LAST WEEK, a developer unveiled its project located away from the Mont’Kiara area proper, heading towards Segambut Dalam, with an interesting marketing pitch.
Its chief marketing officer said the units were “value for money” and that there would be value-creation in future.
The thrust of the message – it’s value for money with scope for future price increase.
She singled out a unit from The Zest @ Kinrara 9, Puchong where its absolute price rose 107% from RM231,000 to RM480,000 between 2009 and 2012, and a unit from The Z Residence, Bukit Jalil which rose from RM333,988 to RM660,000 in the three years between 2011 and 2014, a whopping 98%.
She used non-Mont’Kiara examples, and units developed by her company.
What she omitted to say was, between 2009 and 2011, prices of property rose by leaps and bounds. It did not matter where and what you purchased. In all likelihood, prices would have escalated like crazy.
She also omitted the fact that what happened between 2009 and 2014 was a phenomenal leap, never before seen by real estate personnel with over 30 years of experience.
Or the fact that many developers undertook massive and multiple launches in order to take the opportunity to launch their respective projects when interest in real estate ran deep and wide.
With the leap in property prices, land owners also increased the asking prices of their land; and developers bought land at high prices because they were competing with one another.
However, the party that many thought would go on, finally came to an end.
Four to five years later, we are now in October 2018. It is unlikely that the price escalation that took place will be repeated.
In a sampling size of 3,000 transactions in Mont’Kiara and more than 47 projects, a real estate consultancy concluded that prices have generally stabilised, with serviced apartments priced about RM300 per square foot (psf) higher than condominium prices in 2016 and 2017 but narrowing to about RM200 psf in the 2018 year-to-date.
Prices of serviced apartments average at about RM900 psf and condominiums around RM600 psf or thereabouts.
There are also condominium units at plus or minus RM500 psf, depending on the age of the development.
Says City Valuers director C.Y. Lim: “Condominium prices have stabilised the last three years between 2016 and 2018. Prices have maintained somewhat in 2017.
“There is a slight decline in prices for serviced apartments with a drop of 9.52% in four serviced apartment projects, namely, Kiara Designer Suites, Verve Suites, Gateway Kiaramas Residence and Solaris Dutamas Residence. So, the serviced apartment market has been soft the last three years.”
There may be other serviced apartment transactions but they do not have the transaction data.
Lim divides the Mont’Kiara market into three categories – below 1,200 sq ft; 1,200-2,000 sq ft; and over 2,000 sq ft.
When you look at units between 1,200 sq ft and 2000 sq ft, for certain developments there is a slight increase, says Lim.
For units 2,000 sq ft and above, there are fewer transactions. In 2016 and 2017, there was a decline because the absolute amount was huge.
Generally, there has been a decline for the units below 1,200 sq ft.
“And if I were to buy something to live in, I would choose a condominium over a serviced apartment because the price per sq ft is lower and the outgoings would be less for a condominium,” he says.
Down to the micro level, overall transaction prices are going down by between 2% and 3% for serviced apartments.
“To be fair, we have not reached the end of 2018. For 2019, we do not want to make a call,” says Lim.
Analysing the condominium prices, he says things have stabilised, with developers launching at different times.
“The RM300 gap between serviced apartments and condominiums should narrow.”
Lim says auction prices should always be lower. In 2014, prices of auctioned Mont’Kiara properties were 25% lower than market prices, in 2015, 43% lower.
Mont’Kiara auctioned units used to be sold during the first round of auction but from 2016 onwards, the properties went through more than one round of auction before they were sold, with a 10% price reduction for each round.
This gave the impression there were more Mont’Kiara units coming under the hammer. We do not know the supply of auctioned properties because these are not recorded, Lim says.
In the rental market, the asking rent for older projects is lower at RM1.80 psf. The asking range is between RM2 and RM3 psf, with some asking for RM4, but this is not plausible.
Lim says in the short-to-medium term, there may not be room for capital appreciation because when the rent is low, investors will think twice.
“Vacancy was high at one point and I believe it is still high. The rent is low because the vacancy rate is high.
“With a trend like this, there is little room for capital appreciation. Even if prices were to shoot up to RM1,000 psf, it is not sustainable because the rent is weak. So if you get rental of RM2 or RM3 psf, should you be paying RM1,000 psf for the unit? No.”
SK Brothers Realty (M) Sdn Bhd general manager Chan Ai Cheng says rental rates generally “have been adjusting” throughout the whole of this year.
“It’s not just in Mont’Kiara, but the whole of the Klang Valley,” she says.
Nevertheless, Chan says Mont’Kiara still continues to remain as an attractive location for both buyers and investors.
“Some have taken up large blocks to run an Airbnb. Rental rates at Mont’Kiara are sill alright. The adjustment is happening everywhere, but some buildings are doing better than others.”
PPC International managing director Datuk Siders Sittampalam concurs that rental rates for high-end condominiums within the Klang Valley have been on a decline for a while.
“It’s because there is an oversupply of such units and demand from expatriates has reduced over the years. There are more than 50 condominiums there!”
However, Siders adds that Mont’Kiara is still a highly sought-after address as it is considered a “high-end conclave”.
“Many high-net-worth individuals, especially expatriates, have taken up Mont’Kiara as their place of residence. It’s a good location, and prices won’t keep dropping. Eventually, it will pick up again.”
Chan shares a similar sentiment: “The appeal of Mont’Kiara cannot be denied. It’s a place where a lot of expatriates live and it will continue to attract future ones. It’s also a place that a lot of young people gravitate to, because of the hip lifestyle associated with it. To many youngsters, it’s considered a ‘happening’ place.”
According to Siders, occupancy levels of condominiums within Mont’Kiara have dropped this year.
“There has been about a 10% dip in value in terms of sales price. The place is fully developed and new launches have dropped significantly.”
With that, development has started shifting towards the north of Segambut, with many now calling it Kiara North.
A similar trend was observed in Bangsar, where at one point, prices there couldn’t grow and it started to spill over to Kerinchi.
When that happened, people started calling it Kerinchi Bangsar South – leading to values increasing.
However, Siders cautions that this will only worsen the oversupply situation further.
Moving forward, Chan says she expects rental rates to remain flattish until next year.
“I think it will remain the same for most of 2019,” she says.
According to property consultancy Knight Frank in its Real Estate Highlights report for the first half of 2018, the Kuala Lumpur luxury condominium segment is expected to see improvements this year, on the back of renewed confidence and improving market sentiment.
It says that a total of 216 condominium and apartment units changed hands in Kuala Lumpur in the first quarter of this year.
Despite being marginally lower when compared to the 238 transacted units in the fourth quarter of last year, the property consultancy says there was an uptick in enquiries from potential buyers due to renewed confidence in the new government.
“The recent echo of improving sentiment coupled with the strong growth momentum of the economy and the rebound of oil prices, among others, show that there is a window of opportunity for recovery in the property market, including the high-end segment.
“Malaysia is expected to return to the radar of investors after the market stabilises with more clarity in the policies of the newly-elected government,” it says, adding that the three-month tax holiday period from June to August this year was also positive for the property market.
During the first half of 2018, Knight Frank says rentals of most high-end condominium/serviced apartment schemes in the various localities under its review, continued to hold steady.
“Asking rentals in Bangsar, however, were noted to be generally lower.
“Within the Kuala Lumpur city centre, amid the tight leasing market, owners with weaker holding power are turning to the online marketplace and hospitality service operators such as Airbnb, to offer their accommodation for short-term stay at higher yields.”
It adds that the mismatch of supply and demand within the Kuala Lumpur city centre continues to put pressure on secondary pricing.
“Meanwhile, asking prices in other localities under review remained stable. In the locality of Ampang Hilir/U-Thant, the launching price of Impression U-Thant starts from RM1.3mil (or around RM1,700 psf).
“The pricing on a per sq ft basis is higher compared to other existing projects in the vicinity, as the units offered are smaller in size and semi-furnished.
“Inspirasi Mont’Kiara was launched at RM776 psf onwards, while units at Damansara Fifty6 commanded an average pricing of RM830 psf.”
In the secondary market, Knight Frank says the transacted prices of mid-to-large-sized condominiums/serviced apartments (1,300 sq ft to 3,400 sq ft) in selected locations such as The Troika and Pavilion Residence remained resilient, averaging at RM1,200 psf and RM1,700 psf, respectively.
According to Bank Negara, the number of unsold housing units, of which more than 80% are priced above RM250,000, increased to 146,196 units as at the end of the first quarter of 2018, a rise of 11.86% against 130,690 units a year ago. Bank Negara says unsold units include small offices home offices (SoHos) and serviced apartments.
According to the National Property Information Centre (Napic), the number of unsold completed residential units – including serviced apartments and SoHos – totalled 34,532 worth RM22.26bil as at the first quarter of this year.
This represented an increase of 55.72% in the number of unsold units compared to a year ago, when unsold units totalled 22,175, inclusive of serviced apartments and SoHos, which are built on land zoned as commercial but have a residential element to them.
Bank Negara says unsold units include those that have been launched and are under construction. Napic’s definition includes only units which remain unsold nine months after they have been certified fit for occupation.
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