DOWNWARD CORRECTION OF PRICES BEING FELT IN RESIDENTIAL POCKETS WITHIN SELANGOR
The infallibility of house prices is a belief that is more grounded in the track record of the Malaysia housing industry, and not necessarily rooted in fact.
As a rule of thumb, house prices in key urban centres within the country have a tendency to double (at the very least) over 10-year cyclical periods. However, this doesn’t mean that house prices are immune to dips along the way, even though such an occurrence has been extremely rare since Malaysia first embarked on our stellar growth trajectory decades ago.
Even so, it seems a prolonged depressed market is now beginning to take its toll, and among those feeling it is the country’s most economically vibrant state, Selangor.
According to the National Property Information Centre’s (Napic) Property Market Report 2016, a handful of housing estates in Selangor witnessed price corrections last year, indicating that the transacted prices of landed properties in as many as 30 residential areas seeing a dip of 5% or more.
The steepest decrease in transacted prices for landed homes occurred in Petaling Jaya city’s SS 3 (-10.7%), Section 22 (-9.5%) and Section 20 (-7.4%) neighbourhoods, as well as Taman Bukit Teratai in Ampang (-9.5%) and Taman Kajang Perdana in Kajang (-8.6%).
Worryingly, these five locales are matured and self-sufficient housing estates with convenient access to nearby amenities, which property watchers often cite as factors that should make it resilient to price change.
Experienced real estate agents say that there nothing specific about these areas that make it uniquely susceptible to price decreases. Rather, Napic’s historical data (which is randomly selected) reflects the emergence of a trend that could see price corrections occur in the overall property market.
A prolonged downtrend, they say, will inevitably result in a lower appetite for property purchases which means prices will correct themselves in order to revitalise demand. House owners are simply becoming more realistic and flexible with pricing, which also serves to accommodate the stringent borrowing regime currently being instituted by banks.
Bank valuations have not risen in tandem with asking prices in recent years, so the downward correction of prices will help shrink the price-to-loan disparity and quicken sales.
Long-time market observers are also quick to point out that such situations are not to be seen as home owners “fire selling” below market prices. It is important to note that many of these neighbourhoods are old neighborhoods, with long-time owners that have already made healthy appreciations over their investment cost. Now, they are simply opting to cash-out given the current economic scenario and have an opportunity to do so with an appealing profit margin despite the lowered price.
However, property seekers keen to take advantage of these price corrections should note that prices could swing upwards again once the impact of improved connectivity and public transportation begins to take hold.
Many of these vicinities are already well-connected, with access to Damansara-Puchong Expressway (LDP) and Federal Highway. Demand will continue to be steady because of proximity to LRT stations and will only rise with the improved interconnectivity planned for rail systems in the Klang Valley.
The lowered pricing may also present an opportunity for “redevelopers”, those who invest to refurbish and sell at a profit. Petaling Jaya, for example, remains a prime location for many homeseekers, but the age of properties in the neighbourhoods mentioned above may be a deterrent because of the additional renovation costs and hassle that may be required.
This means those with the capacity to acquire property at a bargain prices and rebuild at an attractive cost, could subsequently take advantage of persistent demand in PJ and flip the property for healthy returns.
As security has also been an increasing concern for older neighbourhoods (in general and across the board), any improvements on that front would also positively impact the sale of these properties.