Special Feature
WTW Property Market Report 2016 Outlook for various sectors in the ensuing year.
IT IS A carry-over from the preceding year – the gloom, that is, though not the doom. Whereas 2015 was a time for caution in a slow, albeit price-resilient, property market, the prognosis for 2016 by C. H. WIlliams, Talhar and Wong( WTW) is that, even for the tough, the going will get tougher and, in the final reckoning, it is the fittest that will survive. The overall sentiment is that the market will remain“ flat”, in consequence of falling crude oil prices and commodities, the depreciating Ringgit, under-performing services sector, increasing cost of living, sluggish global economy, etc. Property developers, in general, are keeping prices up by strategically launching smaller number of units, lamentably,“ beyond the affordability of first-timer buyers.”
Economic Considerations Tabled in October last, Budget 2016 had based oil revenues on crude prices at a“ conservative” USD 48 per barrel. At this writing, however, a“ recalibration” of Budget 2016 is imminent( scheduled for 28 January 2016) following further dips in crude oil prices, now wavering at USD 30 per barrel. For now, indications are that“ minor” cuts are on the cards- in operating expenditure and the shelving of non-priority development projects. Priority projects, e. g., Mass Rapid Transit( MRT) and Kuala Lumpur-Singapore High Speed Rail would go ahead, per the 11th Malaysia Plan. Whilst a modest GDP growth of 4.5 % had been earlier forecast for 2016( likely to be trimmed, come 28 January), domestic demand will remain the main driver of growth. Facilitated by Government infrastructure initiatives, private sector participation and FDI( Foreign Direct Investment), the manufacturing and industrial sectors are expected to expand.
Overview by Region Against the above backdrop of economic fundamentals, the WTW take on the property market focused on three regions, namely, North( Penang), South( Johor Bahru) and Central( Klang Valley):
Penang
� Despite general weaker market / business sentiments,“ no notable decline” in prices / realised rentals as property owners hold out; land reclamation projects( 32.76 acres Light Waterfront Penang and 891 acres Seri Tanjung Pinang Phase 2) opens up new areas for development. State Government raised net household income cap to“ render affordable housing more accessible.”
� Landed residential is still the preferred choice, especially in Seberang Prai- with transactions for 2½-storey and 3-storey semi-detached houses fetching more than RM2.0 and RM3.0 million, respectively.
� Slower growth expected for high-rise residential as more affordable flats / apartments being launched / under construction; bulk of existing apartments / condominiums in northeast sector of the island whilst more being developed and launched in Butterworth / Bukit Mertajam; accordingly, spike in supply
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� expected within next 3 to 5 years. Purpose-built offices- existing supply 9.14 million sq ft with average occupancy rate 88 %; prime office space expected to stay in demand( e. g., slightly-increased rental rate of RM2.80 per sq ft / month in Georgetown), the new growth area will be in the south-east. Healthy albeit competitive outlook for hotel sector, with 11 new developments coming on-stream in next 2-3 years( Georgetown, Tanjung Tokong / Tanjung Bungah and Bayan Baru). Retail market likely to stay healthy in next few years; major developments on island / mainland include Designer Village( NLA 400,000 sq ft), IKEA & Integrated Mall @ Aspen Vision City, both at Batu Kawan and Mydin Hypermarket at Bukit Mertajam( NLA 536,507 sq ft). Industrial development remain focused in south-east, i. e., Batu Kawan and surrounds of Byram and Changkat, with multinationals establishing new plants / investments, engaging in mergers, acquisitions and / or relocation.
Johor Bahru
� Generally, property market expected to be lacklustre, carrying over from 2015, insofar as less new projects and protracted selling period. In the case of high-rise residential development, State Government deterring new applications to build serviced apartments by imposing tax( 1 % on GDV).
� Demand still significant for landed residential properties, particularly in established areas where prices have escalated 11.5 %; in next two years, existing supply expected to increase 5.7 % from the current level of 291,284 units and new launches, outside of these areas, are likely to be affordably-priced to promote buying interest.
� Continued sluggish performance for high-rise residential with downtrend in sub-market transaction activity and value as well as occupancy, aggravated further with new launches coming onstream this year.
� Purpose-built office sector to remain stable over next two years, with existing supply of 9.2 million sq ft, 75 % occupancy rates and rentals( in prime areas) averaging RM2.80 to 3.50 per sq ft / month.
� Retail market is expected to remain steady in next 1-2 years with average occupancy rate of 77 % and rentals of RM27 per sq ft / month.
� Occupancy rates in hotel sector to increase slightly, supported by mix of leisure / business / catalytic developments, whereas average room rates to remain steady following added supply of establishments in 2015, e. g., Holiday Villa, Somerset Medini and Citadines Medini.
�“ Flat” outlook for industrial as market softened, compared to 2014, notwithstanding new developments completed in 2015, namely, SME City i-Park @ Indahpura and Tropika Industrial Park.
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