Cooling measures not dampening auction market

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ONE issue that continues to plague lawmakers and aspiring first-time homebuyers — and is also driving the Malaysian property auction market — is affordability. Auctioneers tell City & Country that they continue to see bargain hunters looking to purchase homes for their own use on the auction market.

Despite the implementation of more stringent financial lending guidelines, the prices of residential property, especially landed units, are staying stubbornly close to their peaks, hence making the auction market attractive.

Based on Property Auction House Sdn Bhd's data, the number of cases put up for auction totalled 47,500 as at end-October. For the first half of the year, 28,000 properties were put up for auction, compared with 62,270 properties for the whole of 2011.

Danny Loh of Property Auction House doesn't believe the total number of cases this year will exceed that of last year. That could be because property values are holding steady, while homeowners are able to find refinancing, he feels. "Many banks are also promoting longer-tenure loans, as long as 40 years, for some house buyers, hence the default rate is minimal. Past auctions have seen many cases being withdrawn at the last moment due to the aggressive efforts by banks in recovering loans," Loh says.

Landed homes below RM700,000 and condominiums below RM500,000 are still drawing interest while upscale units above RM1 million continue to be passed over.

An interesting trend that is emerging as a result of a slower secondary market in 3Q2012 is of property owners opting to sell their properties via auction, auctioneers report.

"Property owners are more willing to put their properties under the hammer as they believe their units can be sold in the shortest period of time and at the best possible price," says Abdul Hamid P V Abdu, founder of Ehsan Auctioneers.

"A few years ago, one out of 10 property owners might believe they could secure a good price for their units via auction. If we were to sit down and discuss the issue with the same 10 fellows now, two or three of them will be agreeable to the option," he says. This shift in perspective, he says, is because the public is better informed about the trade.

Auctioneers also note that a number of buyers are now opting for joint ownership as this can make it easier for them to qualify for bank loans.

While properties in areas such as Rawang, Kajang, Cheras, Puchong, Semenyih and even Klang are gaining popularity, landed houses and commercial units in areas along the upcoming light rail transit (LRT) extension and mass rapid transit (MRT) lines, especially in Petaling Jaya and Kuala Lumpur, continue to be the most sought after.

The fall in supply in traditionally popular areas in Petaling Jaya and older areas in Kuala Lumpur such as Taman Desa and Overseas Union Garden, where a terraced house can now fetch above a million ringgit, has resulted in a fairly competitive market. A property in Bangsar can easily attract up to 40 interested bidders at any given time, says Abdul Hamid.

Foong Chon Wai, auctioneer at Ng Chan Mau and Co Sdn Bhd, says the old property mantra of "location, location, location" holds true for most current home seekers, most who are mainly shopping for low to medium-cost units for their own use. For these buyers, a strategic location is more important than yield or potential capital gain, he adds.

In the secondary market, matching the needs of buyers and sellers isn't an immediate concern, while sellers are also indecisive, contributing to fuller auction halls, he says.

Dwindling disposal income is another factor fuelling the industry. "The immediate possession of the property once the bid is successful is very important for those who fall under the low-income group. Many are paying rent and cannot afford to wait a few years for a property to be completed," explains Loh.

The auctioneers don't expect cooling measures to have much effect on the auction market given that the clients comprise largely owner-occupiers. However, many believe more cases will be put up for auction in the coming six months if the rate of non-performing loans goes up and the eurozone crisis continues to be a drag on the local economy.

Notable transactions recently includes a 2-storey terraced house with a built-up of 1,200 sq ft in Taman Sri Ampang Hilir that was sold for RM420,000 — an increase of RM60,000 from its reserve price. A 2-storey detached house in Kajang, sized at 6,297 sq ft, with a reserve price of RM1.35 million, was transacted for RM 1.37 million.

This story first appeared in The Edge weekly edition of Nov 26-Dec 2, 2012.