Steady outlook for luxury condominium segment

Siders: Over time, the high-end condominium segment will become a niche sector.

THE rebound in the country’s residential property market is expected to spur the high-end condominium segment, which has remained soft for several years.

According to the National Property Information Centre, the residential property segment continued to drive the market during the first half of this year, accounting for more than 60% of the total transaction volume and over 50% of the total transaction value.

As for the high-end residential segment, specifically high-rise developments such as condominiums and serviced apartments, Savills Malaysia Sdn Bhd group managing director Datuk Paul Khong says the uptake for these units has been picking up.

“The condo market, in particular, has seen a better uptake in 2023, but it is still on a selective basis.

“It is concentrated on specific price brackets and we note that investors are still keen on investing in good products at favourable prices,” he tells StarBizWeek.

Khong notes that the residential property market still faces challenges in the form of economic uncertainties, rising inflation costs, financing limitations and evolving buyer preferences.

“We expect prices, especially new builds, to escalate further as the base ingredients of both land and construction costs have been moving northwards.

“This cost push element will affect capital value accordingly,” he says.

Meanwhile, PPC International Sdn Bhd managing director Datuk Siders Sittampalam says the high-end condominium market last year was pretty much stagnant, in terms of movement for both volume and value.

“Most of the movement was for properties below RM500,000 and many developers are focusing on this segment.

“Over time, the high-end condominium segment will become a very niche sector.”

According to Knight Frank in its Real Estate Highlights for the first half of 2023, the cumulative supply of high-end condominiums/serviced apartments in Kuala Lumpur stood at 74,053 units as at the first six months of this year.

It says this follows the completion of six projects contributing an additional 3,298 units to the existing stock.

“Another 7,312 units from several projects are slated for completion by the next half of this year. The significant increase may be attributed to the rise in construction activities, aligning with the ongoing economic recovery.”

Knight Frank says more developers are prioritising digitalisation, sustainability and green spaces within their projects, while offering products with distinctive architecture design and facilities that cater to a wide target market of potential buyers and investors.

“They are also focused on delivering homes within a liveable and harmonious environment.”

Mixed price trends

When analysing prices and rentals of high-end residential units during the first half of this year, Knight Frank says properties in Kuala Lumpur experienced mixed trends in prices.

“The localities of Kenny Hills and Mont’ Kiara witnessed price growth, while for KL City and Bangsar, there were slight dips in the average transacted prices.

“As for the localities of Ampang Hilir/ U-Thant and Damansara Heights, the prices held steady.”

During the period under review, Knight Frank says average transacted prices ranged between RM730 per sq ft and RM820 per sq ft for high-end condominiums located at Kenny Hills.

Meanwhile, in Mont’ Kiara, average transacted prices ranged between RM690 per sq ft and RM750 per sq ft.

Average transacted prices of high-end apartments within the KL city centre, meanwhile, ranged between RM1,070 per sq ft and RM1,160 per sq ft.

“There were positive movements in the average asking rentals of high-end condominiums/serviced apartments in the localities of KL City, Bangsar and Mont’ Kiara.

“However, in the locality of Ampang Hilir/U-Thant and Damansara Heights, the range of asking rentals exhibited a downward trend.

“Going forward, due to rising borrowing costs amid a slowdown in the economy, leasing activity and enquiries are expected to increase,” says Knight Frank.

Overall, Knight Frank says the average transacted prices of high-end condominiums/serviced apartments in Kuala Lumpur were marginally lower by around 1.3% in the first half of 2023, compared to the preceding period (second half of 2022).

Khong: Developers are more serious about adopting placemaking in their projects now.

Spurring the segment

Khong notes that the high-end condominium segment relies on high-net-worth individuals and foreign purchasers such as retirees, expatriates and investors.

“The Malaysia My Second Home programme has been less attractive after the earlier revisions, which if supported, will further attract foreigners and/or retirees to reinvest again here in Malaysia as a preferred location.”

He adds that the favourable tax exemptions of 15%, given to C-suite executives (foreign companies) as announced under Budget 2023, was a good move to spur the segment.

Stimulating the market

“Following the recent state elections, we hope to see a more stable political landscape within the country to attract more foreign investments.

“The recent amendments to the real property gains tax, especially for properties acquired after five years, attract no tax and will help stimulate the market again. Such policies should stay relatively consistent,” Khong says.

With more developers focusing on more affordable housing developments, especially for units below RM500,000, Siders says the supply for high-end condominiums will decline.

“Going forward, in due course, because of limited supply, demand for these types of units will be higher,” he says.

Khong says the high-end condominium market has been challenging for the past five years or more, with many developers moving away from this segment for a while, especially during the pandemic.

“There are some developers that have continued to develop within this segment, but in top locations like Damansara Heights (The Cedar) and Bangsar (111 Menerung).”

He adds that ongoing high-end projects in prominent locations like TRX, Bukit Bintang and other locations surrounding KLCC are also completing and entering the market.

“Being developers, they will continue to build but in more affordable segments based on market demand.

“In view of this, future supply has dwindled, thus making this segment interesting again with fewer competitors.

“This niche segment will stabilise well into the next few years and we expect prices to eventually move again in tandem with rising construction costs for the new supply,” Khong says.