PETALING JAYA: An oversupply of new luxury condominiums in the Klang Valley this year is expected to create pressure on rentals and even result in a “price war” on new and existing units.
Property consultant CH Williams Talhar & Wong Sdn Bhd (WTW) managing director Foo Gee Jen said the number of new units expected to come in over the next few months was “frightening.”
“We expect some 5,000 to 6,000 units coming in within the next six to nine months in the Klang Valley,” he said, adding that he was “mixed” on the outlook for high end condominiums ranging between RM1,000 per sq ft and RM1,500 per sq ft.
Malaysia Institute of Estate Agents (MIEA) president Siva Shanker said he expected a “price war” to erupt amongst owners looking to find the best rental rates for their condominiums.
“A lot of people would have bought these upcoming properties to flip (sell at a higher price). But at such prices, they may have problems finding a buyer. So the next thing they will do is try to rent out the unit.
“Again, to try and get the most out of the situation, they will want to rent out the property at the highest possible price. But because there’s an oversupply situation, there will be competition from other owners.
“So a price war will begin as they start lowering prices (to be able to secure a tenant).”
Siva said he expects units ranging between RM600,000 and RM1.5mil to face this problem.
“However, units that I call super luxury units, ranging over RM3,000 per sq ft, are unlikely to face this problem as they are quite niche and are unlikely to face much competition,” he said.
According to WTW in its report on the luxury condominium sector for the third quarter of 2013, the cumulative supply of luxury condominium in Kuala Lumpur increased from 25,796 units in the second quarter of 2013 to a total of 26,163 units in the third quarter of 2013, contributed by 147 projects.
The bulk of supply was concentrated in KLCC area with a total of 11,181 units or 43% of total cumulative supply in Kuala Lumpur.
“Prices were generally stable in all areas where in KLCC and Mont’ Kiara/Sri hartamas area, prices ranged between RM850 and RM1,400 per sq ft while for the remaining areas, prices were between RM700 to RM1,200 per sq ft.
“In terms of gross asking rentals, rentals in KLCC area indicated stable rates at a range of RM4.50 to RM6.50 per sq ft while the remaining areas ranged from RM3.50 to RM5.50 per sq ft,” said WTW.