By Khairul Khalid
Gavin Tee
The price gap between new properties and units in the secondary market is getting wider especially outside the Kuala Lumpur city centre, according to property consultant Gavin Tee.
“In second tier markets such as Klang, Sungai Buloh and Kajang, the gap is even bigger with some secondary properties selling at 20% to 30% lower than brand new ones in the primary market.
“This is partly because of the distance from the city centre. Despite new and faster transportation modes which cut down travelling time, the perception still persists that these areas are too far away from downtown Kuala Lumpur,” said Tee.
This would lend credence to some market observers who have claimed that despite escalating property prices in recent years, there are affordably priced homes if buyers are willing to consider units in the secondary market as well as living outside the main city centre and townships.
This would also strongly imply that the slowdown in property market in the last two years has had an impact in lowering property prices in certain segments of the market, although Tee did not provide any specific data to support this. However, Tee said that the price gap is noticeably less within the Kuala Lumpur city centre.
“The gap in pricing between the primary and secondary market is not seen however in prime properties such as those located within the core Kuala Lumpur city centre, largely because both old and new properties there are high in demand and easy to rent.
“Properties that have been completed for less than five years are selling at 5%-10% lower than new ones in the primary market. The gap becomes even bigger when the property is aged 10 years and above where prices would be 20%-30% lower than the primary market price. This is assuming the properties are comparable in all respects including being in the same location,” said Tee.
The property consultant gave the example of a new condo unit that can sell at RM1 million at launch, while a comparable condo which is similar in all respects including location but is 10 years older can only fetch between RM700,0000 and RM800,000.
Tee added that despite cheaper properties in the secondary market, primary units will continue to drive the local property market in 2016.
Tee claimed that purchasing property units directly from developers enables buyers to enjoy greater cost savings and easier financing.
The consultant is also a keen proponent of the “rail revolution” that he claims will provide a much-needed boost to the sluggish property market.
Tee cited the massive ongoing transport infrastructure projects such as the Klang Valley Mass Rapid Transit (MRT) Lines 1, 2 and 3 as well as the proposed RM60 billion high-speed rail from Singapore to Kuala Lumpur as potential catalysts for the property market.
The first line of the MRT project (also known as MRT1) between Sungai Buloh and Kajang is estimated to cost RM23 billion. MRT1 began construction in 2011 and phase one of MRT1 is scheduled to start operations at the end of 2016 while the second phase is scheduled to begin in mid-2017.
The second line of the MRT (or MRT2) between Sungai Buloh and Putrajaya is expected to cost RM28 billion. The first phase of MRT2 is scheduled to begin operations in mid-2021 while the second phase is expected to begin in mid-2022. The project delivery partner for both MRT1 and MRT2 projects is the consortium of MMC-Gamuda.
The property consultant said that although these railway infrastructure will eventually reduce the travelling time between central Kuala Lumpur and suburbs outside the city, that is not the main benefit that it will confer on property investments.
“Travelling time is not the key factor in property investment but proximity and connectivity are. An example is the mistake that investors made when they believed that the North South Highway would shorten travelling time to the city centre from Rawang,” said Tee.
He gives examples of his own experience in property investments such as office units at the Mid Valley mall and Bukit Ceylon condominium units in Kuala Lumpur, both of which were not perceived as prime spots when they were initially launched but are now in high demand.
“It will cause a revolution in how people buy property. The popular saying is that location, location, location as the most important factor in property investment. That is not entirely right. In most cases, the timing of your investments is more important,” said Tee.
Tee is expecting 2016 to be a rough year for the property market considering current economic turbulence such as the plunge in oil prices and the weakening ringgit. He nevertheless expects the market to recover in 2018.
He also said that trends in the developments of commercial and residential properties will be in direct opposite of each other.
“Commercial property will trend towards centralisation while residential property will disperse further away from the market centres. This is due to the many mega projects and infrastructure being completed accelerating the speed of growth in urban areas.
“Mega developments such as the Tun Razak Exchange, Bandar Malaysia, as well as major changes in infrastructure, will further drive apart commercial and residential areas. Centralised commercial properties, which are not just concentrated in the Kuala Lumpur city centre but also at the centre of huge satellite cities or suburban townships like Bangsar South, Puchong, Damansara and Bandar Utama will see higher prices while the rest will witness slow movement in their price,” said Tee.
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