According to an article in The Edge, Swhengtee International Sdn Bhd founder and president Gavin Tee said that residential property prices would see corrections this year; property prices may soften for certain products in certain locations, having escalated too fast last year.
Some people asked me for my opinion and in my view, I would quite agree with Mr Gavin Tee. However, I dont see the corrections as a major issue when you are making investments in property - especially residential properties. In terms of property appreciations and prices, there is no straight line upwards; it is always a staggard growth - and it just depends on how steep the line is. =)
...and so... the graph/line would look like this. Staggard upward movement. =)
In my view, I believe that the line is correct, but there will be some changes to the line. Let us zoom in a bit and I'll show you the difference... I believe that there will be a minor correction, which would somewhat be forgotten within a short period of time. After the correction is what matters... In the coming 24-30 months, I believe that the property prices would still go upwards, but slow down a bit (not so steep part of the line...).
How the market will behave after the slight correction.
It will still go up, but not as rapidly as before. In my opinion, property prices, in particular to residential ones are expected to go up at least 10% within this year itself, and steadily grow in the months after that. Being in the construction industry, I have additional 'insider information' of this potential rise; for a start, prices of building materials ranging from steel, cement, concrete, timber and so on have all gone up quite a bit. Apart from this, land costs and values have also gone up tremendously. It has come to the time that developers are unable to keep to the previous market prices, hence a natural increase of prices.
Prices of land, especially in matured neighbourhoods such as Petaling Jaya, the KLCC vicinity as well as various areas in Cheras, Kepong and Kota Damansara have been competitively and aggressively snapped up by developers. This sudden competition have resulted in higher land prices, pushing it way beyond the previous 20-25% (of the Gross Development Value) figures. Today, land costs accounts for almost 30%, and in some cases as high as even 40% of GDV values, resulting in a more expensive end product.
The Icon City PJ by Mah Sing
However, despite this, various developers are still developing properties around, and not giving up. I like the recently launched Icon City PJ by Mah Sing - it has quite an innovative design and layout, a futuristic look and importantly, the quantum of the property prices are not extravagantly priced.
As we go forward from here, I believe that the investors and future owners of properties would be looking at new innovations and ideas from the developers; and the developers have to work and think double hard in order to capture the investors' hearts. =)
The Glomac Damansara, by Glomac.
Another project that has caught my eye is the Glomac Damansara. It is a mixed development, with over 1.6 million sq ft of space, comprising shops offices, office blocks, apartments, as well as a Grade A office tower too. I believe this project would sell very well - do bear in mind that the *new* MRT would run near here, and there is a station nearby too.
So, in all, I would like to summarize that... yes, there will be a minor correction of the property prices in the months to come. But dont worry - I believe that the market will pick itself up and stabilize after that.
Just one thing that you need to think about though for investors.... for that, come back to my blog next week and you'll see it. =)
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