Surviving the property slowdown

Word has it that a Kuala Lumpur property developer recently called up its purchasers to refund them their deposits collected earlier. The developer is opting to put its project on hold rather than proceed with losses, as building material and other costs continue to rise.

As the property sector sinks deeper into a quagmire, industry watchers are worried that some projects may even be abandoned. Master Builders Association Malaysia (MBAM) president Ng Kee Leen has warned that "if this (rising cost of building) persists, the whole industry may collapse." He added, "Political instability due to the outcome of this year’s general elections had also affected the construction and property sectors." Unless the government does something fast, developers may be left with no choice but to abandon projects due to escalating building material prices, a serious shortage of construction workers and weak market sentiments. Analysts say that the hardest hit will be properties costing below RM250,000. Buyers in this range might hold back as they see their household income shrink due to higher food and fuel costs.

Unfazed by the negative sentiments, some developers are still upbeat on their high-end projects. Mulpha Land recently announced plans to launch four new projects in prime areas within Kuala Lumpur over the next two years. Top on the list will be eight bungalow units with built-up areas between 10,000 and 12,000 sq ft priced from RM15 million each in the exclusive Bukit Tunku neighbourhood. And in the adjacent neighbourhood of Bangsar, it will offer seven units of three-storey bungalows priced at between RM9 and RM10 million. Built-up areas for these bungalows will range from 8,500 to 9,600 sq ft. Elsewhere in the so-called Embassy Row area of Ampang, it will build 12-units of luxurious apartments with sizes starting from 3,700 sq ft at and a tag of RM1,000 psf onwards. Mulpha will also build a Class A office building in the city. The 23-storey building will have a leasable area of 270,000 sq ft and will be designed by renowned New York architects Kohn Pedersen Fox who designed the Shanghai World Financial Centre.

SP Setia has also announced its maiden high-end condominium project in the city. Their six-acre freehold Setia Sky Residences will have 844 units ranging in size from 1,044 to 1,679 sq ft. Most of the units will have a clear view of the Petronas Twin Towers and indicative price is RM800 psf. But it remains to be seen how a high-density project can be marketed as a "luxury" condominium.

Glomac Bhd’s group managing director Datuk FD Iskandar is of the opinion that demand for properties above RM1 million remains good and these high-end units usually take only a week to be taken up. SP Setia’s group managing director also shared the same sentiments. He was reported as saying that "higher-end property investors were more resilient and recession-proof."

Meanwhile investors are generally divided on whether to enter the property market now or to avoid it altogether. With inflation expected to surge to a high of 6 per cent and no fresh leads in the stock market, many prefer to be cautious. Some experts are of the opinion that the weaker market and slower take-up rate for new properties might result in property prices coming down despite rising building material and labour costs. Henry Butcher’s chief operating officer Tang Chee Meng was quoted as saying, "Confidence in the economic climate is vital for a buoyant property market. People will buy property if they see that there is room for capital appreciation."

Prime Minister Abdullah Ahmad Badawi was reported in the media as saying that Malaysia’s economy is stable even though the country is faced with global crises such as the increase in fuel and food prices. "There is nothing to worry about. We continue to attract foreign investments and we are still a preferred investment destination," he reiterated. He also said that Malaysia’s economy is still on track to achieve at least 5 per cent growth this year as the fundamentals are strong.

But perhaps Reapfield Properties’ president David Ong sums it up best when he said, "Property is one of the best investments in time of inflation. Any time is a good time to buy." - (www.property-report.com)