24 April 2012
Property Market Update: Rents are forecast to slide with slower economic growth and an anticipated oversupply in the coming months- DFZ Research
Cautious sentiments arising from an anticipated economic slowdown have led to a generally subdued property market which is likely to face a tough year ahead, DTZ Research said.
In a statement yesterday, the property services company said investment activities in the country experienced a slow start to the year, with volume in the first quarter of 2012 (Q1) dropping to RM427.5 million, lower than the quarterly volumes registered in 2011.
"However, the decline does not reflect waning investors' interest for good assets as dismal market conditions in Europe diverted attention to Malaysia and the region, leading to an increase in enquiries. New real estate investment trust (REIT) listings in the pipeline are also expected to give investment activity a boost in the later part of the year," said DTZ Research.
"Funding for good projects and borrowers are still available as liquidity remains ample. Investment activities are expected to pick up in the later part of the year, subject to availability of assets in the market, as more foreign funds have new mandates for the country," it added.
It pointed to IGB Bhd's purchase of a 50% stake in the holding company of Renaissance Hotel as the largest transaction recorded in Q1.
Meanwhile, the stricter guidelines on personal loans have led local property developers to focus on smaller and more affordable units, said DTZ executive director and head of residential marketing, Eddy Wong.
"The imposition of tighter lending guidelines requiring housing loans to be approved based on the net household income instead of gross income should, to some extent, cool an overheated market that has run up substantially in terms of pricing in the last two years, as well as focus developments toward the more affordable housing segment," he added.
The residential market was relatively quiet in Q1 with no new completion recorded and no launches seen due to various public holidays.
The average capital value of high-end condominiums in Kuala Lumpur increased marginally by 0.5% quarter-on-quarter to RM634 per sq ft, while the average monthly rental value rose 3.1% quarter-on-quarter to RM3.62 per sq ft.
DTZ Research also foresees that the office market will see more competitive pressure on rents with pending completions as well as planned projects such as the Kuala Lumpur International Financial District.
"Rents are forecast to slide with slower economic growth and an anticipated oversupply in the coming months, as the pressure to find tenants gathers intensity," it said.
While no new offices were completed in Q1 with the total supply of office space in Kuala Lumpur remaining at 64.6 million sq ft, the city will see a growth in stock of 19% in the next three years; this includes an estimated 4.8 million sq ft of new office space for 2012.
On the Multimedia Development Corp's move to allow MSC-status companies to be located within areas designated as "cybercities" without necessarily being in a specific MSC-designated building, DTZ executive director of consulting and research, Brian Koh, said: "Such a move gives prospective tenants more flexibility and choice on one hand, while helping landlords with such locations to derive cost savings on capital expenditure on the other."
On the retail sector, DTZ Research said it is anticipated to grow slower at 6% this year, down from 6.5% in 2011 due to more cautious consumer spending, job uncertainties and an anticipated tightening of credit card spending.
"Though retail centres in Kuala Lumpur registered a slight decline in occupancy rates, new upcoming major retail centres nonetheless continued to attract retailers who are selective and would still lease space in centres expected to see high footfall.
"The retail sector is likely to continue with moderate growth supported by relatively cautious consumer spending and tourist arrivals, and the recent upward revision of salaries for civil servants. Notwithstanding these, with more retail space entering the market and uncertainty in the global economy, the challenge to keep occupancy rates up remains a major concern," it said.