News: End in sight for 'Malaysian malaise'

Tue, 23 Oct 07

Malaysia´s housing market is expected to recover strongly in the second half of this year, with buying interest in the low end and mid range property ignited by government incentives to bolster sluggish sales, reports the Asia Property Report (http://www.property-report.com)...

While sales in the high end housing market have always been robust, those in the middle and lower price range started to pick up at a steady pace from April this year after languishing for more than two years.

Between April and June this year, the housing property market saw investor activities across all segments of the market as a result of the exemption of the real property gains tax (RPGT), which came into effect in April.

According to the Ministry of Finance (MOF) Economic Report 2007/2008, the residential sector moderated in 2006 following higher inflation and interest rates.

Low-and-medium property developers deferred their new launches, resulting in lower housing starts of 65,045 units during the first half of 2007, down 23.5 per cent from 85,025
units a year earlier.

Decreased building approvals

However, the report said purchasing sentiment picked up in the second quarter of 2007 as reflected by the take-up rate of newly launched residential units, which improved to 30.8 per cent from just 11 per cent a year earlier.

Valuation & Property Services Department under the Finance Ministry said in a report that the existing stock of residential units stood at 3,944,825 units at the end of the second quarter of this year.

During the four quarters to the end of June 2007 a total of 129,128 units were completed, ranging from 37,048 units (Q1 2007) to 55,864 units (Q2 2007). The incoming supply was reduced by 6.5 per cent to 590,667 units from the corresponding period of Q2 2006 (631,790 units).

It said 87,518 units started construction in the past four quarters. The planned supply increased to 644,452 units from the corresponding period of Q2 2006 (631,443 units) but slightly lower than Q1 2007 (650,005 units). The department attributed the lower number of the planned supply to higher number of buildings that started construction and decreased number of building approvals.

A positive outlook

The number of developers with positive outlook on the housing market has doubled to four per cent in the first half of this year compared with the same period last year, the Real Estate and Housing Developers Association (REHDA) said.

REHDA deputy president Michael Yam said the property players achieved better sales after the government introduced incentives, including real property gain tax exemption effective from April 1 and the removal of Foreign Investment Committee approval.

The maximum tax on property gains was 30 per cent for individuals and corporations previously.
Other positive factors include Malaysia´s improving economy, availability of loans to foreigners and no restriction to number of units that can be purchased.

"These factors contributed to renewed interests in the property market and have resulted in more enquiries which translated into better sales," he said.

Yam said those surveyed were likely to raise prices by between 10 per cent and 20 per cent, reflecting the increase in material costs and robust demand for properties in Kuala Lumpur and Selangor. Construction costs continued to climb, reaching 30 per cent year-on-year.

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