Wednesday, January 13, 2010

Promising Outlook For Landed Properties

THE residential property market should see a pick-up this year if buying interest remains sustainable and developers offer more creative and well planned projects.

Take-up rates have gradually picked up since the first quarter of 2009 and by the second quarter, newly launched properties recorded take-up of 31.7% – the highest over the past three years.

The strong take-up is especially evident for landed properties, including super-link terrace houses, semi-detached houses and bungalows, which cater to the upper-middle class.

Prices are also expected to rise in tandem with the economic rebound and landed residences have generally seen price increases of between 10%-15% to RM250 to RM300 per sq ft. While the high-end condominium market is still bleak because of an over supply situation, the outlook for landed residences in premium locations is much brighter.

Developers are more confident of rolling out new projects this year to capitalise on the buoyant sentiment among property buyers.

Mah Sing Group Bhd group chief executive Tan Sri Leong Hoy Kum says with the brighter economic outlook, more Malaysians will be willing to spend on big-ticket items like property.

“We believe this will lead to a strong demand recovery in mid-tier to high-end landed properties,” Leong says, adding that these segments should rake in stronger sales.

He says residential properties that cater to the middle to upper middle market stand to benefit from the rebound in property demand.

GuocoLand Bhd director of marketing and sales KC Chong concurs that landed properties, particularly gated enclaves in good locations, command a strong following.

“They appeal to both owner-occupiers, as well as investors as there is a willing pool of tenants which prefer landed properties complete with security, management and common facilities.”

The “feel good” factor may lead many to upgrade this year, given the (still) relatively favourable financing schemes available, he says.

However, Chong cautions that given the likely increase in launches expected this year, developers will have to work hard to achieve their targets.

SP Setia Bhd president and chief executive officer Tan Sri Liew Kee Sin says developers will have to plan their launches carefully and understand market needs if they expect good take-up rates.

“Many developers today are selling an aspirational lifestyle rather than just a house. Innovative ideas and designs are important factors in selling properties today coupled with a strong brand name,” Liew notes.

ECM Libra analyst Bernard Ching says more positive consumer sentiment and current low mortgage rates will sustain demand for residential properties going forward.

“Based on historical data, we see a strong correlation between consumer sentiment index (CSI) and demand for residential properties. Since hitting a low of 70.5 in the second quarter of 2008, the CSI has rebounded above the 100-point neutral level since the second quarter of last year,” he says.

Ching says the Government’s decision to impose a 5% real property gains tax (RPGT) only on property sales within the first five years of purchase instead of a blanket tax irrespective of date of purchase (as announced under Budget 2010) will boost buying interest.

“This is certainly a positive measure that will provide a much needed relief to the property sector. With the relaxation of the RPGT, we believe buying interest will pick up pace, especially among upgraders who need to sell their existing properties first,” he adds.

He says another catalyst for the property sector will be the impending announcement by the Government to allow Employees Provident Fund contributors to utilise their current and future savings in Account 2 for property purchases.

“This is likely to boost housing affordability, especially among first time home buyers, and benefit the mass residential segment,” he notes.

According to DBS Group Research Equity analyst Yee Mei Hui, a strong appetite for upper mid-high end properties has seen recent launches breaching 70% take-up within the first weekend.

“Developers are increasingly confident and have set higher sales targets, bringing forward launches and replenishing their landbank. Demand is expected to pick up further on the back of an improving economic outlook,” she says.

Yee adds that given the threat of rising inflation caused by higher mortgage rates and the impending introduction of the goods and services tax, more Malaysians are also buying property as a hedge against inflation.

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