Prices of luxury homes, especially strata units, are expected to decline this year due to the absence of the Developer Interest Bearing Scheme (DIBS), which previously played a role in pushing up the cost of these properties, according to CBRE-WTW Managing Director Foo Gee Jen.
“You have to go back to the history of what happened two to three years ago. Whenever developers offer a project, a lot of DIBS and so forth were catered to stratified properties. For landed properties there were no issues in selling so there’s not so much mark-up in terms of pricing for landed properties but a lot of mark up for stratified properties.”
As such, he believes that prices of upscale strata residences could fall by 10 percent to 15 percent in 2017, while the cost of landed housing could drop by 10 percent or lower.
Foo explained that many people who have purchased units with the aid of DIBS and other rebates two years ago are now selling them at lower prices, and this trend is particularly evident in Kuala Lumpur, Kota Kinabalu and Johor Bahru.
In the subsale market, Foo noted that sellers are now more practical, reducing the gap between the asking price and the final agreed amount.
“I believe strongly that the price correction has started. A lot more developers are taking note of that. A lot of them are suffering. Some of the high-end products are not moving and if you go into their showroom it is very quiet.”
Based on his company’s research, the overall number of upscale condos in Kuala Lumpur reached 37,824 units last December. Of this, units costing between RM700 to RM1,000 psf account for 86 percent, but this could slide to 64 percent in 2019.
For high-end units valued from RM1,001 to RM1,500 psf, these are expected post the highest growth of 4,000 units per annum on average, comprising 23 percent of total number of condominiums by 2019.
But the most problematic segment in the housing market are SOHOs/SOVOs (small office home office/serviced office virtual office), as occupancy levels are so low given the supply glut. This situation is expected to persist until the government’s infrastructure projects are finished in the next three to four years.
Once these infrastructures are established, these are anticipated to bolster the SOHO/SOVO sector, and some landlords would find it easier to rent out their units via websites like Airbnb, said Foo.
Overall, the housing sector is forecasted to be flattish in 2017 and lower in terms of value as more builders venture into low-cost flats.
“The only good sign is a lot more developers will venture into affordable housing. If the government pushes hard enough in terms of supply of PR1MA homes and others, the residential segment, I think, will see a slight improvement but overall if you add up the rest, commercial and others, I think it (volume) will be very flat,” he added.