KL property: SOHO, SOVO frozen for 6 months, for now

First of all, anyone who has been following kopiandproperty.com would know that I do not favour paying ever higher prices for SOHO. To be direct, I do think with the right locations, prices of these small units can be as high as a typical condo in a secondary area. However, I do not subscribe to the thinking among many that with lifestyle changes, everyone is going to opt for smaller units. Smaller units would only be extremely popular if all the bigger units becomes way too unaffordable for everyone. Just look at Hong Kong for Singapore for early notice of what may happen in the future. Yes, in Hong Kong, the ‘mosquito’ units are already a normal size for many.

With regards to SOHO, there was one piece of news which was forwarded by many people in Facebook. Of course, many may not think of this as a huge thing. Actually, I think it is a significant step. As per reported in The Sun Daily, all approvals for new new property projects involving serviced apartments, small office home offices (SOHOs) and small office versatile offices (SOVOs) has been frozen for until 30th June 2016 by the Selangor state government. This has been confirmed by the REHDA Selangor chairman Datuk Khor Chap Jen who said, “LPHS issued a letter informing of the decision, pending the issuance of new planning guidelines for such developments.”

The Malaysian Institute of Estate Agents immediate past president Siva Shanker was more direct. He said that this should have been done two years ago because there has already been an oversupply of apartments and condominiums and the market has started to feel it since last year. He further added that the SOHOs and SOVOs are severely affected by the oversupply and it will have the most effect during an economic downturn.

I think his (Siva) reasoning can be easily explained. The demand for these small units are just not that strong and during a slowdown, the sustainability of the premium pricing that some of these small units are enjoying becomes suspect. Not many couples I know are staying in these SOHOs or SOVOs and even my few single colleagues whom I know are either staying in the usual sized apartments or condos. Perhaps this freeze will enable the vacant units to be rented out and lessen the number of oversupply units. I personally also own one small unit in Kota Kinabalu and it gives me double digit returns but this was because I bought it many years ago at just RM180k and not RM400k or higher like today. Let’s wait and see what happens on 30th June 2016 then.

written on 11 Apr 2016

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