The auction market may offer some good property deals later this year, including new properties that were sold under the Developer Interest Bearing Scheme (DIBS) a few years ago.
Auction cases are expected to rise from the third quarter as most properties under DIBS will be completed by then, says Gary Chia, executive director of online auction listing platform AuctionGuru.com. Owners who cannot afford their mortgage payments, which begin upon completion, will see their properties put up for auction.
DIBS, in which developers absorb the mortgage interest during construction, was halted by the government in 2014 over concerns that it encouraged speculation and pushed up property prices.
Chia expects to see more SoHo (small office/home office), SoVo (small office/virtual office) and SoFo (small office/flexible office) units as well as serviced apartments to come onto the auction market soon as many such properties were launched under the DIBS.
“These projects, which were mainly launched two to three years ago, will be completed sometime this year and next. By that time, the market will have many such properties as it becomes more challenging for owners or developers to sell them due to the surge in supply. So, buyers will have a chance to get good deals from the secondary and auction markets then,” he tells TheEdgeProperty.com.
On the market outlook, Chia anticipates that 2016 will continue to be challenging as market sentiment remains poor. He foresees a decline in consumer spending and private sector investment because of the current economic uncertainties.
“The slowdown in the banking, oil and gas as well as retail sectors may affect demand for commercial properties as well as rents. Hence, property buyers and investors should be more cautious when it comes to commercial properties, especially retail, shop or office units, shop offices and factories or industry buildings.”
Chia says 2015 was a tumultuous year for Malaysia because of several internal and external factors. These include the implementation of the 6% Goods and Services Tax in April last year, the depreciation of the ringgit, toll rate hikes, softening demand for palm oil, the plunge in oil prices and political instability. These, in addition to the cost of living and doing business in Malaysia, negatively impacted the property market.
He notes that the local property market has seen a steady decline in transaction volume since 3Q2014. Nevertheless, he believes it is still healthy.
“There was no indication of a housing bubble in 2015 compared with 1997 or 2007, which saw a lot of properties being put up for auction. The number of properties put up for auction last year is extremely low, which means that the owners or investors still have strong holding power,” he says.
Investors and buyers now are more cautious with their bids unless the properties offered are in strategic locations or at rock-bottom prices, he adds.
Also, “the crowds at auctions have thinned since 2014 when they easily drew over 200 people. However, the number has halved in the last year and even then, only a few will bid while the rest just watch,” Chia says.
He expects the property market to remain soft this year with most buyers adopting a wait-and-see approach while keeping an eye out for good deals.
Auction market slows in 2015
In 2015, the Malaysia auction market saw 28,750 properties, with an estimated value of RM7.6 billion, go under the hammer, according to data compiled by AuctionGuru.com. This works out to an average of 2,395 properties a month.
This compares with 35,576 properties, worth an estimated RM7.9 billion, put up for auction in 2014, or an average of 2,964 cases per month.
Last year, the central region — Selangor, Kuala Lumpur and Putrajaya — recorded the highest number of auction properties, at an average of 1,304 properties a month. Notably, 1,523 properties in the central region were put up for auction in September, the most for the year.
This was followed by the northern region (Perlis, Kedah, Penang and Perak), with an average of 630 cases a month and the southern region (Negeri Sembilan, Melaka and Johor), with 294.
Sabah and Sarawak registered an average of 126 auction properties a month while the East Coast region (Kelantan, Terengganu and Pahang), saw the lowest average of 40.5 properties a month.
The total value of the central region’s auction properties was over RM5 billion, followed by the northen region (RM1.2 billion) and the southern region (RM825 million).
Residential properties accounted for 89%, or 25,675 cases, of the auction properties, with a total estimated value of RM5.2 billion, 7% or 2,089 cases were commercial properties worth RM1.4 billion, and the remaining 4% or 986 cases were land assets with an estimated value of RM895 million. - The Edge Property