When developers continue to focus on Klang Valley

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Urbanisation is on our side when it comes to property investments in the Klang Valley. More people are moving into cities. There are some who are retiring and going back to their small hometowns but the number is small lah. In fact, Ttere are still lots of people moving into cities every year. Kids grow up, complete their secondary school education and move on to universities, usually their first choice would be those in the cities. Upon graduation, whether they studied in smaller towns or cities, the first choice would always be where they could build their career. Here, the choice is pretty clear, a city would be better than a town. There are bigger number of available jobs. When they move into cities like Kuala Lumpur, they would need housing. After staying for a couple of years, they would need an upgrade.

The demand for properties? Well, it will continue to increase until the day when the population growth in cities slows down. That’s when the demand stops and depending on supply, the property prices would change. By 2020, the population in Kuala Lumpur is expected to top 10 million (widely reported, just google for it) compared to today’s estimated 7.25 million. Source: What this tells us is that assuming 4 people would stay in the same home, we will need an additional 687,500 units of new residential homes. I know you would like to ask, ‘If this is the case, with such huge demands, then the property prices will surely rise right?’ Short answer is ‘Depends.’ The next question of ‘Depends on what?’ Well, the answer is that it depends on the affordability of these new homes. If it continues to be the price range of PR1MA, RUMAWIP and RumahSelangorku, then these would sell. It may be far away from the city centre but if it’s connected to the MRT or LRT line within 10 minutes, it will sell lah. My staff hates the jam and takes the LRT instead. During these journeys, she could listen to an audio book every week. Lots of new knowledge!

Two developers seem to agree too. Mah Sing is expanding its landbank in the Klang Valley. It has a low gearing and thus may be able to spend up to RM1 billion to buy landbanks. Full article in TheStar here. It says that assuming the land cost is 10 percent, the gross development value for a RM1 billion landbank would be RM10 billion. It has 883.42 hectares currently. Total remaining GDV for it as well as unbilled sales is RM30bil. It is enough to support the company’s revenue and earnings growth for the next eight years. Second developer is thinking of Sentul!  Full article in TheStar here. It seems that Sunsuria does not yet have any landbank in the Kuala Lumpur area. It has existing property development activities in Salak Tinggi, Shah Alam and Bukit Jelutong. It will jointly develop the piece of the land with Genlin Development Sdn Bjd. The final development plan of what is to be built will only finalised at a later stage. Happy waiting for 2020 to arrive.

written on 27 July 2017

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