5% to 10% property price correction seen

KUALA LUMPUR: Luxury condominiums and even landed property may face a
5%-10% price correction this year in response to a slower occupancy
rate last year.
This does not, however, mean that property prices
would start to tumble as overall mass market housing would be able to
sustain slower growth.
According to real estate services provider CH William Talhar & Wong managing director Foo Gee Jen,
the occupancy rate among luxury condominiums in Kuala Lumpur registered
only 67% last year, which was “not a very healthy sign”.
That
said, the property market outlook for 2013 is flattish, with fair
opportunities in prime locations and more focus on areas near public
transport lines and affordable housing.
“The occupancy rate has
been under pressure, but sales has been surprisingly strong,” Foo
pointed out after releasing the Property Market Report 2013.
“If
the scenario continues, then the occupancy rate could fall as low as
60%,” he said, noting that the high-end category now encompassed
condominiums above RM700,000 in prime locations.
With the lower
occupancy being the issue, Foo believes the market needs to re-evaluate
its holding power, “How long can you hold an empty building without
tenants?”
As for mid-range residential properties, which Foo said
the price was hovering around RM400,000 now, there would not be any
price correction as “the demand for these is always there”.
Separately,
prices in the secondary property market would remain in tandem with the
primary market. “The secondary market always benchmarks its prices
against the new property within the locality,” he said.
Foo
believes that the total transaction value for the sector would be lower,
as there would be more affordable housing entering the market, although
volume is unlikely to drop.
“I believe this year would be the
reverse of last year, when transaction value was higher, because the
market was focused on developing properties worth RM500,000 and above in
2011 and 2012,” he said.
Going forward, Foo saw the emergence of
new high-density residential developments along expanding public
transport lines, such as the MRT, LRT or new highways.
“The
market for affordable houses is those who rely on public transport,
(therefore) developers won't go into such housing projects unless the
area is supported by infrastructure,” he said, noting that these
projects need to be government-driven.
“The Government would need to give the green light to build high density, only then would it be viable for the developers.”
Following
the same line of thought, Foo opined that low-cost housing should not
be the main focus in property development as the country moves towards a
high-income nation status.
“I think we should move away from building boxy houses as we move towards becoming a high-income nation,” he said.
As
for office buildings, Foo said there would likely be an oversupply in
the Klang Valley with upcoming mega projects, and the vacancy rate could
go up a further 2.5% from 14% in 2012.
He believes rental would
be under pressure on landlords competing for tenants who may prefer to
pay only slightly higher rent at newer buildings with facilities.
“Old
building owners would suffer more and many landlords are prepared to
negotiate early with current tenants to lock in their tenancy instead of
waiting for the tenancy to expire,” he said, adding that these
landowners needed to upgrade their facilities, bring in retail
components like upmarket cafes or find a niche market to appeal to.