Monday August 11, 2008
Condo prices in Mont’ Kiara, Sri Hartamas hit new high
By S. C. Cheah


New projects in these areas attract investors and home owners
THE high-end property boom of the last few years, particularly in the top two prime locations in the Klang Valley – KLCC and Mont' Kiara/Sri Hartamas, has made it increasingly more expensive to own a condominium, serviced apartment or landed property.
In the case of Mont Kiara (MK) and its adjacent Sri Hartamas, an affluent neighbourhood popular with expatriates, prices of newly launched condominiums have shot up to over RM800 psf with some hitting the RM900 psf mark!

In the early 1990s, condominiums built by the Sunrise Bhd Group such as the MK Pines and MK Palma were around RM300 psf.
Despite fears of over building, soaring prices and congested vehicular traffic, this neighbourhood has continued to attract both investors and home owners, Today, it has evolved into a very self-contained, much sought-after residential enclave of top quality condominiums, bungalows/villas and other high-end residential properties.

As Henry Butcher Marketing Sdn Bhd chief operating officer Tang Chee Meng said there was now a greater variety of property types available compared to the early days of Mont' Kiara's development.

“While the earlier developments have average built-up areas of 1,200 to 1,800 sq ft (MK Pines, MK Palma and Vista Kiara) catering to small and medium sized families, the newer projects that have been launched in Mont' Kiara and Sri Hartamas offer a greater variety of unit types catering to different budgets and preferences,” he said.

They range from very small studio units of 400 to 600 sq ft (Mayfair and Dorchester) catering to singles; small units of 600 to 800 sq ft (Verve Suites, One Kiara) catering to singles and newly married couples; standard sized units of 1,000 to 2,000 sq ft units (One Kiara, Kiara 3, Cerian Kiara) catering to small and medium sized families and large units of 2,000 to 3,000 sq ft units (11@MK, Seni Mont' Kiara) catering to more well off families.

“There are also the super large units of above 3,000 sq ft (Matahari, MK10) for the well heeled. As the prices of the condominiums in Mont' Kiara and Sri Hartamas have gone up, the profile of the buyers also indicate that they are now of a higher income group,” he said, adding that condominium prices in Mont' Kiara have gone up significantly.

“While the prices of condos in Mont' Kiara used to be around RM300 to RM600 psf in 2006, newer projects launched since 2007 have pushed the prices to new threshold levels of RM600 to RM900 psf.”

“Some of these new projects are Sunway Vivaldi (RM800 to RM900 psf), Palazzio (RM840 psf), and Matahari (RM800 psf). Generally for a RM1mil property, based on an 80% loan and an interest rate of 5% per annum for 20 years, the qualifying monthly income is RM15,000 whilst the monthly income required to qualify for a 80% loan for a RM2mil home will be RM30,000,” he said.

According to Tang, the nearly sold-out Kiara 1888 that Henry Butcher marketed has risen 25% to 30% although it is still under construction while Kiara 9 has been released at new benchmark prices. Meanwhile, the current economic uncertainties have seen some people adopting a “wait-and-see” attitude. There are also signs of over-building in many places including Mont' Kiara.

Tang agreed that while rentals have remained stable, vacancy rates appeared to have increased due to the large number of units that have been completed in Mont' Kiara. “One of the chief concerns of potential investors is the fear of oversupply of condos in Mont' Kiara and whether the rental market will hold. Another concern is the worsening traffic congestion due to the increased number of residents in the area,” he said.




The Soho KL at Solaris Mont Kiara

With scarcity of land in Mont' Kiara, industry observers believe that developments in Mont' Kiara will spill over to Segambut. “We believe that in years to come, Mont' Kiara and Segambut will be linked up in a seamless corridor by the new developments. For the moment there is still a price disparity as projects at the Segambut side are still significantly cheaper. In future this price disparity may be narrowed although we believe that there will always be the price differential,” he added.

Tang said overall the property market would be soft, in view of the political uncertainty as well as the slow down in economic growth but the Mont' Kiara/Sri Hartamas area would still continue to attract interest.
“However, investors are now more cautious and will be more selective. Projects with more innovative concepts undertaken by reputable developers will still be able to attract interest, provided that investors are convinced that the pricing is fair value vis a vis the design and quality of the project,” he said.

Fears of a bubble in KL's luxury condo market
Daily Express, published on: Monday, March 13, 2006

Kuala Lumpur: The Malaysian capital's luxury condominium market, which has enjoyed an unprecedented boom over the past two years, is facing the threat of oversupply, experts say.

Some 23 high-end condos are being constructed around the Petronas Twin Towers - the world's second-tallest building - including one plush development that features private swimming pools for each of its 94 units.
At the end of last year there were 1,222 apartment units in the city centre, but industry analysts say that figure will rise to at least 5,000 once the developments now under construction are completed.

"Luxury condominiums and serviced apartments especially in Kuala Lumpur city centre are unlikely to experience the bullishness of previous years," said leading property consultant C.H. Williams Talhar and Wong (WTW) in a recent report.

"There are some concerns of oversupply," said WTW managing director Goh Tian Sui. Condos launched off the plan in the second half of 2005 were "a bit slower" compared to earlier launches, he said.

"If sales slow down, developers will not be optimistic and raise prices... unless you are really very niche, and you are facing the Petronas Twin Towers," he said.

Malathi Thevendran, executive director of research and consultancy at Jones Lang Wootton Malaysia said that city centre condos started to "mushroom" from mid-2003 thanks to an economic recovery and lower interest rates.

"In terms of sale prices, new benchmarks have been achieved," she said. The price of premium condos in the area has more than doubled, breaching RM1,000 (269 dollars) per square foot, from an average of 500 ringgit previously.

Buyers are now faced with a minimum price tag of 500,000 ringgit for a studio with a fashionable address. The same amount could easily purchase a comfortable four-bedroom family house in the suburbs. "However, there has been a slight slowdown in take-up" since last year, Thevendran said.
"This could be because most of the pent-up demand by the locals has been met through the earlier launches of projects," she said adding that Malaysian buyers were becoming "more discerning." As a result, she said developers were increasingly looking towards the foreign market, particularly neighbouring Singapore and the Middle East where investors find Kuala Lumpur prices comparatively low.

WTW's Goh said Malaysia's property market was unlikely to remain buoyant in 2006, citing inflationary pressure from higher interest rates and fuel prices. "It is not really the boom times of the previous years," he said.
On the flip side, he said the hotel sector was expected to continue to perform well in 2006, anticipating higher tourist arrivals and further room rate hikes.

The capital is currently seeing a number of new hotels shooting up around the landmark twin towers, in a building boom fuelled by a bullish outlook for the economy and tourism industry.

At least four new hotels - the Four Seasons, Grand Hyatt, Traders and Novotel - are under construction in the city centre, as the government targets a record 20 million tourist arrivals to the country next year.
Despite the warnings of an imminent bursting of the up-market condo bubble, AmSecurities property analyst Chong Tjen San said there are "arguments to support both views".

Buyers will continue to be lured by the prospects of inner-city living, and top-notch facilities in the area include a soon-to-be-opened luxury hospital, he said.

Neither rich Malaysians nor overseas investors will feel the pinch from hikes in interest rates and prices for petrol and electricity, he said.
But nevertheless luxury apartments in the city centre have reached prices never seen before.

"Most people still feel that there is a bubble emerging," he said. - AFP

Luxury condo prices dive in KL

Luxury condo prices dive in KL
Feb 19, 2009 - The Business Times
Pauline Ng In Kuala Lumpur

PRICES of luxury condos in the Kuala Lumpur City Centre (KLCC) area have dived 15-20 per cent as the economic downturn bites and foreigners try to cash out for the best they can get, says a real estate consultant.

Malaysian buyers were the first to sign up for the high-end condos in 2004 during the onset of recovery after the 1998 Asian financial crisis, Rahim & Co managing director Robert Ang said on Monday. They bought at a half the price of foreigners who went into the market in 2006-07.

'Most foreigners bought at appreciated levels, so they are flexible about asking prices,' he said. 'But Malaysians, having bought earlier, are getting returns of 7-8 per cent and have no reason to sell unless they are cash-strapped. Also, they can refinance as the cost of funds has decreased.' The only bright spot is that so far there have been no forced or fire-sales, Mr Ang told a news conference.

Rahim & Co's executive chairman Abdul Rahim Rahman said he believed prices in the KLCC area would have softened anyway because of oversupply.
An estimated 1,760 units will be completed in the area this year, adding to 1,200 in the past two years.

Mr Ang said: 'The apartments are not well occupied, so there has been some strain on rental yields and returns, which at the end of last year were 4-5 per cent.'

At the peak, top KLCC apartments were edging towards RM3,000 (S$1,254) per sq ft. But most projects are now selling at RM1,000 plus psf in the resale market, though developers are still asking about RM2,000 psf for premium units under construction, such as at OneKL.

It is highly unlikely that better times are around the corner. Sellers and buyers know the market has yet to feel the full impact of the global economic slide.

Just on Monday, Malaysia's Deputy Prime Minister Najib Razak said the government's 2009 economic growth target of 3.5 per cent may not be achieved, as exports and production figures collapse. Although property players claim the overall market is still liquid, fear of the unknown has led to a near-collapse in demand for luxury condos.

Mr Ang said Rahim has advised clients to defer new launches of luxury developments to the second half or third quarter. On the brighter side, landed property prices have held up so far, he said.

In the past three years, many foreigners went into Kuala Lumpur real estate, buying as many as a third of the units in some KLCC projects. They were attracted by the weak ringgit and a market that had not run up as much as others.

But now, some of them may be about to pay the price. After Malaysia's last recession in 1998 the property market took about four years to recover. Mr Abdul Rahim reckons things could move faster this time - if the economic decline can be swiftly arrested.

Should KLCC Investors Yield Or Maintain?

Tuesday, April 14, 2009

Should KLCC Investors Yield Or Maintain?

Recently, in the KLCC region, there have been a flurry of viewings and some transactions for the newly completed projects. Most projects completed in 2009 range from RM700-1200 persf in the secondary market, but do note that these are deflated prices as compared to their initial high back in 2007. From my own personal observation, transactions and even potential viewings were greatly diminished towards the end of 2008, and it was only after the Chinese New Year that things have started moving again. Buyers are slowly coming out in hopes of securing themselves some great bargains.

The question is this, most properties in the KLCC area are worth much more than they are being transacted at now. Do note that value of a property might not be similar to what is being asked for and transacted at ultimately. In dire times like this, vendors are lowering their expectations and hence the lower asking prices. Vendors who can hold on to their investments will prefer to lease their units out while waiting for prices to stabilise once again towards the end of this year. They know that their units can easily be transacted at 20% higher than what it is going for now in just a matter of a year from now. With this, there have been reportedly more landlords in the market now than there are vendors, and this in turn has seen a slight drop in rental rates.

So, in a stagnant economy like this one, what should investors do? When I say investors, I am referring to vendors and landlords, not so much buyers as in my previous post, I have made it clear that there is no better time for buyers to purchase than now. Bank interest rates are at an all time low, as low as 3.2% for the thereafter rates, and prices of prime property are realistically affordable now. But back to vendors and landlords, should they accept current prices of indication of the value of their properties? Should vendors accept lower transaction prices and landlords taking in the first tenants to offer?

I am with the opinion that if you are not able to hold on to your properties to see them surge to their rightful values in the coming years, then yes, you can accept offers that are on average 20% lower than what would have been when times were good. You see, contrary to assumption that most KLCC property owners are bleeding from their investments, the one thing that most folks forget is that these owners are also the ones who were enjoying capital gains on paper as much as 50-60% back in 2007. With the recent tumble in prices, it will take a genuinely lousy investment with a hopeless location to garner its owner losses.

Let's just say that the worst performing development in the KLCC region is still seeing an average of 10% capital appreciation. Don't forget that that this seemingly small capital gains may translate to lump sums of RM150K on average, which is by far higher than any other mediocre investment in the less prime areas. So, with KLCC investments, despite the fact that we are seeing price drops now, few owners out there are actually incurring losses as you would have thought. There is a difference in lower profit margins and total losses.

Rental rates have dropped too in recent times, due to a glut of landlords in the market as opposed to vendors. However, there have been tenants enquiring for rentals as well as they know that now is the time to lock in affordable rental rates. I would suggest to landlords to still screen through their prospective tenants instead of taking the first one to offer because problematic tenants are just as bad as having your unit untenanted, if not worse. However, be realistic with asking rentals. You may not enjoy the surplus that you would have hoped for, and possibly may have to accept rental offers that can barely cover your total monthly expenses. I would say that anything around a break-even is good enough for now. It will help you scrape through and prolong your investment to see values returning to their previous high in a couple of years or so from now.

In other words, do investors settle for lower transaction prices now or do they lease their units out while waiting for the economy to stablise? It all depends on your situation. If you are not so keen on facing possible rental issues and problems, then perhaps you would like to release your units for their lower accepted prices now. A gain is still a gain, and most KLCC properties are still seeing a gross capital appreciation of 30% on average. If you are fine with taking time to furnish your properties and lease them out in the hope of selling them when prices soar once more, then by all means.

I wish to point out that there are advantages to both scenarios. Some may have further ventures to move on to, and will see the exit route a better option rather than staying put with their current portfolio. Some may realise that prices today are not reflective of their actual values and would prefer to delay sales. It all depends on your obligations and directions, and not one decision is deemed better than the other. I have seen folks who heave sighs of relief for not getting into the KLCC bandwagon thinking that recent times have shown that it is clearly a bad idea. They cannot be further from the truth, because KLCC investments are KLCC investments, and there can never be better performing properties out there irregardless of good or bad times. Even at its worst, KLCC properties are still performing at levels equivalent to others at their best.

The Star, Monday April 13, 2009

Office rentals in KL to fall by this year
By Angie Ng

Rates in KL expected to drop by 10% to 15%

OFFICE rental rates in Kuala Lumpur are expected to drop by 10% to 15% from their peak of about RM8 per sq ft this year amid the economic slowdown. Although office occupancy rates are still holding up quite well, rental rates are expected to fall from their earlier highs due partly to new office space coming onstream.

DTZ Nawawi Tie Leung executive director Brian Koh said that at least a dozen new office buildings, with a total net lettable area of 4.13 million sq ft, would be completed in KL and other parts of the Klang Valley this year.
Of these, four – Menara Worldwide, G Tower, Fraser KL and The Icon – are located in KL’s golden triangle, while the rest are in central commercial areas and other decentralised areas such as KL Sentral, Bangsar and Petaling Jaya. Amid uncertainties and fears of a long global economic downturn, occupancy costs are expected to decline in many business districts around the world, led by the contraction in occupier demand.

According to DTZ Research’s 2009 global office occupancy costs survey, covering 114 business districts in 49 countries and territories worldwide, the seismic disruption of the global financial system, which started in mid-2008, has wiped out much of the strong growth recorded by many office markets over the past few years.

The annual survey looks at the main components of occupancy costs in major office markets across the globe and provides a ranking based on total occupancy costs per workstation.

About 78% of the 114 business districts surveyed expect occupancy costs to fall this year, 3% expect a slight increase, and the balance 19% expect costs to remain stable.

Only the Middle East and Africa regions, and central and eastern Europe registered positive annual growth in office occupancy costs of 28% and 11% over the previous year, while other regions witnessed declines in costs.
All business districts surveyed in western, central and eastern Europe, and central and south America expect occupancy costs to fall this year.
In North America, occupancy costs are expected to remain stable in 61% of the business districts surveyed, while a further 39% – comprising mainly the largest business districts at the heart of the financial turmoil – are predicted to experience a significant decline in occupancy costs.
About 76% of the markets surveyed in the Asia-Pacific expect office occupancy costs to fall and 24% see costs remaining stable over the year.
In the Middle East and Africa regions, 30% of the respondents expect some increase in occupancy costs, while the rest expect costs to fall throughout this year.

DTZ said the prospects of an impending supply glut in some markets and the wider adoption of flexible work practices leading to reduced space consumption would help drive down occupancy costs, especially across Europe and the Asia-Pacific region.

Space utilisation standards across most regions are expected to decline as companies focus on space optimisation and cost reduction measures.
Meanwhile, new, better-designed offices with larger floor plates and fewer columns will gradually contribute to greater efficiency in space layout.
In terms of rents and other outgoings per sq ft, Moscow, Hong Kong and London (West End) are the top three most expensive office locations in 2009.

However, due to a higher space utilisation standard per workstation, Tokyo (Central 5 wards) was the world’s most expensive office location on a cost per workstation basis. Its space utilisation per workstation was 144 sq ft compared with Moscow’s 84 sq ft, Hong Kong’s 118 sq ft and West End London’s 118 sq ft.

Tokyo (Central 5 wards) has overtaken London (West End) as the most expensive office location on a cost per workstation basis.
London (West End), which had been the most expensive office market on this basis since 2001 when DTZ first compiled such rankings, was ranked fifth.

Property Outlook 2009

The Malaysian property scene experienced drastic changes in 2008, moving from a boom at the end of 2007 to uncertainties in the midst of general elections and increasing construction costs, and slowing into a relatively quiet market towards the end of last year.
Notwithstanding the gloomy outlook, the Malaysian property market has been notably slow compared with those in the rest of the region, says Allan Soo, managing director of Regroup Associates Sdn Bhd.
“We were branded as laggards, and effectively, we really only had a boom from 2007 compared to Singapore, which had prices sky-rocketing from 2005. Our euphoria was very short-lived as well, so prices have not really had a chance to go crazy although you could say that supply of some sub-sectors, like high-end condominiums, does look like a ski slope,” explains Soo.
With banks tightening their loan terms, obtaining loans for development, factories and shop-houses have been difficult in the last three years. All these, says Soo, suggest a soft landing without any major drop in prices for land, retail centres and landed properties.
“We expect a drop in prices for high-end condominiums in areas where there was more activity in the last two years, as the supply of condominiums would more than double in these areas in the next three years,” he says.
Soo feels that land prices would not drop substantially, as banks will not be able to process defaults until 2010 at the very least. Therefore forced sales will not be the order of the day as far as development land opportunities are concerned. “However, it may be that some smaller players may give up later this year and such opportunities may be worth considering then,” he adds.
Executive director of Knight Frank Malaysia, Sarkunan Subramaniam, expects a slowdown with property prices decreasing by five to 10 per cent from the first quarter, as the slower economy brings down demand and some good bargains arise in the later part of the year.
“The feeling (for the first half of 2009) is down. The property market in 1H 2009 will be very quiet and slow as developers are delaying major project launches due to the lack of market demand. Property purchasers are holding back in the hope that prices will come down further or search for fire-sales,” explains Sarkunan.
While prices may fall, Soo does not foresee any opportunities for bargain hunting. “Prices won’t crash to the floor as they have not gone through the roof previously. You could wait a little to pick some nice condominiums in the best locations at a good discount, although it will be hard to predict how much the quantum will be,” he explains.
Klang Valley property scene
The Klang Valley property scene has been slow in the past two to three months; there were many enquiries for fire sales but zero transactions, says Sarkunan. According to him, there will be more pressure on the rental market, especially in the high-end residential properties within the vicinity of KLCC and Mont’ Kiara due to the numerous newly completed projects within the area.
As for the office sector in Klang Valley, Sarkunan reveals that the office rental rate has stabilised between RM7 psf and RM9 psf for prime offices in the city. There is also a new trend in the Klang Valley office sector where increasingly, office developments are adopting green features such as energy saving, reduction of wastage and water usage, as well as the use of environmentally friendly materials.
Meanwhile, the performance of shopping malls in Klang Valley has been on the slow side, with most centres experiencing a decline in shopper traffic, by as much as 10 per cent since March last year.
“Everyone is expecting that after Chinese New Year, the worst will be seen and it is likely that some centres will drop rents just to fill up space and of course, sales will be the order of the day. The fact that 4.2 million sqf of space was added to the already massive supply of 33 million sqf in 2007 meant that the market was saturated by the end of 2007 and for most of last year.
“Fortunately, there were no major openings planned last year, so only a fraction (just over one million sqf) was added last year. Another 1.5 million will come on stream this year, but this will not impact the rest,” says Soo.
The Malaysian REITs sector has been performing well, although the market is not excited due to small portfolios and the odd properties some of them have, says Soo.
“Of greater significance is that both Sunway and CapitaLand abandoned their respective plans to list their REITs, which were the largest ones as market sentiments were deemed too weak last year,” he says. Sunway’s listing would have included Sunway Pyramid, the hotel and commercial buildings, while CapitaLand’s listing would have included Gurney Plaza, Sungei Wang and The Mines.
“This year may be a difficult year for REITs as rents will be impacted in most cases and the resultant yield or dividend may not show a rise as expected of REITs,” adds Soo.
This year would also most likely be a tough year for the property industry. “General sentiments are understandably weak and the market can be described as lacklustre, but some are expecting the market to become active by the second half,” says Soo.

Source: iproperty