Good news for all those hoping for a drop of home prices in Klang Valley, Malaysia! Starproperty reported that average home prices dropped with a quarter on quarter decrease of 0.8% in KL and 1.6% in Selangor between the period of Q2 and Q3 in 2012. What does this mean anyway? Have a read of Starproperty’s article below and let me know what you think!
Average KL and Selangor house prices dropped in Q3 2012, according to data released by the Ministry of Finance’s National Property Information Centre (NAPIC) in its Tables for The Malaysian House Price Index.
While the drop was marginal (0.8%) in Kuala Lumpur in Q2 2012, it magnified in Q3 2012 with a 3% decrease, quarter-on-quarter. Average house prices dropped from RM517,195 (in Q1) to RM513,008 (Q2) to RM497,535 (Q3).
Much of this could be attributed to the decline in terrace house prices with average terraced houses dropping from RM524,013 to RM501,859 (a decline of 4.2%) in Q3 2012.
Much of the decline in terraced house prices came in the KL North region which includes the districts of Batu, Setapak and Ulu Klang. Average terraced house prices in this region dropped by around 8.5%, from RM360,175 to RM330,328.
KL Central region, which includes Mukim Kuala Lumpur and Mukim Ampang, meanwhile, dropped to a lesser extent, by 4.2%, from RM592,565 to RM567,651.
In Selangor, meanwhile, Q3 saw prices decreasing, for the first time since Q1 2011, by 1.6% quarter-on-quarter. They dropped from an average of RM378,484 to RM372,499. Terraced house prices in Gombak, in particular, declined from an average of RM242,708 to RM231,246, by 4.7%.
“This is partly due to house prices having risen so high that they are out of step with incomes,” opined one property watcher who didn’t want to be named. “For example, in Putrajaya, the terrace houses there I think have gone beyond the market price. In the first half of 2012, the number of transactions in Putrajaya dropped by as much as 16%.”
Property developer Allstones Group Asia’s chairman, K.H. Sim, does not see property prices dropping much further over the coming year, but he does not see prices increasing either. And because prices, especially for new launches, are relatively high, he believes that developers will attempt to offset them with added offerings such as DIBS (developer interest bearing scheme), free furnishings, rental guarantees and free legal and/or service charges.
Another property watcher who runs the Agentdiary blog is significantly more pessimistic about the market’s movements, in particular about new launches purchased between 2010 and 2012 when prices were at their highest.
“I believe these properties are more vulnerable because they have relatively low home equity (less than 10% with developer’s rebate/discount). When they complete two to three years later, the sustainability of their values would be too dependent on future rental yield, resale value or vendors’ holding power,” he said. “The last in particular is correlated to how the economy will fare locally as well as globally and the outlook is gloomy in 2013-14.
“This is the market I’m worried the most. What we have seen so far is nothing. The bulk of supply will only be ready between 2013 to 2015 as shown by NAPIC’s latest housing starts data which indicated that Q3 2012 has recovered to near-2006 levels.”
Article Source: Starproperty