Posted on 19 March 2014 - 05:40am
KUALA LUMPUR: Potential buyers looking for property prices to ease this year will be disappointed, according to CH Williams Talhar & Wong which expects prices to go up by 8%-10%.
"If anyone wants to invest and is hoping for prices to ease overall, I don't think it will happen at all. Prices would still be going up. Perhaps people should look into the secondary market as there are still some good purchases hidden in some locations," its managing director Foo Gee Jen said.
He expects house prices to grow moderately this year though, as opposed to the unsustainable price increases of 15% to 18% the property market saw last year.
"Last three to five years, you see property prices in the residential market in the Klang Valley grow 15% to 18% every year. So we've moved to a level of very high prices, which is unsustainable. Gross domestic product (GDP) growth was only about 5% to 6%. What's the real growth of salaries? On average 5% to 7%.
"So how are we going to support that when property prices have grown double of salaries (comparing 7% salary growth with 15% property price growth)?" he questioned.
"With government measures, which I believe should be done on a staggered basis, we can see the impact now. I think the level of sustainability can be maintained because even if property prices increase about 10%, which is about 2% more than salary growth, it is still sustainable and 10% is a healthy level of growth in terms of residential market," Foo told reporters at the CH Williams Talhar & Wong property outlook briefing yesterday.
He said while property prices in the Klang Valley, Johor and Penang will grow more, smaller towns will see 5% to 8% growth, which is in line with the increase in salaries.
For most sectors, price increases will be below 10% but for the industrial sector, Foo said, growth will be between 10% and 15%. In terms of transaction volume, it will drop 10% this year, in line with the decreasing trend from last year where the volume of transactions fell 14%.
"The bulk (of transaction volumes) is in the residential segment where speculators are now more careful with the government's cooling measures. Capital values will rise but volumes will drop but, we will see an uptake in the second half of the year.
"There will always be speculators but whoever wants to speculate now would have to have deeper pockets than before, to hold much longer," he added.
On the government's cooling measures, Foo said the stricter loan guidelines have made the biggest impact, especially on the luxury residential segment.
"Landed property, from what I gather, there's not much issue there. I think the sentiment among the financial institutions concurs with the findings of most consultants that landed property will continue to grow due to scarcity of land. But generally in terms of high-end products, the so-called condo, SOHO (small office home office) and SOVO (small office versatile office), there's a concern of an oversupply situation," he said.
As for the implementation of the goods and services tax (GST) in April 2015, Foo said the perception that property prices will rise with GST may spur investors to buy this year, which in turn will push prices and demand up, balancing out the slow down during the first half of 2014.
"Even though the government said residential property will be zero-rated, I believe there is still a lot of grey area in some of the taxes, how are they going to input, especially the material cost. Eventually there may be still some element of increase. So GST is not entirely zero-rated for residential property.
"There's also a question of uncertainty as to how they are going to apportion the GST with regard to an integrated project. Nowadays it is very common to have many components within one project. If you're going to zero-rate, will the piling works for the integrated project be zero-rated, because there's also a commercial component. This is still a grey area, yet to be seen how government is going to resolve this issue."
Overall, Foo said, the impact is very much on short-term players while genuine buyers (owner-occupiers) and long-term players who buy for long-term rent will not be affected much by the cooling measures.
"This is a knee-jerk effect, people are concerned about what will happen so it's a wait-and-see situation at the moment. I believe by the second quarter or latest by first half of the year, people will realise they can't wait anymore. They still need to push ahead and make decisions on their investments."