Affordable housing agenda

1MDB plans to bluild 10,000 affordable housing units in the Klang Valley in the next 10-15 years.

1MDB plans to start off Bandar M’sia project with units priced from RM220,000-RM300,000

PETALING JAYA: 1Malaysia Development Bhd (1MDB) will kick- start the development of the Bandar Malaysia project in Sungei Besi with the launch of affordable housing units within the next one to two years, said senior vice-president, of planning, development and real estate, Juraimi Azahar Taharin.

Juraimi said the 1MDB affordable housing concept, complete with a prototype unit, would be unveiled soon to seek input from the public as part of its information gathering exercise to find out the facilities that were needed to best serve the target buyers.

“One of the purposes of this feedback exercise is to align the developer's plan with what the market requires. What we have in mind is to build housing units of between 800 sq ft and 1,000 sq ft at an estimated price of RM220,000 to RM300,000. Both are subject to the findings of the survey,” Juraimi told StarBiz.

Juraimi says a protype affordable housing unit of Bandar Malaysia will soon be unveiled to the public.

He said 1MDB's affordable housing programme was aimed at providing modern and quality affordable living in the city for young families.

“One of the key focus will be on sustainable development and facilities for child care and transit centres for the young and older children,” he said. He added that 1MDB was working with PRIMA for its affordable housing schemes, and was looking to build 10,000 affordable housing units in the Klang Valley over the next 10 to 15 years.

The locations for the housing projects are currently being finalised, but one of the main criteria is that they have to be in areas that have easy accessibility and connectivity. The scheme is open to all Malaysians with household monthly income of less than RM6,000 and they are buying their first house for their own occupancy.

1MDB is a government-owned master developer for the redevelopment of the 495-acre Bandar Malaysia in Sungei Besi, which used to be the base for the Royal Malaysian Air Force (RMAF).

The developer signed a sale and purchase agreement in June with the Federal Land Commissioner for the transfer of the 495 acres of Sungai Besi airport land to 1MDB.

The mixed development project with livability and sustainability as its distinctive characters, aims to be a new and vibrant landmark that reflects the aspirations of a Greater Kuala Lumpur.

1MDB is working with the Malaysian Institute of Planners in organising an international master planning design competition for Bandar Malaysia that is open to local and international urban planners.

The key principles to be included in the plans are planning and design; ecological footprint; infrastructure; diverse housing solutions; transportation; open space, parks and green density; innovation in land structure; urban solutions; technology; history and culture.

The result, expected to be announced in July next year, will be the basis for Bandar Malaysia's urban planning. Juraimi said the priority was to ensure the relocation process of the RMAF base went on smoothly. The relocation process will be done over several years in several phases.

1MDB has to ensure that RMAF has an appropriate place to move their assets and operations, as well as they are comfortably functional at the new location.

“Discussions with regards to the relocation is on-going with the help of Malaysian Armed Force Fund Board and areas such as Subang, Sendayan, Butterworth as well as Kuantan have been identified for the purpose,” he added.

Australian property 'expected to recover in 2012'

The majority of property markets in Australia are expected to undergo a recovery during 2012, according to a new report. Australian Property Monitors (APM) has released its State of the Market survey for December this year, noting overall during 2011 "housing markets entered a correction phase with income growth required to catch up with the finance requirements for home purchases". The organisation added that natural disasters, coupled with low confidence among consumers and a mixed economic performance for the country, have resulted in fewer buyers entering the Australian real estate market. However, APM is predicting a better performance in 2012, citing anticipated economic growth and rising demand for residential properties as two catalysts that can boost the sector. Meanwhile, the firm also expects more interest from investors over the coming 12 months and has asserted average house prices in the country will climb by between three and five per cent in this period. However, Professor from the University of Western Sydney Steve Keen recently predicted in an interview with the Sydney Morning Herald that Australian property prices will fall in 2012, stating the "acceleration of mortgage debt" will push values lower.

Influx of office space in Klang Valley worsens oversupply situation

KUALA LUMPUR: An influx of office space in the Klang Valley is putting a downward pressure on yields.

Property consultants said the entry of more office space was making the oversupply situation worse.

However, they said the situation could be remedied should the economy perform better, thus keeping demand afloat.

“In certain areas, yields will be pressured downward because of the glut situation. But this is also highly dependent on the location of the offices. Those located in prime areas will have less chance of coming under yield pressure,” DTZ Debenham Tie Lung executive director Brian Koh told StarBiz.

Khong & Jaafar managing director Elvin Fernandez said that the slightly higher vacancies this time around was “not too abnormal a situation”.

“The thing about property cycle is that there can be a glut today but this oversupply condition can be offset if demand returns. I do not view it as being serious,

“However, there could be a lot more supply that would flood the office space sector in the medium to long term,” he said.

There were 20 million sq ft of vacant space in the Klang Valley, 22.5 million sq ft of office space under construction and 25 million sq ft which had been approved for construction.

The Government recently earmarked several areas for commercial development such as the KL International Financial District in Jalan Tun Razak, the 100-storey Warisan Merdeka, the Sungai Besi military airport and the Rubber Research Institute land in Sungai Buloh which are expected to come onstream within the next 10 years.

Meanwhile, a report by CB Richard Ellis released earlier this month revealed that office yields in Kuala Lumpur prime area had been flat from 2005 until 2011, ranging from a low of 6.25% to a high of 6.75%(see chart).

The report also showed the office space vacancy rate in the Klang Valley was under 13% on an average basis, which consultants said could rise once new space came in with the completion of several mega projects.

“With all the large-scale development projects coming in, we are looking at a potential oversupply situation but if the economy does exceptionally well despite the problems in the eurozone, this problem would ebb,” said Koh.

Vacancies had risen during the 2008 global financial crisis in prime office spaces and rental rates had been on a slight decline.

The prevalent trend among corporates was to move their bases away from the city centre into newer office buildings within other established suburbs such as Petaling Jaya and Klang as many of the workers lived in these suburbs.

“After the My Rail Transit has been completed, office development would focus back to the city centre as long as they are affordable and corporates can make a decent profit even after paying off these leases. I expect this trend to reverse and that Kuala Lumpur will remain at the primacy of development in the Klang Valley,” Fernandez said.

Angkasa Raya mixed-use tower is set to spice up KL’s skyline

The 65-storey Angkasa Raya tower is the newest mixed-use development to break Kuala Lumpur’s skyline, comprising hotel rooms, offices and apartments.

Designed by Ole Scheeren, the famed architect behind such landmarks as the CCTV headquarters in Bejing, envisaged the building to be constructed out of three interconnected slabs which wist into spirals, in hopes that the design will alter the perception of what a skyscraper can be.

The design is uniquely crafted to challenge the Petronas Twin towers and such in the vicinity, adding to the dramatic skyline of the city.

Angkasa Raya will feature 280 residential units including studios, one to three bedroom apartments and duplexes, along with penthouses, and amenities such as landscaped gardens.

The Agkasa Raya tower is due to be finished by 2016.

KL Eco City to Kick off the ground early 2012

Kuala Lumpur: After more than a decade of delay, property developer SP Setia Bhd expects to start working on the RM6 billion KL Eco City, opposite Mid Valley Megamall in Kuala Lumpur, by early next year.

The land, where the development is to take place over 12 years, has been cleared and is currently vacant.

SP Setia first announced its intention to develop the land almost a decade ago, but had faced problems with squatters in the area, among other things.

In its filing to the stock exchange yesterday, SP Setia said Kuala Lumpur City Hall or Dewan Bandaraya Kuala Lumpur (DBKL) had finally formalised the privatisation of the 10ha cluster of land parcels in the Kampung Haji Abdullah Hukum area.

The land is being alienated to KL Eco City Sdn Bhd (KLEC), which is owned by SP Setia and Yayasan Gerakbakti Kebangsaan on a 60:40 basis.

With net saleable area of 5.7 million square feet, SP Setia proposes to build a retail podium, three boutique office blocks, strata-titled office suites, three office towers, three residential towers and a serviced apartment tower.

The proposed development will also include a new KTM Komuter train station that will be integrated with the existing Abdullah Hukum LRT station.

Railway Asset Corp (RAC) has mandated SP Setia to deposit RM42.09 million in land bond to ensure construction of the train station.

Under the privatisation agreement, SP Setia must pay DBKL RM105.92 million, less the premium already paid, over 36 months.

As soon as SP Setia starts construction, it has to deposit RM10.55 million as performance bond with DBKL.

It also has to cough up a minimum guaranteed profit of RM191.96 million for the proposed development.

These are in addition to the initial agreement that DBKL be taking 20 per cent of the project's net profits.

The privatisation is conditional upon SP Setia paying DBKL RM11.4 million, being the difference between the actual construction cost of the low medium cost Apartment Abdullah Hukum 1 and the purchase price offered to the squatter families on the DBKL land.

The deal also requires SP Setia to pay RM10.59 million, being 10 per cent of the residual land value and RM1.62 million, being the land value for Plot F of the DBKL cluster of land.

SP Setia said these payments to DBKL will not have a material effect on its gearing for the year ending October 2011.

SP Setia estimates the KL Eco City's gross development cost to total RM5 billion.

Private home market in Singapore records “robust sales” in Q3

Despite the threat of a fresh economic slowdown in the US and Europe which has inundated investors and organisations worldwide, the private residential market in Singapore.

continued to see robust home sales in Q, according to the latest research from real estate service provider Savills in Singapore.

Singapore’s economic forecast for 2011 has been down graded from five to seven per cent to between five and six per cent, yet the lion city still saw robust home sales in July and August driven by the mass-market segment where especially HDB upgraders were driving demand.

Executive condominiums have grown in popularity after the government lifted the monthly income ceiling for new EC purchases, states the report, adding that more primary home sales activity was observed in the northeastern region.

High-end and super-luxury home prices slipped two per cent and 0.4 per cent quarter-on-quarter in Q3 respectively, while mid-tier home prices dipped marginally and mass-market home prices rose. The average price for non-landed high-end private homes dipped from S$2,286 (US$1,816) per sq ft to S$2,243 (US$1,782) per sq ft in Q3 while the price or super-luxury units dipped marginally from S$3,681 (US$2,925) per sq ft to S$3,667 (US$2,914) per sq ft

Overall home sales may dip by 20 per cent quarter-on-quarter in Q4, possibly ending the year with a total of 14,500 to 15,500 primary sales, said the report and added that prices of homes may continue to edge up by one to two per cent quarter-on-quarter in Q4, while high-end and mid-tier homes may see a price correction of between two to four per cent.

Boost from KL International Financial District

Artist impression of the Kuala Lumpur International Financial District.

The Kuala Lumpur International Financial District (KLIFD) is a key enabler to strengthen the position of Kuala Lumpur as the global financial city of choice, transforming Kuala Lumpur into an international hub for banking and finance as well as related professional services.

KLIFD has been identified by the Government as an Early Entry Point in its comprehensive Economic Transformation Programme to more than double per capita income by 2020. The Government wholly owns 1Malaysia Development Bhd (1MDB), the master developer for KLIFD.

The RM26bil project is located in the heart of Kuala Lumpur’s southern tip. It sits on 75 acres encompassed by Jalan Tun Razak, Jalan Sultan Ismail and the Putrajaya elevated highway. It will be overseen by 11 local and foreign consultants appointed by 1MBD to push forth its development.

In March, 1MDB carried out a pre-qualification and request for proposal process through its subsidiary 1MDB Real Estate Sdn Bhd.

Among the selected local companies are traffic management consultant Perunding Trafik Klasik Sdn Bhd, quantity surveyor Perunding NFL Sdn Bhd, landscape architect Akitek Jururancang Malaysian Sdn Bhd and land surveyors Jurukur Perpaduan Sdn Bhd and Jurukur ESA Sdn Bhd.

The infrastructure engineering consultants are EDP Consulting Group Sdn Bhd and Buro Happold Consulting Engineers, a UK and US consultant which also acts as KLIFD’s sustainability consultant.

Others include security and risk engineers ARUP Jururunding Sdn Bhd (from Malaysia) and Hong Kong-based ARUP Group International. A consultant from Qatar, KEO International Consultants, has been selected as programme management adviser.

The appointments are in addition to the two master planners, Akitek Jururancang Malaysia Sdn Bhd and Machado Silvetti & Associates, recently selected from an international design competition.

1MDB owns the 30.35ha on which the KLIFD will be developed. The entire financial district is slated to be completed in two decades, with its first phase operational by 2016.

Under Budget 2012, to accelerate the development of the KLIFD, the Government will offer income tax exemption of 100% for a period of 10 years.

Also, property developers in KLIFD will benefit from income tax exemption of 70% for a period of five years.

The global effect on property

The signs of the times are here, and they are not unique to Malaysia. The concerns about the global economy are real. Whether one is an avid property watcher or a young person considering a downpayment on one's first home, there are certain things to take into account.

Says property consultant and valuer Elvin Fernandez of the Khong & Jaafar group of companies: “It is clear and becoming clearer by the day that the growth will slow down because it cannot keep up with just continuous stimulus around the world. Whether this state of affairs will continue depends on how sales fare as we complete this year and move into next. It is also clear that volatility will continue into the new year, which explains why developers are revamping their plans and changing strategies.”

Analysts have downgraded the property sector or had a negative outlook on it after they noted that average take-up rates of launches by property developers dropped from 80%-90% a year ago to a forecast 50%-65% in the second half of this year.

To understand what is going on in our current property market and to get some pointers about its future direction, we need to look back a little.

When property prices began to inch upwards in the second half of 2009, in the wake of the fall of Lehman Brothers in September 2008, there was cheer all round. But as prices continue to escalate into the first half of 2010 and then the second half, property watchers and buyers began to take note of the ballooning values in the landed property sector. The momentum shifted to high-rise, although to a lesser degree.

In response, developers fast-tracked their launch programmes. Some were quick enough to launch products in the second half of 2010, while many of the rest were able to do so this year.

Housing Buyers Association vice-president Brig-Gen (R) Datuk Goh Seng Toh said: “People bought in anticipation of higher prices later on.”

This situation of “buying before price goes up further” is evident not only in the Klang Valley but was especially so on Penang island.

Says Real Estate & Housing Developers' Association (Penang) chairman Datuk Jerry Chan: “Because of land scarcity and worries that prices will go even further, people bought. Why? Because it was anybody's guess what was the ceiling. Is it too much to pay? That was difficult to answer because prices seem to have gone beyond what people expected.”

It was this frenzy of buying in selected locations that fed the worries about a bubble, coupled with the easy credit and low interest-rate regime. This double whammy of easy credit and low interest was not just evident in Malaysia. It has also played out in China, Singapore and other countries in the region.

Banking on property

What is interesting is that the United States has gone through this situation a couple of times.

Says Fernandez: “The United States in the 1950s and 1960s were idyllic. After World War II, there was a certain amount of stability but there was this belief that a little inflation will boost the economic engine in exchange for more jobs.”

It worked and the US economy flourished. Inflation inched up and as it did so, workers demanded wage increases to keep up with higher prices, companies raised prices to compensate for the rising wages, and it became an upward spiral. Recession was the only thing that can break the cycle, and it came in the mid-1980s.

That, both Fernandez and Chan agrees, is what is happening in the United States and then Europe today. In the 1990s, the then US Fed chief Alan Greenspan also kept interest rates too low for too long, which led to a speculative bubble in real estate.

“We are ignoring the dangers of the twin combination of easy credit-low interest and a speculative property market,” warns Fernandez.

The prices of stocks and homes are every bit as vulnerable to inflation as chicken and sawi. He adds: “This notion that one will always make money on property investments is made popular by people who have speculated and gained from such activities, and their success stories are told time and again. We are now seeing in Europe, the United States and previously in Japan, that one can lose with property investment.”

He says although the property market has some distinctive factors, like any other market, it still runs on demand and supply and underlying fundamentals. “Because it is a market that has no shorting mechanism, it has a tendecy to rise rather than fall, unless the fundamentals pulling it down are strong,” Fernandez points out.

In Malaysia, this enchantment with properties the last two years has intensified because of a lack of alternative investment options, the availability of easy credit and as an hedge against inflation.

The government moves are a factor as well. Last year, the Government announced seven mega development projects to spur the economy. Two of these were mentioned in Budget 2012 the development of government-owned land around Sungai Buloh and the KL International Financial District (KLIFD). Both are expected to take off in the second half of next year. The Government has invited some developers to participate.

The finance sector has also profited from the property boom, with property loans being the main driver of growth for the banking industry, accounting for 40.6% of the overall credit expansion. The residential segment accounted for 27% of total loans. Analysts expect property loans to remain the key driver of credit expansion this year and in the near future. Although there was a slowdown in loan applications for residential mortgages after the implementation of the 70% loan-to-value cap on the third and subsequent house financing, the momentum has picked up again since March.

Making a mark in new territories

The sovereign debt problems brewing in Europe and the United States can impact consumer sentiment in property purchases, said RAM Ratings head of financial institution ratings Promod Dass. “The fact is, property is a cornerstone of any economy, and there is a property angle in just about any major venture. Even the proposed my rapid transit (MRT) system is known as “a property-and-rail play.”

Says Fernandez: “Many of the country's plans are property-dependent. We may not be able to live up to that expectation. It is like a father having too many children, and all of them want to spend his salary.”

The demand for property is driven by many factors. In today's prevailing uncertainty, demand is driven by job security, sentiment and affordability, says Tan Sri Leong Hoy Kum, managing director and group chief executive of developer Mah Sing Group Bhd.

“We have a relatively young population, which means there will be a demand for starter homes. Whether for landed units or condominiums, the demand for larger units and high-end housing will definitely be slow. So we are changing our strategy,” he adds.

“Instead of concentrating on high-end housing, we will do mid- to high-end on fast-turnaround basis. We will launch three to nine months from the day we buy the land. If semi-detached units, it will be RM1.4mil and below. If it is a landed strata, it will be priced lower, and if it is high-rise, the built-up area will be smaller. Our focus will be on affordability.

“The high-end sector will definitely soften in terms of sales in the next 12 month or so. Houses in the RM5mil and above range will be difficult to sell. The same goes for big units. The European crisis may be prolonged but we are hoping for a soft landing.”

About two weeks ago, Mah Sing announced that it has purchased 90ha in Rawang. The move to less-prime locations will be another strategy to aid affordability and to overcome land scarcity in the popular areas. The company is the second top developer to recently signal this move to less-prime locations.

SP Setia Bhd is the other; it bought 673 acres in Rinching, located mid-way between Semenyih and the Bangi old town.

As the woes in Europe and United States cast a pall over global economy, what will be ahead for locations around the iconic Petronas Twin Towers in the Kuala Lumpur City Centre, often regarded as the pinnacle of Malaysian property?

Signs of slowing?

Henry Butcher Marketing Sdn Bhd chief operating officer Tang Chee Meng says developers have noted the signs of an imminent slowing of the market. “Developers are today revamping their sizes. They are taking their projects to Singapore, China and Britain to sell. Or they work with banks to provide innovate mortgage packages. Some developers are also having friend-bring-friend commission in order to move sales.

In a buoyant market, this will not happen. The larger units completed a couple of years ago in the KLCC market may continue to remain vacant with pressure on rentals.

“Today, the majority of the sales are from developers, the primary market. In the secondary market, property agents are not getting many calls. The situation with huge leaps in prices is not as serious as last year or in the first half of this year. It is only certain type of properties in selective locations.”

“The European woes are weighing on investors. In that sense, the market is correcting itself. Developers may say these external global situations do not impact us. But there are many discerning people out there and they take note of what is going on in the US and in Europe,” says Tang.

A real estate agent specialising in properties in Mont'Kiara, another location that is closely watched, says the Sunrise MK28 has reduced its original price of about RM680 to RM700 per sq ft to RM590 to RM600 per sq ft. In Desa ParkCity, where prices of landed units have gone up by as much 300% or even more, the larger units of some of its latest launches are still available.

Comparing prices

About a decade ago, especially when the interest in KLCC-Petronas Twin Towers began, and in tandem with the proliferation of high-end landed and high-rise residentials, developers and property professionals took great pride comparing property prices in Malaysia with regional countries and concluded that the prices of Malaysian properties were far below those of China, Hong Kong, Singapore and Thailand. Projects around the Petronas Twin Towers were compared with London's Hyde Park and New York's Central Park. Today, such comparison continues to be made.

Says Fernandez: “This comparison has not stood the test of time. This suggests that our properties are not open to such comparisons and that such comparisons are not an appropriate measure. The drop in prices of between 20% and 25% soon after the 2008 crisis show that the market is mainly driven by our own governing fundamentals.

“The KLCC market, until today, has not rebounded to their original levels. The second point is that location is driven by a large expatriate community, which we do not have.”

Which is another sign of the times we are living in today.

Property Lookout

Here are some pointers for those considering a property investment in the near term:


Elvin Fernandez
Valuer and managing director of Khong & Jaafar Elvin Fernandez

“The global environment is changing. Strictly speaking, an upgrader sells the old house to buy the new. If he is going to hang on to the old, he will have to consider the rental market where yields are falling. He has to consider whether the market has peaked in the areas he wants to buy and whether it can go further and that may be unlikely in many areas. Value has gone above the normal governing fundamentals of price versus household income, and price versus rental returns.

“Although Malaysia is rapidly developing and we have a young population and we have seen more years of prices running up than going down, this may not be replicated as sentiments may be poor as a result of what is happening in Europe.

“As for commercial properties, the retail market looks stronger than the office market as there is an oversupply in this sub-segment.

“As for first time buyers, we have a whole range of housing from the low cost to the high-end. But many of the properties that young people may be able to afford are poorly maintained and because of this, these properties are not desirable. The authories should have more stringent legislation for people who default on their service charges. It makes good sense to seek professional property management instead of doing it on a piecemeal basis. Taking care of the maintenance issue is more logical step than building more, only to have the maintenance issue cropping up again later on.”


Charles Wong
Tetap Tiara Sdn Bhd executive director (Jaya One) Charles Wong

“Prices will have to stabilise. When considering buying the larger residential units for investment, the question to ask is, Can you rent it out? Smaller units will be more feasible. But having said that, we are seeing a huge number of 400 sq ft units of service apartments being built. While these may be affordable, buyers must consider rentability. Access, connectivity and proximity to amenities are important. And if there are so many of these units, you may need to take a longer period to rent and to re-sell in the secondary market in today's uncertain climate.

“In the retail market, rental rates have been coming down and are softer than two to three years ago. For landed properties, the rental are expected to drop from 3%-4% to sometimes 1% or 2% and condominium yield from 7% to 8% to 4%-5%.”


Tan Sri Leong Hoy Kum
Mah Sing group managing director/chief executive Tan Sri Leong Hoy Kum

“The demand will be for smaller units, and for mid-end housing, instead of the high-end ones. If it is a location they want, for example KLCC area, people will buy a little further away like in Jalan Ampang where prices are lower.”

GV International managing director Samuel Tan


Samuel Tan
“In Johor, price increase is expected to be gradual. Areas with good connectivity will be popular. In the last several years, the emphasis on infrastructures like highways has helped to spur interest and prices. The western coastal highway from Skudai to Bukit Indah has made travelling a breeze and prices have moved 10% or more. Developers are expected to report good sales in the near future although September was a soft month, as a result of the US downgrade in August. Iskandar Malaysia will become more visible and is expected to generate interest from the Japanese, South Koreans and Singaporeans.”

Real Estate Housing Developers' Association (Penang) chairman Datuk Jerry Chan


Datuk Jerry Chan
“Demand for landed units on the mainland and Penang island will continue but yield on the island is expected to be low, at 1% or 2%. The price movement for this year has been greater than last year. We continue to see land prices going up. For the lower to mid-end, prices are still moving. Demand is expected to remain firm for properties priced RM600,000-RM700,000 and below. For those between RM800 and RM1,000 per sq ft or about RM1mil, people will have adopted a wait-and-see attitude.

“Currently, prices on the mainland is a quarter or a fifth of those on the island. Penang people are beginning to find it too expensive on the island and are moving to the mainland.”

Experts expect rental within KLCC to remain flat

A view of KLCC in the vicinity of the Petronas Twin Towers.

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.