GST to have mininal impact on property sector

The goods and services tax (GST) is expected to be a mere blip on the property sector, with a rise of not more than 3% to 4% in terms of property prices, according to property consultancy Rahim & Co executive chairman Tan Sri Abdul Rahim Abdul Rahman.

Abdul Rahim said although the residential sub-segment is GST-exempt, building materials, labour and machinery are not, so developers would have to take this into consideration.

“There will not be more than a 3% to 4% price hike in residential properties, which is still lower than the 6% GST,” he told a press conference after the launch the company’s Property Market Review 2014/15 here yesterday.

However, he said prices, inclusive of the GST component, were expected to gradually increase in the range of 7% to 10%, which is a slower-but-steady growth compared with the double-digit growth of previous years.

This increment is not only due to the GST, but also the market’s supply and demand mechanism, he added.

“Buyers, sellers and developers are likely to adopt a wait and see attitude,” he said.

Abdul Rahim said while the GST would only have a “temporary and limited impact”, the greater issue in the overall property sector remains one of affordability.

He said such issues would persist, which, in turn, would increase the demand for affordable housing.

This is expected to add pressure on the Government to undertake speedier action.

He said the provision of more affordable housing might result in private developers reducing prices in order to compete with social housing being supplied by the Government.

He said Malaysia’s housing affordability had deteriorated to 3.6 times in 2014 from 2009’s 3.4 times.

The ratio compares the price of an average-priced, double-storey house with annual household income. The higher the ratio, the less affordable the house is.

Although a ratio of three to four times is still within the global average in certain parts of the country, this value has increased dramatically over the previous years.

The year 2009 is the commonly used benchmark year because property prices started their hefty increase from the end of that year.

According to studies by Rahim & Co, the least affordable terraced house is in Sabah, with a ratio of 6.2, followed by Penang at 5.9 and Kuala Lumpur at 5.6. - By The Star

Property market to consolidate, foreclosures seen rising

Property prices in Malaysia are expected to consolidate this year after seeing a rebound in the first half of 2014, said property consultancy Rahim & Co.

Executive chairman Tan Sri Abdul Rahim Abdul Rahman said the market rebounded after a slowdown in 2013, with higher transaction numbers recorded in the first half of 2014, compared with the corresponding period a year earlier.

Rahim was speaking at a press conference which saw the launch of the company’s Property Market Review 2014/15.

He said the first half of 2014 saw a 3.3% growth, or 193,405 transactions, versus a year earlier. The value of the transactions was RM82bil, an increase of 19.3% from the first half of 2013.

The double-digit increase in value, as opposed to a less than 5% growth in the number of transactions, indicates that average prices are still increasing. The pace of growth would be “slower” in 2015, he said.

Despite the slower growth and the oversupply of high-rise condominium units, there was a huge appetite for land, said managing director Robert Ang.

The company received “overwhelming response” for the tender of two pieces of German government land which closed earlier this week.

The Jalan Kia Peng land had a guide price of RM2,300 per sq ft and the Jalan Tun Razak plot at RM1,500 per sq ft.

Notwithstanding that, the current consolidation of completed units is expected to give rise to more foreclosures going forward.

“But strong liquidity will be able to absorb this,” said Ang.

This is largely due to the various completed schemes entering the market purchased with small downpayments a few years ago. Buyers may not be able to flip with the high margins they had expected earlier and they may not want to go ahead with the mortgage payments.

The rentals may not be able to cover mortgage payments. This may result in the weaker ones falling on the wayside, said Ang.

He said a number of foreclosures in a popular location in the Klang Valley were taken up very speedily – despite built-up areas of 2,000 sq ft and above – which indicates high liquidity.

As for the performance of the various sub-sectors, interest in residentials is expected to continue, particularly for units located along up-and-coming highway projects and public rail transportation.

The office sector remains challenging, especially for smaller and older office buildings in the Klang Valley. Occupancy rate is expected to be stable at about 80%. Incoming supply of about nine million sq ft over the next three to five years is expected to put greater pressure on rents and competition.

Effective rental rates have been declining due to longer rent-free periods, landlord providing renovation costs and rental review clauses which favour tenants.

In the retail sector, new malls are expected to boost real estate investment trusts. Rentals are expected to stabilise. Consumer spending is likely to be restored in the second half. The weaker ringgit could boost tourist expenditure.

On the industrial sector, demand is for properties in managed industrial parks, instead of standard lone lots. - By The Star