Sober outlook for strata units

The Sun 20/12/2005

KUALA LUMPUR: A bullish property market next year will be reined in by growing concern over the surplus supply of condominiums/apartments, according to the latest CEO Opinion Survey on the 2006 Property Sector by CH Williams Talhar & Wong Sdn Bhd (WTW).

The surplus situation of condominiums/apartments is expected to be substantial, according to 26% of respondents, while 44% believed there would be a moderate surplus and 25 % predicting a balance between supply and demand. Only 2 % said there would be a substantial shortage.

According to the results presented by WTW managing director Goh Tian Sui (pix), an increasing number of respondents expressed concern with regards to the price levels of apartments/condominiums with almost 25% of respondents expecting decreases in 2006, compared with 17% in 2005.

The respondents also predicted that demand for condominiums will be lower. An increasing number of correspondents also predicted a fall in the rental yield for condominiums.

However, the condominiums/apartments category will still appeal to both Malaysian and foreign investors. This conundrum was explained by Goh, saying that "the property market is an imperfect market... it is not homogeneous. Compared with other types of investments, information is not freely available on the property sector."

Citing reasons why investors would purchase property, it pointed out that it could be due to lifestyle reasons. "Maybe some of them want to stay close to their mother-in-law, so they can place their children there and save on babysitting costs," he jokes. Others would consider the proximity of a good school, which in the UK plarket, is a factor in high property prices.

The outlook for landed residential properties, particularly terraced/link homes, is rosy. Buying interest in terraced/link homes is expected to remain high although respondents expect some reduction in demand compared with this year.

The survey on the sector was conducted in September and October 2005 to ascertain views on the prevailing market conditions and the CEOs' expectations for the coming year.

This year, the sample survey comprised 136 respondents, which included developers, financial institutions, consultants, construction companies, manufacturers and suppliers of building materials, plantation management and utility services companies and government agencies, investment holdings and trading companies, with 49% located in the Klang Valley. Developers made up 49% of the respondents, and of this figure, 64% are involved in the residential sector.