KL Property: Prices on downward trend

The sluggish secondary housing market in the Klang Valley is expected to continue till the end of the year. While 1Q2008 was a "weakening" period following an indecisive market, 2Q2008 was even quieter, says Allan Soo, managing director of Regroup Associates.
"Although there were enquiries during 1Q2008, these were not followed through with commitments. The market was softening further, going into 2Q2008, as sellers continue to hold out for higher prices. But now, agents say even the buyers are not there," he adds.
"With neither buyers nor sellers in the secondary market, property prices are showing signs of moving downwards. It is already starting to happen and the property prices on a month-on-month comparison shows this trend," he explains when presenting the The Edge/Regroup Klang Valley Housing Property Monitor for 2Q2008.
Soo expects this downtrend to last till the end of the year. He points out that the number of transactions in the secondary market has perceptibly contracted. "Sellers are reluctant to part with their properties at lower prices," he says.
"Landed properties were more saleable than highrise. Existing landed properties in prime areas, such as Bandar Sri Damansara, Bangsar and TTDI, are still in demand provided prices are reasonable. Prime areas in USJ and Puchong seem to have a different demand driver as houses are still being snapped up at surprisingly high prices. Overall, landed properties in prime areas are still attracting interest," he adds.
From the data sampled, the secondary market for the 2Q under review saw prices and rents in some areas dropping from the preceding quarter. Comparing q-o-q, capital values for all property types generally declined in most areas sampled. Soo says buyers are holding out on property purchases because houses are big-ticket items, while sellers are forced to reduce their prices following the lack of demand.
"While it is a general consensus that values are moving down, we can still find values of properties and projects on certain streets and hot spot areas of Damansara Heights, Mont'Kiara and Bangsar moving up," he says.
He adds that demand for these properties may have undergone a time lag from the previous quarter and may not truly reflect the market.
"These are individual cases on a specific street or condo project which could have been experiencing locational preference. It also suggests that there were not many transactions recorded at that time. Values may stabilise and go down in time," says Soo.
The capital values for the 1-storey terraced-type houses sampled remained unchanged except for those in Bandar Sri Damansara, Puchong Perdana and Bangsar Lucky Garden. While the initial two went down by 7.7% and 4.5% respectively, those in Lucky Garden increased by 8.9%.
Meanwhile, the capital values of 2-storey terraced houses declined in Bandar Sri Damansara (4.6%), Bangsar (9.6%), USJ 6 (17.9%) and Pusat Bandar Puchong (5.1%), but increased in Bandar Utama (3%) and Bandar Puchong Jaya (3.6%). Values remained unchanged for the Taman Tun Dr Ismail's Athinahapan area.
Values of highrise residences remained largely unchanged.
Rentals for the condominiums sampled revealed that most areas remained unchanged from the previous quarter, including TTDI's Villa Flora and Kiara Park, Mont'Kiara Pines, Bangsar's Tivoli Villa and KLCC's Stonor Park. Those that saw an increase in rentals were Mont'Kiara Sophia (20%), Lanai Kiara (12%), Bangsar's Cascadium (16.7%), TTDI's The Residence and The Plaza (14.3%), Plaza Damas' Mayfair (16.7%) and KLCC's Marc Service Residence (1.8%).
However, Soo advises property owners to renovate their units to make them more appealing to prospective tenants, who are mainly expatriates.

Primary market
Despite the slowdown on the secondary and primary housing markets in the Klang Valley, there is still visible demand for niche developments in good locations. In terms of new products, Soo believes that smaller projects in areas like Damansara Heights and Bangsar will continue to experience demand from a select market.
"Depending on the type of product being offered in such projects, these properties are still able to attract both local and foreign buyers. These buyers are from an elite group that is not directly affected by the current economic climate and are interested in the property's capital appreciation," says Soo.
He cites a bungalow project in Damansara Heights, which offers limited number of units, with large built-ups and tagged from RM18 million.
For the general market-type properties, usually 2-storey homes of 100 units, with built-ups of about 2,000 sq ft, Soo observes that such products may find market resistance.
However, there are exceptions in some good areas as seen in the recent successful product launches at Puchong, particularly IOI Group's Bandar Puteri Puchong township.
"This shows that demand for properties in good locations has not been affected. It can also mean that the demand is localised, where such locations only appeal to a group of buyers," says Soo.
The credit squeeze and stagflation, which translate into rising costs of doing business and shrinking demand, may lead to a further slowdown in property development. Soo says developers may opt to sell off their land and cut down their profits to minimise risks.
"More developers may be taking this safer approach… selling their land and gaining some profits," he adds. (Loo Pik Kwan /The Edge )