Property market shows signs of slowdown

The Malaysian Insider in its 1 March 2011 edition reported that the property market is showing signs of decline, as indicated by rents and capital values for prime areas (I believe in Kuala Lumpur).

What about Sabah, in particular Kota Kinabalu?

This is the article as published in The Malaysian Insider. Enjoy reading...

Property market shows signs of slowdown
By Lee Wei Lian
March 01, 2011

KUALA LUMPUR, March 1 — The property market has either gone flat or is showing signs of decline, as indicated by rents and capital values for prime areas.

The market, especially the high-end segment, appears to be feeling the pinch of oversupply and the tightening measures on investment.

Figures in a report by property consultancy DTZ Research released in January shows that rental rates for commercial property were on a downward trend last year dropping from RM6 per square foot (psf) in the second quarter to RM5.97 in the fourth quarter.

Office occupancy rates also fell from 87.9 per cent in the second quarter to 86.4 per cent in the fourth quarter.

“The outlook for the (commerical property) sector is expected to remain soft in the next few years as it will take time to increase demand with these new initiatives while there is a substantial amount of new supply, most of which is of a speculative nature,” said the DTZ report.

Meanwhile the average capital value of prime condominiums declined slightly from RM600 psf in the third quarter to RM599 in the fourth quarter.

DTZ pointed out that Bank Negara had mandated a 70 per cent cap on the loan-to-value ratio (LVR) for a purchase of a third residential property, down from 80-90 per cent and this could affect the high end property market in the coming months.

“This (the 70 per cent LVR cap) will have some negative impact on the high-end segment where buying has been concentrated,” said the report.

Property agent Melvin Wong says however that the slowdown will not likely affect affordable properties in the RM300,000 to RM400,000 range.

“The 70 per cent LVR cap doesn”t affect first time home-buyers,” he said. “The government is trying to curb speculation in the higher end segment of the market and those are the properties which might see a slowdown.”