KUALA LUMPUR — The property market will continue to hot up next year as no bubble is expected to emerge, said property consultants.
They said strong buying interests were expected to come from foreigners and there would be more residential transactions in urban areas.
The positive economic growth on the local front amid the grim economic outlook in Europe and US would also boost the market, they said.
Property bubble is a period of rapid increases in the valuation of housing or real estate prices until they reach unsustainable levels and then follow by the reduction in prices.
Executive chairman of Rahim & Co Chartered Surveyors Sdn Bhd, Datuk Abdul Rahim Rahman, said this was evidenced by the increase in the number of residential transactions in the Klang Valley, Johor and Penang.
“Between the first half of 2009 and first half of 2010, residential transactions in these areas increased by 11 per cent, 47 per cent and seven per cent respectively.
“The trend is expected to continue next year as the Malaysian economy is improving,” Rahim told Bernama in an interview.
Rahim said the prices of selected residential properties in the hot spots had increased by between 20 and 50 per cent over the last three years.
He said the steep price increases, however, were only seen in certain areas in Kuala Lumpur, Penang and Johor and for specific projects that were sought-after.
With Bank Negara Malaysia (BNM) monitoring the situation, Rahim said, banks had fine-tuned the loan-to-value (LTV) ratio to avoid non-performing loans.
In November, BNM imposed a 70 per cent LTV cap for third property purchases to curb excessive investment and speculation.
“This move is expected to moderate the excessive investment and speculation, which has resulted in higher-than-average price increases in certain urban locations,” Rahim said.
According to Rahim, while this measure would not stop prices from going up, it would at least cool them.
Rahim said to curb speculative buying of properties, countries such as China, Hong Kong and Singapore, had already implemented progressively higher downpayment ratio for buyers who own more than one property.
Director of Ho Chin Soon Research, Ho Chin Soon, suggested a real property gains tax of 30 per cent, followed by a sliding scale to five per cent and then to zero per cent after five years.
“The new rule does not seem sufficient to curb runaway property prices.
“Looking at the ‘small bubble’ just before the Asian financial crisis, it took some three years for a small bubble to form.
“So far, we have seen an uptrend in property prices for one-and-a-half years already and as such there is still at least another year of upside in prices to look at,” he said.
The government announced several initiative for the property sector during the Budget 2011.
Some of the measures, which were regarded as having a positive impact on the market, included stamp duty exemption of 50 per cent for first-time home buyers to finance purchase of homes not exceeding RM350,000 and 100 per cent loan to buy a house costing below RM220,000.
Rahim said stamp duty exemption for first-time home buyers would definitely give them better options to buy houses, especially for landed homes, because most of them were now priced above RM250,000.
He said the 100 per cent loan to buy a house costing less than RM220,000 would provide an opportunity for more young home buyers, especially those who had just started working, to own a house.
“Both initiatives will fuel demand for houses in the urban as well as outside urban locations,” he said.
Ho, however, said Budget 2011 only had a minimal effect on real estate decisions as houses in the Klang Valley were mostly above RM350,000.
Other major announcements this year included the RM36 billion mass rapid transit (MRT) project within Kuala Lumpur and the proposed 100-storey Warisan Merdeka tower in Kuala Lumpur, he said.
He said studies of mass transportation systems showed that values and rentals could be higher by 25 per cent if a building was located near a MRT station.
“The 100-storey Warisan Merdeka building will be a success if it is easily accessible to a MRT station,” he said.
Rahim said a full market and feasibility studies need to be conducted to determine if the Warisan Merdeka tower was commercially and financially viable on the back of excess capacity in the commercial space in Klang Valley.
“As at first half of 2010, the total supply of commercial buildings, such as purpose-built office, in the Klang Valley was 96 million sq ft and the occupancy rate was at 80 per cent, indicating about 19 million sq ft were vacant,” he said.
He said about 14 million sq ft of future supply would come on stream within the next three to five years.
Rahim said the building sector saw an increasing awareness and demand for sustainable buildings.
“Developers such as the G-Tower in Jalan Tun Razak, Ken Bangsar in Bangsar, Menara Binjai in Kuala Lumpur, Mont Kiara 28 in Mont Kiara and Shell Shared Service Centre in Cyberjaya were taking the initiative to get green certification
He said 2010 was also an exciting year with the announcement of three major mergers and acquisitions — UEM Land-Sunrise, IJM Land-Malaysian Resources Corp and Sunway Holdings-Sunway City.
Rahim said more consolidations were expected as the economy improved and this would enable local property players to go global.