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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