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Saturday, October 8, 2011

Opportunities in secondary market

OPPORTUNITY may present itself for house buyers looking for properties in the secondary market especially in prime areas, with the property market going through a soft patch, dampening sentiments of speculators.

“We have not detected any downward trend in prices yet, in fact prices are still on an upward trend. However, sentiment may have been dampened by the anticipation of measures that the Government may take to curb speculative buying on properties,” property valuer, KGV-Lambert Smith Hampton (M) Sdn Bhd director Anthony Chua tells StarBizWeek.

He notes that the property sector has already seen a downturn in 2008, triggered by the United States subprime mortgage crisis following the 10-year cyclical nature of the global economy.

He, however, says house prices in Malaysia were not impacted extensively at that time.

“I would be more inclined to say that prices appreciation in the near future would be moderate. However, I think there will be a technical correction by next year. If you read the signs now, there might be a correction coming soon,” he said.

“Its about time for a correction. Hopefully we will not experience a drastic correction this time as sales data of new properties built by prominent developers are still enjoying brisk sales. The demand for houses and the savings of people are still there,” he says.

Chua says property prices in the secondary market is still stable especially in established areas and mature townships like Petaling Jaya, while properties outside the vicinity of Klang Valley have not seen any significant uptrend in price, excluding prominent locations like Bukit Tinggi and Penang.

Speculation is rife that the authorities may end the stiff competition seen among banks by maintaining a certain margin for banks, putting a stop to interest-rate slashing by banks to attract more customers for their banking loans.

A local research-house analyst says that although this may be beneficial for banks, ultimately it would squeeze the pockets of consumers in the interest of banks.

He adds that Bank Negara was also keeping a close eye on mortgage loans to see whether a cap on the loan to value ratio (LVR) for second mortgages is necessary.

“Any raise in the LVR would further dampen demand for properties, and right now its exceptionally hard to predict what the authorities are going to do next to further regulate the property market, as these speculated actions are all double-edged swords that the authorities need to carefully play around with,” he says.

Meanwhile, Henry Butcher Malaysia Sdn Bhd chief operating officer Tang Chee Meng expects property prices to hold firm for the next six months but that all depends on how external factors like the eurozone crisis and the faltering US economy will fare in the near term.

“The market has softened a bit with demand weakening since April, and it would be an additional concern for the property market if loans are given based on an individual's net income compared with the currently used gross income standard,” he says.

“People are just concerned and everyone is adopting the wait and see stance before acting. Buyers are more cautious and selective to make sure that the properties they buy are priced reasonably,” he says.

According to data provided by the National Property Information Centre, the country recorded more than 134,000 transactions in the residential property sector during the first half of 2011, an increase from 108,000 transactions recorded in the previous corresponding quarter.

More than 929,000 property transactions worth RM253.19bil were recorded in the market from 2009 till now, including 214,000 transactions worth RM64.75bil for the first half of the year.

Recently, research houses have also started to downgrade the property market, with the most recent being RHB Research which says that the positive catalysts for the sector is scarce.

It expects the property market to continue underperforming the broad market with the weakening ringgit and lower expected returns from properties, coupled with a less bullish sales target next year as the research house sees further downside risk to gross domestic product growth.

“On the physical market, although foreign buyer content in the Malaysian property sector is small, the weakening ringgit does suggest that the expected return from property investment is getting lower from the foreign perspective. This will diminish the relative attractiveness of Malaysian properties to foreigners,” it says.

It says more bargaining opportunities can be found in other countries such as Hong Kong and Singapore as property prices have start to retrace.

By The Star

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