Market Outlook: Where are we at the curve? Kuala Lumpur Real Estate & Residential Market Overview

Transcription

1 Market Outlook: Where are we at the curve? Kuala Lumpur Real Estate & Residential Market Overview April 2016

2 Contents 1. What are the experiences in the past? 2. Where are we now? 3. What will happen? 4. Should an investor wait? 5. Where are the opportunities? 6. Comparison between KL, Penang, Johor

3 What are the experiences in the past?

4 GDP Growth % y-o-y Malaysian Economy, 1986 to % 10.0% 8.0% Asian Financial Crisis 1998 Global Crisis % 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% Source: BNM Asian Financial Crisis: Period in which financial contagion hit Asian currencies starting from Thai Baht followed by the ringgit. Global Crisis started from the subprime crisis in the US & it escalated to a crash in the world US stock market. 4

5 p Volume of transaction ( 000) Change in Value (%) Value of Property Transaction for All Sectors shows Sharpest Drop in Asian Financial Crisis 1998 Property Values fell 47.6% Global Crisis 2008 Property Values fell 8.3% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% Source: NAPIC Volume of Transaction ('000) Change in Value (%) y-o-y 5

6 How severe will be the drop in property prices? The most severe drop in property prices was experienced during the Asian Financial Crisis when values dropped by 47.6% in The Global Financial Crisis in 2008 did not have as severe an impact on property prices with values falling by 8.3% in We think that the drop will lie between the two because:- 1. Malaysia is still growing and not in a recession 2. The other 2 periods were that of a Crisis and negative growth 3. Overhang in property was the worst during the Asian Financial Crisis 4. Overhang situation improved since

7 No. of Overhang (unit) Percentage of overhang No. of Residential Property Overhang % 30% 25% 20% 15% 10% 5% 0% Residential Overhang Malaysia Residential Overhang KL % of Overhang in KL National Property Information Centre (NAPIC) defined property overhang as units which were completed and issued with Certificate of Fitness for Occupation (CFO) or Temporary Certificate of Fitness for Occupation (TCFO) but remained unsold for more than nine months after it was launched for sale on or after 1 January The percentage (%) shows the percentage of residential units overhang from the total of new launched. Source: NAPIC 7

8 Where we are now?

9 Where are we now? 2016 Economic Growth Property Market Still seeing positive growth and not negative Bank Negara sees 4% to 4.5% in 2016; JLL concurs Property Market Volume has fallen 8% in 2015 Volume continues drop in 2016 Prices of distressed asset by as much as 20% to 22% for luxury, high end properties that are older, less well maintained 11

10 What will happen?

11 How will the recovery be V or U-shaped? The Experience of 1986 recession, Asian Financial Crisis 1998 and Global Crisis Commodity Low prices High prices High prices Low prices Oil Low prices Low High prices Low prices Ringgit Strong RM2.50:US$1 Weak Pegged for 5 years RM3.80:US$1 Moderate Did not weaken below peg Weak Unlikely to see a V-shaped downturn and recovery Recovery is likely to be U-shaped but with a shallow downturn that is prolonged similar to

12 Residential Transaction Volume (unit) Transaction Value (RM million) End of DIBs in Budget 2014 presents Market Opportunity Now 300, ,000 Increased foreign floor price, RM500,000 per unit, Jan % Loan-to-value (LTV) for third property, Nov 2010 Residential transaction volume (unit) Residential transaction value (RM million) Increased foreign floor price RM1 mil per unit, DIBS abolished Increased RPGT rate, since Jan 2010 to Jan 2014 and RFG -Home loan 35 years Implementation of GST 6% 90,000 80,000 70, ,000 Annulment of RPGT 60, ,000 50,000 40, ,000 30,000 50,000 20,000 10, Source: NAPIC - 20

13 Weak demand because higher loan rejections Pre-GST 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q 1Q 3Q % 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Source: BNM Loans Applied Loans Approved % 21

14 How can you improve your chances of obtaining a loan? Check your CCRIS by retrieving your CCRIS report at BNM. Banks rely on CCRIS report a central credit bureau residing at BNM that has information on credit of individuals. Reduce unnecessary number of credit cards, pay up other debt asap Apply jointly with spouse or parents who earn income to increase combined income Show other forms of income eg dividends from shares, income from Fixed Deposits, show bonus on top of payslip Easier if you already have a good relationship with the bank Have a standing instruction to pay any debts on time 22

15 2016 will be the window of opportunity for investors The removal of DIBs will be fully felt in Higher loan rejections prevent buyers from entering market. Economy is fundamentally sound - The current economic slowdown is not as severe as imagined. There will no recession only slower growth at 4% to 4.5%. Economic recovery expected next year. 23

16 More Upside in Horizon Upside 1. Economy recovers as commodity prices rise & manufacturing improves, ringgit recovers 2. Post-GST, demand for properties normalizing 3. Demand for housing loans still rising Government likely to help genuine first time house-owners 4. Market to rerate as sentiment was concerned over higher interest rates Downside 1. Bank continues to hold back lending to real estate & reject loan applications. 2. US raise interest rates & more foreign funds flow back to the US 3. Political uncertainty 24

17 Reversal in Outflow of Net Portfolio Investments Outflow of net portfolio investments (RM billion) 1997 (First 9 months ) (First 3 months) 5.6 Source: Bank Negara, Monthly Statistical Bulletin 26

18 Should an investor wait?

19 Should an investor wait? Unlikely to see as severe a price drop as seen during the Asian Financial Crisis (AFC) in Current prices already reflect the drop in transactions & economic slowdown. In fact, economy growing at 4.5% whereas during Global Crisis economy grew at -1.5% Investor should make a move in 2016 to take advantage of those caught by DIBs trying to unload their properties 28

20 Where are the opportunities?

21 Greater Kuala Lumpur New Infrastructures & Megaprojects 1 Naza KL Metropolis GDV: RM15 bil Site: 76 acres Area : Mont Kiara Sg Buloh MRT 1 51 km RM 32 bil (2017) 1 MRT 2 52 km RM 28 bil (2022) 4 TRX GDV: RM40 bil Site: 70 acres Area: KLCC 2 KL 118 (Warisan Merdeka) KLCC GDV: RM6 bil Site: 19 acres Area: KLCC Kelana Jaya Bukit Jalil 5 BBCC GDV: RM8 to RM10 bil Site: 19.4 acres Area: KLCC 3 PJ Sentral GDV: RM15 bil Site: 76 acres Area: PJ Putra Heights LRT Extension Ampang Line: 13 stations Kelana Jaya Line: 12 Stations RM 10 bil (2016) Kajang 6 Bandar Malaysia GDV: RM150 bil Site: 486 acres Area: Sg. Besi 30

22 How infrastructure project affect Residential Property Market? The megaproject developments will provide more job opportunities. With better accessibility through infrastructure projects, it will increase potential residential hotspots in the city hence push up the property price. It also reducing travel times for residents living along the Ampang and Kelana Jaya lines significantly (more convenient). Residential property developments located near key stations along the two LRT lines will perform well, for example Subang Jaya-USJ, Putra Heights, Kinrara, Puchong, Kelana Jaya and Glenmarie. There are three key hotspots highlighted for potential outperformance which are Puchong-Kinrara, Bukit Jalil and Subang-Sunway. 22

23 Example of projects Project Park Sky Residences Project V Residences Suites Property type Condominium Property type Services Apartment Development Developer Status Completion Year Near Vicinity Total Units Pavillion Bukit Jalil City Mall Aset Kayamas Sdn Bhd (Malton) Under Construction 2019 Asia Pacific University, Pavillion Bukit Jalil Mall and 400m away from Bukit Jalil LRT Station. 1,062 units The Curve One Utama IOI Puchong Cheras Bukit Jalil Development Developer Status Completion Year Near Vicinity Total Units Sunway Velocity Sunway Property Under Construction 2017 Velocity mall that opening soon, 250 m away from Maluri MRT & LRT interchange station and Pantai Cheras Medical 268 units Built up size 1,100 sq ft 1,300 sq ft Built up size 624 sq ft 883 sq ft Launch price From RM510 psf Average Launch price RM1,200 psf 23

24 Quick Comparison of KL, Penang and Johor

25 KL is the best performing Kuala Lumpur Penang Johor Source: JPPH 25

26 Property Prices Comparison Between Penang, KL and Johor Baharu Property Prices Comparison Between Penang, KL and Johor Baharu Penang Johor Baharu Kuala Lumpur Mortgage as Percentage of Income: 69.64% % 73.54% Gross Rental Yield (City Centre): 2.98% 3.26% 4.77% Gross Rental Yield (Outside of Centre): 4.15% 5.53% 4.83% Source: Numbeo Mortgage as Percentage of Income is a the ratio of the actual monthly cost of the mortgage to take-home family income (lower is better). Average monthly salary is used to estimate family income. It assumes 100% mortgage is taken on 20 years for the house(or apt) of 90 square meters which price per square meter is the average of price in city centre and outside of city centre. Gross Rental Yield is the total yearly gross rent divided by the house price (expressed in percentages). Higher is better. 26

27 KL offers better rental yields in city centre 1. It is easier for someone in Penang & KL to repay his monthly house mortgage based on his monthly income than if he were in Johor. 2. KL Property has better rental yields in city centre 3. For investments in the suburbs, Johor offers the best yields 27

28 Thank you YY Lau Country Head Malaysia JLL Property Services (Malaysia) Sdn Bhd ( U) (Formerly known as YY Property Solutions Sdn Bhd) Tel: Fax: About JLL JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 230 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in Its investment management business, LaSalle Investment Management, has $56.4 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit JLL has over 50 years of experience in Asia Pacific, with over 32,000 employees operating in 83 offices in 16 countries across the region. The firm was named Best International Property Consultancy and Best Property Consultancy Asia Pacific at the International Property Awards Final 2015 as well as number one real estate advisor in Asia at the 2015 Euromoney Real Estate Awards. COPYRIGHT JONES LANG LASALLE IP, INC. 2015