This 2015 outlook was actually prepared a few weeks ago, but due to the CNY festivities, it’s been put on hold – but as the cliché goes – better late than never. These are the views of the few fellas in Propcafe – do remember whilst we are all investors here, none of us are involved directly in the property development industry – here we are, a bunch of investors with diverse background, sharing with you – our thoughts of the current state of the market, as well as outlook.
- What are your thoughts on the real estate market in Klang Valley in 2014 and the sentiment in the market?
Black Coffee
The sentiment is bearish and reflected in volume of the transaction in first half of 2014 where it is flattish compared to 2013.
Cafe Correto
Definitely not the year for investors. There is nothing in favour for investors.
- Economy does not look good at all especially on the dark cloud of lower oil price crisis that spillover the whole world especially to the oil net exporter like Malaysia. This will affect the “cash flow” of investors to buy or to hold the properties.
- Tightening of credit lines from Bank and BNM does not help at all.
BNM has placed a lot of pressure on Banks to watch out its portfolio risk and indirectly enforced stricter lending criteria than its official BNM guidelines. Less credit means less opportunity to investors. Year to buy VALUE BUY properties. Property at market value (not overpriced) will not entice me to waste my limited credit lines. Like Chinese says, year to aim “Chun Chun”. Developer will be difficult to offer CHEAP properties during bad economic climate due to forever rising cost and also the soon to be started GST. Although residential properties is exempted, relevant material cost still will incur at least additional 2 to 3 percent building cost to add into selling price. Unless, developer reduce its profit margin significantly (to 10 percent?) and put in high density, good deals will be hard to find. Sentiment – Ownstay buyer will be happy as more choice units will be available for them in primary and secondary market. Those bbb days are over and number of investor will be significantly reduced. Cheap units in secondary may not be there except those projects that previously buy x3 by vulnerable investors. Seasonal investors have made their buck last 5 years so holding power would be there. Strong intention to sell will not there from season investors because disposal does not mean they can get back the credit lines to purchase again due to the stringent lending policy which change all the time. The year starts with oil crisis with terrible stock market or other asset investment environment, so first 3 months will be SLOW. Then GST kicks in on April, wait and see from buyers is expected. Second half of the year, if global and Malaysia economy continue to be sluggish then we can expect whole year to be SLOW. If government react to the slow market by loosening the financing/cut rate and start giving incentive to support real estate market or economy getting better (start to recover) then there is some hope to get the performance that close to the year 2014. Or else, it will be a bad year to property market for sure. How bad? Million dollar question. Stagnant in the price likely. Those non strategic location and luxury properties with huge supplies may see more auctions and some selling lower than market price.
Flat White
Extremely slow for landed over 1mil. Lower priced properties such as condos under 500k or landed between 300k to 700k still see good take up rate. However the mad rush to queue overnight is over, as of now. Same sentiment for subsale market.
Kopi O Peng
Government’s anti speculation policies had shown its impact, judging from the shrinking overall property transactions, short term property flippers have switched to other investment tools such as stock and commodity market)
Latte
Brisk take up rate from primary sales. Subsales remain tough, seeing signs of softening asking price from secondary market. In general, we still see value buys were snapped up like hot cakes despite property cooling measures in place.
On market sentiment, many exercise caution however that properties with good value propositions will still perform well.
Soy Cappuccino
In 2014 can be felt that the market was softening and the consistent buying pushing force hardly been felt throughout the years of 2014. Season wise investors started slowly withdrawing from the market as compared early 2008 and can see the market is dominated by younger generation buyer of investors. Nevertheless based on total value of properly transacted, 2014 market was still fairly healthy in some categories especially commercial retail, landed residential and well planned township project which comes with good concept.
Affogato
2014 was an uneventful year, with not many ‘valued’ launches (from the presepctive of an investor). With prices everyhere, from Old Klang Road, to Puchong to Setapak all breaching the RM500psf barrier; it makes getting a healthy yield an even more daunting challenge. Sentiment was pretty soft, with a lot of real estate investors choosing to stay sidelined whilst the late comers snap up various launches.
- What did you think was the hottest launch or best launch of 2014 ?
Black Coffee
The hottest launch would be those affordable mass market, family size house with price range of 400-600k with at least 3 bedrooms. Launches such as Midfields2, Season Gardens, Saville Kajang have been well received.
Cafe Correto
Vortex@KLCC. New launch starts with 1000psf (some units even slightly lower than this) from KLCC zone 1 area, is almost impossible to get nowadays. The layout is superb which utilised fully the space. With the less than or around 800sf, it fits in 2bedrooms and 2 bathroom with addition study area. 2+1 set up with the price starts less than rm800k, what else can you get there at the busy junction between Jln P Ramlee and Jln Sultan Ismail. You won’t miss it if you drive around KLCC which means the visibility and location cannot be wrong. Unfortunately, not even all Monoland previous customers could get it, not to say others.
Flat White
Vortex by Monoland – they don’t even need to sell to fully sold out.
Kopi O Peng
High rise –
- a) Midfields by YTL, Q started a night before the launching, and the developer do not have enough to sell,
- b) Vortex, by invitation only, below market price.
Landed – Ecohills, despite siberfar, many SP Setia and Ecoworld supporters.
Latte
For highrise: Vortex by Monoland it was literally sold off without much marketing efforts.
For landed properties: Few pockets of launches by INP in Bandar Kinrara and Temasya Glenmarie, these launches did not see light and they are all taken – at least the non bumi units.
Soy Cappuccino
There were few launches were quite hot despite the property market is starting to be soften by the incoming influx of newly completed of subsales, to my surprised Eco Majestic by Eco World is doing pretty good as what I had expected.
Affogato
Again, from an investor point of view. For those who want to go into KLCC, it was no doubt Vortex Residence by Monoland – as usual pricing it below market average, making all the other KLCC projects look expensive. Saville Kajang, and absolute price of RM300k++ , for a livable 2/3 bedroom unit, quite unheard of. But this IS Kajang mind you.
- What are your thoughts on the Klang Valley real estate market in 2015, and going forward?
Black Coffee
With all the tough measures that still in place by BNM and government such as ban of DIBS, LTV70, using net income instead of gross income, RPGT etc, the general real estate market in Klang Valley expected to be flattish or slightly dropped compared to 2015. Furthermore, the residential high supply from 2011/2 primary market is hitting secondary market from 2014-6. The potential buyers are also wait and see from the gst impact 1.April.2015 onwards. However most developers if not yet they already built in the cost into the selling prices.
Cafe Correto
Year 2015, well, if you can still buy (cash and credit lines available), why not? Market will be soft means more opportunities for this group of buyer. Many believe that buy new launches now and by 2018/19 bad time could be over (which around election year), many policies in favour for Rakyat should be there to support the market. Peak time again in 3 or 4 years time? The call is yours.
Flat White
Will be slower than 2014 with fewer launches. The 1st 6 months will be testing as GST implementation will cast doubt over people’s minds.
Developers will try to launch mid priced properties (around 500psf).
Kopi O Peng
Slower and reduced transactions, but higher overall transacted amount. Less cooling measurement policies from government as the current policies already successfully cooled down the market.
Latte
Price will likely to be stagnant with lower number of transactions. Credits supply will continue to be tight in near term. Should BNM ease the rates and borrowing restrictions, we may able see more transactions and more positive market sentiment
Soy Cappuccino
Moving forward to 2015, I think the real estate market in 2015 will be more or less same as 2014 due to the continuous lacklustre buying sentiment. Quick flip market is shrinking. Back to basic where normalization of 20% of cap gain. Market uncertainties due to other economical factor, government policy of introduction of more and more affordable homes, min house price regulation for foreigners, adoption of coming GST scheme, Oil price fluctuation, financial institution is more cautious in giving loan, BNM intervention and ringgit paper weakening; somehow will affect the 2015 real estate market where more likely buyers would likely adopt a wait-and-see strategy for six to nine months after the implementation of the GST. For all these indicators, I am expecting to see the change in most developers in Malaysia in their marketing and pricing strategy to adopt to the market comfortable digestion level to introduce product price range of 400k-600k with smaller unit size to the market. It will interesting also that I am anticipating the change of property market trend in term of market requirements and paradigm shift of definition of home, where the emerging of new market is getting clearer – The Gen Y&Z lifestyle product
- Emphasing more on Lifestyle living with premium elegant address
- Integrated mixed development will be getting more acceptable
- The rise of SoHo, SoVo, SoFo , SoXo …
- New developments of township at outer Klang Valley to keep the price at affordable range (The expansion of Klang Valley’s perimeter).
All In all, I would say 2015 property market is the key year to dictate the market on 2016!
Affogato
Launches will continue to take place, but developers will need to re-strategize to target more ‘affordable’ housing price. VP-ed units from 3-4 years ago will be coming online these few months. Will be a test to see investor’s holding power; and if there’s any shift in tenant preferences.
- Any particular launch you are anxiously waiting for in 2015 and why?
Black Coffee
We subscribe to anytime is a good time to buy provided it is a good buy. Launches with good location and accessibility, amenities, affordable mass market pricing, family size will always will be in demand. A new trend is follow the infrastructure. Saville Cheras and Ekotitiwangsa should greatly benefited from the MRT and DUKE extension highway. As for landed, a well thought township from reputable developer is always a good bet. I am looking forward for Eco Sanctuary albeit high end landed from EcoWorld.
Cafe Correto
Hot deal in 2015. It has to be again Monoland product – Sky Suites. Fantastic location but don’t expect great view from this building though it is right opposite KLCC. Rumous the size would be small and pricing starts from rm1200psf up. Next door, the land owned by TA is expected to launch more than rm2000psf. Eventhough it has 1000 units to sell, expectation is, it will be taken up in no time. Hope the message can be sent to other developers. Don’t squeeze the buyers, leave more money on the table then the customers will be always there with you during good or bad times. Another deal would be the affordable Lakefront project by MCT. The launch of project with rm400psf and size from 1ksf means rm400k (hopefully before discount) will be a good buy for 1st time home owner or investors who still believe there is strong rental market in Cyberjaya. Bear in mind, Cyberjaya has ample supplies but this rm400k deal with family size condo looks promising, both on rental or ownstay purpose. Similar size of condo in Cyberjaya either very old or too expensive. This may fit in just nice if you believe in Cyberjaya.
Flat White
We see people are rushing to lock in capital items such as cars, furnitures, luxury items BUT houses prior to the GST. There is no mad rush to lock in properties.
No particularly anxiously waiting but would like to see how is the pricing for Tropicana Aman and Eco Sanctuary.
But my property friends are EAGERLY anticipating Sky Suites by Monoland, a high densed boring but well located project. Was told all 1000 units are fully “booked” even before they were launched. Such a rumour.
Kopi O Peng
I personally do not expect any new launch, as i see more value buys in the sub sales market. Savvy investors will look for undervalue gems in the matured market.
Latte
Sky Suites at KL by Monoland, location, location, location.
Soy Cappuccino
No particular launch, so long is valuable buy, I will buy. I am looking around area of Cyberjaya, Cheras ( nearer KL side), Redevelopment of Pudu, KLCC & Bukit Jalil. If talking about specific particular launch, it will be The Sky Suites @ KLCC by Monoland.
Affogato
Numerous PJ area launches, because this are does not have any more land.. From the F&N land, to the Sentosa cinema, as well as the whole section 13 area.
- What will be the strategy you are going to adopt in the near future?
Black Coffee
The property market is getting tougher with both liquidity in primary and secondary market is drying up.Home buyers and investors must be resilient and have strong holding power. The flipping game (gameplan or accidental flipper) for property is getting tougher. Going forward Property with good cash flow and high liquidity for rental will be safer investment.
Cafe Correto
Value buy in primary market and bargain hunting in secondary market and auction market (if cash allowed to do it). Focus still very much on mass market around rm400 to 500k. Leaving some cash as emergency aid and prepare the worst. If bank suddenly loosen the lending criteria then this cash can be used to BBB again.
Flat White
VALUE BUY, VALUE BUY, VALUE BUY.
Kopi O Peng
“Buy to Let” strategy, buy and rent, focus on matured area.
Latte
To be cautious, to go back the basic to focus to maintain good mix of CF+ portfolios and have sufficient reserves for good deals coming along, or to buffer the uncertain market conditions.
Soy Cappuccino
Buy and hold strategy. Change strategy from Short term to midterm plan. Buy “Limited Unique Product”. My focus will more to these two words of “Value” And “Buy” and apply some knowledge and tools to combine these two words together. Do I need to make it so clear? You do the sum and let me know!
Affogato
Aim sharply before pulling trigger , given the limited credit availability due to LTV70,
- What is your advise to budding new investors ?
Black Coffee
Equipped yourself with knowledge and surrounded yourself will like minded friends/networks. For example Propcafe consists of 7 enthusiast founders with different background but sharing similar love in property investments. Never have herd mindset and always perform own due diligence for investment making decision.
Cafe Correto
In this end of property boom cycle, make sure you have enough buffer to cover: 1 year property installment with zero rental on your empty unit. 2. Buy those you can use as ownstay. 3. Don’t listen too much from the so called guru.
Flat White
Buy whenever you can afford, but applying bank loan is more stricky than one thought currently,
Kopi O Peng
- a) Buy for own stay first before buying for investment
- b) If there is no good buy, rent first while waiting for good deal.
Latte
Work hard to understand the underlying value of the properties. Network, be humble and learn from those who had made it in real estate investment.
Soy Cappuccino
Do you own diligent and be more hard working. Don’t trust others including news and media as well as don’t trust yourself so much either, trust on facts and actual numbers. Don’t extremely over analyzing and do it within your mean. If you look hard enough, there will be good buy regardless of time and location. Last but not least, of course please subscribe to us at PropCafe.Net and following us on our facebook https://www.facebook.com/propcafe.net 🙂
Affogato
Be smart and practical in your investment. If you can wait, then go for valued buy new launches, else can just invest in many of the subsale units available, where the rental yield is still pretty decent. Always always do your own due diligence – and buy with eyes wide open, not eyes wide shut.
- What has been your best investment to date, and why ?
Black Coffee
There are plenty of invested properties yield more than 50% cap gain, some with 5/95 scheme or zero down during the heydays of 2009/10. However my best investment was my first flipped condo in Sentul. From the proceeds, I have re-invested in multiple condos that yield multiple folds return compared if I still keep the condo.
Cafe Correto
It has to be investment on Regalia. Not so much in term of profit but the self satisfaction on the execution part. Booked a leftover underpriced unit from developer (maybe 20 over layouts has confused the marketing team) few months before its VP in Aug 2012. I signed the SPA in March 2013 (don’t ask me how I dragged it) for a 860sf unit 2 bedder at nett rm450k. Received keys in May 2013 then rented out and sold in the same month of Oct 2013 at rm690k. Technically 6mths+ flip with rm240k gross profit. This show that it is still possible to have gems from leftover units from the soon to be vp project.
Flat White
Setia EcoPark. Look no further especially any launch prior to 2012 where its prices still affortable. Best ROI ever especially Setia’s innovative 5/95 DIBS package. Just kicking myself didn’t buy enough.
My big miss was Desa Parkcity. Otherwise I would have been sipping my white wine somewhere in France region while replying this questionnaire.
Kopi O Peng
All the auction deals with 30% below market value.
Latte
Consider myself lucky to start looking at property investment on early days, did enjoy some good appreciation for properties purchased pre BBB era. What was a good gain earlier doesn’t mean you may also gain later, real estate investment is a long haul journey, in all, I enjoy it.
Soy Cappuccino
I think my best investment to date is not property but rather the knowledge of property and friends who are share the same common interest and passion in property. There won’t be any best investment so long you are still investing !
Affogato
Empire Damansara for its liquidity and capital appreciation. Pacific Place, for it’s almost zero down entry scheme; and proximity to LRT station, from low RM400psf ; “where to find” these days. So cheap, compared to the other new launches in the Ara Damansara area.
- Any thoughts on MRT2, MRT3, Kidex, Kwasa – and how it will influence your investment strategy
Black Coffee
Follow the infrastructure as this will enhance accessibility and conveniences of the properties.
Cafe Correto
MRT 2 and 3 just too far away. There are plenty of MRT 1 and LRT opportunities, why bet on something that may change or fail to execute? When bad time come, everything will be shelved.
Flat White
No thought. I don’t buy on rumours, sell on fact.
Kopi O Peng
i am avoiding properties closed to these amenities as developers have priced into the selling price.
Kwasa, MRT2, MRT3 more like a vision 2020, a medium term investors with 3-5 years time horizon, would unlikely to see the impacts.
Latte
Do be very careful to potential new developments that priced in these infrastructures, as track records show that projects under current government administration has the tenancy to delay project completion, and to be further ‘tertangguh’ It would be safe to only invest in these location when these infrastructure materialise.
Soy Cappuccino
No doubt these are the area labeled as hot spot. It does not influence my investment much unless the price and product match my target. Of course, MRT2, 3, KIDEX, KWASA, DUKE2 & DUKE3, SKIP; all this require a longer investment horizon, perhaps I might look at it for long term strategy. No doubt is worth to have your eyes here and maintain a flexible strategy to accommodate some of the properties around here.
Affogato
Look at the time horizon of the estimated completion date, then decide on your time horizon for investing – does it tally, can you hold that long ? i.e. I-City and promise of an LRT line .. when will it materialize , 2020 ? 2025 ?
- Is the usage of rental yield as a benchmark, still reliable ?
Black Coffee
Yes, it is still relevant as rental yield (whether net or gross) is the first yardstick to be used to filter a good cash flow game properties. However, many other factors in play that need to be considered. For example the potential of the “upcoming areas” that might rendered current rental yield insignificant.
Cafe Correto
Forget about great rental yield. Reality hits due to highly priced property nowadays and stagnant income growth. Low and mid cost apartment may still provide relatively good yield but to manage it with high number of property and low quantum may not be everyone’s cup of tea. I will keep the existing portfolio (with pretty good yield) while slowly add in MRT infrastruture driven project. Slow down is the theme of this year.
Flat White
It depends on what is your inclusion as your cost.
Kopi O Peng
Rental yield is just a number, as long as rental can cover monthly instalments, investors shall look at the capital appreciation instead.
Latte
Yes, this is the core fundamental value of asset investment, anything without CF or yield is likely to be speculation than investment.
Soy Cappuccino
Yes to some extent but I won’t be too rigid with that. It is just one of the key factor but not the ultimatum. There are lot more to consider other than rental yield for today’s scenario.
Affogato
As a novice investor, it should be one of the key benchmark during decision making time.
- Your thoughts on “bubble” in the Klang Valley real estate scene?
Black Coffee
Prices have been escalated steeply and BNM, government has taken step to curb speculation since 2011 and thanks to them the transactions have been trending down and flattish for past 2 years. Nevertheless, most developers have sold well and holding large unbilled sales that can last them for next 2-3years therefore they could hold the prices for the inventories and future prices. Nevertheless the Malaysia demographic is young and there are still demand for new housing. 2015/6 will be an interesting period where tough measures, wait and see attitude of buyers, uncertainties of world economy and gst impact, the oil prices etc all are interwined and affecting Klang Valley property market.
Café Coretto
I missed the forummer called Toptail when talk about bubble. I am more incline to believe that market will be stagnant in 2015 and some projects in “si beh ulu and far place” may suffer if it is vp this year. Bubble? No. We don’t have subprime loans in Msia. But, those who thought they are so smart to get loan via “creative” ways, god bless them.
Flat White
There wont be any real bubble in Klang Valley as demand for property is still rather consistent, however certain type of properties at certain locations might not be performing as well as other. I keen to say SOVO buildings not close to public transportation will not be doing that well.
Kopi O Peng
Bubbles = oversupplies, Not applicable on all property categories. High rise properties are oversupplies in general, especially in the new area like Cyberjaya, or overdeveloped area like in Jalan Ampang, or Mont Kiara.
Latte
No sign of property overhang yet. If we were to compare our real estate prices to our neighbouring countries, such as Vietnam, Myanmar, Thailand, and Singapore, in fact Malaysia properties prices are not so bad.
Soy Cappuccino
Bubble? I heard it since 2007 , and very often in 2010-2012 and I hardly hear today. I would say more to price correction especially for high-end market and also overly supplied market with “high end price”.
Affogato
Yes, in selected areas, e.g. Mont Kiara and high-rise, especially studio-sized units in places like Cyberjaya.
In the traditional areas, do not expect a bubble – even if price corrects, there will be people who will snap it up right away.
