THE Kuala Lumpur luxury condominium market is expected to remain soft over the near term, as uncertainties from the Covid-19 pandemic continue.
However, the uncertainties of the pandemic have unveiled valuable lessons that could see the future of the luxury condominium segment seeing changes for the better.
Knight Frank in its Real Estate Highlights Research for the first half of 2021 says the unprecedented crisis has brought health and hygiene in high-rise living to the forefront.
“Moving forward, more upcoming developments are expected to incorporate touchless technology in elevators and door handles, antimicrobial material/surfaces in common areas, customised sensors to adjust air temperature and humidity, air-conditioning systems using UV light to kill bacteria and some viruses, etc.
“Other trends that we foresee may come into place are dedicated workplaces in homes as the work-from-home trend firmly settles in, as well as parcel lockers due to higher demand for contactless deliveries, vertical urban farms, etc.”
In the meantime, Knight Frank says the short-term outlook for the Kuala Lumpur luxury condominium market remains sluggish, as potential buyers and investors adopt the “wait and see” approach during this trying period.
Savills Malaysia Sdn Bhd group managing director Datuk Paul Khong also expects transactions within the luxury condominium market to remain slow, with asking prices in the secondary market anticipated to dip further.
“We have been in lockdown for more than three months. Given this scenario and that many property sectors are closed, we have not seen much action in the high-end market or many new major property launches for 2021,” he tells StarBizWeek.
Given the current market situation, in light of the Covid-19 pandemic and political uncertainties, Khong says the remainder of 2021 remains “extremely challenging”.
“The longer we drag on with the pandemic, the overall impact will be more severe,” he says.
According to Knight Frank’s Real Estate Highlights Research for the first half of 2021, the average gross selling prices of new luxury high-rise residences generally ranged between RM750 per square foot and RM960 per sq ft.
“New and upcoming schemes located at the established and popular residential locales of Bangsar and Mont’ Kiara/Sri Hartamas appear to command higher pricing, although developers are generally offering more discounts to boost sales in this challenging market environment.”
Within the secondary market, Knight Frank says the locality of Damansara Heights is the only exception where the selected schemes monitored had registered higher average prices (on a per sq ft basis), when compared to the second half of 2020.
As for the locality of Mont’ Kiara, Knight Frank says the prices of sampled properties are relatively stable.
“Elsewhere, in the other localities, the prices of high-end residential units remain under pressure.
“During the review period, asking rentals for selected schemes monitored in KL City, Ampang Hilir/U-Thant and Bangsar declined marginally. Meanwhile, in the localities of Damansara Heights and Mont’ Kiara, the asking rents remained in the positive territory.”
Knight Frank Malaysia deputy managing director Keith Ooi says the luxury condominium market in Kuala Lumpur continued to undergo a price correction in the first half of 2021, due to weaker demand albeit rising inventory, both existing and newly built.
“Similarly, in the tenant-led market, rentals remain under pressure due to weaker leasing demand.”
Moving forward, Knight Frank in its Real Estate Highlights Research says the overall rental market is expected to remain under pressure due to weaker leasing demand.
“Tenants looking for affordable rental options continue to be spoilt for choice.
“It is worth mentioning that the country has relaxed its entry ban on certain categories of expatriates and their dependants as well, as professional visit pass holders since September 2020.”
The recent reactivation of the Malaysia My Second Home (MM2H) programme is considered timely to spur the local economy, especially the real estate, health services, education and domestic tourism sectors that have been hard-hit by the pandemic.
The programme has been very successful in wooing expatriates, a key target audience within the luxury condominium market, says Khong.
“It is a good and positive step to reactivate the MM2H programme to allow all eligible foreigners to participate and invest in Malaysia, as compared to a totally closed position earlier,” he says.
The reactivation of the programme has, however, been criticised for its new, updated pre-conditions, as it now makes the applications even harder.
According to reports, it is estimated that more than 90% of the current visa holders do not meet the new criteria. Many have urged that the new pre-conditions either be revised or reverted to the same ones prior to the suspension of the programme.
Khong also believes that the new conditions are too stringent.
“From a property angle, a higher bar is now reintroduced for MM2H in 2021 and it is still doable, even though it will limit the numbers and category of participants.
“Bear in mind that any good real estate (for foreign investments), especially in the Klang Valley, will exceed a minimum price of RM1mil anyway.”
The newly reactivated MM2H programme aims to attract applicants who can contribute to the country’s economy, such as high-income earners. New applications can be submitted starting October and will be reviewed by the Immigration Department, which has taken over the duties from the Tourism, Arts and Culture Ministry.
Khong says the impact of the MM2H programme will only be seen from October. “Hopefully, it will be timed well with the reopening of Malaysian borders.
“The weakening of the ringgit will also make Malaysia relatively attractive and this will hopefully help spur the market for 2021. Any positive news assisting the property sector would also be welcome, considering the current environment.”
Applications for MM2H were frozen when Malaysia closed its borders due to the Covid-19 pandemic last year. This was to allow the Home Ministry, along with the Tourism, Arts and Culture Ministry, to carry out a comprehensive review of the programme. There are currently 57,478 holders of the MM2H passes, including dependants.
Currently, more than 1,000 applications are pending from participants from countries such as China, Japan, the United Kingdom, Bangladesh, South Korea, Singapore, the United States, Australia, Taiwan and Indonesia.
Meanwhile, according to Luxury Living Chicago Realty founder and chief executive officer Aaron Galvin, who was quoted in a Forbes article earlier this year, luxury renters are coming out of the pandemic with new priorities.
He says that while virtual tours are here to stay, they do not replace in-person decision-making.
“When renters were forced to tour apartments virtually due to shutdowns and stay-at-home orders, they quickly embraced the efficiency and convenience of shopping for a new home remotely. High-resolution photography, videography and additional virtual tools needed to be created and paid huge dividends during the pandemic.”
In the first quarter of 2021, Galvin says 25% of all tours were conducted virtually.
“This allows renters to narrow down choices and be most efficient when it comes time to see properties in person. Instead of spending a weekend touring eight to 10 properties, many are still leasing sight-unseen.
“But if they do visit properties in person, the average number of properties is three.
“Virtual touring is here to stay and leasing agents, property managers and owners should continue to evolve and add to their toolbox of digital assets.”
With many luxury renters spending all day within their unit, Galvin says living space has become more important than ever.
“The prior transient renter is now decorating, redecorating and adapting their space to be their office, gym and home.”
Additionally, he says that resident surveys, especially of those who lived in a property for six or more months during the pandemic, are a useful tool to gain insight into post-pandemic preferences. “These insights can inform future construction or capital expenditures for stabilised apartment buildings.”