Soft luxury condo market
Sector to recover at a moderate pace
WHILE the reopening of international borders and resumption of economic activities had spurred the property market, the near-term outlook for the high-end condominium segment is expected to remain challenging.
Still, Savills Malaysia Sdn Bhd group managing director Datuk Paul Khong says the high-end residential market has continued to improve slowly into the year, but at a rather moderate pace.
“The year started well, with the local markets reopening up after the Covid lockdown at the end of the third quarter of 2021 and international borders have since opened in April.
“Malaysia is headed to the endemic status and sentiment has improved substantially,” he tells Starbizweek.
Khong notes that many high-end residential projects that were delayed during the lockdowns in 2021 had resumed towards the fourth quarter of last year.
“Various ongoing projects were showing good progress and are closing in for final completion.”
With the steep increase in prices of building materials translating to higher construction costs, Knight Frank Research in its Malaysia Real Estate Highlights report for the first half of 2022, says prices for residential properties are set to increase moving forward.
“This, coupled with the increase in interest rates will somehow dampen interest in the property market due to higher borrowing cost.”
Knight Frank Research says the short-term outlook for the high-end condominium segment remains challenging, albeit a slow and uneven recovery due to headwinds in the global and domestic markets.
Rising inflationary pressure, the sharp spike in commodity prices and adverse impact of the on-going Russia-ukraine war would also have an impact, it says.
Still, Knight Frank Research says more developers are expected to unveil attractive campaigns to boost sales of unsold inventories and new property products, following the
“The year started well, with the local markets reopening up after the Covid lockdown at the end of the third quarter of 2021 and international borders have since opened in April.”
Datuk Paul Khong
end of the popular Home Ownership Campaign at the end of last year.
“Environmentally friendly homes are becoming more important for sustainability and climate change mitigation.
“As more purchasers move towards sustainable developments that incorporate eco-friendly features, property developers are gradually weaving the environmental, social and governance aspects into the conceptualisation, design and construction stages of their projects.”
Moving into the second half of 2022, Khong says the residential property market continues to be challenging, especially with current supply and rising interests.
“Interest rates increased twice in the first half of 2022. The market will also face headwinds from rising inflation and petrol prices, as well as escalating construction costs.”
According to Knight Frank Research, Kuala Lumpur recorded a total of 7,324 transactions with a collective value of Rm5.6bil in the condominium and serviced apartment categories in 2021.
“The transacted volume and value were marginally higher on the year by 2.2% and 3.7% respectively. In the first quarter of 2022, Kuala Lumpur registered 2,174 transactions valued at Rm2.26bil in the condominium and serviced apartment categories, reflecting year-on-year increments of 9.2% and 50.7% respectively.
A total of 1,990 transactions valued at Rm1.5bil were registered in the first quarter of 2021.
As of the first half of 2022, Knight Frank Research says the cumulative supply of high-end condominiums and residences in Kuala Lumpur stood at 67,995 units, following the completion of seven projects which contributed an additional 2,786 units to the existing stock.
“During the review period, the number of project completions was notably higher, likely attributed to earlier construction delays impacted by the various phases of containment measures.
“Several projects are scheduled for completion by the second half of 2022 and will add circa 5,303 units to the existing high-end residential stock.”
During the review period, Knight Frank Research says there was improved transactional activity in the secondary market.
“The overall (average) transacted price of high-end condominiums and serviced apartments in Kuala Lumpur was marginally higher (circa 1.2%).”
“The average asking rents of highend condominiums and serviced apartments in the localities of KL City, Ampang Hilir and U-thant, Damansara Heights and Mont’ Kiara were marginally higher during the review period while in Bangsar, the rentals remained relatively flat.”
Moving forward, Knight Frank Research says the overall rental market is expected to improve gradually following the country’s reopening of international borders, normalisation of economic activities and anticipated return of the expatriate population to the country.
Additionally, Knight Frank Research says ongoing large scale transportation projects will also help to increase property values.
Phase 1 of the MRT Putrajaya Line commenced operations on 16 June 2022. The scheduled completion of Phase 2 of the Putrajaya Line in 2023 and the revived MRT Circle Line with completion slated by 2030, will further improve connectivity within Greater Klang Valley.
“These improving rail infrastructure are expected to lift property values along the routes.”
Meanwhile, Khong says investors are also envisaging a future increase in overall property prices due to the current escalating “cost push” on both base factors of land prices and construction materials.
“At the current moment, there are many purchase opportunities prevailing in the prime markets in the various popular and centralised locations.
“It is still a good time to buy residential properties per se, as it is a “buyer’s market” especially if a bargain deal can be struck at well-discounted prices,” he says.