As economy bites, condo owners eager to dispose of properties for cash

If you have some spare cash lying around, now is the time to buy a condominium in a tony area of the city as quite a few are for sale at bargain prices.

This is because a growing number of investors are eager to dump their properties — even at below market price — as they lose confidence in the state of the Malaysian economy.

While this is not a widespread trend, this pattern of selling at below market value has been going on for the past four months, a real estate agent observed.

Several condominiums in the Klang Valley — some brand new or just completed this year, others in hotspots such as around the KLCC area — are for sale at prices lower than bank valuation, and some even lower than the purchase price.

“Some with maybe 10 properties want to dispose of most of them as fast as possible because they are worried about the state of the economy over the next two years. They want to hold on to cash.

“Even group investors with holding power are concerned because they have never held on to a property for so long, they usually flip in about two months,” a real estate agent told Malay Mail Online during a viewing of several units selling under market value.

At Sentul’s Capers condominium, which was completed early this year, some units were being sold at up to a 20 per cent discount from the market value of just a year ago.

She said recently she sold a unit that is 1,281 square feet for RM850,000 (RM663.5 psf), below the market value when bank valuation was easily above RM1 million or RM800 per square feet (psf).

Another unit, which she is trying to sell, is usually priced at about RM1.4 million to RM1.5 million at current market value — usually with two car parks — is now being put up for sale for RM1.15 million, and this unit even has six car parks!

According to the latest report by the Valuation and Property Services (JPPH), the residential overhang and unsold situation in Kuala Lumpur is not encouraging.

The overhang numbers for the first half of the year increased to 1,346 units worth RM1.23 billion, up by 28.7 per cent in volume and 28.1 per cent in value compared to H1 2014.

Downplaying the numbers, a real estate agent noted that these overhang numbers meant developers are holding on to those unsold units which represents the primary market. This represents only a “small fraction” compared to the overwhelming majority of the property market, which is the secondary or sub-sale market.

On a similar note, the report said the unsold under construction and not constructed increased to 10,742 and 1,181 units respectively, up by 29.4 per cent and more than two-fold respectively.

Meanwhile, there were 9,291 transactions worth RM11.01 billion recorded in the first half of this year in Kuala Lumpur; contracted by 7.4 per cent in volume against the same period last year.

In tandem, transactions value shrank by 6.5 per cent after experiencing an 18.1 per cent uptrend in the corresponding period.

Although a lower number of transactions and value do not necessarily translate to a drop in property prices, anecdotal evidence shows a slight dip in certain property prices from August onwards.

Idaman Residence near KLCC, tenanted mostly by those from the oil and gas industry, saw a large number of tenants moving out since June this year.

“Most owners don’t want the hassle of renting out anymore after a lot of the tenants lost their jobs in the oil and gas industry,” said a real estate agent.

However, he said that tenants are still coming in but at a much lower budget.

One of the cheapest units is going for RM854 psf, for a 1,697 sf unit at RM1.45 million. This price is still negotiable as he said the owner is keen to dispose of the property.

Another high-end condominium that is slightly further from KLCC, Setia Sky Residences, has a unit that is selling for RM875.8 psf, below its purchase price and bank valuation at RM1.15 million for a 1,313 sf unit.

Meanwhile, condominiums such as the eight-year-old Dua Residency saw a major drop in sale price as well as rental, partly because of the ongoing construction in front of it.

One unit that is for sale is asking for RM800,000 for a 2,315 sf unit, amounting to RM345.5 psf.

Another agent said she also has several units at Dua Residency that are going below market value, between RM800 to RM850 psf.

Since 2008, the real estate agent said rental at the condo fell from between RM12,000 and RM13,000, to RM10,000. And with the construction next to it which started last year, rental fell further to about RM9,000 and now it is about RM6,000 for a unit of a similar size.

Other condos which saw several units for sale under market value in the KLCC area include The Orion, less than RM600 psf, 2 Hampshire, RM800 to RM880 psf, and St Mary Residences at RM1,031 psf for one of its most undervalued unit.

One real estate agent said that although some people think this would be a good time to hunt for bargains, there are not a lot of properties in the KLCC area that are going under market value as there is still demand.

Meanwhile, senior real estate negotiator at Property Hub Roy Teo said those who have invested in the “right property” at a reasonable price three to four years ago, with reasonable holding power, will have no problem selling or renting that property today, despite the current challenges.

“However, many may have overpaid very ambitious prices, for products with limited market demand.

“They will be stuck and forced to sell at a loss if they lack the holding power,” he told Malay Mail Online.

iProperty Group managing director and chief executive officer Georg Chmiel noted that the cooling measures introduced in 2013 saw the volume of transactions reduced in 2014 and continue through to this year.

Its recent Asia Property Market Sentiment Survey also showed that property buyers and investors are adopting a wait-and-see stance now and will be delaying their decision to purchase till 2016.

“Factors such as the the increase in cost of living, weakening ringgit, the current economic and political climate, cooling measures as well as the GST and stringent bank regulations are the likely factors which have and will continue to weigh on buying sentiment. We think the sector will only recover towards the second half of 2016,” he said via e-mail.

Rentals are also seen taking a dip, he said, as the demand for high-end luxury property is currently decreasing. Property owners are opting to rent out these property to help meet the monthly mortgage payments, if any.

Given this scenario, to attract renters, property owners are willing to offer their units for rental at lower than market value. This trend could possible carry on to 2016, he said. - By The Malay Mail Online