THE Kota Kinabalu residential property market continued to perform well in 3Q2012, but the rise in supply and prices — especially of apartments and condominiums — over the past few quarters is a cause for concern. The supply of high-rises in Sabah's capital has grown over 50% in the past five years.
The bullish property market is backed by strong economic growth in various sectors, such as oil and gas, palm oil, construction and tourism, as well as an increase in household income.
Tourist arrivals are expected to soar with more direct flights from Kota Kinabalu to destinations such as Hong Kong, Guangzhou, Shanghai and Osaka.
"As Kota Kinabalu enjoys greater exposure to new markets, the profile of purchasers in the state capital has also seen a change," says Max Sylver Sintia, business development and client service manager of Rahim and Co (Sabah) Sdn Bhd. There have been more investment transactions in residential and commercial properties, he says when presenting The Edge-Rahim & Co Kota Kinabalu Housing Property Monitor for 3Q2012.
"However, this has fuelled some degree of speculation, which has yet to test actual rent and occupancy growth rates in the coming quarters as new projects are completed and several more are in the pipeline," he says.
He notes, however, that although prices are moving upwards, the rental market has not grown in at least the last four quarters, pushing yields down.
Rising capital values
According to Sintia, the higher prices of newly launched and recently completed developments are the main factors contributing to the price growth on the city's secondary market. Capital values of 2-storey terraced houses in the areas sampled rose by an average 8.41% y-o-y (between RM10,000 and RM40,000). Average quarterly price growth was about 1.83% (between RM5,000 and RM10,000) from the previous quarter. Millenium Heights registered the highest y-o-y growth of about 12.5% (from RM320,000 in 3Q2011 to RM360,000 in 3Q2012). Prices in the area rose by another RM10,000 q-o-q.
Taman Indah Permai, which is within the mature area of Jalan Sepangar, registered a quarterly price growth of 3.45% (about RM10,000), which represents a 9.09% y-o-y increase.
"Residential properties [on the secondary market] in this area are expected to continue to enjoy positive price growth as a result of a slew of new commercial and residential developments," says Sintia. He sees potential in areas in the immediate vicinity, especially neighbourhoods linked to the main roads of Kota Kinabalu, such as Jalan Sulaman and Bukit Sepangar.
A 2-storey terraced houses in Taman Indah Permai, which was valued at less than RM250,000 in 2010, now fetches as much as RM350,000 on the secondary market. A similar-sized, newly completed 2-storey terraced house in Bukit Sepangar, which is adjacent to Taman Indah Permai, was recently transacted at RM450,000 with asking prices of up to RM500,000.
The prices of residential developments that offer good access to the city and which are close to the main commercial centres and public facilities continue to record strong growth. These include Jalan Bundusan, Taman Mahkota, Taman Graceland, Taman Mont Tiara and Taman KCK.
As for 1-storey terraced houses, says Sintia, not much change was seen in the sampling. Only Taman Tuan Huat saw prices rise from RM210,000 in 2Q2012 to RM220,000 in 3Q2012 — a change of about 5%.
Taman Sri Kepayan continued to lead with 9% or about RM20,000 y-o-y growth, followed by Taman Tuan Huat (7% or about RM15,000). In most other areas, the prices of 1-storey terraced homes remained stable.
The prices of high-rise residences rose more than 7% y-o-y (about RM25 to RM50 psf) overall, the sampling showed. Over the quarter, prices rose an average of 1.16%.
Bayshore Condominium registered the highest y-o-y growth of 15% (from RM340 psf in 3Q2011 to RM390 psf in 3Q2012), rising 2.63% from the previous quarter (from RM380 to RM390 psf).
Sintia notes that Jalan Sulaman has been maturing as an educational and commercial area. 1 Borneo Condominium registered a 3.33% hike from the previous quarter (from RM300 psf to RM310 psf).
The overall take-up rate of condominiums on the secondary market was slower over the past three quarters due to the many new launches, he says.
Likas, Signal Hill and Damai remained the hot spots for condo buyers with asking prices for existing condos hovering at RM400 to RM550 psf. Prices in these areas grew 9% to 11% y-o-y.
Marina Court in the heart of Kota Kinabalu registered the lowest price growth in the sampling. The main reason, says Sintia, is an upcoming development — Pelagos Designer Suites @ Waterfront — immediately in front of Marina Bay, which, when completed, will block the view of the South China Sea that Marina Court now enjoys.
Sintia notes that the price movements do not necessarily reflect the actual demand for high-rise living space in Kota Kinabalu.
"Instead, we should observe the occupancy and rental rates of the end-users of the market who actually inhabit the units. After all, new launches of condominium developments have reached prices that would have been difficult to imagine a few years back," he says.
For example, The Loft and The Jesselton Residences, both within the city centre, fetched RM700 to RM900 psf while The Bay Residences at Likas Bay were going for RM550 to RM680 psf. Further away from town, Surian Residences at Kepayan achieved RM300 to RM380 psf.
Rental yields in Kota Kinabalu remained relatively stagnant. Rents have not been growing in tandem with property prices for at least a year. "From our observation, it will take time for the rental market in Kota Kinabalu to catch up with the rise in capital values," says Sintia.
The average yield for 2-storey terraced houses in 3Q2012 hovered at 4.09% while 1-storey terraced houses averaged 4.82%. Condos registered the highest yield of 5.16%.
Rents for 2-storey terraced house grew an average of 9% y-o-y with the highest growth of 14% seen in Luyang Perdana — from RM1,400 per month in 3Q2011 to RM1,600 in 3Q2012.
No change was recorded for 1-storey terraced houses in Taman Nelly y-o-y while Taman Sri Kepayan and Taman Tuan Huat registered rental growth of 10% and 6% respectively.
The average rental growth for condos was 3% y-o-y with 1Borneo Condominium seeing the highest growth from RM1,300 per month in 3Q2011 to RM1,500 per month in 3Q2012.
There will be three new notable developments in Kota Kinabalu, all of which are high-rises.
Two condo projects that are set to change the landscape of Jalan Lintas are Lido Avenue by Mega City Development Sdn Bhd and Lido Four Seasons Residence by Kinsabina Sdn Bhd.
Lido Avenue will offer 228 units with sizes ranging from 1,258 to 1,628 sq ft. Selling prices are from RM475 to RM570 psf.
Meanwhile, Lido Four Seasons Residence will have 840 units with built-ups starting from 1,014 sq ft and prices from RM330 to RM390 psf.
Lido Avenue and Lido Four Seasons have yet to be officially launched, but the developers have started taking bookings and registration with both claiming to have achieved 70% bookings.
RA Concept Development Sdn Bhd is launching a condo project, known as The Light Residences, in the Jalan Penampang bypass. The project offers a total of 228 condominium units, with sizes ranging from 1,047 sq ft to 1,493 sq ft. Priced at RM395 to RM518 psf, about 50% of the units are said to have been taken up during the launch in October.
This story first appeared in The Edge weekly edition of Dec 10-16, 2012.
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