Property Market Holding On Well

In December 15th 2008, I issued a press release and also had a press conference. In this press conference, it was where we stated that the market for 2009 will be

• Stable with no crashes
• Prices will mainly drop for KLCC and Mont Kiara with no prices dropping below launch prices
• Landed Properties prices will in fact inch up in 2009
• There will be a flurry of launches after Chinese New Year 2009

In February 2009, we in fact stated that the KLCC and Mont Kiara markets have bottomed out and prices will be flat in 2009, pick up in 2010 and a mini boom in 2011

Many, including my fellow professionals thought I lost it and that I was an eternal optimist, whilst in reality I am just a realist and with strong pulse in the local market. I was call a contrarian, a brave man and many others, but it does fell good now, with the market reacting to how we have said it would.

E&O launched the St Mary Residences successfully a month ago and a week ago so the Temasya Glenmarie launch seeing people queueing a week to buy properties worth RM850k and above. SP Setia and Sime Darby have collectively sold more than RM2B worth of properties since after Chinese New Year, indicating a strong interest in the property market.

How is the market like moving forward? We still maintain that prices will be flat this year, with good landed properties inching up, prices will begin to move first quarter next year and peak in 2011/2012.

Major locations to look at include Klang Valley, Iskandar Malaysia, Penang Island and Kota Kinabalu. Landed properties, condos and office spaces are seen as investments to be focused on.

Issues to be concerned about are third party external factors that could drag the Malaysian market behind such as serious natural disasters in the region, H1N1 turning into a major pandemic in the region like SARs etc.

KLCC - The Raw Truth

Malaysia is not spared in this global financial (please note its not an economic crisis) crisis and no doubt we are experiencing a slower growth and lesser transaction in real estate since late last year. The values have also dropped but at a reasonable rate as compared to other regional countries (Singapore – 40%). We reckon the prices have depreciated approximately 15%-20% in KLCC. Other locations have been holding well especially landed properties such as those in PJ, Cheras, Bangsar, Sri Hratamas, TTDI etc as they are less speculative. Currently, property prices in KLCC are averaging between RM700psf to RM1100psf depending on the development. The prices started to drop late last year the sub prime crisis hit Singapore and Hong Kong badly and the speculative investors from these countries started selling their assets

We remain rather positive on the overall market especially in prime locations. Lately, we have notice many opportunistic buyers (local & foreigners) trying to purchase condominiums in KLCC, Sentul and Mont Kiara, indicating the markets have bottomed out. The demand has created a strong resistant on price depreciation, which is very positive for the property market.

On whether the price to increase to that of 2007 level for developments in KLCC, it’s a resounding “Yes”, but on selected developments. Please note that not all developments will be successful. Good products with good management will differentiate the best from the rest.

We do not expect any further price depreciations, if any to a maximum of 5%, and are even confident that the better developments will see prices inching up.

Singapore Dollars is still relatively strong, therefore, the property prices in Singapore is still very expensive. Even on a dollar to dollar, the best development in KLCC is in excess of SGD3000psf as compared to The Binjai at RM2800. Both countries and market provide different avenue for investment. Malaysia market is more stable and price appreciation is stable unlike Singapore which is a very speculative market on the high end condominiums.

As the property prices continue to appreciate, we will be experiencing a lower yield on rentals. Nevertheless, this can be offset with the stable growth in capital. In fact, we are projecting a better yield as property prices have came down. We used to project 7% to 8% yield but due to slower demand and supply of condominium coming into the market, we are anticipating 5% to 6% now.

For eg. A unit in Dua Residency of 2098sf can fetch a rental of RM8500 per month and the recent sale price here is RM850psf. This will provide a gross yield of 5.7%.

Most existing developments enjoy good occupancy.
Park Seven : 77 %
Dua Residency: 90%
Marc Residence : 60%

On the average, we are projecting an average of 60% to 70%,


Current Supply in KLCC : appx 4,000 units

New supply (under construction) : 3,698 units

Future supply (yet to be launched but approved) : appx 1,500 units