Analysts have said that those who expect property prices to ease soon should rethink their assumptions.


“Against the backdrop of rising inflationary pressure, we believe that home prices cannot afford to stay at the current level owing to rising land cost and cost of raw materials,” said Tan Kam Meng, a Senior Analyst at TA Securities Holdings Bhd (TA Securities), in a report by The Borneo Post.


“Such outlook is underpinned by the accommodative mortgage rate at 4.4 percent, as well as the higher living standard on the back of rising affluence of Malaysian population which in turn, would encourage buyers to switch to properties that offer security such as those in gated and guarded communities and smart home features,” he said.


For Q1 2011, sales of residential properties in major cities climbed 9.7 percent year-on-year to 34,659 units, led by Johor, Penang and Selangor.


The total value transacted in these major cities grew at a faster pace in the first quarter than total transactions, a sign that the mix of product was favouring the high-end segment.


“From January to March, total transactions done at the RM500,000-RM1 million per unit, and those less than RM1 million per unit rose by 0.8 percentage point (ppt) and 0.3ppts, respectively; against the previous year’s corresponding period,” said Tan.


Correspondingly, bigger developers maintained an optimistic outlook in the market by launching new projects, particularly in Greater Kuala Lumpur.


“Longer term, the roll-out of high-impact MRT (Mass Rapid Transit) projects is expected to enhance land value and support property prices in Klang Valley. The implementation of goods and services tax (GST) in the future is expected to lift property prices higher too,” he said.


“Given the concerns over land scarcity at prime districts within the Klang Valley, we expect landbanking exercise to divert from the central of gravity (Kuala Lumpur City Centre) to Cyberjaya, Kajang and Seri Kembangan within Selangor.”


Regarding the recent announcement by Housing and Local Government Minister Datuk Chor Chee Heung about the tougher requirements for aspiring housing developers, Tan noted that the proposed guidelines will work to safeguard buyers’ interest against delayed and abandoned projects.


“It will be positive to the sector,” he said.


“To combat abandoned projects, the most effective tool is to make the ‘build-then-sell’ concept mandatory — such as the one proposed for the new housing act.”