By Lee Wei Lian
March 01, 2011
KUALA LUMPUR, March 1 — The property market has either gone flat or is showing signs of decline, as indicated by rents and capital values for prime areas.
The market, especially the high-end segment, appears to be feeling the pinch of oversupply and the tightening measures on investment.
Figures in a report by property consultancy DTZ Research released in January shows that rental rates for commercial property were on a downward trend last year dropping from RM6 per square foot (psf) in the second quarter to RM5.97 in the fourth quarter.
Office occupancy rates also fell from 87.9 per cent in the second quarter to 86.4 per cent in the fourth quarter.
“The outlook for the (commerical property) sector is expected to remain soft in the next few years as it will take time to increase demand with these new initiatives while there is a substantial amount of new supply, most of which is of a speculative nature,” said the DTZ report.
Meanwhile the average capital value of prime condominiums declined slightly from RM600 psf in the third quarter to RM599 in the fourth quarter.
DTZ pointed out that Bank Negara had mandated a 70 per cent cap on the loan-to-value ratio (LVR) for a purchase of a third residential property, down from 80-90 per cent and this could affect the high end property market in the coming months.
“This (the 70 per cent LVR cap) will have some negative impact on the high-end segment where buying has been concentrated,” said the report.
Property agent Melvin Wong says however that the slowdown will not likely affect affordable properties in the RM300,000 to RM400,000 range.
“The 70 per cent LVR cap doesn”t affect first time home-buyers,” he said. “The government is trying to curb speculation in the higher end segment of the market and those are the properties which might see a slowdown.”
Wong, who specialises in the upper middle-class area of Mt Kiara says that the value of properties there are stable although rentals rates may have been hit by the ample supply of units.
“People who buy in Mt Kiara have holding power so we haven”t seen fire sales yet,” he said. “The supply of condominiums have gone up so rental wise, the market is more competitive.”
Property consultant Lau Han Hoe says that there could be a slight dip in property prices due to the LVR cap.
“There will be an effect,” he said.
He noted however that demand from first-time home owners is always there and developers should build more affordable units to tap into that demand.
The property market could also be affected by expectations that Bank Negara would raise the statutory reserve requirement for banks which could put the brakes on loans growth.
Investment research house ECM Libra said in a report last month that growth in deposits is lagging loans which may curb loans growth momentum going forward
Figures in the ECM Libra report showed that residential and non-residential property loans which accounted for 44 per cent of loans growth in 2010 are showing signs of growth moderation.
Residential loan approval contracted 3.8 per cent year-on-year in December last year while non-residential loan approval slowed to 30.2 per cent from 47.3 per cent in November.