Trends And Outlook For Homebuyers
According to studies done by the Valuation and Property Services Department of the National Property Information Centre (NAPIC), the property market continues to soften, with both volume and values of property transactions for all sub-sectors recording a decline over the past three years. Notably, the drop in value is not as steep as the drop in volume, meaning that while the number of units transacted has contracted, properties now cost higher on average.
YY Lau, Country Head of JLL Malaysia observes that the total value of residential property transactions is considerably smaller than the volume transacted.
Eddy Wong, Managing Director of Nawawi Tie Leung Real Estate Consultants Sdn Bhd explains that buyers are now buying smaller apartments or condominiums, as the unit sizes of newer developments have been trending with smaller units in an effort to keep the unit price quantum affordable. As a consequence, there is increased attention placed on the design and space planning of the units, so as to maximise the utility value despite the smaller unit sizes.
Wong has also observed an increasing emphasis on the provision of common facilities in the condominium developments. As a result, we are seeing better designed developments offering a comprehensive range of facilities coming into the market.
However, the decline in overhang residential units has reversed since the third quarter of 2016. Lau says that there could be a few reasons for the rise in unsold units, especially for high-end condominiums.
Firstly, there are more genuine buyers in the market now who wish to own and occupy the properties, as opposed to the high number of speculative investors in the past. These purchasers are likely to buy properties that they can afford.
Secondly, residential property prices have generally declined for most secondary residential market transactions. This has resulted in lower prices transacted in 2016.
FACILITATING HOME OWNERSHIP
To attract more buyers, many creative products are being introduced into the affordable homes market, especially in term of end-financing that can facilitate buyers to own their respective dream homes.
As affordability has always been an issue, various developers have come out with interesting finance schemes, and some of the examples shared by YY Lau are as follow:
Firstly, the “Own It Now” Easy Payment Scheme is designed to enable purchasers to own a home and aid them in their home buying journey. The scheme encompasses the following:
Buyers to pay RM2,000 upon confirmation for the legal fees which is not part of the 10% downpayment. This will be followed by the signing of the Sales and Purchase Agreement (SPA).
The buyer then pays a monthly down-payment instalment for 42 months (three and a half years).
A loan can be applied at the end of Year three of the instalment (month 36). The buyer now has six months to get the loan approved between month 37 and month 42.
Month 43 – Any excess downpayment paid will be used for related deposit required upon Vacant Possession (VP). If the buyer is purchasing the unit using cash, then he or she must settle the remaining amount (purchase price minus monthly instalment paid for downpayment) on month 43.
In applying for a bank loan, the buyer will need to begin to service the bank loan’s monthly repayment.
Secondly, there is the Special 1Malaysia People’s Housing Programme (PR1MA) End-Financing (SPEF) scheme. The PR1MA implemented a new end-financing scheme known as SPEF beginning Jan 1 2017. Thus, it will increase PR1MA first-home homebuyers’ chances of getting a home loan and provide access to a higher loan amount than they would otherwise be eligible for with conventional loans. For example, a household with RM3,000 monthly household income can now obtain a housing loan of up to RM283,200 instead of only RM187,000 under a conventional loan scheme.
Another way is through the use of industrialised building system (IBS) components to develop homes at a cheaper and faster rate. This will mitigate the loss that developers face while undertaking affordable housing projects.
IBS in simple terms relate to parts of a building, which are assembled during construction in a Lego-like fashion, but which is much more complicated. It enables the building of an entire house in a shorter period of time than conventional construction methods. The cost of construction largely affects the pricing of (new) properties.
As such, it can lower construction costs and consequentially, home prices. It offers benefits to homebuyers with good quality houses being built which are comparable to conventional methods, but within a shorter construction period resulting in lower home prices.
Some developers using IBS include Sime Darby Property Bhd and Gamuda Bhd.
Sime Darby Property Divergent Dwelling Design (D3): Sime Darby Property is banking on the use of IBS components to develop D3 concept homes.
Under the D3 Sustainable Homes Initiative developed by the Construction Industry Development Board’s (CIDB) Construction Research Institute of Malaysia (CREAM) and G&A Architects – it aims to deliver quality homes at a lower cost within 24 to 30 months, as opposed to 42 months via conventional methods, with the use of IBS components.
Gamuda Industrial Building System (GIBS): Gamuda has invested in not one, but two purpose-built IBS plants in 2015. Gamuda invested more than RM100mil – excluding land cost – in constructing Malaysia’s first robotic IBS factory at a seven hectar plot in Tanjung Industrial Park, Sepang.
The factory was completed last June, and is now producing concrete segments for three blocks of affordable housing.
An example of Gamuda Bhd’s development constructed using IBS: Jade Hills: Representing three blocks of affordable housing
An example of Sime Darby Property’s development constructed using IBS:
Kota Elmina: Harmoni 1 Apartments The 900 sq ft unit is priced at RM200,000 while the 1,000 sq ft unit is priced at RM250,000
GOOD BUY FOR THOSE WHO ARE READY
Michael Geh, senior partner of Raine & Horne Malaysia who is also Vice President of the International Real Estate Federation (FIABCI) Malaysian Chapter, foresees that the figures for the second half of 2017 will rise by over 10% since the previous drop. Allocations of loans to be disbursed for PR1MA and Syarikat Perumahan Negara Bhd (SPNB) homebuyers, as mentioned in Budget 2016 will swing into effect by the second half of the year.
As the Malaysian property market continues to face challenges in 2017 due to the global economic downturn, affordable residential properties will continue to be in demand. To date, more than 65% of residential transactions were within the price range of RM300,000 and below.
It is anticipated that a large number of these units will be completed in 2017. However, rents of prime high-rise residential properties is anticipated to slide further and JLL Malaysia forecasts that net effective rents will decline more this year as compared to last year. This will result in many landlords likely to be under pressure to lower their rents in order to retain tenants.
The capital values of prime high-rise residential properties are expected to decline further before picking up in the next few years. Having said that, this is a good opportunity to look out for good buys, as developers are more receptive to offering good incentives to sell their units.
Although in the near term, the property market is expected to remain subdued, the mid to longer term outlook is more positive, supported by demographics and anticipated growth in household income.
Property buyers should go back to basics when selecting what to buy and examine prudently considerations such as location, connectivity and access to amenities, as these are some of the key factors to ensure good return on investments.
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