Secondary property market expected to improve next year

Expert says property prices in the secondary market are fairly competitive due to the downward pressure from the primary market

By S BIRRUNTHA / Pic By TMR

THE secondary property market, which makes up some 80% of the overall residential housing transactions in the country, is expected to grow at a slower pace before making a further improvement next year.

PPC International Sdn Bhd MD Datuk Siders Sittampalam said the first quarter of 2019 already saw the secondary property market reporting a marginal improvement.

“Certainly, the market did pick up to some extent. It is not like what we saw in 2015, but it will gradually see some appreciation in the market.

“What is good to see in the secondary market now, is that it is driven by fundamentals rather than sentiment,” he said.

Siders said the prices in 2017 and 2018 were very much driven by sentiment, as buyers were mainly influenced by the “herd” syndrome.

Now that the sentiment has been completely diffused in the market, he said decisions on house buying are currently made based on fundamentals.

“Going by that, there are certainly ample secondary market properties, let alone the primary market. We are looking forward for 2020 to be a better year for the secondary market,” Siders added.

SuperiorWealth Resources Sdn Bhd founder and CEO Dr Alan Poon said the property prices in the secondary market are fairly competitive due to the downward pressure from the primary market, which causes an increase in overhang of properties.

“Having said that, the demand is still there and the secondary market consists of a lot of investors and buyers who wants to release their properties quickly. So, they would have to give attractive discounts and prices to match the supply that has been available in the market,” he said.

Poon added that the secondary market is known for its proven tenant rental market and people knowing that it is situated in a convenient location, close to all local amenities.

“So, for those who have been renting all this while and they want to buy the property so that they could continue to stay in that area, they can definitely look at the secondary market,” he said.

According to National Property Information Centre data, the secondary property market makes up 80% of all residential property transactions in the country, compared to 20% of new properties in the primary market.

The data reported that there are significantly more varieties of homes at affordable prices for first-time homebuyers within the secondary market.

Siders said the secondary market is now driven by buyers rather than sellers, noting that the buyers have always had better bargaining power.

He said areas with landed properties — including Damansara, Taman Tun Dr Ismail and Bangsar in Kuala Lumpur (KL) — are still attracting buyers, with not very much of a decline in terms of price and sales.

“In terms of volume of buyers, the secondary property market has been slightly increasing too. If you look at the previous years, the launches in KL between 2017 and 2018 have come down, which was around 22,100 and 9,700 respectively.

“On the contrary, the sold properties of the new launches have dropped drastically in 2018,” he added.

Siders attributed the drop in sold properties among new launches to the overbuilding at wrong places and with wrong prices.

“The market direction is now towards anything that is priced below half a million. There is a mismatch between demand and supply,” he said.

Last year, the number of new launches in the property market was recorded at 66,040 units, which contracted by 14.9% from 77,570 units in 2017.

Siders said to a large extent, the secondary market has acted independently from the primary market — although in the past, the primary market was leading the secondary market in terms of pricing.

He added that it is not very much evident now, since the market is so flat in its nature.

In a report released by the Ministry of Finance last year, house prices continued to record a steady increase as the Malaysian House Price Index remained at 193.3 points in 2018, up by 3.1 points against 2017.

The report stated that two major states, led by Johor and followed by Selangor, saw house prices increase by 5.6% and 3.3% respectively.

Poon suggested that it would be better for people who have a slightly stronger financial background to consider properties in the secondary market.

“If you look at the profile of people who always go for the secondary market, it has always been those who have been saving up or those who have been partially subsidised with their parents’ or relatives’ money.

“However, for first-time homebuyers who are in their 20s and 30s or even if they are just starting out, they might not have the financial power. They will be more inclined towards the primary market because it is more attractive and they will be given a 5%-10% rebate or discount that will help them to soften their entry into the market,” Poon said.

Last year, the property market recorded 313,710 transactions worth RM140 billion, which is an increase of 0.6% in volume and 0.3% in value compared to 2017. Residential properties continued to support the overall property sector with a 62.9% market share.