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
