Source from iproperty.com.my

Gavin Tee: There are three areas people worry about – oversupply, overpriced and over-speculated. High-end condo like Mont Kiara and KLCC are oversupplied. I recommend a lot to my clients to buy these especially in KLCC where the secondary market is picking up a bit. In KLCC, there is an oversupply but the price is not very high.

In Malaysia, most of the high-end condo situation is like this. If you really think to buy in the secondary market, keep in mind to keep extra cash for 2 to 3 years. You may not gain in terms of rental yield but most definitely capital gain.

When you talk about the last quarter of the year, people usually speculate in medium cost apartments, shoplots, and gated semi-Ds. As the prices of these have shot up for the past 6 months, people think they could speculate in them. There are still some new launches, and prices are not coming down. They may still be picking up, especially for medium-cost apartments.

My comment to a lot of investors is that the price of medium-cost apartments for the past 10 years has been stagnant and has not moved much. If you go all the way from Jalan Pandan to Jalan Maluri, and from Jalan Klang Lama all the way to Sri Petaling, and then from Segambut and Gombak, to all those near the city areas, and Petaling Jaya, you will realize that the prices of link-houses and medium-cost apartments have not experienced big changes in the past 10 years. It is time for them to appreciate.

Very near the city centre, medium-cost properties will never have problems like oversupply. If you go to Seputeh area, no matter what you build, there will never be an oversupply. Most of the land use there has been utilized.

Concerning the price, I feel that some are overpriced especially those in new areas which are a bit too far away [from town centre].

The story is that Malaysian investors will not differentiate so much on the location or the value or usage of the properties. Rather when you talk about medium-cost, investors think that RM350K for Puchong, RM300K for Bukit Tinggi and Kota Kemuning are fair prices. Even Puchong’s shoplots costing about RM2-3 million are considered okay. 10 years ago, the price of a Telawi shophouse in Bangsar was bout RM3 – RM4 million, Bukit Bintang also RM4 million for the double storey to 4 storey shop houses.

As you can see, a lot of prices are not right, which means it’s bound to be adjusted. So, when all these people talk about oversupply, they think in general. When they think it is speculated, they think about it in general.

In the third quarter, I think prices of medium-cost apartments will still remain strong in the established neighbourhoods. Established areas mean there are a lot of landed and old properties in the area.

The second thing I am looking into is the secondary market, where prices are not so active for many years. Only lately, people have realized prices have changed so much. For example, in SS2, three or four years back, the price was RM300K. Today, prices have shot up to RM600K. People transacted already at RM580, RM600K.

In Taman Desa, four or five years ago, prices were RM400 – RM500K, today they are transacted at RM700-800K. In Seputeh area, years ago the price was RM500-600K. Today, you can only buy it at RM1 million. Price have appreciated so much. So they put the word out that there has been some speculation. This is not really true.

A matured housing estate or garden will have many individual owners, thus it is not quite possible to speculate on the prices. For gated semi-D or bungalow of about 6,000 sq ft, the price is RM500- 600 psf. Compare to high-end condo which are going for RM800-1000+ psf. Buying a condo nowadays include guardhouse, club house, good landscape, and etc.

So comparing RM1,000 psf with RM600 psf, would you stay in a gated bungalow or in a condo. Because in today’s gated bungalow, it caters to the smaller family to live in, and you have bigger master bedroom, luxury bathroom and all these, so it’s no more like big bungalow where you stay inside and feel so lonely. So, I always say that there is much much room for this kind of property to appreciate, and if you say it is overpriced, then I think you may be wrong.

We don’t look at property investment in the basic terms. We don’t look in the past how much they have appreciated, how much people have lost, in respect to this present transaction, so we look into the future at how much further can they appreciate. So when you look at it that way, you study, there are actually reasons why some types of properties appreciated in price.

When you talk about speculation, it’s those unreasonable ones, where there is no market, you know like in 1998, all the way to Semenyih, Pulau Indah, build nice big bungalows and Rawang country homes all the way to Beringin and Nilai. Those are the properties that when the price get so high, you know that speculation took place.

But today we don’t see much of that. Other than in 2008/2009 when KLCC market was speculated a lot. It is mainly because when the government started to open up to global market, foreigners can buy many units after 2007. They can buy commercial, they can take the loan, so compared to before, the global investment market turned hot during the years 2007/2008, especially with Dubai. The success of the Dubai investment story created a wave of investment trend. Singaporean, Hong Kong and then China market came up, also starting 2007/2008. So property investment became a hot topic around the world, and Malaysia at that stage also opened to the world.

That’s how people come in, when they came in, they just bought bloc by bloc. The Koreans bought a lot, Middle Eastern people, Hong Kong people, Singaporeans bought a lot. Mainly in the KLCC and Mont Kiara areas. These are the key areas.

Of course there are some in Penang also, quite a lot. Even in Kota Kinabalu in Sabah, there are quite a lot of foreigners who started to come in during that time. Today, the Koreans went back to Sabah to buy resort properties.

So, the only thing I want to advise is that there is not much of an oversupply in good areas while the price increases in not so prime areas cannot be justified at all.

Gavin Tee is founder and President of SwhengTee International Real Estate Investors Club, and has more than 20 years of experience in property & retail marketing in both the United States & Malaysian markets. He has written a book on Property Rental in Malaysia and is host of a Chinese TV show on real estate in Malaysia.