Malaysia's luxury condo market in 2013

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Kuala Lumpur (The Star/ANN) - The overall high-end condominium market has been challenging in the past six months and this is expected to continue into next year.

Knight Frank reported that two new completions in the second half of 2012 with a total of 967 units from St. Mary Residences and Binjai 8 have brought the cumulative supply of condominium units in Kuala Lumpur to 30,849 units.

Real Estate Highlights (Second Half 2012) says this number is expected to swell further with the completions of several other projects. Their completions will significantly increase the cumulative supply by about 5,000.

The report says a high level of impending supply of high-end condominium is expected next year from on-going products.

This situation has led to developers and buyers playing a "waiting game", with developers waiting for "the right timing" by putting launches on hold, and extending completion dates. Buyers on the other hand wait for better prospects.

Despite developers working with banks to offer easy lending schemes and incentives such as low down payments, discounts and free legal fees for sale and purchase agreement, the sales rates of selected recent launches and on-going developments, are slow.

This is particularly so for units with large built-up areas. This is a consequence of existing and impending supply and a challenging leasing market stemming from low occupational demand.

Against this backdrop, BRDB's Serai seems to buck the trend. Located at Bukit Bandaraya, Kuala Lumpur, Serai units range from 4,025 sq ft to 6,913 sq ft. Sold at between 1,300 ringgit and 1,500 ringgit per sq ft, that project is about 60% sold. There will be two penthouses of 14,000 sq ft, priced between 19 million ringgit (US$6.2 million) and 22 million ringgit ($7.1 million).

As for the Kuala Lumpur City Centre market, DTZ Nawawi Tie Leung Property executive director Brian Koh does not see any significant change in conditions for the larger units with a built-up area of 2,000 sq ft and above going forward.

"New supplies continue to be completed and even if demand were to improve, this will not be sufficient to mitigate market weaknesses," says Koh.

"A new successful launch such as Four Seasons Residences or Platinum Park Residence will certainly create confidence, and assure existing and new buyers that the KLCC market is one that is worthwhile to hold long term. KLCC Properties will also have some iconic projects to be launched next year that will help to create and enhance the attractiveness of that overall location," he says.

On the overall condominium market for the coming year, Koh prefers to focus on the Johor market. He says the condominium market will be the main demand driver in urban areas with Johor's Iskandar region showing more resilience given the low base it is coming from.

"Demand in the Klang Valley will be more selective and for more modest sizes and pricing. Locations that are further away but with potential MRT links will benefit most as their land cost remains more competitive," says Koh.

It is not just the connectivity that buyers are looking for, as seen from the launch of Serai, which is ideally located between Kuala Lumpur and Petaling Jaya.

Increasingly, a popular trend in luxury housing is the branded residences concept that developers tie up with international luxury hospitality and lifestyle brands to set a new definition to luxury living. Hotel-like services such as concierge, security and room service provided by a luxury brand will help maximise the value of a development.

KL City is certainly getting a fair share of this new residential concept as evident from the success of Banyan Tree Signatures Kuala Lumpur (441 private residences) which were sold out at an average pricing of 2,000 ringgit per sq ft. Other notable luxury brands coming on-stream include Four Seasons Place, W Kuala Lumpur Hotel & Residences, Ritz-Carlton and Harrods Hotel and Residences.

PPC International Sdn. Bhd's managing director Siders Sittampalam says the high-rise residential segment registered an average rental rate of 3.50 ringgit per sq ft per month. Rentals in the city centre were the highest in areas like KLCC, and for new condominiums in Bangsar and Mont'Kiara. Areas like Subang Jaya and Kota Damansara continue to command stable rates at an average of 1.50 to 2.50 ringgit per sq ft.

"Notwithstanding this, currently, there are no indications that market is heading towards a bubble' mode. Property prices next year are expected to stabilise with the exception of certain segments and localities that would experience a slowdown.

"We do not expect the market to be bullish as we have seen over the last few years. Our view is that there should not be stringent fiscal measures that would stifle the market. Excessive interference in the free market would have an impact on the investment climate.

"Prices should be market driven with sufficient government expenditure in providing affordable homes and a general improvement in infrastructure and transportation," Siders says.

*US$1=3.0 ringgit

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