Mismatch in the housing market

mismatchPETALING JAYA – The residential property market is experiencing a mismatch in terms of demand and supply, and prices need to be managed so that the market remains sustainable, said Jones Lang Wootton executive director Malathi Thevendran.

“There’s totally a demand-supply mismatch. There is demand but to be sustainable we have to make sure that it is attractive pricing. At the same time occupancy and product differentiation are important,” she said during her presentation on the residential and condominium segment at the 17th National Housing & Property Summit 2014 yesterday.

Malathi said the supply and demand imbalance came about when developers launched too many residential units priced RM1 million and above.

In 2005, only 10% of the launches comprised RM1 million properties. However in 2012, 40% of launches were priced RM1 million and above.

“How many people can upgrade? You can upgrade one or two but can you upgrade to so many bungalows and detached houses? You can’t own so many bungalows,” she said.

As a result, launches reduced and prices rose. According to data from Jones Lang Wootton, there were only 400 residential units launched within seven projects so far this year.

“It shows that in the Klang Valley, there are not many houses launched. If they were to launch, they’re looking at no less than RM750,000. And how many people can actually buy that property? At the same time, it is also whether or not they can get a housing loan because the banks are very stringent. Gone are the days you can buy six, seven or eight properties.”

Malathi said sales at official launches seem very promising because the units have been made available for bookings from six months up to a year before the official launch of the project. In reality, the units have been on the market for a while.
Due to the drop in launches, people are resorting to buying houses in the secondary market and this has caused unrealistic pricing expectations within the secondary market.
For the next 12 months, young couples and professionals will continue to drive the condominium market while more developers are expected to tap into foreign markets as local demand for high end condominiums is expected to weaken.
With the expected slower demand and increase in cost, developers are expected to maintain unit quantum prices while reducing built-up areas.
“Market prices of most existing high end condominiums are expected to be stable in the short term, while prices of low to medium end condominiums in the more popular locations may see some appreciation.”

Source: The Sun, 28/08/2014