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Thursday, February 26, 2009

No property bubble here, say industry experts

PETALING JAYA: The local property market would be able to escape a bubble, such as the one affecting neighbouring countries, several industry experts said.

They said the local property market would be resilient in facing the current downturn as it was mainly driven by domestic demand.

A roundtable discussion on Corporate Real Estate Investment Opportunities organised by Zerin Properties that was posted on its website yesterday, the panellists agreed that the real estate market, particularly the residential sub-sector in well-located areas in the Klang Valley, continued to be attractive to both local and foreign investors.

According to International Real Estate Federation (FIABCI) Malaysia president Datuk Richard Fong, the property market did experience a “slight bubble” in the high-end sector in Kuala Lumpur, particularly in KLCC, Mont’Kiara and Hartamas where property prices had doubled over the last three to five years.

Fong said there were good deals to be had in the condominium market in Kuala Lumpur city centre, especially those priced between RM800 and RM1,000 psf. “One should grab when you find sellers looking to cash out at a 30% discount from the property’s peak price,” he advised.

The roundtable discussion was moderated by Hall Chadwick Asia Sdn Bhd chairman Kumar Tharmalingam.

Previndran Singhe, chief executive officer of Zerin Properties said: “We are still resilient although transactions are slowing down. After the Chinese New Year, you can see developers launching products but in order to be successful, they have to be innovative.”

He pointed out that landed properties continued to remain the best form of property investment. “With developers offering 5/95 and 20/80 financing schemes, the primary residential market is becoming attractive. Then two years down the line, investors can also enjoy some gains from capital appreciation.”

The panellists also said that the liquidity in the marketplace, innovations by developers and the Malaysia My Second Home programme also increased the attractiveness of real estate.

They observed that investing in real estate investment trusts (REITs) was also becoming popular as an alternative form of investment.

Axis REIT chief executive officer Stewart LaBrooy felt that investors found REITs attractive due to their hassle-free nature and high yields which could easily reach 12%.

“For foreign investors, liquid investments are far better than having the burden of a physical property like finding a tenant. When it comes to REITs, they can cash in and out as they please.”

On the commercial office sub-sector, the panellists agreed that KLCC’s iconic Petronas Twin Towers landmark remained attractive to large multinational corporations. Previndran said rental rates in KLCC were not expected to “fly” due to sustainable demand.

However, the office market could get a bit soft in Petaling Jaya with new supply coming from PJ8 and V Square while rentals are stable in micro locations like Damansara Heights and Bangsar.

By The EDGE Malaysia (by Loo Pik Kwan)

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