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Still a Buyer's Market

WITH the dust of the global financial crisis settling at least for now, barring further surprises, the new liberalised environment for the country’s business and property sectors is a good platform for local property players to leverage on.

If the relaxed measures are able to attract more foreign direct investments (FDIs) in the country’s business and property sectors, there should be greater demand for commercial and residential property from these foreign investors.

In fact, the removal of the Foreign Investment Committee ruling for foreigners purchasing commercial property has the potential to turn Malaysia into a vibrant commercial property market as more foreign investors are attracted to the market.

The commercial market has turned a lot more liquid and there could be more en-bloc transactions down the road.

The market has proven its resilience with capital values and rental rates for commercial space holding out quite well despite the onslaught of the global financial crisis.

However, to give a further boost to the local business environment and inflow of FDIs, it will certainly help if the Government can further liberalised the tax structure for businesses and individuals to raise the country’s competitiveness.

As for the residential market, the existing low interest rates for property financing and the housing packages that are still offered by most of the developers are attracting stronger buying interest.

Those who have yet to purchase their own property and are shopping around for one still can take advantage of the low entry cost until developers decide to put a stop to these facilities.

Going by the strong take-up for some of the recently unveiled condominium projects around the peripherals of Kuala Lumpur, it looks like more Malaysians are resorting to investing in property to hedge against inflation.

After all, bank interest rates for property financing are at one of their lowest and it will be wise to lock in at the current levels.

Meanwhile, industry players are also anxious to get on with their project launches once again after having to defer their plans over the past three quarters since the crisis broke out last September.

After having laid low for much of the past few quarters, it is not surprising that developers are eager to unleash their products and are lining up a string of projects for launch. A variety of property products will be making a beeline for the market soon.

They may feel that delaying the launch further will mean higher holding cost for them.

But, a word of caution for developers. The local economy is not yet out of the woods and the gross domestic product for the second quarter is likely to remain in the negative terrain, although the contraction is expected to ease and bottom out by year-end.

There is still an imbalance in demand and supply in the property market for now and it will take a few more months before a more balanced market sets in.

Developers should be prudent and conduct proper feasibility studies before launching their projects, especially new greenfield projects that take many years to complete.

Gauging the market response through project previews and pre-launch registrations will show whether a project is ready for launch.

To register sustainable earnings growth path going forward, developers have to come out with holistic plans for their residential and commercial properties.

There should not be a sudden clamour for project launches but they should be based on market fundamentals and actual takeup rates.

As the market is just about to make a turnaround and it is still very much a buyers’ market, developers have to be prepared with more quality projects and the right product offerings at the right pricing.

Source: Star 8 Aug 2009 (Saturday), Starbizweek