A more healthy market in the making

Reapfield Academy CEO Gerard Kho says the property market this year has been rather interesting for new launches and the secondary market where buyers buy directly from owners.

Reapfield Academy is the training arm of property agent Reapfield.

Kho says that although there is a drop in sales between January and August compared to last year, it is insignificant. Rentals have increased by 1% while sales volume has dropped 1.4%. The net effect is a drop of 0.3%, which is insignificant.

Reapfield does between 5,000 and 6,000 deals (rental and sales) annually and until August, the numbers have been consistent.

However, in terms of ringgit value sales, there is a drop of 12%.

“That means sales volume dropped 1.4% but the value dropped by 12%, which means prices fell by 12%,” says Kho.

He says sales activity among developers’ units are stronger than secondary sales, which dropped by about 20%, while the primary market went up about 20%.

The next question, why are developers’ sales doing better than secondary sales?

Kho says there are some people who have the cash but who do not want to use their cash. Developers’ prices are “somewhat more fairly priced, so those who have the means do not mind entering the property market today. They are given rebates which may be 5% or more.” There is less upfront payment if they buy from developers. They actually gets to “conserve cash” when they buy from developers. If the property is RM1mil, there is a rebate of RM100,000. This money is put into your account, or it is used as your initial downpayment. Somehow, somewhere, it is doable.

When the project is completed three to four years from now, payment kicks in. The disadvantage of this is that you do not have rental income.

In the secondary market, the buyer gets “no help” at all.

Not sustainable

He says giving rebates, however, may not be sustainable. He expects banks and developers to tweak their model and provide better incentives going forward. Developers will have to be “sharper” with their strategies.

Kho also notices a trend never seen in previous years – consistent drop in sales volume for June, July and August.

June and July are usually the strongest months in any year for property sales. In 2012, 2013 and 2014, sales volume either trend up or remained flat. “This year, we are seeing a consistent drop. This is not the norm,” says Kho. If this continues to trend down for the rest of the year, prices will likely drop further next year,” he says.

He says there are two groups of buyers today. Those who buy to stay and the investors. Although the latter group is small, they may still buy if they deem the market is below value.

“Always ask for valuation,” says Kho. Investors will still buy when prices are right. Interest rates have not jumped. Unless something drastic happens, we don’t expect to see too many changes, he says.

Developers who find it challenging to sell may engage real estate services. Agents like this because they need not run around.

Instead, buyers go to them.

On comments that there are now more high-end properties for sale in Damansara Heights and Bangsar, two of Kuala Lumpur’s most upmarket areas, Kho answers in the affirmative. “The stock is not clearing fast enough. Prices are not dropping fast enough because owners do not need to. So instead of 10 units (unsold) a month, it becomes 15 the next month. So there seems to be a lot of choice today in these two high-end areas,” says Kho.

“This does not mean that the market is going to collapse. These are healthy signs. It tends to build a stable and stronger property market,” says Kho. - By The Star

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