More incentives to encourage house buyers
There are several aspects to what determines prices of properties. Location is paramount. There is no dispute to that.
Sentiment matters and incentives provided by developers play a huge role.
Of late property developers have been thinking up ways to energise sales irrespective of the current challenging situation, which IJM Corp Bhd’s managing director and chief executive Datuk Soam Heng Choon can testify to.
“Global financial sentiments matter as much as national issues,” he said.
In this respect, the group unveiled an insurance scheme to mitigate unemployment fears for prospective house buyers.
This is the first time in Malaysia that unemployment insurance is being introduced.
“We expect this to lift sales and mitigate the fear that financial institutions may have on prospective house buyers seeking a loan,” he said.
Such initiatives would help buyers in some sectors such as the oil and gas segment that have come under heavy pressure due to the low oil prices.
Other developers are also providing various schemes.
For instance, some offer the 10/90 scheme where buyers pay only 10% of the price and the balance 90% on vacant possession. This would mean that the buyers have at least two to three years to beef up their financials in order to secure the loan for the property.
Others provide a financial safety net to buyers for a short term in case they are not able to secure a loan. The Sunway Group is one that offers such facilities.
Most of the developers are keeping their promotion until end of the year to help buyers.
Just four months before these benefits end, even the current month of the Hungry Ghost Festival may not deter sales with such innovative schemes.
What determines prices?
According to a Klang Valley-based property consultant, most Malaysians can be quite superstitious about where they want to live.
“People are big on feng shui, and this not just the Chinese. Houses with the numbers ‘four’ on them, can be quite hard to sell sometimes. This includes non-Chinese buyers as well, who are concerned that they won’t be able to sell the property in the future.”
However, there no scientific basis for this.
Axis REIT Managers Bhd head of investments and Malaysian Institute of Estate Agents immediate past president Siva Shanker admits that there is no scientific basis for people to consider the feng shui element when buying property – but people still do it.
“Why insist on hiring a feng shui master or a monk or priest to come and look at the house first? There is no real basis for this kind of thing, but people still do it.”
Still, he points out that the “superstitious” element is more likely to affect the typical property investor rather than the buyer who buys to stay.
“An investor is more likely to take all these factors into consideration, because his main aim is to secure an investor or sell it at a higher price in the future.
“This is unlikely to concern a buyer because he has no plans to rent or sell, and will likely live there all his life.”
SK Brothers general manager Chan Ai Cheng says that many Malaysian buyers – even if they aren’t superstitious, prefer to just “be safe about it.”
“Superstition and tradition, it generally comes down to a belief system. They won’t go against the grain.
“It comes down to peace of mind. If it’s the Hungry Ghost month, people would rather wait two weeks than buy now. If they can put it off for a while, they will.”
Siva concurs that properties are not “bought on the spot.”
“It’s not like buying a car, you can get it within weeks of placing your order. But getting the keys to your property can take a few months.”
PPC International Sdn Bhd managing director Datuk Siders Sittampalam says that the element of superstition is less of a determining factor for the younger buyers.
“The superstition or belief in ‘ghosts and spirits’ when acquiring properties in close proximities is fading among the younger generation with new and redevelopment sites.”
According to the Ministry of Finance’s valuation and property services department’s property market report 2015, Kuala Lumpur’s property market had moderated in performance as market activity and the construction sector softened.
As at 2015, the All House Price Index for Kuala Lumpur stood at 277.0 points, rising by 6.4% over 2014. The average all-house price rose to RM734,957 (Q4 2015) against RM690,541 (Q4 2014) in the previous year.
In line with value appreciation is an upward trend in the residential rental market. The increase was noted in prominent housing schemes as well as property developments that are located along mass rapid transit (MRT) routes.
According to Siders, the current property market slowdown is independent of the Hungry Ghost Festival.
“The market slowdown is a result of a culmination of factors both internal and external economic fundamentals.” His stand concurs with that of IJM Corp Bhd’s Soam.
Citing figures from the National Property Information Centre, Siders observes that the third quarter of the year generally records a declined volume of sales both residential and all properties.
“The first quarter of the year records lower volume of sales transactions generally due to festivals. The market activities picks up in the second quarter, with the third quarter experiencing a decline and volume rising again in the fourth quarter.”
Siders believes that the Hungry Ghost Festival could be a factor for the decline in transaction volume in the third quarter.
“However, a decline could be as a result of other factors such as the goods and services tax implementation last year.
“Therefore, a detailed study on economic factors such as the depreciation in the ringgit, oil prices, share market and cooling measures taken on property funding could be attributed to the impact on sales volume during the quarter.”
iProp Realty Sdn Bhd managing director Victor Lim says that transactions tend to “take a dip” during the Hungry Ghost month but it is insignificant.
“Yes, there is a dip, but it’s not so significant. They’d rather wait.”
However IJM’s Soam feels that the incentives they are offering will spur sales.
“We want them to make a commitment now because the time is right and there are ample choices,” says Soam yesterday.
IJM Land expects strong sales from the insurance incentives it is offering from now until the end of the year.
Apart from property, car sales tend to dip slightly, according to one Klang Valley-based used car seller.
During the Hungry Ghost Festival, consumers, especially the Chinese, don’t buy cars. This is because many see it as a period to mourn rather than to rejoice. So they hold back purchases.
The location element
It’s the age-old adage – when it comes to securing the best price for your property. It’s location, location, location.
But what amounts to a “good location” is subjective.
“Some people chose not to stay next to an oxidation pond, power substation or even a T-junction,” says an industry observer.
He says that people don’t like to live at T-junctions because the headlights of a car, beaming into your living room, can be quite annoying.
However, Chan feels that the T-junction stigma is related to Feng Shui.
“When a car drives straight, it carries energy that follows it. But when the car turns at the T-junction, people believe that the energy does not disperse but continues to move straight into the home, which is not good feng shui,” she says.
And then there is the stigma of purchasing homes that are located near overhead power lines.
There is a set standard based on guidelines by the World Health Organisation on how far these lines must be.
“It’s a stigma that it might have health repercussions on anybody living nearby. So people avoid living there for fear of their health, as well as that it might be a problem selling the property,” says a property consultant.
“Do your research, visit the property, check the surrounding locations. If all is well, and you have the means, buy it, as it will likely be a good investment,” he says.
With the MRT coming on stream soon, many are concerned about how proximity to the stations will affect pricing.
According to a Klang Valley-based property consultant, the nearer the location of the property to an MRT station, the more likely it would fetch a higher price.
“Generally, properties around MRT stations can see up to 10% increase in values,” he says, adding that the MRT helps to improve accessibility and boosts convenience for residents in the neighbourhood.
He adds that how high prices escalate would depend on the surrounding amenities.
The consultant adds, however, that the close proximity to an MRT station could lead to side effects such as noise pollution.
“Generally, values would be impacted if the house is located directly under a line,” he says. People want the MRT close by, but not too close.
Separately, a house located near or next to a cemetery can also be a cause for concern for property buyers and investors.
“Some people have no issues with it. I actually have a buyer who prefers to live next to a cemetery because he feels that the area is quiet,” says iProp Realty’s Lim.
Chan feels that many buyers have been “taken in” by Hollywood films that living next to a graveyard is a “no-no.”
“A home is a place where you find peace. At the end of the day, that’s all that matters.”
The spooky element
But what happens if your property is located on prime location and ideal in every way but was the scene of a horrific crime and is “haunted”?
According to an article by US-based Realtor Magazine, haunted properties fall within the category of “stigmatised properties,” or real estate that is not defective in any physical manner, but due to psychological or emotional factors, may have a reduced value.
Among the situations covered under the title of “stigmatised” is a property that was the site of a murder, suicide, alleged haunting, or “other para-psychological phenomenon,” it says.
According to Reuters, stigmatised homes typically sell for 10% to 20% less than comparable homes.
In certain countries, such as the United States, it is a legal obligation for the seller to disclose information about the property’s history, for example the house may have been the scene of a gruesome crime such as murder.
However, no such law exists in Malaysia.
“Buyer beware,” says a property consultant, who says that the onus is often on the seller to disclose if the home has a macabre past.
Some believe it is up to the estate agent to disclose if the home that’s put on the market had a “dark past.” But this is easier said than done, says Lim.
“If we disclose, the buyer may not buy, and if we don’t disclose, if the buyer finds out later, it would make us look bad,” he says.
Lim recalls having to deal with such a situation on more than one occasion.
“In one of the cases, I dropped the deal,” he says.
Siders admits that living in or near property with a tragic past can be a problem.
“Properties within the immediate surrounding areas of Highland Towers don’t pick up in values very much,” he says.
Still, there are the select number of buyers who are willing to buy properties with a ghastly past.
“To some, a haunted place might be more of an attraction. Not everyone is superstitious or cares if the place is haunted,” says one industry observer.
“A haunted house would cost less – which would be good for those that are looking for a place at a discount.”
Sometimes, location trumps history – case on point is the upcoming mixed integrated project Bukit Bintang City Centre (BBCC), the former Pudu Prison.
Pudu Prison was built in phases by the British colonial government between 1891 and 1895 on the site of a former Chinese burial ground.
During the Second World War, the Japanese occupation forces incarcerated many Allied prisoners of war there. The prison complex was closed in 1996 and demolished in 2009.
Siva says BBCC is unique in that it’s developed on prime location, and that after a while, especially with the younger generation, no one really bothers about what the location used to be.
If you look at the Kuala Lumpur City Centre area, it used to be a race course before. However, not many remember this today.
“I believe that’s what will happen with BBCC. In time, the persona of the buildings there will take over the past persona of the jail.” - The Star