PROSPECTS for the Malaysian property market this year continue to be bright, with the residential sector expected to be the star performer yet again, says top real estate services company CH Williams Talhar & Wong (WTW).

The commercial sector, however, is set to become increasingly important as property trusts actively look to expand and foreign property funds continue to show keen interest here.

As usual, the Klang Valley is expected to lead the market, but things are also looking good in places like Johor Baru (Johor) and Butterworth (Penang).

"Overall, the outlook is very bright. Property prices haven't peaked. Foreign interest is helping drive the market, but there's also a lot of local interest," WTW managing director Goh Tian Sui said yesterday at the launch of its property market and CEO opinion survey for 2008.

Concerns over the impact of the US subprime crisis remain a downside risk, but it has so far not affected the local property market, he said.

"Foreign investors are still actively looking for spots to buy Malaysian assets. People who come to us are prepared to pay top dollar. There's so much capital chasing too few buildings," he remarked.

He predicts that Malaysia, in line with markets elsewhere, will see yields of less than six per cent this year in the Klang Valley, compared with between 6.25 per cent and seven per cent now.

Malaysia's residential sector, which typically accounts for about 60 per cent of total property transactions, has been the best-performing of all sectors since 1997.

Current hotspots include the Kuala Lumpur city centre, KL Sentral, Melawati-Ulu Kelang, Mutiara Damansara, Mont Kiara/Segambut, Kota Damansara and Menjalara/Kepong.

Boutique developments, rather than townships, are expected to do better and are set to be the trend this year.