By Roznah Abdul Jabbar
The morbid outlook for high-end condominiums in Kuala Lumpur is expected to continue for most of this year, following an extremely sluggish performance in 2015.
According to international real estate consultancy Knight Frank, the bleak performance is a direct result of prevailing cooling measures and poor consumer sentiment, which is affecting the housing market as a whole.
Knight Frank Malaysia director Sarkunan Subramaniam said the current environment has naturally led to a slowdown in transaction volume. However, upmarket KL condominiums in particular are now facing a lethargic market with potential buyers and investors adopting a “wait and see” approach.
According to the firm’s recently released report entitled Real Estate Highlights 2H 2015, transaction volume in the condominium and apartment segment will continue to decline with prices remaining generally flat, while rentals are expected to move south amidst heightened competition between existing supply and new completions.
The cumulative supply of high-end condominiums in KL stands at 42,749 units, following the completion of 3,139 units in the second half of 2015. In terms of location, 1,508 units or 48 per cent are in Mont’ Kiara and Sri Hartamas, 35.5 per cent or 1,113 units in KL City and the remaining 518 units or 16.5 per cent of the units are located in the Ampang Hilir / U-Thant area.
Despite the slowdown in the high-end residential market, notable projects were previewed and launched in 2H15, which include YOO8 by Kempinski, Le Nouvel KLCC by Wing Tai Asia, Anggun Residences by UDA Land Development Sdn Bhd and Opus Residences by Bina Puri Holdings Bhd.
However, the report found that in 3Q2015, KL recorded 1,694 transactions in the condominium/apartment segment, which was 6.3 per cent less than the 1,808 transactions in 2Q2015.
“During the review period, asking prices and rentals in most locations were generally flat,” the report said.
In KL City, high-end condominiums with small- to mid-sized units ranging from about 600sq ft to 1,300sq ft in selected schemes – such as ViPod Residences, Marc Serviced Residence and Pavilion Residences – were transacted in excess of RM1,700psf in 1H2015.
Meanwhile, prices of larger units in The Troika, Quadro and One KL, sized above 2,200sq ft, ranged from RM1,100psf toRM1,300psf in price. In the primary market, prices of luxury branded serviced residences ranged from RM2,000 to RM3,000psf.
Sarkunan believes the market sentiment for the high-end condominium segment will remain cautious going forward, as it continues to be impacted by sustained cooling measures, softening demand and a slowdown in the general economy. As a result, some of the projects scheduled for launch by 1H2016 may be deferred.
The Real Estate Highlights 2H 2015 report, however, offers a silver lining by pointing out that the competitive high-end condominium market will likely drive developers to greater levels of product innovation and marketing strategy.
There has been an increased trend of projects offering leaseback arrangements and pool management programmes with guaranteed rental returns to boost sales and attract investors looking for long term returns and potential capital appreciation.
KL also continues to witness the entry of more branded residences as it moves towards becoming a world class city by 2020, supported by major investments in its public transportation system.
Overall, Knight Frank said that in the primary market, developers are offering attractive home ownership packages and creative financial deals with guaranteed rental returns to boost sales, while there is also ample opportunity in the secondary market for buyers and tenants looking for good buys.
Meanwhile, chief operating officer of Henry Butcher Real Estate Sdn Bhd, Tang Chee Meng, said apartment and condominium sales were dismal in first half of 2015 (1H15), with only 779 (18 per cent) of the 4,259 units launched sold.
He said that the number of unsold units rose from 14 per cent to 78 per cent in 1H15 from 64 per cent in the same period in 2014.
Tang noted that 95 per cent of the incoming housing supply in KL is condominiums, apartments and serviced apartments, and 42 per cent of existing stock is high-rise residential units.
“Newly launched units in KL from Q1to Q3 in 2015 were either service apartments or condos and 53 per cent of the transactions for condominiums or apartments in KL were units priced above RM500,000 in the first half of last year,” Tan said.
He pointed out, however, that in the long-term, the slowdown can be seen as positive as it reins in rapid price increases and averts a potential asset bubble.