The extraordinary boom in the property market in Malaysia is ending but high house prices and the middle-class obsession with home ownership are likely to persist for a long time to come.

Data from the National Property Information Centre’s (Napic) First Half Property Market Report shows that during the first six months of the year, the total value of property transactions declined 6% year on year to RM77.08 billion. In terms of volume, property transactions fell 3.5% to 186,618. The residential segment saw a 2.6% drop in transaction volume but its value took a 9.7% dive to RM36.4 billion.

The report will make sobering reading for many younger households who, for years, have seen property prices only move northwards. Between 2009 and 2014, the Malaysian House Price Index registered a compound annual growth rate (CAGR) of 10.1%. It marked a period of sharp acceleration compared with 5.6% for the period between 2000 and 2014.

This rapid growth in an otherwise sedate domestic property sector came on the back of ample liquidity that flooded the market following the global financial crisis in 2008. Predictably, grumbles that houses were too expensive for the hardworking middle class emerged. The government attempted to halt this price growth by stopping free-flowing mortgages and stepping efforts to combat speculative activities as early as 2011. Price growth slowed but it was not till 2015 that growth in residential property deals stalled.

This year, property developers are struggling with sales. Few are selling or building properties at rates seen during the housing boom and Napic reported that property stock, which stood at 4.87 million units in 1Q2015, grew to 4.89 million units in 2Q2015. At the same time, new launches fell 12.8% in 1H2015 year on year while unsold units under construction rose a whopping 32.7%.

These unsold residential units have started to subtly drive prices down. Napic’s numbers indicate that as at 2Q2015, the Malaysian House Price Index was at 220.2 points, up 5.9% y-o-y. The rate of increase of the index has been slowing since 3Q2015.

“House prices have definitely come down. If you don’t see them, it is because property developers have started to offer rebates, discounts or other incentives like free legal fees or stamp duties, which will lower the amount you pay for the property in the end,” says Chang Kim Loong, secretary-general of the National House Buyers Association.

If the additional supply is helping to moderate property prices, then some will find Napic’s data on incoming supply comforting. It reported that Malaysia had incoming supply of 795,372 residential properties in 1Q2015, which increased to 831,186 in 2Q2015.

While private developers are more cautious about adding on to that, the government is not. Based on the 11th Malaysia Plan, the government, through various housing programmes, targets to deliver 653,000 new housing units from 2016 to 2020. The sum excludes many state housing schemes.

For the middle class in particular, the 1Malaysia People’s Housing (PR1MA) programme should be adding an extra half a million affordable homes by 2018. The bulk of the promised 500,000 units should enter the market in 2017 and 2018. Lest we forget, there is also the government’s directive to government-linked companies to build 800 units in Bandar Kwasa Damansara and for Sime Darby Property to build 4,600 units of affordable homes.

Also reassuring for aspiring homeowners is that those in the business of building homes are not expecting property prices to see a surge. They tell The Edge that growth in house prices is likely to stagnate in the near term, as buyers looking for new properties and prepared for the added debt burden are denied owing to lending restrictions.

Bina Puri Holdings Bhd executive director Matthew Tee says, “I expect property prices to remain at current levels, with growth capped by the current regulatory environment. I don’t see prices coming down too much because the cost of development is very high. Land and other costs are still going up.”

Ken Holdings Bhd’s Sam Tan says, “The property development business is not as easy as it used to be. You have to offer more amenities, and provide connectivity and infrastructure to attract buyers. Developers’ profit margins are thinning due to rising costs and slowing market.

“It depends on what you build and how you price your product. The bread-and-butter properties — those priced between RM300,000 and RM500,000 — will still sell. But, generally speaking, you will not see a surge in prices anytime soon.”

So, are moderating residential property prices arising from an increase in supply the answer to the housing affordability woes of the middle class?

MIDF Research economist Izzuddin Yusuf doesn’t believe that is the case. Property prices have swelled too much over the last few years for a small tapering off to count. Affordability is still an issue for most middle-income earners looking to live under their own roof.

“I think the idea of affordable housing has changed recently for the public, to a point that it is considered affordable so long as you are eligible for a bank loan.

“Property prices are currently at a level that is still unaffordable for ‘real demand’, meaning those who buy in order to live in the property, even as speculative buying has slowed significantly. From here, property prices will probably grow at a very slow pace and it will be a while before they become affordable for most first-time buyers,” he says.

Indeed, Khazanah Research Institute’s (KRI) study, “Making Housing Affordable”, found that the the median price for the Malaysian housing market exceeded the three times median annual household — the threshold for affordability. The general median price stood at4.4 times in 2014 — a seriously unaffordable level. In cities like Kuala Lumpur and Penang, residential properties were “severely unaffordable”. Launches were priced way above the affordable threshold of RM274,320 for the capital city and RM168,272 for Penang.

Implicit in KRI’s statistics is that house prices — soaring or moderating — is not the only variable that determines if a middle-class household can afford to buy a property. It also has to do with income level and growth in disposable income.

“Housing affordability is not simply about having cheaper houses … For a house to be affordable, it means that the purchaser has the budget to pay for the home,” says Teh Lip Kim, managing director of Selangor Dredging Bhd.

Ken Holdings’ Tan says, “We try to build affordable homes and what is being sought after, but people still have to be able to buy them. People are now in a situation where banks are tightening lending requirements. [They also] have one or more banking loans to service and face a higher cost of living.”

“To buy a property, you need the additional disposable income. While wages in Malaysia are growing and the employment rate is good, they are not growing as fast as property prices. The higher your income, the more affordable a house will be to you.”

Further, socially popular regulations that stifle property price growth may help quiet public complaints about housing affordability, but won’t do more than that for the Malaysian economy. Not only does the construction sector contribute directly to the country’s gross domestic product (GDP) but it also has a strong multiplier effect. As it also affects sectors like finance, building materials, logistics, infrastructure development and job creation, it is unlikely that a prolonged sluggishness in property prices is what the government wants.

Rajiv Biswas, chief economist at IHS, says, “The construction sector in Malaysia accounted for 4.3% of GDP in 2014, based on government data. Therefore, the size of the sector is significant and any significant slowdown would act as a drag on GDP growth.

“Therefore, if the private sector residential construction sector experiences a downturn, the overall impact on total construction activity could be reduced by stronger public sector spending on affordable housing and public infrastructure projects.” But even as growth in home prices is losing steam, the dream of home ownership may still remain elusive to the middle class.

Source: TheEdgeProperty.com.my

The Association of Banks in Malaysia (ABM) says first time home buyers who are eligible will continue to be able to obtain financing.

It explained that it was crucial for these buyers to also recognise the need to make sound decisions of their own affordability based on their financial circumstances.

“The business of our member banks is in the main lending or extending credit. There is no intention whatsoever to make lending more difficult, particularly for first time home buyers,” ABM said in a statement on Monday.

ABM had issued the statement to clarify a recent report on banks being “overly cautious” on mortgage loans for first-time home buyers.

The association also pointed out that for first time home buyers, the bank would usually finance up to 90% of the price of the property.

“They may also want to consider applying for government schemes such as ‘Skim Rumah Pertamaku’ for assistance in their property purchase,” it said.

ABM added commercial banks had offered special housing loan packages to suit the needs of first time home buyers.

It encouraged them to shop around to find a suitable financing package.

“Additionally, applications for such mortgage loans are decided on a case to case basis and there is no blanket approval system,” it said.

ABM also encouraged consumers to fully and accurately disclose all material information with regard to their financial position when applying for a home loan.

“In conducting affordability assessments, commercial banks take into account the applicant’s income after statutory deductions, expenditure on necessities and all existing debt obligations from banks and non-bank lenders.

“For self-employed applicants, banks will also take into account their proof of savings and regular income sources.

“First time home buyers should work with their financiers when making the suitability and affordability assessments for any facility applied for to pave the way for more robust financial management on the part of the buyers. Commercial banks are committed to playing their role in this process,” it said.

ABM said the association and its council banks would be pleased to engage with all State Governments with regard to matters related to home ownership in the state.

It added members of the public with enquiries or complaints related to housing loan matters could contact the ABMConnect hotline by dialing 1-300-88-9980, or e-mail to eABMConnect by logging on to its website, www.abm.org.my.

Source: TheStar.com.my

Fresh graduates feel compelled to buy property quickly because they fear prices will soon outpace the growth of their income, said Khazanah Research Institute director of research Dr Suraya Ismail.

“Young people used to rent for 10 years before deciding to buy a home. However, graduates today rush to buy their first homes, for fear of rapid price escalation. They think that if they do not buy today, they will never be able to afford a house.”

She explained that this places fresh graduates under stress because “they do not have the confidence they can earn an income and fall in the middle income bracket,” she said at the National Real Estate Convention (NREC) 2015 on Thursday.

Suraya was part of the panel discussion, ‘Homeless Graduates: Reality or Myth?’ on challenges faced by young, aspiring homeowners in purchasing their first homes.

Her fellow panelists include Rahim & Co International Property Consultant Bhd founder and executive chairman Tan Sri Abdul Rahim Abdul Rahman, PR1MA assistant vice president for research and development, Ezlina Adnan, and Bank Simpanan Nasional (BSN) senior vice president and head of distribution, Akhzan Zaini.

Rahim said fresh graduates were facing a hard time buying their first homes due to the huge disparity between current average household income and property prices.

Suraya said the disparity between income and house prices is a complex matter.

“It is not as simple as increasing income to enable graduates to purchase homes. It is very difficult to increase income, especially if we’re not increasing productivity.

“The job market feeds into the housing market; for example, a labourer may be incur both consumption and production of a house,” she added.

According to Suraya, one way of slowing the growth in housing prices is to increase the productivity of all sectors, especially the construction sector.

“Something has got to give, and house prices should go down. We believe that the level of profit before taxation could go down, although we won’t be able to achieve supernormal profit,” she said.

Meanwhile, BSN’s Akhzan advised graduates to be realistic in applying for housing loans.

“You may not be able to purchase a home in the RM300,000 category if you are earning RM3,000 a month. For BSN, we do offer 100% loans for homes that are below approximately RM130,000.

“Graduates should look for homes within their means. If you go beyond your means, bankers will look at your repayment capability, therefore you may have a smaller chance in getting your loans, approved,” he said.

Akhzan said that BSN has approved 335 of 800 applications under the Youth Housing Scheme so far.

For affordable housing, PR1MA is doing the best it can to provide homes for the masses and young graduates, said Ezlina.

“Our goal is to build 500,000 homes by 2018. There are currently 60,000 units on the ground. Based on Budget 2016, our goal is to set house prices below market price.

“What we do is to always evaluate [our projects] on a case-by-case basis. Our projects are based by state, and the products we have,” said Ezlina.

She added that PR1MA is expediting completions by using industrialised building technology. This will lower the cost of construction, which should allow for lower home prices.

The panelists concurred that the government’s affordable housing initiatives should be streamlined under one ministry that handles financing, planning, land acquisition and construction of the homes.

Source: TheEdgeProperty.com.my

A proposed mixed residential development by OHM Group at Hye Keat Estate in Air Itam. It is strategically located along Lehuh Khoo Hye Keat, just a short drives away from Air Itam roundabout.

This strata development comprises a 31-storey condominium with 88 units of luxury residences and 6 units of 3-storey bungalows.

This is still pending for approval. Details to be available upon project launch.

Property Project : (to be confirmed)
Location : Hye Keat Estate, Air Itam, Penang
Property Type : Condominium & 3-storey bungalow
Total Units: 88 (condo), 6 (bungalow)
Indicative Price : (to be confirmed)
Developer : OHM Group (Ong Han Meng Woodwork Sdn. Bhd.)

Location Map:

Eligible Penangites should start applying for affordable housing because developers may not carry out more of such projects.

State Housing Committee chairman Jagdeep Singh Deo said the profit margin of affordable housing projects was only about 20% and it was not considered lucrative for developers.

“We are grateful to Penang property developers who have created 12 affordable housing projects with 22,512 units since 2014.

“We understand that they might not maintain the pace. We hope eligible Penangites will snap up the offered units,” he said during a press conference at Level 53 in Komtar, Penang, yesterday.

M Summit Group managing director Datuk Albert Moh, who was also at the press conference, said the profit margin was only about half of what developers could make if they built high-end property projects.

“It takes us three years to deliver the affordable homes. If you divide the 20% margin into those years, we are only making about 6% a year with what we invest,” he said.

Aspen Group managing director Datuk M. Murly said prospective buyers of affordable homes in Penang tended to be slow in applying for such properties.

He said this was due to the five-year moratorium that places a cap on property appreciation.

“But new affordable housing projects may not be available in the future, so we hope eligible buyers won’t delay any further,” he said.

* CLICK HERE for a full list of affordable housing projects in Penang *

Jagdeep also announced that the ‘Mission Home-Possible 2.0’ affordable housing roadshow would take place until March in several locations on the island and mainland.

The first will be in Gurney Plaze today and tomorrow, while the December show will be in Queensbay Mall on Dec 19 and 20.

Next year, the road show will be held in Mydin Mall, Kepala Batas on Jan 23 and 24, Sunway Carnival on Feb 27 and 28, and Econsave Jawi on March 26 and 27.

Source: TheStar.com.my