Experts expect rental within KLCC to remain flat

PRICES of luxury high-rise residential properties primarily within the Kuala Lumpur City Centre (KLCC) and Mont'Kiara areas are likely to remain soft to flat in 2012, say experts.

James Goh of Savills Rahim & Co says he expects rental prices within the KLCC area to remain flat going forward, with some even dropping, owing to the cautious economic outlook.

“We believe owners will be more realistic (with their selling prices) and be pressured to sell,” he tells StarBizWeek.

On rental prices within the KLCC area, Goh says there were “several categories”, depending on the property.

“There are some that range from RM750 per sq ft to RM950 per sq ft and others that range from RM1,100 to RM1,300 per sq ft. Then there's (Bandar Raya Developments Bhd's) The Troika, which is in a class of its own,” he says.

Goh says he expects prices of high rise properties within the Mont'Kiara area to remain flat next year, just like the KLCC area.

“There is a huge oversupply and many projects coming online there (Mont'Kiara area).”

Goh says he sees more investors taking their money out of the stock market and “placing their money in a safe haven like property.”

“The KLCC area offers a lot of opportunities (for potential investors),” he says, adding that Savills was currently conducting a tender of 61 luxury units from a selection of luxury apartments in Kuala Lumpur.

A property analyst says he expects the high-end residential market to be soft next year.

“We expect rental rates to be soft - with new completions in both the KLCC locality and Mont'Kiara. The market will be quite competitive and this will affect prices.”

Rahim & Co head of research Saleha Yusoff says market activity within the KLCC area has been less active in the secondary market with prices expected to remain stable, ranging between RM800 and RM2,000 per sq ft, going forward.

Saleha says the asking price for property within the KLCC area is currently ranging between RM730 and RM1,400 per sq ft. Not to far away, in the U-Thant area, commonly known as Embassy Row, prices range from RM750-RM1,300 per sq ft. In Mont'Kiara, prices have soften a bit and today is priced from RM590-RM860 per sq ft.

According to the Property Market Report 2011 by C.H. Williams Talhar & Wong, prices of luxury condominiums in the Klang Valley have increased better than moderate over the past year with the biggest threat to price stability being supply.

“A significant new supply of luxury condominium units are anticipated to be added to the current market over the next three years. Further supply can be expected with a number of approved projects. There is also ample supply of land for future condominium projects.

“Thus, the supply situation is anticipated to create further pressure on occupancy rate and rentals upon completion. As most of the luxury condominiums launched earlier have achieved good take-up rates, the risk is with future launches,” it says.

Going forward, the report said the luxury condominium market is expected to be stable to soft.

“Hence, it is imperative for a developer to provide purchasers with a good quality product that will stand out among its competitors.”

On the serviced apartments sub-sector, CH Williams Talhar & Wong says this sub-segment is popular with guests on business or leisure in the KLCC area and is expected to remain attractive due to their strategic locations.

“Healthy gross domestic product growth, increasing tourist arrivals and the Government's effort to attract multinational companies into the country is expected to spur demand for serviced apartments.

“However, many companies and purchasers are expected to become more cost-conscious and selective. This is indicated from the sales trends where the unsold units comprise mostly the bigger units (and/or) penthouse units.”

Although hotel-type serviced apartments recorded stable occupancy and average room rates, continuing competition and “rate undercutting” among serviced apartment and hotel operators which offer “apartment studio units” are expected to intensify.

The C.H. Williams Talhar & Wong property report says the total supply of luxury condominiums in Kuala Lumpur stood at 84 developments with a total of about 10,323 units as at the end of last year.

Six developments were completed in 2010 with a total of 705 units. These included the completion of 2 new developments; D9 Bangsar (nine units) and Suasana Bangsar (190 units) which are expected to be handed over to owners early this year.

The average occupancy rate for existing luxury condominiums in the KLCC area has indicated a slight decline last year due to sluggish demand. Most of the newly launched luxury condominiums with a larger proportion of smaller units showed good sales rates of about 90% within the first 12 months of launch where as most of the unsold units tend to the bigger ones.

In Bangsar, Damansara Heights and Mont'Kiara/Sri Hartamas, the transacted prices of luxury condominiums ranged from RM620-RM850 per sq ft, RM500-RM700 per sq ft and RM500-RM780 per sq ft respectively in the secondary market.

The asking rentals of luxury condominiums in KLCC area ranged between RM4 and RM5.50 per sq ft. Current yields for luxury condominiums in Kuala Lumpur City Centre generally range between 6.0% and 6.5%, said the report.

Meanwhile, the total cumulative supply of serviced apartments in Kuala Lumpur stood at 49 developments with a total of about 11,709 units as at the end of last year, says C.H. Williams Talhar & Wong.

New supply of serviced apartment developments completed by end-2010 included Park Royal Serviced Suites (One Residency- South Tower) and MyHabitat located off Jalan Tun Razak, Sommerset Ampang in Ampang Hilir/U-Thant area and Gateway Kiaramas in Mont'Kiara.

These added about 1,046 units to the total existing supply which will exert some pressure on overall occupancy rates for the serviced apartment sector this year.

In the next three years, a total of 7,352 serviced apartment units in 21 developments are expected to be completed, increasing total supply of serviced apartments to 19,016 units by end of 2013.

Developer's selling prices for serviced apartments launched last year ranged between RM800 to RM1,400 per sq ft and these serviced apartment developments showed a relatively good sale rate of 70% to 90%.

The overall occupancy rate for serviced residences and hotel-type serviced apartments dropped as it faced pressure from the large incoming supply. The average occupancy rate for the existing serviced residences declined from 70.7% in year 2009 to 64.6% 2010 while the average occupancy rate for hotel-type serviced apartments dropped to 70.6% in 2010 from 73% in 2009.

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