The slow but resilient luxury condo market in KL

This particular news about KL condo scene, I think I got it from two first hand information. A friend related to me how tough it was to rent out her condo nearby KLCC because there were just too many competitions from the market, plus many newly completed ones too. Another friend who travels to China frequently, the CEO of 88home.co, Ms.Olivia Lim said, “Let’s put the luxury condo scene into the right perspective. When the buyers that we are trying to attract are from overseas, the prices per sq ft that we are talking about today still seem reasonable. What else with the rental yield in Malaysia is still high compares to most country in Asean” As per Knight Frank Malaysia in its Real Estate Highlights for H1 2016, it said that the market outlook for the high end condominium segment in KL is affected by current weak sentiment and both the potential buyers or even investors are adopting a “wait-and’see” attitude.

It (Knight Frank) also shared that there was now a widening gap between supply and demands well as mismatch in product pricing and affordability. This was one reason why developers have been much more innovative in their push for more sales. I just came back from a mall today and this was what the real estate negotiator told me when I was walking pass his booth. “Mr, this project is by X developer (pretty branded) and you get easy ‘ownership scheme package with support from financial institution. Times are really pretty bad OR that’s the remaining units after the handover of keys. Anyway, the project that was being pushed to me is an existing high-density one, nearby a MRT station.

Other things that Knight Frank Malaysia shared was this, “While the impending completion of the LRT extension line and Phase 1 of the ongoing Sungai Buloh-Kajang MRT line by end of 2016 will continue to promote more transit oriented developments (TODs) along the transportation routes, more developers are also looking to expand their land banks into the suburbs to offer a wider mix of affordable housing products that cater to the domestic market.” In brief, choices will increase and not reduce. Choose wisely please.

One positive thing it shared is that the property prices in Kuala Lumpur has remained resilient in most locations. It then shared what my friend shared a few months earlier. The rental market has lesser demand due to the slump in oil and gas and with more competitions, owners are much more open to lower rentals just to keep tenants. It shared some recent pricing levels for primary markets. The selling prices of high end condo / serviced apartments within the KL city ranges from RM1,300 – RM1,800 per sq ft while branded ones are above RM2,000per sq ft. Mont Kiara wise, the new ones are being launches at between RM800 to RM1,200 per sq ft.

Looking inside the city centre, there are some renewal projects worth some attention. Location such as adjacent to KL 118 which was formerly the Stadium Merdeka is reviving its glory years due to mega project development and the rail construction contract linking Kuala Lumpur and Singapore is released. Potentially, KL is a destination of growth by 2020. While I think the HSR will benefit both countries but certainly any new connections between KL and Singapore would be a good story for the KL property market.

Anyway, my personal thoughts from this report by Knight Frank is that the market does not look too bad. Of course, one look at all the world business news would reveal that more retrenchments may be coming including one from an international bank as well as more from an international oil company. Well, I would prefer to think that for the Malaysian property market scene, as long as it does not get worse moving forward, it’s already considered positive. Any other thoughts? Or is the market totally different from what Knight Frank Malaysia has shared? Happy analysing.

written on 9 Aug 2016

Next suggested article:  Why Chinese investors are warming up to Malaysia’s property market

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