In Malaysia, while the property market in the ‘West’ continues to face strains from an overbuild scenario in some segments, the ‘East’ has begun to witness transformation of its property landscape moving towards ‘new heights’ — especially with more emphasis on mixed-development and high-density projects this year.
In view of the increasing land costs due to high demand for properties in prime areas, the trend was going towards building high-density units such as condominiums/apartments as well as strata-titled town houses which had caught on lately in Kuching and few other towns in Sarawak.
Sabah, on the other hand, was stimulating demand for hotels and luxury resorts, while the ‘boom’ in palm oil had boosted income levels across all consumer segments, encouraging property and retail development.
An exclusive interview carried out with CH William Talhar Wong & Yeo Sdn Bhd (WTWY) managing director Robert KS Ting and few other major property developers in both states came to the conclusion that uncertainties would prevail in undermining the market. However, fundamentals indicated that there was still much room for concerted growth moving forward.
The first half of 2011 (1H11) saw prices escalating in the major cities/towns, with increase in prices surpassing 10 per cent in some of the prime locations in and around the urban areas. “Meanwhile, pent up demand for residential properties from the previous recessive years saw residential property prices soaring as high as 30 per cent in certain hot spots,” Ting told BizHive Weekly.
He further pointed out one of the major driving factors for a continuous active local property market was the weak and uncertain Malaysian stock market, with many reports indicating the market was likely to continue its downward trend due to the ongoing debt issues in Europe and the US.
As such, local investors regarded property as a better investment alternative going forward, and also as a relatively stable hedge against the rising inflation.
A recent interview with Kenanaga Investment Bank Bhd research associate director Chan Ken Yew revealed that inflation would be hovering between 2.9 per cent and three per cent in 2012. “We deduced 2.9 per cent in the first place because we did not take into account the aggressive cut in subsidies.
“I think the overall perception is that subsidies will be cut more aggressively after the general election. Before this, what we have seen is only a moderate kind of subsidy rationalisation,” Chan added.
Apart from that, the underlying regulatory risk for the property sector was also over, as Bank Negara Malaysia issued guidelines to promote more prudent household lending in November 2011. However, many developers voiced out their concerns towards the possible slow down in the sector this year.
Ting, on the other hand, viewing it from a different angle pointed out that the demand was still set to continue in all segments. “A slow down is not an issue as long as the market is not overheated. I believe our government does not want the market to over heat but to allow the market to progress at a comfortable level.”
He further pointed out that both Sabah and Sarawak were unique compared with Peninsular Malaysia because of the booming palm oil industry that generated lucrative returns. “This whole scenario started about five or six years back when the government encouraged more participation of smallholders in the palm oil sector.
“Sabah is very successful in this. Although Sarawak started late, we notice that it is a thriving industry now. The smallholders are doing very well especially with the stable crude palm oil prices and massive investments seen flowing into property — especially in Bintulu and Miri, where palm oil plantations are more advanced,” he revealed.
Data from WTWY showed that for condos in Kuching a price of RM1,528 per square metres (psm) was the highest achieved in 2010, rising to RM6,760psm for bungalows. Semi-detached houses reached RM3,570psm and teraced houses recorded RM2,949psm.
Sarawak’s capital kuching remained the most developed residential market in the state, with residential areas expanding into neighbouring Samarahan. Over half of new launches in 2010 were located in this Kuching-Samarahan area.
Meanwhile, in Sabah, 5,474 apartments and 1,529 condominiums units were launched in the city in 2009, but only 51 detached houses, 206 semi-detached houses and 234 terraced units. From 2008 to 2010, condominiums values in the city jumped 60 per cent, with average price psm increasing from about RM2,691 to a substantial RM4,306.
“Today, banks and finance institutions are getting bigger and so are the developers. With bigger capitalisations and larger borrowings, developers are able to move forward with their masterplans. With mixed-development projects, developers can strategise better.
“The focus of mixed-development projects have been there for several years. Only within the past two years, we saw massive movement and new masterplans being tabled for consideration. Year 2012 will be the year where more focus will be given to mixed-development projects,” said Ting.
Most mixed development projects comprise residential units, education centre, health care centre and commercial units with all the necessities. “As for new township mixed developments, there have to be some form of commercial activities and industries present in the vicinity to generate job opportunities to ensure viability if the said development.
“It won’t be wrong if you go back to the basics as people will stay and buy houses once there are sustainable job opportunities and basic amenities such as school, clinic and shopping areas available,” he explained.
In the sector itself, he also pointed out the new niche market which was seen coming up for semi-detached units above RM1 million. “In other words, developers nowadays are much more creative. They are coming out with new concepts and new designs that targeted different niche segments to cater for market demand.”
“It is not an issue for local buyers to own niche properties worth more than RM1 million, which represents only five per cent of the whole market here,” Ting said.
When asked if property prices would fluctuate due to the uncertain outlook, he revealed it only happened to certain poor locations or probably in outskirt areas. However, for those prime areas, it might happen but only to a certain extent as houses below RM300,000 were still greatly in demand.
“The niche market segment such as high-end semi-detached units or condominiums units are the ones that will be affected if there is a slowdown in the economy. Nevertheless, I don’t regard a dollar thirty now is equivalent to a dollar in 2006,” he concluded.
Oxford Business Group (OBG) in its Sarawak Report 2011, concurred that the Sarawak property market would continue to grow with bright long-term prospects. As schemes like Sarawak Corridor of Renewable Energy (SCORE) got under way, incomes would rise, as would demand for commercial and industrial properties.
“This will lead to real estate development projects outside main urban areas, with new townships such as Tanjung Manis, Mukah and Samalaju set to see property development in the years ahead. Several urban centres will rise in the state over the coming years, as the SCORE programme shifts into higher gear,” it stated.
When it came to the outlook for Sabah’s property sector, pessimists were in the minority. “Along with strong palm oil futures, the state can count on a growing population and a beautiful natural environment that is gradually beginning to attract more foreign buyers,” OBG pointed out in its Sabah Report 2011.
Moreover, Sabah had a history of market stability, with property values in the residential and commercial segments remaining relatively steady through the Asian financial crisis of 1997-98 and the recent global economic downturn. This history was often cited by industry insiders in reference to talk of the local market overheating.
“Having a property is like having an asset that will gain value in times to come. You can’t stop the depreciation value of your money unless you invest in something that will appreciate,” Ting concluded.
Looking at the optimist environment for the property market going forward BizHive Weekly examines some of the larger mega mixed-development projects in each of the respective cities/towns in Sarawak and Sabah.
For the vibrant Sarawak property scene three mega-development property projects stood out — Bandar Baru Permyjaya by Naim Land Sdn Bhd (Miri), Tabuan Tranquility by Ibraco Bhd (Kuching), Sibu Jaya Township by HDCam Sdn Bhd (Sibu), The thriving Sabah property scenario included mega-developments from 1Borneo by Sagajuta (Sabah) Sdn Bhd and Taman Sawit Township by Masama-Winquest JV Sdn Bhd (Tawau).