Weakening demand for luxury condos, increasing prices for cheaper condos

Let me SMILE first. To many who have been reading for some time, you would understand why. I have always said that I do not feel that property prices are too high for all categories. It’s just too high for some while for the secondary market there are still many good choices. Now, let’s look at what the real property gurus in Malaysia has to say. Reported in The Star on 27 August. Media reports said that local demand for high-end condominium will weaken primarily in the Kuala Lumpur City Centre (KLCC) area. Then, according to Jones Lang Wooton Executive Director Malathi Thevendren, there is a mismatch in the level of pricing of the high end luxury condos versus demand because of local affordability. In other words, the locals just could not afford these units.

Then, she said,’for affordable condominiums, demand will see steady growth with young couples and professionals continuing to drive the market.’ This is definitely supported by the current demographics in Malaysia. Just look at the baby section in all departmental stores, new malls. It is growing and the brands of baby diapers are now so many that I see a new one being launched nearly every time I go to the mall!

Other comments from her include the fact that landed is more preferred when compared to condo but affordability is now a serious issue. Market prices for low to medium end condominium in popular locations may even see some appreciation. If you look at some of the online property sites, you will see that there are still many secondary condos which are prices at RM400 psf or lower. Let me tell you something real. For new launches of any condo, based on the usual margin, land price and construction costs, no one would sell at RM400 psf or lower. In fact if it is RM450 psf or lower, majority of the developers would choose NOT to build. The risks far outweighs the risks.

Personally, whatever has been said thus far will always be the same. As majority of the richer people would be living in a landed property, the not so rich ones would want to be like them. Thus, they would want to get landed. Always remember this, the richer people are just using a small portion of their wealth for these landed ones. If you are like me, you would need to use a bigger chunk of your wealth, thus rendering you incapable of buying another property for investment. Think a little differently, the results would be different and within 10 years you may actually be already owning one and have two other properties with rental. Think objectively.

written on 27 Aug 2014

Next suggested article:   The changing condo versus the loved landed. My views.

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  • racistmalaysian on August 28, 2014

    I have different opinion though. If developer selling more than 450psf, the risk is higher because nobody buying expensive condo nowaday. If developer selling less than 450psf, the risk is lower because a lot of people will flock to buy it.

    • chialih on August 29, 2014

      Based on current land price for lands not in faraway land plus construction costs including material and labour and also the fact that the developer needs to maintain a certain margin, Rm 450psf is really quite a good price. For places out of Greater KL, I think it is still possible to sell at much lower than RM450psf. Otherwise, selling at Rm450psf today with completion in 3-4 years time later meant it is really great value. I am not sure how much corners the developers have to cut if they sell much lower unless they really go for lower margin which is then quite risky for the developer. Nothing must go wrong….

  • asali on September 1, 2014

    Good projects always been snapped up fast even the selling price at RM600 to RM700 psf.
    I super liked the last paragraph as started at “As majority of the richer people….” until end. Super thumb up!!! Please write more and more.

    • chialih on September 1, 2014

      Please comment more and more too. Thanks Asali. You have been a pillar of support from the very beginning.

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