17/3/07 (Daily Express News) Kota Kinabalu  -   The increase in land and building costs have pushed up prices of residential properties and those wishing prices of houses would drop may be disappointed.

This is due to a few factors, according to CH Williams Talhar and Wong, Managing Director, Choong Choon Kim.

He said the Sabah economy is doing well owing to the favourable prices of palm oil and rubber.

"The other factor is tourismÉthe growth in the industry is not only sustained by foreign visitors who are here for the sun, sand and sea, and Sabah's varied natural treasures," he said during a press conference on the Sabah Property Market Report 2007, here, Friday.

Apart from visiting, some tourists have also been buying houses since Malaysia launched the campaign "Making Malaysia My Second Home."

The industry has raked in some RM2.5 billion in tourism receipts for 2005, up from RM632 million in 2000 with visitor arrivals increasing from 774,475 to over 1,828 million within the same period. For 2006, arrivals breached the two million-mark, which is an increase of 14.4 per cent.

"Overall I can say that Sabah was doing well in 2006," he said, adding, "and with this, people have more money to invest either in residential properties or others."

However, as for 2007, most buyers will take a bit longer time to buy, or in other words, they will wait as housing prices, especially in Kota Kinabalu, have gone up by 30 to 50 per cent, he said.

"Buyers will be more cautious and apart from that, bank loans are getting more stringent. Interests have gone up to 10 per cent,' he said.

He revealed that most of the houses in Kota Kinabalu are being purchased by people from the East Coast (Tawau, Sandakan and Lahad Datu).

"They are the people who support the present housing prices and due to this, house prices will not go down."

"I can say that there is quite a number of rich people in Sabah, and high-end property, especially condominium, is in good demand," he added.

As for shopping complexes, suddenly there has been an increase in numbers in such a short period of time and Kota Kinabalu will need time to digest this, said Choong.

Meanwhile, the 2007 outlook for Sandakan, he said, will see the oil palm sector continue to do well, with crude palm oil prices looking bullish in anticipation of bio-diesel prospects and suitable undeveloped land being increasingly scarce.

He said the demand for agricultural land will continue to grow commensurate with good commodity prices.

"Nonetheless, property development and investment would be sustained by the favourable outlook for the palm oil sector."

For Tawau, the property sector will generally remain stable for 2007, he said. The upside will be the agricultural sector, where demand for agricultural land for oil palm planting will continue to be good.

As for the district's residential sector, he said medium cost houses are expected to attract more interest while there would be little change in the office sector.

Lahad Datu, an agriculture-based district, and being home to large hectares of oil palm plantations, has immense potential for the development of oil-palm downstream activities such as the bio-diesel industry and other value-added products, he added.