Time for bargains in the Golden Triangle?

CENTRAL CITY Kuala Lumpur, more popularly known as the Golden Triangle, is no stranger to locals and tourists. The popular shopping and entertainment district buzzes 24/7 with the energy of throngs of consumers. Buildings such as Pavilion Kuala Lumpur, Starhill Gallery and Low Yat Plaza are among the area’s famous landmarks. This article covers the price trends of non-landed residences in areas such as Bukit Bintang, Bukit Ceylon, Chow Kit and Pudu. (The Kuala Lumpur City Centre enclave has been covered previously.) Geographically, these areas are bounded by Lebuhraya Sultan Iskandar and Jalan Tun Razak to the north and extend south to Jalan Istana.

Based on TheEdgeProperty.com’s analysis of transactions, the average transacted price of non-landed homes in Central City Kuala Lumpur grew rapidly in the beginning of 2013, saw a peak of RM730 per square foot (psf) in the third quarter of 2013 (3Q2013), and moderated between 1Q2013 and 1Q2015. The average transacted price was at RM687 psf in 1Q2015, down 5.9% from its peak, which still represents an 11.7% y-o-y improvement on RM615 psf in 1Q2014. Similarly, transaction activity, which surged to a peak at the end of 2013, has since subsided. Total transaction volume for the 12 months to 1Q2015, fell from 1,018 units to 554 units. The growth in both average price and transaction volume in 2013 can be attributed to a sudden increase in activity in the high-end segment. Around a quarter (25.4%) of transactions in 3Q2013 were for properties priced above RM1,000 psf compared with16% in 2014.

GMAC Realtors senior negotiator, Lim Jin May (pictured, right) says the slowdown in the property market last year was due mainly to the worldwide market sentiment and banks being tighter with loan approvals. “Some buyers could not even get half of their loan amount approved. Investors are also cautious with where they are investing their money, while some are just holding back to get better buys at the prices they want,” she says. Lim says that high-end non-landed residences such as Pavilion Residences were typically selling for RM1,600 psf in 1Q2015 and 2Q2015, and smaller units for about RM1,800 psf.

Savills Malaysia vice president of project marketing and estate agency, Jeffri Rahim, says that last year, non-landed homes in Bukit Ceylon were transacted at about RM960 psf (Suasana Bukit Ceylon, 6 Ceylon) while units in Bestari Condo in Chow Kit went for around RM550 psf. Units in Casa Mutiara in Pudu were transacted at RM945 psf last year, achieving a compound annual growth rate (CAGR) of 6.3% for the period 2011 to 2015, he adds.

Strong demand

Jeffri notes that demand remains strong for Bukit Bintang and Bukit Ceylon due to their vibrant immediate environment. “Living in a high-rise residential property has become a lifestyle trend among the urban professional community. It is supported by contributing factors such as stylish facilities and security features,” he says.

However, GMAC’s Lim notes that towards the end of 2015, transactions had really begun to slow down.

“When the market slowed down, property prices generally took a hit. There was a unit in one of the condominiums that had a market price of RM2,000 psf being sold for RM1,450 psf, which is a big drop,” she says. “However, the market did pick up a little bit towards the very end of last year because they (investors) felt they needed to make a move at some point of time. If investors saw prices that catered to their individual expectations, they were willing to start committing again,” she says.

Data from TheEdgeProperty.com shows that in the 12 months to 1Q2015, the average transacted price was RM687 psf in 1Q2015, or an average price per unit of RM748,000. Studios and 1-bedroom units were popular among buyers, a trend which was reflected in the majority of transactions (19.5%) in the RM400,001 — RM500,000 price range. In the same period, 20.2% of transactions were for above RM1 million.

Lim says that studios and smaller units are in higher demand because their lower absolute prices make them easier to sell.

Most expensive project

The most expensive project by average transacted unit price in the review period was Pavilion Residences (RM3.94 million), located atop the Pavilion shopping mall, with transaction prices starting at RM2.25 million. With unit sizes varying from 700 to 12,326 sq ft, the average transacted price was skewed by the types of unit sold. The most expensive transaction was for a 4,155 sq ft unit, at RM6.5 million. St Mary Residences located off Jalan P Ramlee was the second-most expensive project at an average transacted unit price of RM1.96 million. Prices here ranged from RM1.4 million to RM2.9 million.

“Pavilion Residences scores for its good location, being right in the centre of retail shops and transportation in and out of the city centre. On the other hand, St Mary Residences has excellent finishes, with most of the units coming with kitchen fittings, and also the triplex penthouses have their own private pool,” Lim notes.

Tepian Loke Yew was the least-expensive project by average transacted price, at RM133,200, followed by San Peng Flats, at RM139,826.

Analysis by TheEdgeProperty.com shows that the strata market in Central City Kuala Lumpur is dominated by transactions of high-end condominiums and low-cost flats, with few-middle class products offered. In the 12 months to 1Q2015, 21.7% of transactions fell in the RM801 — RM1,000 psf range, 20.4% in the RM201 — RM400 psf range, and 19.1% were for above RM1,000 psf. Pavilion Residences and St Mary Residences were the most expensive condominiums on a psf basis, with an average price of RM1,629 psf and RM1,360 psf, respectively. The least expensive projects were older projects such as Malayan Mansion (RM171 psf), Tepian Loke Yew (RM192 psf) and San Peng Flat (RM206 psf). These buildings are all situated in the less developed quarter of the city and are often poorly maintained.

Lim notes that most residents of Central City Kuala Lumpur are expatriates who work in the city centre, and rent homes there to live close to their places of work as well as the area’s abundant entertainment venues. Lim also observes that the demographic of renters here is younger than those who prefer to stay in the suburbs.

“Central City Kuala Lumpur is a very fast-paced area that is busy and congested day and night. It is so convenient for those working in the city area to go about from home to office but the older generation may not enjoy the hectic lifestyle as much. They would very much prefer to stay in areas such as Bangsar and Mont’Kiara where they get the full package of neighbourhood amenities, such as shops, schools and public transport, yet are more laid-back compared with Central City Kuala Lumpur.

“If a family decides to stay in Central City Kuala Lumpur, parents would factor in amenities such as parks or developments with big open spaces for their children. For example, the project by E & O Development, Dua Residency, offers [sizeable] swimming pool for their children’s recreation which is popular among families,” she says.

Lim also observes that the drop in oil and gas prices and other challenging macroeconomic factors has led to a change in the tenant mix of the residential market in Central City Kuala Lumpur.

“At one point, a lot of companies were [transferring] more singles or couples with fewer children [to work] here. This will save on rental cost as there is no need to rent for them bigger units of condominium, which also explains why smaller units are the more popular ones now,” Lim says.

Mid segment condos offer good value

In terms of price growth and indicative asking rental yields, mid-range properties within city boundaries are beginning to appear relatively attractive as prices in the urban areas of Greater Kuala Lumpur hit new highs. The slightly older condominiums offer a good balance of price, location and facilities, and have thus registered the highest growth in capital values. Analysis by TheEdgeProperty.com shows that the mid-range condominiums with the highest average price growth in the 12 months to 1Q2015 were Kenanga Point (+20.3 to RM464 psf), Angkasa Impian (+18.6% to RM551 psf) and Villa Puteri (+10.1% to RM 463 psf).

Average rental rates at high-end condominiums ranged between RM4.53 psf at One Residency and RM6.04 at Pavilion Residences. The analysis also shows that the highest annual asking rental yields were found at The Forum (7%). Located on Jalan Tun Razak, capital values at this old and dignified project have hardly grown, but units here are able to command relatively high rentals because it is one of the few mid-range condominiums within walking distance of the Bukit Bintang area. The Forum will also be located close to the Tun Razak Exchange MRT station once that is completed, further boosting its rental potential. “The rental yield in Central City Kuala Lumpur is going at about 4% to 5% in general,” says Lim. Jeffri concurs. “Many of the units in Central City Kuala Lumpur are rented out to instead of owner-occupied,” he says.

Upcoming projects in Central City Kuala Lumpur include the RM 8.7 billion Bukit Bintang City Centre development, the Tun Razak Exchange financial district with a gross development value (GDV) of RM40 billion in Imbi, and the Bandar Malaysia development with an expected GDV of RM150 billion.

“The short-term and medium term [property] outlook is still uncertain, although prices are unlikely to pick up as fast, with many macroeconomic factors still taking time to stabilise. Investors are still cautious. Long-term, Central City Kuala Lumpur still has the upper hand in terms of location and will still be sought-after once things are stable again,” says Lim.

What keeps the prices of Setia Sky Residences up in the air? Tap here to find out.

Related stories:
PROPERTY SNAPSHOT 1: Central City KL condos moderating
PROPERTY SNAPSHOT 2: What’s affordable in Central City, KL?
PROPERTY SNAPSHOT 3: Central KL, city of price extremes
PROPERTY SNAPSHOT 4: What's hot in Central City KL?

This story first appeared in The Edge Property pullout on Jan 15, 2016, which comes with The Edge Financial Daily every Friday. Download The Edge Property here for free.