Reported in a local English daily. According to CH Williams Talhar & Wong managing director Foo Gee Jen, the average occupancy of high-rise residential property in Kuala Lumpur for 2014 was 69%. With more new completion of high-rise residential developments in 2015, this will definitely lower the rental yield as well as the average occupancy rate. In fact rental would come down, benefitting tenants.
If we look at this average number of 69%, this number tells me two things. One, there are already high-rise with low occupancy. I term low occupancy as below 50%. There are also high-rise with high occupancy. I term high occupancy as anything above 80%. This meant that when we look for secondary properties, it is very important to ensure the total occupancy is high. If it is low, this will remain low or even move lower once the rental of slightly better properties come down and some of these people move out. Remember, there are reasons why some of these high-rise have low occupancy. It may be due to the environment, the maintenance or even because majority of the buyers happen to be investors. These reasons do not disappear. Thus, buy with your eyes wide open.
This number also tells us that there are already some high-rise which are very much in demand. Do note that these high-occupancy high-rises does not necessary mean that they have the best designs etc. However, it tells us that when it was completed, majority of the buyers are looking to stay and as usual, once you have stayed a few years, it will be harder to move. I am not talking about low cost to high end. I am talking about condos which are already good enough to meet our usual needs. These are the places that once we move in, we would stay for a long time, unless circumstances change. Agree?
Buy high-rises which already have good occupancy BUT is still undervalued. There may not be any of these in the usual places you look. Why not look FURTHER away? Yes, literally in terms of kilometres. Places which may be jammed today may have a new MRT within the next 18 months. Understand what you are buying. Just use the occupancy as an important benchmark before you buy. Most of the time, the choices of many may not be the best but it is still the choice of many. You should not have problems in attracting future tenants.
written on 6 Mar 2015
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