The brew of the weakening Ringgit, oversupply in the property market and political climate could impact buying sentiments for this year.
By Khalil Adis
Malaysia faces a delicate balancing act in 2016 in providing affordable homes for locals while trying to lure foreign investors to its property market. The announcements of Budget 2016 clearly dictate that the mass market segment will drive its property market ahead.
However, there have been no revisions to the Real Property Gains Tax (RPGT), minimum purchase price and state levies in popular states like Johor and Kuala Lumpur.
This would make it even more challenging to attract foreign buyers despite the falling Ringgit.
In addition, negative sentiments from the political developments in the country and the perceived oversupply in the market may have spooked potential investors and could result in a “wait-and-see” situation.
With developers marketing high-end projects, they are faced with a difficult situation of finding the right group of buyers in an already small and niche market.
With the pressure to move their existing stocks, they may offer further discounts and other attractive packages.
This would certainly spell good news for buyers with plenty of good deals to be found in the market.
The secondary market will be especially attractive in 2016 as there will be those who are desperate to sell, especially with so much supply in the market.
With this in mind, bargain hunters looking for already completed properties will be spoilt for choice.
Household debts across Malaysia are also on the rise.
This, combined with the increased cost of living, will mean some cannot service their mortgages and will have their homes repossessed.
Therefore, auction properties are expected to rise accordingly, presenting very good buying opportunities for savvy investors.
Here’s a breakdown of the outlook for 2016 by the different popular markets.
Iskandar Malaysia received very little interest in Budget 2016 with the exception of the Eastern Gate – in the corridors of Pasir Gudang and Pengerang.
In all, RM18 billion has been allocated for the massive oil and gas Pengerang RAPID project that is expected to have a spillover impact in Pasir Gudang.
In addition, the Budget had also allocated for a new public hospital in Pasir Gudang to cater to its growing population.
While analysts and market watchers are feeling somewhat disappointed with the allocation of budget for Iskandar Malaysia, it also confirms what many have been saying – the Eastern Gate is poised to be the next growth centre in Iskandar Malaysia.
As more jobs are being created, this will fuel demand for homes in and around the Eastern Gate.
The great thing is property prices here are still relatively affordable for locals averaging around RM300 toRM400 per sq ft.
In addition, the state and federal government had allocated spending for public infrastructure.
These include the upgrading of the Pasir Gudang Highway.
In fact, Dato’ Mohamed Khaled Nordin, Chief Minister of Johor had announced that 865 units of affordable housing will be built here by 2018.
Therefore, Johoreans hunting for their first home should target this area.
As for foreign buyers, although they are far and few between, I would say this is the best time to buy a property in Iskandar Malaysia as some developers are desperate.
It is best to get a home for your own stay rather than for investment.
If you are buying for investment, hotel suites are a good choice especially those in JB Sentral and Nusajaya.
Despite the falling Ringgit, the property market in Kuala Lumpur is admittedly quiet.
Foreign investors are few and far between, while locals feel that they are priced out of the market.
PR1MA homes that are planned around transport hubs and train stations, is a good opportunity for locals to start their property hunts.
A total of 5,000 units of PR1MA and PPA1M houses will be built in the vicinity of LRT and monorail stations in 10 locations, including Pandan Jaya, Sentul and Titiwangsa.
In my opinion, Bangsar is a “to-go-to” location as it has an affluent neighbourhood with plenty of amenities, trendy cafes and shopping malls.
While rentals in Bangsar have remained relatively flat since 2014 remaining at RM3.35 up to the first quarter of 2015, in the secondary market, the capital values based on transacted price has strengthened to RM898 per sq ft.
Thus the secondary market is where all the good deals are.
Government linked companies (GLCs) are planning to build 800 affordable homes near MRT lines.
With the Ampang LRT Extension Line now open from Sri Petaling all the way to Putra Heights, plus future extensions along the Kelana Jaya Line, locals should look for housing projects in and around the vicinity.
Kwasa Damansara is also a hot area to watch ou他 for as it will contain two stations within the township.
The RM27 billion Penang Transport Master plan will drive the property market on the island.
The LRT line will comprise a 17.5km elevated line stretching from Penang International Airport all the way to Menara KOMTAR.
Penangites buying their first homes should look to the Bayan Lepas and Gelugor area near the LRT station.
Those who are priced out from the island should look to Seberang Prai.
For foreigners, avoid the Gurney and Batu Ferringhi area as a massive project being planned will result in massive traffic congestions.
Instead look to properties along the LRT line. I particularly like the Georgetown area due to the heritage sites and abundance of delicious local food there.
Hotel suites is a good product to consider in Malacca due to the shortage of quality hotel rooms.
Due to the increasing number of visitors to Malacca, hotels and shopping centres have benefitted immensely from the spill over in the tourism industry.
There is strong pent-up demand among tourists for 4 to 5-star hotels in the city centre due to its convenience and easy access to tourism hot spots like the UNESCO World Heritage Site, Jonker Street and shopping belt.
When investing in hotel suites, make sure to go for mixed-use development with hotels, shopping centres and residential components.
This will ensure good traffic to maximise on your return of investment.
This story was first published in the January 2016 issue of iProperty.com Malaysia.