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So Far, So Good?

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Elvin Fernandez, Managing Director of Khong and Jaafar Sdn Bhd

Dr Foong Kee-Kuan, Senior Research Fellow from the Malaysian Institute of Economic Research (MIER)

Just a few months back the experts were abuzz with the property outlook for 2011. Now we’re half way through the year – How has things changed? Have the sentiments remained or have theories proved wrong?

Text : Lawrence Julius

“The property market has continued to look positive and robust with an economic growth rate outlook of 5.0% to 6.0% for 2011,” says Elvin Fernandez, Managing Director of Khong and Jaafar Sdn Bhd.

Elvin was speaking at the recent Property Market Outlook 2011 organized by the Real Estate and Housing Developers’ Association (REHDA), held on 31 March.

While there is growth expected in 2011, Dr Foong Kee-Kuan, Senior Research Fellow from the Malaysian Institute of Economic Research (MIER) highlighted that our Gross Domestic Product (GDP) growth has slowed 4.8% year-on-year in 4Q 2010. However, despite the slowdown, MIER is forecasting a moderate GDP growth of 4.8% in 2011 from last year’s 7.2%.

On the property front, signs of growth in 2011 are seen as it is supported by private investments, robust consumption and strong external demand. It is expected that the residential sector will continue to be the main driver for property as predicted.

According to the National Property Information Centre (NAPIC), residential property took 60% (228, 395 units) of the total property transaction volume, which included commercial and industrial properties in 2010. The transaction value for residential properties was RM50.9 billion in 2010, 47% out of the total RM108.9 billion recorded for all transactions.

The average house price is also trending upwards, continuing the steady momentum from 2010. As of 3Q 2010, the average national price for terraces was RM176,590 while high-rises was RM165,530. The terrace market continues to steadily grow after increasing more than RM5,000 from 1Q 2010 to 2Q 2010 on the average price. Though the high-rise market  some dips in prices, overall the numbers are trending upwards with the rise of confidence in the market.

The Real Estate and Housing Developers’ Institute (REHDA) recently did a Property Industry Survey for 2H 2010 with respondents from all 12 states of Malaysia– Respondents are made up of housing and property development companies.

On the average, 37% of respondents indicated better sales in 2Q 2010 while 47% indicated equal sales as 1Q 2010, showing that sentiments are positive coming into 2011. About 33% of respondents revealed that a majority (higher than 75%) of their sales have come from first time owners and that the most attractive price range for owners are within the RM100,001 to RM500,000 mark. The results have shown that there is certainly confidence and demand in the market today.

Overall the sentiments have been positive and are looking good. There will be a steady stream of new launches on the rise in 2011 and prices are expected to increase in direct correlation to construction costs. There is no doubt that the government’s plans and introduction to the Economic Transformation Program, especially the Klang Valley Mass Rapid Transit (KVMRT) project has spurred the confidence and interests of buyers. Optimism mixed with demand is certainly floating in the market. Caution though on the possibility of oversupply as well as price hikes in construction materials that could leave our property industry in a sore position.