Higher demand in secondary market to curb price escalation of new properties

The secondary market was the main driver for the overall transactions in 2017, says president


The increasing demand and improved consumer sentiment in the secondary property market is expected to suppress any drastic price increases for newly launched products in the primary market.

Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) president Foo Gee Jen said the secondary market was the main driver for the overall transactions in 2017.

“The majority of the transactions in the sub-sale market last year was within the RM350,000 and below pricing bracket compared to the primary market, where the pricing points were still largely dominated by those RM350,000 and above,” he told reporters at the 11th Malaysia Property Summit 2018 in Kuala Lumpur yesterday.

He said the sentiment was not the same five years ago, when developers had the upper hand to constantly hike the prices of their new launches.

“At present, developers are forced to re-strategise their price points of new projects due to the shift in market dynamics. This has created some time-lag of perhaps two years or more in between projects,” he said.

Foo, who is also the MD of consulting firm CBRE-WTW, said this new shift in pricing strategies would eventually drive the overall volume up and record a more moderate appreciation in the price points.

“We need to stabilise the year-on-year (YoY) volumes and transactions first, before the entire ecosystem is able to recover,” he added.

Foo said the temporary stop order for the luxury commercial and residential segment priced above RM1 million introduced by the government last year was successful in sending the right signal to developers, end-users, as well as investors.

He said the freeze also indicated that there is a need to be cautious about sub-segments of the market.

Foo said the main concern now should not just be the overhang, but also on the utilisation rate.

“Overhang is defined as unsold units, but some of the units sold had not been fully utilised. So, this is another area which has yet to be captured by the government as it requires a massive data system,” he said.

As for the near future of the market, Foo said it is expected to be flattish and will be mainly dominated by the residential segment.

“The residential market has always been dominant in terms of volume, making up between 60% and 65% of the total transactions in 2017.

“The robust urbanisation rate in the country, which is expected to hit between 75% and 80% in 2030, will also be one of the driving factors to catapult the overall sentiment in the sector — as the need for housing will always be there,” he said.

Data from the Valuation and Property Services Department (JPPH) stated that transaction volumes from the first quarter of 2017 (1Q17) fell by 4.3% to 229,529 against 239,916 recorded in the same period a year ago.

Transaction volumes saw some 6.7% hike to RM102.29 billion for the nine months of 2017 (9M17) compared to RM95.85 billion in 9M16.

JPPH DG Nordin Daharom said the overall volumes of transaction and value are expected to rebound this year, despite the soft market sentiment.

“YoY, the overall transaction would be around 300,000 units, which is not far from the figure recorded in 3Q17.

“And since we have another three months to go, I am confident that we would be able to hit the annual mark, driven by the improved market sentiment and stronger gross domestic product (GDP),” he said, adding that the upward trend in volume is not expected to show any sign of slowing down in 2018.

The property summit was officiated by Deputy Finance Minister II Datuk Lee Chee Leong.

Lee said in his keynote address that the positive growth in the Malaysian economy with 6.2% GDP recorded in 3Q17 and the 5.5% and 5.8% GDP projections for this year by the World Bank and other economic experts, would be the driving factors to aid in the sector’s recovery.

“This indicates that the overall sentiment is expected to improve, which will have a positive ripple effect on the property sector.

“The government’s temporary freeze on luxury properties and to review them on a case-to-case basis is also expected to help stabilise the market,” he said.