In one conversation with a close friend many months ago, she said she wanted to find a property which offers good rental yield and good capital appreciation. Today, one piece of news should offer her an opportunity to get this at the same time. According to Knight Frank Malaysia research and consultancy executive director Judy Ong, the rental market of “selected property sub-sectors [and locations] may undergo a period of consolidation in terms of slower market activities, pricing and rentals.” This softening will happen despite demand still outstripping supply in Greater Kuala Lumpur. Okay, this may not be such a good news to the current owners but based on the prices they had once paid in the beginning, the current softening is not going to adversely affect them.
As for the factors, it is really no different from one report to the other. It’s always the upcoming Goods and Services Tax, the oil prices and I think due to these, the negative sentiment is still prevailing. Actually I like this situation if it is really happening. To me, certain property locations are already too high to sustain. Come on, when rental yields are already negative, that’s already the sign that property prices are NOT sustainable. Who would like to buy a place, pay high mortgage and rent low rates? Increase rental rates then? I think the choices are way too aplenty nowadays for one to dictate the rental rates. Yes, this is definitely a sign that those who are renting may get more negotiation power moving forward.
Knight Frank also said that within first half of 2015, close to 5,000 new units of luxury condominium segment will be delivered. I think this is another very clear alarm that it is really time to think before we buy today. How many ‘high-end’ Malaysians are there in Greater KL to absorb all these? I seriously do not think majority of these owners would be moving into these units anytime soon. Thus, get prepared that the occupancy numbers would drop further. What’s the current occupancy number? Read here: High-rise occupancy is 69% in KL. Well, this may well represent an opportunity for my close friend to buy then. She has always been looking at the more luxury units. In fact this may just meet what she wants, high rental yields and high potential capital gain. Do note that market is always the same. Supply too much, prices come down, developers build lesser, supply starts tightening, prices start moving up again and the cycle continues. The only question as usual is, where and when do we enter? I will let my close friend decide.
written on 21 Mar 2015
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