MALAYSIA’S property market is set to enter tougher months ahead, as the negative sentiment from global real estate market hits the nation’s shore.

That is the overall view shared by industry players at the recently-held Rahim & Co seminar 2009. The one-day event covered a wide range of topics on the domestic economy and property market and included prominent speakers such as economists, former government servants, valuers and property consultants.

Malaysian Institute of Economic Research (MIER) projects Malaysia will have 50% chance of full-year recession this year and is quite certain that the country will dip into technical recession in the first half of this year.

MIER executive director Prof Datuk Mohamed Ariff Abdul Kareem expects the domestic economy to return to normalcy only in two to five years.

He opines the world may witness further economy deterioration, as he sees more companies will collapse within six months times.

He says that typically the property market is the first to feel the strain during an economic crisis and, unfortunately, the last to recover.

Prices trending downwards

As an open economy, Malaysia is not spared from the global financial crisis as well as property market meltdown. Since late last year, the domestic property market has started to show signs of weakening.

Rahim & Co executive chairman Datuk Abdul Rahim Rahman says Kuala Lumpur City Centre’s (KLCC) high-end condominium is heading towards a 15%-20% price depreciation in two to three months.

He says buyers are looking for more realistic pricing, reflecting the current conditions. In a worst-case scenario, he is projecting up to 30% drop in prices over that period.

Average price stands at RM1,500 per sq ft in KLCC presently. In other suburbs such as Bangsar, Damansara Heights and Cheras, he predicts a 10%-15% decline.

Abdul Rahim tells StarBizWeek that rental of office space in KL should not be affected at least until the end of the year but he expects prices to come down after that.

“If I am in the KLCC area, I want to save a little bit of money due to the downturn. I will downgrade my office, which I will reduce from RM8 to RM6 per sq ft. So, the KLCC landlord may have no choice but to reduce by 10% to 15% (to prevent the tenant moving out). But at this time, the rental rates are maintained,” he elaborates.

There will be additional 8 million sq ft of office floor in KL by 2011 or 2012. Currently, the rental rates at KLCC and the KL vicinity are between RM6 and RM8 per sq ft and between RM4 and RM6 per sq ft respectively.