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KL condos that defied the slowdown in 2016

Tan Ai Leng | TheEdgeProperty.com
Saturday, 12 August 2017 09:14:24 AM

Amidst the cloudy market climate, 141 of 507 condominiums in Kuala Lumpur that recorded sale transactions last year had enjoyed positive price growths ranging between 2.1% and 14.9%, according to the Kuala Lumpur Property Market Report 2016 by the National Property Information Centre (Napic).

Among those 141 projects, five saw year-on-year (y-o-y) double-digit growth in their average absolute transacted prices. Topping the list was One Menerung in Bangsar with a 14.9% hike, followed closely by Intan Apartment in Setiawangsa with a 14.5% growth and Sang Suria Condominium in Sentul with a 13.5% growth. Putra Apartment in Setiawangsa and Desa View Towers in Melawati both achieved a 10.5% and 10.1% rise respectively.

At the opposite end, 78 condos saw sale prices drop from 2.2% to 11.7% y-o-y. The five steepest dips were experienced by Platinum Lake PV10 in Setapak at 11.7%, Abadi Indah Apartment in Taman Desa at 9.2%, G Residence in Desa Pandan at 8.9%, Seringin Residences in Kuchai Lama at 8.4% and Idaman Residence @ KLCC at 8.2%.

Meanwhile, prices at 164 condos remained unchanged, while another 124 condos did not have any comparison as there were no transactions the previous year.

The report also showed five condos exceeding RM1 million selling price per unit: 202 Desa Cahaya in Ampang, Kiara Park in Taman Tun Dr Ismail, Ceriaan Kiara in Mont’Kiara, OBD Garden Tower in Taman Desa and The Northshore Gardens in Desa ParkCity.

The residential property market had eased in 2016 with 11,252 transactions worth RM8.97 billion, a decrease of 19% in volume and 13.3% in value y-o-y. Within the residential category, non-landed properties made up 23.2% of the residential transaction volume.

One Menerung

Sang Suria

Selling factors

Based on the findings of the condos that enjoyed high growth, consultants say affordability and proximity to KL city centre (KLCC) are the main factors that spur the demand of these properties.

PA International managing director Jerome Hong observes that the properties that registered high growth were all below RM500,000, except One Menerung. This evidently shows that affordability is the main attraction.

For Sang Suria, its continued popularity is also due to its proximity to the Jalan Ipoh Mass Rapid Transit (MRT) station, which is part of the MRT Line 2 (Sungai
Buloh-Serdang-Putrajaya) currently under constructioin, says Hong. Located at Persiaran Parkview in Sentul, Sang Suria is a freehold development comprising four blocks of 27-storey condos. It is part of YTL Land & Development Bhd’s 186-acre Sentul township development that comprises retail commercial, offices and residential components.

TheEdgeProperty.com data showed that five units at Sang Suria were transacted in 2016, at an average selling price of RM583,000, or RM506 psf. No transaction was recorded in 1H2017.

For the other double-digit achievers, Intan Apartment and Putra Apartment located at Setiawangsa and Desa View Towers in Melawati, City Crest Realtors principal Darren Khor says besides the pricing factor (below RM500,000), their proximity to various amenities and KLCC is another point of attraction.

The freehold 4-storey walk-up Putra Apartment is situated at Taman Setiawangsa, located opposite Setiawangsa Sports Complex and Giant Supermarket Setiawangsa. The Setiawangsa LRT station is about 1.7km away while the distance to KLCC is about 7km.

There were five units in Putra Apartment sold in 2016, at an average price of RM418,000, or RM414 psf. No transaction was recorded in 1H2017.

Intan Apartment is situated behind Setiawangsa Sports Complex, and Setiawangsa Business Centre is just 1km away. This freehold development comprises six blocks of 5-storey walk-up apartments.

According to TheEdgeProperty.com data, there was one unit in Intan Apartment sold in 1Q2017 with a price tag of RM330,000, or RM337 psf.

Meanwhile, the freehold Desa View Towers, situated next to Bukit Tabur at Taman Melawati, comprises four blocks of 6- to 14-storey apartments. It is located about 4.5km away from Tunku Abdul Rahman University College at Jalan Genting Kelang. It is close to Wangsa Maju and Gombak LRT stations.

Desa View Towers had seen three transactions in 2016, with an average selling price of RM301,667, or RM302 psf. There was no transaction recorded in 1H2017.

Khor notes that both Setiawangsa and Melawati are close to KLCC. The easy accessibility through highways or public transportation have drawn homebuyers and investors’ attention to these areas.

“Both areas are also matured housing estates with various amenities and land is scarce in these two areas, making Setiawangsa and Melawati attractive to people seeking affordable homes near KLCC,” he adds.

Jerome Hong

Michael Kong

Lee Teck Hian

Ken Lai

Different kind of upgraders

“As for the high-end One Menerung, its capital appreciation is attributed to its excellent location, compounded by limited supply of similar grade developments in the immediate locality,” Hong highlights.

One Menerung is a freehold luxury condo located at Jalan Menerung, Bangsar. It consists of six 28-storey blocks, housing 229 units on an 8-acre site. Bangsar Shopping Centre, Pusat Bandar Damansara MRT station and Damansara City are within a 1km radius from One Menerung.

According to TheEdgeProperty.com data, One Menerung has registered two transactions in 2016 with an average selling price of RM3.95 million, or RM1,257 psf, in 2016. There was no transaction recorded in 1H2017.

RVT Realty head of residential division Lee Teck Han says despite the softening market, Bangsar’s high-rise luxury market is still in demand because an increasing number of bungalow dwellers are looking for luxury condos in the same area.

“These buyers are different; they are downsizing their houses as their children leave the nest. But they are still looking for big units that may be smaller than their bungalows, but not a small shoebox unit,” he elaborates.

Hence, well-maintained luxury condos like One Menerung and Serai could attract this category of buyers who are eyeing lifestyle upgrades.

However, Lee notes that most of these upgraders are looking at properties within areas they are familiar with, which means they might not explore new places far away.

 

Oversupply

On the condos that had seen price drops last year, Hong from PA International notes that the selected sampling by Napic mainly comprises large units with high price tags, which translate into lower rental yields.

Of the five weakest performers, four condos — Platinum Lake PV10, G Residence, Seringin Residences and Idaman Residence — measure an average of between 1,130 and 1,690 sq ft.

Only Abadi Indah Apartment, situated at Taman Desa on Old Klang Road, has an average size of 840 sq ft. It is a leasehold development comprising five blocks of 10 to 12 storeys, housing 754 units.

“As most buyers are looking for smaller units with affordable pricing, it makes these large units even harder to find new owners,” Hong comments.

As a case in point, the smallest unit in Seringin Residences is 1,707 sq ft, while the largest unit measures 2,638 sq ft. Located in Happy Garden, Kuchai Lama, it comprises two 24-storey blocks, offering 542 luxury condos.

Hong says the bigger units generally have a smaller target market, in terms of owner-occupiers and tenants with families compared with smaller or mid-sized units which attract a larger pool of buyers and tenants.

Hong notes that most transactions at Idaman Residence in 2015 were the developer’s units on the higher floors that were sold at premium prices.

However, transactions in 2016 were mostly normal units on mid- or low-level floors, thus they might not have fetched the same prices as the previous year.

Meanwhile, oversupply issues have also contributed to their price correction.

Property consultancy MacReal International Sdn Bhd founder Michael Kong says some places may be facing an oversupply situation, thus putting pressure on price growth.

“We observed that the drop in PV10 is due to an oversupply situation as there is generally an overbuilding of condos in the Setapak area,” he opines.

PV10 in Taman Danau Kota is a leasehold project comprising 800 units housed in four 22-storey blocks. It is a popular choice for student tenants especially those from the nearby Tunku Abdul Rahman University College.

Ken Lai from Polygon Properties Sdn Bhd concurs that the properties in Setapak are mostly supported by students and the working class, be it the sales or rental market.

“The transaction performance has remained stagnant since early last year, but I have observed that sales have begun to pick up as the working adults who desire a home in this area have started looking for their ideal properties,” Lai says.

He adds that, similarly, Taman Desa is also facing oversupply issues, as many new high-rise residences are coming up there offering full-fledge condo facilities. Thus, older projects such as Abadi Indah Apartment, which is over 15 years old, may not be as attractive as the new offerings.

However, Lai believes the price correction in Setapak and Taman Desa is temporary as these are established areas with various amenities and in strategic locations near to KLCC. They are also supported by a large growing population. Hence, he anticipates the non-landed residential properties in Setapak and Taman Desa will continue to attract buyers after the price correction.

Meanwhile, in the KL city centre, “there was a mismatch between the initial developers’ pricing and the actual market value so condos in the KLCC area in general are now also experiencing a price and rent reduction due to the uncertain global economy, which has resulted in an exodus of expatriates”, Kong explains.

G Residence is a leasehold serviced apartment located in Desa Pandan. It consists of two 23-storey blocks with a total of 474 serviced apartments and 26 retail units.

RVT Realty’s Lee said G Residence, which offers a nice city view of KLCC and the Royal Selangor Golf Course, will remain attractive in the long term, but in the short term, prices will come under further pressure.

Potential catalysts

According to the Napic report, there will be another 42,773 new homes added into the existing pool of 424,434 residential units in KL. In addition, there are 50,588 units in the planned supply.

The rising supply may offer buyers ample choices, but it also implies increasing uncertainties on their investment return.

When it comes to non-landed homes, Hong from PA International advises buyers to look at three aspects: the education catalyst, transit-oriented developments (TOD) and integrated developments with various components.

Affordably-priced properties located close to public transportation networks in the form of public bus services, MRT, Light Rail Transit or KTM Komuter will be in demand, he says.

“The presence of university campuses, colleges, or even private or international schools in the area will boost demand for properties within the same vicinity from both tenants and homebuyers,” he adds.

Polygon Properties’ Lai offers that besides the education factor (schools and universities), medical services could also be a pull factor especially for expatriates and foreigners looking to retire in Malaysia.

He also notes in particular that the mounting growth in construction activities by China contractors and property developers have brought in quite a number of China expatriates from senior management levels who could be looking for rental accommodation or to buy a property in Malaysia.

“In the past, most China buyers consist of investors or speculators, but among the current expat buyers, more are buying for their own-use, be it for their children or for retirement purposes,” he notes.

Lai says locations that fulfil these two factors such as Mont’Kiara and Kota Damansara stand a good chance in attracting China expats.

Aside from these, RVT Realty’s Lee notes that demand for large well-maintained condo units located in affluent areas will draw interest from lifestyle upgraders who are looking for homes they can retire in.

“Condos with full facilities as well as good views and located within familiar communities will continue to see a slow and steady rise in demand,” he opines.

This story first appeared in TheEdgeProperty.com pullout on Aug 11, 2017. Download TheEdgeProperty.com pullout here for free.