Opportunities in a slowing sector

The high-rise condominiums and commercial buildings seen in Mont Kiara and Sri Hartamas, Kuala Lumpur.

Industry experts explain the benefits of a property slowdown

WITH the current property slowdown, and the impending goods and services tax (GST) jitters, many buyers are staying on the sidelines as they maintain a cautious approach.

However, a slowing property market could be a good thing, according to SK Brothers Realty Sdn Bhd general manager Chan Ai Cheng.

“It presents an opportunity for tenants. As some properties get completed now, rental rates can be attractive,” she says.

Time to enter the market?

According Julian Knight’s “Five reasons why a slowdown in the property market could be good news” on High50 UK, a website dedicated to individuals aged 50 and above, a property sector downturn could be beneficial for first-time buyers.

“If prices slow sufficiently to allow wages to catch up a bit, it should mean that more first-time buyers will be able to enter the market, without the aid of government schemes or risky high loan to value mortgages.”

Knight notes that first-time buyers are also key to the health of the property market as they are literally “new blood.”

“They allow people who are looking to trade up from their own first time home – say when they start a family – a better chance of finding a buyer for their property. Without first-time buyers the property market gums up and buying chains can’t form.”

Malaysia Institute of Estate Agents (MIEA) president Siva Shanker points out that the level of property transactions has been dropping since 2012.

“In 2013, it dropped by around 10.9%. I am projecting that it was probably flat last year. Since 2012, prices never went down but transactions did.”

According to him, the various cooling measures introduced by the Government have had an impact on property transactions in the country.

“The rise in property prices has at the same rate as it used to be, which is good,” he says.

And what does this mean for sellers? Should they hold on or wait for prices to go up? Siva likens this situation to the “chicken and the egg” scenario.

“You could wait until next year and fetch a good price compared with now. Or you could wait another two, three, five or 10 years - when the price would be better then.

“It’s like the stock market. If you think you have a good price, sell and move on. The trend with property prices is that it rises and stops, rises and stops. It doesn’t fall.”

For those looking to buy property, especially first-time buyers, Siva says they should adopt a “trade-up” mentality, where they should purchase something that is affordable and upgrade gradually.

“Save money and buy a lower cost property. Then after a few years, sell and upgrade to a bigger and better one.

“Instead of buying something that they can afford, a lot of buyers these days aim for something that they can’t. So they end up saving and saving for that property and by time they can afford it, the price would have gone up further and they still can’t afford it!

Impact of GST 

At a recent property event, IFCA MSC Bhd chief financial officer Daniel Chow was quoted to have said that the impact of GST would be minimal on the housing industry.

According to him, once GST is implemented in April, residential property including SoHo will be exempt supply, meaning buyers will not need to pay the GST on it. 

However, commercial properties would be subject to the 6% GST. 

Construction material such as cement, sand and bricks for both residential and commercial properties will also be subject to the 6% GST. So will heavy machinery like cranes.

Chan believes that there could be a slowdown in commercial properties versus residential due to the GST element.

“A lot of people will be hesitating because they’re unsure how it will affect them. However, I do believe that this sector will spring back,” she says. 

No more ‘gazumping’

According to Knight, a property slowdown would mean a reduction in “gazumping,” a situation where the seller threatens to pull out at the last minute in order to get a higher price.

“Unfortunately it does happen, all too often. However, it doesn’t happen anywhere near as much when there is subdued growth in the property market. This means fewer collapsed sales and less heartaches all round.” - Th Star