Auction - Investors let posh apartments go under the hammer

PROPERTY auctioneers are seeing more high-end apartments in Kuala Lumpur come into the auction market, as more owners grapple with the slowdown in demand for such properties.

A recent poll among auctioneers revealed that a number of local and foreign property buyers have not been servicing their loans for their high-end property purchases made a few years ago, during the height of the luxury high-rise residential property boom in Kuala Lumpur.

Most of these owners have tried for a certain period to either sell or rent out their units but many find it quite difficult to sell residences priced above RM1 million.

However, properties below RM500,000 continue to fare well on the auction market.

"Eventually, these buyers decide that they would rather lose their 10% down payment than to continue being stuck in this situation," says Danny Tan of Property Auction House Sdn Bhd, adding that the cost of maintaining these units are often also high.

"About three in 10 cases of upscale properties going under the hammer in April belonged to foreigners," Tan says.

In and around the Kuala Lumpur city centre, most of these investors in high-end apartments are usually from India, the Middle East or mainland China, while the South Koreans and Japanese prefer to buy posh condominiums in the suburbs such as Bandar Sunway and Mont'Kiara. Then again, this trend could differ depending on where the developer chose to market its projects, Tan points out.

"I have been told that there is a condominium along Jalan Tun Razak that is currently only 60% occupied. The development was completed four years back," says Abdul Hamid P V Abdul, founder of Ehsan Auctioneers Sdn Bhd.

Abdul Hamid adds that although there have been numerous industry reports regarding an obvious oversupply of condominiums in the KLCC area, more high-end, high-rise developments are set to be launched in the area.

The hope is that the upcoming luxury hotel-branded developments with residences, such as The Four Seasons Place, will push up demand for existing KLCC residences in the future, says Abdul Hamid. Located beside the Petronas Twin Towers and fronting Jalan Ampang, the hotel, serviced residence and retail integrated development will occupy 1.4 million sq ft of space.

The auctioneers note that there has been a huge drop in auction cases since early this year. A few of them believe the banks are holding back a number of pending cases and these will only flood the market now, after the general election. According to Auction Data Sdn Bhd, the total number of properties put up for auction in Malaysia, up till June, is about 19,886. Approximately 8,450 units are listed in the Klang Valley.

"Some of us sat down together for a chat recently and came to the conclusion that everyone was dealing with 50% to 60% fewer cases since the start of 2013. Needless to say, this has affected our business," says Abdul Hamid.

Overall, the auction market is going to stay strong for the next half of the year, as long as there are bargains to be found, says Foong Chon Wai of Ng Chan Mau & Co Sdn Bhd. He adds that traditionally, properties in the Klang Valley have been very popular and are expected to continue being popular.

The auctioneers maintain they are positive about the future market for properties below one million ringgit in the Klang Valley, especially landed units.

Notable transactions of high-end apartments in recent months include a 1,149 sq ft serviced apartment in Urbane Tower Designer Suites in Solaris Dutamas, Kuala Lumpur, that was sold on March 6 for RM830,000, or about 20% higher than its reserve price of RM690,000.

This story first appeared in The Edge weekly edition of Jun10-16, 2013.

Looking for properties to buy or rent? With >150,000 exclusive listings, including undervalued properties, from vetted Pro Agents, you can now easily find the right property on Malaysia's leading property portal EdgeProp! You can also get free past transacted data and use our proprietary Edge Reference Price tool, to make an informed purchase.