Upscale highrise residential market to remain generally flat this year

KUALA LUMPUR: High-end condominiums and apartments in Kuala Lumpur are expected to remain generally flat this year but may see modest growth in the long term, said Henry Butcher Marketing Sdn Bhd chief operating officer Tang Chee Meng.

The lacklustre growth is due to a number of factors including concerns of oversupply in the city centre and Mont'Kiara, difficulty in renting out larger units of above 3,000 sq ft in the absence of expatriates, yield compression and reduced interest from foreign investors, he said during a presentation on the outlook of the luxury highrise market in Malaysia on Tuesday, Jan 18.

"Worries about oversupply, rising vacancy rates and lower foreign interest will mean that it will take a while longer for the KLCC luxury condo market  to regain its glory days," he said.

Other worries include uncertainties over the global economic recovery, uncertainty amongst investors over the state of the real property gains tax (RPGT) and loan-to-value ratio (LVR) implemented last year, higher interest rates and cheaper property investment options abroad, added Tang who is also the central region chief operating office of Henry Butcher Asset Auctioneers Sdn Bhd.

"Even foreign distressed properties are being marketed in Malaysia... we are spoilt for choice," he said.

He foresees interest in smaller high-end properties that are more suited to local tenants in the absence of expatriates.

He anticipates moderate growth in the Damansara Heights area and the Bangsar/Bukit Pantai area due to lower supply in those areas.

However, in the next three years, Tang expects properties in all prime areas, namely KLCC, Ampang Hilir/U Thant, Damansara Heights, Bangsar/Pantai and Mont'Kiara to appreciate modestly.

"In the next five years, all upscale highrise residences in these areas are projected to grow on scarcity of prime land for development resulting in higher development costs that will drive up prices.

"The higher land costs in prime locations also mean that the only viable form of residential development will be that of condominiums and apartments," he observed.

He added that the government's ambitions to transform the nation into a high-income nation augurs well for the upscale highrise property market as this will see more local investors in the market.

He was speaking at the 4th Malaysian Property Summit 2011 (4MPS) organised by the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS).