KL office and condo market to remain challenging

KUALA LUMPUR: The Kuala Lumpur office and condominium markets are expected to remain challenging in 2014 due to slow rentals amid new supply and various cooling measures, according to Rahim and Co Chartered Surveyors Sdn Bhd.

Sulaiman Saheh, its director of research and strategy, said compressed and tighter yields are expected from downward pressure on rentals with looming new supply.

A report released in the second half of 2013 by Knight Frank titled “Real Estate Highlights: Kuala Lumpur, Penang and Johor Baru” concurred with Sulaiman and adds that the various cooling measures laid out in Budget 2014 will soften demand in the condo market, with the expected interest rate hike further dampening sentiments.

Sulaiman added that while the cooling measures are meant to create a more sustainable property price growth, they would impact the market by slowing down sales frequency and create a more gradual  price appreciation in the property market.

“Among the measures are a hike in the Real Property Gains Tax (RPGT), abolishment of the Developer Interest Bearing Scheme, and the increase in minimum price for foreign buyers to RM1 million. Also, a 2% levy on property transactions across all property sectors in Johor is being discussed,” he said.

Knight Frank expects the Kuala Lumpur hospitality sector to remain resilient. The sector is backed by strong demand for hotels which is expected to remain the forerunner of the country’s economic development backed by concerted efforts from the government.

It said it is cautiously optimistic for the Klang Valley retail market as consumers are expected to tighten spending ahead of further government subsidy rationalisation measures, a hike in electricity tariffs and toll rates.

According to Sulaiman, landed properties are still preferred, especially freehold properties, as he expects the emergence of niche submarkets within the secondary market.

“New property launches face more challenges but developers will be more creative with their products and marketing strategies,” he said.

Meanwhile, Penang’s high-end residential sector is expected to be affected to a higher degree by the measures introduced in Budget 2014, while the commercial sector should remain relatively stable stated the report.

However, Sulaiman added that the eventual opening of the second Penang Bridge and the state government’s efforts to spur developments in the southern part of the island and the mainland will most likely lead to brighter prospects in these locations.

In Johor,  the report stated that development will continue to be concentrated within the city centre, Danga Bay and the Nusajaya and Medini locality within zone A and B of Iskandar. Apart from the high-end condominiums and apartments, prime office and retail space, the region is expected to see more retail malls and purpose-built offices in Iskandar.

While Sulaiman added that the increase in minimum price for foreign buyers would impact Iskandar the most.

“Medini, which is in Iskandar, has been granted exemption from the RPGT hike and minimum purchase price requirement,” he said.

“Iskandar has seen ... [an increase in the number] of foreign buyers in many of the new residential products in the past year. [This is also the result of] the new processing fee on foreigners buying houses in Johor [being] based on property values instead of [an outright] RM10,000 fee,” he said. — by Haziq Hamid


This article first appeared in The Edge Financial Daily, on February 14, 2014.