By Willy Wilson | Sep 16, 2009
The economic tsunami that crashes the global market appeared rather late in Malaysia, compared to the major economic powers of the world. In respect of the property market, established countries in North America and Europe have suffered since late 2007, followed by major Asian players such as China and Singapore roughly a year later. It is safe to say that the effect in our homeland only began by the fourth quarter of 2008.
Even then, the overall property market in Malaysia is still stable, evident by a mere light shake in Kuala Lumpur’s property scene.
According to First Pacific Group managing director P.L. Lee, the worst affected in the local market is the high priced condominium units located within the KLCC area. This is not surprising as cartographer and respected property speaker Ho Chin Soon estimates that 50 percent of investors in this area are foreign individuals and property investment companies, particularly from Singapore, Hong Kong and the UK.
“When the economy went bad in their countries, the foreign investors liquidated most of the investment here. As a result, the asking price of the high end condominium in Kuala Lumpur went down by 20 to 30 percent,” says P.L. Lee.
The good news is, while some of the sellers may be forced to liquidate their assets to cover whatever losses they sustained, say in the stock market, the number of such parties is too small to have an adverse effect in the general prices of properties.
The direct effect on the local property market is a relatively conducive situation throughout the economy slowdown. In any case, let’s not forget that, despite continuous market correction, the asking price in KLCC area has gone up 80 to 100 percent for the past five years.
“I do not see any marked decrease in asking prices of other sectors of the property market. The main reason for this is probably because parties in the property market, sellers and buyers, are still waiting to see if the recession will have any effect on the level of property prices,” P.L. Lee states.
Despite some positive indications of recovery, this situation is expected to be the trend for the next couple of quarters.
“However, if there is continued recession going beyond 2010,” Ho Chin Soon warns, “a downward trends in the prices of the other property types is possible.” That being said, Chin Soon is adamant that the economy will get better by early next year.
Magic Spell: Location, Timing and Branding!
“Anytime is a good time,” enthuses P.L. Lee, when asked whether 2009 is the best time to invest in properties.
“As the saying goes ‘Golden opportunities can come often from the darkest times if you have the ability to spot the real diamonds in the rough’,” says Lee, “I believe that even the bad of times can hold golden opportunities for the shrewd investors if they buy right.”
Now the question is: How to buy right?
Like other form of investments, a property investor needs to spot a potential investment that will provide greater returns than the initial capital outlay. In the case of property, the magic spell has always been ‘Location, location and location’. But is it still effective?
“Bear in mind that while good location is a critical factor in real estate investment, it will not save a bad investment. Similarly a bad location will not stop an investor from making money,” Lee states.
Ho Chin Soon, too, reckons the old spell is a tad imperfect.
“The spell should be ‘location, timing and branding’,” he says, emphasizing that the timing and branding factors have pretty much been forgotten, despite their significant roles in determining the investment value.
“Take Desa Park City, for instance,” says Ho,” Which has leveraged from unique selling proposition, niche offering (branding) and the right timing. It is now arguably the most profitable investment in our local property market.”
Property Hot Spots
Notwithstanding the location, timing and branding factors, investors should consider the potential growth of the area, capital and rental appreciation, and their financial capacity as investors.
Blue chip areas like Bangsar, Damansara Heights and KLCC are traditionally perceived as safe investment for the big players. But for up-and-coming areas, Lee reckons Puchong and Kota Damansara are quite good picks.
Closer to town, Mutiara Damansara and Tropicana should top the list. As for Mont’ Kiara, there has been a lot of debate as to its ability to sustain its ‘hot spot’ title.
The relentless development in this area means crowded neighbourhood and bad traffic jam. The latter is a direct result of inadequate and unreliable public transport system in the city. With a high number of expatriate populations and affluent locals residing in this area, everyone drives everywhere.
In the early 1990s, condominiums built by the Sunrise Bhd Group such as the MK Pines and MK Palma were around RM300 psf. But now, prices of newly launched condominiums have shot up to over RM800 psf with some hitting the RM900 psf mark. Many predict that this situation, combined with ineffective transport system and high population rate in the area, would force Mont’ Kiara to reach an anti-climax anytime soon.
But Chin Soon begs to differ. Despite fears of over the unstoppable, soaring prices and congested vehicular traffic, this neighbourhood has continued to attract both investors, home and business owners alike - evident with the presence of new shopping malls, cafés, restaurants, bars and hotels. Today, the characteristic of Mont’ Kiara has evolved into a self-contained, fairly established residential enclave of top quality condominiums, bungalows/villas and other high-end residential properties.
For this reason, Chin Soon insists that there will always be two types of people who keep Mont’ Kiara a prime choice: those who have lived there for a while and wish to live somewhere more exclusive and quiet, and those who have always wanted to fit into the city’s upper middle class circle - The sellers and the buyers.
“So I don’t see why the prices in this area will go down significantly,” Chin Soon comments.
