KL prime properties? Not affected by the prevailing negative market. (Of course…)

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I have shared this many times during my talks. Imagine a mature neighbourhood with all available amenities. Everything is ready. Where all the available land is already fully developed except for some very small plots of land. Everyone bought some time back and they love the area. Not many are thinking of moving away because this is already the place where all their favourite eateries are.

Now, think about the potential supply; people willing to sell their units. The number is likely to be small. This is not a newly completed project where the number of units on sale in the secondary market will be many units. Then, we imagine the potential demand. It is likely to be bigger than the few units up for sale. This is because when it comes to a mature and popular neighbourhood, everyone wants to buy into that area. When supply is likely to be small and demand likely to be big, what will happen to the property price? Every transaction will see it inching upwards loh… Now for some expert opinion.

Article in thesundaily.my Savills Research says that prices of prime residential properties in Kuala Lumpur rose 2.4% within H1 2019. This is despite the sluggish property market. According to The Savills World Cities Prime Residential Index, Kuala Lumpur’s average prime residential property prices stood at US$260 (RM1,088) per sq ft (psf) in 1H19. (If anyone is wondering, RM1,088 is extremely low price psf even when compared to our neighbours…)

Savill’s index considered a sample of both landed and high-rise residential units in prime areas of Ampang Hilir, Bandar Utama, Bandar Sunway, Bangsar, Bukit Tunku, Desa Parkcity, KLCC, Mont Kiara and Tropicana. Looking at a 5-year period, prime property prices in Kuala Lumpur rose 13.7% while a 10-year growth was 84.2%. Savills index also showed that Kuala Lumpur’s prime property prices recorded the fourth highest growth for 1H19 in the Savills World Cities Prime Residential Index, after Berlin (4.2%), Paris (3.9%) and Beijing (2.9%). Overall, the index rose 0.4% in 1H19.

In terms of price psf, Hong Kong remains the most expensive at an average value of US$4,730 psf followed by New York at US$2,520 psf and Tokyo at US$2,150 psf. At US$260 psf, Kuala Lumpur’s prime residential property prices remain the cheapest among the cities surveyed in the index. Please do read the full article yeah. The Index actually showed decline of prices in many major property markets. Especially those who has always been trumping Kuala Lumpur when it comes to property price increases. Here’s that article for reference again fromthesundaily.my

No prizes for guessing why the 5-year is much lower in comparison to the 10-year period yeah. One was during the start of a booming period while the past 5 years were really slow years… Reminder. Even during these 5 slow years, it still went up by 13.7%. In other words, a RM500,000 property would have increased by RM68,500. If the downpayment was RM50,000 then the ROI would have been 137%. Divided by 5 years, it would have been a simple 27% per year. WOW… Well, a RM50,000 left in a Fixed Deposit for 5 years would have yielded around RM10,000. Happy understanding yeah.

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written on 11 Aug 2019

<Featured Image is courtesy of Stock Photos from Watchara Ritjan>

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