What’s bad for auctions is also bad for sub-sales

By IZZAT RATNA / Pic By AFIF AB HALIM

Lower-priced foreclosed houses are seen to attract lower bids at bank auctions, with prices to drop as much as 30% this year, say real estate companies.

Part of the cause for lower bids is the increase in number of foreclosed lower-end properties in the market as lower-income owners struggle with high living costs, according to industry experts.

The lower bids at auctions are also seen to affect the secondary housing market for low-end properties as they compete with the same buyers.

CBD Properties Sdn Bhd MD Adrian Wang told The Malaysian Reserve (TMR) that many owners within this housing bracket are facing problems holding on to their assets due to challenging market sentiment and economic environment. “Judging from the trend, this phenomenon is expected to continue throughout this year as the market remains volatile, and any signs of recovery would be dependant on the country’s political and geopolitical factors.

“Also, this phenomenon may also create intense competition in the sub-sale market for homes priced within the same bracket,” he said.

According to the National Property Information Centre’s recent data, about 30% of new housing launches in 2015 and 2016 were priced below RM250,000 in the lower-end category

As at third-quarter of 2016, transaction activity for the overall property market dropped 12% to 239,798 transactions, while overall prices dipped by 16.5% to RM95.34 billion compared to the preceding quarter.

for properties still attracts buyers Property consultants CBRE-WTW said recently that 57% of property transactions were priced below the RM250,000 mark.

Esprit Estate Agent Sdn Bhd MD Aldrin Tan told TMR that over the last two years, there was a significant number of low-end residential properties that were bought by owner/occupiers being put up for auction.

“Naturally, the slowdown in either one of the segments in the property market would result in higher non-performing loans, with more owners facing difficulties servicing their loans,” Aldrin said.

However, Aldrin did not expect the troubles in this segment of the market to disrupt the overall property market.

The latest statistics released by Bank Negara Malaysia noted that loans applied for purchase of residential properties stood at RM19.04 billion in June this year, 14.2% lower than RM22.19 billion in May 2017.

Loans approved by lenders for the same purpose also fell to RM8.5 billion in June 2017, against RM9.34 billion the month before.

However, Aldrin said the mid-market segment for properties priced between RM350,000 and RM750,000 still attracts buyers, mostly from local and foreign investors into the property market.

“Investors are moving on from the RM750,000 to RM1 million homes to the RM500,000 bracket as it is still a digestible price range in the market today.

“Also, most of these units are located in strategic locations near the central business district area, which also plays an integral role in its sustainability,” he said.

Meanwhile, Malaysia-Australia Business Council vice chairman Datuk Peter Tan is urging local manufacturers and developers to adopt pre-fabrication system in order to reduce the construction-building period.

He said that the adoption of this mechanism may shorten construction period by 20% for a 40-month building time-frame, which would also help offset long-term interest rate despite the additional 15% increase in the early establishment phase.

Peter said the new building mechanism will also reduce the absolute price for new homes and faster completion times also means buyers can move in quicker and save money from paying rents.

“One of the reasons for Malaysia to still conform with the old ways of doing construction is because the country still has a lot of access to cheap and low-skilled labour that requires lesser overall construction cost compared to pre-fabrication.

“Therefore, the industry needs to standardise the building design, in tandem with the transformation period into a more efficient way in doing business to produce better end-products,” he said.