By Siti Sakinah Abdul Latiff
THE EDGE MALAYSIA city and country APRIL 11 2011 page 4
With the prices of landed homes in the Klang Valley on an upward trajectory, demand is growing for the property type on the auction market.This has resulted in bids that are way above the reserve price for landed homes in some prime locations.
Licensed auctioneer Tan Kang Yap of Hope Auctioneer says as the current prices of landed homes are at a "ridiculous" high, "buyers are changing direction, with some heading for the auction market to find affordable properties".
He does not believe that new property launches and homes on the secondary market will be any cheaper in the coming months.There are two reasons for the increase in prices on the secondary market, he says. First, potential homebuyers desperately want to buy a property in a particular area but supply is very limited.
"Investors don't want to lose the chance to own a property in a certain area," Tan points out.
Second, it is a seller's market — homeowners are holding on in the hope that prices will rise further.
"So, make a bid if you like the property because win or lose, it's ususally cheaper to buy at auctions than on the secondary market," Tan says.
But according to Auction Data Sdn Bhd CEO Gary Chia, the price of a property on auction could go up due to its "hot" location and be sold for more than its reserve price or even the asking price of a similar property on the secondary market.
For example, in a survey by City & Country on landed homes auctioned in the Klang Valley that were priced from RM250,000 onwards in January and February 2011, a corner terraced house in Subang Jaya,with a land area of about 1,400 sq ft (no other information is available), was sold for RM800.000 — some 53.8% higher than its reserve price of RM520,000.
Another notable sale was that of an 8,275 sq ft corner terraced house in Taman Melawati, Kuala Lumpur, that was auctioned off at RMl.l million, almost double its reserve price of RM620,000.
"First-time buyers who are interested in the auction market should seek the advice of reputable auctioneers or real estate agencies before proceeding to bid for properties," says Chia, adding that the auction and secondary markets have different customer segments.Also, the prices of auctioned properties may not always be lower than the market value; sometimes, they are even higher.
Chia says the growing investor interest in auctioned properties located in the Klang Valley, especially landed homes, is due to foreclosed properties being generally cheaper than new properties launched in the same area.
According to him, buying on the auction market has several benefits, for example the time to purchase and to sell the property is fixed, and the long negotiation period between purchaser and seller is eliminated.
An estimated 5,529 commercial and residential properties were up for auction in January and 4,462 in February throughout the country.
In January, some 3,026 properties (2,701 in February) went under the hammer in the Klang Valley, of which 673 (555 in February) were landed homes.
"We estimate 10% more properties were up for auction in March," says Chia.
City & Country's survey shows that there were no bids for some auctioned properties, including a 3 1/2-storey detached house4n Taman Bukit Ledang, Kuala Lumpur, with a reserve price of RM6.1 million, and a 3 -storey semi-detached house in Beverly Heights, Ampang, with a reserve price of RM2.16 million.
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