1.Fewer new project launchings - Unlike first quarter last year whereby a slew of new housing projects were launched feverishly, this quarter will likely see a subdue market with fewer housing project launchings judging from the promotional activities and advertisements in the local dailies during the period of year-end holiday seasons and new year festivities. Recent housing advertisements and promotional activities are mostly geared towards “stock clearance sales”, indicating that developers/contractors are attempting to reduce their overhang units or clear their inventory.
2.Softening property prices - Whilst some of the housing developers are still holding on to their selling prices, few have started reverting to their old selling prices after price increment ranging from RM10,000 to RM50,000 per unit 5-6 months ago due to escalating costs of fuel and building materials.
Previously, it is common to see developers offering “free legal fees for SPA” only. Now, developers are more “generous” in dishing out perks which include free legal fees for all documentations and absorb all stamping duties on transfer and loan and progressive interest payments during construction period and freebies like LCD TV, air-conditioners, home alarm system, no maintenance charges for first two years etc. Under such packages, If one is to purchase a house costing RM500,000.00 with 95% loan (RM475,000.00), the estimated “savings” can total up to RM35,000.00 - RM45,000.00 per unit or approximately 3-4% of the sales price. The primary market of Penang Property Sector is likely to see more such offerings and new pro-consumer financial packages such as 5/95 Home Loan Package.
3.Higher overhang units were reported in 3Q08 in the latest NAPIC’s report of which 86% of the overhang units is from Seberang Perai (mainland Penang), which still has abundant of usable lands and is facing stiffer competitions as compared to Penang Island.
In a softening demand environment, developers are shifting strategies to shore up sales and focus more on cash flow management to sustain their projects rather than holding on to their overhang units whilst some may review their project plans to either cater for niche product segment or more affordable products range. A clearer picture on the take-up rates of the ongoing housing projects which indicating the demand trend will emerge over the next few months when NAPIC releases its 4Q08 and 1Q09 reports.
4. Slower construction activities-Construction activities of some ongoing housing projects have also noticeably slowing down or scaled down in recent months. Several property developers in Penang have already announced plans to defer their projects in the state;here and here.
5. Lower housing supply -Given the global economic downturn and weak domestic market outlook, the number of new housing supply coming on stream this year may be lower compared to previous good years. It is a challenging times for housing developers to launch new planned projects.
According to Malaysia’s NAPIC Report - Residential Property Stock Report 3Q08(Page 31-33), the Penang State housing stock totals 322,426 units including 1,687 newly completed units in 3Q08. The incoming supply (under construction and works started) is estimated at 51,612 units whilst another 34,648 units planned supply units from housing projects which have been approved as well as those submitted but pending approvals.
On the national front, Malaysia’s housing ministry has projected a lower number of supply of newly completed houses at 80,000 units for year 2009 as compared to annual average of 100,000 units. More at Ministry hopes for 80,000 homes in 2009.
As the property market in Malaysia is taking a breather, the current property downturn has opened up good opportunities for property investors with a long term prospective as Malaysia properties are still comparatively attractive as compared to other regions. For advisory on property investments in Kuala Lumpur and Penang, email to us at Izrin & Tan Properties Sdn. Bhd or call us at +604 6588333 (Penang Office) or +603 92839782 (Kuala Lumpur Office) and we would be pleased to assist.
New housing schemes in Bayan Lepas near Penang International Airport
View of the newly completed housing scheme in Butterworth town.