station that is part of the MRT Putrajaya Line (formerly known as the Sungai Buloh-Serdang-Putrajaya Line) — will enhance the area’s connectivity.

Sentul is well connected and enjoys easy access to a network of roads, including Jalan Tun Razak, Jalan Ipoh, Jalan Kuching, Lebuhraya Sultan Iskandar (previously known as Lebuhraya Mahameru) via Sentul Link and the DUKE Highway.

Henry Butcher Real Estate Sdn Bhd chief operating officer Tang Chee Meng says the revitalisation of the whole area has enhanced the living environment and its image and increased its desirability as a place for people to call home. “The unique architecture of The Capers and The Fennel, which have changed the skyline of Sentul, and the presence of the klpac and the 35-acre private and gated Sentul Park, have also added to Sentul’s allure,” Tang remarks. Sentul Park is part of YTL Land’s masterplan development and was carved out of an existing golf course.

In addition to YTL Land’s Sentul Masterplan development, Tang notes that Melati Ehsan’s Bandar Sentul Utama (initially developed by Sentul Murni Sdn Bhd) has also contributed to the growth and gentrification of Sentul as a whole.

According to Tang, the property market in Sentul over the last 10 years can be described as active and supported by strong demand. “A number of high-end condos as well as commercial developments were launched during this period, including The Capers, The Fennel, d6 and d7 offices in Sentul East by YTL Land, as well as Bayu Sentul condo by Melati Ehsan,” he says.

Metro REC Sdn Bhd’s senior real estate negotiator Vetri Kumar notes that Sentul has one of the highest volumes of property transactions within the Klang Valley. “The property market in Sentul has improved dramatically and grown exponentially over the last decade. Due to its strategic location, demand for developments in the area has increased steadily as Sentul is one of the few suburban areas in KL that have many entry and exit points to major roads and highways,” he says.

Property prices in the area, Vetri notes, have steadily gone up over the years. “One such example is Maple Condominium, where units are currently typically priced at RM1 million from RM900,000 in 2013. Its price per sq ft has grown from about RM550 to RM700 over the past six years.” Vetri believes the number of developments in Sentul will continue to grow and the area will have good opportunities for both homebuyers and investors.

In addition to eateries and restaurants, residents in the area also enjoy a myriad of amenities such as a post office, UTC Sentul, clinics, schools, major banks — CIMB, Public Bank, Maybank, Hong Leong, HSBC, Bank Rakyat and Affin Bank — petrol stations, a police station and convenience stores.

Ongoing developments

Sentul’s appeal has attracted many property players to the area and there are a growing number of new developments. Ongoing projects include SkyAwani 5 Residence by SkyWorld Development, One Maxim by Maxim Holdings, Sentul Point by UOA Group, Vista Sentul by Platinum Victory, Rica Residence Sentul by Fajarbaru Builder Group, M Centura and M Arisa by Mah Sing Group and Sentul Works by YTL Land.

Projects in the pipeline, Tang says, include the d2 and d5 commercial developments, which will be undertaken by YTL Land in Sentul East.

According to Vetri, UOA Group is planning to have another lifestyle-related project opposite its Sentul Point development. “Both developments will be linked by an overhead bridge across Jalan Sentul to become one sizeable integrated development over the next few years,” he says.

He notes that Phase 1 of Sentul Point, comprising 1,400 suite apartments and 39 units of strata shopoffices in two blocks, was handed over in June last year, whereas the second phase, comprising 952 units of suite apartments and 103 units of strata shopoffices, is scheduled for vacant possession in the first half of 2021.

As for Mah Sing, the developer launched M Arisa in 2019 following the successful launch of M Centura in 2017, Wong notes. M Arisa comprises two blocks with a total of 1,598 units, offering built-ups from 550 to 1,025 sq ft with prices from RM299,000 to around RM650,000, similar to prices at M Centura, which comprises two blocks with 1,413 units.

Platinum Victory’s Vista Sentul, Wong notes, comprises two blocks with a total of 705 units with prices starting from RM329,800 and built-ups ranging from 689 to 1,216 sq ft.

Sentul is a juxtaposition of old-world buildings and futuristic-looking skyscrapers (Photo by Izwan Mohd Nazam)

Positive outlook

Amid challenges in the market today, the property experts remain positive on the outlook for Sentul’s property market.

“In the immediate to medium term, demand for properties will be affected by the economic slowdown and job insecurity brought about by the Covid-19 pandemic, the ongoing trade war between the US and China and the current political uncertainties locally. In the long term, however, the prospects for Sentul are definitely bright in view of its strategic location close to the city centre, availability of public transport, a good road network and the uplift of overall living conditions and its image over the past 25 years,” says Tang.

Fundamentally, says Wong, Sentul ticks all the boxes in terms of its central location and proximity to the city centre, the improvements to its connectivity and transport infrastructure, affordable prices (generally below RM500 psf) and regeneration, with new developments featuring modern and attractive designs. “All these will translate into increased demand and the accompanying price appreciation,” he notes.

Vetri similarly thinks that Sentul will continue to experience a further rejuvenation in the years to come as it has become one of the most sought-after markets, being one of the last locations close to the KL city centre. “Although the property market is adversely affected by the current economy and the unforeseen Covid-19 global pandemic, I believe the recent OPR [overnight policy rate] cuts as well as the economic stimulus packages by the government will start attracting investors and homebuyers to re-engage with the property market,” he says.

Further revitalisation

The rapid development of Sentul has brought about an increase in its population and vehicular traffic, leading to traffic congestion, especially along the main access roads in the area, notes Tang. “This issue needs to be looked at and addressed by the relevant authorities. Certain parts of Sentul have also experienced flash floods in the past and it would be good if this issue can be resolved.”

Tang also suggests a proper resettlement scheme for the remaining squatter areas. “A proper resettlement programme should be carried out to resettle these squatters in modern housing with piped water, electricity supply and proper sanitation to enable these areas to be redeveloped and revitalised. Additionally, some of the older low-cost flats in Sentul are in need of proper upkeep and a facelift as this affects the overall image of the area.”

As the trend in the current property market is vertical living, Vetri notes the importance of making such developments eco-friendly. “The global trend is sustainable environments, and developers need to adapt to that.” He adds that features such as a rainwater collection system, electric vehicle charging stations and vertical agriculture are some examples.

“These advancements and changes will attract more potential buyers and investors as the current generation is moving towards a sustainable future in which energy output could be reduced and the environmental impact can be brought down to manageable levels,” Vetri says.

To further build a more vibrant community in Sentul, Wong suggests the provision of more public open spaces to encourage community-centric activities as well as a neighbourhood commercial centre that will add to the area’s placemaking.

“The klpac is a good example of a catalytic development that has helped lift and transform the area. Perhaps more of such developments focusing on other areas of interest will speed up the redevelopment and transformation of this neighbourhood that is located so close to the city centre,” he says.

Jan 19

Love0

What to look out for in the property market this year

By koizumi Media Room

Last year was a tough one for almost all property sectors. According to data from the National Property Information Centre (Napic), in 1H2020, Malaysia’s property market transaction volume and value decreased 27.9% and 31.5% respectively compared with the previous year. While most property consultants believe there should be some recovery this year, it will depend on the Covid-19 vaccine as well as the performance of the job market and economy.

This article first appeared in theedgemarkets.com. View source here.

Some consultants think there will be opportunities for investors in the auction market with foreclosures likely to increase, but others believe that owing to government intervention and the low interest rate environment, this might not be the case. On the other hand, this could be a golden opportunity for first-time homebuyers to purchase their dream home. However, as property is a long-term investment, the age-old advice of doing your homework and buying what you can afford continues to hold true.

The following are the consultants’ thoughts and comments for 2021.

CBRE | WTW managing director Foo Gee Jen

A lockdown brought the economy and property market to their knees in 1H2020. The resumption of activities and proactive fiscal stimulus measures by the government helped buoy the economy in 2H2020. Considering the economic and social costs, policymakers and the public have come to a consensus on a blanket economic shutdown in the future. This should restore some confidence and certainty, facilitate decision-making and effectuate transactions, although volatility will linger until a Covid-19 treatment is found.

Historic low interest rates, coupled with a string of homeownership incentives, will reduce the barriers to residential purchase, or better, accelerate the buying plans of prospective buyers, who may enjoy more bargains and a wider selection.

On the commercial front, lower borrowing costs, rental adjustments and readiness to negotiate are conducive for tenants and investors who are on expansionary mode. Inevitably, there will be owners who experience cash-flow issues. Hence, they may be encouraged to let go of their properties or opt for a sale and leaseback arrangement in exchange for liquidity. This will present opportunities for investors to pick up quality assets in prime locations with reliable income-generation capacity. Additionally, the infrastructure undertakings listed in Budget 2021 will boost the confidence of investors when they assess about investing in Malaysia.

This pandemic has undoubtedly attested to the value of technology-readiness. Technology has essentially negated the physical obstacles in our work and consumption needs. For businesses, technology has proved to be an effective tool to transition their operations amid the recurring disruptions, and a strategic platform to explore new avenues for business continuity or even survival.

This pandemic crisis also highlighted the importance of prudent planning based on a feasibility framework rather than sentimental optimism. For instance, residential properties that are in sync with demand in terms of location, pricing and product will have an edge.

Generally, domestic demand was characterised by higher stability but lower net worth, while the opposite was seen when it came to foreign demand. Therefore, a global-scale crisis like this poses a question to property players with regard to striking the right balance between domestic and foreign demand.

In Budget 2021, the government continued its commitment to deliver more affordable housing. Since the new supply is entering an already-soft and overhang market, planning, backed by thorough analysis and market study, is needed. Drawing from the lessons learnt from some underperforming affordable housing projects in the past, the approach for this segment has to be more methodical and curated to avoid aggravating oversupply.

In 2021, the low base effect from negative growth in the previous year dictates that gross domestic product (GDP) growth will take its course, although the real gains on the ground may not be as evident. For the property market, any corresponding improvement may only be observable from 2H2021 owing to information lag. From a long-term sectoral perspective, apart from logistics and warehousing, Covid-19 could also be a boost for some niche sectors, namely data centre and cold storage facilities.

CCO & Associates director Chan Wai Seen

If not for the moratorium and targeted moratorium, it would have been a disaster for the domestic property market in 2020. Low interest rates and the reintroduction of the Home Ownership Campaign (HOC) sustained the overall Malaysian residential property market performance last year.

Overall, stable performance was observed for the residential and industrial property markets in 2020 while hospitality was the worst affected sector, followed by the retail and office property sectors.

The recovery in the market depends very much on how the government kickstarts the economy and how Covid-19 is contained. Based on the projected 6.5% to 7.5% economic growth for 2021, we expect the property market to record improvements.

If borders reopen, we foresee pent-up demand in the hospitality sector. The reduced supply of hospitality properties, attributed to the closure of hotels/resorts/Airbnb properties during the Movement Control Order (MCO) period, augurs well for the existing hospitality properties.

We foresee a spike in property auctions when the targeted moratorium is withdrawn unless financial assistance continues to be provided to the affected groups. Recovery of business activities may take time while loan repayment obligations will be immediate if the moratorium is withdrawn completely.

With the price correction and various incentives offered, I think it is a good time for home seekers to buy properties for owner-occupation. With the increasing prospect of effective Covid-19 vaccines in 2021, investors who look for recurring rental income should focus on prime commercial and industrial properties, which can generate good and sustainable rental income.

Many prime properties may be available for sale under the current market conditions. We anticipate businesses to recover once the risk of Covid-19 is fully contained. There is good prospect the rental yield will increase when the economy recovers.

Covid-19 is a major “reset” for the country’s economy. The new normal has changed the Malaysian way of life and created both opportunities and hardship for people and companies. This outbreak has also exposed the lack of a social safety net (for individuals and companies) and the vulnerability of the country’s economy.

To expedite the recovery in the property market, the Covid-19 outbreak needs to be contained to instil confidence for consumers to spend and companies to expand to the pre-Covid-19 level. Reopening international borders is imperative for certain property sectors, namely hospitality, retail and, to a certain extent, the industrial property sector. This is also imperative to reactivate commercial activities at the Iskandar Malaysia region, which relies heavily on visitors from Singapore.

Henry Butcher Malaysia COO Tang Chee Meng

The first half of 2020 was very challenging for the property market as the MCO imposed from March to May brought a halt to all physical property sales activities. Although the residential market picked up after the MCO was eased in June, there was a drop in the volume and value of transactions last year.

The retail sector has been badly affected as shoppers stayed away and this resulted in a decline in the overall occupancy rate of malls. The office sector also recorded a decline in occupancy rate owing to reduced demand as a result of companies deferring expansion plans, adopting work from home (WFH) practices, retrenching staff or closing down. The industrial sector also saw a reduction in the volume and value of transactions owing to lower demand caused by a global economic slowdown.

We expect the property market to recover at the earliest in 2H2021, especially if a vaccine for Covid-19 becomes available. We expect, with the change of administration in the US, that there will be more certainty in US policies, which will be beneficial to world trade and relations between countries. This will help the global economic recovery and, ultimately, benefit the Malaysian economy and property market — provided that the country’s political quagmire does not worsen.

The sluggish property market has resulted in property developers offering discounts, rebates, freebies and easy payment schemes to boost sales. In the secondary market, owners have now become more realistic in their price expectations. This has created an attractive climate for investors and homebuyers, who never had such opportunities when the property market was hot a few years ago. Developers have also been refocusing their attention on building affordable homes priced below RM500,000, resulting in an increase in such offerings to investors and homebuyers.

What can be done to expedite the recovery in the property market? Developers have learnt that they need to innovate and not rely solely on the traditional ways of marketing their projects. They have adopted new digital technologies, switched to online marketing platforms and reduced over-reliance on traditional onsite marketing activities. The government has introduced measures under the Penjana and Prihatin economic recovery programmes as well as Budget 2021 to help the property market.

However, more needs to be done to expedite the recovery of the market, such as extending the stamp duty waiver to the secondary market, reducing compliance costs temporarily to lower house prices, and abolishing the Real Property Gains Tax (RPGT) for disposals after five years of ownership.

JLL Property Services (M) Sdn Bhd country head YY Lau

While the Ministry of International Trade and Industry is forecasting a slow U-shaped economic recovery, the real estate market is expected to experience an even more gradual recovery. The Malaysian economy is projected to contract in 2020 at 3.5% to 6%, and the road to recovery may only start in 2021, hopefully, with the help of Budget 2021.

The property market is still seeing overhang or oversupply in multiple sectors. About 31,000 residential units and 29,000 commercial units (including serviced apartments) have been recorded to be overhang thus far. Office buildings in general are also seeing a decline in occupancy. Although recovery will come, we should not expect it to be so soon.

Opportunities lie in understanding the evolving market. With companies allowing their workers to WFH or remotely, buyers’ criteria for choosing houses will be different — central locations may be less important, a larger unit size is preferred to allow for work space, and the provision of high-speed internet is essential.

As noted in JLL’s Budget 2021 highlight, a significant portion of the budget allocation can further benefit the industrial sector, which has already been observed to be the silver lining. This includes the RM1 billion allocation to encourage investment in high technology, high value-added and research and development activity in the aerospace and electrical and electronics sectors in Batu Kawan Industrial Park, Penang, and Kulim, Kedah, as well as non-fiscal initiatives such as the increment of sales value limit from 10% to 40% for activities at free trade zones and bonded warehouses.

Homebuyers and investors can also take advantage of measures announced by the government and Bank Negara Malaysia such as low interest rates, stamp duty exemption and the removal of the 70% loan limit for the third property. Throughout the MCO, there were a lot of offloadings, especially in the residential sector. Globally, investors can look into countries with good handling of the pandemic and safeguarding of their economy.

Lessons learnt during the pandemic include industry players having to moderate their appetite in taking risks, at least in the short term, as some are experiencing the consequences of earlier risk-taking decisions.

Meanwhile, the potential of resilient sectors, such as data centres, is being recognised further. JLL has received increasing interest, both locally and internationally, especially from Japan, for data centres, particularly during the Conditional MCO (CMCO).

In the short term, we expect the property market to recover following an economic recovery, as people are struggling to maintain their livelihood. Welfare and fiscal assistance in Budget 2021 can improve this situation. In the medium to long term, the property market will need to adapt to the new norms, be it in new supply development or in its operation.

KGV International Property Consultants executive director Samuel Tan

Covid-19 will continue to remain a threat to business and consumer confidence this year, unless an effective vaccine is available. If a vaccine is confirmed, the property market is likely to see a rebound in 2H2021. However, the market recovery will be uneven, with the landed residential segment expected to take the lead and properties in favoured areas priced between RM300,000 and RM700,000 to see better response.

Meanwhile, the current climate is good for homebuyers as it is a buyer’s market. Borrowing rates are at an all-time low, developers are more willing to sell at a lower profit margin for better cash flow, and there are many keen sellers in the market who are ready to negotiate a deal. The government has also introduced various incentives, such as the HOC and other stimulus packages, to encourage property purchase, especially for first-time homebuyers.

For investors, it is a good time to buy good-grade properties that can give high yields when the market recovers. For those who can afford the time, there will also be some good picks in the auction market.

One of the lessons learnt from this pandemic is sustainability. As property investment is a long-term venture, it is important not to be over-geared and to ensure that there is sufficient reserve to tide you over dry spells.

Another lesson is affordability — the art of not investing more than what one can afford no matter how attractive the future may be perceived to be. Any risks taken must be calculated and not accidental.

For property market recovery, all stakeholders, including the government and private sectors, must ensure supply matches demand, and the cost of development is brought to a reasonable level. There must also be more transparency in property pricings so that the banking system will not be misled.

Developers should ensure all residential developments are WiFi-enabled and conducive to working from home. The blurring of boundaries between office and home, office decentralisation and the downsizing of offices in urban centres will gradually evolve. Planners, developers, buyers and tenants would have to embrace these new changes.

Knight Frank Malaysia managing director Sarkunan Subramaniam

Last year, the retail and hospitality sectors were badly affected, followed by residential, where interest in the primary market prevailed, and the office sector, whose market was sustained to a certain extent by the growth of the technology, pharmaceutical and e-commerce sectors. The logistics sector and certain industrial segments fared very well owing to the e-commerce, pharmaceutical and technology sectors. For instance, the semiconductor market saw demand as its component is needed in many tech gadgets.

The 2021 property market is very much dependent on the state of the economy. The current slew of job losses, salary cuts and the lifting of the loan moratorium will certainly impact the market, especially the residential sector. The desire to conserve cash will limit transactions.

The office market, facing an oversupply situation, will be subject to downward rental pressure. However, the growth of the technology, pharmaceutical and e-commerce sectors may bring some relief to this market.

If there is a vaccine for Covid-19, the retail and tourism markets will see a recovery as people will want to satisfy their pent-up demand for shopping and travelling. Otherwise, this sector will remain in the doldrums. The industrial and logistics sectors will continue to see steady growth. However, growth may taper as demand is fulfilled.

As for homebuyers with cash, the opportunity lies in the secondary market, especially distressed assets, and in the primary market, by taking advantage of developers’ incentives or rebates. The same applies to investment assets, which may have repositioning opportunities or locational advantage. Sale and leaseback opportunities, especially in the industrial sector, are a good consideration for investors with cash backing.

The most important lesson learnt in this pandemic is to be technologically prepared and advanced. Secondly, to ensure that one is not over-geared and has a reasonable buffer if the market goes south. Having such cash reserves will also enable an investor to jump into a rising sector during a pandemic.

The most important thing to expedite a recovery is a responsive government that extends relief and monetary incentives to the economy. For the current property market, exemption in taxes such as RPGT and stamp duty and extending it across the board will certainly bring some recovery to the market. The loan moratorium, the easing of interest rates and other reliefs extended by the government will certainly help cushion the blow due to Covid-19, and sustain and lead the market to recovery.

Landserve Sdn Bhd managing director Chen King Hoaw

After years of decline and consolidation, the domestic property market saw a recovery in 2019. However, the Covid-19 pandemic, which struck the country in February 2020, drove the property market back on its downward trend. Fortunately, the government was quick in bringing back the HOC, which took effect from June 1, 2020, and ends on May 31, 2021. That helped boost the property market.

Generally, the property market’s performance in 2021 depends heavily on the country’s economy. Political uncertainty continues to plague the country while the government is fighting to contain Covid-19. If this situation is prolonged, more business closures and job cuts can be expected, which will weaken the economy. Under such circumstances, recovery in the property market is unlikely this year.

However, if the pandemic is well contained or no longer a threat and our nation’s economy improves in 2021, underpinned by political stability, rising oil and commodity prices, public spending to pump-prime the economy, job opportunities and so on, then some form of recovery in the property market can be expected in 2H2021 or 2022.

Homebuyers can take advantage of the discount on sale price and incentives under the HOC 2020, which mean huge savings. Interest rates for housing loans are also at a record low.

In addition, investors can look out for properties that are put up for auction as such properties, which failed to attract successful bidders after several rounds of auctions, will see their reserve prices reduced substantially. However, one should not be motivated by price alone. Before making any decision to invest, always consult your estate agent for professional advice.

The pandemic has changed the way we live and work, bringing about a new set of challenges, risks and opportunities. It reminds us that real estate is never a short-term investment. Do not speculate as it is risky. Market research is essential.

To expedite the recovery in the property market, the government and developers must take immediate steps to curb over-building of properties that are not in demand. The HOC 2020 is laudable in boosting demand. Perhaps, the government can consider extending it to cover selected properties in the secondary market.

LaurelCap Sdn Bhd executive director Stanley Toh

The property market has been generally subdued because of the Covid-19 pandemic, which resulted in poor market sentiment. Nevertheless, the government’s initiative to extend the HOC has given a boost to the domestic market. Developers were able to clear stock and purchasers had the opportunity to own their dream homes at a discount, together with other benefits such as full stamp duty exemption of up to RM1 million, partial stamp duty exemption of up to RM2.5 million, stamp duty exemption on instrument of securing a loan of up to RM2.5 million and 10% house discount for properties registered under the scheme.

In addition, Bank Negara’s decision to cut the overnight policy rate (OPR), leading to a reduction in interest rates, also helped the property market.

In the secondary market, we saw a few fire sales during the MCO period (between April and June 2020) in some prominent areas such as Desa ParkCity, Damansara Heights and Taman Tun Dr Ismail. Nevertheless, in 3Q2020 and 4Q2020, asking prices of these areas reverted back to pre-Covid-19 levels.

We observed that during this pandemic, many people invested in the stock market, hence the surge in retail investors. These people will eventually cash out when the Covid-19 vaccine starts to be rolled out and is effective. With cash, they are most likely to invest back in the property market. The property market normally tailgates the country’s economy, and the effects will only be visible six to nine months down the road. With the vaccine due to hit the market in 1Q2021 or 2Q2021, we envisage that the property market will most likely gain momentum in 1Q2022.

For investors, the industrial property market seems to have done better than the retail, office and leisure markets. The warehousing segment was in demand mainly owing to online transactions during the MCO period. For homebuyers, they should take advantage of the HOC programme and the low interest rate environment to maximise their opportunities.

From the property sector’s perspective, the pandemic has taught us about diversification, adaptability and versatility. The traditional way of buying and selling properties has to change. Virtual viewing of properties, online meeting and applications and so on are the new norms.

Developers will also have to bear in mind when designing a home that homebuyers will want a house with more space to conduct their online meetings as well as for their children’s online education and homework.

One thing that could help expedite the recovery of the property market is to relax the rules for foreigners to own properties in Malaysia once the vaccine is out and stable and the Covid-19 threat is diminished. The borders will be opened by then and the MM2H (Malaysia My Second Home) programme should resume.

Also, financial institutions need to be proactive in approving loans, especially for first-time homebuyers, as we see that many people are keen to buy a home but are denied the opportunity because of loan rejections.

Metro Homes Realty Bhd executive director See Kok Loong

The year 2020 has been a challenging one for the property market owing to the pandemic. A high unemployment rate, retrenchments and the closing of businesses are expected to continue until early 2021. Buyer sentiment is low except in mature areas such as Bangsar, Damansara and Desa ParkCity, where purchasers snap up deals when prices drop 10%, and sellers are more willing to take up the offer due to the uncertainty. The only good news for the property market is the record-low interest rate and the six-month loan moratorium.

My opinion of the market in 2021 is that it will continue its downward trend as the overall economy is not doing well and there is a lack of a stimulus package by the government to push recovery. I expect low transaction volume for 2021 as people will not commit to big-ticket items during a recession. For first-time homebuyers, the memorandum of transfer (MOT) stamp duty waiver is until 2025 based on Budget 2021, so they don’t need to rush to buy now.

A lot of good buys will appear in 2H2021, as we foresee a lot more foreclosures by banks, mainly based on the number of applicants asking for further financial aid after the moratorium, which is around 500,000 cases. Coupled with the high household debt of around 86% of GDP, the foreclosures will surface in 2H2021 if the overall economy does not recover by then.

Homebuyers will have the opportunity to choose their choice units from mid-2021 as more units will be available for sale then. For investors, certain prime shopoffices will be up for sale at a reasonable price in 2021. For example, during the 1997 recession, shopoffices in Jalan SS 21/39, Damansara Utama, were sold at RM400,000 compared with the average price of RM1 million in 1995 and 1996.

For businesses, lessons learnt from the pandemic are always have low gearing and be asset-light. A government policy that is business-friendly and open to foreign investment is needed to enable the recovery of the property market. For example, for local businesses, cut the red tape of doing business and encourage Malaysians to innovate and compete since we are part of the Regional Comprehensive Economic Partnership (RCEP), and encourage other countries like China, Japan and South Korea to set up bases here to boost the market.

Nawawi Tie Leung Sdn Bhd managing director Eddy Wong

The residential property market saw a sharp decline in 1H2020, largely owing to the lockdown as a result of Covid-19. The ratio of loan approvals to loan applications for the purchase of residential property declined from 44.1% in January 2020 to 24.6% in June 2020.

The residential property overhang, defined as unsold completed properties that have been in the market for more than nine months after launch, increased 3.3% to 31,661 units compared with 2H2019. The property overhang is most pronounced in Johor (6,166 units), followed by Selangor (4,865 units) and Perak (4,644 units).

If “unsold under construction” properties and “unsold not constructed” properties are included in the overhang numbers, there will be a grand total of 120,433 units of unsold properties, indicating that the oversupply situation is quite serious.

In response to Covid-19, the government announced stamp duty exemption for the purchase of properties between RM300,000 and RM2.5 million under the HOC and RPGT exemption for the disposal of residential properties. In addition, the 70% financing limit applicable for the third housing loan onwards for property valued at RM600,000 and above was lifted. Despite all the initiatives, the number of transactions for 2020 is expected to remain subdued.

The market is expected to remain challenging in 2021 in view of the weak sentiment amid the economic shocks resulting from Covid-19. While GDP growth for 2021 is projected to recover to between 6.5% and 7.5%, concerns about job security and the overall affordability and availability of housing loans will continue to affect demand.

The residential property market may take a while longer before it improves and any recovery is likely to be fragile. This is an excellent opportunity for those looking to buy properties, especially if buying for own stay, as it is a buyer’s market and there are many incentives and freebies being offered by developers in addition to the stamp duty waiver under the HOC. Investors should remember to do their homework and seize this once-in-a-lifetime opportunity to pick up a choice property.

It is good to adopt a longer-term view of the market, and if you do not already own a property, this is the perfect time to start looking for one. A down market is the best time to buy properties as the market will eventually recover. Look for properties with good accessibility to amenities, that are well connected and located in a great neighbourhood. Prices are very attractive in today’s price-sensitive market.

This pandemic has prompted us to review our current ideas about the design of residential homes and how space planning needs to accommodate WFH (and study from home) in the new normal.

The recovery of the property market is dependent on not just the development of a vaccine but also the availability of the vaccine to the general population. Hopefully, in the interim period, we are all able to behave responsibly so that there will not be another lockdown and economic activities can fully resume as soon as possible. It is only when confidence returns that the property market is able to recover from this downturn.

PA International Property Consultants (KL) managing director Jerome Hong

Overall, the property market is in a consolidated period. In the housing segment, there were fewer launches. Developers of selected schemes, however, have reported strong bookings following the reintroduction of the HOC in June although the conversion rate of bookings into sales may be lower owing to stringent financing guidelines.

The prolonged pandemic and the economic slowdown owing to the various phases of MCO amid a resurgence in cases are likely to continue to affect the investment climate, businesses and market sentiment, particularly the tourism and retail sectors.

Residential property prices are expected to remain stagnant owing to lower interest rates, with buyers participating in projects under the HOC. Amid heightened competition and a challenging market environment, developers are expected to review their pricing and marketing strategies to boost sales. Developers with large land banks will continue to focus on terraced homes and the affordable segment to drive sales. We expect to see a correction in pricing in the high-end segment.

Both investors and homebuyers should look at established locations and popular suburbs that provide affordable to mid-range pricing and mixed-use developments with connectivity to ongoing transport rail lines such as LRT Line 3 and MRT Line 2, which will enable them to enjoy both good returns and capital appreciation over time.

Technology and internet facilities (accessibility/connectivity) are playing crucial roles during the prolonged lockdowns. The pandemic has accelerated technology trends such as digital payments, Zoom meetings, online shopping, distance learning and developers’ virtual launches.

To stimulate the property market, we hope the government can consider raising the maximum loan tenure to 40 years to reduce monthly instalment payments; increasing the loan margin to 10:90 or 100% loan; and lowering the initial borrowing rate for a fixed term and thereafter to revert to the prevailing market interest rate. For instance, fix the interest rate at between 2.8% and 3% in the first five years and thereafter to the market interest rate.

Furthermore, increase the margin of withdrawal from EPF Account 2; extend the waiver of RPGT across all property sectors; and extend the HOC incentives to the secondary market — a waiver on stamp duty for properties up to RM1 million on the instrument of transfer for the purchase of residential properties and for financing agreements in order to boost the secondary market.

PPC International Sdn Bhd managing director Datuk Siders Sittampalam

Between March and June 2020, the market was at a standstill. Transactions were very few in numbers. In terms of volume of transactions, there were very few except for large industrial properties. Subsequently, the market picked up but overall, the number of transactions has dropped this year. The total transaction volume and value for 1H2020 decreased by 27.9% and 31.5% respectively (from 160,165 units in 1H2019 to 115,476 units and from RM68.53 billion to RM46.94 billion).

I do not envisage the property market bouncing back to pre-Covid-19 levels in 1H2021. However, market recovery is expected to be seen in 2H2021 with more economic activities and government infrastructure expenditure.

With regard to the moratorium, financial institutions have to consciously undertake the restructuring of problematic loans where borrowers are having difficulties in servicing them or alternatively require interest-only payment instead of the principal for the year 2021. This is to avoid loans going bad in a large way and reduce the high volume of auction properties placed in the market, dragging the market down with excess supply. Also, compliance cost has to be looked into to reduce the cost of developments. Concerted efforts must be made by the federal and state governments.

Homebuyers may see more affordable homes being built, and this would correct the mismatch between demand and supply to a large extent, although this may not be the solution to the current overhang in the market. The pricing of new properties in the market will reflect market fundamentals, with rebates, freebies and interest-bearing schemes diminishing in new launches.

During this period, there have been good properties placed on the market such as landed properties in good residential areas. It will perhaps take another year or two for the property market to see an upswing, for example, the residential schemes in Greater KL. Also, every sector of the economy has been affected.

What are the lessons learnt so far? Perhaps more market studies have to be done, and also policies implemented in order for planners to ensure that for every development approved, there is sufficient justification for it. Moving forward, we hope the market will be more rational — that there is gradual and organic growth rather than a sudden appreciation in the market, and is sustainable for a long period.

Moreover, the definition of affordable homes has to be redefined. We fail to ask, affordable to whom? Affordable should be measured against income levels and the repayment capacity of buyers. High-end or highly priced properties appeared to be more sensitive to the pandemic and the weakening of the economy. Landed residential properties, especially terraced houses, appeared to be resilient to economic crises and the pandemic.

Rahim & Co International Sdn Bhd director of research Sulaiman Saheh

At the national level, in all major sectors, both volume and value of transactions declined in 1H2020. Office and retail occupancy rates also dropped, as shops and offices were closed, as were the tourism and hotel sectors, which were the first to be hit by the pandemic.

With the reopening of the economy during the Recovery MCO in 2H2020, market sentiment improved, with the Malaysian Institute of Economic Research’s (MIER) Consumer Sentiment Index seeing a rebound in 2Q2020 but it has yet to reach the optimism threshold.

There was also a boost in business confidence, with improved sales and an increase in export orders, which kept the labour market’s concerns about unemployment and income security at bay temporarily. Although movement in the property sector is stickier, the steady improvement in sentiment and the reportedly better-than-expected numbers in loan servicing post-moratorium could revive the market, which currently favours buyers through the slew of benefits from the reintroduction of the HOC, relaxed LTV (loan-to-value) ratio, RPGT exemption and low interest rate environment.

However, there are concerns about the sustainability of sentiment, which was affected with the second and third waves of the pandemic, leading to the reimposition of the stricter CMCO in a number of areas, including the Klang Valley.

Although several incentives were introduced by the government to boost the economy, the property sector does not just rely on domestic drivers but also foreigners’ participation and international markets.

While the allocation for Budget 2021 was huge, provisions that directly boost the property sector were rather targeted. This is understandably so, as the focus was to strengthen the roots of the economy rather than treating the superficial symptoms, for a more sustainable and solid growth of the market at large by focusing on expenditures with high multiplier effects.

We expect a gradual recovery in the property market as the pace of recovery in the country and world gains momentum. Currently, the market’s focus is to increase homeownership, especially for first-time homebuyers and the more vulnerable groups. With stamp duty and RPGT exemptions and a low interest rate environment, interest in the residential segment will increase but the question remains whether it will outweigh concerns about income levels, house prices, loan eligibility and affordability.

There are always opportunities for genuine homebuyers in the market, especially in the current supportive environment. The benefits of owning one’s dream home — by either purchasing from the primary market for a new unit or from the secondary market in a mature estate — could be worth it, especially in a market with potentially good bargains.

Investors are also gearing up for the expected bargain hunting, especially in established locations and newer developments near to transport hubs. While purchasing for one’s own use is fine for almost any type of property that meets the needs of the individual, investment properties are more susceptible to market dynamics, as competition is keen and substitutes or alternatives may be abundant.

Although the Covid-19 factor is a black swan event, issues such as high house prices, property overhang and oversupply situations can be better avoided at the earlier stages of a project’s decision-making.

A proper and independently conducted feasibility study should be made before embarking on any project, and this could apply to the local authorities or project financier, who holds significant influence on the project’s progress. Approvals by the authorities should be conditional on timely implementation, with strict controls over extensions.

Consequently, we hope that with more liquidity, higher disposable income and job and income assurances, the property market could get a boost post-pandemic. While many can come up with their wish list for more stimulus injections, the government has to decide on the best-balanced allocation according to expenditure priorities, which is a mammoth task by any measure.

Raine & Horne International Zaki + Partners Sdn Bhd senior partner Michael Geh

The number of residential property transactions in Malaysia for 1H2020 declined about 30%. The number of transactions dropped from 168,482 units worth RM72.88 billion in 2H2019 to 115,476 units worth RM46.94 billion in 1H2020 — the lowest number recorded in a half-year between 2014 and 2020.

The number of transactions in the primary market was at an all-time low in 1H2020, with 14,789 transactions valued at RM5.59 billion compared with 20,300 transactions valued at RM8.07 billion in 2H2019.

The secondary market also saw a drop, from 89,064 transactions at RM29.68 billion in 2H2019 to 60,529 transactions at RM20.03 billion in 1H2020. The secondary market made up the bulk — about 80% — of the total transactions in 1H2020.

Meanwhile, the number of transactions in the commercial sector for 1H2020 dropped to only 8,118 units valued at RM8.51 billion, almost 35% of the transactions in 2H2019.

Only 1,980 transactions valued at RM5.41 billion were recorded for industrial properties in 1H2020, a decline of 40% compared with 3,123 transactions valued at RM7.83 billion in 2H2019.

The 2021 market is expected to fare better owing to better control of the Covid-19 pandemic and stricter social distancing practices, which will allow businesses to be conducted normally, boosting property transactions above 2020 levels.

Residential properties in hotspots, along with transport hubs, will maintain their value. We also do not foresee the widespread auction of homes.

Opportunities for investors and homebuyers in the current climate will result from the change of preference from high- to low-density living, thus, suburban and semi-rural settings are trendy. Lessons learnt from the pandemic include the importance of having a long-term economic recovery plan to ensure sustainable economic growth and increase investor confidence.

We believe the government had given exceptionally strong support to the property market in 1Q2020 and Budget 2021, which will promote the rakyat’s well-being, business continuity and economic resilience.

Savills Malaysia Sdn Bhd managing director Datuk Paul Khong

Local political and global geopolitical uncertainties made 2020 a tough year. However, the loan moratorium and the Penjana and Prihatin stimulus packages were helpful in shoring up the market in Malaysia until the end of 2020 and partially into 2021.

Though we were impacted by these events, the markets were given a fair chance to recover. The markets closed relatively flat at end-2020 with Budget 2021 having little impact on them and with no major movements.

The property market will remain challenging in 2021, especially with the easing of the government’s stimulus programmes. We expect the property market to struggle through this period, with more foreclosure auctions surfacing owing to the current economic headwinds and the dwindling job market.

The residential market is anticipated to remain subdued. While the reintroduction of the HOC 2020 has encouraged home purchases, the risk of financial instability has made buyers re-evaluate their purchase decisions.

In the commercial sector, retail and hospitality were among the most impacted sectors owing to the pandemic. As the economy gradually reopened in 3Q2020 with cases under control, the better malls saw an increase of 80% to 90% in footfall. The same trend was observed in the hospitality sector, as people had started to travel domestically since then. However, the rising number of Covid-19 cases in 4Q2020 led to CMCO being reimposed in Greater KL and various locations, and as a result, these sectors’ recovery was again affected for the rest of the year.

Meanwhile, investors and homebuyers will see some bargains coming as the markets adjust back with a reality check post-moratorium. It is a good time to buy, especially when the market is on a downward trend and asking prices for residential properties are well discounted.

Developers will continue to offer better bargains in the primary market to attract sales. With the easy entry owing to low deposit payments and free stamp duties for transfers and loans and freebies, these offerings are getting interesting and worth considering. Now is the time to “buy low, sell high”. As such, it is important for purchasers to have cash flow to hold investments in the short to medium term to reap the actual benefits.

The pandemic has also accelerated growth in the technology and healthcare sectors, which led to the demand for industrial, logistics and data centres. Logistics and data centres have boomed owing to changes in online shopping patterns and the shift in the shopping paradigm, thus increasing the need for cloud and physical product storage spaces.

The property market has remained resilient throughout the pandemic, being a stable investment. Real estate is a long-term investment and value will not fall off a cliff in most circumstances, but is subject to further yield compression in the short term. The road to recovery moving into 2021 is still an uphill journey during this uncertain period. Ultimately, we hope the vaccine will soon be available for all sectors to get back on track in the new normal.

VPC Alliance (KL) Sdn Bhd managing director James Wong

The office, retail and hotel/leisure sub-sectors were the most affected in 2020. The difficult operating environment owing to the pandemic and resulting business closures affected the occupancy rates and rents of these sectors.

The MCO and CMCO also negatively impacted the property market. The loss of consumer confidence, salary cuts and unemployment led to a cautious market sentiment, which caused buyers to delay their decision on purchasing a property despite the reintroduction of the HOC 2020 and attractive home loan rates.

Apart from that, the soft property market in 2020 was also affected by political instability and external factors such as the US-China trade war, disruption of the global supply chain and negative growth in major world economies. Additionally, oversupply is expected to build up in 2020 and beyond.

With the recovery of the global and Malaysian economy, Bank Negara has projected for a GDP growth of 6.5% to 7.5% for 2021, and this should lead to a gradual recovery of the property market this year.

Meanwhile, more than 53.2% of property overhang is in the condominium/apartment, serviced apartment and SoHo categories, thus their prices are expected to further decrease in 2021, providing buying opportunities.

With the stamp duty exemption announced in Budget 2021, there will be buying opportunities for properties priced RM500,000 and below, especially for first-time homebuyers. There will also be more auction properties for discerning buyers in the coming months.

The lessons learnt from the pandemic include the new norms of WFH and social distancing practices. Technology will play an important role, including in marketing techniques and online purchases. Developers may also have to redesign the layout of houses to accommodate WFH features.

With the availability of the Covid-19 vaccine and the recovery of the global and Malaysian economy, business and consumer confidence will return to the property market and it is expected to recover by end-2021.

Zerin Properties managing director and CEO Previndran Singhe

The residential market saw a reduction in overhang volume with 29,698 units (RM18.91 billion) in 1Q2020, compared with 32,936 units (RM19.96 billion) in 1Q2019. Overall, Johor retained the highest number and value of overhang in the country, in which high-rise residential properties formed the bulk of the overhang. To increase homeownership and reduce the inventory of unsold houses, the HOC 2020 was reintroduced and RPGT exemption was granted.

As for the retail market, it saw a negative growth of 11.4% year on year in retail sales in 1Q2020. Many construction plans and openings of malls were delayed owing to the Covid-19 pandemic and implementation of MCO. Retailers sought rental assistance from landlords, either in the form of rental relief or deferment. This was, however, expected to be a trade-off between extension of leases and rebased rents.

Nonetheless, the retail sector gradually recovered in 3Q2020 owing to pent-up demand, which saw a 149% surge in online sales during the first five months of 2020. Malaysian retailers have started to prioritise digital platforms to stay relevant in the new normal.

Landlords and retailers are also looking at omnichannel retailing to integrate both the offline and online experience for shoppers. Additionally, the pandemic has provided an opportunity to experiment with new business models such as dark kitchens, platform-based communities and subscription models.

Meanwhile, we expect to see more moderate purchasing by investors, but investment appetite will remain healthy and will improve in 2021. We also anticipate 2H2021 to be a measure or benchmark of the tipping point in the market. Flexible office spaces, sustainable developments, assets with stable income and those offering better capital value growth will be the main focus for investors and homebuyers.

Consequently, a clear communication strategy by the Real Estate and Housing Developers’ Association (Rehda) Malaysia and the powers that be, on real estate as a secure investment class and a growth opportunity should be crafted and implemented to boost the property market. This will ultimately push Malaysia to be a regional emerging technology hub, wellness destination and distribution hub, while pursuing sustainability and liveability in this wonderful country of ours.

Dec 19

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Know Your Stuff: Understanding defect liability period and latent defects

By koizumi Media Room

Know Your Stuff: Understanding defect liability period and latent defects

Congratulations! After waiting for three to four years, you finally get the keys to your brand-new house. You are excited and brimming with ideas on how to decorate your new home.

This article first appeared in theedgemarkets.com. View source here.

If you are a first-time homebuyer, the emotions will be 100 times more intense and you cannot wait to get things done and move into your new home.

But as much as you want to start decorating and possibly renovating your home, there is one very important thing you have to do first: Check for defects.

There is a warranty period for your house. During this time frame, known as the defect liability period, you as a homeowner have the obligation to check for defects in your property.

Instead of getting a new house in exchange if a problem is found in your property, you can file a report with the developer and it will fix the problem at no cost.

According to Chur Associates founder and managing partner Chris Tan, the defect liability period is mainly for contractual obligations found in the sale and purchase agreement (SPA), depending on the type of property purchased. The standard SPA, governed by the Housing Development Act (HDA), has a defect liability period clause.

“For residential property under construction, the SPA is regulated by the HDA. The defect liability period is 24 months from the delivery of vacant possession,” says Tan.

He adds that to ensure the developer rectifies the defects, a stakeholder sum, which is 5% of the purchase price, will be retained by the purchaser’s lawyer.

Nawawi Tie Leung Sdn Bhd managing director Eddy Wong notes that commercial developments that are not governed by the HDA may also incorporate a defect liability clause in the SPA. “But since this is not a standard agreement, purchasers need to read the SPA carefully before signing,” he cautions.

Looking for defects and filing the report

Now that you know the defect liability period is 24 months, you should not delay the inspection of your property. But what kind of defects should you look out for?

Wong advises homeowners to inspect the property carefully upon taking vacant possession of the property. Make a list of all the defects, if there are any, and submit it to the developer for rectification work.

“Defects may include defective workmanship or materials, incomplete construction work, or work not conforming to the plans or specifications [as stated in the SPA],” he says.

When you are inspecting your house, bring along the SPA, original floor plan and measuring tape as well as masking tape, label stickers and marker pen.

The floor plan will tell you the built-up area of each room in your house. So, go ahead — measure every room and check against the floor plan.

The SPA has a list of finishes and specifications such as lighting and electrical points, ceiling hooks for fans or lightings, and appliances and fixtures in the bathrooms, toilets and kitchen. Check that whatever is stated in the SPA is installed and provided in your house.

Next, check the property for defects. See a crack on the wall? Stick a piece of masking tape/label sticker next to it and use a marker pen to write a number and make a note of the shortcoming.

After that, compile all the defects in a list and fill up a report to send to the developer. The report is actually a form supplied by the developer for you to complete. You should also consider taking photos with your mobile phone camera, writing down the details and keeping them in your phone.

“There are also apps in the market that some developers may adopt. Typically, such apps have to be downloaded into the homeowners’ mobile phones, and they will have to take photos of the defects and submit the list using the app,” says Wong.

Homeowner’s and developer’s rights

Wong advises homeowners to allow the developer to complete rectification work before commencing any renovation work. Why is that so?

“The developer can refuse to rectify defects that were not caused by it, for example, damage caused during renovation work carried out by the purchaser after delivery of vacant possession,” says Chur Associates’ Tan.

After the defects report has been submitted to the developer, it has 30 days to rectify them. But what if the developer does not respond within that time period?

Tan says the homeowner can bring a civil action for a claim during the contractual defect liability period.

The process for making a claim for defects in residential properties is stated in the contracts regulated by the HDA. This involves the submission of quotations, timeline for rectification and the possibility of homeowners fixing the defects and claiming the money from the 5% retention sum.

“Besides the civil court, a residential property purchaser can actually seek remedy in the Homebuyer’s Tribunal and even complain to the Ministry of Housing and Local Government, which issues licences to housing developers,” says Tan.

Wong says before homeowners repair the defects themselves, they have to notify the developer of the cost of repairs and making good the defects. “Homeowners should allow the developer another 30 days from the date of notification for it to carry out the repair works before they do the rectification works themselves.”

Latent defects

Finally, everything is done and you move into your house. You live there for a number of years and huge cracks suddenly appear on a wall of the property. You suspect this defect was probably caused by the developer’s negligence. But the defect liability period is over. What should you do?

According to Wong, latent defects are defects that are not apparent or obvious and they may not be spotted by the homeowner during the inspection at the time of handover.

“These defects could be hidden behind the visible surface, covered up or dressed up with finishes. They only become obvious after years of wear and tear, as a result of non-compliance with the prescribed industrial and safety standards,” says Tan.

There is no single law that deals with the issue of latent defects, but there is case law over the years, also known as common law, he adds.

In other words, if you want to sue the developer for damages, the civil court will be the best forum for that. The court will judge the case based on past cases. But do keep in mind that there is a time limit to seeking recourse against the developer, which is stated under the Limitation Act 1953. It is advisable to ask your lawyer for more information.

To lodge a complaint with the civil court, you will have to consult a contractor or consultant on the defect and cost of repair.

Tan says homeowners can first make a claim and concurrently get the consultant or contractor to check on the defect and cost. “It is for the developer to form its opinion and rectify the defect. Always make a complaint first.”

He also advises homeowners to obtain a third party’s quotation for the rectification works. If the developer refuses to acknowledge your claim, it will need to provide evidence to support its claim, such as a quality or compliance certification from the relevant authorities or professional opinions, he adds.

So, now that you understand the defect liability period and latent defects, there is one last bit of advice from Wong.

“First-time homebuyers should inspect their property carefully upon getting their keys, so that any defects are properly recorded and rectified by the developer as soon as possible, prior to the commencement of any renovation work.”

Dec 01

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Potential buyers holding back due to uncertain climate

By koizumi Media Room

The Covid-19 pandemic has brought about many changes to our daily lives. For some, having to stay home all day and all night — whether alone or with company — during the Movement Control Order (MCO) period was a challenge. Almost everything, from working and studying to eating and exercising, had to be done at home.

This article first appeared in theedgemarkets.com. View source here.

In September, City & Country conducted a survey to find out whether the MCO had an impact on homebuyers’ preferences — such as the size and location of the property — when it came to their next purchase.

A total of 327 people responded and 41.1% of them were in the 31 to 40 age group. The rest were in the 22 to 30 (26.4%), 41 to 50 (23.9%) and 51 and above (8.6%) age groups.

About 46.2% of the respondents were single while 40.6% were married with children. The rest were married but did not have children. Those living with their partner or spouse and children accounted for 36.7% of the respondents while 27.2% lived with their parents. The remaining participants either lived with their partner or spouse (18%), lived alone (10.1%) or with their housemates (8%).

Many (61.5%) owned the property they were living in, and 28.7% of the respondents said they want to move to another house after going through the MCO.

Whether they planned to move sooner or later, about 50.7% said they would remain within the same area they are living in now.

According to property experts, some may hesitate to move due to the economic uncertainty as a result of the pandemic.

The unstable political environment has also led to the wait-and-see approach taken by potential homebuyers, says Laurelcap Sdn Bhd executive director Stanley Toh.

Nawawi Tie Leung managing director Eddy Wong notes that in this uncertain climate and with jobs at risk, it is not surprising that some are choosing to delay their plan to purchase property until there is more clarity in the market direction.

“People are unsure how long it will take for the pandemic to end and for the economy to recover. Moreover, the process of moving house can be a hassle. Also, as long as the virus has not been eradicated, people may not want to take the risk of engaging strangers to do renovations, clean their new house and move their belongings,” says Henry Butcher (M) Sdn Bhd chief operating officer Tang Chee Meng.

Reasons for moving

Only a small group of survey respondents were certain that they would move to another house post-MCO. Some said they were thinking about it and may move within the next two years (29.6%) or after two years (19.1%).

One of the main reasons given for wanting to move was the size of the house as the respondents said the one they were currently living in was too small.

“The MCO has resulted in a paradigm shift in the way we work and live. Having experienced working from home, more people may adopt it as an alternative mode of working for, perhaps, part of the week, if not the full week. Thus, a larger and more spacious house with an extra study area would now be an important consideration when making a purchase,” says Wong.

Tang believes there are other reasons people may choose to relocate. “There are some who move to a smaller house because they have retired and their children do not want to live with them, or their financial circumstances have deteriorated and they need to cash out of their present house.”

This is in line with one of the findings of the survey, which was that a small group of people, mainly in their forties or fifties, were looking to downsize as their children no longer lived with them. Easier maintenance was another reason given for choosing to downsize.

Meanwhile, the many incentives currently available to homebuyers may motivate some to move. “For people who have not been affected financially, they may take advantage of the attractive discounts, easy payment schemes and other incentives currently offered by property developers to buy a house,” says Tang.

Toh opines that the low interest rate environment and poor property market sentiment will see people who are financially secure acquiring assets at lower prices. “But generally, most people will wait and see until a vaccine is out and when the economy and sentiment in general start to improve.”

Tang believes the MCO has not caused any major shift in house buyers’ preference for larger residences. “The major consideration in this instance will more likely be one’s financial capability.”

Different housing needs

Looking at the survey results from a deeper level, it is clear that people at different stages of their life have different needs, which would influence the type of house they would buy.

Those aged between 22 and 30 were mainly single and did not own the property they were living in. Most were staying in a landed property with their parents. They indicated that when they were ready to move, they would choose a smaller high-rise property in a different area, which is closer to public transport, their workplace or shopping malls.

Other respondents who were single but not staying with their parents were either living alone or with housemates. Most were renting and — similar to the singles who lived with their parents — would prefer a high-rise property in a different area when they were ready to move.

The 31- to 40-year-olds were the most interesting group to study, as they were the most diverse in terms of which stage of life they were in. More than half were homeowners and they said that if they were to move, they would still choose to live in the same area.

Those who were single were either living alone or with their parents. Most of the respondents who were living alone owned a high-rise property and would prefer to move to a landed property. The ones who were living with their parents were mostly not homeowners and resided in a landed property. If they were to move, they said that they would look at high-rise properties.

A significant number of those in the 31 to 40 age group were married with children. Most of them owned a landed property and were looking to move to another landed property within the same area. The reasons given for wanting to relocate were to upgrade for safety purposes and to be closer to parks and open spaces.

A smaller group of respondents were married but did not have children. They were homeowners and about half lived in a landed property while the rest lived in a high-rise unit. Besides wanting to upgrade to a bigger house, they said they would move to be closer to their workplace. This group said they would either choose to remain in the same type of property (landed or high-rise) or upgrade to a larger landed property.

Respondents between the ages of 41 and 50 as well as 51 and above comprised mainly married people with children. Most were homeowners of a landed property and were living with their spouse and children.

Those in the 41 to 50 age group were mainly upgraders and were looking to move to another landed property in the same area. However, there were a few who were looking to downsize to a smaller landed or high-rise property in preparation for retirement.

The 51 and above age group included upgraders looking to move to a landed property in the same area. But about half were looking to downsize to a smaller landed or high-rise property after they retired as their children no longer lived with them.

From the survey, we may conclude that those who are younger and single are more inclined to relocate to a different area, while those who are older and who have families would prefer to remain within the same area should they choose to move house.

“The younger generation wants more life experiences and are keen to explore. Thus, they are more mobile. Meanwhile, the older generation is more traditional, inclined to a routine-based lifestyle and dislikes changes. Hence, they prefer to be in the same area,” Laurelcap’s Toh explains.

Nawawi’s Wong opines that the familiarity factor is the general reason people stay in the same area while motivation for moving to a different location includes “upward social mobility, affordability and easy access to public transport”.

The affordability factor is most likely a huge consideration for the younger crowd, he says. “For example, a young couple may have grown up in Petaling Jaya but the area is too expensive for them to buy a landed property. So, they have a choice of either buying a high-rise property in PJ or moving to a less expensive suburb if they prefer to live in a landed property.”

Henry Butcher’s Tang concurs with Wong on the familiarity factor. “People who are married with children may have probably become used to the area that they are living in, as they have built friendships in the neighbourhood and would prefer not to uproot their children from their present schools as it could be upsetting and disruptive.

“Unless the area that they are currently residing in is beset with issues, most people will be less inclined to move to an unfamiliar area.”

He notes that younger people who are still single have less of such concerns but there are some who may still prefer to live closer to their parents.

Is now a good time to buy?

With uncertainty on the health, economic and political fronts, those looking to buy property are wondering if they should take the plunge.

The general answer from the property experts is yes. “But this is only if you have a stable job and are financially secure,” Tang cautions.

Toh says, “Prices have generally dropped. The market sentiment is weak with the loan moratorium ending and banks have been asked to assist borrowers with their loan repayments, especially those directly affected by the pandemic, such as the tourism sector. Meanwhile, there are some fire sales on the horizon in the secondary market.”

With the many attractive discounts and incentives offered by property developers as well as the ongoing Home Ownership Campaign, property experts say there are good deals to be had now. “This is an almost once-in-a-lifetime opportunity to buy something that you like at a reasonable price,” says Wong.

“People who are looking to sell their current house to raise money to buy their next house can save on tax under the Real Property Gains Tax exemption. Moreover, it would be beneficial to lock in a loan in this low interest rate environment,” says Tang.

Under Budget 2021, full stamp duty exemption on the memorandum of transfer and loan facilities will be given for purchases of first homes of RM500,000 and below. The stamp duty exemption on both documents will also be given to white-knight contractors and original purchasers of abandoned housing projects for an additional period of five years. These exemptions are valid for sale and purchase agreements signed from Jan 1 next year to Dec 31, 2025.

Furthermore, a rent-to-own programme will run until 2022, involving 5,000 units under the 1Malaysia Housing Programme (PR1MA). This is targeted at first-time homebuyers.

Nov 10

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Living spaces evolving to meet changing needs

By koizumi Media Room

We are constantly striving for comfort and convenience in our lives. One of the main areas where that can be achieved is our living space.

This article first appeared in theedgemarkets.com. View source here.

“As living standards improve, living spaces have evolved from basic enclosed rooms to family lifestyle-centric spaces,” says Fabian Tan, principal of Fabian Tan Architect.

While the home was used purely for functional purposes before, it has now become an open living area with multiple uses. The boundary between functional spaces has blurred and the home is styled according to an individual’s taste.

Lillian Tay, immediate past president of Pertubuhan Akitek Malaysia (PAM) and director of VERITAS Architects, says there is a greater reliance on electrical appliances such as air conditioning these days.

“I remember when I was young, our classroom windows and doors were left wide open and there was just a fan. We lived well in an environment that was more sustainable in terms of energy and material usage, and had less waste creation,” she adds.

She observes that in the past, Malaysians were attuned to the tropical climate. Living spaces had many windows for natural ventilation and daylight. Now, with climate change and the sustainability movement, she believes the design of living spaces and buildings should go back to how they were before. “Places [and spaces] have to be more breathable.”

Demands then and now

PPC International Sdn Bhd managing director Datuk Siders Sittampalam says modern lifestyles have led to the development of various types of residential properties, from landed to high-rise homes, traditional houses to modern ones, and private to shared spaces, among others.

“The demand for residential properties has changed over the years with lifestyles progressively changing in terms of technology, ageing, environment, design, space and others,” Siders notes.

Unfortunately, there is a mismatch between what people want and what they can afford, points out Nawawi Tie Leung Sdn Bhd managing director Eddy Wong.

“In an effort to keep the price quantum affordable, developers have been building smaller units, albeit maintaining the number of bedrooms. As a consequence, room sizes have become smaller as compared to 10 years ago,” he says.

In the past, homes had many windows for natural ventilation and light

The development of smaller units, mainly in high-rises, is also due to scarcity of land in city centres, Siders points out. Such units are in demand among young working adults.

Wong observes that despite the smaller unit sizes, more attention is given to design and space planning so as to maximise the utility value. “As a whole, the units are now better designed and space efficient.”

Siders concurs, saying that the exterior and interior finishes play an important role for homebuyers. “Designs were not the main priority when buying a residential property back in the old days.”

Today’s buyers also gravitate towards homes with communal and recreational facilities, say property experts. Another important aspect is technology. Siders says that homebuyers, especially millennials, are more keen on living spaces with technological systems and energy-efficient solutions. As such, more developments are adopting these functions into their designs

The home has become an open living area with multiple uses

Current living space trends

Sharing and flexibility are two recent trends in living spaces. Co-living, for example, is gaining in popularity.

“It is [tailored] for those who seek to work in expensive cities and want to cut the cost of renting a house. Co-living developments are often managed by companies and are furnished with household conveniences, and people share the common areas such as living room, kitchen and toilet,” explains Siders.

Tan is of the opinion that co-living is suitable for groups such as young students and professionals.

“But as Malaysia is a developing nation, it is difficult for everyone to buy into this type of lifestyle. The higher the social class, the more privacy, exclusiveness and personalisation the individual would want,” he says.

Siders and Wong look at co-living from the perspective of affordability.

“Co-living started off as an affordable housing option where housing costs are shared among like-minded individuals, and there is potential for the concept to gain acceptance wherever there is the issue of housing affordability,” says Wong.

Siders agrees. “Prices of properties will keep increasing and [it will be harder to be able to afford] instalments or rent. Co-living may be an answer to this affordability issue.”

Tay of PAM says the concept of shared living space arises from the high cost of housing. She cites a recent micro housing initiative known as Perumahan Bandar by Kuala Lumpur City Hall (DBKL).

Last year, DBKL repurposed two 7-storey shophouses at Jalan Tuanku Abdul Rahman into dormitory-type shared living spaces for young, single Malaysians who are seeking job opportunities in the city and need an affordable place to rent.

“It is a good initiative but it has to be well managed so that it will not become too dense, as the density might become a public health risk in the future,” Tay warns.

The challenge is to achieve a balance between affordability and creating a conducive living space, with natural air ventilation, that is a safe refuge during a public health crisis, she elaborates.

Siders says another trend is flexible living space. For example, rooms can be changed into home offices, music rooms and guest rooms if need be.

Another trend that he has observed is mini homes. “As house prices keep soaring, property developers will make units more compact by shifting to mini housing, which have more affordable prices. It would mean lower maintenance and utility expenses for buyers or tenants.”

Technology will be the main influencer of future living space

Future living space

Experts agree that technology will be the main influencer of future living space.

“Technology is changing and shaping our lifestyles tremendously, which would in turn shape design as a function of space change. The concept of a space may not even exist anymore in the future, where virtual reality may exist seamlessly with the mind and body. The idea of augmented reality and the cyborg is not far-fetched. Spaces could be recreated in our minds,” says Tan.

Siders believes that, in future, the concept of live, work and play will be integrated with technology. This would mean the use of chatbots, augmented reality, virtual reality, Internet of Things sensors, and in-house applications to optimise operations and communications.

IT infrastructure is a very important component of the house, says Tay. “It should be a basic amenity for everyone to have access to data.”

However, the cost of implementing IT infrastructure needs to be managed. “The government needs to step in to make the hardware and software more affordable. It needs to give tax subsidies or reduce tariffs, taxes and duties on IT hardware and software,” she adds.

Tay also sees a move towards using more sustainable and natural materials in construction. There is a realisation now that bamboo is a fast-growing, hardy and natural material. “Maybe we can look into using it for certain types of lower-rise structures.”

Having said all that, the basis of living spaces is that people will always seek comfort and convenience, says Tan. “Trends and styles come and go, but there will always be an emphasis on basic healthy spaces in terms of layout, lighting and connection to nature.”