By Jerry Francis
Indications of a property development boom in the Kinta District are everywhere. Large advertising billboards and banners displaying new property development projects are seen strategically located, particularly around Ipoh. Meanwhile, at the project sites, construction works are in progress as developers rush to meet their deadlines. Among the projects are a number of new townships, such as Bandar Baru Sri Klebang, Bandar Sri Botani, Sunway City and Bandar Meru Raya. Other major projects like The Haven, The Thompson Flora Tropika Residences, and Meru Desa Park vie for attention. Commercial projects too like MH Tower and Riverside….are all gearing up for completion.
Property Buyers on the Increase
Contrary to the signs, there is no boom yet ‘but there are definite and encouraging signs that the property market is stirring. It started about a year ago,” commented Mr. Peter Chan, CEO of Superboom Projects Sdn. Bhd.
On whether the encouraging situation in property development can go on for a decade, he said, “it would depend on how the nation and Perak is doing. From present indications, two to three years is most likely because the trend has started and sentiment has reversed from negative to positive.”
No Property Bubble Noticed
His view has been further supported by the Perak Real Estates and Housing Developers Association (REDHA). Its chairman Dato’ Francis Lee stated there is no property boom or bubble existing in the Kinta District.
“In most circumstances a property bubble is evidenced by the existence of an increasing percentage of buyers who purchase properties with speculative intent only with the hope of yielding some short term financial gains.
“This abnormal increase in demand has the effect of escalating the price of properties, often pushing prices of properties beyond the affordability gap of genuine purchasers,” he said.
“In tandem with this increasing pricing, developers respond by increasing delivery well above the true effective demand which will ultimately cause the bubble to burst. However this is not the case in the Kinta district or anywhere in Perak.”
In the case of residential properties in the Kinta district, Lee said almost all the purchasers are effective home buyers or long term asset class investment buyers. It should be noted that all housing developers in Perak are only making normal profits out of the housing industry and any exception is due to a capital appreciation of the developmental property.
Lee added that the price increase of some 15% over last year is due to increasing costs of delivery, including land procurement, building cost and cost of bureaucratic compliance.
Housing Deliveries Fall Short
“In fact housing deliveries in Perak for the last few years have fallen short of the Ninth Malaysia Plan 2006-2010 target of 58,200 units for the planned period. This is equivalent to 11,640 units per annum for the corresponding period,” he explained.
This is not in keeping with the population growth of Kinta district which has increased from 549,198 in 1991 to 735,601 in 2010 and Perak which has increased from 1,877,471 to 2,258,428 in 2010.
With this increasing urbanisation of the Kinta district within Perak and the fact that the urbanisation tempo will gain further momentum in the longer term, there will be a corresponding increase in demand for residential housing.
According to the report, the number of residential units in existing stock in Kinta is 183,118. Single storey terrace houses and 2 and 3 storey terrace houses account for
102,631. Detached houses total 24,198, single-storey semi detached 4,990, low-cost h
ouses 36,379 and low-cost flats 5,560. The balance is made up of town houses, clusters, flats, service apartments and condominiums.
Single storey terrace and double storey terrace houses represent a 56.0% of total residential housing stock in the Kinta district as of last year. Consistent with the Perak State Government policy for a mandatory delivery of a percentage of total housing deliveries by way of low cost housing, there is a 23% housing stock of low cost houses/flats in the Kinta district.
The total numbers for future delivery of residential houses in Kinta as of last year was 13,974 “incoming supply” (physical construction works in progress), 1,796 “starts” (foundation and footing works in progress), and 18,968 “planned supply” (units with building plans approved).
All types of houses are in demand as they cater to different markets. However, quality housing is preferred as more people demand better quality.
Buyers are both locals and from outside of Perak with an increase in foreigners as well. Their purposes are for own stay, vacation stay, retirement stay and/or investment.
Criteria for Buyers
As secured location is the most important in the minds of prospective buyers, developers are wooing them with gated and guarded enclaves and with CCTV cameras on every street. Some developers are even providing individual alarm systems and auto-gates to every unit. Other criteria such as pricing, location (how close to public amenities such as schools), value for money (quality finishings compared to other similarly valued units), architectural designs (with minimal “white zones” to enable all parts of building to be used), and the reputation of the developers all play a role in developers’ strategy to woo buyers.
“Some prospective buyers are very fussy. They would look at the Feng Shui aspects,” remarked a leading developer. “They are interested whether the location and the architectural design of the building are favourable according to Feng Shui.
He said most developers are aware of such demands from the buyers and are doing everything possible to win them over.
“A right property investment is the best hedge against inflation,” said another developer. The property market this year and next year could still see 10%-15% growth, driven by scarcity of land and higher input costs.