Cheaper homes on the cards?

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PropertyGuru Outlook 2016 Forum: (from left) Sheldon Fernandez, Country Manager, PropertyGuru Malaysia, Milan Doshi (Wealth Mastery Academy), Datuk Seri Dr Vincent Tiew, K K Chua (Armani Media), Siva Shankar, Gary Chua (Smart Financing) and Dr Daniele Gambero (REI International).  PropertyGuru Outlook 2016 Forum: (from left) Sheldon Fernandez, Country Manager, PropertyGuru Malaysia, Milan Doshi (Wealth Mastery Academy), Datuk Seri Dr Vincent Tiew, K K Chua (Armani Media), Siva Shankar, Gary Chua (Smart Financing) and Dr Daniele Gambero (REI International).

For most of us, a house is probably one of the most expensive purchases we will make in our lifetime. With property prices in urban areas climbing steadily over the past two decades, it’s no wonder knowing when to buy can make a huge difference in terms of its impact on your pocketbook.

The good news is those who are on the hunt for a roof over their heads – whether it is to buy or rent – can expect to pay less next year, as the property sector continues its downturn in 2016.

This, in a nutshell, is the consensus of industry players who presented a rather bleak outlook for property sector for 2016 at PropertyGuru’s Property Outlook Forum held in Kuala Lumpur on 14 Dec. They are predicting a fall in prices as well as in the volume of transactions.

The downward trend in this sector, however, has a silver lining for those looking to buy. With speculators removed, they say the market will be driven by genuine demand and realistic prices. Next year will be a buyers and renters market with plenty of opportunities to pick up a good deal or two.

Cheaper rental

According to Siva Shankar, Chief Executive Officer of property agents PPC International Sdn Bhd, Malaysians who are looking to rent houses can expect cheaper prices in 2016 due to financially-squeezed property investors competing for extra income to repay their housing loans.

“I think next year, we are going to see rental dropping straight down as landlords compete with each other to rent out their properties to get a little bit of income to subsidise their mortgages,” said Siva, who was a panellist at the forum.

He predicted that these property speculators will fight “tooth and nail” to keep their properties and avoid defaulting on their loans, resulting in competitive rental rates.

Downward trend

In its Outlook report, the PropertyGuru portal said that the downward trend for the sector which started in 2015 is expected to continue for the first half of next year, before stabilising, thereby setting the stage for recovery in 2017-2018.

The report also stated that in 2015, out of the 10,877 units launched, only 40% or 4,373 units were sold. A large number of unsold units were properties ranging in the RM500,000 to RM1 million range, mostly located in Penang, Greater Kuala Lumpur  and Johor Bahru.

The high number of loan rejections, which has increased by 35% – mostly for properties in the range of RM250,000 to RM500,000 – also contributed to the units going unsold. Buyers can expect the banks to continue tightening financing conditions.

The current oversupply is expected to get worse as a fresh supply of completed development projects enter the market, coupled with weak investor sentiment that stands at 54%, stated the report. Nevertheless, there will be certain properties in prime areas, such as those located near MRT stations, which will buck the trend and continue to appreciate.

The market is expected to correct by 3%-4%; however, experts caution that this does not mean prices will come down significantly as there are many other factors driving property prices. These include land scarcity, public sentiment, construction and compliance costs and the rising cost of living that continues to put pressure on prices.

The rise in costs as well as efforts to keep prices within an affordable range would also see developers building smaller units, ranging from 450 to 850 sq ft, in the city centre and other urban centres.

Buyers, however, can expect plenty of incentives, rebates, freebies and goodies, including full or partial furnishings, guaranteed rental schemes and discounts as enticement to purchase.

Surge in 2019

According to Siva, there is little reason to panic over the property downtrend, which he described as being cyclical in nature. He predicted that the downtrend would be followed by a surge in 2019.

“I think we will start to see a little bit of activity coming back into the market in 2017 and 2018, cautiously at first due to the general elections due to held around that time.

“But once the elections are done and dusted, barring any unfortunate set of circumstances, I believe in 2019 we will see the market surging forward again. The psychological year of 2020 will probably be the next high,” he said.

Fellow panellist Datuk Seri Dr Vincent Tiew, the managing director of Andaman Property Management, agreed with Siva’s prediction on sector’s outlook for 2016, saying that despite the gloom, it is the best time to purchase before the next surge in 2019 and 2020.

For most of us, a house is probably one of the most expensive purchases we will make in our lifetime. With property prices in urban areas climbing steadily over the past two decades, it’s no wonder knowing when to buy can make a huge difference in terms of its impact on your pocketbook.

The good news is those who are on the hunt for a roof over their heads – whether it is to buy or rent – can expect to pay less next year, as the property sector continues its downturn in 2016.

This, in a nutshell, is the consensus of industry players who presented a rather bleak outlook for property sector for 2016 at PropertyGuru’s Property Outlook Forum held in Kuala Lumpur on Dec 14. They are predicting a fall in prices as well as in the volume of transactions.

The downward trend in this sector however, has a silver lining for those looking to buy. With speculators removed, they say the market will be driven by genuine demand and realistic prices. Next year will be a buyers and renters market with plenty of opportunities to pick up a good deal or two.

Cheaper rental

According to Siva Shankar, Chief Executive Officer of property agents PPC International Sdn Bhd, Malaysians who are looking to rent houses can expect cheaper prices in 2016 due to financially-squeezed property investors competing for extra income to repay their housing loans.

“I think next year, we are going to see rental dropping straight down as landlords compete with each other to rent out their properties to get a little bit of income to subsidise their mortgages,” said Siva, who was a panellist at the forum.

He predicted that these property speculators will fight “tooth and nail” to keep their properties and avoid defaulting on their loans, resulting in competitive rental rates.

Downward trend

In its Outlook report, the PropertyGuru portal said that the downward trend for the sector which started in 2015 is expected to continue for the first half of next year, before stabilising, thereby setting the stage for recovery in 2017-2018.

The report also stated that in 2015, out of the 10,877 units launched, only 40% or 4,373 units were sold. A large number of unsold units were properties ranging in the RM500,000 to RM1 million range, mostly located in Penang, Greater Kuala Lumpur  and Johor Bahru.

The high number of loan rejections, which has increased by 35% – mostly for properties in the range of RM250,000 to RM500,000 – also contributed to the units going unsold. Buyers can expect the banks to continue tightening financing conditions.

The current oversupply is expected to get worse as a fresh supply of completed development projects enter the market, coupled with weak investor sentiments that stands at 54%, stated the report. Nevertheless, there will be certain properties in prime areas, such as those located near MRT stations, which will buck the trend and continue to appreciate.

The market is expected to correct by three to four percent; however, experts caution that this does not mean prices will come down significantly as there are many other factors driving property prices. These include land scarcity, public sentiment, construction and compliance costs and the rising cost of living that continues to put pressure on prices.

The rise in costs as well as efforts to keep prices within an affordable range would also see developers building smaller units, ranging from 450 to 850 sq ft, in the city centre and other urban centres.

Buyers, however, can expect plenty of incentives, rebates, freebies and goodies, including full or partial furnishings, guaranteed rental schemes and discounts as enticement to purchase.

Surge in 2019

According to Siva, there is little reason to panic over the property downtrend, which he described as being cyclical in nature. He predicted that the downtrend would be followed by a surge in 2019.

“I think we will start to see a little bit of activity coming back into the market in 2017 and 2018, cautiously at first due to the general elections due to held around that time.

“But once the elections are done and dusted, barring any unfortunate set of circumstances, I believe in 2019 we will see the market surging forward again. The psychological year of 2020 will probably be the next high,” he said.

Fellow panellist Datuk Seri Dr Vincent Tiew, the managing director of Andaman Property Management, agreed with Siva’s prediction on sector’s outlook for 2016, saying that despite the gloom, it is the best time to purchase before the next surge in 2019 and 2020.

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